<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1997
REGISTRATION NO. 333-27105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONCENTRA MANAGED CARE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8093 04-3363415
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or
organization)
</TABLE>
312 UNION WHARF
BOSTON, MASSACHUSETTS 02109
(617) 367-2163
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------
DONALD J. LARSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CONCENTRA MANAGED CARE, INC.
312 UNION WHARF
BOSTON, MASSACHUSETTS 02109
(617) 367-2163
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
JEFFREY A. CHAPMAN RICHARD A. PARR II JAMES WESTRA
Vinson & Elkins L.L.P. Executive Vice President Hutchins, Wheeler &
2001 Ross Avenue and General Counsel Dittmar,
Suite 3700 OccuSystems, Inc. A Professional Corporation
Dallas, Texas 75201 3010 LBJ Freeway, 6th Floor 101 Federal Street
(214) 220-7700 Dallas, Texas 75234 Boston, Massachusetts 02110
(972) 484-2700 (617) 951-6600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
August 1, 1997
To the Stockholders of OccuSystems, Inc.:
You are cordially invited to attend a Special Meeting of Stockholders (the
"OccuSystems Meeting") of OccuSystems, Inc. ("OccuSystems"), to be held on
August 29, 1997, at 9:00 a.m., Dallas time, at the Holiday Inn, 4441 Highway 114
and Esters Boulevard, Irving, Texas 75063.
At the OccuSystems Meeting, you will be asked to approve the merger (the
"OccuSystems Merger") of OccuSystems with and into Concentra Managed Care, Inc.,
a Delaware corporation ("Concentra"), in conjunction with the merger of CRA
Merger Corp., a Massachusetts corporation and wholly-owned subsidiary of
Concentra, with and into CRA Managed Care, Inc., a Massachusetts corporation
("CRA"), pursuant to an Agreement and Plan of Reorganization dated as of April
21, 1997 (the "Reorganization Agreement").
Upon completion of these mergers:
- Concentra will be the surviving corporation of the OccuSystems Merger and
the separate corporate existence of OccuSystems will cease;
- CRA will become a wholly-owned subsidiary of Concentra;
- each outstanding share of OccuSystems Common Stock will be converted into
one share of Concentra Common Stock; and
- each outstanding share of CRA Common Stock (other than shares held by
holders who have perfected appraisal rights) will be converted into 1.786
shares of Concentra Common Stock.
If the mergers are approved, you will also be asked to approve the Concentra
Managed Care, Inc. 1997 Long-Term Incentive Plan (the "Concentra Incentive
Plan") and the Concentra Managed Care, Inc. 1997 Employee Stock Purchase Plan
(the "Concentra Employee Stock Purchase Plan" and, together with the Concentra
Incentive Plan, the "Concentra Benefit Plans"). The mergers contemplated by the
Reorganization Agreement are not conditioned on approval of the Concentra
Incentive Plan or the Concentra Employee Stock Purchase Plan.
A detailed description of the Reorganization Agreement, the proposed mergers
of OccuSystems and CRA, the Concentra Incentive Plan and the Concentra Employee
Stock Purchase Plan is set forth in the accompanying Joint Proxy
Statement/Prospectus, which you should read carefully.
After careful consideration, your Board of Directors has determined that the
transactions contemplated by the Reorganization Agreement are in the best
interests of the stockholders of OccuSystems. Accordingly, the Board has
unanimously approved the Reorganization Agreement and the OccuSystems Merger and
recommends that all OccuSystems stockholders vote for approval thereof. The
Board of Directors has also unanimously approved the Concentra Benefit Plans and
recommends that all OccuSystems stockholders vote for their approval.
YOUR VOTE IS IMPORTANT. FAILURE TO VOTE OR TO RETURN YOUR PROXY CARD WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE REORGANIZATION AGREEMENT AND THE
OCCUSYSTEMS MERGER. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE OCCUSYSTEMS
MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, I URGE YOU TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE.
<PAGE>
You may, of course, attend the OccuSystems Meeting and vote in person, even if
you have previously returned your proxy card.
Sincerely yours,
JOHN K. CARLYLE
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
[LOGO]
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 1997
------------------------
A Special Meeting of Stockholders (the "OccuSystems Meeting") of
OccuSystems, Inc., a Delaware corporation ("OccuSystems"), will be held starting
at 9:00 a.m., Dallas time, on August 29, 1997, at the Holiday Inn, 4441 Highway
114 and Esters Boulevard, Irving, Texas 75063. Attendance at the OccuSystems
Meeting will be limited to stockholders of record on July 16, 1997, or their
proxies, beneficial owners having evidence of ownership on such date and invited
guests of OccuSystems.
The purposes of the OccuSystems Meeting are:
1. To consider and vote upon a proposal (the "OccuSystems Proposal") to
approve and adopt (i) an Agreement and Plan of Reorganization dated as of
April 21, 1997 (the "Reorganization Agreement"), by and among OccuSystems,
CRA Managed Care, Inc., a Massachusetts corporation ("CRA"), and Concentra
Managed Care, Inc., a Delaware corporation ("Concentra"), and (ii) the
merger of OccuSystems with and into Concentra pursuant to the Reorganization
Agreement (the "OccuSystems Merger"). The Reorganization Agreement
contemplates, among other things, that (a) OccuSystems will be merged with
and into Concentra and a wholly-owned subsidiary of Concentra will be merged
with and into CRA, resulting in CRA becoming a wholly-owned subsidiary of
Concentra, (b) each outstanding share of common stock, par value $.01 per
share ("OccuSystems Common Stock"), of OccuSystems will be converted into
one share of common stock, par value $.01 per share ("Concentra Common
Stock"), of Concentra, and (c) each outstanding share of common stock, par
value $.01 per share, of CRA (other than shares held by holders who have
perfected appraisal rights) will be converted into 1.786 shares of Concentra
Common Stock.
2. To consider and vote upon a proposal to approve the adoption of the
Concentra Managed Care, Inc. 1997 Long-Term Incentive Plan (the "Concentra
Incentive Plan"), the terms of which are described in the accompanying Joint
Proxy Statement/Prospectus. The full text of the Concentra Incentive Plan is
included as Appendix G to the Joint Proxy Statement/Prospectus.
3. To consider and vote upon a proposal to approve the adoption of the
Concentra Managed Care, Inc. 1997 Employee Stock Purchase Plan (the
"Concentra Employee Stock Purchase Plan"), the terms of which are described
in the accompanying Joint Proxy Statement/Prospectus. The full text of the
Concentra Employee Stock Purchase Plan is included as Appendix H to the
Joint Proxy Statement/Prospectus.
4. To transact such other business as may properly come before the
OccuSystems Meeting or at any adjournments or postponements thereof.
The terms of the OccuSystems Proposal, the Concentra Common Stock to be
issued in connection therewith, the Concentra Incentive Plan and the Concentra
Employee Stock Purchase Plan are described in detail in the accompanying Joint
Proxy Statement/Prospectus. To ensure that your vote will be counted, please
complete, date and sign the enclosed proxy card and return it promptly in the
enclosed postage-paid envelope, whether or not you plan to attend the
OccuSystems Meeting. You may revoke your proxy in the manner described in the
accompanying Joint Proxy Statement/Prospectus at any time before it is voted at
the OccuSystems Meeting.
<PAGE>
In the event that there are not sufficient votes to approve the OccuSystems
Proposal, the Concentra Incentive Plan or the Concentra Employee Stock Purchase
Plan, it is expected that the OccuSystems Meeting will be postponed or adjourned
in order to permit further solicitation of proxies by OccuSystems.
Holders of record of shares of OccuSystems Common Stock at the close of
business on July 16, 1997, the record date for the OccuSystems Meeting, are
entitled to notice of and to vote at the OccuSystems Meeting or at any
postponements or adjournments thereof. The affirmative vote of the holders of a
majority of the outstanding shares of OccuSystems Common Stock is required to
approve the OccuSystems Proposal. The affirmative vote of the holders of a
majority of the total combined shares present and eligible to vote at the
OccuSystems Meeting and a meeting of CRA stockholders (after giving effect to
the exchange ratio to be applied in the Mergers) is required to approve the
Concentra Incentive Plan and the Concentra Employee Stock Purchase Plan.
By order of the Board of Directors
RICHARD A. PARR II
Executive Vice President, General
Counsel
and Secretary
Dallas, Texas
August 1, 1997
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE OCCUSYSTEMS MEETING IN PERSON, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE. A
RETURN ENVELOPE IS PROVIDED FOR YOUR CONVENIENCE. YOU MAY REVOKE YOUR PROXY AT
ANY TIME BEFORE IT IS VOTED BY DELIVERING TO THE SECRETARY OF OCCUSYSTEMS AT
3010 LBJ FREEWAY, SUITE 400, DALLAS, TEXAS 75234, A SIGNED NOTICE OF REVOCATION
OR A LATER DATED SIGNED PROXY CARD OR BY ATTENDING THE OCCUSYSTEMS MEETING AND
VOTING IN PERSON.
DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.
<PAGE>
[Logo]
August 1, 1997
To the Stockholders of CRA Managed Care, Inc.:
You are cordially invited to attend a Special Meeting of Stockholders (the
"CRA Meeting") of CRA Managed Care, Inc. ("CRA"), to be held on August 29, 1997,
at 10:00 a.m., Boston time, at the offices of Hutchins, Wheeler & Dittmar, 101
Federal Street, Boston, Massachusetts 02110.
At the CRA Meeting, you will be asked to approve the merger (the "CRA
Merger") of CRA Merger Corp., a Massachusetts corporation ("CRA Merger Corp.")
and a wholly-owned subsidiary of Concentra Managed Care, Inc., a Delaware
corporation ("Concentra"), with and into CRA in conjunction with the merger of
OccuSystems, Inc., a Delaware corporation ("OccuSystems"), with and into
Concentra pursuant to an Agreement and Plan of Reorganization dated as of April
21, 1997 (the "Reorganization Agreement").
Upon completion of these mergers:
- CRA will become a wholly-owned subsidiary of Concentra;
- Concentra will be the surviving corporation of the merger with OccuSystems
and the separate corporate existence of OccuSystems will cease;
- each outstanding share of CRA Common Stock (other than shares held by
holders who have perfected appraisal rights) will be converted into 1.786
shares of Concentra Common Stock; and
- each outstanding share of OccuSystems Common Stock will be converted into
one share of Concentra Common Stock.
If the mergers are approved, you will also be asked to approve the Concentra
Managed Care, Inc. 1997 Long-Term Incentive Plan (the "Concentra Incentive
Plan") and the Concentra Managed Care, Inc. 1997 Employee Stock Purchase Plan
(the "Concentra Employee Stock Purchase Plan" and, together with the Concentra
Incentive Plan, the "Concentra Benefit Plans"). The mergers contemplated by the
Reorganization Agreement are not conditioned on approval of the Concentra
Incentive Plan or the Concentra Employee Stock Purchase Plan.
A detailed description of the Reorganization Agreement, the proposed mergers
of CRA and OccuSystems, the Concentra Incentive Plan and the Concentra Employee
Stock Purchase Plan is set forth in the accompanying Joint Proxy
Statement/Prospectus, which you should read carefully.
After careful consideration, CRA's Board of Directors has determined that
the transactions contemplated by the Reorganization Agreement are in the best
interests of the stockholders of CRA. Accordingly, the Board has unanimously
approved the Reorganization Agreement and the CRA Merger and recommends that all
CRA stockholders vote for approval thereof. The Board of Directors also
unanimously approved the Concentra Benefit Plans and recommends that all CRA
stockholders vote for their approval.
YOUR VOTE IS IMPORTANT. FAILURE TO VOTE OR TO RETURN YOUR PROXY CARD WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE CRA MERGER. THEREFORE, WHETHER OR NOT
YOU PLAN TO ATTEND THE CRA MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF
SHARES YOU OWN, I URGE YOU TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE. You may, of course,
attend the CRA Meeting and vote in person, even if you have previously returned
your proxy card.
Sincerely yours,
DONALD J. LARSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
[Logo]
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 1997
------------------------
A Special Meeting of Stockholders (the "CRA Meeting") of CRA Managed Care,
Inc., a Massachusetts corporation ("CRA"), will be held starting at 10:00 a.m.,
Boston time, on August 29, 1997, at the offices of Hutchins, Wheeler & Dittmar,
101 Federal Street, Boston, Massachusetts 02110. Attendance at the CRA Meeting
will be limited to stockholders of record on July 16, 1997, or their proxies,
beneficial owners having evidence of ownership on such date and invited guests
of CRA.
The purposes of the CRA Meeting are:
1. To consider and vote upon a proposal (the "CRA Proposal") to approve
and adopt (i) an Agreement and Plan of Reorganization dated as of April 21,
1997 (the "Reorganization Agreement"), by and among CRA, OccuSystems, Inc.,
a Delaware corporation ("OccuSystems"), and Concentra Managed Care, Inc., a
Delaware corporation ("Concentra"), (ii) the merger of a wholly-owned
subsidiary of Concentra into CRA (the "CRA Merger") and (iii) the Agreement
and Plan of Merger to be entered into by CRA and such subsidiary of
Concentra in order to effect the CRA Merger. The Reorganization Agreement
contemplates, among other things, that (a) OccuSystems will be merged with
and into Concentra and a wholly-owned subsidiary of Concentra will be merged
with and into CRA, resulting in CRA becoming a wholly-owned subsidiary of
Concentra, (b) each outstanding share of common stock, par value $.01 per
share, of OccuSystems will be converted into one share of common stock, par
value $.01 per share ("Concentra Common Stock"), of Concentra, and (c) each
outstanding share of common stock, par value $.01 per share, of CRA (other
than shares held by holders who have perfected appraisal rights) will be
converted into 1.786 shares of Concentra Common Stock.
2. To consider and vote upon a proposal to approve the adoption of the
Concentra Managed Care, Inc. 1997 Long-Term Incentive Plan (the "Concentra
Incentive Plan"), the terms of which are described in the accompanying Joint
Proxy Statement/Prospectus. The full text of the Concentra Incentive Plan is
included as Appendix G to the Joint Proxy Statement/Prospectus.
3. To consider and vote upon a proposal to approve the adoption of the
Concentra Managed Care, Inc. 1997 Employee Stock Purchase Plan (the
"Concentra Employee Stock Purchase Plan"), the terms of which are described
in the accompanying Joint Proxy Statement/Prospectus. The full text of the
Concentra Employee Stock Purchase Plan is included as Appendix H to the
Joint Proxy Statement/Prospectus.
4. To transact such other business as may properly come before the CRA
Meeting or at any adjournments or postponements thereof.
The terms of the CRA Proposal, the Concentra Common Stock to be issued in
connection therewith, the Concentra Incentive Plan and the Concentra Employee
Stock Purchase Plan are described in detail in the accompanying Joint Proxy
Statement/Prospectus. To ensure that your vote will be counted, please complete,
date and sign the enclosed proxy card and return it promptly in the enclosed
postage-paid envelope, whether or not you plan to attend the CRA Meeting. You
may revoke your proxy in the manner described in the accompanying Joint Proxy
Statement/Prospectus at any time before it is voted at the CRA Meeting.
In the event that there are not sufficient votes to approve the CRA
Proposal, the Concentra Incentive Plan or the Concentra Employee Stock Purchase
Plan, it is expected that the CRA Meeting will be postponed or adjourned in
order to permit further solicitation of proxies by CRA.
If the CRA Proposal is approved by the CRA stockholders at the CRA Meeting
and the CRA Merger is effected by CRA, any stockholder (1) who files with the
corporation, before the taking of the vote on the CRA Proposal, written
objection to the proposed action stating that such stockholder intends to demand
payment for such stockholder's shares if the action is taken and (2) whose
shares are not voted in favor of
<PAGE>
such action has or may have the right to demand in writing from CRA, within
twenty days after the date of mailing to such stockholder of notice in writing
that the corporate action has become effective, payment for such stockholder's
shares and an appraisal of the value thereof. CRA and any such stockholder shall
in such case have the rights and duties and shall follow the procedure set forth
in sections 88 to 98, inclusive, of chapter 156B of the General Laws of
Massachusetts.
Holders of record of shares of CRA Common Stock at the close of business on
July 16, 1997, the record date for the CRA Meeting, are entitled to notice of
and to vote at the CRA Meeting or at any postponements or adjournments thereof.
The affirmative vote of the holders of two-thirds of the outstanding shares of
CRA Common Stock is required to approve the CRA Proposal. The affirmative vote
of the holders of a majority of the total combined shares present and eligible
to vote at the CRA Meeting and a meeting of OccuSystems stockholders (after
giving effect to the exchange ratio to be applied in the Mergers) is required to
approve the Concentra Incentive Plan and the Concentra Employee Stock Purchase
Plan.
By order of the Board of Directors
JAMES WESTRA
Clerk
Boston, Massachusetts
August 1, 1997
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE CRA MEETING IN PERSON, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE. A
RETURN ENVELOPE IS PROVIDED FOR YOUR CONVENIENCE. YOU MAY REVOKE YOUR PROXY AT
ANY TIME BEFORE IT IS VOTED BY DELIVERING TO THE CLERK OF CRA AT 312 UNION
WHARF, BOSTON, MASSACHUSETTS 02109, A SIGNED NOTICE OF REVOCATION OR A LATER
DATED SIGNED PROXY CARD OR BY ATTENDING THE CRA MEETING AND VOTING IN PERSON.
DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
OCCUSYSTEMS, INC. CRA MANAGED CARE, INC.
JOINT PROXY STATEMENT/PROSPECTUS
FOR SPECIAL MEETINGS OF
STOCKHOLDERS OF OCCUSYSTEMS, INC.
AND
STOCKHOLDERS OF CRA MANAGED CARE, INC.
TO BE HELD AUGUST 29, 1997
CONCENTRA MANAGED CARE, INC.
PROSPECTUS
This Joint Proxy Statement/Prospectus is being furnished to holders of
common stock of OccuSystems, Inc., a Delaware corporation ("OccuSystems"), in
connection with the solicitation of proxies by the Board of Directors of
OccuSystems (the "OccuSystems Board") for use at the special meeting of
stockholders of OccuSystems to be held on August 29, 1997, or any adjournment or
postponement thereof (the "OccuSystems Meeting"), and to holders of common stock
of CRA Managed Care, Inc. a Massachusetts corporation ("CRA"), in connection
with the solicitation of proxies by the Board of Directors of CRA (the "CRA
Board") for use at the special meeting of stockholders of CRA to be held on
August 29, 1997, or any adjournment or postponement thereof (the "CRA Meeting"
and, together with the OccuSystems Meeting, the "Special Meetings").
The OccuSystems Meeting has been called to consider and vote upon a proposal
(the "OccuSystems Proposal") to approve and adopt (i) an Agreement and Plan of
Reorganization dated as of April 21, 1997 (the "Reorganization Agreement"), by
and among OccuSystems, CRA and Concentra Managed Care, Inc. ("Concentra"), a
Delaware corporation formed by OccuSystems and CRA to consummate the Mergers (as
hereinafter defined), and (ii) the merger of OccuSystems with and into Concentra
pursuant to the Reorganization Agreement (the "OccuSystems Merger") resulting in
the separate corporate existence of OccuSystems ceasing and each outstanding
share of common stock, par value $.01 per share, of OccuSystems ("OccuSystems
Common Stock") being converted into one share of common stock, par value $.01
per share, of Concentra ("Concentra Common Stock").
The CRA Meeting has been called to consider and vote upon a proposal (the
"CRA Proposal") to approve and adopt (i) the Reorganization Agreement, (ii) the
merger of a wholly-owned subsidiary of Concentra with and into CRA pursuant to
the Reorganization Agreement (the "CRA Merger" and, together with the
OccuSystems Merger, the "Mergers") resulting in CRA becoming a wholly-owned
subsidiary of Concentra and each outstanding share of common stock, par value
$.01 per share, of CRA ("CRA Common Stock") being converting into 1.786 shares
of Concentra Common Stock and (iii) the Agreement and Plan of Merger to be
entered into to effect the CRA Merger (the "CRA Merger Agreement").
Stockholders at the Special Meetings will also be asked to consider and vote
upon separate proposals to approve the Concentra Managed Care, Inc. 1997
Long-Term Incentive Plan (the "Concentra Incentive Plan") and the Concentra
Managed Care, Inc. 1997 Employee Stock Purchase Plan (the "Concentra Employee
Stock Purchase Plan" and, together with the Concentra Incentive Plan, the
"Concentra Benefit Plans").
This Joint Proxy Statement/Prospectus also serves as a prospectus of
Concentra with respect to the registration under the Securities Act of 1933 (the
"Securities Act") of up to 38,467,074 shares of Concentra Common Stock that will
be issued to (i) the holders of outstanding shares of OccuSystems Common Stock
upon consummation of the OccuSystems Merger and (ii) the holders of outstanding
shares of CRA Common Stock, upon consummation of the CRA Merger. See "THE
REORGANIZATION AGREEMENT -- Conversion of OccuSystems Common Stock" and "--
Conversion of CRA Common Stock." In addition, this Joint Proxy
Statement/Prospectus serves as a prospectus of Concentra with respect to the
registration under the Securities Act of (i) Concentra's 6% Convertible
Subordinated Notes due 2001 (the "Concentra Notes") to be issued in exchange for
OccuSystems' 6% Convertible Subordinated Notes due 2001 (the "OccuSystems
Notes") upon consummation of the OccuSystems Merger and (ii) 3,291,246 shares
(subject to adjustment in certain events) of Concentra Common Stock to be issued
upon conversion of the Concentra Notes. See "THE MERGERS--OccuSystems Notes."
The OccuSystems Common Stock is listed for trading on the Nasdaq National
Market under the symbol "OSYS" and OccuSystems Notes are listed for trading on
the Nasdaq SmallCap Market under the symbol "OSYSG." The CRA Common Stock is
listed for trading on the Nasdaq National Market under the symbol "CRAA."
Application has been made to list the Concentra Common Stock on the Nasdaq
National Market under the symbol "CCMC and to list the Concentra Notes on the
Nasdaq SmallCap Market under the symbol "CCMCG." On July 30, 1997, the closing
sales prices of the OccuSystems Common Stock and the CRA Common Stock were
$29 1/2 and $53 5/8, respectively.
SEE "RISK FACTORS AND CERTAIN CONSIDERATIONS" BEGINNING ON PAGE 18 OF THIS
JOINT PROXY STATEMENT/ PROSPECTUS FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH YOUR DECISION ON WHETHER TO VOTE FOR THE
MERGERS.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Joint Proxy Statement/Prospectus and accompanying form of proxy are
first being mailed to the stockholders of OccuSystems and CRA and the holders of
the OccuSystems Notes on or about August 1, 1997.
The date of this Joint Proxy Statement/Prospectus is August 1, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AVAILABLE INFORMATION.......................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.................................... 4
SUMMARY........................................ 5
The Companies................................ 5
The Special Meetings......................... 5
The Reorganization Agreement................. 6
The Stock Option Agreements.................. 9
The Mergers.................................. 9
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL
INFORMATION.................................. 13
COMPARATIVE PER SHARE DATA..................... 16
Comparative Market Prices and Dividends...... 16
Quotation of Concentra Common Stock and
Concentra Notes............................ 17
RISK FACTORS AND CERTAIN CONSIDERATIONS........ 18
Concentra.................................... 18
OccuSystems.................................. 21
CRA.......................................... 23
THE SPECIAL MEETINGS........................... 25
Times and Places; Purposes................... 25
Voting Rights, Votes Required for Approval... 25
Proxies...................................... 26
THE MERGERS.................................... 29
Background of the Mergers.................... 29
Recommendation of OccuSystems Board;
OccuSystems' Reasons for the Mergers....... 32
Recommendation of CRA Board; CRA's Reasons
for the Mergers............................ 34
Opinions of Financial Advisors............... 37
Interests of Certain Persons in the
Mergers.................................... 44
Accounting Treatment......................... 46
OccuSystems Notes............................ 47
Certain Federal Income Tax Consequences...... 47
Regulatory Approvals......................... 49
Quotation of Concentra Common Stock and
Concentra Notes............................ 49
Resale Restrictions.......................... 49
Dissenters' Rights........................... 50
THE REORGANIZATION AGREEMENT................... 51
The Mergers.................................. 51
Conversion of OccuSystems Common Stock....... 51
Conversion of CRA Common Stock............... 52
Certain Representations and Warranties....... 52
Certain Covenants............................ 53
Conditions to the Mergers.................... 58
Termination of the Reorganization
Agreement.................................. 59
Termination Fees............................. 60
THE STOCK OPTION AGREEMENTS.................... 60
General...................................... 60
Certain Repurchases.......................... 61
Voting....................................... 61
Limitation on Total Profit................... 61
Standstill Provisions........................ 61
Restrictions on Transfer..................... 62
BUSINESS OF OCCUSYSTEMS........................ 63
BUSINESS OF CRA................................ 65
BUSINESS OF CONCENTRA.......................... 66
General...................................... 66
New Credit Facility.......................... 66
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND
INFORMATION.................................. 67
<CAPTION>
PAGE
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<S> <C>
CAPITALIZATION................................. 68
CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
(Unaudited).................................. 69
COMPARISON OF STOCKHOLDERS' RIGHTS............. 76
Comparison of Stockholders' Rights with
Respect to Concentra and OccuSystems....... 76
Comparison of Stockholders' Rights with
Respect to Concentra and CRA............... 76
DESCRIPTION OF CONCENTRA CAPITAL STOCK......... 80
Authorized Capital Stock..................... 80
Common Stock................................. 80
Preferred Stock.............................. 80
Stockholder Rights Plan...................... 81
Transfer Agent and Registrar................. 83
Certain Antitakeover Effects of Concentra
Certificate, Concentra Bylaws and Delaware
Law........................................ 83
DESCRIPTION OF CONCENTRA NOTES................. 85
MANAGEMENT OF CONCENTRA........................ 97
Directors.................................... 97
Officers..................................... 99
Compensation of Executive Officers........... 100
DESCRIPTION OF THE CONCENTRA 1997 LONG-TERM
INCENTIVE PLAN............................... 101
General...................................... 101
Awards....................................... 102
Other Provisions............................. 103
Tax Implications of Awards................... 104
DESCRIPTION OF THE CONCENTRA EMPLOYEE STOCK
PURCHASE PLAN................................ 106
General...................................... 106
Offering Dates............................... 107
Purchase Price............................... 107
Purchase of Stock; Exercise of Option........ 107
Other Provisions............................. 108
Federal Income Tax Consequences.............. 108
SECURITY OWNERSHIP OF OCCUSYSTEMS, CRA AND
CONCENTRA.................................... 109
OccuSystems.................................. 109
CRA.......................................... 110
Concentra.................................... 111
LEGAL MATTERS.................................. 112
EXPERTS........................................ 112
FUTURE STOCKHOLDER PROPOSALS................... 112
The Reorganization Agreement.................... Appendix A
OccuSystems, Inc. Stock Option
Agreement..................................... Appendix B
CRA Managed Care, Inc. Stock Option
Agreement..................................... Appendix C
Opinion of Donaldson, Lufkin & Jenrette
Securities Corporation........................ Appendix D
Opinion of Alex. Brown & Sons
Incorporated.................................. Appendix E
The CRA Merger Agreement........................ Appendix F
The Concentra Incentive Plan.................... Appendix G
The Concentra Employee Stock
Purchase Plan................................. Appendix H
Sections 86 to 98 of Massachusetts Business
Corporation Law............................... Appendix I
</TABLE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE INTO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND, IF SO GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR THE SALE OF ANY SECURITIES HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF OCCUSYSTEMS OR CRA SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
OccuSystems and CRA are each subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith each files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission that is located at http:// www.sec.gov. OccuSystems Common Stock and
CRA Common Stock are quoted on The Nasdaq National Market and such material may
also be inspected at the offices of The Nasdaq Stock Market, Inc., Listing
Section, 1735 K Street, N.W., Washington, D.C. 20006.
Concentra has filed with the Commission a registration statement on Form S-4
(together with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act of 1933 (the "Securities Act") relating to
shares of Concentra Common Stock and Concentra Notes that are proposed to be
issued in connection with the Mergers to holders of OccuSystems Common Stock,
OccuSystems Notes and CRA Common Stock. See "THE MERGERS -- OccuSystems Notes"
and "THE REORGANIZATION AGREEMENT -- Conversion of OccuSystems Common Stock" and
"-- Conversion of CRA Common Stock." This Joint Proxy Statement/Prospectus does
not contain all of the information set forth in the Registration Statement filed
by Concentra with the Commission, certain portions of which are omitted in
accordance with the rules and regulations of the Commission. Such additional
information is available for inspection and copying at the offices of the
Commission. Statements contained in this Joint Proxy Statement/Prospectus or in
any document incorporated into this Joint Proxy Statement/Prospectus by
reference as to the contents of any contract or other document referred to
herein or therein are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement or such other document, each such statement being
qualified in all respects by such reference.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by OccuSystems with the Commission
under the Exchange Act are incorporated herein by reference:
(a) OccuSystems' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and its Form 10K/A amending such Annual Report filed on July
31, 1997 (collectively, the "OccuSystems Form 10-K");
(b) OccuSystems' Quarterly Report on Form 10-Q for the quarter ended March
31, 1997 (the "OccuSystems Form 10-Q"); and
(c) OccuSystems' Current Reports on Form 8-K dated April 21, 1997 and July
28, 1997 (collectively with the OccuSystems Form 10-K and the OccuSystems Form
10-Q, the "OccuSystems Reports").
The following documents previously filed by CRA with the Commission under
the Exchange Act are incorporated herein by reference:
(a) CRA's Annual Report on Form 10-K for the year ended December 31, 1996
and its Form 10K/A amending such Annual Report filed on July 31, 1997
(collectively, the "CRA Form 10-K");
(b) CRA's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(the "CRA Form 10-Q"); and
(c) CRA's Current Reports on Form 8-K dated June 18, 1997 and July 28, 1997
(collectively with the CRA Form 10-K and the CRA Form 10-Q, the "CRA Reports").
All documents filed by OccuSystems or CRA pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement/Prospectus and prior to the date of the Special Meetings shall be
deemed to be incorporated by reference into this Joint Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein or contained in this Joint Proxy
Statement/Prospectus shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein (or in any other
subsequently filed document that is or is deemed to be incorporated by reference
herein) modifies or supersedes such previous statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except as
modified or superseded.
All information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus relating to OccuSystems has been supplied by OccuSystems
and all such information relating to CRA has been supplied by CRA.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, UPON ORAL OR WRITTEN REQUEST BY
ANY PERSON TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED, IN
THE CASE OF DOCUMENTS RELATING TO OCCUSYSTEMS, FROM OCCUSYSTEMS, 3010 LBJ
FREEWAY, SUITE 400, DALLAS, TEXAS 75234, ATTENTION: RICHARD A. PARR II,
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL; TELEPHONE NUMBER (972) 484-2700,
AND IN THE CASE OF DOCUMENTS RELATING TO CRA, FROM CRA, 312 UNION WHARF, BOSTON,
MASSACHUSETTS 02109, ATTENTION: JEFFREY R. LUBER, SENIOR COUNSEL; TELEPHONE
NUMBER (617) 367-2163. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR
TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY AUGUST 22, 1997.
4
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS INTENDED ONLY TO HIGHLIGHT CERTAIN INFORMATION
CONTAINED ELSEWHERE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS SUMMARY IS
NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, THE APPENDICES HERETO AND THE DOCUMENTS INCORPORATED BY
REFERENCE OR OTHERWISE REFERRED TO HEREIN. STOCKHOLDERS OF OCCUSYSTEMS AND CRA
ARE URGED TO REVIEW THIS ENTIRE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY,
INCLUDING THE APPENDICES HERETO AND SUCH OTHER DOCUMENTS REFERRED TO HEREIN.
THE COMPANIES
OCCUSYSTEMS. Based on a review of public filings and comparison with other
publicly-traded physician practice management companies, OccuSystems' revenues,
number of occupational healthcare centers and number of affiliated physicians
place the company as the nation's largest physician practice management company
focusing on occupational healthcare. OccuSystems currently manages the practices
of 215 physicians in OccuSystems' 120 occupational healthcare centers located in
32 markets in 16 states. OccuSystems provides the management, facilities,
administrative and technical support, case management, physical therapy services
and other ancillary services necessary to establish and maintain a fully
integrated network of occupational healthcare providers. OccuSystems' goal is to
provide a network of physicians and facilities which, combined with OccuSystems'
management expertise and cost containment programs, will afford significant
advantages to patients, employers, physicians and payors in reducing the overall
costs associated with occupational healthcare. Since December 1, 1991,
OccuSystems has acquired the assets of 113 physician practices and developed 28
physician practices. OccuSystems' executive offices are located at 3010 LBJ
Freeway, Suite 400, Dallas, Texas 75234 and its telephone number is (972)
484-2700. See "BUSINESS OF OCCUSYSTEMS."
CRA. CRA provides field case management and specialized cost containment
services designed to reduce workers' compensation costs. CRA operates one of the
largest field case management organizations in North America, consisting of 119
field case management offices with approximately 1,200 field case managers who
provide medical management and return to work services in 49 states, the
District of Columbia and Canada. CRA also provides a broad range of higher
margin specialized cost containment services from 78 service locations,
including utilization management, specialized preferred provider organization
("PPO") network management, telephonic case management and retrospective medical
bill review services, that are designed to reduce costs associated with
work-related injuries and automobile accident-related injuries. Revenues from
specialized cost containment services comprised approximately 33.8% of revenues
for 1996, up from approximately 27.1% for 1995. CRA markets its services to
workers' compensation insurers, third-party administrators ("TPAs"),
self-insured employers and payors of automobile accident medical claims through
a direct sales and marketing organization consisting of over 150 dedicated
personnel. CRA currently has over 1,250 customers nationwide. CRA's executive
offices are located at 312 Union Wharf, Boston, Massachusetts 02109 and its
telephone number is (617) 367-2163. See "BUSINESS OF CRA."
CONCENTRA. Concentra, a Delaware corporation, was formed by OccuSystems and
CRA to consummate the Mergers and has not conducted any substantial business
activities to date. As a result of the Mergers, OccuSystems will be merged into
Concentra and CRA will become a wholly-owned subsidiary of Concentra.
Accordingly, the business of Concentra will be the business currently conducted
by OccuSystems and CRA. The mailing address of Concentra's principal executive
office is 312 Union Wharf, Boston, Massachusetts 02109 and its telephone number
is (617) 367-2163. See "BUSINESS OF CONCENTRA."
THE SPECIAL MEETINGS
OCCUSYSTEMS. The OccuSystems Meeting will be held at the Holiday Inn, 4441
Highway 114 and Esters Boulevard, Irving, Texas 75063 on August 29, 1997,
starting at 9:00 a.m., local time. See "THE
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SPECIAL MEETINGS." At the OccuSystems Meeting, holders of OccuSystems Common
Stock will be asked to approve and adopt the OccuSystems Proposal, the Concentra
Incentive Plan and the Concentra Employee Stock Purchase Plan. The
Reorganization Agreement, the Concentra Incentive Plan and the Concentra
Employee Stock Purchase Plan are included herewith as Appendices A, G and H,
respectively. See "THE MERGERS," "THE REORGANIZATION AGREEMENT," "DESCRIPTION OF
THE CONCENTRA 1997 LONG-TERM INCENTIVE PLAN," and "DESCRIPTION OF THE CONCENTRA
EMPLOYEE STOCK PURCHASE PLAN."
Holders of record of OccuSystems Common Stock at the close of business on
July 16, 1997 (the "OccuSystems Record Date") have the right to receive notice
of and to vote at the OccuSystems Meeting. On July 16, 1997, there were
21,694,545 shares of OccuSystems Common Stock outstanding and entitled to vote.
Each share of OccuSystems Common Stock is entitled to one vote on each matter
that is properly presented to stockholders for a vote at the OccuSystems
Meeting. Under the Delaware General Corporation Law (the "DGCL"), the
affirmative vote of the holders of a majority of the outstanding shares of
OccuSystems Common Stock is required to approve and adopt the OccuSystems
Proposal. The affirmative vote of the holders of a majority of total combined
shares present and eligible to vote at the OccuSystems Meeting and the CRA
Meeting (after giving effect to the Exchange Ratio to be applied in the Mergers)
is required to approve the Concentra Incentive Plan and the Concentra Employee
Stock Purchase Plan.
As of May 31, 1997, directors and executive officers of OccuSystems as a
group beneficially owned 870,687 shares of OccuSystems Common Stock, or
approximately 4.0% of those shares outstanding as of such date and, including
shares issuable upon exercise of options that will vest at the Effective Time as
a result of the Mergers, such persons beneficially owned 1,257,762 shares or
approximately 5.8% of those shares outstanding as of such date.
CRA. The CRA Meeting will be held at the offices of Hutchins, Wheeler &
Dittmar, 101 Federal Street, Boston, Massachusetts 02110, on August 29, 1997,
starting at 10:00 a.m., local time. See "THE SPECIAL MEETINGS." At the CRA
Meeting, holders of CRA Common Stock will be asked to approve and adopt the CRA
Proposal, the Concentra Incentive Plan and the Concentra Employee Stock Purchase
Plan. The Reorganization Agreement, the Concentra Incentive Plan and the
Concentra Employee Stock Purchase Plan are included herewith as Appendices A, G
and H, respectively. See "THE MERGERS," "THE REORGANIZATION AGREEMENT,"
"DESCRIPTION OF THE CONCENTRA 1997 LONG-TERM INCENTIVE PLAN" and "DESCRIPTION OF
THE CONCENTRA EMPLOYEE STOCK PURCHASE PLAN."
Holders of record of CRA Common Stock at the close of business on July 16,
1997 (the "CRA Record Date") have the right to receive notice of and to vote at
the CRA Meeting. On July 16, 1997, there were 9,391,114 shares of CRA Common
Stock outstanding and entitled to vote. Each share of CRA Common Stock is
entitled to one vote on each matter that is properly presented to stockholders
for a vote at the CRA Meeting. Under the Massachusetts Business Corporation Law
(the "MBCL"), the affirmative vote of the holders of two-thirds of the
outstanding shares of CRA Common Stock is required to approve and adopt the CRA
Proposal. The affirmative vote of the holders of a majority of total combined
shares present and eligible to vote at the CRA Meeting and the OccuSystems
Meeting (after giving effect to the Exchange Ratio to be applied in the Mergers)
is required to approve the Concentra Incentive Plan and the
Concentra Employee Stock Purchase Plan.
As of May 31, 1997, directors and executive officers of CRA as a group
beneficially owned 1,447,347 shares of CRA Common Stock, or approximately 16.1%
of those shares outstanding as of such date.
THE REORGANIZATION AGREEMENT
GENERAL. The Reorganization Agreement provides, among other things, for the
merger of OccuSystems into Concentra, with Concentra being the surviving
corporation in the OccuSystems Merger, and the
6
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merger of a wholly-owned subsidiary of Concentra with and into CRA, with CRA
being the surviving corporation in the CRA Merger and becoming a wholly-owned
subsidiary of Concentra.
CONVERSION OF OCCUSYSTEMS COMMON STOCK. Upon consummation of the
OccuSystems Merger, each outstanding share of OccuSystems Common Stock will be
converted into one share of Concentra Common Stock (the "OccuSystems Ratio").
Each share of OccuSystems Common Stock which is held in the treasury of
OccuSystems ("OccuSystems Treasury Stock") will be canceled and cease to exist.
See "THE REORGANIZATION AGREEMENT -- Conversion of OccuSystems Common Stock."
For a description of the Concentra Common Stock, see "DESCRIPTION OF CONCENTRA
CAPITAL STOCK." For a summary of the principal differences between the rights of
holders of Concentra Common Stock and OccuSystems Common Stock, see "COMPARISON
OF STOCKHOLDERS' RIGHTS -- Comparison of Stockholders' Rights with Respect to
Concentra and OccuSystems."
CONVERSION OF CRA COMMON STOCK. Upon consummation of the CRA Merger, each
outstanding share of CRA Common Stock, other than shares held by holders who
have perfected appraisal rights ("Dissenting Shares"), will be converted into
the right to receive 1.786 shares of Concentra Common Stock (the "CRA Ratio").
See "THE REORGANIZATION AGREEMENT -- Conversion of CRA Common Stock." For a
description of the Concentra Common Stock, see "DESCRIPTION OF CONCENTRA COMMON
STOCK." For a summary of the principal differences between the rights of holders
of Concentra Common Stock and CRA Common Stock, see "COMPARISON OF STOCKHOLDERS'
RIGHTS -- Comparison of Stockholders' Rights with Respect to Concentra and CRA."
ASSUMPTION OF OCCUSYSTEMS NOTES. Upon consummation of the OccuSystems
Merger, Concentra, as the successor to OccuSystems under the indenture governing
the OccuSystems Notes, will assume an aggregate principal amount of up to
$97,750,000 of OccuSystems Notes through the issuance of the Concentra Notes.
The OccuSystems Notes are currently convertible into 3,291,246 shares of
OccuSystems Common Stock and, subsequent to the OccuSystems Merger, the
Concentra Notes will be convertible into 3,291,246 shares of Concentra Common
Stock, subject to adjustment in certain events. For a description of the
Concentra Notes, see "DESCRIPTION OF CONCENTRA NOTES." This Joint Proxy
Statement/ Prospectus serves as a prospectus of Concentra with respect to the
registration under the Securities Act of the Concentra Notes to be issued in
exchange for the OccuSystems Notes and of the shares of Concentra Common Stock
that will be issuable upon conversion of the Concentra Notes. The holders of the
OccuSystems Notes are not entitled to vote upon the OccuSystems Proposal.
FRACTIONAL SHARES. No fractional shares of Concentra Common Stock will be
issued to any stockholder of OccuSystems or CRA upon consummation of the
Mergers. For each fractional share that would otherwise be issued, Concentra
will pay by check an amount equal to a pro rata portion of the net proceeds of
the sale by ChaseMellon Shareholder Services, L.L.C. (the "Exchange Agent") of
shares of Concentra Common Stock, representing the aggregate of all such
fractional shares and the aggregate dividends or other distributions that are
payable with respect to such shares of Concentra Common Stock. Such sales will
be executed by the Exchange Agent as soon as practicable after the effective
time of the Mergers (the "Effective Time") at then prevailing prices on the
Nasdaq National Market.
CONDITIONS TO THE MERGERS. The obligations of OccuSystems and CRA to
consummate the Mergers are subject to the fulfillment of various conditions,
including, among others, (i) approval of the OccuSystems Proposal and the CRA
Proposal by the stockholders of OccuSystems and CRA, respectively, (ii)
expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iii) the absence of any injunction or other order preventing or making
the Mergers illegal, (iv) the effectiveness of the Registration Statement and
the absence of any stop order suspending the effectiveness thereof and no
proceeding for that purpose having been initiated by the Commission, (v) receipt
of all required consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory body
and (vi) approval of
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quotation of the Concentra Common Stock on the Nasdaq National Market, subject
only to official notice of issuance. See "THE REORGANIZATION AGREEMENT --
Conditions to the Mergers."
The obligation of OccuSystems to consummate the OccuSystems Merger is
subject to the satisfaction of certain additional conditions, including (i) the
performance by CRA of its obligations under the Reorganization Agreement and the
continued accuracy of the representations and warranties of CRA at the Closing
Date (as hereinafter defined) (subject to certain materiality exceptions), (ii)
the receipt by OccuSystems and Concentra of a satisfactory opinion of its
special counsel that the OccuSystems Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that OccuSystems will not recognize any gain or loss
in the OccuSystems Merger, (iii) no material adverse change in the financial
condition, business or operations of CRA, (iv) holders of not more than five
percent of CRA Common Stock having perfected appraisal rights, (v) receipt of an
opinion dated as of the Closing Date from OccuSystems' auditors that the Mergers
would be properly accounted for as a pooling-of-interests and (vi) that the
fairness opinion of OccuSystems' financial advisor shall not have been withdrawn
or materially modified by such financial advisor in a manner adverse to
OccuSystems' stockholders.
The obligation of CRA to consummate the CRA Merger is subject to the
satisfaction of certain additional conditions, including (i) the performance by
OccuSystems of its obligations under the Reorganization Agreement and the
continued accuracy of the representations and warranties of OccuSystems at the
Closing Date (subject to certain materiality exceptions), (ii) the receipt by
CRA of a satisfactory opinion of its special counsel that the CRA Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code
and/or the transfer of property governed by Section 351 of the Code, (iii) the
receipt by OccuSystems and Concentra of the tax opinion described in the
preceding paragraph, (iv) no material adverse change in the financial condition,
business or operations of OccuSystems, (v) receipt of an opinion dated as of the
Closing Date from CRA's auditors that the Mergers would be properly accounted
for as a pooling-of-interests and (vi) that the fairness opinion of CRA's
financial advisor shall not have been withdrawn or materially modified by such
financial advisor in a manner adverse to CRA's stockholders.
The Reorganization Agreement may be amended at any time before or after
stockholder approval. Either OccuSystems or CRA may extend the time for
performance of any of the obligations of the other party or waive compliance
with any of the agreements or conditions contained in the Reorganization
Agreement. Neither OccuSystems nor CRA currently has any intention to allow for
such extension or to make any such waiver. In the event of any waiver of a
material condition to the consummation of the Mergers by any party (including
without limitation any waiver of the conditions that CRA and OccuSystems receive
opinions concerning the pooling-of-interests accounting treatment for the
Mergers and opinions concerning the tax-free nature of the Mergers), the
Reorganization Agreement will be amended and stockholder approval of the
Reorganization Agreement, including such change, will be obtained.
TERMINATION OF THE REORGANIZATION AGREEMENT. The Reorganization Agreement
is subject to termination at the option of either OccuSystems or CRA if the
Mergers are not consummated on or before October 31, 1997; prior to such time,
by the mutual consent of OccuSystems and CRA; or upon the occurrence of certain
events. The Reorganization Agreement may be terminated by CRA, at any time prior
to the Effective Time, if (i) in the exercise of its fiduciary duties to its
stockholders, the CRA Board determines that such termination is required by
reason of a CRA Alternative Proposal (as hereinafter defined) being made, (ii)
there has been a breach by OccuSystems of any representation or warranty in the
Reorganization Agreement which would have, or which would be reasonably likely
to have, a material adverse effect on OccuSystems, (iii) there has been a
material breach by OccuSystems of any of its covenants or agreements in the
Reorganization Agreement which is not curable or, if curable, is not cured
within 30 days after written notice of the breach, or (iv) the OccuSystems Board
shall have withdrawn or modified, in a manner materially adverse to CRA, its
approval or recommendation of the Reorganization Agreement or the Mergers.
OccuSystems may terminate the Reorganization Agreement, at any time prior to the
Effective Time, if (i) in the exercise of its fiduciary duties to its
stockholders, the OccuSystems Board
8
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determines that such termination is required by reason of an OccuSystems
Alternative Proposal (as hereinafter defined) being made, (ii) there has been a
breach by CRA of any representation or warranty in the Reorganization Agreement
which would have, or which would be reasonably likely to have, a material
adverse effect on CRA, (iii) there has been a material breach by CRA of any of
its covenants or agreements in the Reorganization Agreement which is not curable
or not cured within 30 days of written notice of the breach, or (iv) the CRA
Board shall have withdrawn or modified in a manner materially adverse to
OccuSystems its approval or recommendation of the Reorganization Agreement or
the Mergers. See "THE REORGANIZATION AGREEMENT -- Termination of the
Reorganization Agreement."
TERMINATION FEES. If a CRA Alternative Proposal is made and thereafter the
Reorganization Agreement is terminated (i) by action of the CRA Board in the
exercise of its fiduciary duties by reason of such CRA Alternative Proposal or
(ii) by action of OccuSystems if the CRA Board has withdrawn or modified in a
manner materially adverse to OccuSystems its approval or recommendation of the
Reorganization Agreement or the Mergers, then CRA must pay OccuSystems a
termination fee of $10 million. If an OccuSystems Alternative Proposal is made
and thereafter the Reorganization Agreement is terminated (i) by action of the
OccuSystems Board in the exercise of its fiduciary duties by reason of such
OccuSystems Alternative Proposal or (ii) by action of the CRA Board if the
OccuSystems Board has withdrawn or modified in a manner materially adverse to
CRA its approval or recommendation of the Reorganization Agreement or the
Mergers, then OccuSystems must pay CRA a termination fee of $10 million. See
"THE REORGANIZATION AGREEMENT -- Termination Fees."
THE STOCK OPTION AGREEMENTS
Pursuant to (i) the OccuSystems, Inc. Stock Option Agreement dated as of
April 21, 1997 (the "OccuSystems Stock Option Agreement"), by and between
OccuSystems and CRA, and (ii) the CRA Managed Care, Inc. Stock Option Agreement
dated as of April 21, 1997 (the "CRA Stock Option Agreement" and, together with
the OccuSystems Stock Option Agreement, the "Stock Option Agreements"), by and
between CRA and OccuSystems, OccuSystems has granted to CRA the right (the "CRA
Option"), and CRA has granted to OccuSystems the right (the "OccuSystems Option"
and, together with the CRA Option, the "Options"), to purchase, upon the
occurrence of an event that requires the corporation issuing the option (the
"Issuer") to pay a termination fee as described in the previous paragraph, up to
ten percent of the authorized and outstanding shares of the common stock of the
Issuer as of March 31, 1997, at a price of $21.21 per share for OccuSystems
Common Stock and $37.875 per share for CRA Common Stock. In addition, the Stock
Option Agreements provide that the holder of an Option has the right to require
the Issuer to repurchase from the holder of the Option at any time the Option is
exercisable (i) all or any portion of the Option at a price equal to the
difference between the Market Price (as hereinafter defined) and the exercise
price of the Option, and (ii) any shares purchased pursuant to the Option. The
Stock Options also provide that neither OccuSystems' nor CRA's Total Profit (as
hereinafter defined) from the Option Agreements and the termination fees
discussed above shall exceed $15 million. Further, the Stock Option Agreements
contain certain standstill provisions and provide that any shares acquired must
be voted for and against each matter subject to stockholder vote in the same
proportion as the other stockholders of the Issuer voted for and against such
matter. See "THE STOCK OPTION AGREEMENTS." Copies of the Stock Option Agreements
are attached hereto as Appendices B and C.
THE MERGERS
OWNERSHIP OF CONCENTRA AFTER THE MERGERS. Immediately following the
Mergers, assuming that no CRA stockholders exercise dissenters rights of
appraisal under the MBCL, (i) the former holders of OccuSystems Common Stock
will collectively hold approximately 57.3% of the issued and outstanding shares
of Concentra Common Stock and (ii) the former holders of CRA Common Stock will
collectively hold approximately 42.7% of the issued and outstanding shares of
Concentra Common Stock.
9
<PAGE>
RECOMMENDATION OF OCCUSYSTEMS BOARD; OCCUSYSTEMS' REASONS FOR THE
MERGERS. The OccuSystems Board, by unanimous vote, has determined that the
Mergers are in the best interests of the holders of OccuSystems Common Stock and
recommends that holders of OccuSystems Common Stock vote in favor of the
OccuSystems Proposal. The decision of the OccuSystems Board to enter into the
Reorganization Agreement and to recommend that stockholders vote in favor of the
OccuSystems Proposal is based upon its evaluation of a number of factors,
including the risks associated with the integration of CRA's and OccuSystems'
businesses and management teams, of not achieving desired synergies, of costs
expected in connection with the Mergers and of the fixed merger consideration.
See "RISK FACTORS AND CERTAIN CONSIDERATIONS," "THE MERGERS -- Recommendation of
OccuSystems Board; OccuSystems' Reasons for the Mergers" and "-- Opinions of
Financial Advisors -- Opinion of OccuSystems' Financial Advisor."
RECOMMENDATION OF CRA BOARD; CRA'S REASONS FOR THE MERGERS. The CRA Board,
by unanimous vote, has determined that the Mergers are in the best interests of
the holders of CRA Common Stock and recommends that holders of CRA Common Stock
vote in favor of the CRA Proposal. The decision of the CRA Board to enter into
the Reorganization Agreement and to recommend that stockholders vote in favor of
the CRA Proposal is based on its evaluation of a number of factors, including
the risks associated with the integration of CRA's and OccuSystems' businesses
and management teams, of not achieving desired synergies, of costs expected in
connection with the Mergers and of the fixed merger consideration. See "RISK
FACTORS AND CERTAIN CONSIDERATIONS," "THE MERGERS -- Recommendation of CRA
Board; CRA's Reasons for the Mergers" and "-- Opinions of Financial Advisors --
Opinion of CRA's Financial Advisor."
INTEREST OF CERTAIN PERSONS IN THE MERGERS; MANAGEMENT OF CONCENTRA AFTER
THE MERGERS. Certain members of the management of OccuSystems and CRA and the
OccuSystems Board and the CRA Board have certain interests in the Mergers that
are different from, or in addition to, the interests of stockholders of
OccuSystems and CRA generally. Pursuant to the Reorganization Agreement,
OccuSystems and CRA will designate the directors and officers of Concentra. It
is anticipated that John K. Carlyle, Robert W. O'Leary, Robert A. Ortenzio and
Paul B. Queally, currently directors of OccuSystems, and Donald J. Larson, Lois
E. Silverman, George H. Conrades and Mitchell T. Rabkin, M.D., currently
directors of CRA, will become directors of Concentra. These directors will all
be Continuing Directors for purposes of the Indenture (as hereinafter defined)
relating to OccuSystems Notes. Certain executive officers of OccuSystems and CRA
will become executive officers of Concentra. The following executive officers
and directors of OccuSystems will benefit from the acceleration as a result of
the Mergers of unvested options to purchase in the aggregate 387,075 shares of
OccuSystems Common Stock: John K. Carlyle; Thomas Fogarty, M.D.; James M.
Greenwood; Richard A, Parr II; Richard D. Rehm, M.D.; and Daniel J. Thomas. In
addition, Richard D. Rehm, M.D., an OccuSystems director, will receive a
one-time cash payment of $75,000 in satisfaction of an existing employment
agreement with OccuSystems and Lois E. Silverman, a CRA director, will receive a
one-time cash payment of $300,000 in satisfaction of an existing employment
agreement with CRA. See "THE MERGERS -- Interests of Certain Persons in the
Mergers."
REGULATORY APPROVALS. The Mergers are subject to the requirements of the
HSR Act and the rules and regulations thereunder, which provide that certain
transactions may not be consummated until required information and materials are
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and the requisite
waiting period has expired or is terminated. The waiting period under the HSR
Act expired for OccuSystems and CRA on May 28, 1997. The waiting period with
respect to filings made by Donald J. Larson and Lois E. Silverman under the HSR
Act terminated effective July 11, 1997. Other than compliance with applicable
securities laws, neither OccuSystems nor CRA is aware of any other governmental
or regulatory approval required for consummation of the Mergers. See "THE
MERGERS -- Regulatory Approvals."
10
<PAGE>
ACCOUNTING TREATMENT. OccuSystems and CRA have received a "pooling letter"
from Arthur Andersen LLP, their independent public accountants, dated April 21,
1997, to the effect that the Mergers will be treated as a pooling of interests
for accounting purposes. See "THE MERGERS -- Accounting Treatment" and "THE
REORGANIZATION AGREEMENT -- Conditions to the Mergers."
OPINIONS OF FINANCIAL ADVISORS. OCCUSYSTEMS. On April 16, 1997, Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") made a presentation to the
OccuSystems Board (subsequently confirmed in writing in an opinion dated April
21, 1997) to the effect that, as of the date of such opinion, and based on and
subject to, the assumptions, limitations and qualifications set forth in such
opinions, the quotient of the OccuSystems Ratio and the CRA Ratio (the "Exchange
Ratio") is fair to the holders of OccuSystems Common Stock from a financial
point of view. The full text of the written opinion of DLJ dated April 21, 1997
and updated as of the date of this Joint Proxy Statement/Prospectus which sets
forth assumptions made, factors considered and limitations on the review
undertaken by DLJ, is included as Appendix D to this Joint Proxy
Statement/Prospectus. OccuSystems stockholders are urged to read such opinion
carefully in its entirety. The opinion of DLJ is directed to the OccuSystems
Board, addresses only the Exchange Ratio from a financial point of view, and
does not constitute a recommendation to any stockholder as to how such
stockholder should vote at the OccuSystems Meeting. See "THE MERGERS -- Opinions
of Financial Advisors -- Opinion of OccuSystems' Financial Advisor."
CRA. On April 21, 1997, Alex. Brown & Sons Incorporated ("Alex. Brown"),
financial advisor to CRA, rendered to the CRA Board an opinion to the effect
that, as of such date and based upon and subject to certain matters stated in
such opinion, the Exchange Ratio was fair to the holders of CRA Common Stock
from a financial point of view. The full text of the written opinion of Alex.
Brown dated as of April 21, 1997 and updated as of the date of this Joint Proxy
Statement/Prospectus which sets forth assumptions made, factors considered and
limitations on the review undertaken by Alex. Brown, is included as Appendix E
to this Joint Proxy Statement/Prospectus and should be read carefully in its
entirety. The opinion of Alex. Brown is directed to the CRA Board of Directors,
addresses only the fairness of the Exchange Ratio from a financial point of
view, and does not constitute a recommendation to any stockholder as to how such
stockholder should vote at the CRA Meeting. See "THE MERGERS -- Opinions of
Financial Advisors -- Opinion of CRA's Financial Advisor."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. It is a condition to OccuSystems'
and CRA's obligations to consummate the Mergers that OccuSystems and Concentra
receive an opinion from Vinson & Elkins L.L.P., special counsel to OccuSystems
and Concentra, based upon reasonably requested representation letters, that the
OccuSystems Merger will be treated as a reorganization described in Section
368(a) of the Code and that OccuSystems will not recognize any gain or loss in
the OccuSystems Merger. It is a condition to CRA's obligation to consummate the
CRA Merger that CRA receive an opinion from Hutchins, Wheeler & Dittmar, a
Professional Corporation, special counsel to CRA, based upon reasonably
requested representation letters, that the CRA Merger will be treated as a
reorganization described in Section 368(a) of the Code and/or a transfer of
property under Section 351 of the Code. Based on an opinion rendered to CRA by
Hutchins, Wheeler & Dittmar, a Professional Corporation, and an opinion rendered
to OccuSystems by Vinson & Elkins, L.L.P., no gain or loss generally will be
recognized by a holder of CRA Common Stock or OccuSystems Common Stock who
exchanges such stock solely for Concentra Common Stock pursuant to the Mergers.
Holders of CRA Common Stock may recognize gain or loss by reason of cash
received in lieu of fractional shares or by reason of exercising dissenters'
rights of appraisal. See "THE MERGERS -- Certain Federal Income Tax
Consequences" for a summary of such opinions.
DISSENTERS' RIGHTS. Holders of OccuSystems Common Stock are not entitled to
dissenters' or appraisal rights in connection with the OccuSystems Merger.
Holders of CRA Common Stock (i) who file with CRA before the taking of the vote
of the stockholders on the CRA Proposal, written objection to the proposed
action stating that such holder intends to demand payment for such holder's
shares if the action
11
<PAGE>
is taken and (ii) whose shares are not voted in favor of the proposed action,
and who have otherwise properly complied with Section 86 of the MBCL, will be
entitled to dissenters' rights. See "THE MERGERS -- Dissenters' Rights."
STOCK-BASED COMPENSATION PLANS. If the Mergers and the Concentra Incentive
Plan are approved by the stockholders of OccuSystems and CRA, no additional
awards will be granted under any stock-based compensation plan of OccuSystems or
CRA. Pursuant to the terms of the Reorganization Agreement, Concentra will
assume all outstanding stock options of OccuSystems and CRA upon consummation of
the Mergers. In addition, certain options to purchase shares of OccuSystems
Common Stock held by certain officers and directors of OccuSystems will vest and
become immediately exercisable as of the Effective Time. See "THE MERGERS --
Interests of Certain Persons in the Mergers."
STOCKHOLDERS' RIGHTS. The rights applicable to holders of Concentra Common
Stock under Concentra's Certificate of Incorporation and Bylaws will differ in
certain respects from the rights currently applicable to holders of CRA Common
Stock and OccuSystems Common Stock. See "COMPARISON OF STOCKHOLDERS' RIGHTS."
RISK FACTORS. In evaluating the Mergers, stockholders of OccuSystems and
CRA should take into account certain risk factors relating to the Mergers,
Concentra, OccuSystems, CRA and their respective business, including the risk
factors discussed below:
- forward-looking statements are contained in this Joint Proxy
Statement/Prospectus and, although OccuSystems, CRA and Concentra believe
that they are based on reasonable assumptions, no assurances can be given
that actual results will not differ from such forward-looking statements;
- the merger consideration to be received by the stockholders of OccuSystems
and CRA is fixed and will not be adjusted due to market conditions or in
the event of any fluctuations in the price of the stock of either company;
- Concentra's success will rely upon the successful integration of the
businesses and management teams of OccuSystems and CRA;
- Concentra Common Stock and Concentra Notes will not have a public market
before the Mergers, and prices of those securities may be volatile;
- consummation of the Mergers will result in the acceleration of certain
options held by the directors and officers of OccuSystems and certain
officers of OccuSystems and CRA have entered into employment agreements
with Concentra which will become effective upon the Effective Time;
- certain provisions of Concentra's charter and bylaws may discourage a
change of control; and
- a proposed change to the accounting and reporting treatment of start-up
costs may require OccuSystems to write off certain deferred start-up
costs.
These risk factors are discussed at greater length under the caption "RISK
FACTORS AND CERTAIN CONSIDERATIONS -- Concentra." See also "RISK FACTORS AND
CERTAIN CONSIDERATIONS -- OccuSystems" and "-- CRA" for risk factors concerning
the business of OccuSystems and CRA.
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION
OCCUSYSTEMS HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary historical consolidated financial
information of OccuSystems that has been derived from, and should be read in
conjunction with, OccuSystems' audited consolidated financial statements and
unaudited interim consolidated financial statements, including the notes
thereto, which are incorporated by reference in this Joint Proxy
Statement/Prospectus. Unaudited interim data reflects, in the opinion of
OccuSystems' management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation of results for such
interim periods. Results of operations for unaudited interim periods are not
necessarily indicative of results which may be expected for any other interim or
annual period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993(1) 1994 1995 1996 1996 1997
--------- ---------- --------- ---------- ---------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.............................. $ 14,937 $ 64,185 $ 85,502 $ 136,986 $ 170,035 $ 38,331 $ 46,383
Operating income (loss) from continuing
operations.............................. 452 (17,910) 1,768 10,322 19,742 2,734 5,735
Interest expense.......................... 489 1,710 1,869 3,015 2,064 560 1,598
Income (loss) from continuing operations
before extraordinary charge............. (76) (19,538) (1,149) 3,900 11,033 1,275 3,013
Net income (loss)......................... $ 156 $ (19,386) $ (773) $ 3,220 $ 11,033 $ 1,275 $ 3,013
Primary income (loss) per share from
continuing operations before
extraordinary charge.................... $ (0.01) $ (1.58) $ (0.08) $ 0.22 $ 0.51 $ 0.07 $ 0.14
Primary net income (loss) per share....... $ 0.03 $ (1.57) $ (0.05) $ 0.19 $ 0.51 $ 0.07 $ 0.14
Primary weighted average number of common
shares outstanding...................... 5,317 12,358 14,333 19,115 22,029 21,662 22,316
Basic earnings per share from continuing
operations(2)........................... $ (0.08) $ 0.22 $ 0.50 $ 0.07 $ 0.14
Basic weighted average shares
outstanding(2).......................... 9,616 17,474 20,766 19,451 21,575
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
--------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital.................................... $ 1,131 $ 8,551 $ 11,573 $ 12,244 $ 96,271 $ 86,045
Total assets....................................... 39,926 51,937 76,650 146,369 260,619 263,628
Long-term debt, net of current maturities.......... 11,855 15,825 20,072 18,108 99,089 98,307
Convertible exchangeable preferred stock(3)........ -- -- 15,000 -- -- --
Stockholders' equity............................... 18,764 19,949 20,039 94,586 132,541 136,119
</TABLE>
- ------------------------
(1) Operating results for the year ended December 31, 1993 include certain
nonrecurring charges of approximately $20.6 million principally incurred in
connection with the write-down of goodwill.
(2) The Financial Accounting Standards Board has issued Statement of Accounting
Standards No. 128 ("SFAS 128"), Earnings Per Share, which establishes new
accounting standards for the presentation of earnings per share for periods
ending after December 15, 1997 whereby primary earnings per share is
replaced with "Basic Earnings Per Share." Under SFAS 128, Basic Earnings Per
Share is computed by dividing reported earnings available to common
stockholders by the weighted average shares outstanding.
(3) The convertible exchangeable preferred stock was exchanged for a convertible
debenture upon consummation of OccuSystems' initial public offering in May
1995 and was subsequently converted into OccuSystems Common Stock in March
1996.
13
<PAGE>
CRA HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary historical consolidated financial
information of CRA and has been derived from and should be read in conjunction
with CRA's audited consolidated financial statements and unaudited interim
consolidated financial statements, including the notes thereto, which are
incorporated by reference in this Joint Proxy Statement/Prospectus. Unaudited
interim data reflects, in the opinion of CRA's management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of results for such interim periods. Results of operations for
unaudited interim periods are not necessarily indicative of results which may be
expected for any other interim or annual period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1996 1997
--------- ---------- ---------- ---------- ---------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 80,851 $ 100,546 $ 121,295 $ 146,055 $ 179,652 $ 40,225 $ 54,489
Operating income(1)..................... 4,990 4,533 8,746 12,419 17,466 3,694 5,667
Interest expense........................ 66 16 4,087 2,484 770 194 166
Income before taxes(1).................. 4,984 4,533 4,589 9,935 17,267 3,500 5,527
Provision for income taxes(2)........... 307 355 5,302 3,974 7,166 1,453 2,432
Net income (loss) before extraordinary
items(1)(2)........................... $ 4,677 $ 4,178 $ (713) $ 5,961 $ 10,101 $ 2,047 $ 3,095
Primary pro forma(3) and actual net
income per share...................... $ 0.57 $ 0.91 $ 1.19 $ 0.27 $ 0.34
Primary weighted average shares
outstanding........................... 4,815 6,540 8,475 7,550 9,102
Basic earnings per share before
extraordinary items(3)(4)............. $ 0.59 $ 0.93 $ 1.22 $ 0.28 $ 0.35
Basic weighted average shares
outstanding(4)........................ 4,700 6,431 8,284 7,373 8,935
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------ MARCH 31,
1992 1993 1994 1995 1996 1997
--------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital...................................... $ 9,114 $ 12,126 $ 5,609 $ 7,493 $ 19,345 $ 23,359
Total assets......................................... 15,894 20,836 31,345 36,556 98,128 102,378
Long-term debt, net of current maturities............ -- -- 37,500 -- -- --
Stockholders' equity (deficit)....................... 11,846 15,856 (28,513) 11,660 76,578 80,787
</TABLE>
- ------------------------
(1) Expenses for the period prior to the recapitalization of CRA in March 1994
(the "Recapitalization") include certain compensation and other expenses,
the levels of which are not comparable to the levels of such expenses for
1994. Expenses for 1994 include increased investments in management
information systems, personnel and certain other items.
(2) Prior to the Recapitalization, CRA elected to be taxed as an "S"
Corporation. In connection with the Recapitalization, CRA was required to
change from an "S" corporation which resulted in CRA recording an
incremental tax provision of $3,772,000 in the first quarter of 1994.
(3) The pro forma net income of $2,753,000 and earnings per share for 1994 have
been computed as if CRA had been subject to federal and state income taxes
during the entire period based upon an effective tax rate indicative of the
statutory rate in effect during the period.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
14
<PAGE>
(4) The Financial Accounting Standards Board has issued Statement of Accounting
Standards No. 128 ("SFAS 128"), Earnings Per Share, which establishes new
accounting standards for the presentation of earnings per share for periods
ending after December 15, 1997 whereby primary earnings per share is
replaced with "Basic Earnings Per Share." Under SFAS 128, Basic Earnings Per
Share is computed by dividing reported earnings available to common
stockholders by weighted average shares outstanding.
CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma selected combined financial information
presents the consolidated financial data of OccuSystems and CRA for the years
ended December 31, 1994, 1995 and 1996 and as of and for the three months ended
March 31, 1997. The unaudited pro forma consolidated Statement of Operations
data give effect to the Mergers as if they had occurred on January 1, 1994 and
the unaudited pro forma consolidated balance sheet data give effect to the
Mergers as if they had occurred on March 31, 1997. Concentra will account for
the Mergers as a pooling-of-interests. The unaudited pro forma selected
consolidated condensed financial data have been derived from the unaudited pro
forma combined condensed financial statements starting at page 67 and should be
read in conjunction with those statements, the related notes thereto and the
separate historical financial statements of OccuSystems and CRA incorporated
herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The
pro forma data are not necessarily indicative of the actual or future results of
operations or financial condition that would have been reported had the Mergers
occurred on the dates assumed. The unaudited pro forma selected combined
financial information does not reflect certain deal fees and transition costs
expected to result from the Mergers. See "PRO FORMA FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- -------------------
1994 1995 1996 1997
---------- ---------- ---------- -------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue............................................... $ 206,797 $ 283,041 $ 371,860 $ 103,482
Operating income...................................... 10,514 22,741 38,095 10,895
Income before taxes................................... 4,666 17,494 30,099 8,818
Provision for income taxes............................ 3,062 7,633 11,481 3,463
Net income(1)......................................... $ 1,604 $ 9,861 $ 18,618 $ 5,355
Primary net income per share.......................... $ 0.07 $ 0.33 $ 0.50 $ 0.14
Primary weighted average shares outstanding(2)........ 22,933 30,795 37,165 38,572
Basic earnings per share(3)........................... $ 0.11 $ 0.41 $ 0.64 $ 0.18
Basic weighted average shares outstanding(3).......... 14,316 23,905 29,050 30,510
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1997
-------------------
<S> <C>
BALANCE SHEET:
Working capital............................................................................ $ 52,854
Total assets............................................................................... 407,524
Long-term debt, net of current maturities.................................................. 98,307
Stockholders' equity....................................................................... 199,733
</TABLE>
- ------------------------
(1) The net income amounts presented are before any extraordinary items and
discontinued operations.
(2) The weighted average shares outstanding has been adjusted to reflect the
issuance of shares in accordance with the exchange ratio stated in the
Reorganization Agreement, whereby each share of CRA Common Stock will be
exchanged for 1.786 shares of Concentra Common Stock and each share of
OccuSystems Common Stock will be exchanged for one share of Concentra Common
Stock.
(3) The Financial Accounting Standards Board has issued Statement of Accounting
Standards No. 128 ("SFAS 128"), Earnings Per Share, which establishes new
accounting standards for the presentation of earnings per share for periods
ending after December 15, 1997 whereby primary earnings per share is
replaced with "Basic Earnings Per Share." Under SFAS 128, Basic Earnings Per
Share is computed by dividing reported earnings available to common
stockholders by weighted average shares outstanding.
15
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth for the OccuSystems Common Stock and CRA
Common Stock selected historical per share data and the corresponding unaudited
pro forma per share amounts for the periods indicated, giving effect to the
Mergers. The data presented are based upon the consolidated financial statements
and related notes of each of OccuSystems and CRA incorporated herein by
reference and the unaudited pro forma combined balance sheet and income
statements, including the notes thereto, appearing elsewhere herein. This
information should be read in conjunction with, and is qualified in its entirety
by, the historical and unaudited pro forma combined financial statements and
related notes thereto. The assumptions used in the preparation of this table
appear under "PRO FORMA FINANCIAL INFORMATION." The comparative per share data
are not necessarily indicative of the results of the future operations of the
combined organization or the actual results that would have occurred if the
Mergers had been consummated at the beginning of the periods indicated.
<TABLE>
<CAPTION>
CRA
OCCUSYSTEMS CRA PRO FORMA PRO FORMA
HISTORICAL HISTORICAL CONCENTRA(1) EQUIVALENT(2)
------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Book value per common share:
March 31, 1997.......................................... $ 6.31 $ 9.01 $ 5.31 $ 9.48
Primary net income (loss) per share:
Year ended December 31, 1994............................ $ (0.08) $ 0.57(3) $ 0.07 $ 0.13
Year ended December 31, 1995............................ 0.22 0.91 0.33 0.59
Year ended December 31, 1996............................ 0.51 1.19 0.50 0.89
Three months ended March 31, 1997....................... 0.14 0.34 0.14 0.25
</TABLE>
- ------------------------
(1) See "Unaudited Pro Forma Financial Information."
(2) Represents the pro forma Concentra amounts multiplied by the CRA Ratio
(1.786).
(3) The pro forma net income of $2,753,000 and earnings per share have been
computed as if CRA had been subject to federal and state income taxes during
the entire period based upon an effective tax rate indicative of the
statutory rate in effect during the period.
COMPARATIVE MARKET PRICES AND DIVIDENDS
OccuSystems Common Stock is listed on the Nasdaq National Market under the
symbol "OSYS." CRA Common Stock is listed on the Nasdaq National Market under
the symbol "CRAA."
On April 21, 1997, the last full trading day preceding public announcement
of the proposed Mergers, the closing price per share of OccuSystems Common Stock
on the Nasdaq National Market was $19 1/8 and the closing price per share of CRA
Common Stock on the Nasdaq National Market was $37 7/8. On July 30, 1997, the
most recent practicable date prior to the printing of this Joint Proxy
Statement/Prospectus, the closing price per share of OccuSystems Common Stock on
the Nasdaq National Market was $29 1/2 and the closing price per share of CRA
Common Stock on the Nasdaq National Market was $53 5/8. See "COMPARATIVE PER
SHARE MARKET PRICE AND DIVIDEND INFORMATION."
Holders of OccuSystems Common Stock and CRA Common Stock are urged to obtain
current market quotations prior to making any decision with respect to the
Mergers.
Neither CRA nor OccuSystems has ever paid dividends. The payment of future
dividends on Concentra Common Stock will be a business decision to be made by
the Board of Directors of Concentra from time to time based upon results of
operations and financial condition of Concentra and such other factors as the
Concentra Board of Directors considers relevant.
16
<PAGE>
QUOTATION OF CONCENTRA COMMON STOCK AND CONCENTRA NOTES
Concentra has applied for the quotation of Concentra Common Stock on the
Nasdaq National Market, and it is anticipated that such shares will be quoted on
the Nasdaq National Market upon official notice of issuance under the symbol
"CCMC." It is a condition to OccuSystems' and CRA's obligations to consummate
the Mergers that the shares of Concentra Common Stock to be issued to
OccuSystems' and CRA's stockholders in connection with the Mergers shall have
been approved for quotation on the Nasdaq National Market subject only to
official notice of issuance. See "THE MERGERS -- Quotation of Concentra Common
Stock." In addition, Concentra has applied for the quotation of the Concentra
Notes on the Nasdaq SmallCap Market, and it is anticipated that such notes will
be quoted on the Nasdaq SmallCap Market upon consummation of the Mergers under
the symbol "CCMCG."
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RISK FACTORS AND CERTAIN CONSIDERATIONS
Stockholders should carefully review the following factors together with the
other information contained and incorporated by reference in this Joint Proxy
Statement/Prospectus prior to voting on the proposals herein.
Words such as "believe," "anticipate," "expect," "plan," "intend,"
"estimate," "project," "will," "could," "may" and words of similar import are
intended to identify forward-looking statements which are used in this Joint
Proxy Statement/Prospectus and the documents incorporated by reference herein.
All statements other than statements of historical facts included or
incorporated by reference in this Joint Proxy Statement/Prospectus, including,
without limitation, statements regarding OccuSystems', CRA's or Concentra's
future financial results, financial position, business strategy, budgets,
projected costs and plans and objectives of management for future operations,
are forward-looking statements. Although OccuSystems and CRA believe their
expectations reflected in such forward-looking statements are based on
reasonable assumptions, no assurance can be given that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the expectations reflected in the forward-looking
statements herein include, among others, product and service demand and
acceptance, the availability of appropriate acquisition and joint venture
candidates, economic conditions, the impact of competition and pricing, changes
in the availability, cost and terms of financing, the impact of present or
future occupational, healthcare and insurance legislation and related
legislation or rule making, the continued availability and functionality of data
processing equipment and licensed software, the impact of possible litigation,
and changes in operating expenses. For a more detailed discussion of the factors
which could cause actual results to vary from those disclosed in forward-looking
statements, reference is made to the following factors and to the cautionary
language contained in each company's periodic reports that are incorporated
herein by reference. All subsequent written or oral forward-looking statements
attributable to CRA or OccuSystems, or persons acting on their behalf, are
expressly qualified in their entirety by the foregoing cautionary statements.
CONCENTRA
FIXED MERGER CONSIDERATION
Stockholders of OccuSystems and CRA should consider that the merger
consideration is fixed. Holders of OccuSystems Common Stock will receive one
share of Concentra Common Stock for each share of OccuSystems Common Stock held.
Holders of CRA Common Stock will receive 1.786 shares of Concentra Common Stock
for each share of CRA Common Stock held. As a result, the merger consideration
will not be adjusted in the event of an increase or decrease in the market price
of OccuSystems Common Stock or CRA Common Stock. Stockholders of OccuSystems and
CRA are urged to obtain current stock market quotations for OccuSystems Common
Stock and CRA Common Stock. See "THE REORGANIZATION AGREEMENT."
UNCERTAINTIES RELATING TO COMBINATION OF BUSINESSES
OccuSystems and CRA have entered into the Reorganization Agreement with the
expectation that the Mergers will benefit OccuSystems' and CRA's stockholders.
See "THE MERGERS -- Recommendation of OccuSystems Board; OccuSystems' Reasons
for the Mergers" and "-- Recommendation of CRA Board; CRA's Reasons for the
Mergers." There can be no assurance that OccuSystems and CRA will integrate
their businesses and management teams successfully or that Concentra will
achieve desired synergies or cost savings. The failure to integrate the two
companies' operations or management teams successfully or to achieve such
synergies or cost savings would have a material adverse effect on Concentra. In
addition, certain third parties who have business relationships with CRA and
OccuSystems, such as customers and suppliers, may wish to terminate those
relationships following the Mergers as a result of CRA's affiliation with
OccuSystems or OccuSystems' affiliation with CRA. Although neither OccuSystems
nor CRA
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believes that any material loss of such business relationships will occur as a
result of the Mergers, there can be no assurance that third parties will not
terminate business relationships with CRA or OccuSystems as a result of the
Mergers.
COSTS RELATING TO THE MERGERS
In connection with the Mergers, Concentra expects to incur costs of
approximately $15 to $20 million. These costs include costs, currently estimated
to be $8 to $10 million, related to the transaction fees and costs incident to
the Mergers, including the fees of financial advisors, attorneys and
accountants. In addition, Concentra expects to incur approximately $7 to $10
million in severance costs, system modification costs and costs of termination
of certain employees and the consolidation and elimination of duplicate
facilities. In addition, costs related to the Mergers could increase if
OccuSystems and CRA encounter difficulties in the consummation of the Mergers or
in the integration of their businesses. There can be no assurance that the
combined company will not incur charges in subsequent quarters to reflect
additional costs, which in turn could have an adverse effect on the business,
financial condition, results of operations and price of the Concentra Common
Stock.
EFFECT OF AMORTIZATION ON RESULTS OF OPERATIONS
Both OccuSystems and CRA have pursued acquisitions as an important component
of their business strategies, and Concentra expects that it will continue to
pursue acquisitions of the types historically consummated by OccuSystems and
CRA. Each of OccuSystems and CRA has had, and Concentra will continue to have,
significant charges for depreciation and amortization expense related to the
fixed assets and intangibles acquired, or to be acquired, in their respective
acquisitions. Consequently, Concentra expects that such depreciation and
amortization will continue to impact its results of operations. The Company
periodically reviews whether changes have occurred, either specific to the
business or generally in the industry, which might require revision of the
remaining estimated useful life of the assigned goodwill or render all or a
portion of the goodwill non-recoverable. In accordance with Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of," impairments are determined by comparing
undiscounted estimated future cash flows to the carrying value of long-lived
assets. At March 31, 1997, Pro Forma Combined Intangible Assets were
approximately $201 million compared to Pro Forma Combined Total Assets of $408
million and Pro Forma Combined Stockholders' equity of $200 million. See
"CONCENTRA MANAGED CARE, INC. CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Mergers, there will have been no public market for Concentra
Common Stock. Although OccuSystems Common Stock and CRA Common Stock have been
actively traded, there can be no assurance that an active trading market will
develop or be sustained for Concentra Common Stock. Following the Mergers, the
market price for Concentra Common Stock may be highly volatile depending on
various factors, including the general economy, stock market conditions,
announcements by Concentra and its competitors and fluctuations in Concentra's
overall operating results. In addition, the stock market historically has
experienced volatility which has affected the market price of securities of many
companies and which has sometimes been unrelated to the operating performance of
such companies. The trading price of Concentra Common Stock could also be
subject to significant fluctuations in response to variations in quarterly
results of operations, changes in earnings estimates by analysts, governmental
regulatory action, general trends in the industry, overall market conditions and
other factors. No assurance can be given or prediction made as to the
relationship between trading prices for OccuSystems Common Stock and CRA Common
Stock prior to the completion of the Mergers and future trading prices for
Concentra Common Stock following the Mergers.
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MATERIAL BENEFITS TO INSIDERS
Consummation of the Mergers will constitute a "change of control" under
certain options or rights to purchase shares of OccuSystems Common Stock (each
an "OccuSystems Option") held by OccuSystems' directors and executive officers.
As a result, OccuSystems Options to purchase an aggregate of 387,075 shares of
OccuSystems Common Stock that would not otherwise vest and become exercisable
until certain dates after the Effective Time will, by virtue of consummation of
the Mergers, vest and become exercisable as of the Effective Time. In addition,
certain officers of OccuSystems and CRA have entered into employment agreements
with Concentra which will become effective upon the Effective Time. Dr. Richard
D. Rehm, a director of OccuSystems, and Lois E. Silverman, Chairman of CRA, have
entered into agreements pursuant to which they will receive lump sum payments of
$75,000 and $300,000, respectively, upon termination of their employment with
OccuSystems and CRA, respectively, at the Effective Time. The terms of the
Reorganization Agreement and consummation of the Mergers may also provide the
directors and officers of OccuSystems and CRA with indemnification and certain
other benefits. See "THE MERGERS -- Interests of Certain Persons in the Mergers"
and "MANAGEMENT OF CONCENTRA -- Compensation of Executive Officers."
ANTI-TAKEOVER PROVISIONS
Concentra's Certificate of Incorporation (i) provides for staggered terms of
office for directors, (ii) prohibits stockholders from acting by written
consent, (iii) prohibits stockholders from calling special meetings of
stockholders and (iv) requires supermajority votes to amend provisions (ii) and
(iii). These provisions, alone or in combination with each other, may discourage
transactions involving actual or potential changes of control of Concentra,
including transactions that otherwise could involve payment of a premium over
prevailing market prices to holders of Concentra Common Stock. Concentra is also
subject to provisions of the DGCL that may make some business combinations more
difficult. See "DESCRIPTION OF CONCENTRA CAPITAL STOCK -- Stockholder Rights
Plan, Certain Anti-Takeover Effects of Concentra Certificate, Concentra Bylaws
and Delaware Law."
EFFECT OF STOCK OPTION AGREEMENTS
OccuSystems and CRA have entered into mutual Stock Option Agreements. The
Stock Option Agreements are intended to compensate OccuSystems or CRA, as the
case may be (each an "Option Holder"), upon the occurrence of an event that
requires the corporation issuing the Option (the "Issuer") to pay a termination
fee pursuant to the Reorganization Agreement. The Stock Option Agreements
provide the Option Holder the right to purchase up to 10% of the authorized and
outstanding shares of common stock of the Issuer as of March 31, 1997, at a
price of $21.21 per share for OccuSystems Common Stock and $37.875 per share for
CRA Common Stock. In addition, the Stock Option Agreements provide that the
Option Holder has the right to require the Issuer to repurchase from the Option
Holder at any time the option is exercisable (i) all or any portion of the
Option at a price equal to the difference between the Market Price and the
exercise price of the Option, and (ii) any shares purchased pursuant to the
Option, in each case subject to certain limitations. The Stock Option Agreements
could have the effect of making an acquisition of either CRA or OccuSystems by a
third party more costly because of the need to acquire in any such transaction
the shares of common stock of the Issuer issued under the Stock Option
Agreements. In addition, the exercise of either of the Options may render more
difficult or impossible the consummation by a third party of an acquisition of
the Issuer of such exercised Option under the pooling-of-interests method of
accounting. See "THE STOCK OPTION AGREEMENTS."
PENDING ACCOUNTING DEVELOPMENTS
The American Institute of Certified Public Accountants has proposed a change
to the accounting and reporting treatment of start-up costs. This proposal,
which is not yet final, would require that start-up costs
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be expensed as incurred. At March 31, 1997, OccuSystems had approximately $2.0
million of deferred start-up costs which would be required to be written off if
the proposed pronouncement is adopted.
OCCUSYSTEMS
DEPENDENCE ON FUTURE ACQUISITIONS AND JOINT VENTURES
OccuSystems' growth in new and existing markets is dependent upon an
aggressive acquisition and joint venture strategy. OccuSystems is in various
stages of negotiations to acquire practices from a number of prospective selling
groups. There can be no assurance that further suitable acquisition candidates
can be found, that acquisitions can be financed or consummated on favorable
terms or that such acquisitions, if completed, will be successful. In addition,
the Emerging Issues Task Force of the Financial Accounting Standards Board is
currently evaluating certain matters relating to the physician practice
management industry, including a review of accounting for business combinations.
OccuSystems is unable to predict the impact, if any, that this review may have
on OccuSystems' acquisition strategy.
OccuSystems has also entered into, and is in various stages of negotiations
to form, joint ventures to own and operate occupational healthcare centers in
selected markets. OccuSystems' strategy is to form these joint ventures with
competitively positioned hospital management companies, hospital systems and
other healthcare providers. There can be no assurances that OccuSystems will
continue to utilize joint ventures as part of its growth strategy, that further
suitable joint ventures can be formed or that such ventures will be successful.
UNCERTAINTIES RELATED TO CHANGING HEALTHCARE ENVIRONMENT
The healthcare industry has experienced substantial changes in recent years.
Although managed care has yet to become a major factor in occupational
healthcare, OccuSystems anticipates that managed care programs, including case
rate and capitation plans, may play an increasing role in the delivery of
occupational healthcare services, and that competition in the occupational
healthcare industry may shift from individual practitioners to specialized
provider groups such as those managed by OccuSystems, insurance companies,
health management organizations ("HMOs") and other significant providers of
managed care products. To facilitate OccuSystems' managed care strategy,
OccuSystems is developing risk-sharing products for the workers' compensation
industry that will be marketed to employers, insurers and managed care
organizations. No assurance can be given that OccuSytems will prosper in the
changing healthcare environment or that OccuSystems' strategy to develop managed
care programs will succeed in meeting employers' and workers' occupational
healthcare needs.
UNCERTAINTIES REGARDING HEALTHCARE REFORM
There have been numerous initiatives at the federal and state levels for
comprehensive reforms affecting the payment for and availability of healthcare
services. OccuSystems believes that such initiatives will continue during the
foreseeable future. Aspects of certain of these reforms as proposed in the past
could, if adopted, adversely affect OccuSystems.
RISKS INHERENT IN PROVISION OF MEDICAL SERVICES
The professional associations with which OccuSystems is affiliated (the
"Physician Groups") and certain employees of OccuSystems, are involved in the
delivery of healthcare services to the public and, therefore, are exposed to the
risk of professional liability claims. Claims of this nature, if successful,
could result in substantial damage awards to the claimants which may exceed the
limits of any applicable insurance coverage. Insurance against losses related to
claims of this type can be expensive and varies widely from state to state.
OccuSystems is indemnified under its management agreements with the Physician
Groups for claims against them, maintains liability insurance for itself and
negotiates liability insurance for the physicians in the Physician Groups.
Successful malpractice claims asserted against the
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Physicians Groups or OccuSystems, however, could have a material adverse effect
on OccuSystems' financial condition and profitability.
CORPORATE PRACTICE OF MEDICINE AND OTHER LAWS
Most states limit the practice of medicine to licensed individuals or
professional organizations comprised of licensed individuals. Many states also
limit the scope of business relationships between business entities such as the
Company and licensed professionals and professional corporations, particularly
with respect to fee-splitting between a physician and another person or entity
and non-physicians exercising control over physicians engaged in the practice of
medicine.
Laws and regulations relating to the practice of medicine, fee-splitting and
similar issues vary widely from state to state, are often vague, and are seldom
interpreted by courts or regulatory agencies in a manner that provides guidance
with respect to business operations such as those of OccuSystems. Although
OccuSystems attempts to structure all of its operations so that they comply with
the relevant state statutes and applicable medical practice, fee-splitting and
similar laws, there can be no assurance that (i) courts or governmental
officials with the power to interpret or enforce these laws and regulations will
not assert that OccuSystems or certain transactions in which it is involved are
in violation of such laws and regulations and (ii) future interpretations of
such laws and regulations will not require structural and organizational
modifications of OccuSystems' business. In addition, the laws and regulations of
some states could restrict expansion of OccuSystems' operations into those
states.
FRAUD AND ABUSE LAWS
A federal law (the "Anti-Kickback Statute") prohibits the offer, payment,
solicitation or receipt of any form of remuneration to induce or in return for
the referral of Medicare or other governmental health program patients or
patient care opportunities, or in return for the purchase, lease or order of
items or services that are covered by Medicare or other governmental health
programs. Violations of the statute can result in the imposition of substantial
civil and criminal penalties. In addition, as of January 1, 1995, certain
anti-referral provisions (the "Stark Amendments") prohibit a physician with a
"financial interest" in an entity from referring a patient to that entity for
the provision of any of 11 "designated health services" (some of which are
provided by Physician Groups affiliated with OccuSystems).
Four of the states in which OccuSystems conducts business (Texas, Arizona,
New Jersey and Maryland) have enacted statutes similar in scope and purpose to
the Anti-Kickback Statute. There is no authority interpreting these statutes in
a manner directly relevant to OccuSystems' business. OccuSystems believes that
regulatory authorities and state courts interpreting these statutes may regard
federal law under the Anti-Kickback Statute as persuasive, and further believes
that its arrangements with the Physician Groups comply with the Anti-Kickback
Statute. In addition, most states have statutes, regulations or professional
codes that restrict a physician from accepting various kinds of remuneration in
exchange for making referrals. Several states are considering legislation that
would prohibit referrals by a physician to an entity in which the physician has
a specified financial interest.
All of the foregoing laws are subject to modification and interpretation,
have not often been interpreted by appropriate authorities in a manner directly
relevant to OccuSystems' business, and are enforced by authorities vested with
broad discretion. OccuSystems has attempted to structure all of its operations
so that they comply with all applicable anti-kickback and anti-referral
prohibitions. OccuSystems also continually monitors developments in this area.
If these laws are interpreted in a manner contrary to OccuSystems'
interpretation, are reinterpreted or amended, or if new legislation is enacted
with respect to healthcare fraud and abuse or similar issues, OccuSystems will
seek to restructure any affected operations so as to maintain compliance with
applicable law. No assurance can be given that such restructuring will be
possible, or, if possible, will not adversely affect OccuSystems' business.
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COMPETITION
The market to provide healthcare services within the workers' compensation
system is highly fragmented and competitive. OccuSystems' primary competitors
have typically been independent physicians, hospital emergency departments and
hospital-owned or -affiliated medical facilities. OccuSystems believes that, due
to the emergence of managed care, its competitors will increasingly consist of
specialized provider groups, insurance companies, HMOs and other significant
providers of managed care products. Many of OccuSystems' current and potential
competitors are significantly larger and have greater financial and marketing
resources than OccuSystems. There can be no assurance that OccuSystems will be
able to compete effectively against those competitors in the future.
CRA
POTENTIAL ADVERSE IMPACT OF GOVERNMENT REGULATION
Many states, including a number of those in which CRA transacts business,
have licensing and other regulatory requirements applicable to CRA's business.
Approximately half of the states have enacted laws that require licensing of
businesses which provide medical review services, such as CRA. Some of these
laws apply to medical review of care covered by workers' compensation. These
laws typically establish minimum standards for qualifications of personnel,
confidentiality, internal quality control, and dispute resolution procedures.
These regulatory programs may result in increased costs of operation for CRA,
which may have an adverse impact upon the CRA's ability to compete with other
available alternatives for health care cost control. In addition, new laws
regulating the operation of managed care provider networks have been adopted by
a number of states. These laws may apply to managed care provider networks
having contracts with the CRA or to provider networks which CRA has organized
and may organize in the future. To the extent CRA is governed by these
regulations, it may be subject to additional licensing requirements, financial
oversight and procedural standards for beneficiaries and providers. Regulation
in the health care and workers' compensation fields is constantly evolving. CRA
is unable to predict what additional government regulations, if any, affecting
its business may be promulgated in the future. CRA's business may be adversely
affected by failure to comply with existing laws and regulations, failure to
obtain necessary licenses and government approvals or failure to adapt to new or
modified regulatory requirements. In addition, the automobile insurance
industry, like the workers' compensation industry, is regulated on a
state-by-state basis. While regulatory approval is not required for CRA to offer
most of its services to the automobile insurance market, state regulatory
approval is required in order to offer automobile insurers products that permit
them to direct claimants into a network of medical providers.
RELIANCE ON DATA PROCESSING AND LICENSED SOFTWARE
Certain aspects of CRA's business are dependent upon its ability to store,
retrieve, process and manage data and to maintain and upgrade its data
processing capabilities. Interruption of data processing capabilities for any
extended length of time, loss of stored data, programming errors or other
computer problems could have a material adverse effect on CRA's business and
results of operations. The software used by CRA within its medical bill review
operation is licensed from an independent third party software company pursuant
to a non-exclusive license with a three-year term expiring in February 1998 that
may be terminated by either party upon six months' prior written notice. While
CRA has historically maintained a good relationship with the licensor, there can
be no assurance that this software license will not be terminated or that the
licensor will renew the license upon expiration. Although management believes
that alternative software would be available if the existing license were
terminated, such termination could be disruptive and could have a material
adverse effect on CRA's business and results of operations.
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POSSIBLE LITIGATION AND LEGAL LIABILITY
CRA, through its utilization management services, makes recommendations
concerning the appropriateness of providers' proposed medical treatment plans of
patients throughout the country, and it could share in potential liabilities for
adverse medical consequences. CRA does not grant or deny claims for payment of
benefits and CRA does not believe that it engages in the practice of medicine or
the delivery of medical services. There can be no assurance, however, that CRA
will not be subject to claims or litigation related to the grant or denial of
claims for payment of benefits or allegations that CRA engages in the practice
of medicine or the delivery of medical services. In addition, there can be no
assurance that CRA will not be subject to other litigation that may adversely
affect CRA's business or results of operations. CRA maintains errors and
omissions insurance and such other lines of coverage as CRA believes are
reasonable in light of CRA's experience to date. There can be no assurance,
however, that such insurance will be sufficient or available at reasonable cost
to protect CRA from liability which might adversely affect CRA's business or
results of operations.
COMPETITION
CRA faces competition from large insurers, HMOs, preferred provider
organizations ("PPOs"), third party administrators ("TPAs") and other managed
health care companies. CRA believes that, as managed care techniques continue to
gain acceptance in the workers' compensation marketplace, CRA's competitors will
increasingly consist of nationally focused workers' compensation managed care
service companies, insurance companies, HMOs and other significant providers of
managed care products. Legislative reforms in some states permit employers to
designate health plans such as HMOs and PPOs to cover workers' compensation
claimants. Because many health plans have the ability to manage medical costs
for worker's compensation claimants, such legislation may intensify competition
in the market served by CRA. Many of CRA's current and potential competitors are
significantly larger and have greater financial and marketing resources than
those of CRA, and there can be no assurance that CRA will continue to maintain
its existing performance or be successful with any new products or in any new
geographic markets it may enter.
CHANGES IN MARKET DYNAMICS
Legislative reforms in some states permit employers to designate health
plans such as HMOs and PPOs to cover workers' compensation claimants. Because
many health plans have the capacity to manage health care for workers'
compensation claimants, such legislation may intensify competition in the market
served by CRA. Within the past few years, several states have experienced
decreases in the number of workers' compensation claims and the average cost per
claim which have been reflected in workers' compensation insurance premium rate
reductions in those states. CRA believes that declines in workers' compensation
costs in these states are due principally to intensified efforts by payors to
manage and control claim costs, to improved risk management by employers and to
legislative reforms. If declines in workers' compensation costs occur in many
states and persist over the long-term, they may have an adverse impact on CRA's
business and results of operations.
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THE SPECIAL MEETINGS
This Joint Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies (i) from the holders of OccuSystems Common Stock by the
OccuSystems Board for use at the OccuSystems Meeting and (ii) from the holders
of CRA Common Stock by the CRA Board for use at the CRA Meeting.
TIMES AND PLACES; PURPOSES
OCCUSYSTEMS. The OccuSystems Meeting will be held at the Holiday Inn, 4441
Highway 114 at Esters Boulevard, Irving, Texas 75063, on August 29, 1997,
starting at 9:00 a.m., local time. At the OccuSystems Meeting, the stockholders
of OccuSystems will be asked to consider and vote upon the OccuSystems Proposal,
the Concentra Incentive Plan, the Concentra Employee Stock Purchase Plan and
such other matters as may properly come before the OccuSystems Meeting. The
Reorganization Agreement, the Concentra Incentive Plan and the Concentra
Employee Stock Purchase Plan are included herewith as Appendices A, G and H,
respectively.
CRA. The CRA Meeting will be held at the offices of Hutchins, Wheeler &
Dittmar, 101 Federal Street, Boston, Massachusetts 02110 on August 29, 1997,
starting at 10:00 a.m., local time. At the CRA Meeting, the stockholders of CRA
will be asked to consider and vote upon the CRA Proposal, the Concentra
Incentive Plan, the Concentra Employee Stock Purchase Plan and such other
matters as may properly come before the CRA Meeting. The Reorganization
Agreement, the Concentra Incentive Plan and the Concentra Employee Stock
Purchase Plan are included herewith as Appendices A, G and H, respectively. A
copy of the CRA Merger Agreement is attached as Appendix F to this Joint Proxy
Statement/Prospectus.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
OCCUSYSTEMS. The OccuSystems Board has fixed the close of business on July
16, 1997, as the OccuSystems Record Date. Only holders of record of shares of
OccuSystems Common Stock on the OccuSystems Record Date are entitled to notice
of and to vote at the OccuSystems Meeting. As of July 16, 1997, there were
21,694,545 shares of OccuSystems Common Stock outstanding and entitled to vote
held by approximately 148 stockholders of record.
Each holder of record, as of the OccuSystems Record Date, of OccuSystems
Common Stock is entitled to cast one vote per share. The presence, in person or
by proxy, of the holders of a majority of the outstanding shares of OccuSystems
Common Stock entitled to vote is necessary to constitute a quorum at the
OccuSystems Meeting.
Under the DGCL, the affirmative vote, in person or by proxy, of the holders
of a majority of the shares of OccuSystems Common Stock outstanding on the
OccuSystems Record Date is required to approve and adopt the OccuSystems
Proposal. The affirmative vote of the holders of a majority of total combined
shares present and eligible to vote at the OccuSystems Meeting and the CRA
Meeting (after giving effect to the Exchange Ratio to be applied in the Mergers)
is required to approve the Concentra Incentive Plan and the Concentra Employee
Stock Purchase Plan.
As of May 31, 1997, directors and executive officers of OccuSystems as a
group beneficially owned 870,687 shares of OccuSystems Common Stock, or
approximately 4.0% of those shares of OccuSystems Common Stock outstanding as of
such date and, including shares issuable upon exercise of options that will vest
at the Effective Time as a result of the Mergers, such persons beneficially
owned 1,257,762 shares or approximately 5.8% of those shares outstanding as of
such date.
If fewer shares of OccuSystems Common Stock are voted in favor of the
OccuSystems Proposal, the Concentra Incentive Plan or the Concentra Employee
Stock Purchase Plan than the number required for their approval, it is expected
that the OccuSystems Meeting will be postponed or adjourned for the
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purpose of allowing additional time for soliciting and obtaining additional
proxies or votes, and, at any subsequent reconvening of the OccuSystems Meeting,
all proxies will be voted in the same manner as such proxies would have been
voted at the original convening of the OccuSystems Meeting, except for any
proxies that have theretofore effectively been revoked or withdrawn.
CRA. The CRA Board has fixed the close of business on July 16, 1997, as the
CRA Record Date. Only holders of record of shares of CRA Common Stock on the CRA
Record Date are entitled to notice of and to vote at the CRA Meeting. On July
16, 1997, there were 9,391,114 shares of CRA Common Stock outstanding and
entitled to vote at the CRA Meeting held by approximately 615 stockholders of
record.
Each holder of record, as of the CRA Record Date, of CRA Common Stock is
entitled to cast one vote per share. The presence, in person or by proxy, of the
holders of a majority of the outstanding shares of CRA Common Stock entitled to
vote is necessary to constitute a quorum at the CRA Meeting.
Under the MBCL, the affirmative vote, in person or by proxy, of the holders
of two-thirds of the shares of CRA Common Stock outstanding on the CRA Record
Date and entitled to vote on the CRA Proposal is required to approve and adopt
the CRA Proposal. The affirmative vote of the holders of a majority of total
combined shares present and eligible to vote at the CRA Meeting and the
OccuSystems Meeting (after giving effect to the Exchange Ratio to be applied in
the Mergers) is required to approve the Concentra Incentive Plan and the
Concentra Employee Stock Purchase Plan.
As of May 31, 1997, directors and executive officers of CRA as a group
beneficially owned approximately 1,447,347 shares of CRA Common Stock, or
approximately 16.1% of those shares of CRA Common Stock outstanding as of such
date.
If fewer shares of CRA Common Stock are voted in favor of the CRA Proposal,
the Concentra Incentive Plan or the Concentra Employee Stock Purchase Plan than
the number required for their approval, it is expected that the CRA Meeting will
be postponed or adjourned for the purpose of allowing additional time for
soliciting and obtaining additional proxies or votes, and, at any subsequent
reconvening of the CRA Meeting, all proxies will be voted in the same manner as
such proxies would have been voted at the original convening of the CRA Meeting,
except for any proxies that have theretofore effectively been revoked or
withdrawn.
PROXIES
OCCUSYSTEMS. All shares of OccuSystems Common Stock represented by properly
executed proxies received prior to or at the OccuSystems Meeting and not revoked
will be voted in accordance with the instructions indicated in such proxies. If
no instructions are indicated on a properly executed returned proxy, such proxy
will be voted FOR the OccuSystems Proposal, the Concentra Incentive Plan and the
Concentra Employee Stock Purchase Plan. A properly executed proxy marked
"ABSTAIN," although counted for purposes of determining whether there is a
quorum, will not be voted. Accordingly, since the affirmative vote of a majority
of the shares of OccuSystems Common Stock outstanding on the OccuSystems Record
Date is required for approval of the OccuSystems Proposal, a proxy marked
"ABSTAIN" will have the effect of a vote against the OccuSystems Proposal.
Similarly, a proxy marked "ABSTAIN" will have the effect of a vote against the
Concentra Incentive Plan and the Concentra Employee Stock Purchase Plan. In
accordance with the rules of the National Association of Securities Dealers,
Inc. ("NASD"), brokers and nominees are precluded from exercising their voting
discretion on the OccuSystems Proposal, the Concentra Incentive Plan and the
Concentra Employee Stock Purchase Plan and thus, absent specific instructions
from the beneficial owner of such shares, are not empowered to vote such shares.
A broker non-vote (i.e., shares held by brokers or nominees which are
represented at a meeting but with respect to which the broker or nominee is not
empowered to vote) will have the effect of a vote against the OccuSystems
Proposal because the affirmative vote of a majority of the shares of OccuSystems
Common Stock outstanding is required for approval. A broker non-vote will not be
included in the number of shares voting and therefore will have no effect on the
outcome of voting on the Concentra Incentive
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Plan or the Concentra Employee Stock Purchase Plan. Shares represented by broker
non-votes will, however, be counted for purposes of determining whether there is
a quorum at the OccuSystems Meeting. The persons named as the proxies will not
use discretionary authority to vote to adjourn the OccuSystems Meeting for the
purpose of further soliciting proxies with respect to shares for which the
related proxy card instructs the proxy to vote against approval and adoption of
the OccuSystems Proposal.
CRA. All shares of CRA Common Stock represented by properly executed
proxies received prior to or at the CRA Meeting and not revoked will be voted in
accordance with the instructions indicated in such proxies. If no instructions
are indicated on a properly executed returned proxy, such proxy will be voted
FOR the CRA Proposal, the Concentra Incentive Plan, and the Concentra Employee
Stock Purchase Plan. A properly executed proxy marked "ABSTAIN," although
counted for purposes of determining whether there is a quorum, will not be
voted. Accordingly, since the affirmative vote of two-thirds of the shares of
CRA Common Stock outstanding on the CRA Record Date is required for approval of
the CRA Proposal, a proxy marked "ABSTAIN" will have the effect of a vote
against the CRA Proposal. Similarly, a proxy marked "ABSTAIN" will have the
effect of a vote against the Concentra Incentive Plan and the Concentra Employee
Stock Purchase Plan. In accordance with the rules of the NASD, brokers and
nominees are precluded from exercising their voting discretion on the CRA
Proposal, the Concentra Incentive Plan and the Concentra Employee Stock Purchase
Plan and thus, absent specific instructions from the beneficial owner of such
shares, are not empowered to vote such shares. A broker non-vote will have the
effect of a vote against the CRA Proposal because the affirmative vote of
two-thirds of the shares of CRA Common Stock outstanding is required for
approval. A broker non-vote will not be included in the number of shares voting
and therefore will have no effect on the outcome of voting on the Concentra
Incentive Plan or the Concentra Employee Stock Purchase Plan. Shares represented
by broker non-votes will, however, be counted for purposes of determining
whether there is a quorum at the CRA Meeting. The persons named as the proxies
will not use discretionary authority to vote to adjourn the CRA Meeting for the
purpose of further soliciting proxies with respect to shares for which the
related proxy card instructs the proxy to vote against approval and adoption of
the CRA Proposal.
It is not expected that any matter not referred to herein will be presented
for action at the OccuSystems Meeting or the CRA Meeting. If any other matters
are properly brought before the OccuSystems Meeting or the CRA Meeting, the
persons named in the proxies will have discretion to vote on such matters in
accordance with their best judgment. However, shares represented by proxies that
have been voted "AGAINST" the OccuSystems Proposal or the CRA Proposal, as the
case may be, will not be used to vote "FOR" postponement or adjournment of the
OccuSystems Meeting or the CRA Meeting, as the case may be, for the purpose of
allowing additional time for soliciting additional votes "FOR" the OccuSystems
Proposal or the CRA Proposal, as the case may be. The grant of a proxy will also
confer discretionary authority on the persons named in the proxy as proxy
appointees to vote in accordance with their best judgment on matters incident to
the conduct of the Special Meetings, including (except as stated in the
preceding sentence) adjournment for the purpose of soliciting additional votes.
GENERAL. A stockholder of OccuSystems or CRA may revoke his or her proxy at
any time prior to its use by delivering to the Secretary or Clerk of OccuSystems
or CRA, as the case may be, a signed notice of revocation or a later dated
signed proxy or by attending the OccuSystems Meeting or the CRA Meeting and
voting in person. Attendance at the OccuSystems Meeting or the CRA Meeting will
not in itself constitute the revocation of a proxy.
The cost of solicitation of proxies will be paid by OccuSystems for the
OccuSystems proxies and by CRA for the CRA proxies. In addition to solicitation
by mail, proxies may be solicited in person by directors, officers and employees
of OccuSystems or CRA, as the case may be, without additional compensation, and
by telephone, telegram, teletype, facsimile or similar method. Arrangements will
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy material to beneficial owners; and OccuSystems or CRA, as the case
may be, will, upon request, reimburse them for their reasonable expenses in so
doing. CRA and OccuSystems have retained Georgeson & Company, Inc.
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to aid in the solicitation of proxies at a fee of $15,000 plus expenses. To the
extent necessary in order to ensure sufficient representation at the OccuSystems
Meeting or the CRA Meeting, OccuSystems or CRA, as the case may be, may request
by telephone or telegram the return of proxies. The extent to which this will be
necessary depends entirely upon how promptly proxies are returned.
HOLDERS OF OCCUSYSTEMS COMMON STOCK AND CRA COMMON STOCK SHOULD NOT SEND ANY
CERTIFICATES REPRESENTING OCCUSYSTEMS COMMON STOCK OR CRA COMMON STOCK WITH THE
ENCLOSED PROXY CARD. IF THE MERGERS ARE APPROVED, A LETTER OF TRANSMITTAL WILL
BE MAILED AFTER THE EFFECTIVE TIME TO EACH PERSON WHO WAS A HOLDER OF
OUTSTANDING SHARES OF OCCUSYSTEMS COMMON STOCK OR CRA COMMON STOCK IMMEDIATELY
PRIOR TO THE EFFECTIVE TIME. OCCUSYSTEMS AND CRA STOCKHOLDERS SHOULD SEND
CERTIFICATES REPRESENTING OCCUSYSTEMS COMMON STOCK AND CRA COMMON STOCK TO THE
EXCHANGE AGENT ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE WITH, THE INSTRUCTIONS
CONTAINED IN THE LETTER OF TRANSMITTAL.
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THE MERGERS
BACKGROUND OF THE MERGERS
The terms of the Reorganization Agreement and the related agreements are the
result of arm's-length negotiations between representatives, legal advisers and
financial advisers of CRA and OccuSystems. The following is a brief discussion
of the background of these negotiations.
OccuSystems and CRA commenced discussions regarding a possible transaction
in response to the changes that have occurred and continue to occur within the
healthcare industry in general and the occupational healthcare and managed care
industries in particular. Increasingly, states are expanding the ability of
employers to direct care of injured workers, either directly, or indirectly
through managed care organizations. Employers and insurers are demanding greater
and more detailed information regarding treatment outcomes across the entire
continuum of care. To maintain competitiveness and to control workers'
compensation costs effectively, providers and managed care organizations must
have a broad geographic scope of service coverage and an established primary
care delivery network. Employers and insurers are seeking the benefits of a
single source for occupational healthcare and workers' compensation managed
care-related services. The combination of CRA and OccuSystems should provide the
combined company with a more balanced growth opportunity by allowing it to offer
to customers services designed to address workplace injuries both in terms of
prevention and in terms of treatment, from point of injury through return to
work. Instead of having to obtain occupational health and managed care services
from at least two separate vendors, this business combination addresses
increased customer demand in the industry for "one-stop shopping."
In early January, 1996, representatives of Alex. Brown introduced CRA's
Chief Executive Officer, Donald J. Larson, to OccuSystems' Chief Executive
Officer, John K. Carlyle. Subsequently, the two executives had informal
conversations regarding their respective companies' businesses and possible
relationships that might be developed.
On January 29, 1996, Mr. Larson and Mr. Carlyle met in Boston to discuss in
greater detail a business relationship that might be developed between CRA and
OccuSystems. From that time forward, the two executives occasionally held
general discussions concerning the possibility of entering into complementary
business relationships.
As a result of these preliminary discussions, Mr. Carlyle telephoned Mr.
Larson in June of 1996 and invited him to meet with OccuSystems' senior
management. On July 8, 1996, Mr. Larson met in Dallas with Mr. Carlyle. At this
meeting, the parties first discussed the possibility of a strategic business
combination of CRA and OccuSystems. Mr. Carlyle and Mr. Larson determined that
additional discussions regarding the respective business strengths and
operational strategies of the two companies and an exchange of certain
non-confidential information would be useful to facilitate discussions regarding
a possible business combination. Additional discussions and information
exchanges continued thereafter.
At a regularly scheduled board meeting on July 17, 1996, Mr. Larson reviewed
with the CRA Board the substance and status of negotiations with senior
management of OccuSystems.
On August 13 and 14, 1996, Mr. Carlyle, James M. Greenwood, OccuSystems'
Chief Financial Officer, and Daniel J. Thomas, OccuSystems' President and Chief
Operating Officer, met in Chicago with Mr. Larson, Joseph F. Pesce, CRA's Chief
Financial Officer, and John A. McCarthy, Jr., CRA's Senior Vice President, to
further discuss issues relating to a potential business combination, including,
without limitation, the occupational healthcare and managed care industries in
general, the relative strengths and weaknesses of the two companies, and an
overview of the general business philosophies and strategies of the two
companies. Thereafter, the senior management teams of OccuSystems and CRA
discussed the businesses of the two companies in general and continued
discussions concerning the possibility of various forms of a strategic
transaction between CRA and OccuSystems.
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At special telephonic board meetings on August 22 and August 30, 1996, Mr.
Carlyle reviewed with the OccuSystems Board the substance of discussions with
senior management of CRA.
In early September 1996, because OccuSystems and CRA were unable to reach an
agreement regarding an appropriate exchange ratio, Mr. Carlyle and Mr. Larson
determined that OccuSystems and CRA would not be able to reach an agreement on
acceptable terms at that time.
From September 1996 to February 1997, the parties had little contact. On
February 11, 1997, Mr. Carlyle and Mr. Larson met in New York and reopened
discussions with respect to a possible business combination between CRA and
OccuSystems.
On February 25, 1997, Mr. Larson met with Mr. Carlyle, Mr. Thomas and Mr.
Greenwood in Dallas and discussed specific structural issues related to the
proposed business combination, as well as the relative merits of the proposed
business combination.
At a regularly scheduled board meeting on February 26, 1997, and at a
special board meeting on March 17, 1997, Mr. Carlyle reviewed with the
OccuSystems Board the progress of the continuing discussions with CRA.
At a regularly scheduled board meeting on March 14, 1997, Mr. Larson
reviewed with the CRA Board the status and progress of negotiations with
OccuSystems.
On March 19, 1997, CRA and OccuSystems entered into a Confidentiality
Agreement (the "Confidentiality Agreement") pursuant to which they agreed, among
other things, that any confidential information disclosed by one party to the
other would be treated as confidential and would be used solely for the purpose
of evaluating a proposed transaction. Thereafter, the parties exchanged certain
confidential business information for the purpose of further familiarizing each
of the companies with the business and prospects of the other and facilitating
CRA's and OccuSystems' respective due diligence investigations in connection
with the potential business combination.
On March 19 and 20, 1997, Mr. Greenwood, Mr. Pesce and representatives of
Alex. Brown and DLJ met in Dallas to explore more fully the potential benefits
of a possible business combination between CRA and OccuSystems and to conduct
further due diligence regarding the business, results of operations, financial
condition and prospects of OccuSystems and of the potential combined company.
OccuSystems' senior management provided certain information and answered certain
questions in furtherance of CRA's due diligence investigation. Senior management
of CRA and OccuSystems became more fully acquainted with the capabilities of
each company and learned in greater detail about the complementary attributes of
their respective businesses and operations.
On March 25 and 26, 1997, Mr. Greenwood, Mr. Pesce and representatives of
Alex. Brown and DLJ met in Boston. CRA's senior management provided certain
information and answered certain questions in furtherance of OccuSystems' due
diligence investigation. In addition, senior management of OccuSystems and CRA
continued to more fully acquaint themselves with the capabilities of each
company and the complementary nature of their respective businesses.
Subsequently, CRA and OccuSystems continued their exchange of information in
response to each other's diligence requests.
On April 4, 1997, at a special meeting of the CRA Board, Mr. Larson reported
on the status of discussions with OccuSystems' and CRA's continuing due
diligence activities. The CRA Board heard discussions regarding CRA's retention
of an expert to assist in developing a long-term compensation plan for the
combined company. CRA's legal counsel discussed with the CRA Board the structure
of the proposed transaction, potential use of "Concentra Managed Care, Inc." as
the corporate name, and the inclusion of a non-solicitation clause in the
Reorganization Agreement. Mr. Larson also responded to questions regarding the
rationale for the Mergers.
During the period from March 20 through April 8, 1997, senior management of
CRA and OccuSystems had telephone conferences on several occasions to discuss
due diligence matters, the form of a
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possible transaction and related matters. Throughout this period, the parties
continued their due diligence efforts and senior management and legal and
financial advisers to both companies continued to discuss structural,
procedural, and operational matters with respect to the proposed transaction.
On April 8, 1997, the members of CRA's and OccuSystems' senior management
and representatives of Alex. Brown and DLJ met in Atlanta to discuss the
potential operational and financial structure of the proposed business
combination. The parties also continued their discussions regarding the
healthcare and managed care industries in general and what impact any proposed
business combination would have on the combined company's ability to compete in
this rapidly changing environment.
During the period from April 8 through April 16, 1997, the members of senior
management of OccuSystems and CRA, representatives of Alex. Brown and DLJ, and
the parties' respective legal advisers engaged in extensive discussions and
negotiations to resolve open issues and to establish the terms of a transaction
that could be submitted for consideration to the Boards of Directors of CRA and
OccuSystems. In particular, the senior management of OccuSystems and CRA
determined to present to their respective Boards a proposed exchange ratio based
on historical exchange ratios between the two companies and each company's
contributions to anticipated earnings per share of Concentra.
On April 11, 1997, Mr. Carlyle met in Boston with Lois E. Silverman, a
member of the CRA Board, to familiarize Ms. Silverman with OccuSystems. In
addition, Mr. Carlyle met with other members of the CRA Board and also met with
members of CRA's senior management, who provided information and answered
questions relevant to OccuSystems' due diligence investigation.
On April 11, 1997, at a special meeting of the CRA Board, Mr. Larson
discussed the proposed organizational chart for the combined company and, with
Joseph F. Pesce, CRA's Chief Financial Officer, discussed in greater detail the
potential cost savings and revenue enhancements, including administrative cost
savings from redundant operations and customer cross-selling opportunities, from
a combination of CRA and Occusystems. Representatives of Alex. Brown reviewed
with the CRA Board the valuation methodologies to be utilized by Alex. Brown for
purposes of its financial analysis of the proposed transaction and a summary of
its due diligence findings. CRA's legal counsel provided an update on the status
of negotiations regarding the Reorganization Agreement. It was the consensus of
the CRA Board that the proposed business combination offered significant
potential synergies and should be considered further. The potential synergies
considered by the CRA Board were comprised of expense reduction, including a
reduction in general and administrative costs, a reduction in facilities
expenses, and a reduction in professional fees, and anticipated revenue
increases attributable to customer cross-selling opportunities.
On April 16, 1997, at a special meeting of the OccuSystems Board, members of
OccuSystems' senior management, OccuSystems' legal counsel and representatives
of DLJ made presentations to and reviewed with the OccuSystems Board the terms
of the Mergers, the background of the Mergers, OccuSystems' alternatives to the
Mergers, the strategic rationale for and potential benefits of the Mergers, a
summary of due diligence findings, and the status of negotiations. At this
meeting, DLJ made a presentation to the effect that the Exchange Ratio was fair
to the holders of OccuSystems Common Stock from a financial point of view. See
"-- Opinions of Financial Advisors -- Opinion of OccuSystems' Financial
Advisor." After extensive consideration, the OccuSystems Board instructed
OccuSystems' senior management and legal advisers to continue negotiations and
deferred action regarding the Mergers until a special meeting of the OccuSystems
Board to be held on April 21, 1997.
On April 18, 1997, the CRA Board held a special meeting at which members of
CRA's senior management made presentations to and reviewed with the CRA Board
CRA's financial results for the quarter ended March 31, 1997, the status of
continuing negotiations with OccuSystems, various compensation issues, and
details regarding CRA senior management's plan for effective integration of the
combined companies. CRA's legal counsel discussed the Stock Option Agreements to
be signed by the companies and responded to questions from various directors.
Representatives of Alex. Brown indicated that, subject to
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review of the final documentation for the Mergers, they believed Alex. Brown
would be in a position to render a fairness opinion with respect to the proposed
Exchange Ratio.
On the afternoon of April 21, 1997, the CRA Board held a special telephonic
meeting to consider and vote upon the Mergers. Following presentations by
members of CRA's senior management and financial and legal advisors, including
Alex. Brown's delivery of its opinion (see "-- Opinions of Financial Advisors --
Opinion of CRA's Financial Advisor"), and a summary of the results of the
negotiations, the CRA Board determined by a unanimous vote of directors (i) that
the transactions contemplated by the Reorganization Agreement were in the best
interests of CRA, and (ii) that the Exchange Ratio is fair, from a financial
point of view, to CRA. Subsequently, the CRA Board adopted and approved the
Reorganization Agreement and the transactions contemplated thereby.
Also on the afternoon of April 21, 1997, the OccuSystems Board held a
special meeting to consider and vote upon the Mergers. The OccuSystems Board
approved by a unanimous vote the Reorganization Agreement and the transactions
contemplated thereby. See "-- Opinions of Financial Advisors -- Opinion of
OccuSystems' Financial Advisor."
On the evening of April 21, 1997, Concentra, OccuSystems, and CRA executed
the Reorganization Agreement and CRA and OccuSystems entered into the Stock
Option Agreements.
RECOMMENDATION OF OCCUSYSTEMS BOARD; OCCUSYSTEMS' REASONS FOR THE MERGERS
THE OCCUSYSTEMS BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF OCCUSYSTEMS
COMMON STOCK VOTE FOR THE OCCUSYSTEMS PROPOSAL.
The OccuSystems Board believes that the terms of the Reorganization
Agreement and the transactions contemplated thereby are in the best interests of
OccuSystems and its stockholders. Accordingly, the OccuSystems Board has
unanimously approved the Reorganization Agreement and recommends approval of the
OccuSystems Proposal by the stockholders of OccuSystems.
The OccuSystems Board considered a variety of factors in connection with its
evaluation of the Mergers, including the risks associated with the integration
of CRA's and OccuSystems' businesses and management teams, of not achieving
desired synergies, of costs expected in connection with the Mergers and of the
fixed merger consideration. See "RISK FACTORS AND CERTAIN CONSIDERATIONS." The
OccuSystems Board did not quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination.
The OccuSystems Board believes that the combination of CRA and OccuSystems
is a major step forward in the pursuit of OccuSystems' strategic objective of
becoming the premier managed care services company for the workers' compensation
and disability marketplaces. The OccuSystems Board considered the following
strategic reasons for the Mergers:
- The Mergers should establish Concentra as the premier managed care company
in the workers' compensation and disability marketplace, offering the
broadest spectrum of services in the industry.
- CRA's broad geographic scope of operations throughout the United States
and long-standing relationships with large insurers and self-insured
employers should facilitate OccuSystems' strategy to continue to
consolidate primary care physician practices specializing in occupational
healthcare in new and existing markets and to develop clusters of
occupational healthcare centers.
- CRA's and OccuSystems' information systems, outcomes and cost data will
provide Concentra with access to information across the entire continuum
of care for work related injuries. This should strengthen Concentra's
ability to market its medical services on a case rate and capitated basis.
- CRA's PPO and expertise in case management services should strengthen
OccuSystems' ability to develop vertically integrated networks of
providers.
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- CRA's expertise in case management and specialized cost containment
services should enhance OccuSystems' proprietary injury/illness management
program.
In connection with its approval and recommendation, the OccuSystems Board
considered the following factors:
- The OccuSystems Board considered information concerning the financial
performance, financial condition, business operations and prospects of
each of CRA and OccuSystems. The OccuSystems Board viewed these factors
favorably and determined that they supported the Exchange Ratio and the
conclusion that the Mergers are in the best interests of the stockholders
of OccuSystems.
- The OccuSystems Board considered the historical performance of the common
stock of CRA and OccuSystems. The OccuSystems Board viewed this factor
favorably and determined that it supported the Exchange Ratio and the
conclusion that the Mergers are fair to OccuSystems' stockholders from a
financial standpoint.
- The OccuSystems Board considered the terms and conditions of the
Reorganization Agreement, including the amount and form of consideration
to be received by the stockholders of OccuSystems, the restrictions
relating to solicitation of third party proposals including the provisions
that prohibit OccuSystems, CRA and their affiliates from soliciting or
encouraging alternative acquisition proposals, or subject to the fiduciary
duties of their respective boards, from negotiating with any third party
with respect to an alternative proposal, the termination provisions and
the size, nature and events that would trigger the payment of the $10
million termination fee contained in the Reorganization Agreement (see
"THE REORGANIZATION AGREEMENT -- Termination of the Reorganization
Agreement" and "-- Termination Fees"). The OccuSystems Board determined
that the terms of the Reorganization Agreement were favorable to the
stockholders of OccuSystems. The OccuSystems Board recognized that the
provisions limiting OccuSystems from soliciting or encouraging alternative
proposals, and the termination fee provisions, would decrease the
likelihood that a third party would offer to acquire OccuSystems.
Nonetheless, the OccuSystems Board believed that such provisions were in
the best interests of the CRA stockholders because they enhanced the
likelihood that the Mergers would be accomplished, thereby providing the
OccuSystems stockholders with the strategic benefits of the Mergers
described above. The OccuSystems Board considered whether it was in the
best interest of the OccuSystems stockholders to pursue other strategic
alternatives, including a sale of OccuSystems, or remain an independent
company. The OccuSystems Board decided that the proposed Mergers best
addressed the interests of the OccuSystems stockholders because of the
strategic benefits of the Mergers and because the Mergers would provide
the OccuSystems stockholders with the benefits inherent in continued stock
ownership.
- The OccuSystems Board considered the terms and conditions of the Stock
Option Agreements. The OccuSystems Board viewed these agreements
favorably. Although the OccuSystems Board recognized that these agreements
would decrease the likelihood that a third party would offer to acquire
OccuSystems, the OccuSystems Board believed that the existence of these
agreements would enhance the likelihood that the Mergers would be
consummated and would provide OccuSystems with a significant benefit
should a third party seek to acquire CRA.
- The OccuSystems Board considered favorably that the Mergers would be
tax-free for OccuSystems and its stockholders.
- The OccuSystems Board considered favorably that the Mergers would be
accounted for under the pooling of interest method of accounting.
- The OccuSystems Board considered the possibility of achieving cost
savings, operating efficiencies and synergies from the Mergers that would
not be available to OccuSystems on its own.
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- The OccuSystems Board considered the risk that OccuSystems and CRA would
not integrate their businesses or management teams successfully and that
Concentra may not achieve desired synergies or cost savings. The
OccuSystems Board viewed this risk negatively but concluded that the
factors favoring the Mergers outweighed this risk and the other negative
factors discussed below.
- The OccuSystems Board viewed negatively the costs to be incurred by
OccuSystems, CRA and Concentra in connection with the Mergers, including
transaction fees and costs, severance costs, system modification costs,
costs of termination of certain employees, and costs of consolidation and
elimination of duplicate facilities. The OccySystems Board also viewed
negatively that such costs could increase if OccuSystems and CRA encounter
difficulties in the consummation of the Mergers or in the integration of
their businesses.
- The OccuSystems Board considered the effect on the non-affiliated
stockholders of OccuSystems of the terms of the Reorganization Agreement
and the benefits to the insiders of OccuSystems and CRA. The OccuSystems
Board recognized that consummation of the Mergers would accelerate certain
OccuSystems Options but did not view such acceleration as constituting a
significant negative factor in whether to approve the Reorganization
Agreement. The OccuSystems Board also recognized that Dr. Richard D. Rehm,
a director of OccuSystems, and Lois E. Silverman, Chairman of CRA, would
enter into agreements to receive lump sum payments of $75,000 and
$300,000, respectively, at the Effective Time. The OccuSystems Board
viewed these terms as reasonable to OccuSystems and Concentra. In
addition, the OccuSystems Board viewed favorably that certain officers of
OccuSystems and CRA would enter into employment and indemnification
agreements with Concentra at the Effective Time. The OccuSystems Board
determined that such agreements were appropriate, were necessary to
attract, incentivize and retain such officers, and were in the best
interests of the OccuSystems stockholders.
- The OccuSystems Board considered the risk that the merger consideration is
fixed and will not be adjusted in the event of an increase or decrease in
the market price of OccuSystems Common Stock or CRA Common Stock. The
OccuSystems Board recognized that fixed merger consideration in a merger
of equals transaction such as the Mergers is not unusual and that the
fixed merger consideration, while creating a risk to OccuSystems'
stockholders, could also operate to benefit OccuSystems' stockholders. The
OccuSystems Board did not view this factor as a significant risk in
approving the transaction.
In reaching its determination, the OccuSystems' Board consulted with
OccuSystems' management, as well as OccuSystems' legal counsel and financial
advisor, and considered the opinion of DLJ described below and the financial
analyses performed by DLJ in connection therewith. The OccuSystems Board also
considered favorably that it is a condition to OccuSystems' obligation to
consummate the Mergers that the opinion of DLJ would not be withdrawn or
materially modified. See "-- Opinion of Financial Advisors -- Opinion of
OccuSystems' Financial Advisor."
After considering such factors, the OccuSystems Board concluded that the
terms of the Reorganization Agreement were fair to the OccuSystems stockholders,
that the potential strategic benefits arising from the Mergers outweighed any
potential risks associated therewith, and the the benefits to insiders were
appropriate, given their anticipated contributions and importance to the future
success of Concentra.
RECOMMENDATION OF CRA BOARD; CRA'S REASONS FOR THE MERGERS
THE CRA BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF CRA COMMON STOCK VOTE
FOR THE CRA PROPOSAL.
The CRA Board believes that the terms of the Reorganization Agreement and
the transactions contemplated thereby are in the best interests of CRA and its
stockholders. Accordingly, the CRA Board has unanimously approved the
Reorganization Agreement and recommends that the stockholders of CRA
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vote for the approval and adoption of the Reorganization Agreement and the
transactions contemplated thereby.
The CRA Board believes that the combination of CRA and OccuSystems is a
major step forward in the pursuit of CRA's strategic objective of becoming the
premier managed care services company for the workers' compensation and
disability marketplaces. The CRA Board considered the following strategic
reasons for the Mergers:
- The ability to leverage OccuSystems' primary care expertise at the point
of injury to influence the direction of care, as appropriate.
- The ability to combine the strengths of national leaders in the workers'
compensation and disability industries so as to create one national leader
offering the broadest spectrum of services, which is increasingly being
demanded by the marketplace.
- The complementary nature of the business of CRA and OccuSystems, including
the complementary nature of CRA's insurance-oriented customer base and
OccuSystems' employer-oriented customer base.
- The potential to utilize statistical information concerning the full
spectrum of CRA's and OccuSystems' services made possible by both
companies' investment in substantially compatible information technology.
- The prospect of a combined company that will have a significantly larger
market capitalization than CRA, and the resulting potential for greater
liquidity for stockholders.
- The potential for administrative cost savings and business synergies which
the CRA Board believes could result from a combined company, including
potentially better utilization or expansion of OccuSystems' network of
treatment centers and a primary physician network that could be used by
CRA to offer new fully integrated products to its customers.
In connection with its approval and recommendation, the CRA Board considered
the following factors:
(a) The CRA Board considered information concerning the financial performance,
financial condition, business operations and prospects of each of CRA and
OccuSystems. The CRA Board viewed these factors favorably and determined
that they supported the Exchange Ratio and the conclusion that the Mergers
are in the best interests of stockholders of CRA.
(b) The CRA Board considered the historical performance of the common stock of
CRA and OccuSystems. The CRA Board viewed this factor favorably and
determined that it supported the Exchange Ratio and the conclusion that the
Mergers are fair to CRA stockholders from a financial standpoint.
(c) The CRA Board considered the terms and conditions of the Reorganization
Agreement, including the amount and form of consideration to be received by
the stockholders of CRA, the restrictions relating to solicitation of third
party proposals, including the provisions that prohibit OccuSystems, CRA and
their respective subsidiaries, and their respective Directors, officers,
employees and representatives, from soliciting or encouraging any
alternative acquisition proposals, or subject to the fiduciary duties of
their respective boards, from negotiating with any third party with respect
to an alternative proposal, the termination provisions and the size, nature
and events that would trigger the payment of the $10 million termination fee
contained in the Reorganization Agreement (see "THE REORGANIZATION AGREEMENT
-- Termination of the Reorganization Agreement" and "-- Termination Fees").
The CRA Board determined that the terms of the Reorganization Agreement were
favorable to the stockholders of CRA. The CRA Board recognized that the
provisions limiting CRA and OccuSystems from soliciting or encouraging
alternative proposals, and the termination fee provisions, would decrease
the likelihood that a third party would offer to acquire CRA. Nonetheless,
the CRA
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Board felt that such provisions were in the best interests of the CRA
stockholders because they enhanced the likelihood that the Merger would be
accomplished, thereby providing the CRA stockholders with the strategic
benefits of the Mergers outlined above. The CRA Board considered whether it
was in the best interest of the CRA stockholders to pursue other strategic
alternatives, including a sale of CRA, or remain an independent company. The
CRA Board decided that the proposed Mergers best addressed the interests of
the CRA stockholders because of the strategic benefits of the Mergers, and
because effectuation of the Mergers would provide the CRA stockholders with
the benefits inherent in continued stock ownership.
(d) The CRA Board considered the terms and conditions of the Stock Option
Agreements. The CRA Board viewed these Agreements favorably, because
although the CRA Board recognized that these Agreements would decrease the
likelihood that a third party would offer to acquire CRA, the CRA Board felt
that the existence of these Agreements would enhance the likelihood that the
Mergers would be consummated and would provide CRA with a significant
benefit should a third party seek to acquire OccuSystems.
(e) The CRA Board considered that the transaction would be tax-free for CRA and
the CRA stockholders, which the CRA Board viewed favorably because the CRA
stockholders would not be currently taxed.
(f) The CRA Board considered that the Mergers would be accounted for under the
pooling of interest method of accounting, which the Board viewed favorably
because of the impact that such accounting treatment would have on the
financial reporting and earnings per share of Concentra.
(g) The CRA Board considered that the transaction had been structured as a
merger of equals, which the CRA Board viewed favorably because it concluded
that the structure accurately reflected the contributions which CRA would
make to the combined company and would provide the CRA stockholders with the
benefit of continuity at the Board and management levels.
(h) The CRA Board considered the possibility of achieving cost savings,
operating efficiencies and synergies as a result of consummating the Mergers
which would not be available to CRA on its own, which the CRA Board viewed
favorably, because such savings, efficiencies and synergies would redound to
the benefit of the stockholders of CRA and should be reflected in the future
stock performance of Concentra.
In connection with its approval and recommendation, the CRA Board also
considered the following potential negative aspects and risks associated with
the Mergers:
(a) The CRA Board considered the business risks associated with the ongoing
businesses of CRA and OccuSystems, including risks associated with
dependence on future acquisitions and joint ventures, risks related to the
changing health care environment and risks associated with changes in the
competitive market place, and concluded that the integration of the
businesses of CRA and OccuSystems would provide a stronger base from which
to pursue the historical business of CRA, and thus would benefit the CRA
stockholders.
(b) The CRA Board considered the possibility that the integration of the
businesses and management teams of CRA and OccuSystems would not proceed as
planned, and that the desired synergies would therefore not be achieved, but
after reviewing a detailed integration plan, and discussing the matter in
depth with management of CRA, concluded that significant cost reductions and
revenue enhancement could, in fact, be achieved.
(c) The CRA Board was fully informed of the benefits to insiders of OccuSystems
and CRA which were being received in connection with the Mergers, including
the terms of employment and severance agreements, the acceleration of
certain OccuSystems options, and the payments which were being made to Dr.
Richard D. Rehm, a Director of OccuSystems, and Lois E. Silverman, Chairman
of CRA, and considered the risk that one or more members of the management
of CRA or OccuSystems might chose to terminate employment following
consummation of the Mergers. The CRA Board viewed
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these factors negatively, but determined that the benefits received by the
insiders of OccuSystems and CRA were appropriate, given their anticipated
contributions and importance to the future success of Concentra, and were
necessary to attract, incent and retain key employees. Based upon
conversations with management of CRA and based upon a discussion of the
parameters of a long term incentive plan which Concentra intends to
implement following consummation of the Mergers, the CRA Board concluded
that the risk that one or more members of management of CRA or OccuSystems
would terminate his employment following consummation of the Mergers should
not prevent the Mergers from proceeding as planned.
(d) The CRA Board viewed negatively the costs to be incurred in connection with
the Mergers, including transaction fees and costs, severance costs, costs of
termination of certain employees and other costs and expenses to be incurred
in connection with achieving desired synergies. While the CRA Board viewed
such costs negatively, it felt that such costs would more than be outweighed
by the benefits which the CRA stockholders could expect to achieve as a
result of the Mergers.
(e) The CRA Board viewed negatively those provisions of the Reorganization
Agreement which would require CRA to pay a severance fee and to grant to
OccuSystems an option under the Stock Option Agreement should CRA ultimately
be acquired by a third party. While the CRA Board viewed these factors
negatively, it concluded that such factors were necessary in order to induce
OccuSystems to enter into the Reorganization Agreement, and that they were
appropriate for transactions such as the Mergers.
(f) The CRA Board considered that the Exchange Ratio is fixed, and will not be
adjusted in the event of an increase or decrease in the market price of the
OccuSystems Common Stock or CRA Common Stock. While the CRA Board recognized
that fixed merger consideration could have a negative effect on stockholders
of CRA if the market price of OccuSystems Common Stock declined relative to
the market price of CRA Common Stock, the CRA Board recognized that fixed
merger consideration in a merger of equals transaction such as the Mergers
is not unusual, and could in fact benefit the stockholders of CRA if the
market price of CRA's Common Stock declined relative to the market price of
OccuSystems Common Stock.
In reaching its determination, the CRA Board consulted with CRA management,
as well as CRA's legal counsel and financial advisor, and considered the opinion
of Alex. Brown described below and the financial analyses performed by Alex.
Brown in connection therewith. The CRA Board also considered favorably that it
is a condition to CRA's obligation to consummate the Mergers that the opinion of
Alex. Brown not be withdrawn or materially modified. See "-- Opinion of
Financial Advisors -- Opinion of CRA's Financial Advisor." In light of the
variety of factors considered in connection with its evaluation of the
Reorganization Agreement, the CRA Board did not consider it practicable to, nor
did it attempt to, quantify or otherwise assign relative weights to the specific
factors it considered in reaching its determination, and individual directors
may have given different weights to different factors.
In considering the proposed Reorganization Agreement, full disclosure was
made to the CRA Board of all benefits to insiders of OccuSystems and CRA,
including the terms of employment and severance agreements, acceleration of
certain OccuSystems options, and the long term incentive plans which are
proposed to be adopted by Concentra.
After carefully considering the factors decribed above, the CRA Board
concluded that the terms of the Reorganization Agreement were fair to the CRA
stockholders, and that the potential strategic benefits arising from the Mergers
outweighed any potential risks associated therewith.
OPINIONS OF FINANCIAL ADVISORS
OPINION OF OCCUSYSTEMS' FINANCIAL ADVISOR
On March 27, 1997, OccuSystems engaged DLJ to act as its exclusive financial
advisor in connection with the Reorganization Agreement. On April 16, 1997, DLJ
made a presentation to the OccuSystems Board, which DLJ confirmed by delivery of
its written opinion dated April 21, 1997 (the "DLJ Opinion"),
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to the effect that, as of April 21, 1997, and based upon and subject to the
assumptions, limitations and qualifications set forth in its opinion, the
Exchange Ratio was fair to the holders of OccuSystems Common Stock from a
financial point of view. Such opinion was updated as of the date of this Joint
Proxy Statement/Prospectus. In connection with updating such opinion, DLJ
updated certain of its analyses and reviewed the assumptions on which such
analyses were based and the factors considered in connection therewith.
THE FULL TEXT OF THE DLJ OPINION DATED APRIL 21, 1997 IS SET FORTH AS ANNEX
D TO THIS JOINT PROXY STATEMENT/ PROSPECTUS AND SHOULD BE READ CAREFULLY IN ITS
ENTIRETY FOR A DISCUSSION OF THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER
MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY DLJ.
The DLJ Opinion was prepared for the OccuSystems Board and addresses only
the fairness of the Exchange Ratio to the holders of OccuSystems Common Stock
from a financial point of view and does not constitute a recommendation to any
stockholder of OccuSystems as to how such stockholder should vote at the
OccuSystems Meeting. The DLJ Opinion does not constitute an opinion as to the
price at which Concentra Common Stock will actually trade at any time. The type
and amount of consideration for the Mergers was determined in arms' length
negotiations between OccuSystems and CRA. DLJ advised OccuSystems in the
negotiations. OccuSystems did not impose any restrictions or limitations on DLJ
with respect to the investigations made or procedures followed by DLJ in
rendering its opinion. OccuSystems did not request DLJ to, nor did DLJ, solicit
the interest of any other party in acquiring OccuSystems.
In arriving at the DLJ Opinion, DLJ reviewed drafts of the Reorganization
Agreement, the OccuSystems Stock Option Agreement and the CRA Stock Option
Agreement. DLJ also reviewed financial and other information that was publicly
available or furnished to DLJ by OccuSystems and CRA, including information
provided during discussions with their respective managements. This information
included financial projections of OccuSystems for the period beginning January
1, 1997, and ending on December 31, 2001, prepared by the management of
OccuSystems, and financial projections of CRA for the period beginning January
1, 1997, and ending on December 31, 2001, prepared by the management of CRA. In
addition, DLJ compared certain financial and securities data of OccuSystems and
CRA with various other companies that DLJ deemed to be relevant whose securities
are traded in public markets, reviewed the historical stock prices and trading
volumes of OccuSystems Common Stock and CRA Common Stock and reviewed such other
financial studies and analyses, and performed such other investigations, as DLJ
deemed appropriate for purposes of its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
from public sources, that was provided by OccuSystems and CRA or their
respective representatives, or that was otherwise reviewed by DLJ. In
particular, DLJ relied upon the estimates of the management of OccuSystems of
the operating synergies achievable as a result of the Mergers (the "Operating
Synergies"), which DLJ discussed with the management of CRA. With respect to the
financial projections supplied to DLJ, DLJ assumed that such projections were
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of OccuSystems and CRA as to the
future operating and financial performance of OccuSystems and CRA, respectively.
DLJ did not assume any responsibility for making an independent evaluation of
OccuSystems' assets or liabilities or for making any independent verification of
any of the information reviewed by DLJ.
The DLJ Opinion was necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. The following is a summary of the
presentation made by DLJ to the OccuSystems Board at the meeting on April 16,
1997.
CONTRIBUTION ANALYSIS. DLJ analyzed the relative contributions of
OccuSystems and CRA to revenues, earnings before interest, taxes, depreciation
and amortization ("EBITDA"), earnings before interest and taxes ("EBIT"),
pre-tax income and net income, as if OccuSystems and CRA were a combined entity.
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Such analysis was completed for various periods of time, including among others,
for calendar year 1996, after giving pro forma effect to CRA's Focus Healthcare
Management, Inc., Prompt Associates, Inc. and QMC3, Inc. acquisitions, as if
each acquisition had occurred on January 1, 1996 ("Pro Forma 1996"), and for the
projected calendar years 1997 and 1998. Based on Pro Forma 1996, OccuSystems'
revenues, EBITDA, EBIT, pre-tax income and net income represent 46.6%, 54.5%,
52.1%, 49.1% and 52.2%, respectively, of the combined entity. Based on projected
1997, OccuSystems' revenues, EBITDA, EBIT, pre-tax income and net income
represent 48.6%, 58.3%, 56.4%, 52.6% and 56.3%, respectively, of the combined
entity. Based on projected 1998, OccuSystems' revenues, EBITDA, EBIT, pre-tax
income and net income represent 51.4%, 61.9%, 60.4%, 57.2% and 59.3%,
respectively, of the combined entity. The shares of Concentra Common Stock
(including shares underlying all outstanding options, calculated using the
treasury method) to be issued to the holders of OccuSystems Common Stock in
accordance with the Exchange Ratio represents approximately 57.8% of the
outstanding shares of Concentra Common Stock pro forma for the Mergers (the
"OccuSystems Ownership Percentage"), based on the number of shares of
OccuSystems Common Stock and CRA Common Stock outstanding in March 1997.
EARNINGS PER SHARE IMPACT ANALYSIS. DLJ analyzed the pro forma effects on
OccuSystems' earnings per share ("EPS") of the Mergers, including the Operating
Synergies as forecasted by the management of OccuSystems, for various periods of
time, including among others, for Pro Forma 1996 and projected calendar years
1997 and 1998. This analysis was based on a number of assumptions, including
among other things, the cost of integrating the operations of OccuSystems and
CRA, estimated amounts and timing of implementation of the Operating Synergies,
the projected financial performance of OccuSystems and CRA and prevailing
interest rates. The analysis indicated that the Mergers, accounted for as a
pooling of interests, with the benefit of the Operating Synergies but excluding
one-time expenses related to the Mergers, is accretive to OccuSystems'
stand-alone EPS for each of Pro Forma 1996 and projected calendar years 1997 and
1998 by 11.1%, 6.3% and 11.2%, respectively.
HISTORICAL TRADING RELATIONSHIP. DLJ analyzed the historical trading
relationship of CRA Common Stock and OccuSystems Common Stock over the time
periods noted below. For each period selected, the high, low and average ratios
were calculated by dividing the closing price of CRA Common Stock by the closing
price of OccuSystems Common Stock for each day during such period. The time
periods (each ending April 15, 1997) selected for analysis were as follows: last
12 months, last 120 trading days, last 60 trading days, last 20 trading days,
last ten trading days, last five trading days and at the close of trading on
April 15, 1997. The average ratios or actual ratio, as the case may be, of the
closing price of CRA Common Stock to those of OccuSystems Common Stock for each
of the aforementioned time periods or days were 1.6332, 1.8167, 1.8848, 1.8366,
1.9669, 2.1083 and 2.1060, respectively.
DISCOUNTED CASH FLOW ANALYSIS. DLJ performed a discounted cash flow ("DCF")
analysis for the five-year period ended December 31, 2001 on the stand-alone,
unlevered free cash flows of OccuSystems and Concentra, which were based upon
financial projections provided by OccuSystems' management and CRA's management
and which included the Operating Synergies. The unlevered free cash flows were
calculated for each of OccuSystems and Concentra based on projected EBIT minus
income taxes, minus projected capital expenditures, plus or minus projected
changes in working capital and plus projected depreciation and amortization
expenses. DLJ calculated terminal values by applying a range of EBITDA multiples
of 8.0x to 12.0x to the projected calendar year 2001 EBITDA of OccuSystems and
Concentra, respectively. The equity value was determined by discounting the
unlevered free cash flows and terminal values to the present using a range of
discount rates of 11.0% to 15.0%, representing an estimated range of the
weighted average cost of capital of each of OccuSystems and Concentra. DLJ then
applied the OccuSystems Ownership Percentage to the DCF analysis of Concentra to
establish the value of OccuSystems stockholders' interest in Concentra. Based on
this analysis, DLJ calculated equity values of OccuSystems stand-alone ranging
from $476.3 million to $883.1 million and of OccuSystems stockholders' interest
in Concentra ranging from $497.5 million to $884.9 million.
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The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ, but describes, in summary form, the principal
elements of the presentation made by DLJ to the OccuSystems Board on April 16,
1997. The preparation of a fairness opinion involves various judgments as to
appropriate methods of financial analysis to be applied to particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Each of the analyses conducted by DLJ was carried out in
order to provide a different perspective on the transaction and add to the total
mix of information available. DLJ did not conclude whether any individual
analysis, considered in isolation, supported or failed to support an opinion as
to the fairness of the Exchange Ratio from a financial point of view. Rather, in
reaching its conclusion, DLJ considered the results of each analysis in light of
each other and ultimately reached its opinion based on the results of its
analyses taken as a whole. DLJ did not place particular reliance or weight on
any individual analysis, but instead concluded that its analyses, taken as a
whole, supported its determination. Accordingly, notwithstanding the separate
factors summarized above, DLJ believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all analyses and factors, could create an incomplete or
misleading view of the evaluation process underlying its opinion. In performing
its analyses, DLJ made numerous assumptions with respect to industry
performance, business and economic conditions and other matters. The analyses
performed by DLJ are not necessarily indicative of actual value or future
results, which may be significantly more or less favorable than suggested by
such analyses.
RELATIONSHIP BETWEEN OCCUSYSTEMS, CRA AND DLJ. DLJ is a nationally
recognized investment banking firm that has substantial experience in health
care related businesses and is familiar with OccuSystems, CRA and their
respective businesses. As part of its investment banking business, DLJ is
regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
Pursuant to the letter agreement, dated March 27, 1997, between OccuSystems
and DLJ (the "DLJ Engagement Letter"), DLJ received a fee of $800,000 at the
time OccuSystems requested DLJ to deliver its opinion to the OccuSystems Board
and is entitled to (i) an additional fee of $50,000 for each update of the DLJ
Opinion delivered by DLJ to the OccuSystems Board and (ii) a transaction fee
equal to $1,800,000 (less any other fees paid pursuant to the DLJ Engagement
Letter) payable upon consummation of the Mergers. In addition, OccuSystems has
agreed to reimburse DLJ for certain out-of-pocket expenses, and to indemnify DLJ
for certain liabilities and expenses, arising out of the Mergers or the
transactions in connection therewith, including liabilities under federal
securities laws. The terms of the fee arrangement with DLJ, which OccuSystems
and DLJ believe are customary in transactions of this nature, were negotiated at
arms' length between OccuSystems and DLJ, and the OccuSystems Board was aware of
such arrangement, including the fact that a significant portion of the aggregate
fee payable to DLJ is contingent upon consummation of the Mergers.
DLJ has performed investment banking and other services for OccuSystems in
the past and has been compensated for such services. Those services have
included serving as (i) lead manager of OccuSystems' initial public offering in
May 1995, (ii) lead manager of a secondary equity offering in March 1996 and
(iii) lead manager of a convertible subordinated notes offering in December
1996, in each case, for which DLJ received usual and customary compensation. In
addition, an affiliate of DLJ has invested an aggregate of $12.5 million in debt
and equity securities of Concentra Development Corp., an entity to which
OccuSystems provides certain management and administrative services.
In the ordinary course of business, DLJ actively trades debt and equity
securities of OccuSystems for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
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OPINION OF CRA'S FINANCIAL ADVISOR
CRA engaged Alex. Brown to act as its exclusive financial advisor in
connection with the Mergers. On April 21, 1997, at a meeting of the CRA Board
held to evaluate the proposed Mergers, Alex. Brown rendered to the CRA Board an
opinion to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the Exchange Ratio was fair from a
financial point of view to the holders of CRA Common Stock. Such opinion was
updated as of the date of this Joint Proxy Statement/ Prospectus. In connection
with updating such opinion, Alex. Brown updated certain of its analyses and
reviewed the assumptions on which such analyses were based and the factors
considered in connection therewith. No limitations were imposed by the CRA Board
upon Alex. Brown with respect to the investigations made or the procedures
followed by it in rendering its opinion.
The full text of the written opinion of Alex. Brown dated April 21, 1997,
which sets forth the assumptions made, matters considered and limitations of the
review undertaken, is attached as Appendix E to this Joint Proxy
Statement/Prospectus and should be read carefully in its entirety. Alex. Brown's
opinion is directed to the CRA Board, addresses only the fairness of the
Exchange Ratio from a financial point of view and does not constitute a
recommendation to any stockholder as to how such stockholder should vote at the
CRA Meeting. The summary of the opinion of Alex. Brown set forth in this Joint
Proxy Statement/ Prospectus is qualified in its entirety by reference to the
full text of such opinion.
In connection with its opinion, Alex. Brown reviewed certain publicly
available financial information and other information concerning CRA and
OccuSystems and certain internal analyses and other information furnished to
Alex. Brown by CRA and OccuSystems. Alex. Brown also held discussions with
members of the senior managements of CRA and OccuSystems regarding the
businesses and prospects of their respective companies and the joint prospects
of a combined company. In addition, Alex. Brown (i) reviewed the reported prices
and trading activity for both the CRA Common Stock and OccuSystems Common Stock,
(ii) compared certain financial and stock market information for CRA and
OccuSystems with similar information of certain other companies whose securities
are publicly traded, (iii) reviewed the financial terms of recent business
combinations which Alex. Brown deemed comparable in whole or in part, and (iv)
performed such other studies and analyses and considered such other factors as
Alex. Brown deemed appropriate.
As described in its opinion, Alex. Brown assumed and relied upon, without
independent verification, the accuracy, completeness and fairness of the
information furnished to or otherwise reviewed by or discussed with Alex. Brown
for purposes of its opinion. With respect to the information relating to the
prospects of CRA and OccuSystems, Alex. Brown assumed that such information
reflected the best currently available judgments and estimates of the
managements of CRA and OccuSystems as to the likely future financial
performances of their respective companies and of the combined company. Alex.
Brown did not make nor was it provided with an independent evaluation or
appraisal of the assets of CRA and OccuSystems. Alex. Brown's opinion was based
on market, economic and other conditions as they existed and could be evaluated
as of the date of the opinion. Although Alex. Brown evaluated the Exchange Ratio
from a financial point of view, the type and amount of consideration payable in
the Mergers was determined through negotiation between CRA and OccuSystems.
Alex. Brown's opinion does not constitute an opinion as to the price at which
the Concentra Common Stock will actually trade at any time.
The following is a summary of the material analyses and factors considered
by Alex. Brown in connection with its opinion to the CRA Board dated April 21,
1997:
STOCK TRADING HISTORY. Alex. Brown reviewed the historical trading volumes
and market prices for the CRA Common Stock and the OccuSystems Common Stock and
the implied historical exchange ratio of the CRA Common Stock and the
OccuSystems Common Stock (the closing price of the OccuSystems Common Stock
divided by the closing price of the CRA Common Stock) based on such market
prices as of the 10 trading days, 20 trading days, three-month period and
six-month period preceding April 18, 1997 (the last trading day prior to the
execution of the Reorganization Agreement). This analysis indicated
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average exchange ratios for the CRA Common Stock and the OccuSystems Common
Stock as of the 10 trading days, 20 trading days, three-month period and
six-month period preceding April 18, 1997 of approximately 0.48, 0.53, 0.53 and
0.55, respectively, as compared to the OccuSystems Exchange Ratio divided by the
CRA Exchange Ratio, which equates to 0.56.
CONTRIBUTION ANALYSIS. Alex. Brown analyzed the relative contributions of
CRA and OccuSystems to the estimated revenues, EBITDA, EBIT and net income of
Concentra for the latest 12 months ended December 31, 1996, the estimated
revenues, EBITDA and net income of Concentra for fiscal 1997, and the estimated
net income of Concentra for fiscal 1998 and 1999, based on internal estimates of
the managements of CRA and OccuSystems, and compared such contributions to the
pro forma ownership of Concentra by the holders of CRA Common Stock. This
analysis indicated that (i) for the latest 12 months ended December 31, 1996,
CRA would have contributed approximately 51% of the revenues, 43% of EBITDA, 47%
of EBIT and 48% of the net income of Concentra, (ii) in fiscal 1997, CRA would
contribute approximately 51% of the revenues, 43% of EBITDA and 44% of the net
income of Concentra and (iii) in fiscal 1998 and 1999, CRA would contribute
approximately 41% and 39%, respectively, of the net income of Concentra. Based
on the Exchange Ratio, current holders of CRA Common Stock would own
approximately 42% of Concentra upon consummation of the Mergers.
EARNINGS PER SHARE IMPACT ANALYSIS. Alex. Brown analyzed the pro forma
effect of the Mergers on the EPS of CRA in fiscal 1997 (pro forma as if the
Mergers had occurred on January 1, 1997), 1998 and 1999, based on internal
estimates of the management of CRA and OccuSystems and assuming certain cost
savings and other potential synergies anticipated by such managements to result
from the Mergers, including administrative cost savings from redundant
operations and customer cross-selling opportunities, in the aggregate amount of
between $2.5 million and $8.8 million, were achieved. This analysis indicated
that the Mergers could be slightly dilutive to CRA's EPS in 1997 (pro forma) and
accretive to CRA's EPS in fiscal 1998 and 1999. The actual operating or
financial results achieved by Concentra may vary from projected results and
variations may be material as a result of business and market risks, the timing
and amount of synergies, the costs associated with achieving such synergies and
other factors.
DISCOUNTED CASH FLOW ANALYSIS. Alex. Brown performed a discounted cash flow
analysis of OccuSystems to estimate the present value of the stand-alone,
unlevered, after-tax free cash flows that OccuSystems could generate over the
five-year period ending December 31, 2001, based on internal estimates of the
management of OccuSystems. After-tax cash flows were calculated as the after-tax
EBIT of OccuSystems, plus depreciation and amortization, less net investment in
non-cash working capital, capital expenditures and expenditures for
acquisitions. Terminal values for OccuSystems were calculated by applying
multiples ranging from 10.0x to 15.0x to the projected EBITDA of OccuSystems.
The cash flow streams and terminal values were then discounted to present value
utilizing discount rates ranging from 12.5% to 17.5%. This analysis yielded an
equity reference range for OccuSystems of between $21.32 and $41.25 per share,
as compared to the equity value implied by the Exchange Ratio of approximately
$22.26 per share based on the closing price of CRA Common Stock on April 18,
1997.
ANALYSIS OF SELECTED MERGERS OF EQUALS TRANSACTIONS. Alex. Brown reviewed
certain merger of equals transactions which it deemed comparable in whole or in
part to the Mergers, based on, among other things, relative market values; pro
forma ownership; relative exchange ratios; historical stock price movements; and
composition of management and board of directors. Specifically, Alex. Brown
reviewed the following 17 transactions which resulted in equal representation of
each company on the board of directors of the combined company: Morgan Stanley
Group, Inc./Dean Witter, Discover & Co.; Morton International/Autoliv AB;
Applied Bioscience International, Inc./Pharmaceutical Product Development, Inc.;
NYNEX Corporation/Bell Atlantic Corporation; Pharmacia AB/The Upjohn Company;
Scott Paper Company/Kimberly-Clark Corporation; Abbey Healthcare Group,
Inc./Homedco Group, Inc.; Vestar, Inc./ Nexagen, Inc.; Dibrill Brothers,
Inc./Monk-Austin, Inc.; Lockheed Corporation/Martin Marietta Corporation;
Babbage's Inc./Software Etc. Stores, Inc.; Synoptics Communications/Wellfleet
Communications,
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Inc.; Price Company/Costco Wholesale Corp.; Critical Care America, Inc./Medical
Care International, Inc.; Iowa Resources, Inc./Midwest Energy Company; Morino,
Inc./Duquesne Systems, Inc.; and Teleconnect, Inc./SouthernNet, Inc. (the
"Selected Transactions"). Alex. Brown calculated the percentage premium or
discount of the exchange ratios in the Selected Transactions relative to the
stock market prices of the companies involved in the Selected Transactions 30
days prior to public announcement of the Selected Transaction. Alex. Brown
compared the average premium paid by the company whose chief executive officer
continued as the chief executive officer of the combined company with the
implied premium payable in the Mergers. This analysis indicated a range of
premiums (excluding outliers) in the Selected Transactions of approximately
(15%) to 33% (with an average of 8%), as compared to a premium of approximately
2% to 16% in the Mergers based on historical exchange ratios of the CRA Common
Stock and the OccuSystems Common Stock over various periods ending April 18,
1997.
HISTORICAL AND PRO FORMA COMPARISON. In rendering its opinion, Alex. Brown
also reviewed, among other things, (i) the historical and pro forma financial
profile of CRA, OccuSystems and Concentra, (ii) movements in the CRA Common
Stock, the OccuSystems Common Stock and the S&P 500 Index, (iii) the historical
and pro forma equity values and trading multiples of CRA and OccuSystems and
other physician practice management and specialty managed care companies in
order to ascertain the valuations attributed to such companies by the public
markets, (iv) growth rate estimates of selected investment banking firms with
respect to CRA, OccuSystems and other physician practice management and
specialty managed care companies and (v) the pro forma ownership of Concentra.
The foregoing factors were confirmatory or informational in nature and were
reviewed by Alex. Brown as points of reference to provide additional
perspectives in the evaluation of the Exchange Ratio.
The summary set forth above does not purport to be a complete description of
the opinion of Alex. Brown to the CRA Board of Directors or the financial
analyses performed and factors considered by Alex. Brown in connection with its
opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant methods
of financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Alex. Brown believes that its analyses and the summary set
forth above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or selecting portions of the above
summary, without considering all factors and analyses, could create a misleading
or incomplete view of the processes underlying such analyses and opinion. In
performing its analyses, Alex. Brown made numerous assumptions with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of CRA and
OccuSystems. No company, transaction or business used in such analyses as a
comparison is identical to CRA, OccuSystems, Concentra or the proposed Mergers,
nor is an evaluation of the results of such analyses entirely mathematical;
rather, such analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the companies, business segments
or transactions being analyzed. The estimates contained in such analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than those suggested by such analyses. In addition, analyses
relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. Alex. Brown's opinion and financial analyses were only
one of many factors considered by the CRA Board in its evaluation of the
proposed Mergers and should not be viewed as determinative of the views of the
CRA Board or management with respect to the Exchange Ratio or the Mergers.
RELATIONSHIP BETWEEN CRA, OCCUSYSTEMS AND ALEX. BROWN. Alex. Brown is a
nationally recognized investment banking firm and, as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
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underwritings, private placements and valuations for estate, corporate and other
purposes. CRA selected Alex. Brown to serve as its financial advisor based on
Alex. Brown's reputation and health care expertise as well as its familiarity
with CRA, OccuSystems and their respective businesses. In the past, Alex. Brown
has provided financial advisory services to CRA and has acted as lead-managing
underwriter with respect to CRA Common Stock offerings. Alex. Brown also has
acted as co-managing underwriter with respect to OccuSystems Common Stock and
OccuSystems Notes offerings. Alex. Brown maintains a market in CRA Common Stock
and OccuSystems Common Stock and regularly publishes research reports regarding
the health care industry and the businesses and securities of CRA and
OccuSystems and other publicly-owned companies in that industry. In the ordinary
course of business, Alex. Brown may actively trade the securities of both CRA
and OccuSystems for its own account and the accounts of its customers and,
accordingly, may at any time hold a long or short position in securities of CRA
and OccuSystems.
Pursuant to the terms of Alex. Brown's engagement, CRA has agreed to pay
Alex. Brown for its financial advisory services in connection with the Mergers
an aggregate fee of $3.8 million, including a fee of $750,000 payable in
connection with the delivery of Alex. Brown's opinion. In addition, CRA has
agreed to reimburse Alex. Brown for its reasonable out-of-pocket expenses,
including fees and disbursements of counsel, and to indemnify Alex. Brown and
certain related parties against certain liabilities, including certain
liabilities under the federal securities laws, relating to, or arising out of,
its engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
In considering the respective recommendations of the OccuSystems Board and
the CRA Board with respect to the Reorganization Agreement and the transactions
contemplated thereby, stockholders of OccuSystems and CRA should be aware that
certain members of the management of OccuSystems and CRA and the OccuSystems
Board and the CRA Board have certain interests in the Mergers that are different
from, or in addition to, the interests of stockholders of OccuSystems and CRA
generally.
OCCUSYSTEMS
DIRECTORS AND EXECUTIVE OFFICERS OF CONCENTRA. John K. Carlyle, Robert W.
O'Leary, Robert A. Ortenzio and Paul B. Queally, each of whom is a current
director of OccuSystems, will become directors of Concentra. In addition,
certain executive officers of OccuSystems, including John K. Carlyle, Daniel J.
Thomas, Richard A. Parr II, W. Thomas Fogarty, M.D. and James M. Greenwood, are
executive officers (or, in the case of Mr. Carlyle, Chairman) of Concentra and
parties to employment agreements with Concentra that become effective upon
consummation of the Mergers. In addition, Dr. Richard D. Rehm, a director of
OccuSystems, has entered into an agreement to terminate his existing employment
agreement upon effectiveness of the Mergers in consideration of the payment by
OccuSystems to Dr. Rehm of a $74,000 lump sum amount. See "MANAGEMENT OF
CONCENTRA."
STOCK OPTION PROGRAMS. At the Effective Time, each outstanding OccuSystems
Option shall be converted into an option to purchase shares of Concentra Common
Stock, as provided below. Following the Effective Time, each such OccuSystems
Option will be exercisable for the same number of shares, and at the same
exercise price, as are in effect for such OccuSystems Option at the Effective
Time. As of March 31, 1997, directors and executive officers of OccuSystems held
outstanding OccuSystems Options to purchase 1,292,800 shares of OccuSystems
Common Stock at exercise prices ranging from $3.00 to $25.88 per share. All of
the OccuSystems Options were granted pursuant to OccuSystems' employee benefit
plans except that 20,000 options were granted in 1991 prior to OccuSystems'
adoption of stock based employee benefit plans. Consummation of the Mergers will
constitute a "change in control" under certain OccuSystems Options held by
certain of OccuSystems' directors and executive officers. As a result,
OccuSystems Options to purchase an aggregate of 387,075 shares of OccuSystems
Common Stock that would not otherwise vest and become exercisable until certain
dates after the Effective Time will, by virtue of consummation of the Mergers,
vest and become exercisable as of the Effective Time. The following OccuSystems
officers and directors hold the following options which will vest as a result of
the consummation of the Mergers: John K. Carlyle, options to
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purchase 125,000 shares; Thomas Fogarty, M.D., options to purchase 30,825
shares; James M. Greenwood, options to purchase 56,250 shares; Richard A. Parr
II, options to purchase 50,000 shares; Richard Rehm, M.D., options to purchase
50,000 shares; and Daniel J. Thomas, options to purchase 75,000 shares.
EMPLOYEE BENEFIT PLANS. The Reorganization Agreement provides that,
immediately following the Effective Time, Concentra will cause employee benefit
plans to be in effect for the benefit of OccuSystems' employees that are
reasonably comparable in the aggregate to the employee benefit plans that were
in effect prior to the Effective Time.
CRA
DIRECTORS AND EXECUTIVE OFFICERS OF CONCENTRA. Following the Mergers,
Donald J. Larson, Lois E. Silverman, George H. Conrades and Mitchell T. Rabkin,
M.D., each of whom is a current director of CRA, will become members of the
Concentra Board of Directors. In addition, certain executive officers of CRA,
including Donald J. Larson, John A. McCarthy, Jr., Joseph F. Pesce and Peter R.
Gates, are executive officers of Concentra and parties to employment agreements
with Concentra that become effective upon consummation of the Mergers. See "THE
MERGER -- Interests of Certain Persons in the Mergers." In addition, Ms. Lois E.
Silverman, CRA's Chairman, has entered into an agreement to terminate her
existing employment agreement upon effectiveness of the Mergers in consideration
of the payment by CRA of a $300,000 lump sum amount. See "MANAGEMENT OF
CONCENTRA."
STOCK OPTION PROGRAMS. The Reorganization Agreement provides that, at the
Effective Time, each outstanding option or right to purchase shares of CRA
Common Stock (a "CRA Option") shall be converted into an option to purchase
shares of Concentra Common Stock. Following the Effective Time, each such CRA
Option will be exercisable upon the same terms and conditions as are in effect
for such CRA Option at the Effective Time, except that (i) each such CRA Option
will be exercisable for that number of shares of Concentra Common Stock equal to
the product of (x) the number of shares of CRA Common Stock for which such CRA
Option was exercisable and (y) the CRA Ratio and (ii) the exercise price of such
CRA Option will be equal to the exercise price of such option as of the date of
the Reorganization Agreement divided by the CRA Ratio. As of June 30, 1997,
directors and executive officers of CRA held outstanding CRA Options to purchase
434,320 shares of CRA Common Stock at exercise prices ranging from $5.89 to
$49.25 per share. Consummation of the Mergers will not accelerate the vesting or
exercisability of any of the CRA Options.
EMPLOYEE BENEFIT PLANS. The Reorganization Agreement provides that,
immediately following the Effective Time, Concentra will cause employee benefit
plans to be in effect for the benefit of CRA's employees that are reasonably
comparable in the aggregate to the employee benefit plans that were in effect
prior to the Effective Time.
CONCENTRA
INDEMNIFICATION; DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The
Reorganization Agreement provides that, from and after the Effective Time,
Concentra will indemnify, defend and hold harmless to the fullest extent that
OccuSystems or CRA would have been permitted under applicable law each person
who is now, or has been at any time prior to the date hereof, an officer or
director of OccuSystems or CRA (individually an "Indemnified Party" and
collectively the "Indemnified Parties"), against all losses, claims, damages,
liabilities, costs or expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation arising out of or pertaining to acts or
omissions, or alleged acts or omissions, by them in their capacities as such
occurring at or prior to the Effective Time. The Reorganization Agreement also
provides that Concentra will maintain, and cause OccuSystems and CRA to keep in
effect, provisions of their charter and bylaws providing for exculpation of
director and officer liability and indemnification of the Indemnified Parties to
the fullest extent permitted under applicable law, which provisions shall not be
amended except as required by applicable law or except to make changes permitted
by law that would enlarge the Indemnified Parties'
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rights of exculpation and indemnification. The Reorganization Agreement also
provides that, for period of six years after the Effective Time, directors' and
officers' liability insurance will be maintained covering the Indemnified
Parties who are currently covered, in their capacities as directors and
officers, by OccuSystems' and CRA's existing directors' and officers' liability
insurance policies on terms no less advantageous to the Indemnified Parties than
such existing insurance to the extent such coverage can be maintained or
procured by the payment of an annual premium not exceeding one and one-half
times the current annual premium paid by OccuSystems for its existing coverage
(which current annual premium is approximately $110,000).
EMPLOYMENT AGREEMENTS. Concentra has entered into employment agreements
with its Chairman of the Board and each of its executive officers. The
employment agreements provide for base salaries as follows: Mr. Carlyle,
$340,000; Mr. Larson, $350,000; Mr. McCarthy, $260,000; Mr. Parr, $230,000; Mr.
Pesce, $260,000; Mr. Thomas, $260,000; Dr. Fogarty, $240,000; Mr. Gates,
$230,000; and Mr. Greenwood, $230,000 (each being an "Officer"). Each of the
employment agreements also provide that bonuses, if any, will be paid at the
discretion of Concentra's Board of Directors and allows participation in any
employee benefit plan adopted by Concentra for its employees. The term of each
of the agreements is two years. Each of the agreements entitles each such
individual to receive severance payments if Concentra (i) terminates the
employment agreement without Cause (as defined in the employment agreement),
(ii) the Officer terminates the agreement for Good Reason (as defined in the
employment agreement, which, for Mr. Carlyle, includes ceasing to be Chairman of
the Board of Concentra for any reason) or (iii) Concentra does not renew the
employment agreement other than because of death or disability of the Officer.
Such severance payments shall equal two years' base salary for Messrs. Carlyle
and Larson and one year's base salary for each of the other Officers. In
addition, restricted stock and stock options to purchase an aggregate of 330,000
shares granted by OccuSystems to Messrs. Carlyle, Thomas, Parr, Fogarty and
Greenwood will accelerate upon termination of such Officers by Concentra without
Cause or by such Officers for Good Reason.
REGISTRATION RIGHTS AGREEMENT. Lois E. Silverman, Chairman of the Board of
CRA, Donald J. Larson, President and Chief Executive Officer of CRA, and CRA are
parties to a Registration Rights Agreement dated March 8, 1994 (the
"Registration Rights Agreement"). Pursuant to the Registration Rights Agreement,
Ms. Silverman and Mr. Larson were granted the right to require CRA to file up to
three registration statements under the Securities Act on their behalf. CRA also
granted Ms. Silverman and Mr. Larson the right to register the sale of their
shares on any registration statement (except one on Form S-4 or S-8 or any
successor thereto) filed by CRA, subject to certain limitations. Concentra has
agreed to enter into an Agreement of Acceptance pursuant to which Concentra will
assume the obligations of CRA under the Registration Rights Agreement and will
grant Lois E. Silverman and Donald J. Larson the right to register shares of
Concentra Common Stock on the same terms as in the Registration Rights
Agreement.
ACCOUNTING TREATMENT
OccuSystems and CRA have received a "pooling letter" from Arthur Andersen
LLP, their independent public accountants, dated April 21, 1997, to the effect
that the Mergers will be treated as a pooling-of-interests for accounting
purposes. Under this method of accounting, the assets and liabilities of
OccuSystems and CRA will be combined based on the respective carrying values of
the accounts in the historical financial statements of each entity. Results of
operations of the combined company will include income of OccuSystems and CRA
for the entire fiscal period in which the combination occurs and the historical
results of operations of the separate companies for fiscal years prior to the
Mergers will be combined and reported as the results of operations of the
combined company.
Consummation of the Mergers is conditioned upon OccuSystems and CRA
receiving an opinion, dated the Closing Date of the Mergers, to the effect that
the business combination to be effected by the Mergers would be properly
accounted for as a pooling of interests for accounting purposes. See "THE
REORGANIZATION AGREEMENT -- Conditions to the Mergers." Certain events,
including certain
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transactions with respect to OccuSystems Common Stock or CRA Common Stock by
affiliates of OccuSystems or CRA, respectively, may prevent the Mergers from
qualifying as a pooling of interests for accounting purposes. See "THE MERGERS
- -- Resale Restrictions."
OCCUSYSTEMS NOTES
Contemporaneously with the Mergers, Concentra will assume an aggregate
principal amount of up to $97,750,000 of the OccuSystems Notes through the
issuance of the Concentra Notes. The OccuSystems Notes are currently convertible
into 3,291,246 shares of OccuSystems Common Stock and, subsequent to the
Mergers, the Concentra Notes will be convertible into 3,291,246 shares of
Concentra Common Stock, subject to adjustment in certain events. Consummation of
the Mergers will not constitute a change in control under the Indenture
governing the OccuSystems Notes. After the Mergers, the Concentra Notes will be
unsecured general obligations of Concentra, subordinated in right of payment to
all existing and future Senior Indebtedness (as defined in such indenture) of
Concentra. See "DESCRIPTION OF CONCENTRA NOTES."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the tax opinion received by OccuSystems from
Vinson & Elkins L.L.P. and the tax opinion received by CRA from Hutchins,
Wheeler & Dittmar, a Professional Corporation, concerning the material federal
income tax consequences of the Mergers. Such tax opinions are based upon current
provisions of the Code, existing regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
No attempt has been made to comment on all federal income tax consequences of
the Mergers that may be relevant to particular holders in light of their
personal investment circumstances or to holders that are subject to special
rules under the federal income tax laws such as dealers in securities, foreign
persons, mutual funds, insurance companies, tax-exempt entities and holders who
do not hold their shares as capital assets. The opinions also do not address any
aspects of state, local or foreign taxation. Holders of OccuSystems Common Stock
and CRA Common Stock are advised and expected to consult their own tax advisers
regarding the federal income tax consequences of the Mergers in light of their
personal circumstances and the consequences under state, local and foreign tax
laws.
Such opinions are subject to certain assumptions and based on certain
representations of OccuSystems, CRA and Concentra including representations that
the historic stockholders of OccuSystems and CRA will retain a significant
continuing equity interest in Concentra and that substantially all of the assets
of OccuSystems and CRA will be retained by Concentra. No ruling from the
Internal Revenue Service (the "IRS") has been or will be requested in connection
with the Mergers. Stockholders of OccuSystems and CRA should be aware that such
opinions are not binding on the IRS and no assurance can be given that the IRS
will not adopt a contrary position or that the IRS position would not be
sustained by a court.
Based upon the representation letters referenced above, which will be
confirmed by OccuSystems, CRA and Concentra prior to the closing of the Mergers,
(i) it is the opinion of Vinson & Elkins L.L.P. that the OccuSystems Merger will
be treated for federal income tax purposes as a reorganization described in
Section 368(a) of Code and that the federal income tax consequences to
OccuSystems and to the holders of OccuSystems Common Stock will be as described
below under the heading "Treatment of OccuSystems and Holders of OccuSystems
Common Stock" and (ii) it is the opinion of Hutchins, Wheeler & Dittmar, a
Professional Corporation, that the CRA Merger will be treated for federal income
tax purposes as a reorganization described in Section 368(a) of the Code or a
transfer of property to Concentra by the holders of CRA Common Stock governed by
Section 351 of the Code, or both and that the federal income tax consequences to
CRA and to holders of CRA Common Stock will be as described below under the
heading "Treatment of CRA and Holders of CRA Common Stock." It is a condition to
the obligations of OccuSystems and CRA to consummate the Mergers that each shall
have received confirmation, dated the
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Closing Date of the Reorganization Agreement, of the opinion of its special
counsel described in this paragraph. See "THE REORGANIZATION AGREEMENT --
Conditions to the Mergers."
TREATMENT OF OCCUSYSTEMS AND HOLDERS OF OCCUSYSTEMS COMMON STOCK
The following federal income tax consequences will occur upon a
reorganization under Section 368(a) of the Code:
(a) No gain or loss will be recognized by OccuSystems in connection with
the Mergers;
(b) No gain or loss will be recognized by a holder of OccuSystems Common
Stock upon the exchange of all of such holder's shares of OccuSystems Common
Stock solely for shares of Concentra Common Stock in the Mergers;
(c) the aggregate basis of the shares of Concentra Common Stock received
by an OccuSystems stockholder in the Merger (including any fractional share
deemed received) will be the same as the aggregate basis of the shares of
OccuSystems Common Stock surrendered in exchange therefor; and
(d) the holding period of the shares of Concentra Common Stock received
by an OccuSystems stockholder in the Mergers will include the holding period
of the shares of OccuSystems Common Stock surrendered in exchange therefor,
provided that such shares of OccuSystems Common Stock are held as capital
assets at the Effective Time.
TREATMENT OF CRA AND HOLDERS OF CRA COMMON STOCK
The following federal income tax consequences will occur upon a
reorganization under Section 368(a) of the Code or a transfer of property
under Section 351 of the Code:
(a) No gain or loss will be recognized by CRA in connection with the
Mergers;
(b) No gain or loss will be recognized by a holder of CRA Common Stock
upon the exchange of all of such holder's shares of CRA Common Stock solely
for shares of Concentra Common Stock in the Mergers;
(c) the aggregate basis of the shares of Concentra Common Stock received
by an CRA stockholder in the Merger (including any fractional share deemed
received) will be the same as the aggregate basis of the shares of CRA
Common Stock surrendered in exchange therefor;
(d) the holding period of the shares of Concentra Common Stock received
by a CRA stockholder in the Mergers will include the holding period of the
shares of CRA Common Stock surrendered in exchange therefor, provided that
such shares of CRA Common Stock are held as capital assets at the Effective
Time;
(e) a stockholder of CRA who receives cash in lieu of a fractional share
will recognize gain or loss equal to the difference, if any, between such
stockholder's basis in the fractional share (as described in paragraph (c)
above) and the amount of cash received; such gain or loss will be a capital
gain or loss if the CRA Common Stock is held by such stockholder as a
capital asset at the Effective Time; and
(f) a stockholder of CRA who exercises dissenters' rights will recognize
gain or loss equal to the difference, if any, between such stockholder's
basis in the shares of CRA Common Stock sold pursuant to the exercise of
dissenters' rights and the amount of cash received. Such gain or loss will
be a capital gain or loss if the CRA Common Stock is held by such
stockholder as a capital asset at the time of sale.
THIS FEDERAL INCOME TAX DISCUSSION MAY NOT APPLY TO ALL HOLDERS OF
OCCUSYSTEMS COMMON STOCK OR TO ALL HOLDERS OF CRA COMMON STOCK. SUCH HOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF
THE MERGERS.
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REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by the FTC, the
Mergers may not be consummated until notifications have been given and certain
information has been furnished to the Antitrust Division of the United States
Department of Justice and the FTC and specified waiting period requirements have
been satisfied. OccuSystems and CRA each filed with the Antitrust Division and
the FTC a Notification and Report Form (the "Notification and Report Form") with
respect to the Mergers on May 13, 1997. The required waiting period for each of
these filings expired at 11:59 p.m. on May 28, 1997. Donald J. Larson and Lois
E. Silverman have also filed with the Antitrust Division and the FTC a
Notification and Report Form with respect to the Mergers. The waiting period
with respect to filings made by Mr. Larson and Ms. Silverman under the HSR Act
terminated effective July 11, 1997. Other than compliance with applicable
securities laws, neither OccuSystems nor CRA is aware of any other governmental
or regulatory approval required for consummation of the Mergers.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Mergers. At any time before or
after the Special Meetings, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the Mergers or seeking the divestiture of
substantial assets of CRA or it subsidiaries or OccuSystems or its subsidiaries.
In addition, state antitrust authorities may also bring legal action under
the antitrust laws. Such action could include seeking to enjoin the consummation
of the Mergers or seeking divesture of certain assets of OccuSystems or CRA.
Private parties may also seek to take legal action under the antitrust laws
under certain circumstances. There can be no assurance that a challenge to the
Mergers on antitrust grounds will not be made or, if such a challenge is made,
of the result thereof.
CRA's business is regulated primarily at the state level, and it must comply
with regulatory requirements which differ from state to state. CRA and CRA
subsidiaries hold numerous licenses, certifications, permits and/or other
approvals (collectively "Approvals") issued by regulatory agencies in various
states in which CRA and its subsidiaries do business in compliance with
applicable state laws. The business activities for which Approvals have been
issued fall into three general categories: (i) Approvals for workers'
compensation managed care programs; (ii) Approvals for medical review services;
and (iii) Approvals for provider networks.
Most of the regulatory agencies which have issued Approvals to CRA or CRA
subsidiaries in connection with their business as now conducted will require
notification of the CRA Merger and the other transactions contemplated by the
Reorganization Agreement. The precise nature of the required notification varies
by state and regulatory agency. In almost all instances, notification to state
regulatory agencies may be made by letter, with documentation attached as
necessary, after the Mergers are completed. With respect to several of the
Approvals, the state regulatory agencies may require CRA to file a new or
amended application subsequent to the notification.
QUOTATION OF CONCENTRA COMMON STOCK AND CONCENTRA NOTES
Concentra intends to apply for the quotation of the Concentra Common Stock
on the Nasdaq National Market under the symbol "CCMC." It is a condition to
OccuSystems' and CRA's obligations to consummate the Mergers that the shares of
Concentra Common Stock to be issued to the stockholders of OccuSystems and CRA
in connection with the Mergers shall have been approved for quotation on the
Nasdaq National Market, subject only to official notice of issuance. In
addition, Concentra has applied for the quotation of the Concentra Notes on the
Nasdaq SmallCap Market, and it is anticipated that such notes will be quoted on
the Nasdaq SmallCap Market upon consummation of the Mergers under the symbol
"CCMCG."
RESALE RESTRICTIONS
All shares of Concentra Common Stock received by OccuSystems and CRA
stockholders in the Mergers and all Concentra Notes to be issued in the
OccuSystems Merger will be freely transferable,
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except that shares of Concentra Common Stock and Concentra Notes received by
persons who are deemed to be "affiliates" (as such term is defined under the
Securities Act) of OccuSystems or CRA prior to the Mergers may be resold by them
only in transactions permitted by the resale provisions of Rule 145 promulgated
under the Securities Act (or Rule 144 in the case of such persons who become
affiliates of Concentra) or as otherwise permitted under the Securities Act.
Persons who may be deemed to be affiliates of OccuSystems, CRA or Concentra
generally include individuals or entities that control, are controlled by, or
are under common control with, such party and may include certain officers and
directors of such party as well as principal stockholders of such party. The
Reorganization Agreement requires OccuSystems and CRA to use reasonable efforts
to deliver or cause to be delivered to Concentra, prior to the Closing Date,
from each affiliate thereof, a letter agreement to the effect that such person
will not (i) offer or sell or otherwise dispose of any of the shares of
Concentra Common Stock issued to such persons in or pursuant to the Mergers in
violation of the Securities Act or the rules and regulations promulgated by the
Commission thereunder, (ii) sell or transfer any stock of CRA or OccuSystems 30
days prior to consummation of the Mergers or (iii) sell, transfer or otherwise
dispose of any Concentra Common Stock until Concentra publishes results covering
at least 30 days of combined operations of Concentra, OccuSystems and CRA (an
"Affiliate Letter"). Further, the Reorganization Agreement prohibits the
issuance of Concentra Common Stock to an affiliate of OccuSystems or CRA prior
to such affiliate executing an Affiliate Letter.
DISSENTERS' RIGHTS
Under the DGCL, holders of OccuSystems Common Stock are not entitled to
dissenters' rights in connection with the OccuSystems Merger because the
OccuSystems Common Stock is designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. Under the MBCL, holders of CRA Common Stock who comply with
sections 86 through 88 of the MBCL have appraisal rights.
Under the MBCL, CRA stockholders will have certain dissenters' rights of
appraisal. If the CRA Proposal is approved by the CRA stockholders at the CRA
Meeting and the CRA Merger is effected by CRA, any stockholder (1) who files
with the corporation before the taking of the vote on the CRA Proposal, written
objection to the proposed action stating that such stockholder intends to demand
payment for such stockholder's shares if the action is taken and (2) whose
shares are not voted in favor of such action has or may have the right to demand
in writing from CRA, within 20 days after the date of mailing to such
stockholder of notice in writing that the corporate action has become effective,
payment for such stockholder's shares and an appraisal of the value thereof. CRA
and any such stockholder shall in such case have the rights and duties and shall
follow the procedure set forth in sections 88 to 98, inclusive, of the MBCL.
Failure to vote against the CRA Proposal will constitute a waiver of such rights
set forth in Appendix I. Except as set forth herein, stockholders of CRA will
not be entitled to appraisal rights in connection with the CRA Merger.
Within ten days after the date on which the CRA Merger becomes effective,
CRA must notify each stockholder who, in compliance with the requirements
described above, filed written objection and did not vote any shares in favor of
such action, that the action approved at the meeting of CRA has become
effective. If within 20 days after the date of mailing of this notice, any
stockholder to whom CRA is required to give such notice demands in writing from
CRA payments for such stockholder's stock, CRA will pay to such stockholder the
fair value of the stock within 30 days after the expiration of the period during
which such demand may be made. If during this 30 day period CRA and any such
objecting stockholder fail to agree as to the value of such stock, CRA, or any
such stockholder, may within four months after the expiration of such 30 day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
CRA has its principal office in Massachusetts.
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The foregoing is only a partial summary of sections 88 to 98, inclusive, of
the MBCL, and is qualified in its entirety by reference to the provisions
thereof, the full text of which is set forth as Appendix I to this Joint Proxy
Statement/Prospectus. Each stockholder of CRA is urged to read carefully the
full text of sections 88 to 98, inclusive, of the MBCL.
THE REORGANIZATION AGREEMENT
The following is a brief summary of the material provisions of the
Reorganization Agreement, a copy of which is attached as Appendix A to this
Joint Proxy Statement/Prospectus and is incorporated herein by reference. This
summary is qualified in its entirety by reference to the full and complete text
of the Reorganization Agreement.
THE MERGERS
Pursuant to the Reorganization Agreement and subject to the terms and
conditions thereof, OccuSystems will be merged with and into Concentra and a
wholly-owned subsidiary of Concentra will be merged with and into CRA. As a
result of the Mergers, CRA will become a wholly owned subsidiary of Concentra.
As part of the Mergers, stockholders of OccuSystems and CRA will receive the
consideration described below.
Subject to the terms and conditions of the Reorganization Agreement, the
closing of the transactions contemplated thereby will take place on the third
business day following the day on which all conditions to the Reorganization
Agreement are satisfied or waived (the "Closing Date"). The Mergers will become
effective upon both the filing of a certificate of merger with the Secretary of
State of the State of Delaware with respect to the OccuSystems Merger and the
filing of articles of merger with the Secretary of State of the Commonwealth of
Massachusetts relating to the CRA Merger. The time at which the Mergers become
effective is referred to as the Effective Time.
CONVERSION OF OCCUSYSTEMS COMMON STOCK
Pursuant to the Reorganization Agreement, upon consummation of the
OccuSystems Merger, (i) each share of OccuSystems Common Stock, except for
OccuSystems Treasury Stock, issued and outstanding at the Effective Time, will
be converted into one share of Concentra Common Stock and upon such conversion
all shares of OccuSystems Common Stock will be canceled and cease to exist, and
(ii) all shares of OccuSystems Treasury Stock will be canceled and retired
without payment of any consideration therefor.
HOLDERS OF OCCUSYSTEMS COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES
REPRESENTING OCCUSYSTEMS COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE
MERGERS ARE APPROVED, A LETTER OF TRANSMITTAL WILL BE MAILED AFTER THE EFFECTIVE
TIME TO EACH PERSON WHO WAS A HOLDER OF OUTSTANDING SHARES OF OCCUSYSTEMS COMMON
STOCK IMMEDIATELY PRIOR TO THE EFFECTIVE TIME. OCCUSYSTEMS STOCKHOLDERS SHOULD
SEND CERTIFICATES REPRESENTING OCCUSYSTEMS COMMON STOCK TO THE EXCHANGE AGENT
ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE WITH, THE INSTRUCTIONS CONTAINED IN
THE LETTER OF TRANSMITTAL.
OCCUSYSTEMS STOCK OPTIONS. As provided in the Reorganization Agreement, at
the Effective Time, each OccuSystems Option will be assumed by Concentra and
converted into an option to purchase Concentra Common Stock. Following the
Effective Time, each such OccuSystems Option will be exercisable for the same
number of shares, and at the same exercise price, as in effect for such
OccuSystems Option. See "THE MERGERS -- Interests of Certain Persons in the
Mergers -- OccuSystems -- Stock Option Programs."
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DIVIDENDS. No dividends or other distributions declared after the Effective
Time on Concentra Common Stock shall be paid with respect to any shares of
OccuSystems Common Stock represented by an OccuSystems stock certificate
("OccuSystems Certificate") until such OccuSystems Certificate is surrendered
for exchange according to the procedures described above.
FRACTIONAL SHARES. Because the OccuSystems Ratio equals one, no fractional
shares of Concentra Common Stock will be issued to any stockholder of
OccuSystems upon consummation of the Mergers.
CONVERSION OF CRA COMMON STOCK
Pursuant to the Reorganization Agreement, upon consummation of the CRA
Merger, (i) each share of CRA Common Stock issued and outstanding immediately
prior to the Effective Time, except for CRA Treasury Stock or Dissenting Shares,
will be converted into the right to receive 1.786 shares of Concentra Common
Stock and upon such conversion such shares of CRA Common Stock will be canceled
and cease to exist, and (ii) all CRA Treasury Stock, if any, will be canceled
and retired without payment of any consideration therefor.
HOLDERS OF CRA COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES REPRESENTING
CRA COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE MERGERS ARE APPROVED, A
LETTER OF TRANSMITTAL WILL BE MAILED AFTER THE EFFECTIVE TIME TO EACH PERSON WHO
WAS A HOLDER OF OUTSTANDING SHARES OF CRA COMMON STOCK IMMEDIATELY PRIOR TO THE
EFFECTIVE TIME. CRA STOCKHOLDERS SHOULD SEND CERTIFICATES REPRESENTING CRA
COMMON STOCK TO THE EXCHANGE AGENT ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE
WITH, THE INSTRUCTIONS CONTAINED IN THE LETTER OF TRANSMITTAL.
CRA OPTIONS. As provided in the Reorganization Agreement, at the Effective
Time, each CRA Option will be assumed by Concentra and converted into an option
to purchase Concentra Common Stock. Following the Effective Time, each such CRA
Option will be exercisable on the same terms and conditions as are then
applicable to such CRA Option, except that (i) each such CRA Option will be
exercisable for a number of shares of Concentra Common Stock equal to the
product of (x) the number of shares of CRA Common Stock for which such CRA
Option was exercisable and (y) the CRA Ratio and (ii) the exercise price of such
CRA Option will be equal to the exercise price of such CRA Option as of the date
of the Reorganization Agreement, divided by the CRA Ratio. See "THE MERGERS --
Interests of Certain Persons in the Mergers -- CRA -- Stock Option Programs."
DIVIDENDS. No dividends or other distributions declared after the Effective
Time on Concentra Common Stock shall be paid with respect to any shares of CRA
Common Stock represented by a CRA stock certificate ("CRA Certificate") until
such CRA Certificate is surrendered for exchange according to the procedures
described above.
FRACTIONAL SHARES. No fractional shares of Concentra Common Stock shall be
issued to any stockholder of CRA upon consummation of the Mergers. For each
fractional share that would otherwise be issued, Concentra will pay by check an
amount equal to a pro rata portion of the net proceeds of the sale by the
Exchange Agent of shares of Concentra Common Stock, representing the aggregate
of all such fractional shares, and the aggregate dividends or other
distributions that are payable with respect to such shares of Concentra Common
Stock. Such sales are to be executed by the Exchange Agent as soon as
practicable after the Effective Time at then prevailing prices on the Nasdaq
National Market.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Reorganization Agreement contains customary representations and
warranties by both OccuSystems and CRA as to, among other things, (i) existence,
good standing and corporate authority to enter into the Reorganization Agreement
and related agreements, (ii) authorization, validity and effect of the
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Reorganization Agreement and related agreements, (iii) capitalization, (iv)
ownership of subsidiaries, (v) the lack of certain investments or interests,
(vi) the compliance of the Mergers with charters, bylaws and the law, (vii) the
absence of certain material defaults or violations, (viii) the filing of all
required documents with the Commission and the accuracy of financial statements
filed therewith, (ix) material litigation, (x) material adverse changes in each
party's business, results of operations, financial condition or prospects, (xi)
tax matters, (xii) employee benefit plans, (xiii) labor matters, (xiv) brokers,
(xv) fairness opinions and (xvi) pooling accounting treatment.
CERTAIN COVENANTS
CONDUCT OF BUSINESS PENDING THE MERGERS. Pursuant to the Reorganization
Agreement, OccuSystems and CRA have made various customary covenants. CRA has
agreed that, prior to the Effective Time, CRA and its significant subsidiaries
will conduct their operations according to their usual, regular and ordinary
course of business. Specifically, CRA has agreed, among other things:
(i) to preserve intact its business organization, relationships and
goodwill and to keep available the services of its officers and employees;
(ii) not to amend its certificate of incorporation or bylaws (other than
bylaw amendments that are not material to CRA or to the consummation of the
Mergers);
(iii) to promptly notify OccuSystems of any breach of any representation
or warranty or any CRA Material Adverse Effect (as defined in the
Reorganization Agreement);
(iv) not to (A) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date of the
Reorganization Agreement and disclosed to OccuSystems, issue any of its
capital stock, effect a stock split or otherwise change its capitalization
from that existing on the date of the Reorganization Agreement, (B) grant,
confer or award any option, warrant, conversion right or other right not
existing on the date of the Reorganization Agreement to acquire any shares
of its capital stock (other than the grant of options to acquire up to
15,000 shares of CRA Common Stock pursuant to the terms of CRA's stock
option plans at an exercise price of not less than the fair market value of
the CRA Common Stock on the date of grant) or grant, confer or award any
bonuses or other forms of cash incentives to any officer, director or
employee except consistent with past practice, (C) increase any compensation
of its present or future officers, directors or employees, except for normal
increases consistent with past practice or as required under the written
terms of an employment agreement in effect on or before December 31, 1996,
enter into any employment agreement with any present or future employee,
officer or director or amend any such agreement in any material respect,
grant any severance or termination pay to any officer, director or employee
other than pursuant to existing severance arrangements and policies, or
adopt any new benefit plan (including any stock option, stock benefit or
stock purchase plan) or amend any existing benefit plan in any material
respect;
(v) not to (A) declare any dividends, or make any distributions with
respect to its capital stock, (B) redeem or otherwise acquire any of its
capital stock or stock of its subsidiaries, or (C) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution of its capital stock;
(vi) not to dispose of any of its assets, except in the ordinary course
of business, or acquire any business or assets except as previously
disclosed to OccuSystems and acquisitions involving the payment of
consideration by CRA not in excess of $10 million for any single transaction
or $25 million in the aggregate;
(vii) not to incur material indebtedness for borrowed money, or make any
loans, advances or capital contributions to, or investments (other than
non-controlling investments in the ordinary course of business or other
investments permitted pursuant to clause (vi) above) in, any other person
other
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than a wholly-owned subsidiary, or issue or sell any debt securities, other
than borrowings under existing lines of credit in the ordinary course of
business, in each case, in an amount exceeding $1,000,000;
(viii) not, except as previously approved by the CRA Board and identified
to OccuSystems prior to the date the Reorganization Agreement, or except in
the ordinary course of business, to make or commit to make capital
expenditures other than (A) capital expenditures budgeted for the fiscal
year ending December 31, 1997, and (B) capital expenditures (not otherwise
included in budgeted capital expenditures referred to in clause (A) above)
that may be made by CRA in connection with the acquisitions by CRA or its
subsidiaries permitted under clause (vi) above;
(ix) not to mortgage or otherwise encumber or subject to any lien any
properties or assets except as would not be reasonably likely to have a
material adverse effect on CRA;
(x) not to make any change to its accounting (including tax accounting)
methods, principles or practices, except as may be required by generally
accepted accounting principles and except, in the case of tax accounting
methods, principles or practices, in the ordinary course of business of CRA;
(xi) not to permit any of its subsidiaries to enter into any agreement
or arrangement with any of their respective affiliates, other than with
wholly-owned subsidiaries of CRA, on terms less favorable to CRA or such
subsidiary, as the case may be, than could be reasonably expected to have
been obtained with an unaffiliated third party on an arm's-length basis;
(xii) to use commercially reasonable efforts to maintain with financially
responsible companies insurance in such amounts and against such risks and
losses as are customary for companies engaged in their respective
businesses; and
(xiii) not to (A) make or rescind any material express or deemed election
relating to taxes, unless it is reasonably expected that such action will
not result in a material adverse effect on CRA, (B) settle or compromise any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, except where such
settlement or compromise will not result in a material adverse effect on
CRA, or (C) change in any material respect any of its methods of reporting
income or deductions for federal income tax purposes from those employed in
the preparation of its federal income tax returns that have been filed for
prior taxable years, except as may be required by applicable law or except
for changes that are reasonably expected not to result in a material adverse
effect on CRA.
OccuSystems has agreed that, prior to the Effective Time, OccuSystems and
its significant subsidiaries will conduct their operations according to their
usual, regular and ordinary course of business. OccuSystems has agreed, among
other things:
(i) to preserve intact its business organization, relationships and
goodwill and to keep available the services of its officers and employees;
(ii) not to amend its certificate of incorporation or bylaws (other than
bylaw amendments that are not material to OccuSystems or to the consummation
of the Mergers);
(iii) to promptly notify CRA of any breach of any representation or
warranty or any OccuSystems Material Adverse Effect (as defined in the
Reorganization Agreement);
(iv) not to (A) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date of the
Reorganization Agreement and disclosed to CRA, issue any of its capital
stock, effect a stock split or otherwise change its capitalization from that
existing on the date of the Reorganization Agreement, (B) confer or award
any option, warrant, conversion right or other right not existing on the
date of the Reorganization Agreement to acquire any shares of its capital
stock (other than the grant of options to acquire up to 15,000 shares of
OccuSystems Common
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Stock pursuant to the terms of OccuSystems' stock option plans at an
exercise price of not less than the fair market value of the OccuSystems
Common Stock on the date of grant) or grant, confer or award any bonuses or
other forms of cash incentives to any officer, director or employee except
consistent with past practice, (C) increase any compensation of its present
or future officers, directors or employees, except for normal increases
consistent with past practice or as required under the written terms of an
employment agreement in effect on or before December 31, 1996; enter into
any employment agreement with any present or future employee, officer or
director, or amend any such agreement in any material respect, grant any
severance or termination pay to any officer, director or employee other than
pursuant to existing severance arrangements and policies, or adopt any new
benefit plan (including any stock option, stock benefit or stock purchase
plan) or amend any existing benefit plan in any material respect;
(v) not to (A) declare any dividends, or make any distributions with
respect to its capital stock, (B) redeem any of its capital stock or stock
of its subsidiaries or (C) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution of its capital stock;
(vi) not to dispose of any of its assets, except in the ordinary course
of business, or acquire any business or assets except as previously
disclosed to CRA and acquisitions involving the payment of consideration by
OccuSystems not in excess of $10 million for any single transaction or $25
million in the aggregate;
(vii) not to incur material indebtedness for borrowed money, or make any
loans, advances or capital contributions to, or investments (other than
non-controlling investments in the ordinary course of business or other
investments permitted pursuant to clause (vi) above) in, any other person
other than a wholly-owned subsidiary, or issue or sell any debt securities,
other than borrowings under existing lines of credit in the ordinary course
of business, in each case, in an amount exceeding $1,000,000;
(viii) not, except as previously approved by the OccuSystems Board and
identified to CRA prior to the date the Reorganization Agreement, or except
in the ordinary course of business, to make or commit to make capital
expenditures other than (A) capital expenditures budgeted for the fiscal
year ending December 31, 1997, and (B) capital expenditures (not otherwise
included in budgeted capital expenditures referred to in clause (A) above)
that may be made by OccuSystems in connection with the acquisitions by
OccuSystems or its subsidiaries permitted under clause (vi) above;
(ix) not to mortgage or otherwise encumber or subject to any lien any
properties or assets except as would not be reasonably likely to have a
material adverse effect on OccuSystems;
(x) not to make any change to its accounting (including tax accounting)
methods, principles or practices, except as may be required by generally
accepted accounting principles and except, in the case of tax accounting
methods, principles or practices, in the ordinary course of business of
OccuSystems;
(xi) not to permit any of its subsidiaries to enter into any agreement
or arrangement with any of their respective affiliates, other than with
wholly-owned subsidiaries of OccuSystems, on terms less favorable to
OccuSystems or such subsidiary, as the case may be, than could be reasonably
expected to have been obtained with an unaffiliated third party on an
arm's-length basis;
(xii) to use commercially reasonable efforts to maintain with financially
responsible companies insurance in such amounts and against such risks and
losses as are customary for companies engaged in their respective
businesses; and
(xiii) not to (A) make or rescind any material express or deemed election
relating to taxes, unless it is reasonably expected that such action will
not result in a material adverse effect on OccuSystems, (B)
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settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
taxes, except where such settlement or compromise will not result in an
material adverse effect on OccuSystems, or (C) change in any material
respect any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of its federal
income tax returns that have been filed for prior taxable years, except as
may be required by applicable law or except for changes that are reasonably
expected not to result in a material adverse effect on OccuSystems.
CRA ALTERNATIVE PROPOSALS. Pursuant to the Reorganization Agreement, CRA
has agreed that it will not, and will not authorize or (to the extent within its
control) permit any of its officers, directors, employees, agents, affiliates
and other representatives or those of any of its subsidiaries to, directly or
indirectly, solicit or encourage (including by way of providing information) any
prospective acquiror or the invitation or submission of any inquiries, proposals
or offers or any other efforts or attempts that constitute, or may reasonably be
expected to lead, to any CRA Acquisition Proposal (as hereinafter defined) from
any person or engage in any discussions or negotiations with respect thereto or
otherwise cooperate with or assist or participate in, or facilitate, any such
proposal; provided, however, that, notwithstanding any other provision of the
Reorganization Agreement, (i) the CRA Board may take and disclose to the
stockholders of CRA a position contemplated by Rule 14e-2(a) promulgated under
the Exchange Act and (ii) following receipt from a third party, without any
solicitation, initiation or encouragement, directly or indirectly, by CRA or any
CRA representative, of a bona fide CRA Acquisition Proposal, (x) CRA may engage
in discussions or negotiations with such third party and may furnish such third
party information concerning it and its business, properties and assets if such
third party executes a confidentiality agreement in reasonably customary form
and (y) the CRA Board may withdraw, modify or not make its recommendation to
adopt and approve the CRA Proposal or terminate the Reorganization Agreement, in
each case referred to in the foregoing clauses (i) and (ii), only to the extent
that the CRA Board shall conclude in good faith based on the advice of CRA's
outside counsel that such action is necessary in order for the CRA Board to act
in a manner that is consistent with its fiduciary obligations under applicable
law. As used in the Reorganization Agreement, "CRA Acquisition Proposal" means
any proposal or offer made by a person or group of persons other than a proposal
or offer by OccuSystems or any of its affiliates (which person or group has, in
the good faith determination of the CRA Board, the financial ability to
consummate such proposal or offer), for, or that could be reasonably expected to
lead to, a tender or exchange offer, a merger, consolidation or other business
combination involving such person or group and CRA or any CRA Significant
Subsidiaries (as defined in the Reorganization Agreement) or any proposal from
any such person or group to acquire in any manner a substantial equity interest
in, or any substantial portion of the assets of, CRA or any CRA Significant
Subsidiaries.
OCCUSYSTEMS ALTERNATIVE PROPOSALS. Pursuant to the Reorganization
Agreement, OccuSystems has agreed that it will not, and will not authorize or
(to the extent within its control) permit any of its officers, directors,
employees, agents, affiliates and other representatives or those of any of its
subsidiaries to, directly or indirectly, solicit or encourage (including by way
of providing information) any prospective acquiror or the invitation or
submission of any inquiries, proposals or offers or any other efforts or
attempts that constitute, or may reasonably be expected to lead, to any
OccuSystems Acquisition Proposal (as hereinafter defined) from any person or
engage in any discussions or negotiations with respect thereto or otherwise
cooperate with or assist or participate in, or facilitate, any such proposal;
provided, however, that, notwithstanding any other provision of the
Reorganization Agreement, (i) the OccuSystems Board may take and disclose to the
stockholders of OccuSystems a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act and (ii) following receipt from a third party, without
any solicitation, initiation or encouragement, directly or indirectly, by
OccuSystems or any OccuSystems representative, of a bona fide OccuSystems
Acquisition Proposal, (x) OccuSystems may engage in discussions or negotiations
with such third party and may furnish such third party information concerning it
and its business, properties and assets if such third party executes a
confidentiality agreement in reasonably customary form and (y) the OccuSystems
Board may withdraw, modify or not make its recommendation to adopt and
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approve the OccuSystems Proposal or terminate the Reorganization Agreement, but
in each case referred to in the foregoing clauses (i) and (ii), only to the
extent that the OccuSystems Board shall conclude in good faith based on the
advice of OccuSystems' outside counsel that such action is necessary in order
for the OccuSystems Board to act in a manner that is consistent with its
fiduciary obligations under applicable law. As used in the Reorganization
Agreement, "OccuSystems Acquisition Proposal" means any proposal or offer made
by a person or group of persons other than a proposal or offer by CRA or any of
its affiliates (which person or group has, in the good faith determination of
the OccuSystems Board, the financial ability to consummate such proposal or
offer), for, or that could be reasonably expected to lead to, a tender or
exchange offer, a merger, consolidation or other business combination involving
such person or group and OccuSystems or any OccuSystems Significant Subsidiaries
(as defined in the Reorganization Agreement) or any proposal from any such
person or group to acquire in any manner a substantial equity interest in, or
any substantial portion of the assets of, OccuSystems or any OccuSystems
Significant Subsidiaries.
EMPLOYEE BENEFITS. Concentra has agreed in the Reorganization Agreement
that it will cause to be in effect immediately following the Effective Time
employee benefit plans for the benefit of CRA's and OccuSystems' employees that
are reasonably comparable in the aggregate to the employee benefit plans for
such employees that were in effect immediately prior to the Effective Time.
MEETINGS OF STOCKHOLDERS. Pursuant to the Reorganization Agreement, both
OccuSystems and CRA have agreed to take all necessary action, in accordance with
applicable law and their respective charters and bylaws, to promptly convene the
Special Meetings. OccuSystems and CRA have also agreed, subject to the exercise
of the fiduciary duties of their respective Boards of Directors, to recommend
such approval and to take all lawful action to solicit such approvals.
INDEMNIFICATION AND INSURANCE. The Reorganization Agreement provides that,
from and after the Effective Time, Concentra will indemnify, defend and hold
harmless to the fullest extent that OccuSystems or CRA would have been permitted
under applicable law, each person who was, as of the date of the Reorganization
Agreement, or has been at any time prior to the date of the Reorganization
Agreement, an officer or director of OccuSystems or CRA (individually an
"Indemnified Party" and collectively the "Indemnified Parties"), against all
losses, claims, damages, liabilities, costs or expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement in connection
with any claims, suits, actions, proceedings or investigations arising out of or
pertaining to acts or omissions, or alleged acts or omissions, made by them in
their capacities as officers and directors. The Reorganization Agreements also
provides that Concentra will maintain, and cause CRA to keep in effect,
provisions of their charter and bylaws providing for exculpation of director and
officer liability and indemnification of the Indemnified Parties to the fullest
extent permitted under applicable law. The Reorganization Agreement also
provides that, for a period of six years after the Effective Time, directors'
and officers' liability insurance will be maintained covering the Indemnified
Parties who are currently covered, in their capacities as directors and
officers, by OccuSystems' and CRA's existing directors' and officers' liability
insurance policies on terms no less advantageous to the Indemnified Parties than
such existing insurance to the extent such coverage can be maintained or
procured by the payment of an annual premium not exceeding one and one-half
times the current annual premium paid by OccuSystems for its existing coverage
(which current annual premium is approximately $110,000).
OTHER ACTIONS. Pursuant to the Reorganization Agreement, both CRA and
OccuSystems have agreed to use their reasonable efforts to take, or cause to be
taken, all other action and to do, or cause to be done, all other things
necessary, proper or appropriate to consummate the transactions contemplated by
the Reorganization Agreement.
CERTAIN OTHER COVENANTS. Both OccuSystems and CRA have also agreed (i) to
promptly make their respective filings, and any other submissions, under the HSR
Act and obtain all other consents, approvals or permits from the necessary
Federal and state governments and regulatory agencies prior to the Effective
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Time, (ii) to allow all designated officers, attorneys, accountants and
representatives of the other reasonable access to the offices, records and files
and to instruct their respective employees, counsel and financial advisors to
cooperate with each other's investigation, (iii) to consult with each other
prior to issuing any press release or public statement, (iv) to cooperate in the
filing of the Registration Statement and obtaining all necessary state
securities laws permits or approvals, (v) to cause Concentra to submit an
application to the Nasdaq National Market covering the Concentra Common Stock to
be issued in the Mergers and to use reasonable efforts to obtain the approval of
such application prior to the Effective Time, (vi) to use all reasonable efforts
to deliver or cause to be delivered to Concentra an affiliate letter, in the
form attached to the Reorganization Agreement, from each of the OccuSystems
Affiliates and the CRA Affiliates prior to the Closing Date, (vii) to pay all
costs and expenses incurred by it except (a) HSR filing fees, (b) Registration
Statement filing fees, (c) expenses of Concentra, and (d) costs of printing and
mailing this Joint Proxy Statement/Prospectus, which shall be shared equally by
OccuSystems and CRA, (ix) to take such actions as are necessary to minimize or
eliminate the effects of any antitakeover statute or regulation, (x) to cause
Concentra and CRA Merger Sub to perform their obligations under the
Reorganization Agreement and not to perform any other function, and (xi) to
cooperate in the filing of all returns, questionnaires, applications or other
documents relating to any taxes or fees that become payable in connection with
the Mergers.
CONDITIONS TO THE MERGERS
The obligations of OccuSystems and CRA to consummate the Mergers are
conditioned on the fulfillment of the following conditions: (i) approval, in the
manner required by law or the applicable requirements of the Nasdaq National
Market, by the stockholders of OccuSystems and CRA, of the OccuSystems Proposal
and the CRA Proposal, respectively; (ii) expiration or termination of the
applicable waiting period under the HSR Act; (iii) neither CRA nor OccuSystems
shall be subject to any order or injunction of a court of competent jurisdiction
which prohibits the consummation of the transactions contemplated by the
Reorganization Agreement; (iv) the effectiveness of the Registration Statement
and the absence of any stop order suspending the effectiveness thereof and no
proceeding for that purpose having been initiated by the Commission; (v) the
receipt of all consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory body
required in connection with the execution, delivery and performance of the
Reorganization Agreement (except for those documents required to be filed after
the Effective Time and except where the failure to obtain such approval or order
would not have a material adverse effect on Concentra); and (vi) the approval
for quotation of the Concentra Common Stock on the Nasdaq National Market,
subject only to official notice of issuance.
The obligation of OccuSystems to consummate the Mergers is conditioned on
the fulfillment of the following additional conditions: (i) the performance by
CRA, in all material respects, of its obligations required to be performed on or
prior to the Closing Date and contained in the Reorganization Agreement, and the
representations and warranties made by CRA in the Reorganization Agreement being
true and correct as of the Closing Date; (ii) the receipt by OccuSystems of an
opinion from tax counsel stating that the OccuSystems Merger will be treated as
a reorganization described in Section 368(a) of the Code; (iii) no material
adverse change in the business, financial condition or operations of CRA shall
have occurred; (iv) holders of not more than five percent of the outstanding
shares of CRA Common Stock have perfected appraisal rights; (v) receipt of an
opinion from OccuSystems' independent auditors that the Mergers would be
properly accounted for as a pooling-of-interests; and (vi) DLJ's fairness
opinion shall not have been withdrawn or materially modified by DLJ in a manner
adverse to OccuSystems stockholders.
The obligation of CRA to consummate the Mergers is conditioned on the
fulfillment of the following additional conditions: (i) the performance by
OccuSystems, in all material respects, of its obligations required to be
performed on or prior to the Closing Date and contained in the Reorganization
Agreement and the representations and warranties made by OccuSystems in the
Reorganization Agreement being true
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and correct in all material respects as of the Closing Date: (ii) the receipt by
CRA of a satisfactory opinion of its special counsel that the CRA Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code
and/or the transfer of property governed by Section 351 of the Code: (iii) the
receipt by OccuSystems and Concentra of the tax opinion described in the
preceding paragraph: (iv) no material adverse change in the business, financial
condition or operations of OccuSystems shall have occurred: (v) receipt of an
opinion dated as of the Closing Date from CRA's auditors that the Mergers would
be properly accounted for as a pooling of interests; and (vi) Alex. Brown's
fairness opinion shall not have been withdrawn or materially modified by Alex.
Brown in a manner adverse to CRA's stockholders.
The Reorganization Agreement may be amended at any time before or after
stockholder approval. Either OccuSystems or CRA may extend the time for
performance of any of the obligations of the other party or waive compliance
with any of the agreements or conditions contained in the Reorganization
Agreement. Neither OccuSystems nor CRA currently has any intention to allow for
such extension or make any such waiver. In the event of any waiver of a material
condition to the consummation of the Mergers by any party (including without
limitation any waiver of the conditions that CRA and OccuSystems receive
opinions concerning the pooling-of-interests accounting treatment for the
Mergers and opinions concerning the tax-free nature of the Mergers), the
Reorganization Agreement will be amended and stockholder approval of the
Reorganization Agreement, including such change, will be obtained.
TERMINATION OF THE REORGANIZATION AGREEMENT
The Reorganization Agreement is subject to termination by the mutual consent
of OccuSystems and CRA. The Reorganization Agreement may also be terminated by
either party if (i) the Mergers are not consummated on or before October 31,
1997, (ii) either CRA's or OccuSystems' stockholders fail to approve the CRA
Proposal or the OccuSystems Proposal, respectively, or (iii) a United States
Federal court or Federal governmental, regulatory or administrative agency, or a
state court of competent jurisdiction or state governmental, regulatory or
administrative agency or commission, issues an order, decree or ruling
permanently restraining, enjoining or otherwise prohibiting the consummation of
the Mergers, and such order, decree or ruling has become final and
non-appealable, provided that the party seeking to terminate the Reorganization
Agreement shall have used all reasonable efforts to remove such injunction,
order or decree.
The Reorganization Agreement may be terminated by the OccuSystems Board at
any time prior to the Effective Time if (i) in the good faith judgment of the
OccuSystems Board, as advised by outside counsel, its fiduciary duties to its
stockholders requires such termination by reason of an OccuSystems Alternative
Proposal being made, (ii) there has been a breach by CRA of any representation
or warranty in the Reorganization Agreement, subject to certain materiality
exceptions, (iii) there has been a material breach of any of the covenants or
agreements in the Reorganization Agreement on the part of CRA which is not
curable or not cured within 30 days after written notice of the breach by
OccuSystems or (iv) the CRA Board shall have withdrawn or modified, in a manner
materially adverse to OccuSystems, its approval or recommendation of the CRA
Proposal.
The Reorganization Agreement may be terminated by the CRA Board at any time
prior to the Effective Time if (i) in the good faith judgment of the CRA Board,
as advised by outside counsel, its fiduciary duties to its stockholders requires
such termination by reason of a CRA Alternative Proposal being made, (ii) there
has been a breach by OccuSystems of any representation or warranty in the
Reorganization Agreement, subject to certain materiality exceptions, (iii) there
has been a material breach of any of the covenants or agreements in the
Reorganization Agreement on the part of OccuSystems which is not curable or not
cured within 30 days after written notice of the breach by CRA or (iv) the
OccuSystems Board shall have withdrawn or modified, in a manner materially
adverse to CRA, its approval or recommendation of the OccuSystems Proposal.
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TERMINATION FEES
If a CRA Alternative Proposal is made and thereafter the Reorganization
Agreement is terminated (i) by action of the CRA Board in the exercise of its
fiduciary duties by reason of such CRA Alternative Proposal or (ii) by action of
OccuSystems if the CRA Board has withdrawn or modified, in a manner materially
adverse to OccuSystems, its approval or recommendation of the CRA Proposal, then
CRA must pay OccuSystems a termination fee of $10 million. If an OccuSystems
Alternative Proposal is made and thereafter the Reorganization Agreement is
terminated (i) by action of the OccuSystems Board in the exercise of its
fiduciary duties by reason of such OccuSystems Alternative Proposal or (ii) by
action of the CRA Board if the OccuSystems Board has withdrawn or modified in a
manner materially adverse to CRA its approval or recommendation of the
OccuSystems Proposal, then OccuSystems must pay CRA a termination fee of $10
million.
THE STOCK OPTION AGREEMENTS
The following is a brief summary of the terms of the Stock Option
Agreements, copies of which are attached hereto as Appendices B and C and which
are incorporated herein by reference. Such summary is qualified in its entirety
by reference to the Stock Option Agreements.
GENERAL
Pursuant to mutual Stock Option Agreements, CRA has granted to OccuSystems
the OccuSystems Option, and OccuSystems has granted to CRA the CRA Option. As
holders of such Options (the "Option Holders"), OccuSystems and CRA have the
right under certain circumstances to purchase, respectively, up to (i) with
respect to the CRA Option, ten percent of the outstanding shares of OccuSystems
Common Stock as of March 31, 1997, and (ii) with respect to the OccuSystems
Option, ten percent of the outstanding shares of CRA Common Stock as of March
31, 1997 (shares purchasable pursuant to the CRA Option and the OccuSystems
Option are collectively referred to as the "Option Shares") at a price of
$37.875 per share for CRA Common Stock and at a price of $21.21 per share for
OccuSystems Common Stock. The exercise price is payable in cash. The Stock
Option Agreements could have the effect of making an acquisition of either CRA
or OccuSystems by a third party more costly because of the need to acquire in
any such transaction the shares of common stock of the Issuer issued under the
Stock Option Agreements. In addition, the exercise of either of the Options may
render more difficult or impossible the consummation by a third party of an
acquisition of the Issuer of such exercised Option under the
pooling-of-interests method of accounting.
An Option may be exercised by the Option Holder, in whole or in part, at any
time or from time to time after the Reorganization Agreement is terminated under
circumstances that entitle such Option Holder to termination fees as described
in "THE REORGANIZATION AGREEMENT--Termination Fees" (a "Trigger Event"). The
Options will terminate upon the earlier of (i) the Effective Time, (ii) the
termination of the Reorganization Agreement pursuant to its terms (other than a
termination which is also a Trigger Event), or (iii) the 180th day following a
Trigger Event (or if, at the expiration of such period the Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, ten business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal, but in no event
under this clause (iii) later than the 548th day following such Triggering
Event).
Notwithstanding the foregoing, no Option may be exercised if the Option
Holder is in material breach of any of its representations, warranties,
covenants or agreements contained in the applicable Stock Option Agreement or in
the Reorganization Agreement. In addition, the Total Profit of the Option Holder
resulting from the payment of a termination fee under the Reorganization
Agreement and the exercise of rights under its Stock Option Agreement may not
exceed $15 million. See "-- Limitation on Total Profit."
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CERTAIN REPURCHASES
Under the terms of the Stock Option Agreements, at any time during which the
Option is exercisable (the "Repurchase Period"), the Option Holder has the right
to require the Issuer to repurchase from the Option Holder all or any portion of
the Option or the Option Shares purchased pursuant to the exercise of the
Option. The amount that the Issuer must pay to the Option Holder to repurchase
the Option is the difference between the Market Price (as defined below) for
shares of Issuer common stock as of the date the Option Holder gives notice of
its intent to exercise its repurchase rights (the "Notice Date") and the
exercise price for the Option, multiplied by the number of Option Shares, but
only if the Market Price is greater than such exercise price. The amount that
the Issuer must pay to the Option Holder to repurchase the Option Shares is the
exercise price paid by the Option Holder for the Option Shares plus the
difference between the Market Price and the exercise price paid by the Option
Holder for the Option Shares, but only if the Market Price is greater than such
exercise price, multiplied by the number of Option Shares. The Stock Option
Agreements define "Market Price" as the average of the closing sale prices of
shares of Issuer common stock on the Nasdaq National Market for the ten trading
days immediately preceding the Notice Date.
VOTING
Under the terms of the Stock Option Agreements, each party has agreed to
vote, prior to the Expiration Date (as defined below under "-- Standstill
Provisions"), any shares of the capital stock of the other party acquired
pursuant to the Stock Option Agreements or otherwise beneficially owned by such
party on each matter submitted to a vote of stockholders of such other party for
and against such matter in the same proportion as the vote of all other
stockholders of such other party are voted for and against such matter.
LIMITATION ON TOTAL PROFIT
Each Stock Option Agreement limits an Option Holder's Total Profit to $15
million. As used in the Stock Option Agreements, "Total Profit" means the
aggregate amount (before taxes) of the following: (i) the termination fee
received by the Option Holder under the Reorganization Agreement; (ii) the
amount received by the Option Holder pursuant to a repurchase of the Option
Holder's Option or the Issuer's shares less the purchase price for such shares;
and (iii) the net cash amount received by the Option Holder from the sale of any
shares acquired pursuant to the Stock Option Agreement less the amount paid for
such shares. In addition, the Stock Option Agreement limits an Option Holder's
"Notional Total Profit" (as hereinafter defined) to $15 million. If the Notional
Total Profit exceeds $15 million, the Option Holder may, in its sole discretion,
increase the option exercise price to limit the Total Notional Profit to $15
million. For purposes of the Stock Option Agreement, "Notional Total Profit"
means the Total Profit determined as of the date of a notice to exercise an
Option assuming that the Option was exercised on such date for such number of
shares, and that such shares, together with all other shares of the Issuer that
the Option Holder had acquired pursuant to the Stock Option Agreement were sold
for cash at the closing market price as of the close of business on the
preceding trading day (less customary brokerage commission).
STANDSTILL PROVISIONS
The Stock Option Agreements provide that, other than pursuant to the
Reorganization Agreement or the Stock Option Agreements, following the date of
the Stock Option Agreements and prior to the Expiration Date of the Stock Option
Agreements, without the prior written consent of the other party, neither party
shall, and neither party shall permit its affiliates to, directly or indirectly,
alone or in concert or conjunction with any other Person or Group (as defined
below), (i) in any manner acquire, agree to acquire or make any proposal to
acquire, any securities of, equity interest in, or any material property of,
such other party or any of its subsidiaries, (ii) except at the specific written
request of such other party,
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propose to enter into any business combination involving such other party or any
of its subsidiaries or to purchase a material portion of the assets of such
other party or any of its subsidiaries, (iii) make or in any way participate in
any "solicitation" of "proxies" (as such terms are used in Regulation 14A
promulgated under the Exchange Act) to vote, or seek to advise or influence any
Person with respect to the voting of any voting securities of such other party
or any its subsidiaries, (iv) form, join or in any way participate in a Group
with respect to any voting securities of such other party or any of its
subsidiaries, (v) seek to control or influence the management, Board of
Directors or policies of such other party, (vi) disclose any intention, plan or
arrangement inconsistent with the foregoing, (vii) advise, assist or encourage
any other Person in connection with the foregoing or (viii) request such other
party (or its directors, officers, employees or agents) to amend or waive any
provision of the Stock Option Agreements that relate to the restrictions
described in this paragraph or take any action that may require such other party
to make a public announcement regarding the possibility of a business
combination or merger with such party.
For purposes of the foregoing, (i) the term "Person" means any corporation,
partnership, individual, trust, unincorporated association or other entity or
Group (within the meaning of Section 13(d)(3) of the Exchange Act), (ii) the
term "Expiration Date" with respect to any obligation or restriction imposed on
a party shall mean the earlier to occur (A) the first anniversary of the date of
the Stock Option Agreements and (B) such time as the other party shall have
suffered a Change of Control, and (iii) a "Change of Control" shall be deemed to
have occurred whenever (A) there shall be consummated (1) any consolidation or
merger of such party in which such party is not the continuing or surviving
corporation, or pursuant to which shares of such party's common stock would be
converted in whole or in part into cash, other securities or other property,
other than a merger of such party in which the holders of such party's common
stock immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (2) any sale, lease, exchange or transfer (in one transaction or a
series of related transactions) of all or substantially all the assets of such
party, or (B) the stockholders of such party shall approve any plan or proposal
for the liquidation or dissolution of such party, or (C) any party, other than
such party or a subsidiary thereof or any employee benefit plan sponsored by
such party or a subsidiary thereof or a corporation owned, directly or
indirectly, by the stockholders of such party in substantially the same
proportions as their ownership of stock of such party, shall become the
beneficial owner of securities of such party representing 25% or more of the
combined voting power of then outstanding securities ordinarily (and apart from
rights accruing in special circumstances) having the right to vote in the
election of directors, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, or (D) at any time
during the period commencing on the date of the Stock Option Agreements and
ending on the Expiration Date, individuals who on the date of the execution of
the Stock Option Agreements constituted the Board of Directors of such party
shall cease for any reason to constitute at least a majority thereof, unless the
election or the nomination for election by such party's stockholders of each new
director during the period commencing on the date of the Stock Option Agreements
and ending on the Expiration Date was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the date of the
Stock Option Agreements, or (E) any other event shall occur with respect to such
party that would be required to be reported in response to Item 6(e) (or any
successor provision) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act.
RESTRICTIONS ON TRANSFER
The Stock Option Agreements provide that, prior to the Expiration Date,
neither party may sell, assign, pledge or otherwise dispose of or transfer the
shares it acquires pursuant to the Stock Option Agreements (collectively, the
"Restricted Shares") except as specifically provided for in the Stock Option
Agreements. The Stock Option Agreements further provide that, following the
termination of the Reorganization Agreement, either party may sell any
Restricted Shares pursuant to a tender or exchange offer approved or
recommended, or otherwise determined to be fair and in the best interests of
such other party's stockholders, by a majority of the Board of Directors of such
other party. In addition to the repurchase rights described above under "Certain
Repurchases," subsequent to the termination of the Reorganization Agreement, the
parties have the right to have such shares of the other party registered under
the Securities Act for sale in a public offering.
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BUSINESS OF OCCUSYSTEMS
Based on a review of public filings and comparison with other
publicly-traded physician practice management companies, OccuSystems' revenues,
number of occupational healthcare centers and number of affiliated physicians
place the company as the nation's largest physician practice management company
focusing on occupational healthcare. OccuSystems currently manages the practices
of 215 physicians in OccuSystems' 120 occupational healthcare centers located in
32 markets in 16 states. OccuSystems provides the management, facilities,
administrative and technical support, case management, physical therapy services
and other ancillary services necessary to establish and maintain a fully
integrated network of occupational healthcare providers. OccuSystems believes
that this network of physicians and facilities combined with OccuSystems'
management expertise and cost containment programs provide significant
advantages to patients, employers, physicians and payors in reducing the overall
costs associated with occupational healthcare. Since December 1, 1991,
OccuSystems has acquired the assets of 113 physician practices and developed 28
physician practices. The Company's consolidated results of operations reflect
the revenues generated by the Physician Groups and the costs associated with the
delivery of their services.
As a physician practice management company focusing on occupational
healthcare, OccuSystems manages occupational healthcare centers at which it
provides support personnel, marketing, information systems, and management
services to its affiliated physicians. OccuSystems owns all of the operating
assets of the centers, including leasehold interests and medical equipment.
Physician and physical therapy services are provided at the Company's centers
under management agreements with affiliated physician associations (the
"Physician Groups"), which are organized as professional corporations that hire
licensed physicians and physical therapists to provide medical services to the
centers' patients. Under these agreements, all revenues derived from medical
services provided by the physicians and physical therapists employed by the
Physician Groups are revenues of the Physician Groups, and the compensation,
benefits and other payments to these physicians and physical therapists, as well
as malpractice insurance premiums and other miscellaneous expenses associated
with these providers, are expenses of the Physician Groups.
OccuSystems believes that the decisions made by primary care physicians are
a critical determinant of the total costs (including non-medical costs) of a
workers' compensation case. Because most occupational medicine at the primary
care level is provided on a non-dedicated basis by physicians as part of their
general medical practices, OccuSystems believes that an attractive opportunity
exists in organizing primary care physicians within a national network that
exclusively provides occupational healthcare services. By so doing, OccuSystems
believes that it can substantially reduce the costs associated with occupational
healthcare while maintaining the quality of care.
The occupational healthcare market is extremely fragmented. Individual
physicians, small group practices, local practice management companies and
hospital-based programs have accounted for the majority of providers of
occupational healthcare services. OccuSystems believes that, due to increasing
business and regulatory complexity, greater capital requirements and the
development of larger integrated networks such as OccuSystems, physicians are
seeking to affiliate with larger, professionally managed organizations.
OccuSystems' strategy is as follows:
- To continue to consolidate primary care physician practices specializing
in occupational medicine to meet the needs of physicians seeking to
affiliate with professionally managed organizations.
- To continue to develop clusters of occupational healthcare centers in new
and existing geographic markets, through the acquisition and development
of physician practices and the formation of strategic joint ventures, to
serve employers, payors and employees more effectively and to leverage
management resources.
- To develop and affiliate with vertically integrated networks of providers,
including specialists and hospitals. Such specialists and hospitals must
understand the importance of treating OccuSystems'
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patients in a timely manner and work in concert with the goal of returning
the injured employee to work as quickly as medically appropriate.
- To employ its information systems and practice management expertise to
optimize the performance of its centers and enhance its affiliated
physicians' efficiency in practicing occupational medicine.
- To implement its proprietary Active Injury/Illness Management ("AIM-SM-")
program to manage the occupational injury and illness resolution process
proactively from the moment of initial treatment to return to work.
- To market its services on a case rate (fixed fee for all medical costs by
diagnosis) and capitated (fixed fee per employee per month, regardless of
the nature and frequency of actual injuries) basis to employers, insurers
and managed care organizations. Workers' compensation services are
currently reimbursed almost exclusively on a fee-for-service basis; only a
negligible amount of OccuSystems' revenues are represented by case rate or
capitation arrangements.
OccuSystems' executive offices are located at 3010 LBJ Freeway, Suite 400,
Dallas, Texas 75234, and its telephone number at that address is (972) 484-2700.
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BUSINESS OF CRA
CRA provides field case management and specialized cost containment services
designed to reduce workers' compensation costs. CRA operates one of the largest
field case management organizations in North America, consisting of 119 field
case management offices with approximately 1,200 field case managers who provide
medical management and return to work services in 49 states, the District of
Columbia and Canada. CRA's field case managers provide contact with injured
employees, medical providers and employers to promote communication, coordinate
treatment needs and facilitate the injured workers' recovery and return to work.
CRA also provides a broad range of higher margin specialized cost containment
services from 78 service locations, which include a variety of prospective and
retrospective techniques designed to control medical and indemnity costs. Such
services include utilization management, specialized PPO network management,
telephonic case management and retrospective medical bill review services, that
are designed to reduce costs associated with work-related injuries and
automobile accident-related injuries. Revenues from specialized cost containment
services comprised approximately 33.8% of revenues for 1996, up from
approximately 27.1% for 1995. CRA markets its services to workers' compensation
insurers, TPAs, self-insured employers and payors of automobile accident medical
claims through a direct sales and marketing organization consisting of over 150
dedicated personnel. CRA currently has over 1,250 customers nationwide.
CRA's objective is to expand and capitalize on its presence as a national
provider of comprehensive managed care services to workers' compensation payors
and to take advantage of developing opportunities in related industries. CRA's
strategy for achieving this objective is as follows:
- To continue its primary focus on providing workers' compensation managed
care services to workers' compensation insurers, third party
administrators and self-insured employers.
- To increase its penetration of large, national payors by leveraging its
broad-based workers' compensation expertise and its existing experience
with its base of national accounts.
- To aggressively cross-sell its specialized cost containment services to
its existing customer base.
- To increase its marketing of early intervention services such as first
report of injury, precertification, telephonic case management and access
to PPO networks in order to promptly identify cases that have the
potential to result in significant expenses and to control these expenses
before they are incurred.
- To capitalize on the recent introduction of managed care techniques to the
automobile insurance market through the acquisition of QMC3, Inc.
("QMC3"), a leading provider of managed care services to this industry.
- To continue to seek complementary strategic acquisitions, such as FOCUS
HealthCare Management, Inc., QMC3 and Prompt Associates, Inc., to further
expand its product offerings and enhance its opportunities for growth.
CRA's executive offices are located at 312 Union Wharf, Boston,
Massachusetts 02109, and its telephone number at that address is (617) 367-2163.
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BUSINESS OF CONCENTRA
GENERAL
Concentra, the capital stock of which is owned equally by OccuSystems and
CRA, has not conducted any substantial business activities to date, other than
those incident to its formation, its execution of the Reorganization Agreement
and related agreements and its participation in the preparation of this Joint
Proxy Statement/Prospectus. Immediately following the consummation of the
Mergers, Concentra will become a holding company for CRA and its subsidiaries
and OccuSystems' subsidiaries. Accordingly, the business of Concentra, through
its wholly-owned subsidiary CRA and OccuSystems' and CRA's subsidiaries, will be
the businesses currently conducted by OccuSystems and CRA and their respective
subsidiaries. See "BUSINESS OF OCCUSYSTEMS" and BUSINESS OF CRA."
Concentra's executive offices are located at 312 Union Wharf, Boston,
Massachusetts 02109, and its telephone number at that address is (617) 367-2163.
NEW CREDIT FACILITY
Concentra is negotiating with First Union National Bank ("First Union") for
First Union, along with other financial institutions to be determined, to
provide Concentra with a $100,000,000 revolving credit facility (the "New Credit
Facility"). First Union has committed to provide $60,000,000 under the New
Credit Facility. Concentra anticipates that the New Credit Facility will replace
OccuSystems' and CRA's existing credit facilities, will have a term of five
years, will bear interest at a variable rate depending on certain financial
ratios, and will be secured by a pledge of all capital stock of Concentra's
subsidiaries. Amounts drawn under the New Credit Facility will be available for
general working capital purposes, including acquisitions.
The loan documents governing the New Credit Facility are expected to contain
customary covenants and restrictions relating to Concentra's operations. The
closing of the New Credit Facility will be conditioned upon, among other things,
the consummation of the Mergers, the satisfaction of certain financial
requirements and negotiation and execution of appropriate documentation.
Although Concentra expects that the New Credit Facility will be available by the
Effective Time, there can be no assurance that Concentra and First Union will
establish the New Credit Facility.
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The OccuSystems Common Stock and the CRA Common Stock are listed on the
Nasdaq National Market. The table below sets forth, for the calendar quarters
indicated, the reported high and low bid prices of OccuSystems Common Stock and
CRA Common Stock as reported on the Nasdaq National Market, in each case based
on published financial sources.
<TABLE>
<CAPTION>
OCCUSYSTEMS COMMON CRA COMMON STOCK
STOCK
-------------------- --------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
--------- --------- --------- ---------
1995
Second Quarter.............................................................. $ 20 $ 15 1/2 $ 25 1/4 $ 16 1/2
Third Quarter............................................................... 21 3/4 16 1/2 25 19
Fourth Quarter.............................................................. 21 1/2 17 1/4 24 1/2 20 3/4
1996
First Quarter............................................................... 25 3/4 17 3/4 38 1/4 22 3/8
Second Quarter.............................................................. 40 3/4 22 1/4 48 33
Third Quarter............................................................... 37 1/2 25 56 3/4 31
Fourth Quarter.............................................................. 31 23 3/8 59 1/16 41
1997
First Quarter............................................................... 28 22 51 1/4 37
Second Quarter.............................................................. 29 1/2 17 1/4 52 5/8 31 7/8
Third Quarter (through July 30, 1997)....................................... 30 1/8 27 1/2 54 1/4 48 3/4
</TABLE>
On April 21, 1997, the last full trading day prior to the public
announcement of the proposed Mergers, the closing price on the Nasdaq National
Market was $19 1/8 per share of OccuSystems Common Stock and $37 7/8 per share
of CRA Common Stock. On July 30, 1997, the most recent practicable date prior to
the effectiveness of the registration statement of which this Joint Proxy
Statement/Prospectus is a part, the closing price on the Nasdaq National Market
was $29 1/2 per share of OccuSystems Common Stock and $53 5/8 per share of CRA
Common Stock. Holders of OccuSystems Common Stock and CRA Common Stock are urged
to obtain current market quotations prior to making any decision with respect to
the Mergers.
Neither CRA nor OccuSystems has ever paid dividends. The payment of future
dividends on Concentra Common Stock will be a business decision to be made by
the Board of Directors of Concentra from time to time based upon results of
operations and financial condition of Concentra and such other factors as the
Concentra Board of Directors considers relevant.
67
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of OccuSystems and CRA as
of March 31, 1997, and the pro forma capitalization of Concentra after giving
effect to the Mergers prior to the inclusion of any deal fees and transition
costs. This table should be read in conjunction with the "Pro Forma Financial
Statements" included elsewhere in this Joint Proxy Statement/Prospectus and the
OccuSystems and CRA historical consolidated financial statements, including the
notes thereto, which are incorporated by reference in this Joint Proxy
Statement/ Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
----------------------------------------
<S> <C> <C> <C>
OCCUSYSTEMS CRA
HISTORICAL PRO FORMA(1) PRO FORMA
------------ ------------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Revolving Credit Facility............................................... $ -- $ 46,012 $ 46,012
Current portion of long-term debt....................................... 860 126 986
6% Convertible Subordinated Notes due 2001.............................. 97,750 -- 97,750
Other long-term debt.................................................... 557 -- 557
Stockholders' equity:
Preferred Stock; $.01 par value; none, 1,000,000 and 20,000,000
authorized; none issued and outstanding............................. -- -- --
Common Stock; $.01 par value; 50,000,000 and 40,000,000 100,000,000
authorized; 21,579,898, 8,961,185 and 37,584,574 shares issued and
outstanding, respectively........................................... 216 90 376
Paid-in capital....................................................... 143,803 92,347 236,080
Retained deficit...................................................... (7,900) (11,650) (36,723)(2)
------------ ------------- -----------
Total stockholders' equity.......................................... 136,119 80,787 199,733
------------ ------------- -----------
Total capitalization............................................ $ 235,286 $ 126,925 $ 345,038
------------ ------------- -----------
------------ ------------- -----------
</TABLE>
- ------------------------
(1) Reflects the pro forma effect of CRA's acquisition of First Notice Systems,
Inc. on June 4, 1997.
(2) Includes the effects of (i) the write-off of $1,973 in deferred start-up
cost associated with OccuSystems, (ii) the recording of $20,000 in deal fees
and transition costs and (iii) the recording of the estimated tax benefit of
$4,800.
68
<PAGE>
CONCENTRA MANAGED CARE, INC.
CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited consolidated pro forma financial statements give
effect to the Mergers using the pooling of interest method of accounting, after
giving effect to the pro forma adjustments described in the accompanying notes.
These unaudited pro forma combined financial statements have been prepared from,
and should be read in conjunction with, the historical financial statements and
notes thereto of OccuSystems, Inc. ("OccuSystems") and CRA Managed Care, Inc.
("CRA") which are incorporated by reference in this Joint Proxy
Statement/Prospectus.
OccuSystems acquired five separate businesses in pooling of interest mergers
during 1996, all of which have been reflected in OccuSystems' historical
Statement of Operations and one in 1997 which was not material to the
OccuSystems financial statements and OccuSystems restated its opening retained
earnings as of the acquisition date. OccuSystems acquired the Baltimore
Industrial Medical Group on January 1, 1996, Occupational Medicine Services,
Inc. on October 4, 1996, Prizm Environmental and Occupational Health, Inc. on
November 1, 1996, and Ideal Occupational Medical Centers Group on November 2,
1996. OccuSystems also purchased three other businesses during 1996; Deer Park
Family Clinic on May 1, 1996, Austin Regional Clinic on July 1, 1996, DRCA
Medical Corporation on December 31, 1996 and Medicine of Columbus, P.C. on
February 1, 1997. These purchase acquisitions, individually or in the aggregate,
were not material to the OccuSystems financial statements and are not reflected
in the pro forma amounts presented.
CRA purchased FOCUS HealthCare Management, Inc. ("FOCUS") on April 2, 1996,
Prompt Associates, Inc. ("Prompt") on October 29, 1996, and First Notice
Systems, Inc. on June 4, 1997 and acquired QMC3, Inc. ("QMC3") on May 29, 1996
in a pooling of interests transaction. The QMC3 acquisition was not material to
the Company's financial statements and the Company restated its opening retained
earnings as of the acquisition date to reflect the net assets of QMC3.
The unaudited Consolidated Pro Forma Balance Sheet gives effect to the
Mergers as if they had occurred on March 31, 1997, combining the consolidated
balance sheets of OccuSystems and CRA, after giving effect to CRA's recent
acquisition of assets of First Notice Systems Company ("FNS") on June 4, 1997.
The Consolidated Pro Forma Statement of Operations for the three months ended
March 31, 1997 give effect to the Mergers as if they had occurred on January 1,
1997, combining the results of operation of OccuSystems and CRA, after giving
effect to CRA's recent acquisition of FNS, effective January 1, 1997. The
Consolidated Pro Forma Statement of Operations for the year ended December 31,
1996 give effect to the Mergers as if they had occurred on January 1, 1996,
combining the results of operation of OccuSystems and CRA, after giving effect
to CRA's acquisition of FOCUS, Prompt and FNS effective January 1, 1996. The
Consolidated Pro Forma Statement of Operations for the years ended December 31,
1995 and 1994 give effect the Mergers as if they had occurred on January 1,
1994, combining the results of operation of OccuSystems and CRA.
The Consolidated Pro Forma Financial Statements of the Company do not
purport to present the financial position or results of operations of the
Company had the Mergers or acquisitions been consummated at the dates indicated,
nor is it necessarily indicative of future operating results or financial
position of the merged companies. Certain reclassifications have been made to
the unaudited historical financial statements to conform to the presentation
expected to be used by the merged companies.
As a result of the Mergers, the merged companies will incur certain deal
fees and transition costs, currently estimated at $15 to $20 million dollars
(pre-tax), in connection with consummating of the transaction and integrating
the operations of CRA and OccuSystems. The transition costs will consist
principally of professional and registration fees, systems modification costs,
cost associated with the elimination and consolidation of duplicate facilities
and employee severance and relocation resulting from the Merger. While the exact
timing, nature and amount of these transition costs is subject to change,
Concentra Managed Care, Inc. anticipates that this one time pre-tax charge will
be recorded in the quarter
69
<PAGE>
in which the Merger is consummated. The unaudited Consolidated Pro Forma
Financial Statements reflect $20 million of costs described above (including an
aggregate of $375,000 of lump-sum payments to Dr. Rehm and Ms. Silverman as a
result of their terminating the employment agreements with OccuSystems and CRA,
respectively) but none of the anticipated recurring expense savings. The
American Institute of Certified Public Accountants has proposed a change to the
accounting and reporting treatment of start-up costs. This proposal, which is
not yet final, would require the start-up costs be expensed as incurred. At
March 31, 1997, OccuSystems had approximately $1,973,000 of deferred start-up
costs which would be required to be written off if the proposed pronouncement is
adopted. This anticipated write-off has been reflected on the Consolidated Pro
Forma Balance Sheet at March 31, 1997.
70
<PAGE>
CONCENTRA MANAGED CARE, INC.
CONSOLIDATED PRO FORMA BALANCE SHEET
(UNAUDITED--AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA CRA PRO FORMA PRO FORMA
CRA FNS ADJUSTMENTS PRO FORMA OCCUSYSTEMS ADJUSTMENTS COMBINED
--------- --------- ------------- ----------- ------------ ----------- -----------
ASSETS
Current assets:
Cash and cash
equivalents............ $ 1,692 $ -- $ -- $ 1,692 $ 21,577 $ -- $ 23,269
Short-term investments... -- -- -- -- 31,097 -- 31,097
Accounts receivable,
net.................... 41,478 2,124 -- 43,602 41,606 -- 85,208
Prepaid expenses and tax
assets................. 939 17 -- 956 6,631 -- 7,587
--------- --------- ------------- ----------- ------------ ----------- -----------
Total current
assets............. 44,109 2,141 -- 46,250 100,911 -- 147,161
Long-term investments...... -- -- -- -- 9,494 -- 9,494
Property and equipment,
net...................... 9,566 2,795 -- 12,361 37,650 -- 50,011
Intangible Assets:
Goodwill, net............ 47,354 -- 35,875(1) 83,229 106,537 -- 189,766
Assembled workforce and
customer lists......... 1,022 -- 1,125(1) 2,147 1,067 -- 3,214
Other assets............... 327 1,555 1,882 7,969 (1,973) 12) 7,878
--------- --------- ------------- ----------- ------------ ----------- -----------
$ 102,378 $ 6,491 $ 37,000 $ 145,869 $ 263,628 ($ 1,973) $ 407,524
--------- --------- ------------- ----------- ------------ ----------- -----------
--------- --------- ------------- ----------- ------------ ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Revolving credit
facilities............. $ 6,012 $ -- $ 40,000(2) $ 46,012 $ -- $ -- $ 46,012
Current portion of long-
term debt.............. 40 86 -- 126 860 -- 986
Due to affiliates........ -- 6,931 (6,931)(3) -- -- -- --
Accounts payable and
accrued expenses....... 7,025 262 2,483(4) 9,770 12,643 -- 22,413
Accrued payroll and
related expenses....... 6,280 660 -- 6,940 1,363 20,000 (13 28,303
Accrued income taxes..... 1,393 -- -- 1,393 -- (4,800) 13) (3,407)
--------- --------- ------------- ----------- ------------ ----------- -----------
Total current
liabilities........ 20,750 7,939 35,552 64,241 14,866 15,200 94,307
Long-term debt............. -- -- -- -- 98,307 -- 98,307
Long-term deferred tax and
other liabilities........ 841 -- -- 841 14,336 -- 15,177
Stockholders' equity
(deficit)................ 80,787 (1,448) 1,448(5) 80,787 136,119 (17,173) 14) 199,733
--------- --------- ------------- ----------- ------------ ----------- -----------
$ 102,378 $ 6,491 $ 37,000 $ 145,869 $ 263,628 ($ 1,973) $ 407,524
--------- --------- ------------- ----------- ------------ ----------- -----------
--------- --------- ------------- ----------- ------------ ----------- -----------
</TABLE>
See accompanying Notes to Consolidated Pro Forma Financial Statements.
71
<PAGE>
CONCENTRA MANAGED CARE, INC.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED--AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA CRA PRO FORMA
CRA FNS ADJUSTMENTS PRO FORMA OCCUSYSTEMS COMBINED
--------- --------- ----------- ----------- ------------- -----------
Net revenues................................ $ 54,489 $ 2,610 $ -- $ 57,099 $ 46,383 $ 103,482
Cost of services............................ 44,156 2,003 -- 46,159 35,787 81,946
--------- --------- ----------- ----------- ------------- -----------
Gross profit................................ 10,333 607 -- 10,940 10,596 21,536
General and administrative expenses......... 4,251 806 -- 5,057 4,086 9,143
Amortization of intangibles................. 415 -- 274(6) 689 775 1,464
--------- --------- ----------- ----------- ------------- -----------
Operating income............................ 5,667 (199) (274) 5,194 5,735 10,929
Interest expense, net....................... 140 137 700(7) 977 773 1,750
Other expense, net.......................... -- -- -- -- 327 327
--------- --------- ----------- ----------- ------------- -----------
Income before taxes......................... 5,527 (336) (974) 4,217 4,635 8,852
Provision for income taxes.................. 2,432 -- (524)(8) 1,908 1,622 3,530
--------- --------- ----------- ----------- ------------- -----------
Net income (loss)........................... $ 3,095 ($ 336) ($ 450) $ 2,309 $ 3,013 $ 5,322
--------- --------- ----------- ----------- ------------- -----------
--------- --------- ----------- ----------- ------------- -----------
Primary net income per share................ $ 0.34 $ 0.25 $ 0.14 $ 0.14
--------- ----------- ------------- -----------
--------- ----------- ------------- -----------
Primary weighted average shares
outstanding............................... 9,102 9,102 22,316 38,572(9)
--------- ----------- ------------- -----------
--------- ----------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA CRA PRO FORMA
CRA FOCUS PROMPT FNS ADJUSTMENTS PRO FORMA OCCUSYSTEMS COMBINED
--------- --------- --------- --------- ----------- ----------- ------------ -----------
Net revenues............... $ 179,652 $ 2,327 $ 10,692 $ 9,423 ($ 269) 10) $ 201,825 $ 170,035 $ 371,860
Cost of services........... 147,085 1,739 5,995 6,545 (269) 10) 161,095 130,682 291,777
--------- --------- --------- --------- ----------- ----------- ------------ -----------
Gross profit............... 32,567 588 4,697 2,878 -- 40,730 39,353 80,083
General and administrative
expenses................. 14,439 605 2,505 2,057 (110) 11) 19,496 15,867 35,363
Amortization of
intangibles.............. 662 187 -- -- 1,763(6) 2,612 2,780 5,392
Write down of goodwill and
other nonrecurring
charges.................. -- -- -- -- -- -- 964 964
--------- --------- --------- --------- ----------- ----------- ------------ -----------
Operating income........... 17,466 (204) 2,192 821 (1,653) 18,622 19,742 38,364
Interest expense, net...... 199 2 (62) 330 4,918(7) 5,387 1,773 7,160
Other expense, net......... -- -- -- -- -- -- 836 836
--------- --------- --------- --------- ----------- ----------- ------------ -----------
Income before taxes........ 17,267 (206) 2,254 491 (6,571) 13,235 17,133 30,368
Provision for income
taxes.................... 7,166 395 857 -- (2,865)(8) 5,553 6,100 11,653
--------- --------- --------- --------- ----------- ----------- ------------ -----------
Net income (loss).......... $ 10,101 ($ 601) $ 1,397 $ 491 ($ 3,706) $ 7,682 $ 11,033 $ 18,715
--------- --------- --------- --------- ----------- ----------- ------------ -----------
--------- --------- --------- --------- ----------- ----------- ------------ -----------
Primary net income per
share.................... $ 1.19 $ 0.91 $ 0.50 $ 0.50
--------- ----------- ------------ -----------
--------- ----------- ------------ -----------
Primary weighted average
shares outstanding....... 8,475 8,475 22,029 37,165(9)
--------- ----------- ------------ -----------
--------- ----------- ------------ -----------
</TABLE>
See accompanying Notes to Consolidated Pro Forma Financial Statements.
72
<PAGE>
CONCENTRA MANAGED CARE, INC.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED--AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------
<S> <C> <C> <C>
PRO FORMA
CRA OCCUSYSTEMS COMBINED
--------- ------------ -----------
Revenues.................................................................... $ 146,055 $ 136,986 $ 283,041
Cost of services............................................................ 122,615 107,284 229,899
--------- ------------ -----------
Gross profit................................................................ 23,440 29,702 53,142
General and administrative expenses......................................... 11,021 16,611 27,632
Amortization of intangibles................................................. -- 1,871 1,871
Writedown of goodwill and other nonrecurring charges........................ -- 898 898
--------- ------------ -----------
Operating income............................................................ 12,419 10,322 22,741
Interest expense, net....................................................... 2,484 2,202 4,686
Other expense, net.......................................................... -- 561 561
--------- ------------ -----------
Income before taxes......................................................... 9,935 7,559 17,494
Provision for income taxes.................................................. 3,974 3,659 7,633
--------- ------------ -----------
Net income.................................................................. $ 5,961 $ 3,900 $ 9,861
--------- ------------ -----------
--------- ------------ -----------
Primary net income per share................................................ $ 0.91 $ 0.22 $ 0.33
--------- ------------ -----------
--------- ------------ -----------
Primary weighted average shares outstanding................................. 6,540 19,115 30,795(9)
--------- ------------ -----------
--------- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------
<S> <C> <C> <C>
PRO FORMA
CRA OCCUSYSTEMS COMBINED
--------- ------------ -----------
Revenues.................................................................... $ 121,295 $ 85,502 $ 206,797
Cost of services............................................................ 103,796 73,257 177,053
--------- ------------ -----------
Gross profit................................................................ 17,499 12,245 29,744
General and administrative expenses......................................... 8,753 9,922 18,675
Amortization of intangibles................................................. -- 555 555
--------- ------------ -----------
Operating income............................................................ 8,746 1,768 10,514
Interest expense, net....................................................... 4,025 1,663 5,688
Other expense, net.......................................................... 132 28 160
--------- ------------ -----------
Income before taxes......................................................... 4,589 77 4,666
Provision for income taxes.................................................. 1,836 1,226 3,062
--------- ------------ -----------
Net income (loss)........................................................... $ 2,753 ($ 1,149) $ 1,604
--------- ------------ -----------
--------- ------------ -----------
Primary net income (loss) per share......................................... $ 0.57 ($ 0.08) $ 0.07
--------- ------------ -----------
--------- ------------ -----------
Primary weighted average shares outstanding................................. 4,815 14,333 22,933(9)
--------- ------------ -----------
--------- ------------ -----------
</TABLE>
See accompanying Notes to Consolidated Pro Forma Financial Statements.
73
<PAGE>
CRA MANAGED CARE, INC.
NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED--AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) To record the excess of cost over fair value of net assets acquired
resulting from the preliminary purchase price allocation of FNS as follows:
<TABLE>
<S> <C>
Pro forma purchase price including fees and expenses:.............. $ 42,483
Purchase price allocated to:
Current assets............................................... 2,141
Property and equipment....................................... 2,795
Assembled workforce.......................................... 700
Customer list................................................ 425
Other long term assets....................................... 1,555
Current liabilities.......................................... (1,008)
---------
Net assets acquired.................................... 6,608
---------
Excess of cost over fair value of net assets acquired.............. $ 35,875
---------
</TABLE>
The foregoing purchase price allocation is based upon preliminary
information. The final purchase price allocation is contingent upon the final
determination of the fair value of the net assets acquired on June 4, 1997, the
date of acquisition. Based upon presently available information, the Company
does not believe that the final purchase price allocation will materially differ
from the preliminary allocation.
(2) To record the borrowing of $40,000 under the Company's recently expanded
$60,000 Credit Facility to finance the FNS acquisition.
(3) To eliminate the loans and advances from affiliates which will be
forgiven immediately prior to the closing of the transaction.
(4) To record fees and expenses associated with the purchase of FNS.
(5) To eliminate the historical stockholders' deficit of FNS.
(6) To record goodwill, assembled workforce and customer contract
amortization as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
--------------------- -----------------
<S> <C> <C>
Elimination of historical Focus goodwill amortization..................... $ -- $ (187)
Record additional Focus goodwill ($19,217) amortization, under a forty
year life for the period, prior to its acquisition on April 2, 1996..... -- 120
Record additional Focus assembled workforce ($229) amortization under a
five year life, prior to its acquisition................................ -- 11
Record additional Focus customer list ($454) amortization under a seven
year life, prior to its acquisition..................................... -- 17
Record additional Prompt goodwill ($28,792) amortization, under a forty
year life for the period prior to its acquisition, on October 29,
1996.................................................................... -- 600
Record additional Prompt assembled workforce ($283) amortization under a
five year life, prior to its acquisition................................ -- 47
Record Prompt customer list ($476) amortization under a seven year life,
prior to its acquisition................................................ -- 57
</TABLE>
74
<PAGE>
CRA MANAGED CARE, INC.
NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED--AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
--------------------- -----------------
<S> <C> <C>
Record FNS goodwill amortization, under a forty year life, for the periods
presented............................................................... 224 897
Record FNS assembled workforce amortization, under a five year life, for
the periods presented................................................... 35 140
Record FNS customer list amortization, under a seven year life, for the
periods presented....................................................... 15 61
----- ------
$ 274 $ 1,763
----- ------
</TABLE>
(7) To record interest expense on the borrowings used to finance the
acquisitions at an interest rate of 7% (the weighted average interest rate for
borrowings under CRA's revolving credit facility during 1996 was 6.94%) as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
--------------------- -----------------
<S> <C> <C>
Interest on $21,000 of borrowings for Focus, prior to its acquisition on
April 2, 1996........................................................... $ -- $ 368
Interest on $30,000 of borrowings for Prompt prior to its acquisition on
October 29, 1996........................................................ -- 1,750
Interest on $40,000 of borrowings for FNS for the periods presented....... 700 2,800
----- ------
$ 700 $ 4,918
----- ------
</TABLE>
(8) To record the tax benefits of $524 and $2,865 associated with the pro
forma adjustments and to adjust the tax provisions for the acquired companies
results of operations to a statutory tax rate of 40% (federal income tax rate of
35% and state income tax rate of approximately 5%, net of the federal income tax
benefit). Prior to its acquisition, FNS had elected "S" corporation status under
Section 1362 of the Internal Revenue Code. Accordingly, FNS was not liable for
federal and state income taxes as income was taxed directly to its stockholders.
(9) The weighted average shares outstanding have been adjusted to reflect
the issuance of shares in the exchange ratio stated in the Merger Agreement,
whereby each share of CRA Managed Care, Inc. stock will be exchanged for 1.786
shares of Concentra common stock and each share of OccuSystems, Inc., stock will
be exchanged for one share of Concentra Managed Care, Inc. common stock.
(10) To eliminate sales between CRA and Focus of $269 for the year ended
December 31, 1996.
(11) To eliminate cost savings on general overhead expenses allocated to
Focus by United HealthCare Corporation of $110 for the year ended December 31,
1996.
(12) The American Institute of Certified Public Accountants has proposed a
change to the accounting and reporting treatment of start-up costs. This
proposal, which is not yet final, would require that start-up costs be expensed
as incurred. At March 31, 1997, OccuSystems had approximately $1,973 of deferred
start-up costs which would be required to be written off if the proposed
pronouncement is adopted.
(13) To record the estimated $20,000 in certain deal fees and transition
costs associated with the Merger and the related estimated tax benefit of
$4,800.
(14) To record the effect of the above two pro forma adjustments on
stockholders' equity.
75
<PAGE>
COMPARISON OF STOCKHOLDERS' RIGHTS
At the Effective Time, the stockholders of OccuSystems and CRA will become
stockholders of Concentra. As stockholders of Concentra, their rights will be
governed by the DGCL and Concentra's Amended and Restated Certificate of
Incorporation (the "Concentra Certificate") and Bylaws (the "Concentra Bylaws").
Following are summaries of certain differences between (i) the rights of
OccuSystems stockholders and Concentra stockholders and (ii) the rights of CRA
stockholders and Concentra stockholders.
COMPARISON OF STOCKHOLDERS' RIGHTS WITH RESPECT TO CONCENTRA AND OCCUSYSTEMS
Concentra and OccuSystems are both organized under the laws of the State of
Delaware. Any differences, therefore, in the rights of holders of OccuSystems
Common Stock and Concentra Common Stock arise solely from differences in their
respective certificates of incorporation and bylaws. The Concentra Certificate
and Concentra Bylaws are substantially similar to the OccuSystems Amended and
Restated Certificate of Incorporation (the "OccuSystems Certificate") and the
OccuSystems Bylaws, respectively, except for certain matters as described
herein.
AUTHORIZED CAPITAL. The total number of authorized shares of capital stock
of OccuSystems is 70,000,000 shares, consisting of 50,000,000 shares of
OccuSystems Common Stock, and 20,000,000 shares of preferred stock, no par value
(the "OccuSystems Preferred Stock"). The authorized capital of Concentra is set
forth under "DESCRIPTION OF CONCENTRA CAPITAL STOCK -- Authorized Capital
Stock."
SPECIAL MEETING OF STOCKHOLDERS. Special meetings of OccuSystems
stockholders may be called by the President, the Board of Directors or by the
stockholders if the holders of not less than ten percent of all shares entitled
to vote at such meeting request such meeting in writing. The Concentra
Certificate does not permit stockholders to call a special meeting.
COMPARISON OF STOCKHOLDERS' RIGHTS WITH RESPECT TO CONCENTRA AND CRA
Concentra is organized under the laws of the State of Delaware and CRA is
organized under the laws of the Commonwealth of Massachusetts. The following
discussion summarizes certain differences between the Concentra Certificate and
the Concentra Bylaws and the CRA Articles of Organization (the "CRA
Certificate") and the CRA Bylaws and between certain provisions of the DGCL and
MBCL affecting stockholders' rights.
AUTHORIZED CAPITAL. The total number of authorized shares of capital stock
of CRA is 41,000,000 shares, consisting of 40,000,000 shares of CRA Common Stock
and 1,000,000 shares of preferred stock, par value $.01 per share (the "CRA
Preferred Stock"). The authorized capital of Concentra is set forth under
"DESCRIPTION OF CONCENTRA CAPITAL STOCK -- Authorized Capital Stock."
DIRECTORS. The CRA Board is divided into three separate classes,
consisting, as nearly as possible, of equal numbers of directors. At each annual
meeting of stockholders, successors to the class of directors whose term expires
at that annual meeting shall be elected for a three-year term. The Concentra
Board will also be divided into three separate classes consisting, as near as
possible, of equal numbers of directors to serve three year terms.
INDEMNIFICATION AND LIMITATION OF LIABILITY. Delaware law generally permits
indemnification of officers, directors, employees and agents of a Delaware
corporation against expenses (including attorneys' fees) incurred in connection
with a derivative action and against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlements incurred in connection with a
third party action, provided there is a determination by a majority vote of
disinterested directors, independent legal counsel or the stockholders that the
person seeking indemnification acted in good faith and in a manner reasonably
76
<PAGE>
believed to be in, or not opposed to, the best interests of the corporation
(and, with respect to any third party criminal action or proceeding, had no
reasonable cause to believe this conduct was unlawful). Without court approval,
however, no indemnification may be made in respect of any derivative action in
which such person is adjudged liable to the corporation.
Massachusetts law similarly permits indemnification of expenses in a
derivative or third-party action, except that no indemnification shall be
provided for any person with respect to any matter as to which he shall have
been adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the corporation or, to the extent that
such matter relates to service with respect to any employee benefit plan, in the
best interests of the participants or beneficiaries of such benefit plan.
Delaware law requires indemnification when the individual being indemnified
has successfully defended the action on the merits or otherwise. Massachusetts
law merely permits indemnification to the extent authorized in the corporation's
articles of organization or its by-laws or as set forth in a vote of
stockholders.
Expenses incurred by an officer or director in defending an action may be
paid in advance under Delaware and Massachusetts law if such officer or director
undertakes to repay such amounts should it be determined ultimately that he is
not entitled to indemnification. Delaware law also permits the advancement of
expenses to employees and agents of the corporation without such an undertaking
to repay such amounts. In addition, both Delaware and Massachusetts law permit a
corporation to purchase indemnity insurance for the benefit of its officers,
directors, employees and agents whether or not the corporation would have the
power to indemnify against the liability covered by the policy.
Both Delaware and Massachusetts corporations may include in their corporate
charters a provision eliminating or limiting the liability of a director in
certain circumstances to the corporation or its stockholders for monetary
damages for a breach of certain fiduciary duties as a director notwithstanding
any provision of law imposing such liability. Both the CRA Certificate and the
Concentra Certificate include such provisions.
The indemnification and limitation of liability provisions of Massachusetts
law, and not Delaware law, will apply to actions of CRA's directors, officers,
employees and agents taken prior to the CRA Merger.
INSPECTION RIGHTS. Inspection rights under Delaware law are more extensive
than under Massachusetts law. Under Delaware law, stockholders, upon the
demonstration of a proper purpose, have the right to inspect a corporation's
stock ledger, stockholder lists and other books and records. Under Massachusetts
law, a corporation's stockholders have a right to inspect only the corporation's
charter, by-laws, records of all meetings of incorporators and stockholders and
transfer records.
SPECIAL MEETINGS OF STOCKHOLDERS. Pursuant to the CRA Bylaws, a special
meeting of stockholders of CRA may be called by the holders of shares entitled
to cast not less than 40% of the votes at the meeting. The Concentra Certificate
does not permit stockholders to call a special meeting.
ACTION BY CONSENT OF STOCKHOLDERS. Under Massachusetts law, any action to
be taken by stockholders may be taken without a meeting only if all stockholders
entitled to vote on the matter consent to the action in writing, and a
corporation may not provide otherwise in its charter documents or by-laws. Under
Delaware law, unless the certificate of incorporation provides otherwise, any
action to be taken by the stockholders may be taken without a meeting, without
prior notice and without a vote, if the stockholders having the number of votes
that would be necessary to take such action at a meeting at which all of the
stockholders were present and voted consent to the action in writing. The
Concentra Certificate requires that any action by stockholders be taken at an
annual or special meeting of stockholders and not by written consent.
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PROXIES. Massachusetts law permits the authorization by a stockholder to
vote by proxy to be valid for no more than six months. Delaware law permits a
proxy to be valid for up to three years unless the proxy provides for a longer
period.
APPROVAL OF BUSINESS COMBINATIONS AND ASSET SALES. Generally, under
Massachusetts law, the affirmative vote of two-thirds of the shares of each
class of stock outstanding and entitled to vote or which would be adversely
affected by a merger or asset sale is necessary to approve a merger or a sale of
all or substantially all of the corporation's assets unless the articles of
organization provide for a lesser proportion of each class entitled to vote, but
not less than a majority. The CRA Certificate does not provide for such a lesser
proportion, so that the approval of any such merger or sale, including the CRA
Merger, requires a two-thirds vote of each class entitled to vote. Under
Delaware law, the affirmative vote of only a majority of the shares of stock
outstanding and entitled to vote are necessary to approve a merger or asset
sale.
ANTI-TAKEOVER LEGISLATION. Under Section 203 of the DGCL, certain "business
combinations" with "interested stockholders" of Delaware corporations are
subject to a three year moratorium unless specified conditions are met. Section
203 applies to Concentra. See "DESCRIPTION OF CONCENTRA CAPITAL STOCK -- Certain
Antitakeover Effects of Concentra Certificate, Concentra Bylaws and Delaware
Law."
Massachusetts law contains an analogous anti-takeover law which is set forth
in Chapter 110F of the General Laws of Massachusetts. Chapter 110F does not
apply to the CRA Merger because the transaction has been approved by the CRA
Board. Chapter 110D of the Massachusetts General Laws is another anti-takeover
statute which applies to acquisitions of so-called "control shares." The CRA
Bylaws include a provision excluding CRA from the applicability of Chapter 110D.
Chapter 110D would apply to CRA, however, if the CRA Bylaws were amended to
remove such provision.
DISSENTERS' RIGHTS. Under Massachusetts law, dissenting stockholders who
follow prescribed statutory procedures are entitled to dissenters' rights in
connection with any merger or sale of substantially all the assets of a
corporation and in connection with certain mergers, reclassifications and other
transactions which may adversely affect the rights or preferences of
stockholders. See "THE MERGERS -- Dissenters' Rights." Delaware provides similar
rights in the case of a merger or consolidation of a corporation except that
such rights are not provided as to shares of a corporation listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation systems by the NASD or held of record by more than 2,000
stockholders where such stockholders are required to accept in such a merger
only (i) shares of the surviving or resulting corporation, (ii) shares of a
corporation listed on a national securities exchange or held of record by more
than 2,000 holders, (iii) cash in lieu of fraction shares, or (iv) any
combination thereof. Delaware law does not provide dissenters' rights in
connection with sales of substantially all of the assets of a corporation,
reclassifications of stock or other amendments to the certificate of
incorporation which adversely affect a class of stock; provided, however, that a
corporation may provide in its certificate of incorporation that appraisal
rights shall be available as a result of an amendment to its certificate of
incorporation, a merger or a sale of all or substantially all of its assets. The
Concentra Certificate, however, does not provide for the appraisal rights
described in the preceding sentence.
CLASSIFIED BOARD. Massachusetts law requires, unless a corporation chooses
otherwise, and Delaware law permits, but does not require, a board of directors
to be divided into classes with each class having a term of office longer than
one year. Massachusetts law limits the term of directors on a classified board
to five years. CRA has a classified board of directors with terms of three
years. See "-- Directors." Concentra will have a classified board of directors.
See "MANAGEMENT OF CONCENTRA -- Directors."
REMOVAL OF DIRECTORS. Under Delaware law, a director serving on the board
that is not classified may be removed with or without cause by the holders of a
majority of the outstanding shares entitled to vote at
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an election of directors. In the case of a Delaware corporation having a
classified board, stockholders may effect such removal only for cause unless the
certificate of incorporation otherwise provides. Concentra has a classified
board of directors and, as a result, its directors may not be removed without
cause. Under Massachusetts law, any director or the entire board of directors
may be removed, except as otherwise provided in the articles of organization or
by-laws, with or without cause, by the holders of a majority of the shares
entitled to vote at an election of directors, except that directors of a class
elected by a particular class of stockholders may be removed only by the vote of
the holders of a majority of the shares entitled to vote for the election of
such directors. In addition, directors of a classified board, such as CRA's, may
only be removed for cause.
CHANGE IN NUMBER OF DIRECTORS. Under Massachusetts law, the number of
directors is determined in the manner provided in the corporation's by-laws. The
board of directors may be enlarged by the stockholders or, if authorized by the
by-laws, by vote of a majority of directors. The CRA Bylaws fix the number of
directors at not less than three, unless there are fewer than three
stockholders, in which case there can be as few directors as stockholders. The
number of directors of CRA is determined by the stockholders.
Under Delaware law, the number of directors shall be fixed by or in the
manner provided in the by-laws unless the number of directors is fixed in the
corporation's certificate of incorporation. Neither the Concentra Certificate
nor the Concentra Bylaws specify a particular number of directors.
INTERESTED DIRECTOR TRANSACTIONS. Delaware law provides that no transaction
between a corporation and a director or officer, or any entity in which any of
them have an interest, is void or voidable solely for this reason, solely
because the director or officer is present at or participates in the meeting of
the board or committee which authorizes the contract or transaction, or solely
because of his or their votes are counted for such purpose if (i) after full
disclosure the transaction is approved by the disinterested directors, which may
be less than a quorum, or the stockholders or (ii) the transaction is fair to
the corporation at the time it is approved. Massachusetts law only expressly
provides that directors who vote for and officers who knowingly participate in
loans to officers or directors are jointly and severally liable to the
corporation for any part of the loan which is not repaid, unless (i) a majority
of the directors who are not direct or indirect recipients of such loans, or
(ii) the holders of a majority of the shares entitled to vote for such
directors, have approved or ratified the loan as one which in the judgment of
such directors or stockholders, as the case may be, may reasonably be expected
to benefit the corporation.
FILLING VACANCIES ON THE BOARD OF DIRECTORS, Under Massachusetts law,
unless the articles of organization provide otherwise, any vacancy in the board
of directors, however occurring, including a vacancy resulting from enlargement
of the board and any vacancy in any other office, may be filled in the manner
prescribed in the by-laws, or, in the absence of any such provision in the
by-laws, by the directors.
Under Delaware law, vacancies and newly created directorships may be filled
by a majority of directors then in office, unless otherwise provided in the
corporation's certificate of incorporation or by-laws, provided that if at the
time of filling any vacancy or newly created directorship, the directors then in
office constitute less than a majority of the entire board as constituted
immediately prior to any increase, the Delaware Court of Chancery may, upon
application of any stockholder or stockholders holding at least 10% of the total
number of shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships or to replace the directors chosen by the directors
then in office.
PAYMENT OF DIVIDENDS. There are no restrictions on authorized dividend
payments under Massachusetts law. Delaware law permits the payment of dividends
out of paid-in and earned surplus or out of net profits for the current and
preceding fiscal year.
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DESCRIPTION OF CONCENTRA CAPITAL STOCK
The summary of the terms of the capital stock of Concentra set forth below
does not purport to be complete and is subject to and qualified in its entirety
by reference to the Concentra Certificate and the Concentra Bylaws.
AUTHORIZED CAPITAL STOCK
Under the Concentra Certificate, the total number of shares of all classes
of capital stock that Concentra has authority to issue is 120,000,000 shares, of
which 100,000,000 are shares of Concentra Common Stock, par value $.01 per
share, and 20,000,000 are shares of Concentra Preferred Stock, par value $.01
per share ("Concentra Preferred Stock").
The additional shares of authorized capital stock available for issuance by
Concentra might be issued at such times and under such circumstances as to have
a dilutive effect on earnings per share and on the equity ownership of the
holders of Concentra Common Stock. The ability of the Concentra Board to issue
additional shares of capital stock could enhance the Concentra Board's ability
to negotiate on behalf of the stockholders in a takeover situation and also
could be used by the Concentra Board to make a change in control more difficult,
thereby denying stockholders the potential to sell their shares at a premium and
entrenching current management.
COMMON STOCK
Holders of Concentra Common Stock will be entitled to one vote per share on
all matters voted on generally by the stockholders, including the election of
directors, and, except as otherwise required by law or except as provided with
respect to any series of Concentra Preferred Stock, the holders of such shares
will possess all voting power. The Concentra Certificate does not provide for
cumulative voting for the election of directors. Thus, under the DGCL, the
holders of more than one-half of the outstanding shares of Concentra Common
Stock generally will be able to elect all the directors of Concentra then
standing for election and holders of the remaining shares will not be able to
elect any director.
Subject to any preferential rights of any series of Concentra Preferred
Stock, holders of shares of Concentra Common Stock will be entitled to receive
dividends on such stock out of assets legally available for distribution when,
as and if authorized and declared by the Concentra Board and to share ratably in
the assets of Concentra legally available for distribution to its stockholders
in the event of its liquidation, dissolution or winding up.
Holders of Concentra Common Stock will have no preferences or preemptive,
conversion or exchange rights.
PREFERRED STOCK
The Concentra Board is authorized to issue shares of Concentra Preferred
Stock, in one or more series, and to fix for each such series the number of
shares thereof and voting powers and such preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions as are permitted by the DGCL. The Concentra Board
could authorize the issuance of shares of Concentra Preferred Stock with terms
and conditions that could discourage a takeover or other transaction that
holders of some or a majority of shares of Concentra Common Stock might believe
to be in their best interests or in which such holders might receive a premium
for their shares of stock over the then market price of such shares. As of the
date hereof, no shares of Concentra Preferred Stock are outstanding and the
Concentra Board has no present intention to issue any shares of Concentra
Preferred Stock after the Effective Time.
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STOCKHOLDER RIGHTS PLAN
Concentra anticipates that, immediately upon completion of the Mergers, the
Board of Directors of Concentra will declare, pursuant to a rights agreement
(the "Rights Agreement"), a dividend distribution of one common share purchase
right ("Right") for each outstanding share of Concentra Common Stock. Each Right
will entitle the registered holder to purchase from Concentra one thousandth of
a share of Series A Junior Participating Preferred Stock, par value $.01 per
share (the "Junior Preferred Shares"), of Concentra at a price per share to be
determined by the Concentra Board with the advice of its financial advisor about
the long-term prospects for Concentra's value (the "Purchase Price"), subject to
adjustment. Each thousandth of a Junior Preferred Share will be economically
equivalent to one share of Concentra Common Stock. The Purchase Price is
expected to be significantly higher than the trading price of the Concentra
Common Stock. Therefore, the dividend will have no initial value and no impact
on the financial statements of Concentra. The following summary of the Rights
does not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement, which is an exhibit to the Registration Statement.
Initially, the Rights will be attached to all certificates representing
shares of Concentra Common Stock then outstanding, and no separate certificates
representing the Rights will be distributed. Subject to extension by a majority
of the Continuing Directors (as defined in the Rights Agreement) acting on
behalf of Concentra, the Rights will separate from the Concentra Common Stock
upon the Distribution Date, which is defined as the earlier of (a) ten days
following a public announcement that a person or group of affiliated or
associated persons has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Concentra Common Stock
(any of the foregoing persons being an "Acquiring Person"), or (b) ten business
days following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 15% or more of such outstanding
shares of Concentra Common Stock. Until the Distribution Date, (i) the Rights
will be evidenced by the Concentra Common Stock certificates and will be
transferred with and only with the Concentra Common Stock certificates, (ii) all
certificates representing shares of Concentra Common Stock will contain a
notation incorporating the Rights Agreement by reference and (iii) the surrender
for transfer of any certificate for Concentra Common Stock outstanding will also
constitute the transfer of the Rights associated with the Concentra Common Stock
represented by that certificate. As soon as practicable after the Distribution
Date, separate certificates evidencing the Rights will be mailed to holders of
record of the Concentra Common Stock.
The Rights are not exercisable until the Distribution Date and will expire
ten years after consummation of the Mergers, unless earlier redeemed by
Concentra.
In the event that, at any time following the Distribution Date, (a)
Concentra is the surviving corporation in a merger or combination with an
Acquiring Person and the shares of Concentra Common Stock shall remain
outstanding and not be changed or exchanged, (b) a person becomes the beneficial
owner of 15% or more of the then outstanding shares of Concentra Common Stock,
or (c) an Acquiring Person engages in one or more "self-dealing" transactions as
set forth in the Rights Agreement, each holder of a Right will thereafter have
the right to receive, upon exercise, Junior Preferred Shares (or, in certain
circumstances, Concentra Common Stock, cash, property or other securities of
Concentra) having a value equal to two times the exercise price of the Right.
For example, at an exercise price of $100.00 per Right, each Right not owned by
an Acquiring Person following an event described above would entitle its holder
to purchase from Concentra $200.00 worth of Junior Preferred Shares (or in
certain circumstances, Concentra Common Stock, cash, property or other
securities of Concentra) for $100.00. Assuming that the Concentra Common Stock
had a current market price per share of $20.00 at that time, the holder of each
valid Right would be entitled to purchase ten one-thousandths of Junior
Preferred Shares for $100.00. Notwithstanding the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by an Acquiring Person will be null and void. However, Rights
are not exercisable following the
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occurrence of any of the events set forth above until such time as the Rights
are no longer redeemable by Concentra as set forth below.
In the event that, at any time following the date that a person has become
an Acquiring Person (the "Shares Acquisition Date"), (a) Concentra is acquired
in a merger or other combination transaction in which Concentra is not the
surviving entity, (b) Concentra consolidates with or merges with or into any
other person pursuant to which Concentra is the surviving entity but all or a
part of the shares of Concentra Common Stock are changed into or exchanged for
stock of another person or cash or other property or (c) 50% or more of
Concentra's assets or earning power is sold or transferred, each holder of a
Right (except Rights that previously have been voided as described above) shall
thereafter have the right to receive, upon exercise, common stock or other
securities of the acquiring company having a value equal to two times the
exercise price of the Right.
The Purchase Price payable and the number of Junior Preferred Shares or
other securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (a) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Concentra
Common Stock, (b) upon the grant to holders of Concentra Common Stock of certain
rights or warrants to subscribe for Concentra Common Stock or convertible
securities at less than the current per-share market price of the Concentra
Common Stock or (c) upon the distribution to holders of Concentra Common Stock
of evidences of indebtedness or assets of Concentra (excluding regular periodic
cash dividends at a rate approved by the majority of Continuing Directors of
Concentra or dividends payable in Concentra Common Stock) or of subscription
rights or warrants (other than those referred to above).
With certain exceptions, no adjustment to the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% to
the Purchase Price. Upon the exercise of a Right, Concentra will not be required
to issue fractional Junior Preferred Shares or fractional shares of Concentra
Common Stock (other than fractions in multiples of one one-thousandth of a
Junior Preferred Share) and, in lieu thereof, an adjustment in cash may be made
based on the market price of the Junior Preferred Shares or Concentra Common
Stock on the last trading date prior to the date of exercise.
At any time until 15 business days following the Shares Acquisition Date,
Concentra may redeem the Rights in whole, but not in part, at a price of $.01
per Right, payable in cash. Immediately upon the action of the Concentra Board
of Directors ordering redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the $.01 redemption
price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of Concentra, including, without limitation, the right to vote
or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to Concentra, stockholders may, depending upon the
circumstances, recognize taxable income in the event that any of the Rights are
exercised for Concentra Common Stock (or other consideration) or for common
stock or other securities of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement, other than those provisions
relating to the principal economic terms of the Rights, may be amended by the
Concentra Board of Directors before the Distribution Date, and no stockholder
approval will be sought for noneconomic amendments to the Rights Agreement
except as required by law or by the rules of any national securities exchange on
which the Concentra Common Stock is then listed. After the Distribution Date,
the provisions of the Rights Agreement may be amended by the Concentra Board of
Directors to cure any ambiguity, to make changes that do not adversely affect
the interests of holders of Rights (excluding the interests of any Acquiring
Person) or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to adjust the time period governing
redemption may be made when the Rights are not redeemable.
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The Rights have certain anti-takeover effects. The rights will cause
substantial dilution to any person or group that attempts to acquire Concentra
without conditioning the offer on the acquisition of a substantial number of
Rights. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors of Concentra because the Board of
Directors may, at its option, at any time before the close of business on the
earlier of the 15th day following the Shares Acquisition Date or ten years after
the Effective Date, redeem all, but not less than all, of the then outstanding
Rights at $.01 per Right.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Concentra Common Stock will be
ChaseMellon Shareholder Services, L.L.C.
CERTAIN ANTITAKEOVER EFFECTS OF CONCENTRA CERTIFICATE, CONCENTRA BYLAWS AND
DELAWARE LAW
GENERAL. Certain provisions of the Concentra Certificate, the Concentra
Bylaws and the DGCL may have the effect of impeding the acquisition of control
of Concentra by means of a tender offer, a proxy fight, open market purchases or
otherwise in a transaction not approved by the Concentra Board.
The provisions of the Concentra Certificate, the Concentra Bylaws and the
DGCL described below are designed to reduce, or have the effect of reducing, the
vulnerability of Concentra to an unsolicited proposal for the restructuring or
sale of all or substantially all of the assets of Concentra or an unsolicited
takeover attempt that is unfair to Concentra stockholders. The summary of such
provisions set forth below does not purport to be complete and is subject to and
qualified in its entirety by reference to the Concentra Certificate, the
Concentra Bylaws and the DGCL.
CLASSIFIED BOARD. The Concentra Certificate provides that the Concentra
Board be divided into three classes, and, after an initial term, each director
will be elected for a three-year term. See "MANAGEMENT OF CONCENTRA --
Directors."
BUSINESS COMBINATIONS. Section 203 of the DGCL restricts a wide range of
transactions ("business combinations") between a corporation and an interested
stockholder. An "interested stockholder" is, generally, any person who
beneficially owns, directly or indirectly, 15% or more of the corporation's
outstanding voting stock. Business combinations are broadly defined to include
(i) mergers or consolidations with, (ii) sales or other dispositions of more
than 10% of the corporation's assets to, (iii) certain transactions resulting in
the issuance or transfer of any stock of the corporation or any subsidiary to,
(iv) certain transactions which would result in increasing the proportionate
share of stock of the corporation or any subsidiary owned by, or (v) receipt of
the benefit (other than proportionately as a stockholder) of any loans, advances
or other financial benefits by, an interested stockholder. Section 203 provides
that an interested stockholder may not engage in a business combination with the
corporation for a period of three years from the time of becoming an interested
stockholder unless (i) the board of directors approved either the business
combination or the transaction which resulted in the person becoming an
interested stockholder prior to the time such person became an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
person becoming an interested stockholder, that person owned at least 85% of the
corporation's voting stock (excluding shares owned by persons who are officers
and also directors and shares owned by certain employee stock plans) or (iii)
the business combination is approved by the board of directors and authorized by
the affirmative vote of at least two-thirds of the outstanding voting stock not
owned by the interested stockholder. The restrictions on business combinations
with interested stockholders contained in Section 203 do not apply to a
corporation whose certificate of incorporation contains a provision expressly
electing not to be governed by the statute. The Concentra Certificate does not
contain a provision electing to "opt-out" of Section 203.
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SPECIAL MEETINGS; PROHIBITION OF ACTIONS BY WRITTEN CONSENT. Pursuant to
the DGCL, a special meeting of stockholders may be called by the board of
directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. The Concentra Certificate provides that special
meetings of stockholders may only be called by the Concentra Board, the Chairman
of the Concentra Board or the President of Concentra. In addition, the Concentra
Certificate provides that any action required or permitted to be taken at any
annual or special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting, and may not be taken by a written
consent of the stockholders.
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DESCRIPTION OF CONCENTRA NOTES
The OccuSystems Notes were issued pursuant to an indenture (the "Indenture")
dated as of December 24, 1996, by and between OccuSystems and United States
Trust Company of New York, as trustee (the "Trustee"). The Indenture will be
assumed by Concentra pursuant to a supplemental indenture upon consummation of
the Mergers. The following summary of the terms of the Concentra Notes and the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by, reference to all of the provisions of the Indenture, which is
filed as an exhibit to the Registration Statement. Capitalized terms used herein
without definition have the meanings ascribed to them in the Indenture.
GENERAL
Upon consummation of the Mergers, Concentra will assume an aggregate of up
to $97,750,000 in principal amount of OccuSystems Notes. The Concentra Notes
will be convertible into 3,291,243 shares of Concentra Common Stock at the
initial conversion price (the "Conversion Price") of $29.70 per share
(equivalent to a conversion rate of 33.67 shares per $1,000 principal amount of
Concentra Notes), subject to adjustment in certain events. The OccuSystems Notes
are currently convertible into OccuSystems Common Stock and, subsequent to the
consummation of the Mergers, the Concentra Notes will be convertible at the
option of the holders into shares of Concentra Common Stock until the close of
business on the stated maturity of the Concentra Notes, unless previously
redeemed or repurchased. The Concentra Notes will have the same terms and
conditions as the Occusystems Notes and, like the OccuSystems Notes, will be
governed by the Indenture.
The Concentra Notes will mature on December 15, 2001. Interest on the
Concentra Notes is payable semi-annually on June 15 and December 15 of each
year, commencing on June 15, 1997. Principal of, premium, if any, and interest
on the Concentra Notes will be payable, and the Concentra Notes will be
convertible, at the office or agency of Concentra maintained for such purpose,
which office or agency shall be maintained in the Borough of Manhattan, The City
of New York (which initially will be the office of the Trustee). Interest will
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
At the option of Concentra, payment of interest may be made by check mailed
to the Holders of the Concentra Notes at the addresses set forth upon the
registry books of Concentra. No service charge will be made for any registration
of transfer or exchange of Concentra Notes, but Concentra may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of securities of Concentra or the
incurrence of Senior Indebtedness. The Indenture contains no covenants or other
provisions to afford protection to holders of Concentra Notes in the event of a
highly-leveraged transaction or a change of control of Concentra, except to the
limited extent described under "--Repurchase of Concentra Notes at the Option of
the Holder Upon a Change of Control" below.
CONVERSION RIGHTS
Each Holder will have the right at any time on or after the 90th day
following the latest date of initial issuance of the Concentra Notes and prior
to the close of business on the Stated Maturity of the Concentra Notes, unless
previously redeemed or repurchased, at the Holder's option, to convert any
portion of the principal amount thereof that is an integral multiple of $1,000
into shares of Concentra Common Stock at any time at the Conversion Price
(subject to adjustment as described below). The right to convert a Concentra
Note called for redemption or delivered for repurchase and not withdrawn will
terminate at the close of business on the Business Day, respectively,
immediately prior to the Redemption Date or
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Repurchase Date for such Concentra Note, unless Concentra subsequently fails to
pay the applicable Redemption Price or Repurchase Price, as the case may be.
In the case of any Concentra Note that has been converted after any Record
Date, but on or before the next Interest Payment Date, interest, the stated due
date of which is on such Interest Payment Date, shall be payable on such
Interest Payment Date notwithstanding such conversion, and such interest shall
be paid to the Holder of such Concentra Note who is a Holder on such Record
Date. Any Concentra Note converted after any Record Date before the next
Interest Payment Date must be accompanied by payment of an amount equal to the
interest payable on such Interest Payment Date on the principal amount of
Concentra Notes being surrendered for conversion; provided no such payment shall
be required with respect to interest payable on December 15, 1999. No fractional
shares will be issued upon conversion but, in lieu thereof, an appropriate
amount will be paid in cash by Concentra based on the market price of Concentra
Common Stock (determined in accordance with the Indenture) at the close of
business on the day of conversion. As a result of the foregoing provisions,
Holders that surrender Concentra Notes for conversion on a date that is not an
Interest Payment Date will not receive any interest for the period from the
Interest Payment Date next preceding the date of conversion to the date of
conversion or for any later period.
The Conversion Price will be subject to adjustment in certain events,
including (a) any payment of a dividend (or other distribution) payable in
Concentra Common Stock on any class of Capital Stock of Concentra, (b) any
issuance to all holders of Concentra Common Stock of rights, options or warrants
entitling them to subscribe for or purchase Concentra Common Stock at less than
the then current market price of Concentra Common Stock (determined in
accordance with the Indenture), provided, however, that if such rights, options
or warrants are only exercisable upon the occurrence of certain triggering
events, then the Conversion Price will not be adjusted until such triggering
events occur, (c) certain subdivisions, combinations or reclassifications of
Concentra Common Stock, (d) any distribution to all holders of Concentra Common
Stock of evidences of indebtedness, shares of Capital Stock other than Concentra
Common Stock, cash or other assets (including securities, but excluding those
dividends, rights, options, warrants and distributions referred to above and
excluding dividends and distributions paid exclusively in cash and in mergers
and consolidations to which the third succeeding paragraph applies), (e) any
distribution consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the third succeeding paragraph applies) to all holders of
Concentra Common Stock in an aggregate amount that, combined together with (i)
all other such all-cash distributions made within the then preceding 12 months
in respect of which no adjustment has been made and (ii) any cash and the fair
market value of other consideration paid or payable in respect of any tender or
exchange offer by Concentra or any of its subsidiaries for Concentra Common
Stock concluded within the preceding 12 months in respect of which no adjustment
has been made, exceeds 15% of Concentra's market capitalization (defined as
being the product of the then current market price of the Concentra Common Stock
times the number of shares of Concentra Common Stock then outstanding) on the
record date of such distribution, and (f) the completion of a tender or exchange
offer made by Concentra or any of its subsidiaries for Concentra Common Stock
that involves an aggregate consideration that, together with (i) any cash and
other consideration payable in a tender or exchange offer by Concentra or any of
its subsidiaries for Concentra Common Stock expiring within the 12 months
preceding the expiration of such tender or exchange offer in respect of which no
adjustment has been made and (ii) the aggregate amount of any such all-cash
distributions referred to in (e) above to all holders of Concentra Common Stock
within the 12 months preceding the expiration of such tender or exchange offer
in respect of which no adjustments have been made, exceeds 15% of Concentra's
market capitalization on the expiration of such tender offer. No adjustment of
the Conversion Price will be required to be made until the cumulative
adjustments amount to 1.0% or more of the Conversion Price as last adjusted.
In the event of a taxable distribution to holders of Concentra Common Stock
(or other transaction) which results in any adjustment of the Conversion Price,
the Holders of Concentra Notes may, in certain
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circumstances, be deemed to have received a distribution subject to United
States federal income tax as a dividend; in certain other circumstances, the
absence of such an adjustment may result in a taxable dividend to the holders of
Concentra Common Stock.
Concentra, from time to time and to the extent permitted by law, may reduce
the Conversion Price by any amount for any period of at least 20 Business Days,
in which case Concentra shall give at least 15 days notice of such reduction, if
the Concentra Board has made a determination that such reduction would be in the
best interests of Concentra, which determination shall be conclusive. Concentra
may, at its option, make such reductions in the Conversion Price, in addition to
those set forth above, as the Concentra Board deems advisable to avoid or
diminish any income tax to holders of Concentra Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for United States federal income tax purposes.
In case of any consolidation or merger of Concentra with or into another
Person or any merger of another Person with or into Concentra (with certain
exceptions), or in case of any sale, transfer or conveyance of all or
substantially all of the assets of Concentra, each Concentra Note then
outstanding will, without the consent of any Holder of Concentra Notes, become
convertible only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale, transfer or conveyance by a
holder of the number of shares of Concentra Common Stock into which such
Concentra Note was convertible immediately prior thereto, after giving effect to
any adjustment event, who failed to exercise any rights of election and received
per share the kind and amount received per share by a plurality of non-electing
shares.
Concentra will cause all registrations with, and will obtain any approvals
by, any governmental authority under any Federal or state law of the United
States that may be required in connection with the conversion of the Concentra
Notes into Concentra Common Stock.
Upon consummation of the Merger Agreement, the Concentra Notes will be
convertible into shares of Concentra Common Stock on the same basis as they
would have been convertible into shares of OccuSystems Common Stock.
SUBORDINATION
The Concentra Notes will be general, unsecured obligations of Concentra,
subordinated in right of payment to all existing and future Senior Indebtedness
of Concentra. The Concentra Notes will be structurally subordinated in right of
payment to all liabilities (including trade payables) of Concentra's
subsidiaries. The Indenture does not restrict the incurrence of Senior
Indebtedness or other indebtedness by Concentra or its subsidiaries or the
ability of Concentra to transfer assets or business operations to its
subsidiaries, subject to the provisions described under "--Repurchase of
Concentra Notes at the Option of the Holder Upon a Change of Control" and
"--Limitation on Merger, Sale or Consolidation" below.
The Indenture provides that no payment may be made by Concentra on account
of the principal of, premium, if any, or interest on the Concentra Notes, or to
acquire any of the Concentra Notes (including repurchases of Concentra Notes at
the option of the Holder) for cash or property (other than Junior Securities),
or on account of the redemption provisions of the Concentra Notes, (i) upon the
maturity of any Senior Indebtedness of Concentra by lapse of time, acceleration
(unless waived) or otherwise, unless and until all principal of, premium, if
any, and interest on such Senior Indebtedness are first paid in full (or such
payment is duly provided for), or (ii) in the event of default in the payment of
any principal of, premium, if any, or interest on any Senior Indebtedness of
Concentra when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise (a "Payment Default"),
unless and until such Payment Default has been cured or waived or otherwise has
ceased to exist. The payment of cash, property or securities (other than Junior
Securities) upon conversion of a Concentra Note will constitute payment on a
Concentra Note and therefore will be subject to the subordination provisions in
the Indenture.
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Upon (i) the happening of an event of default (other than a Payment Default)
that permits, or would permit with (a) the passage of time, (b) the giving of
notice, (c) the making of any payment of the Concentra Notes then required to be
made or (d) any combination thereof (collectively, a "Non-Payment Default"), the
holders of Senior Indebtedness having a principal amount then outstanding in
excess of $3 million (or with respect to which Senior Indebtedness the holders
are obligated to lend in excess of $3 million principal amount) or their
representative immediately to accelerate its maturity and (ii) written notice of
such Non-Payment Default given to Concentra and the Trustee by the holders of an
aggregate of at least $3 million outstanding principal amount (or commitments to
lend up to $3 million in Senior Indebtedness) of such Senior Indebtedness or
their representative (a "Payment Notice"), then, unless and until such
Non-Payment Default has been cured or waived or otherwise has ceased to exist,
no payment (by setoff or otherwise) may be made by or on behalf of Concentra on
account of the principal of, premium, if any, or interest on the Concentra
Notes, or to acquire or repurchase any of the Concentra Notes for cash or
property, or on account of the redemption provisions of the Concentra Notes, in
any such case other than payments made with Junior Securities. Notwithstanding
the foregoing, unless (i) the Senior Indebtedness in respect of which such
Non-Payment Default exists has been declared due and payable in its entirety
within 179 days after the Payment Notice is delivered as set forth above (the
"Payment Blockage Period"), and (ii) such declaration has not been rescinded or
waived, at the end of the Payment Blockage Period, Concentra shall be required
to pay all sums not paid to the Holders of the Concentra Notes during the
Payment Blockage Period due to the foregoing prohibitions and to resume all
other payments as and when due on the Concentra Notes. Not more than one Payment
Notice may be given in any consecutive 365-day period, irrespective of the
number of defaults with respect to Senior Indebtedness during such period.
However, if any Payment Notice within such 365-day period is given by or on
behalf of any holders of Senior Indebtedness other than under the Loan
Agreement, the agent under the Loan Agreement may give another Payment Notice
within such period. In no event, however, may the total number of days during
which any Payment Blockage Period or Payment Blockage Periods are in effect
exceed 179 days in the aggregate during any consecutive 365-day period.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of Concentra (other than Junior Securities) shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of Senior
Indebtedness of Concentra, and shall be paid or delivered by the Trustee or such
Holders, as the case may be, to the holders of the Senior Indebtedness of
Concentra remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of Concentra
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness of Concentra held or represented by
each, for application to the payment of all Senior Indebtedness of Concentra
remaining unpaid, to the extent necessary to pay or to provide for the payment
of all such Senior Indebtedness in full after giving effect to any concurrent
payment or distribution, or provision therefor, to the holders of such Senior
Indebtedness.
Upon any distribution of assets of Concentra upon any dissolution, winding
up, total or partial liquidation or reorganization of Concentra, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshaling of
assets or liabilities (i) the holders of all Senior Indebtedness of Concentra
will first be entitled to receive payment in full (or have such payment duly
provided for) before the Holders are entitled to receive any payment on account
of the principal of, premium, if any, or interest on the Concentra Notes (other
than Junior Securities) and (ii) any payment or distribution of assets of
Concentra of any kind or character, whether in cash, property or securities
(other than Junior Securities) to which the Holders or the Trustee on behalf of
the Holders would be entitled (by setoff or otherwise), except for the
subordination provisions contained in the Indenture, will be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness of Concentra or
their representative to the extent necessary to make payment in full of all such
Senior Indebtedness remaining unpaid, after
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giving effect to any concurrent payment or distribution, or provision therefor,
to the holders of such Senior Indebtedness.
No provision contained in the Indenture or the Concentra Notes will affect
the obligation of Concentra, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on the Concentra Notes. The
subordination provisions of the Indenture and the Concentra Notes will not
prevent the occurrence of any Default or Event of Default under the Indenture or
limit the rights of the Trustee or any Holder, subject to the preceding
paragraphs, to pursue any other rights or remedies with respect to the Concentra
Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of Concentra or any
of its subsidiaries or a marshaling of assets or liabilities of Concentra and
its subsidiaries, Holders of Concentra Notes may receive ratably less than other
creditors.
Concentra's ability to meet its cash obligations in the future will be
dependent upon the ability of its subsidiaries to make cash distributions to
Concentra. The ability of its subsidiaries to make distributions to Concentra is
and will continue to be restricted by, among other limitations, applicable
provisions of state law and contractual provisions. The Indenture will not limit
the ability of Concentra's subsidiaries to incur such restrictions in the
future. The right of Concentra to participate in the assets of any subsidiary
(and thus the ability of holders of the Concentra Notes to benefit indirectly
from such assets) is generally subject to the prior claims of creditors,
including trade creditors, of that subsidiary except to the extent that
Concentra is recognized as a creditor of such subsidiary, in which case
Concentra's claims would still be subject to any security interest of other
creditors of such subsidiary. The Concentra Notes, therefore, will be
structurally subordinated to creditors, including trade creditors, of
subsidiaries of Concentra with respect to the assets of the subsidiaries against
which such creditors have a claim.
REDEMPTION AT THE COMPANY'S OPTION
The Concentra Notes will not be subject to redemption prior to December 15,
1999 and will be redeemable thereafter at the option of Concentra, in whole or
in part, upon not less than 30 nor more than 60 days' notice to each Holder, at
the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the 12-month period commencing December 15 of the
years indicated below, in each case (subject to the right of Holders of record
on a Record Date to receive interest due on an Interest Payment Date that is on
or prior to such Redemption Date) together with accrued and unpaid interest, if
any, to, but excluding, the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
1999.................................................................................. 102.4%
2000.................................................................................. 101.2
</TABLE>
In the case of a partial redemption, the Trustee shall select the Concentra
Notes or portions thereof for redemption on a pro rata basis, by lot or in such
other manner it deems appropriate and fair. The Concentra Notes may be redeemed
in part in multiples of $1,000 only.
The Concentra Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption, to the Holder
of each Concentra Note to be redeemed to such Holder's last address as then
shown upon the registry books of the Registrar. The notice of redemption must
state the Redemption Date, the Redemption Price and the amount of accrued
interest to be paid. Any notice that relates to a Concentra Note to be redeemed
in part only must state the portion of the principal amount equal to the
unredeemed portion thereof and must state that on and after the Redemption Date,
upon surrender of such Concentra Note, a new Concentra Note or Concentra Notes
in
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principal amount equal to the unredeemed portion thereof will be issued. On and
after the Redemption Date, interest will cease to accrue on the Concentra Notes
or portions thereof called for redemption, unless Concentra defaults in its
obligations with respect thereto.
REPURCHASE OF CONCENTRA NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF
CONTROL
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Concentra Notes will have the right, at such Holder's
option, pursuant to an irrevocable and unconditional (except as set forth below)
offer by Concentra (the "Repurchase Offer"), to require Concentra to repurchase
all or any part of such Holder's Concentra Notes (provided that the principal
amount of such Concentra Notes must be $1,000 or an integral multiple thereof)
on the date (the "Repurchase Date") that is no later than 50 Business Days after
the occurrence of such Change of Control at a cash price (the "Repurchase
Price") equal to 100% of the principal amount thereof, together with accrued and
unpaid interest if any, to (but excluding) the Repurchase Date. The Repurchase
Offer shall be made within 25 Business Days following a Change of Control and
shall remain open for 20 Business Days following its commencement except to the
extent that a longer period is required by applicable law (the "Repurchase Offer
Period"). Upon expiration of the Repurchase Offer Period, Concentra shall
purchase all Concentra Notes tendered in response to the Repurchase Offer. If
required by applicable law, the Repurchase Date and the Repurchase Offer Period
may be extended as so required; however, if so extended, it shall nevertheless
constitute an Event of Default if the Repurchase Date does not occur within 60
Business Days of the Change of Control.
On or before the Repurchase Date, Concentra will (i) accept for payment
Concentra Notes or portions thereof properly tendered pursuant to the Repurchase
Offer, (ii) deposit with the Paying Agent cash sufficient to pay the Repurchase
Price (together with accrued and unpaid interest) of all Concentra Notes so
tendered and (iii) deliver to the Trustee the Concentra Notes so accepted,
together with an Officers' Certificate listing the Concentra Notes or portions
thereof being purchased by Concentra. The Paying Agent will promptly mail to the
Holders of Concentra Notes so accepted payment in an amount equal to the
Repurchase Price (together with accrued and unpaid interest), and the Trustee
will promptly authenticate and mail or deliver to such Holders a new Concentra
Note or Concentra Notes equal in principal amount to any unpurchased portion of
the Concentra Notes surrendered. Any Concentra Notes not so accepted will be
promptly mailed or delivered by Concentra to the Holder thereof. Concentra will
publicly announce the results of the Repurchase Offer on or as soon as
practicable after the Repurchase Date.
The phrase "all or substantially all" of the assets of Concentra, as
included in the definition of Change of Control, is likely to be interpreted by
reference to applicable state law at the relevant time, and will be dependent on
the facts and circumstances existing at such time. As a result, there may be a
degree of uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of Concentra has occurred.
The Change of Control purchase feature of the Concentra Notes may make more
difficult or discourage a takeover of Concentra, and, thus, the removal of
incumbent management. The Change of Control purchase feature resulted from
negotiations between Concentra and the Initial Purchasers.
The provisions of the Indenture relating to a Change of Control may not
afford the Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that may
adversely affect Holders, if such transaction does not constitute a Change of
Control. Moreover, certain events with respect to Concentra which may involve an
actual change of control of Concentra may not constitute a Change of Control for
purposes of the Indenture.
Concentra may not have sufficient financial resources available to fulfill
its obligation to repurchase the Concentra Notes upon a Change of Control or to
repurchase other debt securities of Concentra or its subsidiaries providing
similar rights to the holders thereof. The right to require Concentra to
repurchase
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Concentra Notes as a result of the occurrence of a Change of Control could
create an event of default under Senior Indebtedness as a result of which any
repurchase could, absent a waiver, be blocked by the subordination provision of
the Concentra Notes. Failure of Concentra to repurchase the Concentra Notes when
required would result in an Event of Default with respect to the Concentra Notes
whether or not such repurchase is permitted by the subordination provisions. Any
such default may, in turn, cause a default under Senior Indebtedness of
Concentra. Moreover, the Change of Control may cause an event of default under
Senior Indebtedness of Concentra. As a result, in each case, any repurchase of
the Concentra Notes could, absent a waiver, be blocked by the subordination
provisions of the Concentra Notes. See "--Subordination" above.
Except as described herein, no modification of the Indenture regarding the
provisions on repurchase at the option of any Holder of a Concentra Note upon a
Change of Control is permissible without the consent of the Holder of the
Concentra Note so affected. In the event of a Change of Control, if Holders of
in excess of two-thirds of the outstanding aggregate principal amount of the
Concentra Notes so determine at any time following the occurrence of such Change
of Control and before the close of business on the Business Day immediately
preceding the Repurchase Date, such event shall not be treated as a Change of
Control for purposes of the Indenture. In such event, (i) Concentra shall not be
required to make the Repurchase Offer, (ii) to the extent the Repurchase Offer
has already been made, such Repurchase Offer shall be deemed revoked, and (iii)
to the extent any Concentra Notes have been tendered in response to any such
revoked Repurchase Offer, such tender shall be rescinded and the Concentra Notes
so tendered shall be promptly returned to the Holders thereof. For purposes of
any such determination by the Holders of the outstanding Concentra Notes,
Concentra Notes held by Concentra or an Affiliate of Concentra (including any
Person that would become an Affiliate of Concentra (or its successor) as a
consequence of the event or series of events that otherwise would be treated as
a Change of Control for purposes of the Indenture) shall be disregarded.
To the extent applicable, Concentra will comply with the provisions of Rule
13e-4 or any other tender offer rules, and will file a Schedule 13E-4 or any
other schedule required under such rules, in connection with any offer by
Concentra to repurchase Concentra Notes at the option of the Holders upon a
Change of Control.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that Concentra may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets (other than to its wholly-owned
subsidiaries), whether in a single transaction or a series of related
transactions, to another Person or group of affiliated Persons, unless (i)
either (a) in the case of a merger or consolidation Concentra is the surviving
entity or (b) the resulting, surviving or transferee entity is a corporation
organized under the laws of the United States, any state thereof or the District
of Columbia and expressly assumes by supplemental indenture all of the
obligations of Concentra in connection with the Concentra Notes and the
Indenture; and (ii) no Default or Event of Default shall exist or shall occur
immediately after giving effect to such transaction.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of Concentra in accordance with the foregoing, the successor
corporation formed by such consolidation or into which Concentra is merged or to
which such transfer is made, shall succeed to, and be substituted for, and may
exercise every right and power of, Concentra under the Indenture with the same
effect as if such successor corporation had been named therein as Concentra, and
Concentra will be released from its obligations under the Indenture and the
Concentra Notes, except as to any obligations that arise from or as a result of
such transaction.
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REPORTS
Whether or not Concentra is subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, Concentra shall deliver to the Trustee, within
15 days after it is or would have been required to file such with the
Commission, annual and quarterly consolidated financial statements substantially
equivalent to financial statements that would have been included in reports
filed with the Commission if Concentra were subject to the requirements of
Section 13 or 15 (d) of the Exchange Act, including, with respect to annual
information only, a report thereon by Concentra's certified independent public
accountants as such would be required in such reports to the Commission and, in
each case, together with a management's discussion and analysis of financial
condition and results of operations as such would be so required.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by Concentra to
pay any installment of interest on the Concentra Notes as and when due and
payable and the continuance of any such failure for 30 days, (ii) the failure by
Concentra to pay all or any part of the principal of, or premium, if any on the
Concentra Notes when and as the same become due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
pursuant to any Repurchase Offer or otherwise, (iii) the failure of Concentra to
perform any conversion of Concentra Notes required under the Indenture and the
continuance of any such failure for 30 days, (iv) the failure by Concentra to
observe or perform any other covenant or agreement contained in the Concentra
Notes or the Indenture and subject to certain exceptions, the continuance of
such failure for a period of 60 days after written notice is given to Concentra
by the Trustee or to Concentra and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Concentra Notes outstanding, (v) certain
events of bankruptcy, insolvency or reorganization in respect of Concentra or
any of its Significant Subsidiaries, (vi) failure of Concentra or any
Significant Subsidiary to make any payment at maturity, including any applicable
grace period, in respect of Indebtedness (other than nonrecourse obligations) in
an amount in excess of $10 million and continuance of such failure for 30 days
after written notice is given to Concentra by the Trustee or to Concentra and
the Trustee by the Holders of at least 25% in aggregate principal amount of
Concentra Notes outstanding, (vii) default by Concentra or any Significant
Subsidiary with respect to any Indebtedness (other than non-recourse
obligations), which default results in the acceleration of Indebtedness in an
amount in excess of $10 million without such Indebtedness having been discharged
or such acceleration having been rescinded or annulled for 30 days after written
notice is given to Concentra by the Trustee or to Concentra and the Trustee by
the Holders of at least 25% in aggregate principal amount of Concentra Notes
outstanding and (vii) final unsatisfied judgments not covered by insurance
aggregating in excess of $10 million, at any one time rendered against Concentra
or any of its Significant Subsidiaries and not stayed, bonded or discharged
within 60 days. The Indenture provides that if a default occurs and is
continuing, the Trustee must, within 90 days after the occurrence of such
default, give to the Holders notice of such default, but the Trustee shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the best interest of the Holders, except in the
case of a default in the payment of the principal of, premium, if any, or
interest on any of the Concentra Notes when due or in the payment of any
redemption or repurchase obligation.
The Indenture provides that if an Event of Default occurs and is continuing
(other than an Event of Default specified in clause (v) above with respect to
Concentra), then in every such case, unless the principal of all of the
Concentra Notes shall have already become due and payable, either the Trustee or
the Holders of 25% in aggregate principal amount of the Concentra Notes then
outstanding, by notice in writing to Concentra (and to the Trustee if given by
Holders) (an "Acceleration Notice"), may declare all principal and accrued
interest thereon to be due and payable immediately. If an Event of Default
specified in clause (v) above with respect to Concentra occurs, all principal
and accrued interest, if any, will be immediately due and payable on all
outstanding Concentra Notes without any declaration or other act on
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the part of the Trustee or the Holders. The Holders of no less than a majority
in aggregate principal amount of Concentra Notes generally are authorized to
rescind such acceleration if all existing Events of Default, other than the
non-payment of the principal of, premium, if any, and interest on the Concentra
Notes that have become due solely by such acceleration, have been cured or
waived.
Prior to the declaration of acceleration of the maturity of the Concentra
Notes, the Holders of a majority in principal amount of the Concentra Notes at
the time outstanding may waive on behalf of all the Holders any default, except
a default in the payment of principal of or interest on any Concentra Note not
yet cured, or a default with respect to any covenant or provision that cannot be
modified or amended without the consent of the Holder of each outstanding
Concentra Note affected. Subject to the provisions of the Indenture relating to
the duties of the Trustee, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request, order or
direction of any of the Holders, unless such Holders have offered to the Trustee
reasonable security or indemnity. Subject to all provisions of the Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
Concentra Notes at the time outstanding will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee.
The Indenture provides that no Holder may pursue any remedy under the
Indenture, except for a default in the payment of principal, premium, if any, or
interest on the Concentra Notes, unless the Holder gives to the Trustee written
notice of a continuing Event of Default, the Holders of at least 25% in
principal amount of the outstanding Concentra Notes make a written request to
the Trustee to pursue the remedy, such Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense, the Trustee
does not comply with the request within 60 days after receipt of the request and
the offer of indemnity, and the Trustee shall not have received a contrary
direction from the Holders of a majority in principal amount of the outstanding
Concentra Notes.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting Concentra and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Concentra Notes at the time
outstanding, Concentra and the Trustee are permitted to amend or supplement the
Indenture or any supplemental indenture or modify the rights of the Holders;
provided, that no such modification may, without the consent of each Holder
affected thereby: (i) change the Stated Maturity of any Concentra Note or reduce
the principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any Concentra Note
or any premium or the interest thereon is payable, or impair the right to
institute suit for the conversion of any Concentra Note or the enforcement of
any such payment on or after the due date thereof (including, in the case of
redemption, on or after the Redemption Date), or reduce the Repurchase Price, or
alter the Repurchase Offer (other than as set forth herein) or redemption
provisions in a manner adverse to the Holders, or (ii) reduce the percentage in
principal amount of the outstanding Concentra Notes, the consent of whose
Holders is required for any such amendment, supplemental indenture or waiver
provided for in the Indenture, or (iii) adversely affect the right of such
Holder to convert Concentra Notes. A supplemental indenture entered into in
compliance with the "Limitation on Merger, Sale or Consolidation" covenant would
not require the consent of the Noteholders.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
The Indenture provides that no stockholder, employee, officer or director,
as such, past, present or future of Concentra or any successor corporation,
shall have any personal liability in respect of the
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obligations of Concentra under the Indenture or the Concentra Notes by reason of
his, her or its status as such stockholder, employee, officer or director.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Concentra Notes in accordance with the
Indenture. Concentra or the Trustee may require a Holder, among other things, to
furnish appropriate endorsements, legal opinions and transfer documents, and to
pay any taxes and fees required by law or permitted by the Indenture. Concentra
is not required to transfer or exchange any Concentra Notes selected for
redemption. Also, Concentra is not required to transfer or exchange any
Concentra Notes for a period of 15 days before (i) the mailing of a notice of an
offer to repurchase as a result of a Change of Control or (ii) a selection of
Concentra Notes to be redeemed.
The registered holder of a Concentra Note may be treated as the owner of it
for all purposes.
CERTAIN DEFINITIONS
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is a
party that is required to be classified and accounted for as a capital lease
obligation under GAAP.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Change of Control" means (i) an event or series of events as a result of
which any "person" or "group" (as such terms are used in Sections 13(d)(3) and
14(d) of the Exchange Act) (excluding Concentra or any wholly-owned subsidiary
thereof) is or becomes, directly or indirectly, the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable) of more than 50% of the combined voting power of the then
outstanding securities entitled to vote generally in elections of directors,
managers or trustees, as applicable, of Concentra or any successor entity
("Voting Stock"), (ii) the completion of any consolidation with or merger of
Concentra into any other Person, or conveyance, transfer or lease by Concentra
of all or substantially all of its assets to any Person, or any merger of any
other Person into Concentra in a single transaction or series of related
transactions, and, in the case of any such transaction or series of related
transactions, the outstanding Concentra Common Stock is changed or exchanged as
a result, unless the stockholders of Concentra immediately before such
transaction own, directly or indirectly, immediately following such transaction,
at least a majority of the combined voting power of the outstanding voting
securities of the Person resulting from such transaction in substantially the
same proportion as their ownership of the Voting Stock immediately before such
transaction, or (iii) such time as the Continuing Directors do not constitute a
majority of the Concentra Board (or, if applicable, a successor corporation to
Concentra); provided that a Change of Control shall not be deemed to have
occurred if either (x) the last sale price of the Concentra Common Stock for any
five trading days during the 10 trading days immediately preceding the Change of
Control is at least equal to 105% of the Conversion Price in effect on such day,
or (y) with respect to a merger or consolidation otherwise constituting a Change
of Control described in clause (ii) above, at least 90% of the consideration in
such transaction or transactions consists of common stock or securities
convertible into common stock that are, or upon issuance will be, traded on a
United States national securities exchange or approved for quotation on the
Nasdaq National Market.
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"Continuing Director" means at any date a member of the Concentra's Board
(i) who was a member of the OccuSystems Board on the date of initial issuance of
the Concentra Notes or (ii) who was nominated or elected by at least a majority
of the directors who were Continuing Directors at the time of such nomination or
election or whose election to the Concentra Board was recommended or endorsed by
at least a majority of the directors who were Continuing Directors at the time
of such nomination or election.
"Disqualified Capital Stock" means, with respect to Concentra, Capital Stock
of Concentra that, by its terms or by the terms of any security into which it is
convertible, exercisable or exchangeable, is, or upon the happening of an event
or the passage of time would be, required to be redeemed or repurchased
(including at the option of the holder thereof) by Concentra, in whole or in
part, on or prior to the Stated Maturity of the Concentra Notes, provided that
only the portion of such Capital Stock which is so convertible, exercisable,
exchangeable or redeemable or subject to repurchase prior to such Stated
Maturity shall be deemed to be Disqualified Capital Stock.
"Indebtedness" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such person, (i) in respect of
borrowed money (whether or not the lender has recourse to all or any portion of
the assets of such person), (ii) evidenced by credit or loan agreements, bonds,
notes, debentures or similar instruments (including, without limitation, notes
or similar instruments given in connection with the acquisition or any business,
properties or assets of any kind), (iii) evidenced by bankers' acceptances or
similar instruments issued or accepted by banks, (iv) for the payment of money
relating to a Capitalized Lease Obligation, or (v) evidenced by a letter of
credit or a reimbursement obligation of such person with respect to any letter
of credit; (b) all obligations of such person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (c) all net
obligations of such person under Interest Swap and Hedging Obligations; (d) all
liabilities of others of the kind described in the preceding clauses (a), (b) or
(c) that such person has guaranteed or that is otherwise its legal liability, or
which is secured by a lien on property of such person, and all obligations to
purchase, redeem or acquire any Capital Stock; and (e) any and all deferrals,
renewals, extensions, modifications, replacements, restatements, refinancings
and refundings (whether direct or indirect) of, or any indebtedness or
obligation issued in exchange for, any liability of the kind described in any of
the preceding clauses (a), (b), (c) or (d), or this clause (e), whether or not
between or among the same parties.
"Interest Swap and Hedging Obligations" means the obligations of any Person
under any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement or other interest rate hedge agreement, interest rate collar agreement
or other similar agreement or arrangement to which such Person is a party or
beneficiary.
"Junior Securities" means any Qualified Capital Stock (as defined) and any
Indebtedness of Concentra that is fully subordinated in right of payment to the
Concentra Notes and has no scheduled installment of principal due, by
redemption, sinking fund payment or otherwise, on or prior to the Stated
Maturity of the Concentra Notes.
"Loan Agreement" means the Amended and Restated Loan and Security Agreement,
dated as of January 3, 1995, among OccuCenters, Inc., OccuSystems, the lenders
from time to time party thereto and Creditanstalt-Bankverein, as agent for the
lenders thereunder, as the same may from time to time be amended, modified,
supplemented, restated, renewed, refunded, restructured, refinanced, replaced or
extended, in whole or in part, whether with same or different agents or lenders
thereunder.
"Qualified Capital Stock" means any Capital Stock of Concentra that is not
Disqualified Capital Stock.
"Senior Indebtedness" means all obligations of Concentra to pay the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar
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proceeding, whether or not a claim for post-petition interest is allowable as a
claim in any such proceeding) and rent payable on or in connection with, and all
fees, costs, expenses and other amounts accrued or due on or in connection with,
any Indebtedness of Concentra, whether outstanding on the date of the Indenture
or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by
Concentra, unless the instrument creating or evidencing such Indebtedness
provides that such Indebtedness is not senior or superior in right of payment to
the Concentra Notes or which is PARI PASSU with, or subordinated to, the
Concentra Notes; provided that in no event shall Senior Indebtedness include (a)
Indebtedness of Concentra owed or owing to any subsidiary of Concentra or any
officer, director or employee of Concentra or any subsidiary of Concentra, (b)
Indebtedness representing or with respect to any account payable or other
accrued current liability or obligation incurred in the ordinary course of
business in connection with the obtaining of materials or services or (c) any
liability for taxes owed or owing by Concentra or any subsidiary of Concentra.
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" of Concentra within the meaning of Rule 1.02(w) of Regulation S-X
promulgated by the Commission as in effect as of the date of the Indenture.
"Stated Maturity," when used with respect to any Concentra Note, means
December 15, 2001.
"Subsidiary" with respect to any person, means (i) a corporation a majority
of whose Capital Stock with voting power normally entitled to vote in the
election of directors is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one or
more Subsidiaries of such person, (ii) a partnership in which such person or a
Subsidiary of such person is, at the time, a general partner and owns alone or
together with one or more Subsidiaries of such person a majority of the
partnership interests, or (iii) any other person (other than a corporation) in
which such person, one or more Subsidiaries of such person, or such person and
one or more Subsidiaries of such person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest.
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MANAGEMENT OF CONCENTRA
DIRECTORS
The following table sets forth information as to the persons who are
expected to serve as directors of Concentra immediately following the Effective
Time. Prior to the Effective Time, John K. Carlyle and Donald J. Larson will
serve as the sole directors of Concentra.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------------- --------- -----------------------------------------------------
<S> <C> <C>
John K. Carlyle.................................... 42 Chairman of the Board
Donald J. Larson................................... 46 Director, President and Chief Executive Officer
George H. Conrades................................. 58 Director
Robert W. O'Leary.................................. 53 Director
Robert A. Ortenzio................................. 40 Director
Paul B. Queally.................................... 33 Director
Mitchell T. Rabkin, M.D............................ 66 Director
Lois E. Silverman.................................. 56 Director
</TABLE>
JOHN K. CARLYLE has served as OccuSystems' Chairman and Chief Executive
Officer since January 1997. He joined OccuSystems in 1990 as its President and
served in that capacity until December 1996. Mr. Carlyle has served as the Chief
Executive Officer and a director of OccuSystems since 1991. From 1985 to 1990,
Mr. Carlyle served as Senior Vice President and Chief Financial Officer of
Medical Care International, Inc. ("Medical Care"), an operator of outpatient
surgical centers. Mr. Carlyle has served as a director of National Surgery
Centers, Inc., an owner and operator of free standing, multi-specialty
ambulatory surgery centers, since 1991. He also serves as a director of several
private companies. Mr. Carlyle is a certified public accountant.
DONALD J. LARSON co-founded CRA in 1978 and has served as President and
Chief Executive Officer of CRA since January 1, 1996 and as President and Chief
Operating Officer of CRA since 1988. Prior to founding CRA, Mr. Larson held the
position of New England Regional Manager at IntraCorp. Inc., a division of Cigna
Corporation.
GEORGE H. CONRADES has served as a director of CRA since July 1994. Mr.
Conrades has been President and Chief Executive Officer of BBN Corporation, a
provider of internetworking services, products and application solutions, since
1994 and has been Chairman of the Board of BBN Corporation since November 1995.
From 1992 to 1994, Mr. Conrades was a partner in Conrades/Reilly Associates, a
business consulting company. From 1961 to 1992, Mr. Conrades held a number of
management positions with International Business Machines Corp., most recently
as Senior Vice President for Corporate Marketing and Services. Mr. Conrades is
also a director of BBN Corporation, Westinghouse Electric Corp. and Cubist
Pharmaceuticals, Inc.
ROBERT W. O'LEARY has served as a director of OccuSystems since July 1995.
Since March 1995, Mr. O'Leary has served as Chairman and Chief Executive Officer
of Premier, Inc., a voluntary healthcare alliance. From 1991 until 1995, Mr.
O'Leary served as Chairman and Chief Executive Officer of American Medical
International, Inc., a healthcare facilities management company. From 1989 to
1991, Mr. O'Leary served as President and Chief Executive Officer of Voluntary
Hospitals of America, a national hospital alliance. Previously, Mr. O'Leary
served as the Chairman of i-STAT Corporation, a medical device manufacturer.
ROBERT A. ORTENZIO has served as a director of OccuSystems since May 1992.
Mr. Ortenzio currently serves as the President of Select Medical Corporation, a
private healthcare company based in Mechanicsburg, Pennsylvania, and has served
in such capacity since August 1996. From 1986 to 1996, Mr. Ortenzio was employed
by Continental Medical Systems, Inc., a nationwide provider of rehabilitation
services, from
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1986 until 1988 as its Senior Vice President, from 1988 until June 1995 as its
President and Chief Operating Officer and from July 1995 to August 1996 as its
President and Chief Executive Officer. Mr. Ortenzio also served as the Executive
Vice President and a director of Horizon/CMS Healthcare Corporation from July
1995 to August 1996.
PAUL B. QUEALLY has served as a director of OccuSystems since 1993. Mr.
Queally is a general partner of Welsh, Carson, Anderson & Stowe, an investment
firm specializing in healthcare and in formation services industries. From 1993
to 1996, Mr. Queally was a general partner of The Sprout Group, a division of
Donaldson, Lufkin & Jenrette Capital Corporation, and prior thereto an associate
since 1986. Mr. Queally also serves as a director of several private companies,
including First Physician Care, a physician practice management company, and
Ortholink, Inc., an orthopedic physician practice management company.
MITCHELL T. RABKIN, M.D. has served as a Director of CRA since February
1995. From 1966 to September 1996, Dr. Rabkin served as Chief Executive Officer
of Boston's Beth Israel Hospital, where he currently holds the rank of Professor
of Medicine. Since October 1, 1996, Dr. Rabkin has been Chief Executive Officer
of CareGroup, Inc., parent corporation of Beth Israel Deaconess Medical Center.
Dr. Rabkin is a graduate of Harvard College and received his M.D. from Harvard
Medical School.
LOIS E. SILVERMAN co-founded CRA in 1978 and has served as Chairman of the
Board of CRA since March 1994 and as Chief Executive Officer of CRA from 1988 to
December 31, 1995. Prior to founding CRA, Ms. Silverman held the position of
Northeast Regional Manager at IntraCorp., a Division of Cigna Corporation. Ms.
Silverman is a director of Sun Healthcare Group, Inc., and CareGroup, Inc.,
parent corporation of Beth Israel Deaconess Medical Center, and serves as a
Trustee of Simmons College and Overseer of Tufts Medical Schools.
Concentra's Certificate of Incorporation provides, among other things, for a
Board of Directors divided into three classes, designated Class I, Class II and
Class III. Directors serve for staggered terms of three years each, except that
initially the Class I directors will serve until Concentra's 1998 annual meeting
of stockholders, the Class II directors until the 1999 meeting and the Class III
directors until the 2000 meeting. The Class I directors will be Messrs. Queally
and Rabkin, the Class II directors will be Messrs. Ortenzio and Conrades and Ms.
Silverman, and the Class III directors will be Messrs. Carlyle, O'Leary and
Larson.
COMPENSATION OF THE BOARD OF DIRECTORS. Concentra anticipates paying each
non-employee director for his services as a director an annual fee of $15,000 in
restricted stock (subject to pro-rata forfeiture in the event a director fails
to attend at least 75% of board meetings in such year) and granting the director
options each year to acquire 5,000 shares of Concentra Common Stock. Each annual
grant of options will vest, and the restrictions with respect to each annual
grant of restricted stock will lapse, after one year. In addition, each of
Concentra's directors will receive reimbursement of all ordinary and necessary
expenses incurred in attending any meeting of the Concentra Board or any
committee of the Concentra Board.
COMMITTEES OF THE BOARD OF DIRECTORS. The Concentra Board has established
two standing committees: the Audit Committee and the Compensation Committee. The
functions of the Audit Committee will be to recommend to the Concentra Board the
appointment of independent auditors, to review the plan and scope of any audit
of Concentra's financial statements and to review Concentra's significant
accounting policies and other matters. Mr. Queally and Ms. Silverman will serve
on the Audit Committee. The functions of the Compensation Committee will be to
make recommendations to the Concentra Board regarding the compensation of
executive officers and to administer Concentra's incentive plans. Messrs.
Carlyle, Ortenzio and Conrades will serve on the Compensation Committee.
Pursuant to an agreement entered into between Ms. Silverman and Mr. Larson, Mr.
Larson has agreed to vote his shares in favor of Ms. Silverman or her designee
as a member of the Concentra Board for as long as
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Ms. Silverman, her family, and trusts established by her, hold at least 519,113
shares of Concentra Common Stock.
OFFICERS
Set forth below are the names and titles of Concentra's Chairman of the
Board and executive officers.
<TABLE>
<CAPTION>
NAME AND YEAR FIRST BECAME AN
EXECUTIVE OFFICER OF OCCUSYSTEMS OR CRA AGE OFFICE
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
John K. Carlyle (1990)............................... 42 Chairman of the Board
Donald J. Larson (1978).............................. 46 President and Chief Executive Officer
John A. McCarthy, Jr. (1994)......................... 38 Executive Vice President of Managed Care Services
Richard A. Parr II (1996)............................ 39 Executive Vice President, General Counsel and
Secretary
Joseph F. Pesce (1994)............................... 48 Executive Vice President, Chief Financial Officer and
Treasurer
Daniel J. Thomas (1993).............................. 38 Executive Vice President-Practice Management Services
W. Thomas Fogarty, M.D. (1985)....................... 49 Senior Vice President and Chief Medical Officer
Peter R. Gates (1996)................................ 45 Senior Vice President-Marketing and Sales
James M. Greenwood (1993)............................ 36 Senior Vice President of Corporate Development
</TABLE>
JOHN K. CARLYLE. See "--Directors."
DONALD J. LARSON. See "--Directors."
JOHN A. MCCARTHY has served as Senior Vice President -- Cost Containment
Services and Corporate Development of CRA since August 1996. He previously
served as CRA's Vice President -- Cost Containment Services and Corporate
Development since August 1994. From June 1992 to July 1994, Mr. McCarthy was
Senior Vice President and Chief Financial Officer of MedChem Products, Inc., a
manufacturer of specialty medical products. From March 1989 to June 1992, Mr.
McCarthy was a Partner at Kaufman & Company, an investment banking firm. From
August 1987 to February 1989, Mr. McCarthy was an associate at Morgan Stanley &
Co. Incorporated, an investment banking firm.
RICHARD A. PARR II has served as OccuSystems' Executive Vice President,
General Counsel and Secretary since August 1996. Prior to joining OccuSystems,
Mr. Parr served as Vice President and Assistant General Counsel of OrNda
HealthCorp, a national hospital management company, from April 1993 through
August 1996 and as Associate General Counsel of OrNda HealthCorp from September
1991 through March 1993.
JOSEPH F. PESCE has served as Senior Vice President -- Finance and
Administration of CRA since August 1996 and as Chief Financial Officer and
Treasurer of CRA since October 1994. Mr. Pesce served as Vice President
- --Finance and Administration of CRA from October 1994 to August 1996. From
October 1981 to September 1994, Mr. Pesce held various financial positions with
Computervision Corporation and its predecessor, Prime Computer, Inc., including
Director of Corporate Planning and Analysis, Director of Leasing, Corporate
Controller, Treasurer and, most recently, Vice President -- Finance and Chief
Financial Officer. Mr. Pesce is a certified public accountant.
DANIEL J. THOMAS has served as a director of OccuSystems and its President
and Chief Operating Officer since January 1997. From April 1993 through December
1996, Mr. Thomas served as OccuSystems' Executive Vice President and Chief
Operating Officer. Prior to joining OccuSystems in 1993, Mr. Thomas
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served as controller of Medical Care International, Inc. from 1987 to 1990 and
as its Senior Vice President and Divisional Director from 1990 to 1993. Mr.
Thomas is a certified public accountant.
W. THOMAS FOGARTY, M.D. has served as OccuSystems' Senior Vice President and
Chief Medical Officer since September 1995. From 1993 to September 1995, Dr.
Fogarty served as Vice President and Medical Director of OccuSystems. From 1992
to 1993, he served as a Regional Medical Director of OccuSystems and, from 1985
until 1992, as a medical director of one of OccuSystems' centers.
PETER R. GATES has served as Senior Vice President -- Marketing and Sales of
CRA since August 1996. From May 1995 to July 1996, Mr. Gates was Vice President
of Mercer Management Consulting. From January 1990 to January 1995, Mr. Gates
was Manger of Business Development, and later General Manager, of the x-ray
business of GE Medical Systems.
JAMES M. GREENWOOD has served as OccuSystems' Chief Financial Officer since
he joined OccuSystems as a Vice President in 1993. Mr. Greenwood has served as a
Senior Vice President of OccuSystems since May 1994. From 1988 until he joined
OccuSystems in 1993, Mr. Greenwood served in numerous positions with Bank One,
Texas, N.A., and its predecessors, most recently as Senior Vice President and
Manager of Mergers and Acquisitions. Mr. Greenwood is a certified public
accountant.
COMPENSATION OF EXECUTIVE OFFICERS
For information concerning the compensation paid to the Chief Executive
Officers and the other four most highly compensated executive officers of each
of OccuSystems and CRA for the 1996 fiscal year, see the 1996 Proxy Statement
for OccuSystems and the 1996 Proxy Statement for CRA, the relevant portions of
which are incorporated by reference into the OccuSystems Form 10-K and the CRA
Form 10-K, respectively. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
EMPLOYMENT AGREEMENTS. Concentra has entered into employment agreements
with each of its executive officers. The employment agreements provide for base
salaries as follows: Mr. Carlyle, $340,000; Mr. Larson, $350,000; Mr. McCarthy,
$260,000; Mr. Parr, $230,000; Mr. Pesce, $260,000; Mr. Thomas, $260,000; Dr.
Fogarty, $240,000; Mr. Gates, $230,000; and Mr. Greenwood, $230,000 (each being
an "Officer"). Each of the employment agreements also provide that bonuses, if
any, will be paid at the discretion of the Concentra Board and allows
participation in any employee benefit plan adopted by Concentra for its
employees. The term of each of the agreements is two years. Each of the
agreements entitles each such individual to receive severance payments if
Concentra (i) terminates the employment agreement without Cause (as defined in
the employment agreement), (ii) the Officer terminates the agreement for Good
Reason (as defined in the employment agreement, which, for Mr. Carlyle, includes
ceasing to be Chairman of the Board of Concentra for any reason) or (iii)
Concentra does not renew the employment agreement other than because of death or
disability of the Officer. Such severance payments shall equal two years' base
salary for Messrs. Carlyle and Larson and one year's base salary for each of the
other executive officers. In addition, all restricted stock and stock options to
purchase an aggregate of 330,000 shares granted by Occusystems to Messrs.
Carlyle, Thomas, Parr, Fogarty and Greenwood will accelerate upon termination of
such Officers by Concentra without Cause or by such Officers for Good Reason.
LIMITATIONS ON DIRECTORS' LIABILITY. The Concentra Certificate provides
that no director of Concentra shall be personally liable to Concentra or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
Concentra or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases or (iv) for any transaction from which the director derived an
improper personal benefit. The effect of these provisions is to eliminate the
rights of Concentra and its stockholders (through stockholders' derivative suits
on behalf of Concentra) to recover monetary damages against a director for
breach of
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fiduciary duty as a director (including breaches resulting from grossly
negligent behavior), except in the situations described above.
INDEMNIFICATION AGREEMENTS. Concentra intends to enter into indemnification
agreements with each of its directors and officers at the Effective Time.
Pursuant to these agreements, Concentra will, to the extent permitted under
applicable law, indemnify these persons against all expenses, judgments, fines
and penalties incurred in connection with the defense or settlement of any
actions brought against them by reason of the fact that they are or were
directors or officers of Concentra or that they assumed certain responsibilities
at the direction of Concentra.
DESCRIPTION OF CONCENTRA 1997 LONG-TERM INCENTIVE PLAN
The description set forth below represents a summary of the principal terms
and conditions of the Concentra Managed Care, Inc. Long-Term Incentive Plan (the
"Concentra Incentive Plan") and does not purport to be complete. The description
is qualified in its entirety by reference to the Concentra Incentive Plan, a
copy of which is attached as Appendix G to this Joint Proxy
Statement/Prospectus.
GENERAL
Concentra may grant awards with respect to shares of Concentra Common Stock
under the Concentra Incentive Plan to officers, directors, employees and certain
consultants and advisors. At the Effective Time, Concentra is expected to have
eight directors and approximately 5,500 employees. The awards under the
Concentra Incentive Plan include (i) incentive stock options qualified as such
under U.S. Federal income tax laws, (ii) stock options that do not qualify as
incentive stock options, (iii) stock appreciation rights ("SARs"), (iv)
restricted stock awards, and (v) performance units.
The number of shares of Concentra Common Stock that may be subject to
outstanding awards under the Concentra Incentive Plan at any one time is equal
to ten percent of the total number of outstanding shares of Concentra Common
Stock (treating as outstanding all shares of Concentra Common Stock issuable
within 60 days upon exercise of stock options or conversion or exchange of
outstanding, publicly-traded convertible or exchangeable securities of
Concentra) MINUS the total number of shares of Concentra Common Stock subject to
outstanding awards under the Concentra Incentive Plan and any future stock-based
plan for employees or directors of Concentra. After the Effective Time, no
additional awards will be made under the existing CRA and OccuSystems
stock-based plans and only that number of shares of Concentra Common Stock
issuable upon exercise of awards granted under the existing CRA and OccuSystems
stock-based plans as of the Effective Time will be reserved for issuance in
respect of such plans by Concentra. At the Effective Time, the number of shares
authorized under the Concentra Incentive Plan will be approximately 4.2 million
(assuming no additional issuances of shares by OccuSystems or CRA). The number
of shares authorized under the Concentra Incentive Plan and the number of shares
subject to an award under the Concentra Incentive Plan will be adjusted for
stock splits, stock dividends, recapitalizations, mergers and other changes
affecting the capital stock of Concentra.
The Board of Directors or any committee designated by it may administer the
Concentra Incentive Plan (the "Committee"). Concentra intends to have its
Compensation Committee administer the Concentra Incentive Plan. The Committee
has broad discretion to administer the Concentra Incentive Plan, interpret its
provisions, and adopt policies for implementing the Concentra Incentive Plan.
This discretion includes the ability to select the recipient of an award,
determine the type and amount of each award, establish the terms of each award,
accelerate vesting or exercisability of an award, extend the exercise period for
an award, determine whether performance conditions have been satisfied, waive
conditions and provisions of an award, permit the transfer of an award to family
trusts and other persons, and otherwise modify or amend any award under the
Concentra Incentive Plan. Nevertheless, no awards for more than 250,000 shares
or more than $2.5 million in cash may be granted to any one employee in a
calendar year.
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AWARDS
The Committee determines the exercise price of each option granted under the
Concentra Incentive Plan. The exercise price for an incentive stock option must
not be less than the fair market value of the Concentra Common Stock on the date
of grant, and the exercise price of non-qualified stock options must not be less
than 85% of the fair market value of the Concentra Common Stock on the date of
grant. Stock options may be exercised as the Committee determines, but not later
than ten years from the date of grant
in the case of incentive stock options. At the discretion of the Committee,
holders may use shares of stock to pay the exercise price, including shares
issuable upon exercise of the option. Under the Concentra Incentive Plan, each
non-employee director who is a director of Concentra as of both the day
immediately preceding the annual meeting of Concentra's stockholders and the day
immediately following that annual meeting shall automatically be granted a
Nonstatutory Option for the purchase of 5,000 shares of Concentra Common Stock
and a Restricted Stock Award having a fair market value of $15,000 effective on
the date of the first meeting of the Concentra Board following that annual
meeting, whether or not that director is in attendance at that Board meeting.
An SAR may be awarded in connection with or separate from a stock option. An
SAR is the right to receive an amount in cash or stock equal to the excess of
the fair market value of a share of the Concentra Common Stock on the date of
exercise over the exercise price specified in the agreement governing the SAR
(for SARs not granted in connection with a stock option) or the exercise price
of the related stock option (for SARs granted in connection with a stock
option). An SAR granted in connection with a stock option will require the
holder, upon exercise, to surrender the related stock option or portion thereof
relating to the number of shares for which the SAR is exercised. The surrendered
stock option or portion will then cease to be exercisable. Such an SAR is
exercisable or transferable only to the extent that the related stock option is
exercisable or transferable. An SAR granted independently of a stock option will
be exercisable as the Committee determines. The Committee may limit the amount
payable upon exercise of any SAR. SARs may be paid in cash or stock, as the
Committee provides in the agreement governing the SAR.
A restricted stock award is a grant of shares of Concentra Common Stock that
are nontransferable or subject to risk of forfeiture until specific conditions
are met. The restrictions will lapse in accordance with a schedule or other
conditions as the Committee determines. During the restriction period, the
holder of a restricted stock award may, in the Committee's discretion, have
certain rights as a stockholder, including the right to vote the stock subject
to the award or receive dividends on that stock. Restricted stock may also be
issued upon exercise or settlement of options, SARs or performance units.
Performance units are performance-based awards payable in cash, stock or a
combination of both. The Committee may select any performance measure or
combination of measures as conditions for cash payments or stock issuances under
the Concentra Incentive Plan, except that performance measures for executive
officers must be objective measures chosen from among the following choices: (a)
total stockholder return (Concentra Common Stock appreciation plus dividends);
(b) net income; (c) earnings per share; (d) cash flow per share; (e) return on
equity; (f) return on assets, (g) revenues; (h) costs; (i) costs as a percentage
of revenues; (j) increase in the market price of Concentra Common Stock or other
securities; (k) the performance of Concentra in any of the items mentioned in
clause (a) through (j) in comparison to the average performance of the companies
included in the Nasdaq Health Services Stocks Index; or (1) the performance of
Concentra in any of the items mentioned in clause (a) through (j) in comparison
to the average performance of the companies used in a self-constructed peer
group established before the beginning of the performance period. The Committee
may choose different performance measures if the stockholders so approve, if tax
laws or regulations change so as not to require stockholder approval of
different measures in order to deduct the compensation related to the award for
federal income tax purposes, or if the Committee determines that it is in
Concentra's best interest to grant awards not satisfying the requirements of
Section 162(m) of the Code or any successor law.
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OTHER PROVISIONS
At the Committee's discretion and subject to conditions that the Committee
may impose, a participant's tax withholding with respect to an award may be
satisfied by the withholding of shares of Concentra Common Stock issuable
pursuant to the award or the delivery of previously owned shares of Concentra
Common Stock, in either case based on the fair market value of the shares.
The Committee has discretion to determine whether an award under the
Concentra Incentive Plan will have change-of-control features. The Committee
also has discretion to vary the change of control features as its deems
appropriate. The following describes the change of control features that
Concentra generally expects may apply to additional awards, if any such feature
applies. An award agreement under the Concentra Incentive Plan may provide that,
upon a change of control of Concentra with respect to Awards held by
Participants who are employees or directors at the occurrence of the change of
control, (1) all outstanding SARs and options will become immediately and fully
vested and exercisable in full, (2) the restriction period on any restricted
stock award will be accelerated and the restrictions will expire, and (3) the
target payout opportunity attainable under the performance units will be deemed
to have been fully earned for all performance periods as of the effective date
of the change in control and the holder will be paid a pro rata portion of all
associated targeted payout opportunities (based on the number of complete and
partial calendar months elapsed as of the change of control) in cash within
thirty days following the change of control or in stock effective as of the
change of control, for cash and stock-based performance units, respectively. The
award may also provide that it will remain exercisable for its original term
whether or not employment is terminated at or following a change in control. In
general, a change in control of Concentra occurs in any of four situations: (1)
a person other than Concentra or certain affiliated companies or benefit plans
becomes the beneficial owner of 20% or more of the voting power of Concentra's
outstanding voting securities (except acquisitions from Concentra or in a
transaction meeting the requirements of the parenthetical exception in clause
(3) below); (2) a majority of the Concentra Board is not comprised of the
members of the Concentra Board immediately following the Mergers and persons
whose elections as directors were approved by those directors or their approved
successors; (3) Concentra merges or consolidates with another corporation or
entity (whether Concentra or the other entity is the survivor), or Concentra and
the holders of the voting securities of such other corporation or entity (or the
stockholders of Concentra and such other corporation or entity) participate in a
securities exchange (other than a merger, consolidation or securities exchange
in which Concentra's voting securities are converted into or continue to
represent securities having the majority of voting power in the surviving
company, in which no person other than that surviving company owns 20% or more
of the outstanding shares of common stock or voting shares of the surviving
corporation, and in which at least a majority of the board of directors of the
surviving corporation were members of the incumbent board of Concentra); or (4)
Concentra liquidates or sells all or substantially all of its assets, except
sales to an entity having substantially the same ownership as Concentra.
If a restructure of Concentra occurs that does not constitute a change in
control of Concentra, the Committee may (but need not) cause Concentra to take
any one or more of the following actions: (1) accelerate in whole or in part the
time of vesting and exercisability of any outstanding stock options and stock
appreciation rights in order to permit those stock options and SARs to be
exercisable before, upon or after the completion of the restructure; (2) grant
each optionholder corresponding cash or stock SARS; (3) accelerate in whole or
in part the expiration of some or all of the restrictions on any restricted
stock award;.(4) treat the outstanding performance units as having fully or
partially met their targets and pay, in full or in part, the targeted payout;
(5) if the restructure involves a transaction in which Concentra is not the
surviving entity, cause the surviving entity to assume in whole or in part any
one or more of the outstanding awards under the Concentra Incentive Plan upon
such terms and provisions as the Committee deems desirable; or (6) redeem in
whole or in part any one or more of the outstanding awards (whether or not then
exercisable) in consideration of a cash payment, adjusted for withholding
obligations. A restructure generally is any merger of Concentra or the direct or
indirect transfer of all or substantially all of Concentra's assets (whether by
sale, merger, consolidation, liquidation, or otherwise) in one transaction or a
series of transactions.
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Without stockholder approval, the Concentra Board may not amend the
Concentra Incentive Plan to increase materially the aggregate number of shares
of Concentra Common Stock that may be issued under the Concentra Incentive Plan
(except for adjustments pursuant to the terms of the Concentra Incentive Plan).
Otherwise, the Concentra Board of Directors may at any time and from time to
time alter, amend, suspend or terminate the Concentra Incentive Plan in whole or
in part and in any way, subject to requirements that may exist in stock exchange
rules or in securities, tax and other laws from time to time. No award may be
issued under the Concentra Incentive Plan after the tenth anniversary of its
initial stockholder approval.
TAX IMPLICATIONS OF AWARDS
Set forth below is a summary of the federal income tax consequences to
employees, directors and other participants in the Concentra Incentive Plan
("Concentra Employees") and Concentra as a result of the grant and exercise of
awards under the Concentra Incentive Plan. This summary is based on statutory
provisions, Treasury regulations thereunder, judicial decisions and IRS rulings
in effect on the date hereof.
NONQUALIFIED STOCK OPTIONS; STOCK APPRECIATION RIGHTS; INCENTIVE STOCK
OPTIONS.
Concentra Employees will not realize taxable income upon the grant of a
non-qualified stock option ("NQSO") or a SAR. Upon the exercise of a SAR or
NQSO, a Concentra Employee will recognize ordinary compensation income (subject
to withholding by Concentra) in an amount equal to the excess of (i) the amount
of cash and the fair market value of the Concentra Common Stock received over
(ii) the exercise price (if any) paid therefor. The Concentra Employee will
generally have a tax basis in any shares of Concentra Common Stock received
pursuant to the exercise of a SAR, or pursuant to the cash exercise of a NQSO,
that equals the fair market value of such shares on the date of exercise.
Subject to the discussion under "-- Tax Code Limitations on Deductibility,"
Concentra (or a subsidiary) will be entitled to a deduction for federal income
tax purposes that corresponds as to timing and amount with the compensation
income recognized by the Concentra Employee under the foregoing rules.
Concentra Employees eligible to receive an incentive stock option ("ISO")
will not have taxable income on the grant of an ISO. Upon the exercise of an
ISO, the Concentra Employee will not have taxable income, although the excess of
the fair market value of the shares of Concentra Common Stock received upon
exercise of the ISO ("ISO Stock") over the exercise price will increase the
alternative minimum taxable income of the Concentra Employee, which may cause
such Concentra Employee to incur alternative minimum tax. The payment of any
alternative minimum tax attributable to the exercise of an ISO would be allowed
as a credit against the Concentra Employee's regular tax liability in a later
year to the extent the Concentra Employee's regular tax liability is in excess
of the alternative minimum tax for that year.
Upon the disposition of ISO Stock that has been held for the requisite
holding period (generally, at least two years from the date of grant and one
year from the date of exercise of the ISO), the Concentra Employee will
generally recognize capital gain (or loss) equal to the excess (or shortfall) of
the amount received in the disposition over the exercise price paid by the
Concentra Employee for the ISO Stock. However, if a Concentra Employee disposes
of ISO Stock that has not been held for the requisite holding period (a
"disqualifying disposition"), the Concentra Employee will recognize ordinary
compensation income in the year of the disqualifying disposition in an amount
equal to the amount by which the fair market value of the ISO Stock at the time
of exercise of the ISO (or, if less, the amount realized in the case of an arm's
length disqualifying disposition to an unrelated party) exceeds the exercise
price paid by the Concentra Employee for such ISO Stock. The Concentra Employee
would also recognize capital gain to the extent the amount realized in the
disqualifying disposition exceeds the fair market value of the ISO stock on the
exercise date. If the exercise price paid for the ISO Stock exceeds the amount
realized (in the case of an arm's-length disposition to an unrelated party),
such excess would ordinarily constitute a capital loss.
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Concentra and its subsidiaries will generally not be entitled to any federal
income tax deduction upon the grant or exercise of an ISO, unless the Concentra
Employee makes a disqualifying disposition of the ISO Stock. If a Concentra
Employee makes such a disqualifying disposition, Concentra (or a subsidiary)
will then, subject to the discussion below under "-- Tax Code Limitations on
Deductibility," be entitled to a tax deduction that corresponds as to timing and
amount with the compensation income recognized by the Concentra Employee under
the rules described in the preceding paragraph.
Under current rulings, if a Concentra Employee transfers previously held
shares of Concentra Common Stock (other than ISO Stock that has not been held
for the requisite holding period) in satisfaction of part or all of the exercise
price of an NQSO or ISO, no additional gain will be recognized on the transfer
of such previously held shares in satisfaction of the NQSO or ISO exercise price
(although the Concentra Employee would still recognize ordinary compensation
income upon exercise of an NQSO in the manner described above). Moreover, that
number of shares of Concentra Common Stock received upon exercise which equals
the number of shares of previously held Concentra Common Stock surrendered
therefor in satisfaction of the NQSO or ISO exercise price will have a tax basis
that equals, and a holding period that includes, the tax basis and holding
period of the previously held shares of Concentra Common Stock surrendered in
satisfaction of the NQSO or ISO exercise price. Any additional shares of
Concentra Common Stock received upon exercise will have a tax basis that equals
the amount of cash (if any) paid by the Concentra Employee, plus the amount of
compensation income recognized by the Concentra Employee under the rules
described above. If a reload option is issued in connection with a Concentra
Employee's transfer of previously held Concentra Common Stock in full or partial
satisfaction of the exercise price of an ISO or NQSO, the tax consequences of
the reload option will be as provided above for an ISO or NQSO, depending on
whether the reload option itself is an ISO or NQSO.
PERFORMANCE UNITS; RESTRICTED STOCK AWARDS.
A Concentra Employee will recognize ordinary compensation income upon
receipt of cash pursuant to a performance unit or, if earlier, at the time the
cash is otherwise made available for the Concentra Employee to draw upon it. A
Concentra Employee will not have taxable income at the time of grant of a stock
award in the form of performance units denominated in Concentra Common Stock
("Stock Unit Award"), but rather, will generally recognize ordinary compensation
income at the time he receives Concentra Common Stock in satisfaction of the
Stock Unit Award in an amount equal to the fair market value of the Concentra
Common Stock received. In general, a Concentra Employee will recognize ordinary
compensation income as a result of the receipt of Concentra Common Stock
pursuant to a restricted stock award or performance unit in an amount equal to
the fair market value of the Concentra Common Stock when such stock is received;
provided, however, that if the stock is not transferable and is subject to a
substantial risk of forfeiture when received, the Concentra Employee will
recognize ordinary compensation income in an amount equal to the fair market
value of the Concentra Common Stock (a) when the Concentra Common Stock first
becomes transferable or is no longer subject to a substantial risk of forfeiture
in cases where the Concentra Employee does not make an valid election under
Section 83(b) of the Code or (b) when the Concentra Common Stock is received in
cases where the Concentra Employee makes a valid Section 83(b) election.
A Concentra Employee will be subject to withholding for federal, and
generally for state and local, income taxes at the time he recognizes income
under the rules described above with respect to Concentra Common Stock or cash
received. Dividends that are received by a Concentra Employee prior to the time
that the Concentra Common Stock is taxed to the Concentra Employee under the
rules described in the preceding paragraph are taxed as additional compensation,
not as dividend income. The tax basis of a Concentra Employee in the Concentra
Common Stock received will equal the amount recognized by him as compensation
income under the rules described in the preceding paragraph, and the Concentra
Employee's holding period in those shares will commence on the date of receipt
of the shares.
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Subject to the discussion immediately below, Concentra (or a subsidiary)
will be entitled to a deduction for federal income tax purposes that corresponds
as to timing and amount with the compensation income recognized by the Concentra
Employee under the foregoing rules.
TAX CODE LIMITATIONS ON DEDUCTIBILITY. In order for the amounts described
above to be deductible by Concentra (or a subsidiary), such amounts must
constitute reasonable compensation for services rendered or to be rendered and
must be ordinary and necessary business expenses. The ability of Concentra (or a
subsidiary) to obtain a deduction for future payments under the Concentra
Incentive Plan could also be limited by the golden parachute payment rules of
Section 280G of the Code, which prevent the deductibility of certain excess
parachute payments made in connection with a change in control of an employer-
corporation. Finally, the ability of Concentra (or a subsidiary) to obtain a
deduction for amounts paid under the Concentra Incentive Plan could be limited
by Section 162(m) of the Code, which limits the deductibility, for federal
income tax purposes, of compensation paid to certain executive officers of
Concentra to $1 million with respect to any such officer during any taxable year
of Concentra. However, an exception applies to this limitation in the case of
certain performance-based compensation. The Concentra Incentive Plan is intended
to satisfy the requirements for the performance-based exception. Concentra
intends to comply with the requirements of the Code with respect to awards under
the Concentra Incentive Plan so as to be eligible for the performance-based
exception, but Concentra may, in its sole discretion, determine that in one or
more cases it is in its best interests to not satisfy the requirements for the
performance-based exception.
THE CRA BOARD RECOMMENDS THAT STOCKHOLDERS OF CRA VOTE IN FAVOR OF THE
APPROVAL OF THE CONCENTRA INCENTIVE PLAN.
THE OCCUSYSTEMS BOARD RECOMMENDS THAT STOCKHOLDERS OF OCCUSYSTEMS VOTE IN
FAVOR OF THE APPROVAL OF THE CONCENTRA INCENTIVE PLAN.
DESCRIPTION OF THE CONCENTRA EMPLOYEE STOCK PURCHASE PLAN
The description set forth below represents a summary of the principal terms
and conditions of the Concentra Managed Care, Inc. Employee Stock Purchase Plan
(the "Concentra Employee Stock Purchase Plan") and does not purport to be
complete. Such description is qualified in its entirety by reference to the
Concentra Employee Stock Purchase Plan, a copy of which is attached at Appendix
H to this Joint Proxy Statement/Prospectus.
GENERAL
A total of 500,000 shares of Concentra Common Stock are reserved for
issuance under the Concentra Employee Stock Purchase Plan. The purpose of the
Concentra Employee Stock Purchase Plan is to provide employees of Concentra who
participate in the Concentra Employee Stock Purchase Plan with an opportunity to
purchase Concentra Common Stock through payroll deductions. The Concentra
Employee Stock Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. See "-- Federal Income Tax Consequences" below.
The Concentra Board of Directors or any committee designated by it may
administer the Concentra Employee Stock Purchase Plan (the "Committee").
Concentra intends to have its Compensation Committee administer the plan. The
Committee has broad discretion to administer the Concentra Employee Stock
Purchase Plan, interpret its provisions and adopt policies for implementing the
plan.
Any persons (including officers of Concentra) who have been employed by
Concentra (or any of its parent or subsidiary corporations (within the meaning
of Sections 424(e) and (f) of the Code)) for at least five months and are
employed for at least 20 hours per week and more than five months in a calendar
year will be eligible to participate in the Concentra Employee Stock Purchase
Plan, subject to certain limitations imposed by Section 423(b) of the Code.
Eligible employees may become participants in the Concentra Employee Stock
Purchase Plan by delivering to Concentra an agreement authorizing payroll
deductions prior to the applicable offering date.
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OFFERING DATES
The Concentra Employee Stock Purchase Plan will be implemented by two
six-month offerings during each calendar year. The offering periods will
commence on January 1 and July 1 of each year. The first offering period will
commence January 1, 1998.
PURCHASE PRICE
The purchase price per share at which shares of Concentra Common Stock will
be sold under the Concentra Employee Stock Purchase Plan will be the lower of
85% of the fair market value of the Concentra Common Stock on the first day of
each six-month offering period and 85% of the fair market value of the Concentra
Common Stock on the last day of each offering period. The fair market value of
the Concentra Common Stock on a given date will be the last reported sales price
of the Concentra Common Stock on the Nasdaq National Market on such date.
The purchase price of the shares of Concentra Common Stock to be purchased
under the Concentra Employee Stock Purchase Plan will be accumulated by payroll
deductions during each offering period. The deductions may not exceed 15% of a
participant's eligible compensation, which is defined in the Concentra Employee
Stock Purchase Plan to include all wages, salary, commissions and bonuses
received (including employee contributions to a 401(k) plan) during the offering
period. A participant may discontinue participation in the Concentra Employee
Stock Purchase Plan, but may not otherwise increase or decrease the rate of
payroll deductions at any time during the offering period. Payroll deductions
will commence on the first payday on or following the first day of the offering
period and continue at the same rate until terminated as provided in the
Concentra Employee Stock Purchase Plan. Such payroll deductions will be credited
to a book entry account for each participant.
PURCHASE OF STOCK; EXERCISE OF OPTION
The maximum number of shares placed under option to a participant in an
offering period under the Concentra Employee Stock Purchase Plan will be the
lesser of 1,000 or that number determined by dividing the amount of the
participant's total payroll deductions during the offering period (and any
carryover amounts from the preceding offering period) by the purchase price per
share under the Concentra Employee Stock Purchase Plan. Unless a participant
withdraws from the Concentra Employee Stock Purchase Plan, such participant's
option for the purchase of shares will be exercised automatically at the end of
each offering period for the maximum number of whole shares at the applicable
price. As soon as practicable following the end of each offering period,
Concentra will cause a certificate to be issued in each participant's name
representing the total number of whole shares of Concentra Common Stock acquired
by the participant through the exercise of the option. Any balance remaining in
a participant's account following the exercise of the participant's option in an
offering period will be carried over to the next offering period.
Notwithstanding the foregoing, no employee of Concentra will be permitted to
subscribe for shares of Concentra Common Stock under the Concentra Employee
Stock Purchase Plan if, immediately after the grant of the option, the employee
would own five percent or more of the voting power or value of all classes of
stock of Concentra or of any of its subsidiaries (including stock which may be
purchased under the Concentra Employee Stock Purchase Plan or pursuant to any
other options), nor will any employee be granted an option which would permit
the employee to buy pursuant to the Concentra Employee Stock Purchase Plan more
than $25,000 worth of stock (determined at the fair market value of the shares
at the time the option is granted) in any six month offering period.
OTHER PROVISIONS
A participant's interest in a given offering under the Concentra Employee
Stock Purchase Plan may be terminated in whole, but not in part, by signing and
delivering to Concentra a notice of withdrawal from the Concentra Employee Stock
Purchase Plan. A participant may elect to withdraw from the Concentra Employee
Stock Purchase Plan at any time prior to 30 days before the last day of the
offering period. Upon
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a withdrawal, Concentra shall refund to the participant the accumulated payroll
deductions credited to the participant's account, and the participant's payroll
deductions and interest in the offering shall terminate.
In the event any change is made in Concentra's capitalization, such as a
stock split, stock dividend, exchange of shares, or merger, which results in an
increase or decrease in the number of outstanding shares of Concentra Common
Stock without receipt of consideration by Concentra, appropriate adjustments
will be made by the Committee in the shares subject to purchase under the
Concentra Employee Stock Purchase Plan and in the purchase price per share.
An option granted to a participant under the Concentra Employee Stock
Purchase Plan may not be pledged, assigned or transferred for any reason and any
participant's attempt to do so may be treated by Concentra as an election to
withdraw from the Concentra Employee Stock Purchase Plan.
The Concentra Board of Directors may at any time amend or terminate the
Concentra Employee Stock Purchase Plan, except that such termination shall not
affect options previously granted nor may any amendment make any change in an
option granted prior thereto which adversely affects the rights of any
participant without the written consent of such participant. In addition, no
amendment may be made to the Concentra Employee Stock Purchase Plan without
prior approval of the stockholders of Concentra if such amendment would
materially increase the benefits accruing to participants under the Concentra
Employee Stock Purchase Plan, increase the number of shares of Concentra Common
Stock that may be issued under the Concentra Employee Stock Purchase Plan,
change the class of individuals eligible for participation in the Concentra
Employee Stock Purchase Plan, extend the term of the Concentra Employee Stock
Purchase Plan, or cause options issued under the Concentra Employee Stock
Purchase Plan to fail to meet the requirements for employee stock purchase plans
as defined in Section 423 of the Code.
FEDERAL INCOME TAX CONSEQUENCES
The Concentra Employee Stock Purchase Plan, and the right of participants to
make purchases thereunder, is intended to qualify under the provisions of
sections 421 and 423 of the Code. Under these provisions, no income will be
taxable to a participant at the time of grant of the option or purchase of the
shares. Upon disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon the participant's
holding period. If the shares have been held by the participant for more than
two years after the date of the option grant, the lesser of (a) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price or (b) the excess of the fair market value of the shares at the
date of the option grant over the purchase price will be treated as ordinary
income, and any further gain or loss will be treated as long-term capital gain
or loss. If the shares are disposed of before the expiration of this holding
period, the excess of the fair market value of the shares on the purchase date
over the purchase price will be treated as ordinary income, and any further gain
or loss on such disposition will be long-term or short-term capital gain or
loss, depending on the holding period. Concentra is not entitled to a deduction
for amounts taxed as ordinary income or capital gain to a participant except to
the extent of ordinary income reported by participants upon disposition of
shares within two years from the date of grant.
The foregoing brief summary of the effect of federal income taxation upon
the participants and Concentra with respect to the purchase of shares under the
Concentra Employee Stock Purchase Plan does not purport to be complete, and
reference should be made to the applicable provisions of the Code. In addition,
this summary does not discuss tax consequences of a participant's death or the
provisions of the income tax laws of any municipality, state or foreign country
in which the participant may reside.
THE CRA BOARD RECOMMENDS THAT THE STOCKHOLDERS OF CRA VOTE IN FAVOR OF THE
APPROVAL OF THE CONCENTRA EMPLOYEE STOCK PURCHASE PLAN.
THE OCCUSYSTEMS BOARD RECOMMENDS THAT THE STOCKHOLDERS OF OCCUSYSTEMS VOTE
IN FAVOR OF THE APPROVAL OF THE CONCENTRA EMPLOYEE STOCK PURCHASE PLAN.
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SECURITY OWNERSHIP OF OCCUSYSTEMS, CRA AND CONCENTRA
OCCUSYSTEMS
The following table sets forth the beneficial ownership of OccuSystems
Common Stock, as of May 31, 1997, of each person who is (i) an OccuSystems
director, (ii) the Chief Executive Officer of OccuSystems, (iii) the four most
highly compensated executive officers of OccuSystems other than the Chief
Executive Officer, calculated based upon the compensation of the executive
officers of OccuSystems for 1996, (iv) all OccuSystems directors and executive
officers, as a group, and (v) a beneficial owner of five percent or more of the
outstanding OccuSystems Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-----------------------
<S> <C> <C>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES (1) PERCENT
- -------------------------------------------------------------------------------------------- ---------- -----------
Richard D. Rehm, M.D........................................................................ 305,438 1.4%
Daniel J. Thomas............................................................................ 200,367 *
John K. Carlyle............................................................................. 152,250 *
W. Thomas Fogarty, M.D...................................................................... 128,864 *
James M. Greenwood.......................................................................... 41,250 *
Robert A. Ortenzio(2)....................................................................... 26,719 *
Paul B. Queally............................................................................. 10,799 *
Robert W. O'Leary........................................................................... 5,000 *
Richard A. Parr II.......................................................................... -- *
Stephen A. George, M.D...................................................................... -- *
Putnam Investments, Inc.(3)................................................................. 2,373,981 11.0
One Post Office Square
Boston, Massachusetts 02109
Pilgrim, Baxter & Associates, Ltd.(3)....................................................... 1,446,321 6.7
1255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19087
All directors and executive officers as a group (10 persons)................................ 870,687 4.0%
</TABLE>
- ------------------------
* Less than one percent
(1) Includes shares of OccuSystems Common Stock which an individual has a right
to acquire upon exercise of options or warrants or conversion of debt
securities within 60 days of May 31, 1997. Such shares are deemed to be
outstanding for purposes of computing the percentage ownership of the
individual holding such shares, but are not deemed outstanding for purposes
of computing the percentage of any other person shown on the table.
(2) Includes 5,000 shares held of record by Remainderman Life Estate, which Mr.
Ortenzio indirectly owns.
(3) Ownership is based upon a Schedule 13G filed on or before March 10, 1997.
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CRA
The following table sets forth the beneficial ownership of CRA Common Stock,
as of May 31, 1997, of each person who is (i) a CRA director, (ii) the Chief
Executive Officer of CRA, (iii) the four most highly compensated executive
officers of CRA other than the Chief Executive Officer, calculated based upon
the compensation of the executive officers of CRA for 1996, (iv) all CRA
directors and executive officers, as a group, and (v) a beneficial owner of five
percent or more of the outstanding CRA Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-----------------------
<S> <C> <C>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES (1) PERCENT
- -------------------------------------------------------------------------------------------- ---------- -----------
Donald J. Larson(2)......................................................................... 948,148 10.6%
Lois E. Silverman(3)........................................................................ 433,647 4.8
George H. Conrades.......................................................................... 23,500 *
Mitchell T. Rabkin, M.D..................................................................... 15,866 *
Jeffrey R. Jay, M.D......................................................................... -- *
Anne E. Kirby............................................................................... 13,882 *
Peter R. Gates.............................................................................. 10,000 *
Joseph F. Pesce............................................................................. 2,304 *
John A. McCarthy, Jr........................................................................ -- --
Putnam Investment Management, Inc.(4)....................................................... 1,204,300 13.4
The Putnam Advisory Company, Inc.
One Post Office Square
Boston, Massachusetts 02109
Arlene Osoff, Trustee(5).................................................................... 485,323 5.4
c/o Jansson
411 Waverly Oak Drive
Waltham, Massachusetts 02154
All directors and executive officers as a group (9 persons)................................. 1,447,347 16.1%
</TABLE>
- ------------------------
* Less than one percent
(1) Includes shares of CRA Common Stock which an individual has a right to
acquire upon exercise of options or warrants or conversion of debt
securities within 60 days of May 31, 1997. Such shares are deemed to be
outstanding for purposes of computing the percentage ownership of the
individual holding such shares, but are not deemed outstanding for purposes
of computing the percentage of any other person shown on the table.
(2) Includes 18,750 shares of CRA Common Stock held of record by trusts created
for the benefit of Mr. Larson's children.
(3) Includes 23,500 shares of CRA Common Stock held of record by the Michael E.
Silverman 1995 Irrevocable Trust dated March 13, 1995 (the "Michael
Silverman Trust"), 23,500 shares of CRA Common Stock held of record by the
Susan E. Bender 1995 Irrevocable Trust dated March 13, 1995 (the "Susan
Bender Trust"), and 28,500 shares of CRA Common Stock held in the Silverman
Family Foundation, Inc. Ms. Silverman disclaims beneficial ownership of the
shares held by such trusts and such foundation.
(4) Ownership is based upon a Schedule 13G filed on or before March 10, 1997.
(5) Consists of 438,323 shares of CRA Common Stock held of record by the
Silverman 1996 Grantor Retained Annuity Trust, 23,500 shares of CRA Common
Stock held of record by the Michael Silverman Trust and 23,500 shares of CRA
Common Stock held of record by the Susan Bender Trust.
110
<PAGE>
CONCENTRA
The following table sets forth the anticipated beneficial ownership of
Concentra Common Stock, after giving effect to the Mergers, of each person
expected to be (i) a Concentra director, (ii) the Chief Executive Officer of
Concentra, (iii) the four most highly compensated executive officers of
Concentra other than the Chief Executive Officer, calculated based upon the
compensation of the executive officers of OccuSystems and CRA for 1996, (iv) all
persons expected to be Concentra directors and executive officers, as a group
and (v) a beneficial owner of five percent or more of the outstanding Concentra
Common Stock. The table is based on ownership of OccuSystems Common Stock and
CRA Common Stock as of May 31, 1997.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-----------------------
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES (1) PERCENT
- -------------------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Donald J. Larson(2)......................................................................... 1,694,392 4.5%
Lois E. Silverman(3)........................................................................ 774,493 2.1
John K. Carlyle............................................................................. 277,250 *
Daniel J. Thomas............................................................................ 275,367 *
W. Thomas Fogarty, M.D...................................................................... 159,689 *
George H. Conrades.......................................................................... 41,971 *
Mitchell T. Rabkin, M.D..................................................................... 28,336 *
Robert A. Ortenzio(4)....................................................................... 26,719 *
Paul B. Queally............................................................................. 10,799 *
Robert W. O'Leary........................................................................... 5,000 *
Joseph F. Pesce............................................................................. 4,114 *
John A. McCarthy, Jr........................................................................ 1,000 --
Putnam Investment Management, Inc.(5)....................................................... 4,524,860 12.0
The Putnam Advisory Company, Inc.
One Post Office Square
Boston, Massachusetts 02109
All directors and executive officers as a group (15 persons)................................ 3,464,490 9.2%
</TABLE>
- ------------------------
* Less than one percent
(1) Includes shares of Concentra Common Stock which an individual has a right to
acquire upon exercise of options or warrants or conversion of debt
securities within 60 days of May 31, 1997, including giving effect to the
acceleration of stock options resulting from the Mergers. Such shares are
deemed to be outstanding for purposes of computing the percentage ownership
of the individual holding such shares, but are not deemed outstanding for
purposes of computing the percentage of any other person shown on the table.
(2) Includes 33,488 shares of Common Stock held of record by trusts created for
the benefit of Mr. Larson's children.
(3) Includes 41,971 shares of Common Stock held of record by the Michael E.
Silverman 1995 Irrevocable Trust dated March 13, 1995 (the "Michael
Silverman Trust"), 41,971 shares of CRA Common Stock held of record by the
Susan E. Bender 1995 Irrevocable Trust dated March 13, 1995 (the "Susan
Bender Trust"), and 50,901 shares of Common Stock held in the Silverman
Family Foundation, Inc. Ms. Silverman disclaims beneficial ownership of the
shares held by such trusts and such foundation.
(4) Includes 5,000 shares held of record by Remainderman Life Estate, which Mr.
Ortenzio indirectly owns.
(5) Ownership is based upon Schedule 13Gs filed on or before March 10, 1997.
111
<PAGE>
LEGAL MATTERS
The validity of the Concentra Common Stock to be issued in connection with
the Mergers will be passed upon by Vinson & Elkins L.L.P. The federal income tax
consequences in connection with the OccuSystems Merger will be passed upon for
OccuSystems and Concentra by Vinson & Elkins L.L.P. The federal income tax
consequences in connection with the CRA Merger will be passed upon for CRA by
Hutchins, Wheeler & Dittmar, A Professional Corporation.
EXPERTS
The consolidated financial statements of OccuSystems as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31, 1996,
incorporated in this Joint Proxy Statement/ Prospectus by reference to the
OccuSystems Form 10-K, have been so incorporated in reliance on the report of
Arthur Andersen LLP, independent public accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of CRA at December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996,
incorporated by reference in this Joint Proxy Statement/Prospectus by reference
to the CRA Form 10-K, have been so incorporated in reliance on the report of
Arthur Andersen LLP, independent public accountants, given upon the authority of
such firm as experts in accounting and auditing.
It is expected that representatives of Arthur Andersen LLP, OccuSystems' and
CRA's independent public accountants, will be present at the OccuSystems Meeting
and at the CRA Meeting where they will have an opportunity to respond to
appropriate questions of stockholders and to make a statement if they so desire.
FUTURE STOCKHOLDER PROPOSALS
If the Mergers are consummated, the first annual meeting of the public
stockholders of Concentra after such consummation is expected to be held May 15,
1998.
Subject to the foregoing, if any Concentra stockholder intends to present a
proposal at the 1998 Concentra annual meeting and wishes to have such proposal
considered for inclusion in the proxy materials for such meeting, such holder
must submit the proposal to the Secretary of Concentra in writing so as to be
received at the executive offices of Concentra by December 1, 1997. Such
proposals must also meet the other requirements of the rules of the Commission
relating to stockholders' proposals.
If the Mergers are not consummated and if any OccuSystems stockholder
intends to present a proposal at the 1998 OccuSystems annual meeting and wishes
to have such proposal considered for inclusion in the proxy materials for such
meeting, such holder must submit the proposal to the Secretary of OccuSystems in
writing so as to be received at the executive offices of OccuSystems by December
1, 1997. Such proposals must also meet the other requirements of the rules of
the Commission relating to stockholders' proposals.
If the Mergers are not consummated and any CRA stockholder intends to
present a proposal at the 1998 CRA annual meeting and wishes to have such
proposal considered for inclusion in the proxy materials for such meeting, such
holder must submit the proposal to the Clerk of CRA in writing so as to be
received at the executive offices of CRA by January 4, 1998. Such proposals must
also meet the other requirements of the rules of the Commission relating to
stockholders' proposals.
112
<PAGE>
APPENDIX A
------------------------
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
CRA MANAGED CARE, INC.
OCCUSYSTEMS, INC.
AND
CONCENTRA MANAGED CARE, INC.
APRIL 21, 1997
------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE I
FORMATION OF HOLDING COMPANY AND SUBSIDIARIES.................................................... 1
1.1. Holding Company............................................................................. 1
1.2. Directors and Officers of Holding Company................................................... 2
1.3. Organization of CRA Merger Subsidiary....................................................... 2
1.4. Actions of Directors and Officers........................................................... 2
1.5. Actions of CRA and OSI...................................................................... 2
ARTICLE 2
THE MERGERS; CLOSING............................................................................. 2
2.1. The Mergers................................................................................. 2
2.2. The Closing................................................................................. 3
ARTICLE 3
DIRECTORS AND OFFICERS OF CRA MERGER SUB AND SURVIVING CORPORATIONS.............................. 3
3.1. Directors................................................................................... 3
3.2. Officers.................................................................................... 3
ARTICLE 4
EFFECT OF THE MERGERS ON SECURITIES OF CRA, OSI, HOLDING COMPANY AND THE CRA MERGER SUB.......... 3
4.1. CRA Merger Sub Stock........................................................................ 3
4.2. Holding Company Capital Stock............................................................... 3
4.3. Conversion of CRA Stock..................................................................... 3
4.4. Conversion of OSI Common Stock.............................................................. 5
4.5. Fractional Shares, Etc...................................................................... 5
4.6. Exchange Fund Exchange Procedures, Etc...................................................... 6
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF OSI............................................................ 8
5.1. Existence; Good Standing; Corporate Authority.............................................. 8
5.2. Authorization, Validity and Effect of Agreements........................................... 8
5.3. Capitalization............................................................................. 8
5.4. Subsidiaries............................................................................... 9
5.5. Other Interests............................................................................ 9
5.6. No Conflict; Required Filings and Consents................................................. 9
5.7. Compliance................................................................................. 10
5.8. SEC Documents.............................................................................. 10
5.9. Litigation................................................................................. 11
5.10. Absence of Certain Changes................................................................. 11
5.11. Taxes...................................................................................... 11
5.12. Employee Benefit Plans..................................................................... 12
5.13. Labor Matters.............................................................................. 13
5.14. No Brokers................................................................................. 13
5.15. Opinion of Financial Advisor............................................................... 13
5.16. Preliminary Pooling Letter................................................................. 13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CRA............................................................ 13
6.1. Existence; Good Standing; Corporate Authority.............................................. 13
6.2. Authorization, Validity and Effect of Agreements........................................... 14
6.3. Capitalization............................................................................. 14
6.4. Subsidiaries............................................................................... 14
6.5. Other Interests............................................................................ 15
6.6. No Conflict; Required Filings and Consents................................................. 15
6.7. Compliance................................................................................. 16
6.8. SEC Documents.............................................................................. 16
6.9. Litigation................................................................................. 16
6.10. Absence of Certain Changes................................................................. 16
6.11. Taxes...................................................................................... 17
6.12. Employee Benefit Plans..................................................................... 17
6.13. Labor Matters.............................................................................. 18
6.14. No Brokers................................................................................. 18
6.15. Opinion of Financial Advisor............................................................... 19
6.16. Preliminary Pooling Letter................................................................. 19
ARTICLE 7
COVENANTS........................................................................................ 19
7.1. Alternative Proposals...................................................................... 19
7.2. Interim Operations......................................................................... 21
7.3. Meetings of Stockholders................................................................... 24
7.4. Filings, Other Action...................................................................... 24
7.5. Inspection of Records...................................................................... 25
7.6. Publicity.................................................................................. 25
7.7. Registration Statement..................................................................... 25
7.8. Listing Application........................................................................ 26
7.9. Further Action............................................................................. 26
7.10. Affiliate Letters.......................................................................... 26
7.11. Expenses................................................................................... 27
7.12. Insurance; Indemnity....................................................................... 27
7.13. Takeover Statute........................................................................... 28
7.14. Conduct of Business by Holding Company and CRA Merger Sub Pending the
Mergers.......................................................................................... 28
7.15. Employee Benefits.......................................................................... 28
7.16. Conveyance Taxes........................................................................... 28
7.17. Incentive Plan............................................................................. 28
ARTICLE 8
CONDITIONS....................................................................................... 29
8.1. Conditions to Each Party's Obligation to Effect the Mergers................................. 29
8.2. Conditions to Obligation of OSI to Effect the Mergers....................................... 29
8.3. Conditions to Obligation of CRA to Effect the Mergers....................................... 30
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE 9
TERMINATION...................................................................................... 31
9.1. Termination by Mutual Consent............................................................... 31
9.2. Termination by Either CRA or OSI............................................................ 31
9.3. Termination by OSI.......................................................................... 31
9.4. Termination by CRA.......................................................................... 31
9.5. Effect of Termination and Abandonment....................................................... 32
9.6. Extension, Waiver........................................................................... 32
ARTICLE 10
GENERAL PROVISIONS............................................................................... 33
10.1. Nonsurvival of Representations, Warranties and Agreements................................. 33
10.2. Notices................................................................................... 33
10.3. Assignment; Binding Effect................................................................ 34
10.4. Entire Agreement.......................................................................... 34
10.5. Amendment................................................................................. 34
10.6. Governing Law............................................................................. 34
10.7. Counterparts.............................................................................. 34
10.8. Headings.................................................................................. 35
10.9. Interpretation............................................................................ 35
10.10. Waivers................................................................................... 35
10.11. Incorporation of Exhibits................................................................. 35
10.12. Severability.............................................................................. 35
10.13. Enforcement of Agreement.................................................................. 35
10.14. Subsidiaries.............................................................................. 35
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as of April
21, 1997, among CRA Managed Care, Inc., a Massachusetts corporation ("CRA"),
OccuSystems, Inc., a Delaware corporation ("OSI"), and Concentra Managed Care,
Inc., a Delaware corporation ("Holding Company").
RECITALS
A. The Boards of Directors of CRA, OSI and Holding Company have approved,
and deem it advisable and in the best interests of their respective companies
and stockholders, to consummate the reorganization (the "Reorganization")
provided for herein, pursuant to which (i) Holding Company will acquire all of
the common stock of CRA through the merger of a Subsidiary (as defined in
Section 10.14) of Holding Company with and into CRA and (ii) OSI will be merged
with and into Holding Company.
B. For federal income tax purposes, it is intended that the CRA Merger (as
hereinafter defined) will qualify as an exchange under the provisions of Section
351 of the United States Internal Revenue Code of 1986, as amended (the "Code"),
a tax free reorganization under Section 368(a) of the Code or both, and that the
OSI Merger (as hereafter defined) will qualify as a tax free reorganization
under Section 368(a) of the Code.
C. CRA and OSI desire to make certain representations, warranties, covenants
and agreements in connection with the transactions contemplated hereby.
D. Simultaneously with the execution and delivery of this Agreement CRA has
entered into a certain CRA Managed Care, Inc. Stock Option Agreement (the "CRA
Stock Option Agreement) pursuant to which OSI has the right to acquire certain
shares of CRA Common Stock subject to and in accordance with the terms and
conditions of said Agreement and simultaneously with the execution and delivery
of this Agreement OSI has entered into a certain OccuSystems, Inc. Stock Option
Agreement (the "OSI Stock Option Agreement") pursuant to which CRA has the right
to acquire certain shares of OSI Common Stock subject to and in accordance with
the terms and conditions of said Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
FORMATION OF HOLDING COMPANY AND SUBSIDIARIES
1.1. HOLDING COMPANY. Holding Company is a corporation newly formed for the
purpose of entering into this Agreement and effecting the transactions
contemplated hereby. Holding Company has undertaken no actions and has incurred
no liabilities other than in connection with this Agreement and the transactions
contemplated hereby. The Certificate of Incorporation and By-laws of Holding
Company are set forth on Exhibit A attached hereto. The Certificate of
Incorporation of Holding Company will be amended prior to the Effective Time to
provide that (a) the authorized capital stock of Holding Company shall consist
of 100,000,000 shares of common stock, $.01 par value (the "Holding Company
Common Stock") and 20,000,000 shares of blank check preferred stock, $.01 par
value, (b) Holding Company shall have a staggered board of directors, (c) no
action required to be taken or that may be taken at any meeting of common
stockholders of Holding Company may be taken without a meeting, and the power of
common stockholders to consent in writing, without a meeting, to the taking of
any action is specifically denied, and (d) special meetings of the stockholders
of Holding Company, and any proposals to be considered at such meetings, may be
called and proposed exclusively by Holding Company's Board of Directors, and the
stockholders of Holding Company shall not have the right to call special
meetings of the stockholders or to propose business at a special meeting thereof
(in each of cases (b), (c) and (d), on terms substantially similar to the forms
of such provisions previously reviewed by the parties hereto). Immediately prior
to the Effective Time there shall be no more than 100 shares of Holding Company
Common Stock outstanding.
A-1
<PAGE>
1.2. DIRECTORS AND OFFICERS OF HOLDING COMPANY. Immediately following the
execution and delivery of this Agreement the directors and officers of Holding
Company shall be as set forth on Schedule 1.2 attached hereto. Each such officer
and director shall remain in office until his or her successors are elected.
1.3. ORGANIZATION OF CRA MERGER SUBSIDIARY. As promptly as practicable
following the execution of this Agreement, Holding Company shall cause CRA
Merger Corp., a corporation organized under the laws of the Commonwealth of
Massachusetts ("CRA Merger Sub") to be organized for the sole purpose of
effectuating the CRA Merger contemplated herein. The Articles of Organization
and By-laws of CRA Merger Sub are and at Closing shall be substantially in the
forms attached hereto as Exhibit B. The authorized capital stock of CRA Merger
Sub are and shall at Closing consist of 100 shares of common stock, par value
$.01 per share, all of which are and at Closing shall be owned by Holding
Company.
1.4. ACTIONS OF DIRECTORS AND OFFICERS. As promptly as practicable following
the execution of this Agreement, Holding Company shall cause (a) the directors
of CRA Merger Sub to ratify and approve the Merger Agreement (as defined in
Section 2.1) to be executed on behalf of the CRA Merger Sub, and (b) the
directors and officers of the CRA Merger Sub to take such steps as may be
necessary or appropriate to complete the organization of the CRA Merger Sub and
to approve the Merger Agreement (as defined in Section 2.1).
1.5. ACTIONS OF CRA AND OSI. CRA and OSI, as the holders of all of the
outstanding shares of capital stock of Holding Company, have ratified and
approved this Agreement, and Holding Company, as the sole shareholder of CRA
Merger Sub, has ratified and approved the Merger Agreement. CRA, OSI and Holding
Company agree that they shall not rescind, revoke, condition or impair any such
ratification or approval. CRA and OSI shall cause Holding Company and CRA Merger
Sub to perform their respective obligations under this Agreement and the Merger
Agreements.
ARTICLE 2
THE MERGERS; CLOSING
2.1. THE MERGERS. Pursuant to Plans of Merger substantially in the forms
attached as Exhibits C and D (sometimes hereinafter referred to individually as
the "CRA Merger Agreement" and the "OSI Merger Agreement", respectively, and
collectively as the "Merger Agreements"), upon the terms and subject to the
conditions set forth in this Agreement and in the Merger Agreements:
(a) CRA Merger Sub shall be merged with and into CRA (the "CRA Merger")
in accordance with the applicable provisions of the laws of the Commonwealth
of Massachusetts. CRA shall be the surviving corporation in the CRA Merger
and shall continue its corporate existence under the laws of the
Commonwealth of Massachusetts. As a result of the CRA Merger, CRA shall
become a wholly owned Subsidiary of Holding Company. The effects and
consequences of the CRA Merger shall be as set forth in the CRA Merger
Agreement and as provided by the laws of the Commonwealth of Massachusetts.
(b) OSI will be merged with and into Holding Company (the "OSI Merger"),
in accordance with the applicable provisions of the laws of the State of
Delaware. Holding Company shall be the surviving corporation in the OSI
Merger and shall continue its corporate existence under the laws of the
State of Delaware. The effects and consequences of the OSI Merger shall be
as set forth in the OSI Merger Agreement and as provided by the laws of the
State of Delaware. The term "Mergers" shall mean the CRA Merger and the OSI
Merger.
(c) The term "Effective Time" shall mean the time and date which is (A)
the later of (i) the date and time of the filing of the articles of merger
relating to the CRA Merger with the Secretary of State of the Commonwealth
of Massachusetts (or such other date and time as may be specified in such
certificate as may be permitted by law) and (ii) the date and time of the
filing of a certificate of merger
A-2
<PAGE>
with the Secretary of State of the State of Delaware with respect to the OSI
Merger (or such other date and time as may be specified in such certificate
as may be permitted by law) or (B) such other time and date as CRA and OSI
may agree.
2.2. THE CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement and the Merger
Agreements (the "Closing") shall take place (a) at the offices of Hutchins,
Wheeler & Dittmar, A Professional Corporation, Boston, Massachusetts at 10:00
a.m., local time, on the third business day following the day on which the last
to be fulfilled or waived of the conditions set forth in Article 8 shall be
fulfilled or waived in accordance herewith or (b) at such other time, date or
place as CRA and OSI may agree. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
ARTICLE 3
DIRECTORS AND OFFICERS OF CRA MERGER SUB
AND SURVIVING CORPORATIONS
3.1. DIRECTORS. The persons listed on Schedule 3.1(a) shall be the directors
of the surviving corporation of the CRA Merger as of the Effective Time and
until their successors are duly appointed or elected in accordance with
applicable law. The directors of the surviving corporation of the OSI Merger as
of the Effective Time shall include four (4) individuals appointed by CRA and
four (4) individuals appointed by OSI. The persons listed on Schedule 3.1(b)
shall be the directors of OccuCenters, Inc. ("OCI"), a wholly owned subsidiary
of Holding Company, as of the Effective Time and until their successors are duly
appointed or elected in accordance with applicable law. The Board of Directors
of the surviving corporation of the OSI Merger as of the Effective Time shall
establish the following committees: (i) a Compensation Committee consisting of
three (3) members including one independent director; (ii) an Audit Committee
consisting of two (2) members; and (iii) a Nominating Committee consisting of
two (2) members.
3.2. OFFICERS. The persons listed on Schedules 3.2(a) and 3.2(b) shall be
the officers of the surviving corporations of the CRA Merger and the OSI Merger,
respectively, as of the Effective Time and until their successors are duly
appointed or elected in accordance with applicable law. The persons listed on
Schedule 3.2(c) shall be the officers of OCI as of the Effective Time and until
their successors are duly appointed or elected in accordance with applicable
law.
ARTICLE 4
EFFECT OF THE MERGERS ON SECURITIES OF
CRA, OSI, HOLDING COMPANY AND THE
CRA MERGER SUB
4.1. CRA MERGER SUB STOCK. At the Effective Time, each share of the common
stock of CRA Merger Sub outstanding immediately prior to the Effective Time
shall be converted into and shall become one share of common stock of the
surviving corporation of the CRA Merger.
4.2. HOLDING COMPANY CAPITAL STOCK. At the Effective Time, each share of the
capital stock of Holding Company issued and outstanding immediately prior to the
Effective Time shall be canceled and retired without payment of any
consideration therefor.
4.3. CONVERSION OF CRA STOCK. (a) Subject to Section 4.3(b), at the
Effective Time, each share of common stock, par value $0.01 per share, of CRA
("CRA Common Stock") issued and outstanding at the Effective Time shall be
converted into the right to receive 1.786 (the "CRA Ratio") shares of Holding
Company Common Stock, payable upon the surrender of the certificates formerly
representing CRA Common Stock pursuant to Section 4.6.
A-3
<PAGE>
(b) As a result of the CRA Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of CRA Common Stock shall cease
to be outstanding and shall be canceled and retired and shall cease to exist,
and each holder of shares of CRA Common Stock shall thereafter cease to have any
rights with respect to such shares of CRA Common Stock, except the right to
receive the number of shares of Holding Company Common Stock determined in
accordance with Section 4.3(a), cash without interest, for fractional shares of
Holding Company Common Stock in accordance with Section 4.5 and dividends or
other distributions, if any, in accordance with Section 4.5 upon the surrender
of a certificate representing such shares of CRA Common Stock (a "CRA
Certificate").
(c) At the Effective Time, each share of CRA Common Stock which is held in
the treasury of CRA immediately prior to the Effective Time shall, by virtue of
the Mergers, cease to be outstanding and shall be canceled and retired without
payment of any consideration therefor.
(d) Notwithstanding anything in this Section 4.3 to the contrary, shares of
CRA Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who have not voted such shares
in favor of the CRA Merger and who shall have properly exercised their rights of
appraisal for such shares in the manner provided by the Massachusetts General
Business Corporation Law, Chapter 156B (the "MBCL") (the "CRA Dissenting
Shares"), shall not be converted into the right to receive the Holding Company
Common Stock, unless and until such holder shall have failed to perfect or shall
have effectively withdrawn or lost his right to appraisal and payment, as the
case may be. If such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, his shares shall thereupon be deemed
to have been converted into, at the Effective Time, the right to receive the
Holding Company Common Stock plus cash in accordance with Section 4.5 and
Section 4.6. CRA shall give OSI prompt notice of any CRA Dissenting Shares (and
shall also give OSI prompt notice of any withdrawals of such demands for
appraisal rights) and Holding Company shall have the right to direct all
negotiations and proceedings with respect to any such demands. Neither CRA nor
the surviving corporation of the CRA Merger shall, except with the prior written
consent of Holding Company, voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for appraisal rights.
(e) At the Effective Time, each outstanding option or right to purchase
shares of CRA Common Stock (a "CRA Option") shall be assumed by Holding Company
in such manner that it is converted into an option to purchase shares of Holding
Company Common Stock, as provided below. Following the Effective Time, each such
CRA Option shall be exercisable upon the same terms and conditions as then are
applicable to such CRA Option, except that (i) each such CRA Option shall be
exercisable for that number of shares of Holding Company Common Stock equal to
the product of (x) the number of shares of CRA Common Stock for which such CRA
Option was exercisable and (y) the CRA Ratio and (ii) the exercise price of such
option shall be equal to the exercise price of such option as of the date hereof
divided by the CRA Ratio. It is the intention of the parties that, to the extent
that any such CRA Option constituted an "incentive stock option" (within the
meaning of Section 422 of the Code) immediately prior to the Effective Time,
such option continue to qualify as an incentive stock option to the maximum
extent permitted by Section 422 of the Code, and that the assumption of CRA
Stock Options provided by this Section 4.3(e) satisfy the conditions of Section
424(a) of the Code. From and after the date of this Agreement, no additional
options to purchase shares of CRA Common Stock shall be granted under the CRA
1994 Time Accelerated Restricted Stock Option Plan, the CRA 1994 Non-Qualified
Stock Option Plan for Non-Employee Directors, the CRA 1997 Stock Option Plan or
any other CRA option, stock or other benefit plan or agreement (collectively,
the "CRA Stock Option Plans") (other than (i) the grant of options to
individuals other than executive officers of CRA to acquire up to 15,000 shares
of CRA Common Stock pursuant to the terms of the CRA Stock Option Plans at an
exercise price of not less than the fair market value of the CRA Common Stock on
the date of grant and (ii) the option granted to OSI on the date hereof).
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4.4. CONVERSION OF OSI COMMON STOCK. (a) Subject to Sections 4.4(c) and
4.4(d), at the Effective Time each issued and outstanding share of Common Stock,
$.01 par value of OSI (the "OSI Common Stock"), shall be converted into the
right to receive one (the "OSI Ratio") share of Holding Company Common Stock,
payable upon the surrender of the certificates formerly representing OSI Common
Stock pursuant to Section 4.6.
(b) As a result of the OSI Merger and without any action on the part of the
holders thereof, at the Effective Time all shares of OSI Common Stock shall
cease to be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of shares of OSI Common Stock shall thereafter cease to
have any rights with respect to such shares of OSI Common Stock, except the
right to receive the number of shares of Holding Company Common Stock determined
in accordance with Section 4.4(a), cash, without interest, for fractional shares
of Holding Company Common Stock in accordance with Section 4.5 and dividends or
other distributions, if any, in accordance with Section 4.5 upon the surrender
of a certificate representing such shares of OSI Common Stock (an "OSI
Certificate").
(c) Notwithstanding anything contained in this Section 4.4 to the contrary,
each share of OSI Common Stock issued and held in OSI's treasury immediately
prior to the Effective Time shall, by virtue of the OSI Merger, cease to be
outstanding and shall be canceled and retired without payment of any
consideration therefor.
(d) At the Effective Time, each outstanding option or right to purchase
shares of OSI Common Stock (a "OSI Option") shall be assumed by Holding Company
in such manner that it is converted into an option to purchase shares of Holding
Company Common Stock, as provided below. Following the Effective Time, each such
OSI Option shall be exercisable upon the same terms and conditions as then are
applicable to such OSI Option, except that (i) each such OSI Option shall be
exercisable for that number of shares of Holding Company Common Stock equal to
the product of (x) the number of shares of OSI Common Stock for which such OSI
Option was exercisable and (y) the OSI Ratio and (ii) the exercise price of such
option shall be equal to the exercise price of such option as of the date hereof
divided by the OSI Ratio. It is the intention of the parties that, to the extent
that any such OSI Option constituted an "incentive stock option" (within the
meaning of Section 422 of the Code) immediately prior to the Effective Time,
such option continue to qualify as an incentive stock option to the maximum
extent permitted by Section 422 of the Code, and that the assumption of OSI
Options provided by this Section 4.4(d) satisfy the conditions of Section 424(a)
of the Code. From and after the date of this Agreement, no additional options to
purchase shares of OSI Common Stock shall be granted under the OSI 1995
Long-Term Incentive Plan, the First Amended and Restated OSI and its
Subsidiaries and Affiliates Stock Option and Restricted Stock Purchase Plan, the
currently existing stock option agreements of OSI not governed by such plans or
any other OSI option, stock or other benefit plan or agreement (collectively,
the "OSI Stock Option Plans") (other than (i) the grant of options to
individuals other than executive officers of OSI to acquire up to 15,000 shares
of OSI Common Stock pursuant to the terms of the OSI Stock Option Plans at an
exercise price of not less than fair market value of the OSI Common Stock on the
date of grant and (ii) the option granted to CRA on the date hereof).
4.5. FRACTIONAL SHARES, ETC. No certificate or scrip representing fractional
shares of Holding Company Common Stock shall be issued upon the surrender for
exchange of Certificates (as hereinafter defined) except pursuant to this
Section 4.5, no dividend or other distribution, stock split or interest shall
relate to any such fractional shares, and such fractional shares shall not
entitle the holder thereof to vote or to any rights of a security holder of
Holding Company. In lieu of any fractional shares, each holder of shares of
Converted Stock (as hereinafter defined) who would otherwise have been entitled
to a fraction of a share of Holding Company Common Stock upon surrender of
Certificates for exchange pursuant to this Article 4 will be paid an amount of
cash (without interest) equal to such holder's proportionate interest in the sum
of (i) the gross proceeds from the sale or sales by the Exchange Agent (as
hereinafter defined) in accordance with the provisions of this Section 4.5, on
behalf of all such holders of shares of Converted Stock, of the aggregate
fractional shares of Holding Company Common Stock issued pursuant to this
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Article 4 and (ii) the aggregate dividends or other distributions that are
payable to holders of shares of Converted Stock with respect to such shares of
Holding Company Common Stock pursuant to Section 4.6(c) (such dividends and
distributions being herein called the "Fractional Dividends"). As soon as
practicable following the Effective Time, the Exchange Agent shall determine the
excess of (x) the number of full shares of Holding Company Common Stock
delivered to the Exchange Agent by Holding Company pursuant to Section 4.6(a)
over (y) the aggregate number of full shares of Holding Company Common Stock to
be distributed to the holders of Converted Stock pursuant to Section 4.3 (with
respect to CRA Common Stock) and Section 4.4 (with respect to OSI Common Stock)
(such excess being herein called the "Excess Securities") and the Exchange
Agent, as agent for the former holders of Converted Stock, shall sell the Excess
Securities at the prevailing prices on the Nasdaq National Market. The sale of
the Excess Securities by the Exchange Agent shall be executed on the Nasdaq
National Market through one or more member firms of the National Association of
Securities Dealers, Inc. Holding Company shall pay all commissions, transfer
taxes and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with such sale of
Excess Securities. Until the gross proceeds of such sale of Excess Securities
and the Fractional Dividends, if any, have been distributed to the former
holders of shares of Converted Stock, the Exchange Agent will hold such proceeds
and dividends in trust for such former holders.
4.6 EXCHANGE FUND EXCHANGE PROCEDURES, ETC. (a) At or prior to the Effective
Time, Holding Company shall deposit, or cause to be deposited, with a bank or
trust company designated by Holding Company (the "Exchange Agent"), for the
benefit of the holders of CRA Common Stock and OSI Common Stock which were
outstanding immediately prior to the Effective Time, for exchange in accordance
with this Section 4.6, through the Exchange Agent, (i) certificates evidencing a
number of shares of Holding Company Common Stock equal to the aggregate number
issuable to holders of CRA Common Stock pursuant to Section 4.3, together with
any dividend or distribution with respect thereto and (ii) certificates
evidencing a number of shares of Holding Company Common Stock equal to the
aggregate number issuable to holders of OSI Common Stock pursuant to Section
4.4, together with any dividend or distribution with respect thereto. The
certificates and cash deposited with the Exchange Agent in accordance with this
subsection 4.6(a) are hereinafter referred to as the "Exchange Fund." The
Exchange Agent shall, pursuant to irrevocable instructions, deliver Holding
Company Common Stock and cash, as described above, in exchange for surrendered
certificates representing CRA Common Stock and OSI Common Stock pursuant to the
terms of this Agreement out of the Exchange Fund.
(b) As soon as practicable after the Effective Time, Holding Company shall
cause the Exchange Agent to send to each record holder of a certificate or
certificates which, at the Effective Time, represent outstanding shares of CRA
Common Stock or OSI Common Stock (the "Certificates"), which holder's shares of
CRA Common Stock or OSI Common Stock were converted into the right to receive
shares of Holding Company Common Stock (the "Converted Stock") pursuant to
Section 4.3 and 4.4, respectively, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing the Converted Stock shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
contain such other provisions as Holding Company shall reasonably determine),
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Holding Company Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Holding Company Common Stock and cash in lieu of
fractional shares as contemplated by Section 4.5, if any, which such holder has
the right to receive pursuant to the provisions of this Article 4, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Converted Stock which is not registered in the transfer
records of the Company, a certificate evidencing the proper number of shares of
Holding Company Common Stock may be issued to the transferee if the certificate
evidencing the Converted Stock, as the case may be, shall be surrendered to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by
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evidence that any applicable stock transfer taxes have been paid. Until
surrender for exchange in accordance with the provisions of Section 4.6 of this
Agreement, each Certificate theretofore representing shares of Converted Stock
(other than any CRA Dissenting Shares) shall from and after the Effective Time
represent for all purposes only the right to receive the number of shares of
Holding Company Common Stock and cash in lieu of fractional shares, if any, as
set forth in this Agreement. If any holder of Converted Stock shall be unable to
surrender such holder's Certificates because such Certificates have been lost or
destroyed, such holder may deliver in lieu thereof an affidavit and indemnity
bond in the form and substance and with surety reasonably satisfactory to
Holding Company.
(c) No dividends or other distributions with respect to Holding Company
Common Stock declared or made after the Effective Time with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the right to receive shares of Holding Company Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 4.5, until the holder of such
Certificate shall surrender such Certificate in accordance herewith. Subject to
the effect of applicable laws, following the surrender of any such Certificate,
there shall be paid to the holder thereof, without interest: (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
Holding Company Common Stock to which such holder is entitled pursuant to
Section 4.5 and the amount of dividends or distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Holding Company Common Stock, if any; and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such whole shares of Holding Company Common
Stock, if any.
(d) All shares of Holding Company Common Stock issued upon surrender for
exchange of shares of Converted Stock in accordance with the terms hereof
(including any cash paid pursuant to Section 4.5) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Converted
Stock.
(e) Any portion of the Exchange Fund that remains unclaimed by the former
holders of Converted Stock on the first anniversary of the Closing Date shall be
delivered to Holding Company upon demand, and any former holders of Converted
Stock who have not theretofore complied with this Article 4 shall thereafter
look only to Holding Company for the number of shares of Holding Company Common
Stock and cash in lieu of fractional shares, if any, as set forth in this
Agreement. Holding Company shall not be liable to any former holder of Converted
Stock for any Holding Company Common Stock or cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(f) Holding Company (or any affiliate thereof) shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any former holder of Converted Stock such amounts as Holding Company (or any
affiliate thereof) is required to deduct and withhold with respect to the making
of such payment under the Code or any other provision of federal, state, local
or foreign tax law and Holding Company agrees to remit to the proper taxing
authority such amounts so withheld. To the extent that amounts are so withheld
by Holding Company, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the former holder of Converted Stock in
respect of which such deduction and withholding was made by Holding Company.
Holding Company shall, within a reasonable period of time prior to withholding
any such amount, inform CRA and OSI of its intent to deduct and withhold any
amounts pursuant to this Section 4.6(d) and will cooperate with CRA and OSI in
taking commercially reasonable actions necessary to avoid and/or minimize the
amounts required to be deducted and withheld from the consideration payable
pursuant to this Agreement. Holding Company agrees to promptly pay to the former
holders of Converted Stock any refunded amounts received by Holding Company that
are attributable to such withholding.
(g) Certificates surrendered for exchange by any person constituting an
"affiliate" of CRA or OSI for purposes of Rule 145(c) under the Securities Act
of 1933, as amended (the "Securities Act"), shall not be exchanged until Holding
Company has received a written agreement from such person as provided in Section
7.10.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF OSI
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to CRA (the "OSI Disclosure Letter") or in OSI Reports (as
defined below), OSI represents and warrants to CRA as of the date of this
Agreement as follows:
5.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. OSI is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. OSI is duly licensed or qualified to do business
as a foreign corporation and is in good standing under the laws of any other
state of the United States in which the character of the properties owned or
leased by it or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified or to be in
good standing would not have a material adverse effect on the business, results
of operations, financial condition or prospects of OSI and its Subsidiaries
taken as a whole (an "OSI Material Adverse Effect"). OSI has all requisite
corporate power and authority to own, operate and lease its properties and carry
on its business as now conducted. Each of OSI's Significant Subsidiaries (as
defined in Section 10.14 hereof) is a corporation, partnership or limited
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, has the
corporate, partnership or other similar power and authority to own its
properties and to carry on its business as it is now being conducted, and is
duly qualified to do business and is in good standing in each jurisdiction in
which the ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing would not have an OSI Material Adverse Effect. The
copies of OSI's Certificate of Incorporation and Bylaws previously made
available to CRA are true and correct.
5.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. OSI has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. Subject only to the
approval of this Agreement and the transactions contemplated hereby by the
holders of a majority of the outstanding shares of OSI Common Stock, the
consummation by OSI of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of OSI, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
5.3. CAPITALIZATION. The authorized capital stock of OSI consists of
50,000,000 shares of OSI Common Stock and 20,000,000 shares of preferred stock,
no par value (the "OSI Preferred Stock"). As of March 31, 1997, (a) 21,579,898
shares of OSI Common Stock were issued and outstanding, (b) no shares of
preferred stock were issued and outstanding, (c) 2,518,094 shares of OSI Common
Stock were reserved for issuance pursuant to the OSI Stock Option Plans, (d)
there were no shares of OSI Common Stock held in OSI's treasury, (e) 200,000
shares of OSI Common Stock were reserved for issuance pursuant to certain
warrants issued by OSI, (f) 3,291,246 shares of OSI Common Stock were reserved
for issuance upon conversion of the 6% Convertible Subordinated Notes due 2001
of OSI in the aggregate principal amount of $97,750,000 (the "OSI Convertible
Notes") and (g) 26,482 shares of OSI Common Stock were reserved for issuance
upon conversion of that certain 6% Convertible Promissory Note dated October 1,
1993 issued by OSI to John Anderson, D.O. in connection with the Stock Purchase
Agreement dated October 1, 1993 between an OSI Subsidiary and John Anderson,
D.O. (the "Anderson Note"). Since March 31, 1997, (i) no additional shares of
capital stock of OSI have been issued, except pursuant to the terms existing on
the date hereof of the OSI Stock Option Plans and (ii) no options or other
rights to acquire shares of OSI's capital stock have been granted (other than
(i) options that have been or may be granted after March 31, 1997 to individuals
other than executive officers of OSI to acquire up to 15,000 shares of OSI
Common
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Stock pursuant to the terms of the OSI Stock Option Plans at an exercise price
of not less than the fair market value of the OSI Common Stock on the date of
grant and (ii) the option granted to CRA on the date hereof). Other than the OSI
Convertible Notes and the Anderson Note, OSI has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of OSI on any matter. All issued and
outstanding shares of OSI Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. There are not at the
date of this Agreement any existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate OSI or any of its Subsidiaries to issue, transfer or sell any shares of
capital stock of OSI or any of its Subsidiaries (other than under the OSI Stock
Option Plans, the OSI Convertible Notes and the Anderson Note).
5.4. SUBSIDIARIES. OSI owns directly or indirectly each of the outstanding
shares of capital stock (or other ownership interests having by their terms
ordinary voting power to elect a majority of directors or others performing
similar functions with respect to such OSI Significant Subsidiary) of each of
OSI's Significant Subsidiaries. Each of the outstanding shares of capital stock
of each of OSI's Significant Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and is owned, directly or indirectly, by OSI. Each
of the outstanding shares of capital stock of each Significant Subsidiary of OSI
is owned, directly or indirectly, by OSI free and clear of all liens, pledges,
security interests, claims or other encumbrances other than liens in favor of
Creditanstalt-Bankverein, as agent, under OSI's existing Loan and Security
Agreement therewith and liens imposed by local law which are not material. The
following information for each Significant Subsidiary of OSI has been previously
provided to CRA, if applicable: (i) its name and jurisdiction of incorporation
or organization; (ii) its authorized capital stock or share capital; and (iii)
the number of issued and outstanding shares of capital stock or share capital.
All of the Subsidiaries of OSI other than the Significant Subsidiaries, when
taken together, do not in the aggregate constitute a Significant Subsidiary of
OSI.
5.5. OTHER INTERESTS. Except for interests in OSI Subsidiaries, neither
OSI nor any OSI Significant Subsidiary owns directly or indirectly any interest
or investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity (other than investments of less than
$1,000,000 in the aggregate).
5.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and
delivery of this Agreement by OSI do not, and the consummation by OSI of the
transactions contemplated hereby will not, (i) conflict with or violate the
certificate of incorporation or by-laws or equivalent organizational documents
of (x) OSI or (y) any OSI Significant Subsidiary, (ii) subject to making the
filings and obtaining the approvals identified in Section 5.6(b) hereof,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to OSI or any OSI Subsidiary or by which any property or asset of OSI
or any OSI Subsidiary is bound or affected, or (iii) subject to making the
filings and obtaining the approvals identified in Section 5.6(b) hereof, result
in any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, result in the loss of a material
benefit under, or give to others any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of OSI or any OSI Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which OSI or any OSI Subsidiary is a party or by which OSI or any
OSI Subsidiary or any property or asset of OSI or any OSI Subsidiary is bound or
affected, except, in the case of clauses (i)(y), (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not
prevent or delay consummation of any of the transactions contemplated hereby in
any material respect, or otherwise prevent OSI from performing its obligations
under this Agreement in any material respect, and would not, individually or in
the aggregate, have an OSI Material Adverse Effect. The execution and delivery
of this Agreement by OSI do not, and the consummation by OSI of the transactions
contemplated hereby will not, result in any material breach
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of or constitute a material default (or an event which with notice or lapse of
time or both would become a material default) under, result in the loss of a
material benefit under, or give to others any right of purchase or sale, or any
right of termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of OSI or any OSI Subsidiary pursuant to, any Material
Contract to which OSI or any OSI Subsidiary is a party or by which OSI or any
OSI Subsidiary or any property or asset of OSI or any OSI Subsidiary is bound or
affected. For the purposes hereof, "Material Contract", as such term relates to
OSI, shall mean any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation that is required to
be listed as an Exhibit to OSI's Form 10-K filed with the SEC (as hereinafter
defined) with respect to its year ended December 31, 1996.
(b) The execution and delivery of this Agreement by OSI do not, and the
performance of this Agreement and the consummation by OSI of the transactions
contemplated hereby will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign (each a "Governmental Entity"), except (i) for
(A) applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), state securities or "blue sky" laws ("Blue Sky Laws") and
state takeover laws, (B) the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), (C) filing and recordation of
appropriate merger and similar documents as required by Delaware law and
Massachusetts law and (D) applicable requirements, if any, of the Code and
state, local and foreign tax laws, and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of any of the
transactions contemplated hereby in any material respect, or otherwise prevent
OSI from performing its obligations under this Agreement in any material
respect, and would not, individually or in the aggregate, have an OSI Material
Adverse Effect.
5.7. COMPLIANCE. Neither OSI nor any OSI Subsidiary is in conflict with,
or in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to OSI or any OSI Subsidiary or by which any property or asset
of OSI or any OSI Subsidiary is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which OSI or any OSI Subsidiary is a party or
by which OSI or any OSI Subsidiary or any property or asset of OSI or any OSI
Subsidiary is bound or affected, in each case except for any such conflicts,
defaults or violations that would not, individually or in the aggregate, have an
OSI Material Adverse Effect. OSI and its Subsidiaries have obtained all
licenses, permits and other authorizations and have taken all actions required
by applicable law or governmental regulations in connection with their business
as now conducted, where the failure to obtain any such item or to take any such
action would have, individually or in the aggregate, an OSI Material Adverse
Effect.
5.8. SEC DOCUMENTS. (a) OSI has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission ("SEC")
since May 8, 1995 (collectively, the "OSI Reports"). As of their respective
dates, the OSI Reports and any such reports, forms and other documents filed by
OSI with the SEC after the date of this Agreement (i) complied, or will comply,
as to form in all material respects with the applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations thereunder and
(ii) did not, or will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. The representation in clause (ii) of the preceding
sentence shall not apply to any misstatement or omission in any OSI Report filed
prior to the date of this Agreement which was superseded by a subsequent OSI
Report filed prior to the date of this Agreement. No OSI Subsidiary is required
to file any report, form or other document with the SEC.
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(b) Each of the consolidated balance sheets of OSI included in or
incorporated by reference into OSI Reports (including the related notes and
schedules) fairly presents the consolidated financial position of OSI and OSI
Subsidiaries as of its date, and each of the consolidated statements of income,
retained earnings and cash flows of OSI included in or incorporated by reference
into OSI Reports (including any related notes and schedules) fairly presents the
results of operations, retained earnings or cash flows, as the case may be, of
OSI and the OSI Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
not be material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein. Neither OSI nor any of the OSI Subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of OSI or in the notes thereto, prepared in
accordance with generally accepted accounting principles consistently applied,
except for (i) liabilities or obligations that were so reserved on, or reflected
in (including the notes to), the consolidated balance sheet of OSI as of
December 31, 1996; (ii) liabilities or obligations arising in the ordinary
course of business since December 31, 1996 and (iii) liabilities or obligations
which would not, individually or in the aggregate, have an OSI Material Adverse
Effect.
5.9. LITIGATION. There are no actions, suits or proceedings pending
against OSI or the OSI Subsidiaries or, to the actual knowledge of the executive
officers of OSI, threatened against OSI or the OSI Subsidiaries, at law or in
equity, or before or by any federal or state commission, board, bureau, agency
or instrumentality, that are reasonably likely to have an OSI Material Adverse
Effect.
5.10. ABSENCE OF CERTAIN CHANGES. Except as specifically contemplated by
this Agreement, since December 31, 1996, there has not been (i) any OSI Material
Adverse Effect; (ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to its capital stock; or (iii) any material
change in its accounting principles, practices or methods.
5.11. TAXES. (a) OSI and each of the OSI Subsidiaries has filed all
material tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, and all tax returns and reports are complete and accurate
in all respects, except to the extent that such failures to file, have
extensions granted that remain in effect or be complete and accurate in all
respects, as applicable, individually or in the aggregate, would not have an OSI
Material Adverse Effect. OSI and each of the OSI Subsidiaries have paid (or OSI
has paid on its behalf) all taxes shown as due on such tax returns and reports.
The most recent financial statements contained in the OSI Reports reflect an
adequate reserve for all taxes payable by OSI and the OSI Subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements, and no deficiencies for any taxes have been proposed, asserted or
assessed against OSI or any OSI Subsidiary that are not adequately reserved for,
except for inadequately reserved taxes and inadequately reserved deficiencies
that would not, individually or in the aggregate, have an OSI Material Adverse
Effect. No requests for waivers of the time to assess any taxes against OSI or
any OSI Subsidiary have been granted or are pending, except for requests with
respect to such taxes that have been adequately reserved for in the most recent
financial statements contained in the OSI Reports, or, to the extent not
adequately reserved, the assessment of which would not, individually or in the
aggregate, have an OSI Material Adverse Effect.
(b) Neither OSI nor any OSI Subsidiary has taken any action or has any
knowledge of any fact or circumstance that is reasonably likely to prevent the
OSI Merger from qualifying as a reorganization governed by Section 368(a) of the
Code.
(c) As used herein, "taxes" shall include all Federal, state, local and
foreign income, franchise, property, sales, use, excise and other taxes, fees,
assessments or charges of any kind or nature whatsoever imposed by any
governmental authority, including obligations for withholding taxes from
payments due or made to any other person and any interest, penalties or
additions to tax.
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5.12 EMPLOYEE BENEFIT PLANS.
(a) The OSI Disclosure Letter lists each of the following which is
sponsored, maintained, or contributed to by OSI or any OSI Subsidiary for
the benefit of any current or former employees, officers, or directors of
OSI or any OSI Subsidiary or for which OSI or any OSI Subsidiary has any
liability or contingent liability;
(i) each "employee benefit plan," as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (each an "OSI ERISA Plan");
(ii) each employment, severance, termination, retention,
stay-with-bonus, or change-of-control agreement or understanding (each an
"OSI Employment Agreement"), except that the OSI Disclosure Letter only
lists OSI Employment Agreements with OSI's executive officers; and
(iii) each personnel policy, stock option or purchase plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan or
arrangement, vacation policy, deferred compensation agreement or
arrangement, executive compensation or supplemental income arrangement, and
each other employee benefit plan, agreement, arrangement, program, practice
or understanding (each, an "OSI Benefit Program"), except that the OSI
Disclosure Letter only lists OSI Benefit Programs that are for the exclusive
benefit of one or more of OSI's executive officers. The OSI ERISA Plans, the
OSI Employment Agreements and the OSI Benefit Programs are sometimes
collectively hereinafter referred to as the "OSI Plans".
(b) True, correct and complete copies of each of the OSI ERISA Plans,
and related trusts, if applicable, including all amendments thereto, have
been furnished to CRA. There has also been furnished to CRA, with respect to
each OSI ERISA Plan required to file such report and description, the most
recent report on Form 5500 and the summary plan description. True, correct
and complete copies or descriptions of all OSI Benefit Programs and
Employment Agreements that are for the exclusive benefit of, or are with,
OSI's executive officers have also been furnished to CRA. Each of the OSI
ERISA Plans intended to be qualified under Section 401(a) of the Code
satisfies the requirements of such section, and has received a favorable
determination letter from the Internal Revenue Service regarding such
qualified status (a copy of which has been provided to CRA) and has not,
since receipt of the most favorable determination letter, been amended or,
to the knowledge of OSI, operated in a way which would adversely affect such
qualified status.
(c) Each of the OSI Plans is in compliance in all material respects with
all applicable requirements of law, including ERISA and the Code, and all
reports and disclosures relating to the OSI Plans required to be filed with
or furnished to governmental agencies, OSI Plan participants or OSI Plan
beneficiaries have been filed or furnished in accordance with applicable law
(except where the failure to file or furnish would not have an OSI Material
Adverse Effect), and there are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of OSI, threatened
against, or with respect to, any of the OSI Plans or their assets.
(d) All contributions required to be made to the OSI Plans pursuant to
their terms or provisions have been timely made (except where the failure to
make such contributions would not have an OSI Material Adverse Effect).
(e) None of the OSI Plans is a "defined benefit pension plan" within the
meaning of section 3(35) of ERISA or is a "multiemployer plan" (within the
meaning of section 3(37) of ERISA) without regard to whether any such plans
are subject to Title IV of ERISA.
(f) None of OSI or any OSI Subsidiary has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments, that would not be deductible by reason of
section 280G of the Code or that would be subject to an excise tax under
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section 4999 of the Code or, except as previously disclosed in writing to
CRA, that would not be deductible by reason of section 162 of the Code.
(g) Except as disclosed in the OSI Disclosure Letter, the execution of,
and performance of the transactions contemplated in this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any OSI Plan or any trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligations to fund benefits with respect to any current or former employee,
officer, or director.
(h) Other than coverage mandated by applicable statute, none of OSI or
any OSI Subsidiary is under any obligation or liability to provide medical
benefits or death benefits (including through insurance) to retirees or to
former employees, officers, or directors of OSI or any OSI Subsidiary.
5.13. LABOR MATTERS. There is no labor strike, labor dispute, work
slowdown, stoppage or lockout actually pending, or to the knowledge of the
executive officers of OSI, threatened against or affecting OSI or any OSI
Subsidiary, except as would not, individually or in the aggregate, have an OSI
Material Adverse Effect. There is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of the executive officers of OSI,
threatened against OSI or its Subsidiaries relating to their business, except
for any such proceeding which would not have an OSI Material Adverse Effect.
5.14. NO BROKERS. OSI has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of OSI,
Holding Company or CRA to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that OSI has retained Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") as its financial advisor, the arrangements with which have been
disclosed in writing to CRA prior to the date hereof. Other than the foregoing
arrangements, OSI is not aware of any claim for payment of any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
5.15. OPINION OF FINANCIAL ADVISOR. OSI has received the opinion of DLJ to
the effect that, as of the date hereof, the Exchange Ratio is fair to the
holders of OSI Common Stock from a financial point of view. As used herein, the
"Exchange Ratio" means the quotient of the OSI Ratio divided by the CRA Ratio.
5.16 PRELIMINARY POOLING LETTER. OSI has received an opinion, dated as of
the date of this Agreement, from its independent accountants, Arthur Andersen,
L.L.P., to the effect that if the business combination to be effected by the
Mergers were to occur on the date hereof they would be properly accounted for as
a pooling-of-interests. OSI is aware of no reasons why the transactions
contemplated hereby would not be properly accounted for as a
pooling-of-interests.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CRA
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to OSI (the "CRA Disclosure Letter") or in CRA Reports (as
defined below), CRA represents and warrants to OSI as of the date of this
Agreement as follows:
6.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. CRA is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. CRA is duly licensed or qualified to do business
as a foreign corporation and is in good standing under the laws of any other
state of the United States in which the character of the properties owned or
leased by it or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified or
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to be in good standing would not have a material adverse effect on the business,
results of operations, financial condition or prospects of CRA and its
Subsidiaries taken as a whole (a "CRA Material Adverse Effect"). CRA has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted. Each of CRA's Significant
Subsidiaries (as defined in Section 10.14 hereof) is a corporation or
partnership duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has the corporate or
partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good standing
would not have a CRA Material Adverse Effect. The copies of CRA's Articles of
Organization and Bylaws previously made available to OSI are true and correct.
6.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. CRA has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. Subject only to the
approval of this Agreement and the transactions contemplated hereby by the
holders of two-thirds of the outstanding shares of CRA Common Stock, the
consummation by CRA of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of CRA, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
6.3. CAPITALIZATION. The authorized capital stock of CRA consists of
40,000,000 shares of CRA Common Stock and 1,000,000 shares of preferred stock,
$.01 par value (the "CRA Preferred Stock"). As of March 31, 1997, (a) 8,961,985
shares of CRA Common Stock were issued and outstanding, (b) no shares of
preferred stock were issued and outstanding, (c) 1,070,000 shares of CRA Common
Stock were reserved for issuance pursuant to CRA Stock Option Plans and (d)
there were no shares of CRA Common Stock held in CRA's treasury. Since such
date, (i) no additional shares of capital stock of CRA have been issued, except
pursuant to the terms existing on the date hereof of the CRA Stock Option Plans
and (ii) no options or other rights to acquire shares of CRA's capital stock
have been granted (other than (i) options that have been or may be granted after
March 31, 1997 to individuals other than to executive officers of CRA to acquire
up to 15,000 shares of CRA Common Stock pursuant to the terms of the CRA Stock
Option Plans at an exercise price of not less than the fair market value of the
CRA Common Stock on the date of grant and (ii) the option granted to OSI on the
date hereof). CRA has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of CRA on any matter. All issued and outstanding shares of CRA
Common Stock are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. There are not at the date of this Agreement any
existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements or commitments which obligate CRA or any of its
Subsidiaries to issue, transfer or sell any shares of capital stock of CRA or
any of its Subsidiaries (other than under the CRA Stock Option Plans).
6.4. SUBSIDIARIES. CRA owns directly or indirectly each of the outstanding
shares of capital stock (or other ownership interests having by their terms
ordinary voting power to elect a majority of directors or others performing
similar functions with respect to such CRA Significant Subsidiary) of each of
CRA's Significant Subsidiaries. Each of the Outstanding shares of capital stock
of each of CRA's Significant Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and is owned, directly or indirectly, by CRA. Each
of the outstanding shares of capital stock of each Significant Subsidiary of CRA
is owned, directly or indirectly, by CRA free and clear of all liens, pledges,
security interests, claims or other encumbrances other than liens imposed by
local law which are not material. The following information for each Significant
Subsidiary of CRA has been previously provided to OSI, if applicable: (i) its
name and jurisdiction of incorporation or organization; (ii) its authorized
capital stock or share capital; and (iii) the
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number of issued and outstanding shares of capital stock or share capital. All
of the Subsidiaries of CRA other than the Significant Subsidiaries, when taken
together, do not in the aggregate constitute a Significant Subsidiary of CRA.
6.5. OTHER INTERESTS. Except for interests in CRA Subsidiaries, neither
CRA nor any CRA Significant Subsidiary owns directly or indirectly any interest
or investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity (other than investments of less than
$1,000,000 in the aggregate).
6.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and
delivery of this Agreement by CRA do not, and the consummation by CRA of the
transactions contemplated hereby will not, (i) conflict with or violate the
certificate of incorporation or by-laws or equivalent organizational documents
of (x) CRA or (y) any CRA Significant Subsidiary, (ii) subject to making the
filings and obtaining the approvals identified in Section 6.6(b) hereof,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to CRA or any CRA Subsidiary or by which any property or asset of CRA
or any CRA Subsidiary is bound or affected, or (iii) subject to making the
filings and obtaining the approvals identified in Section 6.6(b) hereof, result
in any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, result in the loss of a material
benefit under, or give to others any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of CRA or any CRA Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which CRA or any CRA Subsidiary is a party or by which CRA or any
CRA Subsidiary or any property or asset of CRA or any CRA Subsidiary is bound or
affected, except, in the case of clauses (i)(y), (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not
prevent or delay consummation of any of the transactions contemplated hereby in
any material respect, or otherwise prevent CRA from performing its obligations
under this Agreement in any material respect, and would not, individually or in
the aggregate, have a CRA Material Adverse Effect. The execution and delivery of
this Agreement by CRA do not, and the consummation by CRA of the transactions
contemplated hereby will not, result in any material breach of or constitute a
material default (or an event which with notice or lapse of time or both would
become a material default) under, result in the loss of a material benefit
under, or give to others any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of CRA or any CRA Subsidiary pursuant to, any Material Contract to which CRA or
any CRA Subsidiary is a party or by which CRA or any CRA Subsidiary or any
property or asset of CRA or any CRA Subsidiary is bound or affected. For the
purposes hereof, "Material Contract", as such term relates to CRA, shall mean
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation that is required to be
listed as an Exhibit to CRA's Form 10-K filed with the SEC with respect to its
year ended December 31, 1996.
(b) The execution and delivery of this Agreement by CRA do not, and the
performance of this Agreement and the consummation by CRA of the transactions
contemplated hereby will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign (each a "Governmental Entity"), except (i) for
(A) applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), state securities or "blue sky" laws ("Blue Sky Laws") and
state takeover laws, (B) the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), (C) filing and recordation of
appropriate merger and similar documents as required by Delaware law and
Massachusetts law and (D) applicable requirements, if any, of the Code and
state, local and foreign tax laws, and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of any of the
transactions contemplated hereby in any material respect, or otherwise prevent
CRA from performing its obligations
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under this Agreement in any material respect, and would not, individually or in
the aggregate, have a CRA Material Adverse Effect.
6.7. COMPLIANCE. Neither CRA nor any CRA Subsidiary is in conflict with,
or in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to CRA or any CRA Subsidiary or by which any property or asset
of CRA or any CRA Subsidiary is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which CRA or any CRA Subsidiary is a party or
by which CRA or any CRA Subsidiary or any property or asset of CRA or any CRA
Subsidiary is bound or affected, in each case except for any such conflicts,
defaults or violations that would not, individually or in the aggregate, have a
CRA Material Adverse Effect. CRA and its Subsidiaries have obtained all
licenses, permits and other authorizations and have taken all actions required
by applicable law or governmental regulations in connection with their business
as now conducted, where the failure to obtain any such item or to take any such
action would have, individually or in the aggregate, a CRA Material Adverse
Effect.
6.8. SEC DOCUMENTS. (a) CRA has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission ("SEC")
since May 3, 1995 (collectively, the "CRA Reports"). As of their respective
dates, the CRA Reports and any such reports, forms and other documents filed by
CRA with the SEC after the date of this Agreement (i) complied, or will comply,
as to form in all material respects with the applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations thereunder and
(ii) did not, or will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. The representation in clause (ii) of the preceding
sentence shall not apply to any misstatement or omission in any CRA Report filed
prior to the date of this Agreement which was superseded by a subsequent CRA
Report filed prior to the date of this Agreement. No CRA Subsidiary is required
to file any report, form or other document with the SEC.
(b) Each of the consolidated balance sheets of CRA included in or
incorporated by reference into the CRA Reports (including the related notes and
schedules) fairly presents the consolidated financial position of CRA and the
CRA Subsidiaries as of its date, and each of the consolidated statements of
income, retained earnings and cash flows of CRA included in or incorporated by
reference into the CRA Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of CRA and the CRA Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. Neither CRA nor any
of the CRA Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of CRA or in the notes
thereto, prepared in accordance with generally accepted accounting principles
consistently applied, except for (i) liabilities or obligations that were so
reserved on, or reflected in (including the notes to), the consolidated balance
sheet of CRA as of December 31, 1996; (ii) liabilities or obligations arising in
the ordinary course of business since December 31, 1996 and (iii) liabilities or
obligations which would not, individually or in the aggregate, have a CRA
Material Adverse Effect.
6.9. LITIGATION. There are no actions, suits or proceedings pending
against CRA or the CRA Subsidiaries or, to the actual knowledge of the executive
officers of CRA, threatened against CRA or the CRA Subsidiaries, at law or in
equity, or before or by any federal or state commission, board, bureau, agency
or instrumentality, that are reasonably likely to have a CRA Material Adverse
Effect.
6.10. ABSENCE OF CERTAIN CHANGES. Except as specifically contemplated by
this Agreement, since December 31, 1996, there has not been (i) any CRA Material
Adverse Effect; (ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to its capital stock; or (iii) any material
change in its accounting principles, practices or methods.
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6.11. TAXES. (a) CRA and each of the CRA Subsidiaries has filed all
material tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, and all tax returns and reports are complete and accurate
in all respects, except to the extent that such failures to file, have
extensions granted that remain in effect or be complete and accurate in all
respects, as applicable, individually or in the aggregate, would not have a CRA
Material Adverse Effect. CRA and each of the CRA Subsidiaries have paid (or CRA
has paid on its behalf) all taxes shown as due on such tax returns and reports.
The most recent financial statements contained in the CRA Reports reflect an
adequate reserve for all taxes payable by CRA and the CRA Subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements, and no deficiencies for any taxes have been proposed, asserted or
assessed against CRA or any CRA Subsidiary that are not adequately reserved for,
except for inadequately reserved taxes and inadequately reserved deficiencies
that would not, individually or in the aggregate, have a CRA Material Adverse
Effect. No requests for waivers of the time to assess any taxes against CRA or
any CRA Subsidiary have been granted or are pending, except for requests with
respect to such taxes that have been adequately reserved for in the most recent
financial statements contained in the CRA Reports, or, to the extent not
adequately reserved, the assessment of which would not, individually or in the
aggregate, have a CRA Material Adverse Effect.
(b) Neither CRA nor any CRA Subsidiary has taken any action or has any
knowledge of any fact or circumstance that is reasonably likely to prevent the
CRA Merger from qualifying as a reorganization or an exchange governed by
Section 368(a) or Section 351(a) of the Code.
(c) As used herein, "taxes" shall include all Federal, state, local and
foreign income, franchise, property, sales, use, excise and other taxes, fees,
assessments or charges of any kind or nature whatsoever imposed by any
governmental authority, including obligations for withholding taxes from
payments due or made to any other person and any interest, penalties or
additions to tax.
6.12 EMPLOYEE BENEFIT PLANS.
(a) The CRA Disclosure Letter lists each of the following which is
sponsored, maintained, or contributed to by CRA or any CRA Subsidiary for
the benefit of any current or former employees, officers, or directors of
CRA or any CRA Subsidiary or for which CRA or any CRA Subsidiary has any
liability or contingent liability:
(i) each "employee benefit plan," as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (each a "CRA ERISA Plan");
(ii) each employment, severance, termination, retention,
stay-with-bonus, or change-of-control agreement or understanding (each a
"CRA Employment Agreement"), except that the CRA Disclosure Letter only
lists CRA Employment Agreements with CRA's executive officers; and
(iii) each personnel policy, stock option or purchase plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan or
arrangement, vacation policy, deferred compensation agreement or
arrangement, executive compensation or supplemental income arrangement, and
each other employee benefit plan, agreement, arrangement, program, practice
or understanding (each, a "CRA Benefit Program"), except that the CRA
Disclosure Letter only lists CRA Benefit Programs that are for the exclusive
benefit of one or more of CRA's executive officers. The CRA ERISA Plans, the
CRA Employment Agreements and the CRA Benefit Programs are sometimes
collectively hereinafter referred to as the "CRA Plans".
(b) True, correct and complete copies of each of the CRA ERISA Plans,
and related trusts, if applicable, including all amendments thereto, have
been furnished to OSI. There has also been furnished to OSI, with respect to
each CRA ERISA Plan required to file such report and description, the most
recent report on Form 5500 and the summary plan description. True, correct
and complete copies or descriptions of all CRA Benefit Programs and
Employment Agreements that are for the exclusive benefit of, or are with,
CRA's executive officers have also been furnished to OSI. Each of the
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CRA ERISA Plans intended to be qualified under Section 401(a) of the Code
satisfies the requirements of such section, and has received a favorable
determination letter from the Internal Revenue Service regarding such
qualified status (a copy of which has been provided to OSI) and has not,
since receipt of the most favorable determination letter, been amended or,
to the knowledge of CRA, operated in a way which would adversely affect such
qualified status.
(c) Each of the CRA Plans is in compliance in all material respects with
all applicable requirements of law, including ERISA and the Code, and all
reports and disclosures relating to the CRA Plans required to be filed with
or furnished to governmental agencies, CRA Plan participants or CRA Plan
beneficiaries have been filed or furnished in accordance with applicable law
(except where the failure to file or furnish would not have a CRA Material
Adverse Effect), and there are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of CRA, threatened
against, or with respect to, any of the CRA Plans or their assets.
(d) All contributions required to be made to the CRA Plans pursuant to
their terms or provisions have been timely made (except where the failure to
make such contributions would not have a CRA Material Adverse Effect).
(e) None of the CRA Plans is a "defined benefit pension plan" within the
meaning of section 3(35) of ERISA or is a "multiemployer plan" (within the
meaning of section 3(37) of ERISA) without regard to whether any such plans
are subject to Title IV of ERISA.
(f) None of CRA or any CRA Subsidiary has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments, that would not be deductible by reason of
section 280G of the Code or that would be subject to an excise tax under
section 4999 of the Code or, except as previously disclosed in writing to
OSI, that would not be deductible by reason of section 162 of the Code.
(g) Except as disclosed in the CRA Disclosure Letter, the execution of,
and performance of the transactions contemplated in this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any CRA Plan or any trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligations to fund benefits with respect to any current or former employee,
officer, or director.
(h) Other than coverage mandated by applicable statute, none of CRA or
any CRA Subsidiary is under any obligation or liability to provide medical
benefits or death benefits (including through insurance) to retirees or to
former employees, officers, or directors of CRA or any CRA Subsidiary.
6.13. LABOR MATTERS. There is no labor strike, labor dispute, work
slowdown, stoppage or lockout actually pending, or to the knowledge of the
executive officers of CRA, threatened against or affecting CRA or any CRA
Subsidiary, except as would not, individually or in the aggregate, have a CRA
Material Adverse Effect. There is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of the executive officers of CRA,
threatened against CRA or its Subsidiaries relating to their business, except
for any such proceeding which would not have a CRA Material Adverse Effect.
6.14. NO BROKERS. CRA has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of CRA,
Holding Company or OSI to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that CRA has retained Alex. Brown & Sons Incorporated as its financial
advisor, the arrangements with which have been disclosed in writing to OSI prior
to the date hereof. Other than the foregoing arrangements, CRA is not aware of
any claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
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6.15. OPINION OF FINANCIAL ADVISOR. CRA has received the opinion of Alex.
Brown & Sons Incorporated to the effect that, as of the date hereof, the CRA
Ratio to be applied to the exchange of CRA Common Stock in the CRA Merger and
the OSI Ratio to be applied to the exchange of OSI Common Stock in the OSI
Merger are fair to the holders of CRA Common Stock from a financial point of
view.
6.16 PRELIMINARY POOLING LETTER. CRA has received an opinion, dated as of
the date of this Agreement, from its independent accountants, Arthur Andersen,
L.L.P., to the effect that if the business combination to be effected by the
Mergers were to occur on the date hereof they would be properly accounted for as
a pooling-of-interests. CRA is aware of no reasons why the transactions
contemplated hereby would not be properly accounted for as a
pooling-of-interests.
ARTICLE 7
COVENANTS
7.1. ALTERNATIVE PROPOSALS.
(a) OSI Alternative Proposals.
(i) From and after the date hereof, OSI will not, and will not authorize
or (to the extent within its control) permit any of its officers, directors,
employees, agents, Affiliates and other representatives or those of any of
its Subsidiaries (collectively, "OSI Representatives") to, directly or
indirectly, solicit or encourage (including by way of providing information)
any prospective acquiror or the invitation or submission of any inquiries,
proposals or offers or any other efforts or attempts that constitute, or may
reasonably be expected to lead, to any OSI Acquisition Proposal (as
hereinafter defined) from any person or engage in any discussions or
negotiations with respect thereto or otherwise cooperate with or assist or
participate in, or facilitate any such proposal; provided, however, that,
notwithstanding any other provision of this Agreement (i) OSI's Board of
Directors may take and disclose to the stockholders of OSI a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act and (ii)
following receipt from a third party, without any solicitation, initiation
or encouragement, directly or indirectly, by OSI or any OSI Representative,
of a bona fide OSI Acquisition Proposal, (x) OSI may engage in discussions
or negotiations with such third party and may furnish such third party
information concerning it, and its business, properties and assets if such
third party executes a confidentiality agreement in reasonably customary
form and (y) the Board of Directors of OSI may withdraw, modify or not make
its recommendation referred to in Section 7.3 or terminate this Agreement in
accordance with Article 9, but in each case referred to in the foregoing
clauses (i) and (ii), only to the extent that OSI's Board of Directors shall
conclude in good faith based on the advice of OSI's outside counsel that
such action is necessary in order for OSI's Board of Directors to act in a
manner that is consistent with its fiduciary obligations under applicable
law.
(ii) OSI shall immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by OSI or any OSI Representatives with
respect to any OSI Acquisition Proposal existing on the date hereof.
(iii) Not less than one business day prior to taking any action referred
to in Section 7.1(a)(i), if OSI intends to participate in any such
discussions or negotiations or provide any such information to any such
third party, OSI shall give written notice to CRA of such intended action.
OSI will promptly notify CRA of such requests of such information or the
receipt of any OSI Acquisition Proposal, including the identity of the
person or group engaging in such discussions or negotiations, requesting
such information or making such OSI Acquisition Proposal, and the material
terms and conditions of any OSI Acquisition Proposal.
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(iv) As used in this Agreement, "OSI Acquisition Proposal" means any
proposal or offer made by a person or group of persons other than a proposal
or offer by CRA or any of its Affiliates (which person or group has, in the
good faith determination of the Board of Directors of OSI, the financial
ability to consummate such proposal or offer), for, or that could be
reasonably expected to lead to, a tender or exchange offer, a merger,
consolidation or other business combination involving such person or group
and OSI or any OSI Significant Subsidiaries or any proposal from any such
person or group to acquire in any manner a substantial equity interest in,
or any substantial portion of the assets of, OSI or any OSI Significant
Subsidiaries. (b) CRA Alternative Proposal.
(i) From and after the date hereof, CRA will not, and will not authorize
or (to the extent within its control) permit any of its officers, directors,
employees, agents, Affiliates and other representatives or those of any of
its Subsidiaries (collectively, "CRA Representatives") to, directly or
indirectly, solicit or encourage (including by way of providing information)
any prospective acquiror or the invitation or submission of any inquiries,
proposals or offers or any other efforts or attempts that constitute, or may
reasonably be expected to lead, to any CRA Acquisition Proposal (as
hereinafter defined) from any person or engage in any discussions or
negotiations with respect thereto or otherwise cooperate with or assist or
participate in, or facilitate any such proposal; provided, however, that,
notwithstanding any other provision of this Agreement (i) CRA's Board of
Directors may take and disclose to the stockholders of CRA a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act and (ii)
following receipt from a third party, without any solicitation, initiation
or encouragement, directly or indirectly, by CRA or any CRA Representative,
of a bona fide CRA Acquisition Proposal, (x) CRA may engage in discussions
or negotiations with such third party and may furnish such third party
information concerning it, and its business, properties and assets if such
third party executes a confidentiality agreement in reasonably customary
form and (y) the Board of Directors of CRA may withdraw, modify or not make
its recommendation referred to in Section 7.3 or terminate this Agreement in
accordance with Article 9, but in each case referred to in the foregoing
clauses (i) and (ii), only to the extent that CRA's Board of Directors shall
conclude in good faith based on the advice of CRA's outside counsel that
such action is necessary in order for CRA's Board of Directors to act in a
manner that is consistent with its fiduciary obligations under applicable
law.
(ii) CRA shall immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by CRA or any CRA Representatives with
respect to any CRA Acquisition Proposal existing on the date hereof.
(iii) Not less than one business day prior to taking any action referred
to in Section 7.1(b)(i), if CRA intends to participate in any such
discussions or negotiations or provide any such information to any such
third party, CRA shall give written notice to OSI of such intended action.
CRA will promptly notify OSI of such requests of such information or the
receipt of any CRA Acquisition Proposal, including the identity of the
person or group engaging in such discussions or negotiations, requesting
such information or making such CRA Acquisition Proposal, and the material
terms and conditions of any CRA Acquisition Proposal.
(iv) As used in this Agreement, "CRA Acquisition Proposal" means any
proposal or offer made by a person or group of persons other than a proposal
or offer by OSI or any of its Affiliates (which person or group has, in the
good faith determination of the Board of Directors of CRA, the financial
ability to consummate such proposal or offer), for, or that could be
reasonably expected to lead to, a tender or exchange offer, a merger,
consolidation or other business combination involving such person or group
and CRA or any CRA Significant Subsidiaries or any proposal from any such
person or group to acquire in any manner a substantial equity interest in,
or any substantial portion of the assets of, CRA or any CRA Significant
Subsidiaries.
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7.2. INTERIM OPERATIONS. (a) Prior to the Effective Time, except as set
forth in the OSI Disclosure Letter or as contemplated by any other provision of
this Agreement, unless CRA has consented in writing thereto, OSI:
(i) Shall, and shall cause each of its Significant Subsidiaries to,
conduct its operations according to their usual, regular and ordinary course
in substantially the same manner as heretofore conducted;
(ii) Shall use its commercially reasonable efforts, and shall cause each
of its Significant Subsidiaries to use its commercially reasonable efforts,
to preserve intact their business organizations and goodwill, keep available
the services of their respective officers and employees and maintain
satisfactory relationships with those persons having business relationships
with them;
(iii) Shall not amend its Certificate of Incorporation or Bylaws or
comparable governing instruments (other than Bylaw amendments which are not
material to OSI or to the consummation of the transactions contemplated by
this Agreement);
(iv) Shall promptly notify CRA of any breach of any representation or
warranty of OSI of which OSI becomes aware contained herein or any OSI
Material Adverse Effect;
(v) Shall promptly deliver to CRA true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement;
(vi) Shall not (w) except pursuant to the conversion of the OSI
Convertible Notes, the conversion of the Anderson Note, and the exercise of
options, warrants, conversion rights and other contractual rights existing
on the date hereof and disclosed pursuant to this Agreement or in the OSI
Reports, issue any shares of its capital stock, effect any stock split or
otherwise change its capitalization as it existed on the date hereof, (x)
grant, confer or award any option, warrant, conversion right or other right
not existing, on the date hereof to acquire any shares of its capital stock
(other than the grant of options to acquire an aggregate of up to 15,000
shares of OSI Common Stock pursuant to the terms of the OSI Stock Option
Plans at an exercise price of not less than the fair market value of the OSI
Common Stock on the date of grant) or grant, confer or award any bonuses or
other forms of cash incentives to any officer, director, or employee except
consistent with past practice, (y) increase any compensation of its present
or future officers, directors, or employees (except for normal increases
consistent with past practice or as required under the written terms of an
OSI Employment Agreement in effect on or before December 31, 1996); enter
into any employment agreement with any present or future employee, officer,
or director, or amend any such agreement in any material respect; grant any
severance or termination pay to any officer, director or employee other than
pursuant to existing severance arrangements and policies of OSI or (z) adopt
any new OSI Plan or amend any existing OSI Plan in any material respect;
(vii) Shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or other ownership interests, (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock or capital
stock of any of its Subsidiaries, or make any commitment for any such action
or (iii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock;
(viii) Shall not, and shall not permit any of its Subsidiaries to (A)
sell, lease or otherwise dispose of any of its assets (including capital
stock of Subsidiaries) except in the ordinary course of business, or (B)
acquire any business or any substantial portion of the assets of any person
except as identified in the OSI Disclosure Letter and acquisitions involving
the payment of consideration by OSI not in excess of $10,000,000 for any
single acquisition or $25,000,000 in the aggregate (it being understood that
OSI will give CRA not less than fifteen (15) days prior notice of the
proposed acquisition of any business or any substantial portion of the
assets of any person; if such acquisition requires the written consent of
CRA under this clause (viii), consent shall not be unreasonably withheld;
and CRA shall be
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deemed to have given such consent if it does not respond within ten (10)
days of receipt of the notice contemplated hereby);
(ix) Shall not incur any material amount of indebtedness for borrowed
money or make any loans, advances or capital contributions to, or
investments (other than non-controlling investments in the ordinary course
of business or other investments permitted pursuant to clause (viii) above)
in, any other person other than a wholly owned Subsidiary, or issue or sell
any debt securities, other than borrowings under existing lines of credit in
the ordinary course of business, in each case in an amount exceeding
$1,000,000;
(x) Shall not, except as previously approved by the Board of Directors
of OSI and identified to CRA prior to the date hereof, or except in the
ordinary course of business, make or commit to make capital expenditures
other than (A) capital expenditures budgeted for the fiscal year ending
December 31, 1997, and (B) capital expenditures (not otherwise included in
budgeted capital expenditures referred to in clause (A) above) that may be
made by OSI in connection with the acquisitions by OSI or its Subsidiaries
permitted under subsection (viii) above; provided such acquisitions would
have been permitted under such subsection (viii) if such capital
expenditures were deemed to be payment of consideration by OSI in connection
therewith;
(xi) Shall not mortgage or otherwise encumber or subject to any lien any
properties or assets except as would not be reasonably likely to have an OSI
Material Adverse Effect;
(xii) Shall not make any change to its accounting (including tax
accounting) methods, principles or practices, except as may be required by
generally accepted accounting principles and except, in the case of tax
accounting methods, principles or practices, in the ordinary course of
business of OSI or any of its Subsidiaries;
(xiii) Shall not and shall not permit any of its Subsidiaries to, enter
into any agreement or arrangement with any of their respective Affiliates,
other than with wholly-owned Subsidiaries of OSI, on terms less favorable to
OSI or such Subsidiary, as the case may be, than could be reasonably
expected to have been obtained with an unaffiliated third party on an
arm's-length basis;
(xiv) Shall, and shall cause its Subsidiaries to, use commercially
reasonable efforts to maintain with financially responsible insurance
companies insurance in such amounts and against such risks and losses as are
customary for companies engaged in their respective businesses; and
(xv) Shall not (i) make or rescind any material express or deemed
election relating to taxes, unless it is reasonably expected that such
action will not result in an OSI Material Adverse Effect, (ii) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, except
where such settlement or compromise will not result in an OSI Material
Adverse Effect, or (iii) change in any material respect any of its methods
or reporting income or deductions for federal income tax purposes from those
employed in the preparation of its federal income tax returns that have been
filed for prior taxable years, except as may be required by applicable law
or except for changes that are reasonably expected not to result in an OSI
Material Adverse Effect.
(b) Prior to the Effective Time, except as set forth in the CRA Disclosure
Letter or as contemplated by this Agreement, unless OSI has consented in writing
thereto, CRA:
(i) Shall, and shall cause each of its Significant Subsidiaries to,
conduct its operations according to their usual, regular and ordinary course
in substantially the same manner as heretofore conducted;
(ii) Shall use its commercially reasonable efforts, and shall cause each
of its Significant Subsidiaries to use its commercially reasonable efforts,
to preserve intact their business organizations and goodwill, keep available
the services of their respective officers and employees and maintain
satisfactory relationships with those persons having business relationships
with them;
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(iii) Shall not amend its Certificate of Incorporation or Bylaws or
comparable governing instruments (other than Bylaw amendments which are not
material to CRA or to the consummation of the transactions contemplated by
this Agreement);
(iv) Shall promptly notify OSI of any breach of any representation or
warranty of CRA of which CRA becomes aware contained herein or any CRA
Material Adverse Effect;
(v) Shall promptly deliver to OSI true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement;
(vi) Shall not (w) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date hereof
and disclosed pursuant to this Agreement or in the OSI Reports, issue any
shares of its capital stock, effect any stock split or otherwise change its
capitalization as it existed on the date hereof, (x) grant, confer or award
any option, warrant, conversion right or other right not existing, on the
date hereof to acquire any shares of its capital stock (other than the grant
of options to acquire an aggregate of up to 15,000 shares of CRA Common
Stock pursuant to the terms of the CRA Stock Option Plans at an exercise
price of not less than the fair market value of the CRA Common Stock on the
date of grant) existing on the date hereof of CRA's stock option plan) or
grant, confer or award any bonuses or other forms of cash incentives to any
officer, director, or employee except consistent with past practice, (y)
increase any compensation of its present or future officers, directors, or
employees, (except for normal increases consistent with past practice or as
required under the written terms of a CRA Employment Agreement in effect on
or before December 31, 1996); enter into any employment agreement with any
present or future employee, officer, or director or amend any such agreement
in any material respect; grant any severance or termination pay to any
officer, director or employee other than pursuant to existing severance
arrangements and policies of CRA or (z) adopt any new CRA Plan or amend any
existing CRA Plan in any material respect;
(vii) Shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or other ownership interests, (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock or capital
stock of any of its Subsidiaries, or make any commitment for any such action
or (iii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock;
(viii) Shall not, and shall not permit any of its Subsidiaries to (A)
sell, lease or otherwise dispose of any of its assets (including capital
stock of Subsidiaries) except in the ordinary course of business, or (B)
acquire any business or any substantial portion of the assets of any person
except as identified in the CRA Disclosure Letter and acquisitions involving
the payment of consideration by CRA not in excess of $10,000,000 for any
single acquisition or $25,000,000 in the aggregate (it being understood that
CRA will give OSI not less than fifteen (15) days prior notice of the
proposed acquisition of any business or any substantial portion of the
assets of any person; if such acquisition requires the consent of OSI under
this clause (viii), consent shall not be unreasonably withheld; and OSI
shall be deemed to have given such consent if it does not respond within ten
(10) days of receipt of the notice contemplated hereby);
(ix) Shall not incur any material amount of indebtedness for borrowed
money or make any loans, advances or capital contributions to, or
investments (other than non-controlling investments in the ordinary course
of business or other investments permitted pursuant to clause (viii) above),
in each case in an amount exceeding $1,000,000;
(x) Shall not, except as previously approved by the Board of Directors
of CRA and identified to OSI prior to the date hereof, or except in the
ordinary course of business, make or commit to make
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capital expenditures other than (A) capital expenditures budgeted for the
fiscal year ending December 31, 1997 and (B) capital expenditures (not
otherwise included in budgeted capital expenditures referred to in clause
(A) above) that may be made by CRA in connection with the acquisitions by
CRA or its Subsidiaries permitted under subsection (viii) above; provided
such acquisitions would have been permitted under such subsection (viii) if
such capital expenditures were deemed to be payment of consideration by CRA
in connection therewith.
(xi) Shall not mortgage or otherwise encumber or subject to any lien any
properties or assets except as would not be reasonably likely to have a CRA
Material Adverse Effect;
(xii) Shall not make any change to its accounting (including tax
accounting) methods, principles or practices, except as may be required by
generally accepted accounting principles and except, in the case of tax
accounting methods, principles or practices, in the ordinary course of
business of CRA or any of its Subsidiaries;
(xiii) Shall not and shall not permit any of its Subsidiaries to, enter
into any agreement or arrangement with any of their respective Affiliates,
other than with wholly-owned Subsidiaries of CRA, on terms less favorable to
CRA or such Subsidiary, as the case may be, than could be reasonably
expected to have been obtained with an unaffiliated third party on an
arm's-length basis;
(xiv) Shall, and shall cause its Subsidiaries to, use commercially
reasonable efforts to maintain with financially responsible insurance
companies insurance in such amounts and against such risks and losses as are
customary for companies engaged in their respective businesses; and
(xv) Shall not (i) make or rescind any material express or deemed
election relating to taxes, unless it is reasonably expected that such
action will not result in a CRA Material Adverse Effect, (ii) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, except
where such settlement or compromise will not result in a CRA Material
Adverse Effect, or (iii) change in any material respect any of its methods
or reporting income or deductions for federal income tax purposes from those
employed in the preparation of its federal income tax returns that have been
filed for prior taxable years, except as may be required by applicable law,
or except for changes that are reasonably expected not to result in a CRA
Material Adverse Effect.
7.3. MEETINGS OF STOCKHOLDERS. Each of CRA and OSI will take all action
necessary in accordance with applicable law and its Articles of Organization or
Certificate of Incorporation, as the case may be, and Bylaws to convene a
meeting of its stockholders as promptly as practicable to consider and vote upon
(i) in the case of CRA, the approval of this Agreement, the CRA Merger Agreement
and the CRA Merger and (ii) in the case of OSI, the approval of this Agreement
and the OSI Merger. Subject to the exercise of the fiduciary duties of the
Boards of Directors of CRA and OSI, the Board of Directors of each of CRA and
OSI shall recommend such approval (and shall not revoke or withdraw such
recommendation) and CRA and OSI shall each take all lawful action to solicit
such approval, including, without limitation, timely mailing the Proxy
Statement/Prospectus (as defined in Section 7.7).
7.4. FILINGS, OTHER ACTION. (a) Each party hereto shall file or cause to
be filed with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") any
notification required to be filed by their respective "ultimate parent"
companies under the HSR Act and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby. Such parties will use all
commercially reasonable efforts to make such filings promptly and to respond on
a timely basis to any requests for additional information made by either of such
agencies. Each of the parties hereto agrees to furnish the others with copies of
all correspondence, filings and communications (and memorandum setting forth the
substance thereof) between it and its Affiliates and their respective
representatives, on the one hand, and the FTC, the Antitrust Division or any
other court, governmental, regulatory or administrative agency or commission or
other governmental authority or
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instrumentality, domestic or foreign (a "Governmental Entity"), or members or
their respective staffs, on the other hand, with respect to this Agreement and
the transactions contemplated hereby, other than personal financial information
filed therewith. Each party hereto agrees to furnish the others with such
necessary information and reasonable assistance as such other parties and their
respective affiliates may reasonably request in connection with their
preparation of necessary filings, registrations or submissions of information to
any Governmental Entities, including without limitation any filings necessary
under the provisions of the HSR Act.
(b) Each party hereto shall cooperate and use its reasonable best efforts to
promptly prepare and file all necessary documentation to effect all necessary
application, notices, petitions, filings and other documents, and use all
commercially reasonable efforts to obtain (and will cooperate with each other in
obtaining) any consent, acquiescence, authorization, order or approval of, or
any exemption or nonopposition by, any Governmental Entity required to be
obtained or made by OSI or CRA or any of their respective Significant
Subsidiaries in connection with the Mergers or the taking of any action
contemplated thereby or by this Agreement; and
(c) Subject to the terms and conditions herein provided, including the
exercise of the fiduciary duties of the Boards of Directors of CRA and OSI, the
parties hereto shall use all commercially reasonable efforts to take, or cause
to be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement.
7.5. INSPECTION OF RECORDS. From the date hereof to the Effective Time,
each of OSI and CRA shall (i) allow all designated officers, attorneys,
accountants and other representatives of the other reasonable access at all
reasonable times to the offices, records and files, correspondence, audits and
properties, as well as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to the business and
affairs, of OSI and CRA and their respective Subsidiaries, as the case may be,
(ii) furnish to the other, the other's counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information as such persons may reasonably request and (iii) instruct the
employees, counsel and financial advisors of OSI or CRA, as the case may be, to
cooperate with the other in the other's investigation of the business of it and
its Subsidiaries.
7.6. PUBLICITY. The initial press release relating to this Agreement shall
be a joint press release and thereafter OSI and CRA shall, subject to their
respective legal obligations (including requirements of stock exchanges,
quotation or trading systems and other similar regulatory bodies), consult with
each other, and use commercially reasonable efforts to agree upon the text of
any press release, before issuing any such press release or otherwise making
public statements with respect to the transactions contemplated hereby and in
making any filings with any federal or state governmental or regulatory agency
or with any national securities exchange or quotation or trading system with
respect thereto.
7.7. REGISTRATION STATEMENT. CRA and OSI shall cooperate and promptly
prepare and Holding Company shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the Holding Company Common Stock issuable in the Mergers, a
portion of which Registration Statement shall also serve as the joint proxy
statement with respect to the meetings of the stockholders of OSI and of CRA in
connection with the Mergers (the "Proxy Statement/Prospectus"). The respective
parties will cause the Proxy Statement/Prospectus and the Form S-4 to comply as
to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Holding Company shall use all commercially reasonable efforts, and CRA and OSI
will cooperate with Holding Company, to have the Form S-4 declared effective by
the SEC as promptly as practicable and to keep the Form S-4 effective as long as
is necessary to consummate the Mergers. Holding Company shall, as promptly as
practicable, provide copies of any written comments received from the SEC with
respect to the Form S-4 to CRA and OSI and advise CRA and OSI of any verbal
comments with respect to the Form S-4 received from the SEC. Holding
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Company shall use its reasonable best efforts to obtain, prior to the effective
date of the Form S-4, all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto. Holding Company agrees
that (i) the S-4 will not, at the time it is filed with the Commission and the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (ii) the
Proxy Statement/Prospectus and each amendment or supplement thereto at the time
of mailing thereof and at the time of the respective meetings of stockholders of
OSI and CRA will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
material fact was made by Holding Company in reliance upon and in conformity
with written information concerning CRA or OSI furnished to Holding Company by
CRA or OSI specifically for use in the Proxy Statement/Prospectus. CRA and OSI
each agrees that the written information provided by it for inclusion in the S-4
and each amendment or supplement thereto, at the time it is filed with the
Commission and the time it becomes effective under the Securities Act, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. CRA and OSI each agrees that the written information provided by it
for inclusion in the Proxy Statement/Prospectus and each amendment or supplement
thereto, at the time of mailing thereof, and at the time of the respective
meetings of stockholders of OSI and CRA will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. No amendment or supplement to the Proxy
Statement/Prospectus will be made by Holding Company without the approval of CRA
and OSI. Holding Company will advise CRA and OSI, promptly after it receives
notice thereof, of the time when the Form S-4 has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of Holding Company Common Stock issuable in
connection with the Mergers for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement/Prospectus or the Form
S-4 or comments thereon and responses thereto or requests by the SEC for
additional information.
7.8. LISTING APPLICATION. Holding Company shall promptly prepare and
submit to the Nasdaq National Market a listing application covering the shares
of Holding Company Common Stock issuable in the Mergers, and shall use
commercially reasonable efforts to obtain, prior to the Effective Time, approval
for the quotation, of such Holding Company Common Stock, subject to official
notice of issuance, on the Nasdaq National Market.
7.9. FURTHER ACTION. Each party hereto shall, subject to the fulfillment
at or before the Effective Time of each of the conditions of performance set
forth herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Mergers, including in the
case of CRA and OSI causing their designees on the Holding Company Board of
Directors to cause Holding Company to perform such acts and execute such
documents.
7.10. AFFILIATE LETTERS. At least 30 days prior to the Closing Date, CRA
and OSI shall deliver to Holding Company a list of names and addresses of those
persons who were, in CRA's and OSI's reasonable judgment, at the record date for
its stockholders' meeting to approve the Mergers, "affiliates" (each such
person, an "Affiliate") of CRA or OSI within the meaning of Rule 145 of the
rules and regulations promulgated under the Securities Act. OSI shall use all
commercially reasonable efforts to deliver or cause to be delivered to Holding
Company, prior to the Closing Date, from each of the Affiliates of OSI
identified in the foregoing list, an Affiliate Letter in the form attached
hereto as Exhibit E. CRA shall use all commercially reasonable efforts to
deliver or cause to be delivered to Holding Company, prior to the Closing Date,
from each of the Affiliates of CRA identified in the foregoing list, an
Affiliate Letter in the
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form attached hereto as Exhibit E. Holding Company shall be entitled to place
legends as specified in such Affiliate Letters on the certificates evidencing
any Holding Company Common Stock to be received by such Affiliates pursuant to
the terms of this Agreement, and to issue appropriate stop transfer instructions
to the transfer agent for the Holding Company Common Stock, consistent with the
terms of such Affiliate Letters.
7.11. EXPENSES. Whether or not the Mergers are consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein and except that (a) the filing fee in connection with
the HSR Act filing, (b) the filing fee in connection with the filing of the Form
S-4 or Proxy Statement/ Prospectus with the SEC, (c) the reasonable expenses of
Holding Company and (d) the expenses incurred in connection with printing and
mailing the Form S-4 and the Proxy Statement/Prospectus, shall be shared equally
by OSI and CRA. OSI and CRA each agree to pay one-half of any such expenses
promptly upon written request therefor by Holding Company or by any other
person, including OSI or CRA, paying on behalf of, or providing credit with
respect thereto to, Holding Company.
7.12. INSURANCE; INDEMNITY. (a) From and after the Effective Time, Holding
Company shall indemnify, defend and hold harmless to the fullest extent that CRA
or OSI would have been permitted under applicable law each person who is now, or
has been at any time prior to the date hereof, an officer or director of CRA or
OSI (individually, an "Indemnified Party" and collectively, the "Indemnified
Parties"), against all losses, claims, damages, liabilities, costs or expenses
(including attorneys' fees), judgments, fines, penalties and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to acts or omissions, or alleged acts
or omissions, by them in their capacities as such occurring at or prior to the
Effective Time. In the event of any such claim, action, suit, proceeding, or
investigation (an "Action"), (i) any Indemnified Party wishing to claim
indemnification shall promptly notify Holding Company thereof, (ii) Holding
Company shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Party, which counsel shall be reasonably acceptable to Holding
Company, in advance of the final disposition of any such Action to the full
extent permitted by applicable law, upon receipt of any undertaking required by
applicable law, and (iii) Holding Company will cooperate in the defense of any
such matter; provided, however, that Holding Company shall not be liable for any
settlement effected without its written consent and provided, further, that
Holding Company shall not be obligated pursuant to this Section to pay the fees
and disbursements of more than one counsel for all Indemnified Parties in any
single Action except to the extent that, in the opinion of counsel for the
Indemnified Parties, two or more of such Indemnified Parties have conflicting
interests in the outcome of such action.
(b) Holding Company shall keep in effect, and shall cause the surviving
corporation of the CRA Merger to keep in effect, provisions in its Articles or
Certificate of Incorporation or Organization and Bylaws providing for
exculpation of director and officer liability and its indemnification of the
Indemnified Parties to the fullest extent permitted under applicable law, which
provisions shall not be amended except as required by applicable law or except
to make changes permitted by law that would enlarge the Indemnified Parties'
rights of exculpation and indemnification.
(c) For a period of six years after the Effective Time, Holding Company
shall cause to be maintained officers' and directors' liability insurance
covering the Indemnified Parties who are currently covered, in their capacities
as officers and directors, by CRA's or OSI's existing officers' and directors'
liability insurance policies on terms materially no less advantageous to the
Indemnified Parties than such existing insurance; provided, however, that
Holding Company shall not be required in order to maintain or procure such
coverage to pay an annual premium for either CRA or OSI in excess of one and
one-half times the current annual premium paid by OSI for its existing coverage
(the "Cap") (which current annual premium is approximately $110,000); and
provided, further, that if equivalent coverage cannot be obtained for CRA or
OSI, or can be obtained only by paying an annual premium in excess of the Cap,
Holding Company shall
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only be required to obtain as much coverage for CRA or OSI as can be obtained by
paying an annual premium equal to such Cap.
(d) In the event that Holding Company or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, in each such case, proper provisions shall be made so that the
successors and assigns of Holding Company shall assume the obligations set forth
in this Section 7.12.
(e) The provisions of this Section shall survive the consummation of the
Mergers and expressly are intended to benefit each of the Indemnified Parties.
The foregoing provisions of this Section 7.12 shall not limit or impair the
rights of the Indemnified Parties arising under any indemnification or other
agreements to which they are a party, the charter, bylaws or other
organizational documents of CRA and OSI and their respective Subsidiaries or
applicable laws.
7.13. TAKEOVER STATUTE. If any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, CRA and OSI and the members
of the Boards of Directors of CRA and OSI shall grant such approvals and take
such actions as are reasonably necessary so that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby.
7.14. CONDUCT OF BUSINESS BY HOLDING COMPANY AND CRA MERGER SUB PENDING THE
MERGERS. Prior to the Effective Time and subject to any applicable regulatory
approvals, CRA and OSI shall cause Holding Company and CRA Merger Sub to (a)
perform their respective obligations hereunder and under this Agreement and the
Merger Agreements in accordance with the terms hereof and thereof and take all
other actions necessary or appropriate for the consummation of the transactions
contemplated hereby and thereby, (b) not incur directly or indirectly any
liabilities or obligations except those incurred in connection with the
consummation of this Agreement and the Merger Agreements and the transactions
contemplated hereby and thereby, (c) not engaged directly or indirectly in any
business or activities of any type or kind whatsoever and not enter into any
agreements or arrangements with any person or entity, or be subject to or be
bound by any obligation or undertaking which is not contemplated by this
Agreement or the Merger Agreements and (d) not create, grant or suffer to exist
any lien upon their respective properties or assets which would attach to any
properties or assets of CRA or OSI after the Effective Time.
7.15. EMPLOYEE BENEFITS. Immediately following the Effective Time, Holding
Company will cause employee benefit plans to be in effect for the benefit of
CRA's and OSI's employees that are reasonably comparable in the aggregate to the
employee benefit plans that were in effect immediately prior to the Effective
Time.
7.16. CONVEYANCE TAXES. OSI and CRA shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.
7.17 INCENTIVE PLAN. Holding Company shall promptly adopt an executive
long term incentive plan reasonably acceptable to both CRA and OSI.
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ARTICLE 8
CONDITIONS
8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS. The
respective obligation of each party to effect the Mergers shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
approved in the manner required by applicable law or by the applicable
regulations of the Nasdaq National Market, any stock exchange or other
regulatory body, as the case may be, by the holders of the issued and
outstanding shares of capital stock of OSI and CRA, respectively.
(b) The waiting period applicable to the consummation of the Mergers under
the HSR Act shall have expired or been terminated and all filings required to be
made prior to the Effective Time with, and all consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from, any
Governmental Entity in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby shall
have been made or obtained (as the case may be), except for such consents,
approvals, permits or authorizations the failure of which to be obtained would
not, in the aggregate, be reasonably likely to have, a Material Adverse Effect
on Holding Company (assuming the Mergers have taken place) or to materially
adversely affect the consummation of the Mergers, and no such consent, approval,
permit or authorization shall impose terms or conditions that would have, or
would be reasonably likely to have, a Material Adverse Effect on Holding Company
(assuming the Mergers have taken place).
(c) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction, no order of any
Governmental Entity having jurisdiction over any party hereto, and no other
legal restraint or prohibition shall be in effect (an "Injunction") preventing
or making illegal the consummation of the Mergers. In the event any such
Injunction shall have been issued, each party agrees to use its reasonable best
efforts to have any such Injunction lifted.
(d) The Form S-4 shall have become effective and shall be effective at the
Effective Time, and no stop order suspending effectiveness of the Form S-4 shall
have been issued, no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness thereof shall have been initiated and be continuing
or, to the knowledge of CRA or OSI, threatened.
(e) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for filings in connection
with the Mergers and any other documents required to be filed after the
Effective Time and except where the failure to have obtained or made any such
consent, authorization, order, approval, filing or registration would not have a
material adverse effect on the business, results of operations or financial
condition of CRA and OSI (and their respective Subsidiaries), taken as a whole,
following the Effective Time.
(f) The Holding Company Common Stock to be issued to CRA and OSI
stockholders in connection with the Mergers shall have been approved for
quotation on the Nasdaq National Market, subject only to official notice of
issuance.
8.2. CONDITIONS TO OBLIGATION OF OSI TO EFFECT THE MERGERS. The obligation
of OSI to effect the Mergers shall be subject to the fulfillment at or prior to
the Closing Date of the following conditions:
(a) CRA shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the Closing
Date, the representations and warranties of CRA contained in this Agreement and
in any document delivered in connection herewith shall be true and correct in
all respects as of the Closing Date (other than those representations and
warranties which
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contain qualifications as to materiality, which shall be true and correct in all
respects as of the Closing Date), except (i) for changes specifically permitted
by this Agreement and (ii) that those representations and warranties which
address matters only as of a particular date shall remain true and correct in
all material respects as of such date (other than those representations and
warranties which contain qualifications as to materiality, which shall be true
and correct in all respects as of such date), and OSI shall have received a
certificate of the President or a Vice President of CRA, dated the Closing Date,
certifying to such effect.
(b) OSI and Holding Company shall have received the opinion of Vinson &
Elkins L.L.P., special counsel to OSI and Holding Company, based upon reasonably
requested representation letters and dated the Closing Date, to the effect that
the OSI Merger will be treated as a reorganization governed by Section 368(a) of
the Code; and that OSI will not recognize gain or income in the OSI Merger.
(c) From the date of this Agreement through the Effective Time, there shall
not have occurred any change in the financial condition, business or operations
of CRA and its Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have a CRA Material Adverse Effect.
(d) Holders of not more than 5% of the CRA Common Stock outstanding
immediately preceding the Effective Time shall have perfected appraisal rights
under applicable law.
(e) At the Closing, OSI shall have received an opinion, dated the Closing
Date, from CRA's independent auditors, Arthur Andersen, L.L.P., to the effect
that the business combination to be effected by the Mergers would be properly
accounted for as a pooling-of-interests.
(f) The opinion of DLJ referred to in Section 5.15 herein shall have been
reissued at the time of mailing the Proxy Statement/Prospectus and shall not
have been withdrawn or materially modified by DLJ in a manner adverse to OSI's
stockholders.
8.3. CONDITIONS TO OBLIGATION OF CRA TO EFFECT THE MERGERS. The obligation
of CRA to effect the Mergers shall be subject to the fulfillment at or prior to
the Closing Date of the following conditions:
(a) OSI shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the Closing
Date, the representations and warranties of OSI contained in this Agreement and
in any document delivered in connection herewith shall be true and correct in
all material respects as of the Closing Date (other than those representations
and warranties which contain qualifications as to materiality, which shall be
true and correct in all respects as of the Closing Date), except (i) for changes
specifically permitted by this Agreement and (ii) that those representations and
warranties which address matters only as of a particular date shall remain true
and correct in all material respects as of such date (other than those
representations and warranties which contain qualifications as to materiality,
which shall be true and correct in all respects as of such date), and CRA shall
have received a certificate of the President or Vice President of OSI, dated the
Closing Date, certifying to such effect.
(b) CRA shall have received the opinion of Hutchins, Wheeler & Dittmar,
special counsel to CRA, based upon reasonably requested representation letters
and dated the Closing Date, to the effect that the CRA Merger will be treated as
a transfer of property to Holding Company by holders of CRA Common Stock
governed by Section 351(a) of the Code or a reorganization governed by Section
368(a) of the Code or both; and OSI and Holding Company shall have received the
opinion of Vinson & Elkins LLP described in Section 8.2(b) of this Agreement.
(c) From the date of this Agreement through the Effective Time, there shall
not have occurred any change in the financial condition, business or operations
of OSI and its Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have an OSI Material Adverse Effect.
(d) Holders of not more than 5% of the OSI Common Stock outstanding
immediately preceding the Effective Time shall have perfected appraisal rights
under applicable law.
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(e) At the Closing, CRA shall have received an opinion, dated the Closing
Date, from OSI's independent auditors, Arthur Andersen, L.L.P., to the effect
that the business combination to be effected by the Mergers would be properly
accounted for as a pooling-of-interests.
(f) The opinion of Alex. Brown & Sons Incorporated referred to in Section
6.15 herein shall have been reissued at the time of mailing the Proxy
Statement/Prospectus and shall not have been withdrawn or materially modified by
Alex. Brown & Sons Incorporated in a manner adverse to CRA's stockholders.
ARTICLE 9
TERMINATION
9.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Mergers may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of CRA or OSI, by the
mutual written consent of CRA and OSI.
9.2. TERMINATION BY EITHER CRA OR OSI. This Agreement may be terminated
and the Mergers may be abandoned by action of the Board of Directors of either
CRA or OSI if (a) the Mergers shall not have been consummated by October 31,
1997, or (b) the approval of OSI's stockholders required by Section 8.1(a) shall
not have been obtained at a meeting duly convened therefor or at any adjournment
thereof, or (c) the approval of CRA's stockholders required by Section 8.1(a)
shall not have been obtained at a meeting duly convened therefor or at any
adjournment thereof, or (d) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and non-appealable;
provided, that the party seeking to terminate this Agreement pursuant to this
clause (d) shall have used all commercially reasonable efforts to remove such
injunction, order or decree; and provided, in the case of a termination pursuant
to clause (a) above, that the terminating party shall not have breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the failure to consummate the Mergers by October
31, 1997.
9.3. TERMINATION BY OSI. This Agreement may be terminated and the Mergers
may be abandoned at any time prior to the Effective Time, before or after the
adoption and approval by the stockholders of OSI referred to in Section 8.1(a),
by action of the Board of Directors of OSI, if (a) in the exercise of its good
faith judgment as to fiduciary duties to its stockholders imposed by law, as
advised by outside counsel, the Board of Directors of OSI determines that such
termination is required by reason of an OSI Alternative Proposal being made;
provided that OSI shall notify CRA promptly of its intention to terminate this
Agreement or enter into a definitive agreement with respect to any OSI
Alternative Proposal, but in no event shall notice be given less than one full
business day prior to the public announcement of OSI's termination of this
Agreement; or (b) there has been a breach by CRA of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have a CRA Material Adverse Effect; or (c) there has been a material
breach of any of the covenants or agreements set forth in this Agreement on the
part of CRA, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by OSI to CRA; or (d) the
Board of Directors of CRA shall have withdrawn or modified in a manner
materially adverse to OSI its approval or recommendation of this Agreement or
the Mergers. Notwithstanding the foregoing, OSI's ability to terminate this
Agreement pursuant to this Section 9.3 is conditioned upon the prior payment by
OSI of any amount owed by it pursuant to Section 9.5(a).
9.4 TERMINATION BY CRA. This Agreement may be terminated and the Mergers
may be abandoned at any time prior to the Effective Time, before or after the
approval by the stockholders of CRA referred to in Section 8.1(a), by action of
the Board of Directors of CRA, if (a) in the exercise of its good faith judgment
as to fiduciary duties to its stockholders imposed by law, as advised by outside
counsel, the Board
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of Directors of CRA determines that such termination is required by reason of a
CRA Alternative Proposal being made; provided that CRA shall notify OSI promptly
of its intention to terminate this Agreement or enter into a definitive
agreement with respect to any CRA Alternative Proposal, but in no event shall
notice be given less than one full business day prior to the public announcement
of CRA's termination of this Agreement; or (b) there has been a breach by OSI of
any representation or warranty contained in this Agreement which would have or
would be reasonably likely to have an OSI Material Adverse Effect; or (c) there
has been a material breach of any of the covenants or agreements set forth in
this Agreement on the part of OSI, which breach is not curable or, if curable,
is not cured within 30 days after written notice of such breach is given by CRA
to OSI; or (d) the Board of Directors of OSI shall have withdrawn or modified in
a manner materially adverse to CRA its approval or recommendation of this
Agreement or the Mergers. Notwithstanding the foregoing, CRA's ability to
terminate this Agreement pursuant to this Section 9.4 is conditioned upon the
prior payment by CRA of any amount owed by it pursuant to Section 9.5(b).
9.5. EFFECT OF TERMINATION AND ABANDONMENT. (a) In the event that any
person shall have made an OSI Alternative Proposal for OSI and thereafter this
Agreement is terminated pursuant to Section 9.3(a) or Section 9.4(d), then OSI
shall pay to CRA a fee of $10 million, which amount shall be payable by wire
transfer of same day funds either on the date contemplated in the last sentence
of 9.3 if applicable or, otherwise, within two business days after such amount
becomes due. OSI acknowledges that the agreements contained in this Section
9.5(a) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, CRA would not enter into this Agreement;
accordingly, if OSI fails to properly pay the amount due pursuant to this
Section 9.5(a) and, in order to obtain such payment, CRA commences a suit which
results in a judgment against OSI for the fee set forth in this Section 9.5(a),
OSI shall pay to CRA its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest in the amount of the fee at
the rate of 12% per annum.
(b) In the event that any person shall have made a CRA Alternative Proposal
for CRA and thereafter this Agreement is terminated pursuant to Section 9.4(a)
or 9.3(d), then CRA shall pay to OSI a fee of $10 million, which amount shall be
payable by wire transfer of same day funds either on the date contemplated in
the last sentence of 9.4 if applicable or, otherwise, within two business days
after such amount becomes due. CRA acknowledges that the agreements contained in
this Section 9.5(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, OSI would not enter into
this Agreement; accordingly, if CRA fails to properly pay the amount due
pursuant to this Section 9.5(b) and, in order to obtain such payment, OSI
commences a suit which results in a judgment against CRA for the fee set forth
in this Section 9.5(b), CRA shall pay to OSI its costs and expenses (including
attorneys' fees) in connection with such suit, together with interest in the
amount of the fee at the rate of 12% per annum.
(c) In the event of termination of this Agreement and the abandonment of the
Mergers pursuant to this Article 9, all obligations of the parties hereto shall
terminate, except the obligations of the parties pursuant to this Section 9.5
and Section 7.11 and except for the provisions of Article 10. Moreover, in the
event of termination of this Agreement pursuant to Section 9.3 or 9.4, nothing
herein shall prejudice the ability of the non-breaching party from seeking
damages from any other party for any breach of this Agreement, including without
limitation, attorneys' fees and the right to pursue any remedy at law or in
equity.
9.6. EXTENSION, WAIVER. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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ARTICLE 10
GENERAL PROVISIONS
10.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Mergers and shall not survive
the Mergers, provided, however, that the agreements contained in Article 4,
Section 7.11, Section 7.12, Section 7.15 and this Article 10 shall survive the
Mergers and Sections 7.11 and 9.5 shall survive termination.
10.2. NOTICES. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by next day delivery by a nationally recognized overnight delivery
service or by certified or registered mail, postage prepaid, and shall be deemed
to be given, dated and received (i) when so delivered personally, (ii) upon
receipt of an appropriate electronic answerback or confirmation when so
delivered by telegraph or telecopy (to such number specified below or another
number or numbers as such person may subsequently designate by notice hereunder)
or (iii) one business day after sending by overnight delivery, and five business
days after the date of mailing by certified or registered mail, to the following
address or to such other address or addresses as such person may subsequently
designate by notice given hereunder, if so delivered by mail:
If to CRA:
CRA Managed Care, Inc.
312 Union Wharf
Boston, Massachusetts 02109
Attention: Chairman
Telecopier No.: (617) 720-1259
With copies to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: James Westra, Esq.
Telecopier No.: (617) 951-1295
If to OSI:
OccuSystems, Inc.
3010 LBJ Freeway
Suite 400
Dallas, TX 75234
Attention: General Counsel
Telecopier No.: (972) 243-7540
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With copies to:
Vinson & Elkins L.L.P.
2001 Ross Avenue
Suite 3700
Dallas, TX 75201
Attention: Jeffrey A. Chapman
Telecopier No.: (214) 220-7716
If to Holding Company:
Concentra Managed Care, Inc.
c/o CRA in accordance with the provisions
of this Section 10.2 and to
Concentra Managed Care, Inc.,
c/o OSI in accordance with the provisions
of this Section 10.2 or to such other address as any party shall specify by
written notice so given.
10.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Section 7.12 and Section 7.15 nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
10.4. ENTIRE AGREEMENT. This Agreement, the Exhibits, OSI Disclosure
Letter, CRA Disclosure Letter, the Confidentiality Agreement dated March 19,
1997, between OSI and CRA (except that the "standstill" provisions set forth in
such Confidentiality Agreement are hereby deemed to be superseded by Section 9
of each of the CRA Stock Option Agreement and the OSI Stock Option Agreement),
and any documents delivered by the parties in connection herewith constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement shall
be binding upon any party hereto unless made in writing and signed by all
parties hereto.
10.5. AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with Mergers by the
stockholders of OSI and CRA, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
10.6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Delaware without regard to its rules of conflict of
laws, except that the provisions of Article 2 and Article 4 with respect to the
CRA Merger shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
10.7. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
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10.8. HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
10.9. INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.10. WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.11. INCORPORATION OF EXHIBITS. The OSI Disclosure Letter, CRA
Disclosure Letter and all Exhibits and Schedules attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
10.12. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.13. ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any Federal or state court located in the
State of Delaware, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.14. SUBSIDIARIES. As used in this Agreement, the word "Subsidiary" when
used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which such party is a
general partner. When a reference is made in this Agreement to Significant
Subsidiaries, the words "Significant Subsidiaries" shall refer to Subsidiaries
(as defined above) which constitute "significant subsidiaries" under Rule 405
promulgated by the SEC under the Securities Act.
[Remainder of this Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
CRA MANAGED CARE, INC.
By: /s/ DONALD J. LARSON
-----------------------------------------
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OCCUSYSTEMS, INC.
By: /s/ JOHN K. CARLYLE
-----------------------------------------
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CONCENTRA MANAGED CARE, INC.
By: /s/ JOHN K. CARLYLE
-----------------------------------------
CHAIRMAN
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<PAGE>
SCHEDULE 1.2
TO
AGREEMENT AND PLAN OF REORGANIZATION
DIRECTORS AND OFFICERS OF THE HOLDING COMPANY
DIRECTORS
Donald J. Larson
John K. Carlyle
OFFICERS
<TABLE>
<S> <C>
John K. Carlyle Chairman
Donald J. Larson President and Chief Executive Officer
John A. McCarthy Executive Vice President--Managed Care Services
Richard A. Parr II Executive Vice President, General Counsel, and Secretary
Joseph F. Pesce Executive Vice President, Chief Financial Officer, and
Treasurer
Daniel J. Thomas Executive Vice President--Practice Management Services
W. Tom Fogarty, M.D. Senior Vice President and Chief Medical Officer
Peter R. Gates Senior Vice President--Marketing and Sales
James M. Greenwood Senior Vice President--Corporate Development
</TABLE>
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<PAGE>
SCHEDULE 3.1(A)
TO
AGREEMENT AND PLAN OF REORGANIZATION
DIRECTORS OF THE SURVIVING CORPORATION OF CRA MERGER
Donald J. Larson
John A. McCarthy
Joseph F. Pesce
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<PAGE>
SCHEDULE 3.1(B)
TO
AGREEMENT AND PLAN OF REORGANIZATION
DIRECTORS OF OCCUCENTERS, INC.
Donald J. Larson
Joseph F. Pesce
Daniel J. Thomas
A-39
<PAGE>
SCHEDULE 3.2(A)
TO
AGREEMENT AND PLAN OF REORGANIZATION
OFFICERS OF THE SURVIVING CORPORATION OF THE CRA MERGER
<TABLE>
<S> <C>
John K. Carlyle Chairman
Donald J. Larson President and Chief Executive Officer
John A. McCarthy Executive Vice President--Managed Care Services
Richard A. Parr II Executive Vice President, General Counsel, and Secretary
Joseph F. Pesce Executive Vice President, Chief Financial Officer, and
Treasurer
Peter R. Gates Senior Vice President--Marketing and Sales
James M. Greenwood Senior Vice President--Corporate Development
</TABLE>
A-40
<PAGE>
SCHEDULE 3.2(B)
TO
AGREEMENT AND PLAN OF REORGANIZATION
OFFICERS OF THE SURVIVING CORPORATION OF THE OSI MERGER
<TABLE>
<S> <C>
John K. Carlyle Chairman
Donald J. Larson President and Chief Executive Officer
John A. McCarthy Executive Vice President--Managed Care Services
Richard A. Parr II Executive Vice President, General Counsel, and Secretary
Joseph F. Pesce Executive Vice President, Chief Financial Officer, and
Treasurer
Daniel J. Thomas Executive Vice President--Practice Management Services
W. Tom Fogarty, M.D. Senior Vice President and Chief Medical Officer
Peter R. Gates Senior Vice President--Marketing and Sales
James M. Greenwood Senior Vice President--Corporate Development
</TABLE>
A-41
<PAGE>
SCHEDULE 3.2(C)
TO
AGREEMENT AND PLAN OF REORGANIZATION
OFFICERS OF OCCUCENTERS, INC.
<TABLE>
<S> <C>
John K. Carlyle Chairman
Donald J. Larson President and Chief Executive Officer
Daniel J. Thomas Executive Vice President--Practice Management Services
Richard A. Parr II Executive Vice President, General Counsel, and Secretary
Joseph F. Pesce Executive Vice President, Chief Financial Officer, and
Treasurer
W. Tom Fogarty, M.D. Senior Vice President and Chief Medical Officer
Peter R. Gates Senior Vice President--Marketing and Sales
James M. Greenwood Senior Vice President--Corporate Development
</TABLE>
A-42
<PAGE>
APPENDIX B
OCCUSYSTEMS, INC. STOCK OPTION AGREEMENT
OCCUSYSTEMS, INC. STOCK OPTION AGREEMENT (this "Agreement"), dated as of
April 21, 1997, by and between CRA Managed Care, Inc., a Massachusetts
corporation ("CRA"), and OccuSystems, Inc., a Delaware corporation ("OSI").
WHEREAS, concurrently with the execution and delivery of this Agreement,
CRA, OSI and Concentra Managed Care, Inc., a Delaware corporation ("Holding
Company"), are entering into an Agreement and Plan of Reorganization, dated as
of the date hereof (the "Merger Agreement"), which provides that, among other
things, upon the terms and subject to the conditions thereof, OSI will be merged
with and into Holding Company (the "Merger"), with Holding Company continuing as
the surviving corporation;
WHEREAS, as a condition to CRA's willingness to enter into the Merger
Agreement, CRA has requested that OSI agree, and OSI has so agreed, to grant to
CRA an option with respect to certain shares of OSI's common stock on the terms
and subject to the conditions set forth herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement, OSI
and CRA are entering into a CRA Stock Option Agreement (the "CRA Stock Option
Agreement") pursuant to which CRA has agreed to grant to OSI an option with
respect to certain shares of CRA's Common Stock on the terms and subject to the
conditions set forth therein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF OPTION.
(a) OSI hereby grants CRA an irrevocable option (the "OSI Option") to
purchase up to the Option Number (as hereinafter defined) of shares (the
"OSI Shares") of common stock, par value $.01 per share, of OSI (the "OSI
Common Stock"), in the manner set forth below at a price (the "Exercise
Price") of $21.21 per OSI Share, payable in cash in accordance with Section
4 hereof. As used herein, the "Option Number" shall initially be the number
of shares equal to 10% of the total number of shares of OSI Common Stock
issued and outstanding as of March 31, 1997, and shall be adjusted hereafter
to reflect changes in OSI's capitalization occurring after the date hereof
in accordance with Section 12. Capitalized terms used herein but not defined
herein shall have the meanings set forth in the Merger Agreement.
(b) Notwithstanding any other provision of this Agreement, in no event
shall CRA's Total Profit (as hereinafter defined) exceed $15 million and, if
it otherwise would exceed such amount, CRA, at its sole election, shall
either (a) deliver to OSI for cancellation OSI Shares previously purchased
by CRA, (b) pay cash to OSI or (c) undertake any combination thereof, so
that CRA's Total Profit shall not exceed $15 million after taking into
account the foregoing actions.
(c) Notwithstanding any other provision of this Agreement, the OSI
Option may not be exercised for a number of OSI Shares as would, as of the
date of the Exercise Notice (as hereinafter defined), result in a Notional
Total Profit (as hereinafter defined) of more than $15 million and, if
exercise of the OSI Option otherwise would exceed such amount, CRA, at its
discretion, may increase the Purchase Price for that number of OSI Shares
set forth in the Exercise Notice so that the Notional Total Profit shall not
exceed $15 million.
(d) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by
CRA pursuant to Section 9.5(a) of the Merger Agreement, (ii) (x) the amount
received by CRA pursuant to OSI's repurchase of OSI Shares or the
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<PAGE>
OSI Option pursuant to Section 7 hereof, less (y) CRA's purchase price for
such OSI Shares, and (iii) (x) the net cash amounts received by CRA pursuant
to the sale of OSI Shares (or any other securities into which such OSI
Shares are converted or exchanged), less (y) CRA's purchase price for such
OSI Shares.
(e) As used herein, the term "Notional Total Profit" with respect to any
number of OSI Shares as to which CRA may propose to exercise the OSI Option
shall be the Total Profit determined as of the date of the Exercise Notice
assuming that the OSI Option was exercised on such date for such number of
OSI Shares and assuming that such OSI Shares, together with all other OSI
Shares held by CRA and its affiliates as of such date, were sold for cash at
the closing market price for the OSI Common Stock as of the close of
business on the preceding trading day (less customary brokerage
commissions).
2. EXERCISE OF OPTION. The OSI Option may be exercised by CRA, in whole or
in part, at any time or from time to time after the occurrence of a "Trigger
Event". For purposes hereof, a "Trigger Event" shall mean an event that causes
OSI to pay the fee to CRA provided in Section 9.5(a) of the Merger Agreement. In
the event CRA wishes to exercise the OSI Option, CRA shall deliver to OSI a
written notice (an "Exercise Notice") specifying the total number of OSI Shares
it wishes to purchase. Each closing of a purchase of OSI Shares (a "Closing")
shall occur at a place, on a date and at a time designated by CRA in an Exercise
Notice delivered at least two business days prior to the date of the Closing.
The OSI Option shall terminate (the "Termination Date") upon the earlier of: (i)
the Effective Time; (ii) the termination of the Merger Agreement other than
under circumstances which also constitute a Trigger Event; or (iii) the 180th
day following a Trigger Event (or if, at the expiration of such period the OSI
Option cannot be exercised by reason of any applicable judgment, decree, order,
law or regulation, 10 business days after such impediment to exercise shall have
been removed or shall have become final and not subject to appeal but in no
event under this clause (iii) later than the 548th day following such Triggering
Event). Notwithstanding the foregoing, the OSI Option may not be exercised if
CRA is in material breach of any of its representations, warranties, covenants
or agreements contained in this Agreement or in the Merger Agreement.
3. CONDITIONS TO CLOSING. The obligation of OSI to issue the OSI Shares to
CRA hereunder is subject to the conditions, which (other than the conditions
described in clauses (i) and (iii) below) may be waived by OSI in its sole
discretion, that (i) all waiting periods, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder ("HSR Act"), applicable to the issuance of the OSI Shares
hereunder shall have expired or have been terminated, and all consents,
approvals, orders or authorizations of, or registrations, declarations or
filings with, any federal administrative agency or commission or other federal
governmental authority or instrumentality, if any, required in connection with
the issuance of the OSI Shares hereunder shall have been obtained or made, as
the case may be; (ii) the OSI Shares shall have been approved for quotation on
the Nasdaq Stock Market upon official notice of issuance; and (iii) no
preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such issuance shall be in
effect.
4. CLOSING. At any Closing, (a) OSI will deliver to CRA a single certificate
in definitive form representing the number of OSI Shares designated by CRA in
its Exercise Notice, such certificate to be registered in the name of CRA and to
bear the legend set forth in Section 13, and (b) CRA will deliver to OSI the
aggregate price for the OSI Shares so designated and being purchased by wire
transfer of immediately available funds to a bank designated by OSI at the
Closing.
5. REPRESENTATIONS AND WARRANTIES OF OSI. OSI represents and warrants to CRA
that (a) OSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, (b) the execution and delivery of this Agreement by OSI and the
consummation by OSI of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part
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<PAGE>
of OSI and no other corporate proceedings on the part of OSI are necessary to
authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by OSI and constitutes a
valid and binding obligation of OSI, and, assuming this Agreement constitutes a
valid and binding obligation of CRA, is enforceable against OSI in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity, (d) OSI has taken all necessary corporate action to authorize and
reserve for issuance and to permit it to issue, upon exercise of the OSI Option,
and at all times from the date hereof through the expiration of the OSI Option
will have reserved, a number of authorized and unissued OSI Shares not less than
the Option Number, all of which, upon their issuance and delivery in accordance
with the terms of this Agreement, will be validly issued, fully paid and
nonassessable, (e) upon delivery of OSI Shares to CRA upon the exercise of the
OSI Option, CRA will acquire OSI Shares, free and clear of all claims, liens,
charges, encumbrances and security interests of any nature whatsoever, (f) the
execution and delivery of this Agreement by OSI does not, and the performance of
this Agreement by OSI will not (i) violate the Certificate of Incorporation or
By-Laws of OSI, (ii) conflict with or violate any statute, rule, regulation,
order, judgment or decree applicable to OSI or by which it or any of its
property is bound or affected or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give rise to any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of OSI pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, or other instrument or
obligation to which OSI is a party or by which OSI or any of its property is
bound or affected, except, in the case of clauses (ii) and (iii) above, for
violations, breaches, defaults, rights, liens or encumbrances which would not,
individually or in the aggregate, have an OSI Material Adverse Effect, and (g)
the execution and delivery of this Agreement by OSI does not, and the
performance of this Agreement by OSI will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority except the pre-merger notification requirements of the
HSR Act.
6. REPRESENTATIONS AND WARRANTIES OF CRA. CRA represents and warrants to OSI
that (a) CRA is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement by CRA
and the consummation by CRA of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of CRA and no
other corporate proceedings on the part of CRA are necessary to authorize this
Agreement or any of the transactions contemplated hereby, (c) this Agreement has
been duly executed and delivered by CRA and constitutes a valid and binding
obligation of CRA, and, assuming this Agreement constitutes a valid and binding
obligation of OSI, is enforceable against CRA in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity, (d) the
execution and delivery of this Agreement by CRA does not, and the performance of
this Agreement by CRA will not (i) violate the Articles of Organization or
By-Laws of CRA, (ii) conflict with or violate any statute, rule, regulation,
order, judgment or decree applicable to CRA or by which it or any of its
property is bound or affected or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give rise to any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of CRA pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, or other instrument or
obligation to which CRA is a party or by which CRA or any of its property is
bound or affected, except, in the case of clauses (ii) and (iii) above, for
violations, breaches, defaults, rights, liens or encumbrances which would not,
individually or in the aggregate, have a CRA Material Adverse Effect, (e) the
execution and delivery of this Agreement by CRA does not, and the performance of
this Agreement by CRA will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except the pre-merger notification requirements of the HSR Act and
(f) any OSI Shares acquired upon
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<PAGE>
exercise of the OSI Option will not be, and the OSI Option is not being,
acquired by CRA with a view to the public distribution thereof.
7. CERTAIN REPURCHASES.
(a) CRA Put. At the request of CRA at any time during which the OSI
Option would be exercisable pursuant to Section 2 (the "Repurchase Period"),
OSI (or any successor entity thereof) shall, subject to the limitations set
forth in Section 1, repurchase from CRA (1) the OSI Option, including any
portion thereof, at the price set forth in subparagraph (i) below, or (2)
OSI Shares purchased by CRA pursuant thereto, at a price set forth in
subparagraph (ii) below:
(i) the difference between the average of the closing sale prices of
shares of OSI Common Stock on the Nasdaq Stock Market for the ten trading
days immediately preceding the date CRA gives notice of its intent to
exercise its rights under this Section 7 (the "Market Price") and the
Exercise Price, multiplied by the number of the OSI Shares purchasable
pursuant to the OSI Option (or portion thereof with respect to which CRA
is exercising its rights under this Section 7), but only if the Market
Price is greater than the Exercise Price; or
(ii) the Exercise Price paid by CRA for the OSI Shares acquired
pursuant to the OSI Option plus the difference between the Market Price
and the Exercise Price, but only if the Market Price is greater than the
Exercise Price, multiplied by the number of OSI Shares so purchased.
(b) Payment and Redelivery of the OSI Option or Shares. In the event CRA
exercises its rights under this Section 7, OSI shall, within 10 business
days thereafter, pay the required amount to CRA by wire transfer of
immediately available funds and CRA shall surrender to OSI the OSI Option or
the certificates evidencing OSI Shares purchased by CRA pursuant thereto,
and CRA shall warrant that it owns such shares and that such shares are then
free and clear of all liens, claims, damages, charges and encumbrances of
any kind or nature whatsoever.
8. VOTING OF SHARES. Following the date hereof and prior to the Expiration
Date (as defined in Section 9(b)), each party shall vote any shares of capital
stock of the other party acquired by such party pursuant to this Agreement or
otherwise beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) by such
party (the shares so owned by a party collectively the "Restricted Shares") on
each matter submitted to a vote of stockholders of such other party for and
against such matter in the same proportion as the vote of all other stockholders
of such other party are voted (whether by proxy or otherwise) for and against
such matter.
9. RESTRICTION ON CERTAIN ACTIONS.
(a) Restrictions. Other than pursuant to the Merger Agreement, following
the date hereof and prior to the Expiration Date, without the prior written
consent of the other party, neither party shall, nor shall permit its
affiliates to, directly or indirectly, alone or in concert or conjunction
with any other Person or Group (as defined in Section 9(b)), (i) in any
manner acquire, agree to acquire or make any proposal to acquire, any
securities of, equity interest in, or any material property of, such other
party or any of its subsidiaries (other than pursuant to this Agreement, the
CRA Stock Option Agreement or the Merger Agreement), (ii) except at the
specific written request of such other party, propose to enter into any
merger or business combination involving such other party or any of its
subsidiaries or to purchase a material portion of the assets of such other
party or any of its subsidiaries, (iii) make or in any way participate in
any "solicitation" of "proxies" (as such terms are used in Regulation 14A
promulgated under the Exchange Act) to vote, or seek to advise or influence
any Person with respect to the voting of, any voting securities of such
other party or any of its subsidiaries, (iv) form, join or in any way
participate in a Group with respect to any voting securities of such other
party or any of its subsidiaries, (v) seek to control or influence the
management, Board of Directors or policies of such other party, (vi)
disclose any intention, plan or arrangement inconsistent with the foregoing,
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<PAGE>
(vii) advise, assist or encourage any other Person in connection with the
foregoing or (viii) request such other party (or its directors, officers,
employees or agents), to amend or waive any provision of this Section 9, or
take any action which may require such other party to make a public
announcement regarding the possibility of a business combination or merger
with such party.
(b) Expiration Date. For purposes of this Agreement, (i) the term
"Person" shall mean any corporation, partnership, individual, trust,
unincorporated association or other entity or Group (within the meaning of
Section 13(d)(3) of the Exchange Act), (ii) the term "Expiration Date" with
respect to any obligation or restriction imposed on one party shall mean the
earlier to occur of (A) the first anniversary of the date hereof and (B)
such time as the other party shall have suffered a Change of Control and
(iii) a "Change of Control" with respect to one party shall be deemed to
have occurred whenever (A) there shall be consummated (1) any consolidation
or merger of such party in which such party is not the continuing or
surviving corporation, or pursuant to which shares of such party's common
stock would be converted in whole or in part into cash, other securities or
other property, other than a merger of such person in which the holders of
such party's common stock immediately prior to the merger have substantially
the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (2) any sale, lease, exchange
or transfer (in one transaction or a series of related transactions) of all
or substantially all the assets of such party, or (B) the stockholders of
such party shall approve any plan or proposal for the liquidation or
dissolution of such party, or (C) any party, other than such party or a
subsidiary thereof or any employee benefit plan sponsored by such party or a
subsidiary thereof or a corporation owned, directly or indirectly, by the
stockholders of such party in substantially the same proportions as their
ownership of stock of such party, shall become the beneficial owner of
securities of such party representing 25% or more of the combined voting
power of then outstanding securities ordinarily (and apart from rights
accruing in special circumstances) having the right to vote in the election
of directors, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, or (D) at any time
during the period commencing on the date of this Agreement and ending on the
Expiration Date, individuals who at the date hereof constituted the Board of
Directors of such party shall cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by such
party's stockholders of each new director during the period commencing on
the date of this Agreement and ending on the Expiration Date was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the date hereof, or (E) any other event shall occur with
respect to such party that would be required to be reported in response to
Item 6(e) (or any successor provision) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act.
10. RESTRICTIONS ON TRANSFER.
(a) Restrictions on Transfer. Prior to the Expiration Date, CRA shall
not, directly or indirectly, by operation of law or otherwise, sell, assign,
pledge or otherwise dispose of or transfer any Restricted Shares
beneficially owned by it, other than (i) pursuant to Section 7, or (ii) in
accordance with Section 10(b) or 11. Subsequent to the Expiration Date, CRA
shall not, directly or indirectly, by operation of law or otherwise, sell,
assign, pledge or otherwise dispose of or transfer any Restricted Shares
beneficially owned by it to any purchaser, assignee, pledgee or other
transferee who would, immediately after such sale, assignment, pledge,
disposition or transfer, beneficially own more than 4.9% of the then
outstanding voting power of the issuer of the Restricted Shares, except in
accordance with Section 10(b) or Section 11.
(b) Permitted Sales. Following the termination of the Merger Agreement,
CRA shall be permitted to sell any Restricted Shares beneficially owned by
it if such sale is made pursuant to a tender or exchange offer that has been
approved or recommended, or otherwise determined to be fair and in the best
interests of the stockholders of OSI, by a majority of the members of the
Board of Directors of OSI (which majority shall include a majority of
directors who were directors prior to the announcement of such tender or
exchange offer).
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11. REGISTRATION RIGHTS. Following the termination of the Merger Agreement,
CRA (a "Designated Holder") may by written notice (the "Registration Notice") to
OSI (the "Registrant") request the Registrant to register under the Securities
Act all or any part of the Restricted Shares beneficially owned by such
Designated Holder (the "Registrable Securities") pursuant to a bonafide firm
commitment underwritten public offering in which the Designated Holder and the
underwriters shall effect as wide a distribution of such Registrable Securities
as is reasonably practicable and shall use their best efforts to prevent any
Person (including any Group) and its affiliates from purchasing through such
offering Restricted Shares representing more than 1% of the outstanding shares
of Common Stock of the Registrant on a fully diluted basis (a "Permitted
Offering"). The Registration Notice shall include a certificate executed by the
Designated Holder and its proposed managing underwriter, which underwriter shall
be an investment banking firm of nationally recognized standing and reasonably
satisfactory to the Registrant (the "Manager"), stating that (i) they have a
good faith intention to commence promptly a Permitted Offering and (ii) the
Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price equal to at least 80% of the Fair Market Value of such shares. For
purposes hereof, the "Fair Market Value" of such shares shall mean the average
of the closing sales prices of such shares on the Nasdaq Stock Market (or such
other stock exchange or market system as shall then be the primary trading
market for such security) for the ten trading days immediately preceding the
Registration Notice. The Registrant (and/or any Person designated by the
Registrant) shall thereupon have the option exercisable by written notice
delivered to the Designated Holder within 10 business days after the receipt of
the Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities for cash at a price (the "Option Price") equal to the
product of (i) the number of Registrable Securities to be so purchased and (ii)
the Fair Market Value of such shares. Any such purchase of Registrable
Securities by the Registrant hereunder shall take place at a closing to be held
at the principal executive offices of the Registrant or its counsel at any
reasonable date and time designated by the Registrant and/or such designee in
such notice within 20 business days after delivery of such notice. Any payment
for the shares to be purchased shall be made by delivery at the time of such
closing of the Option Price in immediately available funds.
If the Registrant does not elect to exercise its option pursuant to this
Section 11 with respect to all Registrable Securities, it shall use its
reasonable best efforts to effect, as promptly as practicable, the registration
under the Securities Act of the unpurchased Registrable Securities; provided,
however, that (i) neither party shall be entitled to more than an aggregate of
two effective registration statements hereunder and (ii) the Registrant will not
be required to file any such registration statement during any period of time
(not to exceed 40 days after such request in the case of clause (A) below or 90
days in the case of clauses (B) and (C) below) when (A) the Registrant is in
possession of material non-public information which it reasonably believes would
be detrimental to be disclosed at such time and, in the opinion of counsel to
such Registrant, such information would have to be disclosed if a registration
statement were filed at that time; (B) such Registrant is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) such Registrant determines, in
its reasonable judgment, that such registration would interfere with any
financing, acquisition or other material transaction involving the Registrant or
any of its affiliates. If consummation of the sale of any Registrable Securities
pursuant to a registration hereunder does not occur within 90 days after the
filing with the Securities and Exchange Commission of the initial registration
statement, the provisions of this Section 11 shall again be applicable to any
proposed registration; provided, however, that neither party shall be entitled
to request more than two registrations pursuant to this Section 11. The
Registrant shall use its reasonable best efforts to cause any Registrable
Securities registered pursuant to this Section 11 to be qualified for sale under
the securities or Blue-Sky laws of such jurisdictions as the Designated Holder
may reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that the Registrant shall not be
required to qualify to do business in, consent to general service of process in,
or subject itself to taxation in any jurisdiction by reason of this provision.
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The registration rights set forth in this Section 11 are subject to the
condition that the Designated Holder shall provide the Registrant with such
information with respect to such holder's Registrable Securities, the plans for
the distribution thereof, and such other information with respect to such holder
as, in the reasonable judgment of counsel for the Registrant, is necessary to
enable the Registrant to include in such registration statement all material
facts required to be disclosed with respect to a registration thereunder.
A registration effected under this Section 11 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and expenses of counsel to the Holder, and the Registrant shall provide to
the underwriters such documentation (including certificates, opinions of counsel
and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to indemnify each
other and the underwriters in the customary manner and (ii) to enter into an
underwriting agreement in form and substance customary to transactions of this
type with the Manager and the other underwriters participating in such offering.
12. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change in
OSI Common Stock by reason of stock dividends, splitups, mergers (other than the
Merger), recapitalizations, combinations, exchange of shares or the like, the
type and number of shares or securities subject to the OSI Option, and the
purchase price per share provided in Section 1, shall be adjusted appropriately.
13. RESTRICTIVE LEGENDS. Each certificate representing shares of OSI Common
Stock issued to CRA hereunder, shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH
SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH
IN THE STOCK OPTION AGREEMENT, DATED AS OF APRIL 21, 1997, A COPY OF WHICH MAY
BE OBTAINED FROM OCCUSYSTEMS, INC.
14. BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement, neither
this Agreement nor the rights or the obligations of either party hereto are
assignable, except by operation of law, or with the written consent of the other
party. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement. Any Restricted Shares sold by a party in compliance with the
provisions of Section 10 or 11 shall, upon consummation of such sale, be free of
the restrictions imposed with respect to such shares by this Agreement, unless
and until such party shall repurchase or otherwise become the beneficial owner
of such shares, and any transferee of such shares shall not be entitled to the
rights of such party. Certificates representing shares sold in a registered
public offering pursuant to Section 11 shall not be required to bear the legend
set forth in Section 13.
15. SPECIFIC PERFORMANCE. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is adequate remedy at law.
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16. ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement dated
March 19, 1997 between OSI and CRA (other than "standstill" provisions thereof,
which are superseded pursuant ot Section 10.4 of the Management Agreement), the
Merger Agreement (including the exhibits and schedules thereto) and the CRA
Stock Option Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof.
17. FURTHER ASSURANCES. Each party will execute and deliver all such further
documents and instruments and take all such further action as may be necessary
in order to consummate the transactions contemplated hereby.
18. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
19. NOTICES. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by next day delivery by a nationally recognized overnight delivery
service or by certified or registered mail, postage prepaid, and shall be deemed
to be given, dated and received (i) when so delivered personally, (ii) upon
receipt of an appropriate electronic answerback or confirmation when so
delivered by telegraph or telecopy (to such number specified below or another
number or numbers as such person may subsequently designate by notice hereunder)
or (iii) one business day after sending by overnight delivery, and five business
days after the date of mailing by certified or registered mail, to the following
address or to such other address or addresses as such person may subsequently
designate by notice given hereunder, if so delivered by mail:
If to CRA:
CRA Managed Care, Inc.
312 Union Wharf
Boston, Massachusetts 02109
Attention: Chairman
Telecopier No.: (617) 720-1259
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With copies to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: James Westra, Esq.
Telecopier No.: (617) 951-1295
If to OSI:
OccuSystems, Inc.
3010 LBJ Freeway
Suite 400
Dallas, Texas 75234
Attention: General Counsel
Telecopier No.: (972) 243-7540
With copies to:
Vinson & Elkins LLP
2001 Ross Avenue
Suite 3700
Dallas TX 75201
Attention: Jeffrey A. Chapman
Telecopier No.: (214) 220-7716
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.
21. DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
22. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original, but both of which, taken together,
shall constitute one and the same instrument.
23. EXPENSES. Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
24. AMENDMENTS; WAIVER. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
CRA MANAGED CARE, INC.
By: /S/ DONALD J. LARSON
--------------------------------------
Title: PRESIDENT & CHIEF EXECUTIVE
OFFICER
OCCUSYSTEMS, INC.
By: /s/ JOHN K. CARLYLE
--------------------------------------
Title: CHAIRMAN & CHIEF EXECUTIVE
OFFICER
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APPENDIX C
CRA MANAGED CARE, INC. STOCK OPTION AGREEMENT
CRA MANAGED CARE, INC. STOCK OPTION AGREEMENT (this "Agreement"), dated as
of April 21, 1997 by and between OccuSystems, Inc., a Delaware corporation
("OSI"), and CRA Managed Care, Inc., a Massachusetts corporation ("CRA").
WHEREAS, concurrently with the execution and delivery of this Agreement,
OSI, CRA and Concentra Managed Care, Inc. a Delaware corporation ("Holding
Company"), are entering into an Agreement and Plan of Reorganization, dated as
of the date hereof (the "Merger Agreement"), which provides that, among other
things, upon the terms and subject to the conditions thereof, CRA will be merged
with a wholly owned subsidiary of Holding Company (the "Merger"), with CRA
continuing as the surviving corporation;
WHEREAS, as a condition to OSI's willingness to enter into the Merger
Agreement, OSI has requested that CRA agree, and CRA has so agreed, to grant to
OSI an option with respect to certain shares of CRA's common stock on the terms
and subject to the conditions set forth herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement, CRA
and OSI are entering into an OSI Stock Option Agreement (the "OSI Stock Option
Agreement") pursuant to which OSI has agreed to grant to CRA an option with
respect to certain shares of OSI's Common Stock on the terms and subject to the
conditions set forth therein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF OPTION.
(a) CRA hereby grants OSI an irrevocable option (the "CRA Option") to
purchase up to the Option Number (as hereinafter defined) of shares (the "CRA
Shares") of common stock, par value $.01 per share, of CRA (the "CRA Common
Stock"), in the manner set forth below at a price (the "Exercise Price") of $37
7/8 per CRA Share, payable in cash in accordance with Section 4 hereof. As used
herein, the "Option Number" shall initially be the number of shares equal to 10%
of the total number of shares of CRA Common Stock issued and outstanding as of
March 31, 1997, and shall be adjusted hereafter to reflect changes in CRA's
capitalization occurring after the date hereof in accordance with Section 12.
Capitalized terms used herein but not defined herein shall have the meanings set
forth in the Merger Agreement.
(b) Notwithstanding any other provision of this Agreement, in no event shall
OSI's Total Profit (as hereinafter defined) exceed $15 million and, if it
otherwise would exceed such amount, OSI, at its sole election, shall either (a)
deliver to CRA for cancellation CRA Shares previously purchased by OSI, (b) pay
cash to CRA or (c) undertake any combination thereof, so that OSI's Total Profit
shall not exceed $15 million after taking into account the foregoing actions.
(c) Notwithstanding any other provision of this Agreement, the CRA Option
may not be exercised for a number of CRA Shares as would, as of the date of the
Exercise Notice (as hereinafter defined), result in a Notional Total Profit (as
hereinafter defined) of more than $15 million and, if exercise of the CRA Option
otherwise would exceed such amount, OSI, at its discretion, may increase the
Purchase Price for that number of CRA Shares set forth in the Exercise Notice so
that the Notional Total Profit shall not exceed $15 million.
(d) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount of cash received by OSI pursuant
to Section 9.5(b) of the Merger Agreement, (ii)
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(x) the amount received by OSI pursuant to CRA's repurchase of CRA Shares or the
CRA Option pursuant to Section 7 hereof, less (y) OSI's purchase price for such
CRA Shares, and (iii) (x) the net cash amounts received by OSI pursuant to the
sale of CRA Shares (or any other securities into which such CRA Shares are
converted or exchanged), less (y) OSI's purchase price for such CRA Shares.
(e) As used herein, the term "Notional Total Profit" with respect to any
number of CRA Shares as to which OSI may propose to exercise the CRA Option
shall be the Total Profit determined as of the date of the Exercise Notice
assuming that the CRA Option was exercised on such date for such number of CRA
Shares and assuming that such CRA Shares, together with all other CRA Shares
held by OSI and its affiliates as of such date, were sold for cash at the
closing market price for the CRA Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
2. EXERCISE OF OPTION. The CRA Option may be exercised by OSI, in whole or
in part, at any time or from time to time after the occurrence of a "Trigger
Event". For purposes hereof, a "Trigger Event" shall mean an event that causes
CRA to pay the fee to OSI provided in Section 9.5(b) of the Merger Agreement. In
the event OSI wishes to exercise the CRA Option, OSI shall deliver to CRA a
written notice (an "Exercise Notice") specifying the total number of CRA Shares
it wishes to purchase. Each closing of a purchase of CRA Shares (a "Closing")
shall occur at a place, on a date and at a time designated by OSI in an Exercise
Notice delivered at least two business days prior to the date of the Closing.
The CRA Option shall terminate (the "Termination Date") upon the earlier of: (i)
the Effective Time; (ii) the termination of the Merger Agreement other than
under circumstances which also constitute a Trigger Event; or (iii) the 180th
day following a Trigger Event (or if, at the expiration of such period the CRA
Option cannot be exercised by reason of any applicable judgment, decree, order,
law or regulation, 10 business days after such impediment to exercise shall have
been removed or shall have become final and not subject to appeal but in no
event under this clause (iii) later than the 548th day following such Triggering
Event). Notwithstanding the foregoing, the CRA Option may not be exercised if
OSI is in material breach of any of its representations, warranties, covenants
or agreements contained in this Agreement or in the Merger Agreement.
3. CONDITIONS TO CLOSING. The obligation of CRA to issue the CRA Shares to
OSI hereunder is subject to the conditions, which (other than the conditions
described in clauses (i) and (iii) below) may be waived by CRA in its sole
discretion, that (i) all waiting periods, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder ("HSR Act"), applicable to the issuance of the CRA Shares
hereunder shall have expired or have been terminated, and all consents,
approvals, orders or authorizations of, or registrations, declarations or
filings with, any federal administrative agency or commission or other federal
governmental authority or instrumentality, if any, required in connection with
the issuance of the CRA Shares hereunder shall have been obtained or made, as
the case may be; (ii) the CRA Shares shall have been approved for quotation on
the Nasdaq Stock Market upon official notice of issuance; and (iii) no
preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such issuance shall be in
effect.
4. CLOSING. At any Closing, (a) CRA will deliver to OSI a single certificate
in definitive form representing the number of CRA Shares designated by OSI in
its Exercise Notice, such certificate to be registered in the name of OSI and to
bear the legend set forth in Section 13, and (b) OSI will deliver to CRA the
aggregate price for the CRA Shares so designated and being purchased by wire
transfer of immediately available funds to a bank designated by CRA at the
Closing.
5. REPRESENTATIONS AND WARRANTIES OF CRA. CRA represents and warrants to OSI
that (a) CRA is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement by CRA
and the consummation by CRA of the transactions contemplated hereby have been
duly authorized by all necessary corporate action
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on the part of CRA and no other corporate proceedings on the part of CRA are
necessary to authorize this Agreement or any of the transactions contemplated
hereby, (d) this Agreement has been duly executed and delivered by CRA and
constitutes a valid and binding obligation of CRA, and, assuming this Agreement
constitutes a valid and binding obligation of OSI, is enforceable against CRA in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity, (d) CRA has taken all necessary corporate action to
authorize and reserve for issuance and to permit it to issue, upon exercise of
the CRA Option, and at all times from the date hereof through the expiration of
the CRA Option will have reserved, a number of authorized and unissued CRA
Shares not less than the Option Number, all of which, upon their issuance and
delivery in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable, (e) upon delivery of CRA Shares to OSI upon the
exercise of the CRA Option, OSI will acquire CRA Shares, free and clear of all
claims, liens, charges, encumbrances and security interests of any nature
whatsoever, (f) the execution and delivery of this Agreement by CRA does not,
and the performance of this Agreement by CRA will not (i) violate the Articles
of Organization or By-Laws of CRA, (ii) conflict with or violate any statute,
rule, regulation, order, judgment or decree applicable to CRA or by which it or
any of its property is bound or affected or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give rise to any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the property or assets of CRA pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, or other
instrument or obligation to which CRA is a party or by which CRA or any of its
property is bound or affected, except, in the case of clauses (ii) and (iii)
above, for violations, breaches, defaults, rights, liens or encumbrances which
would not, individually or in the aggregate, have a CRA Material Adverse Effect,
and (g) the execution and delivery of this Agreement by CRA does not, and the
performance of this Agreement by CRA will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority except the pre-merger notification requirements of the
HSR Act.
6. REPRESENTATIONS AND WARRANTIES OF OSI. OSI represents and warrants to CRA
that (a) OSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, (b) the execution and delivery of this Agreement by OSI and the
consummation by OSI of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of OSI and no other
corporate proceedings on the part of OSI are necessary to authorize this
Agreement or any of the transactions contemplated hereby, (c) this Agreement has
been duly executed and delivered by OSI and constitutes a valid and binding
obligation of OSI, and, assuming this Agreement constitutes a valid and binding
obligation of CRA, is enforceable against OSI in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity, (d) the
execution and delivery of this Agreement by OSI does not, and the performance of
this Agreement by OSI will not (i) violate the Certificate of Incorporation or
By-Laws of OSI, (ii) conflict with or violate any statute, rule, regulation,
order, judgment or decree applicable to OSI or by which it or any of its
property is bound or affected or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give rise to any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of OSI pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, or other instrument or
obligation to which OSI is a party or by which OSI or any of its property is
bound or affected, except, in the case of clauses (ii) and (iii) above, for
violations, breaches, defaults, rights, liens or encumbrances which would not,
individually or in the aggregate, have an OSI Material Adverse Effect, (e) the
execution and delivery of this Agreement by OSI does not, and the performance of
this Agreement by OSI will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except the pre-merger notification requirements of the HSR Act and
(f) any CRA Shares acquired upon
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exercise of the CRA Option will not be, and the CRA Option is not being,
acquired by OSI with a view to the public distribution thereof.
7. CERTAIN REPURCHASES.
(a) OSI PUT. At the request of OSI at any time during which the CRA Option
would be exercisable pursuant to Section 2 (the "Repurchase Period"), CRA (or
any successor entity thereof) shall, subject to the limitations set forth in
Section 1, repurchase from OSI (1) the CRA Option, including any portion
thereof, at the price set forth in subparagraph (i) below, or (2) CRA Shares
purchased by OSI pursuant thereto, at a price set forth in subparagraph (ii)
below:
(i) the difference between the average of the closing sale prices of
shares of CRA Common Stock on the Nasdaq Stock Market for the ten trading
days immediately preceding the date OSI gives notice of its intent to
exercise its rights under this Section 7 (the "Market Price") and the
Exercise Price, multiplied by the number of the CRA Shares purchasable
pursuant to the CRA Option (or portion thereof with respect to which OSI is
exercising its rights under this Section 7), but only if the Market Price is
greater than the Exercise Price; or
(ii) the Exercise Price paid by OSI for the CRA Shares acquired pursuant
to the CRA Option plus the difference between the Market Price and the
Exercise Price, but only if the Market Price is greater than the Exercise
Price, multiplied by the number of CRA Shares so purchased.
(b) PAYMENT AND REDELIVERY OF THE CRA OPTION OR SHARES. In the event OSI
exercises its rights under this Section 7, CRA shall, within 10 business days
thereafter, pay the required amount to OSI by wire transfer of immediately
available funds and OSI shall surrender to CRA the CRA Option or the
certificates evidencing CRA Shares purchased by OSI pursuant thereto, and OSI
shall warrant that it owns such shares and that such shares are then free and
clear of all liens, claims, damages, charges and encumbrances of any kind or
nature whatsoever.
8. VOTING OF SHARES. Following the date hereof and prior to the Expiration
Date (as defined in Section 9(b)), each party shall vote any shares of capital
stock of the other party acquired by such party pursuant to this Agreement or
otherwise beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) by such
party (the shares so owned by a party collectively the "Restricted Shares") on
each matter submitted to a vote of stockholders of such other party for and
against such matter in the same proportion as the vote of all other stockholders
of such other party are voted (whether by proxy or otherwise) for and against
such matter.
9. RESTRICTION ON CERTAIN ACTIONS.
(a) RESTRICTIONS. Other than pursuant to the Merger Agreement, following the
date hereof and prior to the Expiration Date, without the prior written consent
of the other party, neither party shall, nor shall permit its affiliates to,
directly or indirectly, alone or in concert or conjunction with any other Person
or Group (as defined in Section 9(b)), (i) in any manner acquire, agree to
acquire or make any proposal to acquire, any securities of, equity interest in,
or any material property of, such other party or any of its subsidiaries (other
than pursuant to this Agreement, the OSI Stock Option Agreement or the Merger
Agreement), (ii) except at the specific written request of such other party,
propose to enter into any merger or business combination involving such other
party or any of its subsidiaries or to purchase a material portion of the assets
of such other party or any of its subsidiaries, (iii) make or in any way
participate in any "solicitation" of "proxies" (as such terms are used in
Regulation 14A promulgated under the Exchange Act) to vote, or seek to advise or
influence any Person with respect to the voting of, any voting securities of
such other party or any of its subsidiaries, (iv) form, join or in any way
participate in a Group with respect to any voting securities of such other party
or any of its subsidiaries, (v) seek to control or influence the management,
Board of Directors or policies of such other party, (vi) disclose any intention,
plan or arrangement inconsistent with the foregoing, (vii) advise, assist or
encourage any other Person in connection with the foregoing or (viii) request
such other party (or its directors, officers,
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employees or agents), to amend or waive any provision of this Section 9, or take
any action which may require such other party to make a public announcement
regarding the possibility of a business combination or merger with such party.
(b) EXPIRATION DATE. For purposes of this Agreement, (i) the term "Person"
shall mean any corporation, partnership, individual, trust, unincorporated
association or other entity or Group (within the meaning of Section 13(d)(3) of
the Exchange Act), (ii) the term "Expiration Date" with respect to any
obligation or restriction imposed on one party shall mean the earlier to occur
of (A) the first anniversary of the date hereof and (B) such time as the other
party shall have suffered a Change of Control and (iii) a "Change of Control"
with respect to one party shall be deemed to have occurred whenever (A) there
shall be consummated (1) any consolidation or merger of such party in which such
party is not the continuing or surviving corporation, or pursuant to which
shares of such party's common stock would be converted in whole or in part into
cash, other securities or other property, other than a merger of such person in
which the holders of such party's common stock immediately prior to the merger
have substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (2) any sale, lease,
exchange or transfer (in one transaction or a series of related transactions) of
all or substantially all the assets of such party, or (B) the stockholders of
such party shall approve any plan or proposal for the liquidation or dissolution
of such party, or (C) any party, other than such party or a subsidiary thereof
or any employee benefit plan sponsored by such party or a subsidiary thereof or
a corporation owned, directly or indirectly, by the stockholders of such party
in substantially the same proportions as their ownership of stock of such party,
shall become the beneficial owner of securities of such party representing 25%
or more of the combined voting power of then outstanding securities ordinarily
(and apart from rights accruing in special circumstances) having the right to
vote in the election of directors, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or otherwise, or (D) at
any time during the period commencing on the date of this Agreement and ending
on the Expiration Date, individuals who at the date hereof constituted the Board
of Directors of such party shall cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by such
party's stockholders of each new director during the period commencing on the
date of this Agreement and ending on the Expiration Date was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the date hereof, or (E) any other event shall occur with respect to such
party that would be required to be reported in response to Item 6(e) (or any
successor provision) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act.
10. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIONS ON TRANSFER. Prior to the Expiration Date, OSI shall not,
directly or indirectly, by operation of law or otherwise, sell, assign, pledge
or otherwise dispose of or transfer any Restricted Shares beneficially owned by
it, other than (i) pursuant to Section 7, or (ii) in accordance with Section
10(b) or 11. Subsequent to the Expiration Date, OSI shall not, directly or
indirectly, by operation of law or otherwise, sell, assign, pledge or otherwise
dispose of or transfer any Restricted Shares beneficially owned by it to any
purchaser, assignee, pledgee or other transferee who would, immediately after
such sale, assignment, pledge, disposition or transfer, beneficially own more
than 4.9% of the then outstanding voting power of the issuer of the Restricted
Shares, except in accordance with Section 10(b) or Section 11.
(b) PERMITTED SALES. Following the termination of the Merger Agreement, OSI
shall be permitted to sell any Restricted Shares beneficially owned by it if
such sale is made pursuant to a tender or exchange offer that has been approved
or recommended, or otherwise determined to be fair and in the best interests of
the stockholders of CRA, by a majority of the members of the Board of Directors
of CRA (which majority shall include a majority of directors who were directors
prior to the announcement of such tender or exchange offer).
11. REGISTRATION RIGHTS. Following the termination of the Merger Agreement,
OSI (a "Designated Holder") may by written notice (the "Registration Notice") to
CRA (the "Registrant") request the
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Registrant to register under the Securities Act all or any part of the
Restricted Shares beneficially owned by such Designated Holder (the "Registrable
Securities") pursuant to a bonafide firm commitment underwritten public offering
in which the Designated Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use their best efforts to prevent any Person (including any Group) and its
affiliates from purchasing through such offering Restricted Shares representing
more than 1% of the outstanding shares of Common Stock of the Registrant on a
fully diluted basis (a "Permitted Offering"). The Registration Notice shall
include a certificate executed by the Designated Holder and its proposed
managing underwriter, which underwriter shall be an investment banking firm of
nationally recognized standing and reasonably satisfactory to the Registrant
(the "Manager"), stating that (i) they have a good faith intention to commence
promptly a Permitted Offering and (ii) the Manager in good faith believes that,
based on the then prevailing market conditions, it will be able to sell the
Registrable Securities at a per share price equal to at least 80% of the Fair
Market Value of such shares. For purposes hereof, the "Fair Market Value" of
such shares shall mean the average of the closing sales prices of such shares on
the Nasdaq Stock Market (or such other stock exchange or market system as shall
then be the primary trading market for such security) for the ten trading days
immediately preceding the Registration Notice. The Registrant (and/or any Person
designated by the Registrant) shall thereupon have the option exercisable by
written notice delivered to the Designated Holder within 10 business days after
the receipt of the Registration Notice, irrevocably to agree to purchase all or
any part of the Registrable Securities for cash at a price (the "Option Price")
equal to the product of (i) the number of Registrable Securities to be purchased
and (ii) the Fair Market Value of such shares. Any such purchase of Registrable
Securities by the Registrant hereunder shall take place at a closing to be held
at the principal executive offices of the Registrant or its counsel at any
reasonable date and time designated by the Registrant and/or such designee in
such notice within 20 business days after delivery of such notice. Any payment
for the shares to be purchased shall be made by delivery at the time of such
closing of the Option Price in immediately available funds.
If the Registrant does not elect to exercise its option pursuant to this
Section 11 with respect to all Registrable Securities, it shall use its
reasonable best efforts to effect, as promptly as practicable, the registration
under the Securities Act of the unpurchased Registrable Securities; provided,
however, that (i) neither party shall be entitled to more than an aggregate of
two effective registration statements hereunder and (ii) the Registrant will not
be required to file any such registration statement during any period of time
(not to exceed 40 days after such request in the case of clause (A) below or 90
days in the case of clauses (B) and (C) below) when (A) the Registrant is in
possession of material non-public information which it reasonably believes would
be detrimental to be disclosed at such time and, in the opinion of counsel to
such Registrant, such information would have to be disclosed if a registration
statement were filed at that time; (B) such Registrant is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) such Registrant determines, in
its reasonable judgment, that such registration would interfere with any
financing, acquisition or other material transaction involving the Registrant or
any of its affiliates. If consummation of the sale of any Registrable Securities
pursuant to a registration hereunder does not occur within 90 days after the
filing with the Securities and Exchange Commission of the initial registration
statement, the provisions of this Section 11 shall again be applicable to any
proposed registration; provided, however, that neither party shall be entitled
to request more than two registrations pursuant to this Section 11. The
Registrant shall use its reasonable best efforts to cause any Registrable
Securities registered pursuant to this Section 11 to be qualified for sale under
the securities or Blue-Sky laws of such jurisdictions as the Designated Holder
may reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that the Registrant shall not be
required to qualify to do business in, consent to general service of process in,
or subject itself to taxation in any jurisdiction by reason of this provision.
The registration rights set forth in this Section 11 are subject to the
condition that the Designated Holder shall provide the Registrant with such
information with respect to such holder's Registrable
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Securities, the plans for the distribution thereof, and such other information
with respect to such holder as, in the reasonable judgment of counsel for the
Registrant, is necessary to enable the Registrant to include in such
registration statement all material facts required to be disclosed with respect
to a registration thereunder.
A registration effected under this Section 11 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and expenses of counsel to the Holder, and the Registrant shall provide to
the underwriters such documentation (including certificates, opinions of counsel
and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to indemnify each
other and the underwriters in the customary manner and (ii) to enter into an
underwriting agreement in form and substance customary to transactions of this
type with the Manager and the other underwriters participating in such offering.
12. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change in
CRA Common Stock by reason of stock dividends, splitups, mergers (other than the
Merger), recapitalizations, combinations, exchange of shares or the like, the
type and number of shares or securities subject to the CRA Option, and the
purchase price per share provided in Section 1, shall be adjusted appropriately.
13. RESTRICTIVE LEGENDS. Each certificate representing shares of CRA Common
Stock issued to OSI hereunder, shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH
SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH
IN THE STOCK OPTION AGREEMENT, DATED AS OF APRIL 21, 1997, A COPY OF WHICH MAY
BE OBTAINED FROM CRA MANAGED CARE, INC.
14. BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement, neither
this Agreement nor the rights or the obligations of either party hereto are
assignable, except by operation of law, or with the written consent of the other
party. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement. Any Restricted Shares sold by a party in compliance with the
provisions of Section 10 or 11 shall, upon consummation of such sale, be free of
the restrictions imposed with respect to such shares by this Agreement, unless
and until such party shall repurchase or otherwise become the beneficial owner
of such shares, and any transferee of such shares shall not be entitled to the
rights of such party. Certificates representing shares sold in a registered
public offering pursuant to Section 11 shall not be required to bear the legend
set forth in Section 13.
15. SPECIFIC PERFORMANCE. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is adequate remedy at law.
16. ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement dated
March 19, 1997 between CRA and OSI (other than the "standstill" provisions
thereof, which are superseded pursuant to Section 10.4 of the Merger Agreement),
the Merger Agreement (including the exhibits and schedules thereto) and
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the OSI Stock Option Agreement constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof.
17. FURTHER ASSURANCES. Each party will execute and deliver all such further
documents and instruments and take all such further action as may be necessary
in order to consummate the transactions contemplated hereby.
18. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
19. NOTICES. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by next day delivery by a nationally recognized overnight delivery
service or by certified or registered mail, postage prepaid, and shall be deemed
to be given, dated and received (i) when so delivered personally, (ii) upon
receipt of an appropriate electronic answer back or confirmation when so
delivered by telegraph or telecopy (to such number specified below or another
number or numbers as such person may subsequently designate by notice hereunder)
or (iii) one business day after sending by overnight delivery, and five business
days after the date of mailing by certified or registered mail, to the following
address or to such other address or addresses as such person may subsequently
designate by notice given hereunder, if so delivered by mail:
If to CRA:
CRA Managed Care, Inc.
312 Union Wharf
Boston, Massachusetts 02109
Attention: Chairman
Telecopier No.: (617) 720-1259
With copies to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: James Westra, Esq.
Telecopier No.: (617) 951-1295
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If to OSI:
OccuSystems, Inc.
3010 LBJ Freeway
Suite 400
Dallas, Texas 75234
Attention: General Counsel
Telecopier No.: (972) 243-7540
With copies to:
Vinson & Elkins LLP
2001 Ross Avenue
Suite 3700
Dallas, TX 75201
Attention: Jeffrey A. Chapman
Telecopier No.: (214) 220-7716
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts applicable to
agreements made and to be performed entirely within such State.
21. DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
22. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original, but both of which, taken together,
shall constitute one and the same instrument.
23. EXPENSES. Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
24. AMENDMENTS; WAIVER. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
OCCUSYSTEMS, INC.
By: /s/ JOHN K. CARLYLE
- --------------------------------------------------------------------------------
Title: CHAIRMAN & CHIEF EXECUTIVE
OFFICER
CRA MANAGED CARE, INC.
By: /s/ DONALD J. LARSON
- --------------------------------------------------------------------------------
Title: PRESIDENT & CHIEF EXECUTIVE
OFFICER
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APPENDIX D
[DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION LETTERHEAD]
April 21, 1997
Board of Directors
OccuSystems, Inc.
3010 LBJ Freeway
Suite 400
Dallas, Texas 75234
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of OccuSystems, Inc. (the "Company") of the Exchange
Ratio, as hereinafter defined, pursuant to the terms of the Agreement and Plan
of Reorganization, dated as of April 21, 1997 (the "Agreement"), among CRA
Managed Care, Inc. ("CRA"), the Company and Concentra Managed Care, Inc.
("Concentra"), a newly formed holding company, pursuant to which a wholly owned
subsidiary of Concentra will be merged with and into CRA and the Company will be
merged with and into Concentra (the "Merger").
Pursuant to the Agreement, each share of common stock, par value $0.01 per
share, of the Company ("Company Common Stock") will be converted into the right
to receive one share (the "OccuSystems Exchange Ratio") of common stock, $0.01
par value per share, of Concentra ("Concentra Common Stock"), and each share of
common stock, par value $0.01 per share, of CRA ("CRA Common Stock") will be
converted, subject to certain exceptions, into the right to receive 1.7857
shares (the "CRA Exchange Ratio") of Concentra Common Stock (the quotient of the
OccuSystems Exchange Ration and the CRA Exchange Ratio, the "Exchange Ratio").
In arriving at our opinion, we have reviewed the draft dated April 17, 1997,
of the Agreement, and the drafts dated April 17, 1997, of the OccuSystems Stock
Option Agreement and the CRA Stock Option Agreement, in each case, by and
between CRA and the Company. We also have reviewed financial and other
information that was publicly available or furnished to us by the Company and
CRA including information provided during discussions with their respective
managements. Included in the information provided during discussions with the
respective managements was certain financial projections of the Company for the
period beginning January 1, 1997, and ending December 31, 2001, prepared by the
management of the Company and certain financial projections of CRA for the
period beginning January 1, 1997, and ending December 31, 2001, prepared by the
management of CRA. In addition, we have compared certain financial and
securities data of the Company and CRA with various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of CRA Common Stock and Company Common Stock and such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion. We were not requested to, nor did we, solicit the
interest of any other party in acquiring the Company.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and CRA or their
respective representatives, or that was otherwise reviewed by us. In particular,
we have relied upon the estimates of the management of the Company of the
operating synergies achievable as a result of the Merger and upon our discussion
of such synergies with the management of CRA. With respect to the financial
projections supplied to us, we have assumed that they have been reasonably
prepared on the basis reflecting the best currently available estimates and
judgments
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of the management of the Company and CRA as to the future operating and
financial performance of the Company and CRA, respectively. We have not assumed
any responsibility for making an independent evaluation of the Company's assets
or liabilities or for making any independent verification of any of the
information reviewed by us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion other than as expressly provided in that certain
letter agreement dated March 27, 1997, between the Company and Donaldson, Lufkin
& Jenrette Securities Corporation ("DLJ"). We are expressing no opinion herein
as to the price at which Concentra Common Stock will actually trade at any time.
Our opinion does not address the relative merits of the Merger and the other
business strategies being considered by the Company's Board of Directors, nor
does it address the Board's decision to proceed with the Merger. Our opinion
does not constitute a recommendation to any stockholder as to how such
stockholder should vote on the proposed transaction.
DLJ, as part of its investment banking services, is regularly engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. DLJ
has performed investment banking and other services for the Company in the past
and has been compensated for such services. Included in such services were (i)
lead managing the Company's initial public offering in May of 1995, (ii) lead
managing a secondary equity offering in March of 1996, and (iii) lead managing a
convertible subordinated notes offering in December of 1996, in each case, for
which DLJ received normal and customary compensation. In addition, an affiliate
of DLJ has invested an aggregate of $12.5 million in debt and equity securities
of Concentra Development Corp. an affiliate of the Company.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the holders of the Company
Common Stock from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael R. Nicolais
-----------------------------------
Michael R. Nicolais
Managing Director
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APPENDIX E
[ALEX. BROWN & SONS INCORPORATED LETTERHEAD]
April 21, 1997
Board of Directors
CRA Managed Care, Inc.
312 Union Wharf
Boston, MA 02109
Dear Sirs and Madam:
CRA Managed Care, Inc. ("CRA"), OccuSystems, Inc. ("OccuSystems") and
Concentra Managed Care, Inc. ("Concentra") have entered into an Agreement and
Plan of Reorganization dated April 21, 1997 (the "Agreement") pursuant to which
(i) Concentra will acquire all of the common stock of CRA through the merger of
a wholly owned subsidiary of Concentra to be organized for the sole purpose of
effectuating the Agreement ("CRA Merger Sub"), with and into CRA and (ii)
OccuSystems will be merged with and into Concentra (the "Merger"). The terms of
the Agreement provide, among other things, that each outstanding share of the
common stock, par value $0.01 per share, of CRA ("CRA Common Stock") shall be
converted into the right to receive 1.786 shares of Concentra (the "CRA Ratio")
and that each outstanding share of the common stock, par value $0.01 per share,
of OccuSystems ("OccuSystems Common Stock") shall be converted into the right to
receive one share of Concentra (the "OccuSystems Ratio", and together with the
CRA Ratio, the "Exchange Ratios"), subject to the surrender of certificates
representing CRA and OccuSystems common stock, respectively. You have requested
our opinion as to whether the Exchange Ratios are fair, from a financial point
of view, to the stockholders of CRA.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of CRA in
connection with the transaction described above and will receive a fee for our
services, a portion of which is contingent upon the consummation of the Merger.
In the past, we have provided financial advisory services and acted as
lead-managing underwriter with respect to CRA's common stock financings. We have
also acted as co-managing underwriter with respect to OccuSystems' common stock
and convertible debt financings. Alex. Brown maintains a market in the common
stock of CRA and OccuSystems and regularly publishes research reports regarding
the healthcare industry and the businesses and securities of CRA and OccuSystems
and other publicly owned companies in that industry. In the ordinary course of
business, Alex. Brown may actively trade the securities of both CRA and
OccuSystems for our own account and the account of our customers and,
accordingly, may at any time hold a long or short position in securities of CRA
and OccuSystems.
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning CRA and OccuSystems and
certain internal analyses and other information furnished to us by CRA and
OccuSystems. We have also held discussions with the members of the senior
managements of CRA and OccuSystems regarding the businesses and prospects of
their respective companies and the joint prospects of a combined company. In
addition, we have (i) reviewed the reported prices and trading activity for the
common stock of both CRA and OccuSystems, (ii) compared certain financial and
stock market information for CRA and OccuSystems with similar information of
certain
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Board of Directors
CRA Managed Care, Inc.
April 21, 1997
Page 2
other companies whose securities are publicly traded, (iii) reviewed the
financial terms of recent business combinations which we deemed comparable in
whole or in part, and (iv) performed such other studies and analyses and
considered such other factors as we deemed appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of CRA and
OccuSystems, we have assumed that such information reflects the best currently
available judgements and estimates of the managements of CRA and OccuSystems as
to the likely future financial performances of their respective companies and of
the combined company. In addition, we have not made nor been provided with an
independent evaluation or appraisal of the assets of CRA and OccuSystems. Our
opinion is based on market, economic and other conditions as they exist and can
be evaluated as of the date of this letter.
Our advisory services and the opinion expressed herein were prepared for the
use of the Board of Directors of CRA and do not constitute a recommendation to
CRA's stockholders as to how they should vote at the stockholder's meeting in
connection with the Merger. We hereby consent, however, to the inclusion of this
opinion in its entirety as an exhibit to any proxy or registration statement
required to be distributed to stockholders in connection with the transaction
contemplated in the Agreement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratios are fair, from a financial point view,
to the stockholders of CRA.
Very truly yours,
Alex. Brown & Sons Incorporated
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APPENDIX F
CRA MERGER AGREEMENT
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of ,
1997, by and between CRA Merger Corp., a Massachusetts corporation ("CRA Merger
Corp.") and a wholly-owned subsidiary of Concentra Managed Care, Inc., a
Delaware corporation ("Holding Company"), and CRA Managed Care, Inc., a
Massachusetts corporation ("CRA"). CRA and CRA Merger Corp. are sometimes
referred to herein as the "Constituent Corporations."
RECITALS
A. This Agreement is being entered into pursuant to an Agreement and Plan of
Reorganization dated as of April 21, 1997 (the "Reorganization Agreement"), by
and among CRA, OccuSystems, Inc., a Delaware corporation ("OccuSystems"), and
Holding Company. The Reorganization Agreement provides for, among other things,
(i) the merger of OccuSystems with and into Holding Company and (ii) the merger
of CRA Merger Corp. with and into CRA. All defined terms that are not otherwise
defined herein shall have the meaning ascribed to such terms in the
Reorganization Agreement.
B. The number of outstanding shares of common stock, par value $.01 per
share, of CRA Merger Corp. is 100, all of which shares are of one class and all
of which shares are entitled to vote. The number of outstanding shares of the
common stock, par value $.01 per share, of CRA (the "CRA Common Stock") is
, all of which shares are of one class and all of which shares are
entitled to vote.
C. The respective Boards of Directors of CRA Merger Corp. and CRA have
approved this Agreement and have directed that this Agreement be submitted to a
vote of Holding Company, the sole stockholder of CRA Merger Corp, and the
stockholders of CRA.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, CRA Merger Corp. and CRA hereby agree, subject to the terms and
conditions hereinafter set forth, as follows:
ARTICLE I
THE MERGER
SECTION 1.1 MERGER. In accordance with the provisions of this Agreement and
the Massachusetts Business Corporation Law (the "MBCL"), at the Effective Time
of the CRA Merger (as hereinafter defined) CRA Merger Corp. shall be merged with
and into CRA (the "CRA Merger"), the separate corporate existence of CRA Merger
Corp. shall cease and CRA will become a wholly-owned subsidiary of Holding
Company. CRA shall be the surviving corporation in the CRA Merger (hereinafter
sometimes referred to as the "Surviving Corporation") and shall continue its
corporate existence under the laws of the Commonwealth of Massachusetts.
SECTION 1.2 FILING AND EFFECTIVENESS. The CRA Merger shall become effective
when the following actions have been completed: (a) the Reorganization Agreement
and the CRA Merger shall have been adopted and approved by the stockholders of
CRA and Holding Company, the sole stockholder of CRA Merger Corp., in accordance
with the requirements of the MBCL; and (b) an executed Articles of Merger shall
have been filed with the Secretary of State of the Commonwealth of
Massachusetts. The date and time when the CRA Merger shall become effective, as
hereinabove provided, is herein called the "Effective Time of the CRA Merger."
SECTION 1.3 EFFECT OF THE MERGER. At the Effective Time of the CRA Merger,
(a) the separate existence of CRA Merger Corp. shall cease and CRA, as the
Surviving Corporation, shall possess all the rights, privileges, powers,
franchises and authority, both public and private, and be subject to all the
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restrictions, disabilities and duties of the Constituent Corporation and (b) the
Surviving Corporation shall be vested with all assets and property, real,
personal and mixed, and every interest therein, wherever located, belonging to
each of the Constituent Corporations and shall be liable for all the obligations
and liabilities of each of the Constituent Corporations, all as more fully
provided under the applicable provisions of the MBCL.
ARTICLE II
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
SECTION 2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of CRA
Merger Corp. as in effect immediately prior to the Effective Time of the CRA
Merger shall be the Articles of Incorporation of the Surviving Corporation
immediately after the Effective Time of the CRA Merger.
SECTION 2.2 BYLAWS. The Bylaws of CRA Merger Corp. as in effect immediately
prior to the Effective Time of the CRA Merger shall be the Bylaws of the
Surviving Corporation immediately after the Effective Time of the CRA Merger.
SECTION 2.3 DIRECTORS AND OFFICERS. The directors and officers of CRA Merger
Corp. immediately prior to the Effective Time of the CRA Merger shall be the
directors and officers of the Surviving Corporation until their successors shall
have been duly elected and qualified in accordance with applicable law.
ARTICLE III
CONVERSION OF STOCK
SECTION 3.1 CRA COMMON STOCK. At the Effective Time of the CRA Merger, each
share of CRA Common Stock issued and outstanding immediately prior thereto
shall, by virtue of the CRA Merger and without any action by the Constituent
Corporations, the holder of such share or any other person, be converted into
the right to receive 1.786 (the "CRA Ratio") shares of Holding Company Common
Stock, payable upon the surrender of the certificates formerly representing CRA
Common Stock pursuant to Section 3.5. Each certificate which immediately prior
to the Effective Time of the CRA Merger represented outstanding shares of CRA
Common Stock shall, on and after the Effective Time of the CRA Merger, be deemed
for all purposes to represent the right to receive the number of shares of
Holding Company Common Stock into which the shares of CRA Common Stock
represented by such certificate shall have been converted pursuant to this
Section 3.1.
SECTION 3.2 HOLDING COMPANY COMMON STOCK. At the Effective Time of the CRA
Merger, each share of Holding Company Common Stock issued and outstanding
immediately prior thereto shall, by virtue of the CRA Merger and without any
action by the Constituent Corporations, the holder of such share or any other
person, be canceled without payment of any consideration therefor and cease to
exist and be outstanding.
SECTION 3.3 DISSENTING SHARES. Notwithstanding anything in this Article III
to the contrary, shares of CRA Common Stock which are issued and outstanding
immediately prior to the Effective Time of the CRA Merger and which are held by
stockholders who have not voted such shares in favor of the CRA Merger and who
shall have properly exercised their rights of appraisal for such shares in the
manner provided by the MBCL (the "Dissenting Shares") shall not be converted
into or be exchangeable for the right to receive shares of Holding Company
Common Stock pursuant to Section 3.1, unless and until such holder shall have
failed to perfect or shall have effectively withdrawn or lost his right to
appraisal and payment, as the case may be. If such holder shall have so failed
to perfect or shall have effectively withdrawn or lost such right, his shares
shall thereupon be deemed to have been converted into and to
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have become exchangeable for, at the Effective Time of the CRA Merger, the right
to receive the shares of Holding Company Common Stock pursuant to Section 3.1,
without any interest thereon.
SECTION 3.4 FRACTIONAL SHARES, ETC. No certificate of scrip representing
fractional shares of Holding Company Common Stock shall be issued upon the
surrender for exchange of Certificates. In lieu of any fractional shares, each
holder of shares of Converted Stock who would otherwise have been entitled to a
fraction of a share of Holding Company Common Stock upon surrender of
Certificates for exchange will be paid an amount of cash (without interest) in
accordance with the terms and conditions of Section 4.5 of the Reorganization
Agreement.
SECTION 3.5 EXCHANGE FUND EXCHANGE PROCEDURES, ETC. The surrender and
exchange of Certificates for shares of Holding Company Common Stock shall be
made in accordance with the terms and conditions of Section 4.6 of the
Reorganization Agreement.
ARTICLE IV
GENERAL
SECTION 4.1 FURTHER ASSURANCE. From time to time, as and when required by
the Surviving Corporation, or by its successors or assigns, there shall be
executed and delivered on behalf of CRA such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions
as shall be appropriate or necessary in order to vest or perfect in or confirm
of record or otherwise by Surviving Corporation the title to and possession of
all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of CRA and otherwise to carry out the purposes of this
Agreement, and the officers and directors of the Surviving Corporation are fully
authorized in the name and on behalf of CRA or otherwise to take any and all
such action and to execute and deliver any and all such deeds and other
instruments.
SECTION 4.2 TERMINATION. At any time before the Effective Time of the CRA
Merger, this Agreement may be terminated and the CRA Merger may be abandoned for
any reason whatsoever by the Board of Directors of either CRA or CRA Merger
Corp., or of both, notwithstanding the approval of this Agreement by the
stockholders of CRA or the sole stockholder of CRA Merger Corp. In the event of
the termination of this Agreement, this Agreement shall forthwith become void
and there shall be no liability on the part of either of the parties hereto
except as otherwise provided in the Reorganization Agreement.
SECTION 4.3 COUNTERPARTS. In order to facilitate the filing and recording of
this Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
SECTION 4.4 AMENDMENT. This Agreement shall not be amended other than
pursuant to an amendment to the Reorganization Agreement approved in the manner
therein provided. If any such amendment to the Reorganization Agreement is so
approved, any amendment to this Agreement required by such amendment to the
Reorganization Agreement shall be effected by the parties hereto by action taken
by their respective Boards of Directors.
SECTION 4.5 GOVERNING LAW. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
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IN WITNESS WHEREOF, this Agreement is hereby executed on behalf of each of
the Constituent Corporations.
CRA MANAGED CARE, INC.
a Massachusetts corporation
By: ____________________________________
Name: __________________________________
Title: _________________________________
CRA MERGER CORP.
a Massachusetts corporation
By: ____________________________________
Name: __________________________________
Title: _________________________________
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APPENDIX G
CONCENTRA MANAGED CARE, INC.
1997 LONG-TERM INCENTIVE PLAN
SCOPE AND PURPOSE OF PLAN
Concentra Managed Care, Inc., a Delaware corporation (the "CORPORATION"),
has adopted this 1997 Long-Term Incentive Plan (the "PLAN") to provide for the
granting of:
(a) Incentive Options to certain Employees;
(b) Nonstatutory Options to certain Employees and other persons;
(c) Performance Units to certain Employees and other persons;
(d) Restricted Stock Awards to certain Employees, Non-employee
Directors, and other persons; and
(e) Stock Appreciation Rights to certain Employees and other persons.
The purpose of the Plan is to provide an incentive for Employees, directors,
and certain consultants and advisors of the Corporation or its Subsidiaries to
remain in the service of the Corporation or its Subsidiaries, to extend to them
the opportunity to acquire a proprietary interest in the Corporation so that
they will apply their best efforts for the benefit of the Corporation, and to
aid the Corporation in attracting able persons to enter the service of the
Corporation and its Subsidiaries.
SECTION 1. DEFINITIONS
1.1 "Annual Retainer" has the meaning given it in Subparagraph 5.2(a).
1.2 "Annual Restricted Stock Award" has the meaning given it in Paragraph
5.2.
1.3 "Award" means the grant of any form of Option, Performance Unit, Reload
Option, Restricted Stock Award, or Stock Appreciation Right under the Plan,
whether granted singly, in combination, or in tandem, to a Holder pursuant to
the terms, conditions, and limitations that the Committee may establish in order
to fulfill the objectives of the Plan.
1.4 "Award Agreement" means the written document or agreement delivered to
Holder evidencing the terms, conditions, and limitations of an Award that the
Corporation granted to that Holder.
1.5 "Board of Directors" means the board of directors of the Corporation.
1.6 "Business Day" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in the State of Texas are authorized or obligated
by law or executive order to close.
1.7 "Change in Control" means the occurrence of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (x) the then outstanding shares of
Common Stock of the Corporation (the "OUTSTANDING CORPORATION COMMON STOCK")
or (y) the combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of directors
(the "OUTSTANDING CORPORATION VOTING SECURITIES"); PROVIDED, HOWEVER, that
for purposes of this Subparagraph (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the
Corporation, (B) any acquisition by the Corporation, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or
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maintained by the Corporation or any corporation controlled by the
Corporation or (D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of paragraph (iii)
below; or
(ii) Individuals who, as of the date of this Plan, constitute the Board
of Directors cease for any reason to constitute at least a majority of the
Incumbent Board; or
(iii) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Corporation or an acquisition of assets of another corporation (a "BUSINESS
COMBINATION"), in each case, unless, following such Business Combination,
(A) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation Common Stock
and Outstanding Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities, as the case may be, (B) no Person (excluding
any employee benefit plan (or related trust) of the Corporation or the
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
results solely from ownership of the Corporation that existed prior to the
Business Combination and (C) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the committee or subcommittee appointed pursuant to
Section 3 by the Board of Directors to administer this Plan.
1.10 "Common Stock" means the authorized common stock, par value $.01 per
share, as described in the Corporation's Certificate of Incorporation.
1.11 "Common Stock Equivalent" means (without duplication with any other
Common Stock or Common Stock Equivalents) rights, warrants, options, convertible
securities, or exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly or indirectly,
Common Stock or securities convertible or exchangeable into Common Stock,
whether at the time the number of shares of Common Stock Equivalents are
determined or within sixty days of that date and that are traded or are of the
same class as securities that are traded on a national securities exchange or
quoted on the NASDAQ National Market System, NASDAQ, or National Quotation
Bureau Incorporated. The number of shares of Common Stock Equivalents
outstanding shall equal the number of shares of Common Stock plus the number of
shares of Common Stock issuable upon exercise, conversion or exchange of all
other Common Stock Equivalents.
1.12 "Corporation" means Concentra Managed Care, Inc., a Delaware
corporation.
1.13 "Date of Grant" has the meaning given it in Paragraph 4.3.
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1.14 "Disability" has the meaning given it in Paragraph 11.5.
1.15 "Effective Date" means , 1997.
1.16 "Eligible Individuals" means (a) Employees, (b) Non-employee Directors,
and (c) any other Person that the Committee designates as eligible for an Award
(other than for Incentive Options) because the Person performs bona fide
consulting or advisory services for the Corporation or any of its Subsidiaries
(other than services in connection with the offer or sale of securities in a
capital-raising transaction).
1.17 "Employee" means any employee of the Corporation or of any of its
Subsidiaries, including officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.
1.18 "Exchange Act" means the Securities Exchange Act of 1934.
1.19 "Exercise Notice" has the meaning given it in Paragraph 6.5.
1.20 "Exercise Price" has the meaning given it in Paragraph 6.4.
1.21 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange
at the date of determining the Fair Market Value, then the last reported
sale price, regular way, on the composite tape of that exchange on the last
Business Day before the date in question or, if no such sale takes place on
that Business Day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to unlisted
trading privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subparagraph 1.21(a) and if sales
prices for shares of Stock of the same class in the over-the-counter market
are reported by the NASDAQ National Market System (or a similar system then
in use) at the date of determining the Fair Market Value, then the last
reported sales price so reported on the last Business Day before the date in
question or, if no such sale takes place on that Business Day, the average
of the high bid and low asked prices so reported; or
(c) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subparagraph 1.21(a) and sales
prices for shares of Stock of the same class are not reported by the NASDAQ
National Market System (or a similar system then in use) as provided in
Subparagraph 1.21(b), and if bid and asked prices for shares of Stock of the
same class in the over-the-counter market are reported by NASDAQ (or, if not
so reported, by the National Quotation Bureau Incorporated) at the date of
determining the Fair Market Value, then the average of the high bid and low
asked prices on the last Business Day before the date in question; or
(d) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subparagraph 1.21(a) and sales
prices or bid and asked prices therefor are not reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subparagraph 1.21(b)
or Subparagraph 1.21(c) at the date of determining the Fair Market Value,
then the value determined in good faith by the Committee, which
determination shall be conclusive for all purposes; or
(e) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges as provided in Subparagraph 1.21(a) or sales
prices or bid and asked prices therefor are reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subparagraph 1.21(b)
or Subparagraph 1.21(c) at the date of determining the Fair Market Value,
but the volume of trading is so low that the Board of Directors determines
in good faith that such prices are not indicative of the
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fair value of the Stock, then the value determined in good faith by the
Committee, which determination shall be conclusive for all purposes
notwithstanding the provisions of Subparagraphs 1.21(a), (b) or (c).
For purposes of valuing Incentive Options, the Fair Market Value of Stock
shall be determined without regard to any restriction other than one that, by
its terms, will never lapse and shall be determined on the date in question
instead of the last Business Day before the date in question.. For purposes of
the redemption provided for in Subparagraph 10.3(d)(v), Fair Market Value shall
have the meaning and shall be determined as provided above; PROVIDED, HOWEVER,
that the Committee, with respect to any such redemption, shall have the right to
determine that the Fair Market Value for purposes of the redemption should be an
amount measured by the value of the shares of stock, other securities, cash or
property otherwise being received by holders of shares of Stock in connection
with the Restructure, and upon that determination the Committee shall have the
power and authority to determine Fair Market Value for purposes of the
redemption based upon the value of such shares of stock, other securities, cash
or property. Any such determination by the Committee shall be conclusive for all
purposes.
1.22 "Holder" means an Eligible Individual to whom an Award has been
granted.
1.23 "Incentive Option" means an incentive stock option as defined under
Section 422 of the Code and regulations thereunder.
1.24 "Incumbent Board" means the individuals who, as of the Effective Date,
constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election or appointment by
the Board of Directors or nomination for election by the Corporation's
stockholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Incumbent Board.
1.25 "NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotations, Inc.
1.26 "Non-employee Director" means a director of the Corporation who while a
director is not an Employee.
1.27 "Nonstatutory Option" means a stock option that does not satisfy the
requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Option Agreement to be an option other than an
Incentive Option.
1.28 "Non-Surviving Event" means an event of Restructure as described in
either subparagraph (b) or (c) of Paragraph 1.38.
1.29 "Normal Retirement" means the separation of the Holder from employment
with the Corporation and its Subsidiaries on account of retirement at any time
on or after the date on which the Holder reaches age sixty.
1.30 "Option Agreement" means an Award Agreement for an Incentive Option or
a Nonstatutory Option.
1.31 "Option" means either an Incentive Option or a Nonstatutory Option, or
both.
1.32 "Performance Period" means a period of one or more fiscal years of the
Corporation, beginning with the fiscal year for which Performance Units are
granted and over which performance is measured, for the purpose of determining
the payment value of Performance Units. A Performance Period shall not exceed
ten years.
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1.33 "Performance Unit" means a unit representing a contingent right to
receive a specified amount of cash or shares of Stock at the end of a
Performance Period.
1.34 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a limited liability company, a partnership, a trust or other
entity. A Person, together with that Person's affiliates and associates (as
those terms are defined in Rule 12b-2 under the Exchange Act for purposes of
this definition only), and any Persons acting as a partnership, limited
partnership, joint venture, association, syndicate or other group (whether or
not formally organized), or otherwise acting jointly or in concert or in a
coordinated or consciously parallel manner (whether or not pursuant to any
express agreement), for the purpose of acquiring, holding, voting or disposing
of securities of the Corporation with that Person, shall be deemed a single
"Person."
1.35 "Plan" means the Concentra Managed Care, Inc. 1997 Long-Term Incentive
Plan, as it may be amended from time to time.
1.36 "Reload Option" has the meaning given it in Paragraph 6.10.
1.37 "Restricted Stock Award" means the grant or purchase, on the terms and
conditions that the Committee determines or on the terms and conditions of
Section 5, of Stock that is nontransferable or subject to substantial risk of
forfeiture until specific conditions are met.
1.38 "Restructure" means the occurrence of any one or more of the following:
(a) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or surviving
entity of that merger or consolidation and the Stock remaining outstanding
and not changed into or exchanged for stock or other securities of any other
Person or of the Corporation, cash, or other property;
(b) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or surviving
entity of that merger or consolidation or (ii) the Corporation remaining the
continuing or surviving entity of that merger or consolidation but all or a
part of the outstanding shares of Stock are changed into or exchanged for
stock or other securities of any other Person or the Corporation, cash, or
other property; or
(c) The transfer, directly or indirectly, of all or substantially all of
the assets of the Corporation (whether by sale, merger, consolidation,
liquidation or otherwise) to any Person whether effected as a single
transaction or a series of related transactions.
1.39 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act,
or any successor rule, as it may be amended from time to time.
1.40 "SAR Exercise Price" has the meaning given it in Paragraph 1.45.
1.41 "Section 162(m)" means Section 162(m) of the Code and the rules and
regulations adopted from time to time thereunder, or any successor law or rule
as it may be amended from time to time.
1.42 "Securities Act" means the Securities Act of 1933.
1.43 "Stock" means Common Stock, or any other securities that are
substituted for the Stock as provided in Section 10.
1.44 "Stock Appreciation Right" means the right to receive an amount equal
to the excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over, as appropriate, the Exercise Price of a related Option
or over a price specified in the related Award Agreement (the "SAR EXERCISE
PRICE") that is not less than eighty-five percent of the Fair Market Value of
the Stock on the Date of Grant of the Stock Appreciation Right.
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1.45 "Stockholder Approved Standard" means initially (a) total stockholder
return (Stock price appreciation plus dividends), (b) net income, (c) earnings
per share, (d) cash flow per share, (e) return on equity, (f) return on assets,
(g) revenues, (h) costs, (i) costs as a percentage of revenues, (j) increase in
the market price of Stock or other securities, (k) the performance of the
Corporation in any of the items mentioned in clauses (a) through (j) in
comparison to the average performance of the companies included in the Standard
& Poors' Corporation 500 Composite Stock Price Index or successor index, or (l)
the performance of the Corporation in any of the items mentioned in clauses (a)
through (j) in comparison to the average performance of the companies used in a
self-constructed peer group established before the beginning of the Performance
Period; and any other performance objective approved by the stockholders of the
Corporation in accordance with Section 162(m).
1.46 "Subsidiary" means, with respect to any Person, any corporation or
other entity (i) of which a majority of the Voting Securities is owned, directly
or indirectly, by that Person, or (ii) with which such Person has entered into
any management, operating or similar agreement to manage or operate any portion
of such corporation's or the entity's business, operations or assets.
1.47 "Total Shares" has the meaning given it in Paragraph 10.2.
1.48 "Voting Securities" means any securities that are entitled to vote
generally in the election of directors, in the admission of general partners, or
in the selection of any other similar governing body.
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 MAXIMUM NUMBER OF SHARES. Subject to the provisions of Paragraph 2.6
and Section 10 of the Plan, the aggregate number of shares of Stock that the
Corporation may have subject to outstanding Awards at one time under the Plan
shall be an amount equal to (a) ten percent of the total number of shares of
Common Stock Equivalents outstanding from time to time MINUS (b) the total
number of shares of Stock subject to outstanding Awards on the date of
calculation under any other stock-based plan for employees or directors of the
Corporation and its Subsidiaries.
2.2 DETERMINATION OF AVAILABLE SHARES. In computing the total number of
shares of Stock subject to outstanding Awards at one time under the Plan, the
Committee shall count the number of shares of Stock subject to issuance upon
exercise of outstanding Options, the number of shares of Stock equal to the
number of outstanding Stock Appreciation Rights, the number of shares of Stock
subject to outstanding Restricted Stock Awards to the extent such shares are
subject to a risk of forfeiture under the restrictions governing such Awards,
and the number of shares of Stock that equal the value of outstanding
Performance Units determined in each case as of the Date of Grant of each Award
(other than Awards designated to be paid only in cash), but shall not (except to
the extent subject to the risk of forfeiture under the restrictions governing
such Awards) count the number of shares of Stock that have been issued upon
prior exercise of Options, the number of shares of Stock that were subject to
previously settled Stock Appreciation Rights, the number of shares of Stock
issued under Restricted Stock Awards for which the risk of forfeiture has
lapsed, and the number of shares of Stock issued upon exercise or settlement of
Performance Units. The number of shares of Stock subject to awards under any
employee stock purchase plan of the Corporation during any offering period of
that plan shall equal the number of shares of Stock that would be issued using
(a) the fair market value of the Stock on the first day of the offering period
and (b) an aggregate purchase price equal to the total projected payroll
deductions during the authorized period based solely on the number of
participants and authorized payroll deduction amounts for those participants on
the first day of the offering period.
2.3 RESTORATION OF UNUSED AND SURRENDERED SHARES. If Stock subject to any
Award is not issued or transferred, or ceases to be issuable or transferable for
any reason, including (but not exclusively) because an Award is forfeited,
terminated, expires unexercised, is settled in cash in lieu of Stock, or is
exchanged for other Awards, the shares of Stock that were subject to that Award
shall no longer be charged against
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the number of available shares and shall again be available for issue, transfer,
or exercise pursuant to Awards under the Plan to the extent of such forfeiture,
termination, expiration, settlement or exchange.
2.4 DESCRIPTION OF SHARES. The shares to be delivered under the Plan shall
be made available from (a) authorized but unissued shares of Stock, (b) Stock
held in the treasury of the Corporation, or (c) previously issued shares of
Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.5 REGISTRATION AND LISTING OF SHARES. From time to time, the Board of
Directors and appropriate officers of the Corporation shall be and are
authorized to take whatever actions are necessary to file required documents
with governmental authorities, stock exchanges, and other appropriate Persons to
make shares of Stock available for issuance pursuant to Awards.
2.6 REDUCTION IN OUTSTANDING SHARES OF STOCK. Nothing in this Section 2
shall impair the right of the Corporation to reduce the number of outstanding
shares of Stock pursuant to repurchases, redemptions, or otherwise; PROVIDED,
HOWEVER, that no reduction in the number of outstanding shares of Stock shall
(a) impair the validity of any outstanding Award, whether or not that Award is
fully exercisable or fully vested or (b) impair the status of any shares of
Stock previously issued pursuant to an Award or thereafter issued pursuant to a
then-outstanding Award as duly authorized, validly issued, fully paid, and
nonassessable shares.
2.7 INDIVIDUAL LIMITATIONS ON AWARDS. No Person may be granted, during any
one-year period, (a) Awards (other than Awards designated to be paid only in
cash) with respect to more than [250,000 shares] of Stock and (b) Awards
designated to be paid only in cash having a value determined on the Date of
Grant in excess of [$2,500,000].
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 COMMITTEE. The Board of Directors shall administer the Plan with
respect to all Eligible Individuals or may delegate all or part of its duties
under this Plan to the Committee or to any officer or committee of officers of
the Corporation, subject in each case to such conditions and limitations as the
Board of Directors may establish and subject to the following sentence. Unless a
majority of the members of the Board of Directors determines otherwise: (a) the
Committee shall be constituted in a manner that satisfies the requirements of
Rule 16b-3, which Committee shall administer the Plan with respect to all
Eligible Individuals who are subject to Section 16 of the Exchange Act in a
manner that satisfies the requirements of Rule 16b-3; and (b) the Committee
shall be constituted in a manner that satisfies the requirements of Section
162(m), which Committee shall administer the Plan with respect to "performance-
based compensation" for all Eligible Individuals who are reasonably expected to
be "covered employees" as those terms are defined in Section 162(m). The number
of persons that shall constitute the Committee shall be determined from time to
time by a majority of all the members of the Board of Directors. Except for
references in Paragraphs 3.1, 3.2, and 3.3 and unless the context otherwise
requires, references herein to the Committee shall also refer to the Board of
Directors as administrator of the Plan for Eligible Individuals or to the
appropriate delegate of the Committee or the Board of Directors.
3.2 DURATION, REMOVAL, ETC. The members of the Committee shall serve at
the pleasure of the Board of Directors, which shall have the power, at any time
and from time to time, to remove members from or add members to the Committee.
Removal from the Committee may be with or without cause. Any individual serving
as a member of the Committee shall have the right to resign from membership in
the Committee by at least three days written notice to the Board of Directors.
The Board of Directors, and not the remaining members of the Committee, shall
have the power and authority to fill vacancies on the Committee, however caused.
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3.3 MEETINGS AND ACTIONS OF COMMITTEE. The Board of Directors shall
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee chairman, the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as chairman until he ceases to be a member of the Committee or until the
Board of Directors elects a new chairman. The Committee shall hold its meetings
at those times and places as the chairman of the Committee may determine. At all
meetings of the Committee, a quorum for the transaction of business shall be
required, and a quorum shall be deemed present if at least a majority of the
members of the Committee are present. At any meeting of the Committee, each
member shall have one vote. All decisions and determinations of the Committee
shall be made by the majority vote or majority decision of all of its members
present at a meeting at which a quorum is present; provided, however, that any
decision or determination reduced to writing and signed by all of the members of
the Committee shall be as fully effective as if it had been made at a meeting
that was duly called and held. The Committee may make any rules and regulations
as it may deem advisable for the conduct of its business that are not
inconsistent with the provisions of the Plan, the Certificate of Incorporation,
the by-laws of the Corporation, Rule 16b-3 so long as it is applicable, and
Section 162(m) so long as it is applicable.
3.4 COMMITTEE'S POWERS. Subject to the express provisions of the Plan and
any applicable law with which the Corporation intends the Plan to comply, the
Committee shall have the authority, in its sole and absolute discretion, (a) to
adopt, amend, and rescind administrative and interpretive rules and regulations
relating to the Plan, including without limitation to adopt and observe such
procedures concerning the counting of Awards against the Plan and individual
maximums as it may deem appropriate from time to time; (b) to determine the
Eligible Individuals to whom, and the time or times at which, Awards shall be
granted; (c) to determine the amount of cash and the number of shares of Stock,
Stock Appreciation Rights, Restricted Stock Awards, or Performance Units, or any
combination thereof, that shall be the subject of each Award; (d) to determine
the terms and provisions of each Award Agreement (which need not be identical),
including provisions defining or otherwise relating to (i) the term and the
period or periods and extent of exercisability of the Options, (ii) the extent
to which the transferability of shares of Stock issued or transferred pursuant
to any Award is restricted, (iii) the effect of termination of employment on the
Award, and (iv) the effect of approved leaves of absence (consistent with any
applicable regulations of the Internal Revenue Service); (e) to accelerate,
pursuant to Section 10, the time of exercisability of any Option or Stock
Appreciation Right that has been granted or the time of vesting or settlement of
any Restricted Stock Award or Performance Unit; (f) to construe the respective
Award Agreements and the Plan; (g) to make determinations of the Fair Market
Value of the Stock pursuant to the Plan; (h) to delegate its duties under the
Plan to such agents as it may appoint from time to time, subject to the second
sentence of Paragraph 3.1; and (i) to make all other determinations, perform all
other acts, and exercise all other powers and authority necessary or advisable
for administering the Plan, including the delegation of those ministerial acts
and responsibilities as the Committee deems appropriate subject in all respects
to the last two sentences of Paragraph 6.12. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the Plan, in any
Award, or in any Award Agreement in the manner and to the extent it deems
necessary or desirable to carry the Plan into effect, and the Committee shall be
the sole and final judge of that necessity or desirability. The determinations
of the Committee on the matters referred to in this Paragraph 3.4 shall be final
and conclusive. The Committee shall not have the power to appoint members of the
Committee or to terminate, modify, or amend the Plan. Those powers are vested in
the Board of Directors.
3.5 TRANSFERABILITY OF AWARDS. Notwithstanding any limitation on a
Holder's right to transfer an Award, the Committee may (in its sole discretion)
permit a Holder to transfer an Award, or may cause the Corporation to grant an
Award that otherwise would be granted to an Eligible Individual, in any of the
following circumstances: (a) pursuant to a qualified domestic relations order,
(b) to a trust established for the benefit of the Eligible Individual or one or
more of the children, grandchildren, or spouse of the Eligible Individual; (c)
to a limited partnership in which all the interests are held by the Eligible
Individual and that Person's children, grandchildren or spouse; or (d) to
another Person in circumstances that the
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Committee believes will result in the Award continuing to provide an incentive
for the Eligible Individual to remain in the service of the Corporation or its
Subsidiaries and apply his or her best efforts for the benefit of the
Corporation or its Subsidiaries. If the Committee determines to allow such
transfers or issuances of Awards, any Holder or Eligible Individual desiring
such transfers or issuances shall make application therefor in the manner and
time that the Committee specifies and shall comply with such other requirements
as the Committee may require to assure compliance with all applicable laws,
including securities laws, and to assure fulfillment of the purposes of this
Plan. The Committee shall not authorize any such transfer or issuance if it may
not be made in compliance with all applicable federal, state and foreign
securities laws. The granting of permission for such an issuance or transfer
shall not obligate the Corporation to register the shares of Stock to be issued
under the applicable Award.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBLE INDIVIDUALS. Awards may be granted pursuant to the Plan only
to persons who are Eligible Individuals at the time of the grant thereof or in
connection with the severance or retirement of Eligible Individuals.
4.2 GRANT OF AWARDS. Subject to the express provisions of the Plan, the
Committee shall determine which Eligible Individuals shall be granted Awards
from time to time. In making grants, the Committee shall take into consideration
the contribution the potential Holder has made or may make to the success of the
Corporation or its Subsidiaries and such other considerations as the Board of
Directors may from time to time specify. The Committee shall also determine the
number of shares or cash amounts subject to each of the Awards and shall
authorize and cause the Corporation to grant Awards in accordance with those
determinations.
4.3 DATE OF GRANT. The date on which an Award is granted (the "DATE OF
GRANT") shall be the date specified by the Committee as the effective date or
date of grant of an Award or, if the Committee does not so specify, shall be the
date effective as of which the Committee adopts the resolution approving the
offer of an Award to an individual, including the specification of the number
(or method of determining the number) of shares of Stock and the amount (or
method of determining the amount) of cash to be subject to the Award, even
though certain terms of the Award Agreement may not be determined at that time
and even though the Award Agreement may not be executed or delivered until a
later time. In no event shall a Holder gain any rights in addition to those
specified by the Committee in its grant, regardless of the time that may pass
between the grant of the Award and the actual execution or delivery of the Award
Agreement by the Corporation or the Holder. The Committee may invalidate an
Award at any time before the Award Agreement is signed by the Holder (if
signature is required) or is delivered to the Holder (if signature is not
required), and such Award shall be treated as never having been granted.
4.4 AWARD AGREEMENTS. Each Award granted under the Plan shall be evidenced
by an Award Agreement that incorporates those terms that the Committee shall
deem necessary or desirable. More than one Award may be granted under the Plan
to the same Eligible Individual and be outstanding concurrently. If an Eligible
Individual is granted both one or more Incentive Options and one or more
Nonstatutory Options, those grants shall be evidenced by separate Award
Agreements, one for each of the Incentive Option grants and one for each of the
Nonstatutory Option grants.
4.5 LIMITATION FOR INCENTIVE OPTIONS. Notwithstanding any provision
contained herein to the contrary, (a) a person shall not be eligible to receive
an Incentive Option unless he or she is an Employee of the Corporation or a
corporate Subsidiary (but not a partnership or other non-corporate Subsidiary
within the meaning of Section 424(e) and (f) of the Code), and (b) a person
shall not be eligible to receive an Incentive Option if, immediately before the
time the Incentive Option is granted, that person owns (within the meaning of
Sections 422 and 424 of the Code) stock possessing more than ten percent of the
total combined voting power or value of all classes of stock of the Corporation
or a Subsidiary. Nevertheless, this Subparagraph 4.5(b) shall not apply if, at
the time the Incentive Option is granted, the Exercise Price
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of the Incentive Option is at least one hundred and ten percent of Fair Market
Value and the Incentive Option is not, by its terms, exercisable after the
expiration of five years from the Date of Grant.
4.6 NO RIGHT TO AWARD. The adoption of the Plan shall not be deemed to
give any person a right to be granted an Award except pursuant to Section 5.
SECTION 5. AWARDS TO NON-EMPLOYEE DIRECTORS
5.1 INELIGIBILITY FOR OTHER AWARDS. Non-employee Directors shall not be
eligible to receive any Awards under the Plan other than the automatic Awards
specified in this Section 5.
5.2 AUTOMATIC GRANT OF AWARDS. Awards of Nonstatutory Options shall be
made automatically to Non-employee Directors as follows: Each Non-employee
Director who is a director of the Corporation as of the day of the first meeting
of the Corporation's Board of Directors held after the approval of the Plan by
the Corporation's stockholders shall automatically be granted (a) a Nonstatutory
Option for the purchase of 5,000 shares of Stock effective on the date of such
meeting of the Board of Directors whether or not that director is in attendance
at that meeting and (b) a Restricted Stock Award of that number of shares of
Stock equal to $15,000 divided by the Fair Market Value on the date of such
meeting of the Board of Directors (rounded up to a whole share for any
fractional share), effective on the date of such first meeting of the Board of
Directors, whether or not that director is in attendance at that meeting.
Beginning in 1998, each Non-employee Director who is a director of the
Corporation as of both the day immediately preceding the annual meeting of the
Corporation's stockholders and the day immediately following the annual meeting
shall automatically be granted (a) a Nonstatutory Option for the purchase of
5,000 shares of Stock effective on the date of the first meeting of the Board of
Directors following the annual meeting, whether or not that director is in
attendance at that meeting and (b) a Restricted Stock Award of that number of
shares of Stock equal to $15,000 divided by the Fair Market Value on the date of
such first meeting of the Board of Directors (rounded up to a whole share for
any fractional share), effective on the date of such first meeting of the Board
of Directors, whether or not that director is in attendance at that meeting.
5.3 AVAILABLE STOCK. The automatic Awards specified in Paragraph 5.2 shall
be made in the amounts specified in that Paragraph only if the number of shares
of Stock available to be issued, transferred or exercised pursuant to Awards
under the Plan (as calculated in Section 2) is sufficient to make all automatic
grants required to be made by Paragraph 5.2 on the Date of Grant of those
automatic Awards. In the event that a lesser number of shares of Stock are
available to be issued, transferred, or exercised pursuant to Awards under the
Plan on the Date of Grant of the automatic Awards described Paragraph 5.2, but
their number is insufficient to permit the grant of the entire number of shares
specified in the automatic Awards, then the number of available shares shall be
apportioned equally among the automatic Awards made on that date, and the number
of shares apportioned to each automatic Award shall be the number of shares
automatically subject to that automatic Award.
5.4 TERMS AND CONDITIONS OF AUTOMATIC AWARDS. Award Agreements for
Nonstatutory Option Awards to Non-employee Directors shall be in the form
attached as ANNEX A and, except as expressly provided in those Award Agreements,
the automatic Awards to Non-employee Directors shall not be subject to the
provisions of Section 10 (other than Paragraph 10.1) or 11. In addition, the
following terms and conditions shall apply to automatic Nonstatutory Option
Awards pursuant to Paragraph 5.2: (a) the exercise price for each share of Stock
subject to the Option shall be the Fair Market Value of a share of Stock on the
Date of Grant of such Option; (b) the Option shall become vested and exercisable
with respect to 5,000 shares of Stock (or, if less, the number determined
pursuant to Paragraph 5.3) on the first anniversary of the Date of Grant so long
as the Non-employee Director remains a director of the Corporation after the
Date of Grant through such date; and (c) the Option shall terminate on the
earliest of (i) 11:59 p.m., Boston, Massachusetts, time, on the date ten years
from the Date of Grant, (ii) immediately when the Holder ceases to be a
director, if the Board demands or requests the Holder's
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resignation from the Board, (iii) 11:59 p.m., Boston, Massachusetts, time, on
the date 90 days after the Holder ceases to be a director for any reason other
than the reasons specified in the preceding clause (ii) or the following clause
(iv), or (iv) 11:59 p.m., Boston, Massachusetts, time, on the date one year
after the Holder ceases to be a director because of death or permanent
disability (as defined in ANNEX A attached hereto). Award Agreements for
Restricted Stock Awards to Non-employee Directors shall be in the form attached
as ANNEX A and, except as expressly set forth in those Award Agreements, the
automatic Awards to Non-employee Directors shall not be subject to the
provisions of Section 10 (other than Paragraph 10.1) or 11. In addition, the
following terms and conditions shall apply to automatic Restriced Stock Awards
pursuant to Paragraph 5.2: (a) the restrictions on sale, transfer, alienation
and hypothecation of each Restricted Stock Award shall lapse with respect to all
of the shares of Stock subject to each Restricted Stock Award on the first
anniversary of the Date of Grant so long as the Non-employee Director remains a
director of the Corporation after the Date of Grant through such date; (b) the
restricted portion of each Restricted Stock Award shall be forfeited and
terminate on the date the Holder ceases to be a director for any reason; and (c)
if the Non-employee director fails to attend, during the fiscal year of the
Corporation in which the Restricted Stock Award is made, at least 75% of the
aggregate of (i) the total number of meetings of the Board of Directors (held
during the period for which such person has been a director) and (ii) the total
number of meetings held by all committees of the Board of Directors on which
such individual served (during the periods such person was a member of the Board
of Directors), the Restricted Stock Award shall be forfeited (effective as of
the day immediately prior to the first anniversary of the Date of Grant) with
respect to that percentage of the Restricted Stock Award equal to the percentage
of the number of meetings in (i) and (ii) of the Board of Directors and
Committees of the Board of Directors held during such fiscal year that such
Non-employee Director failed to attend.
5.5 TAX WITHHOLDING. The Corporation shall have the right, subject to
applicable law, to require a Non-employee Director to pay to the Corporation the
amount necessary to satisfy the Corporation's current or future obligation to
withhold federal, state or local income or other taxes that the Non-employee
Director incurs by the granting, vesting or exercising of an Option or
Restricted Stock Award. Tax withholding obligations in respect of Options or
Restricted Stock Awards to Non-employee Directors may not be satisfied by the
Corporation's withholding of Stock subject to the Option or Restricted Stock
Award or by the Non-employee Director's transfer of Stock to the Corporation.
5.6 PRIVILEGES OF A STOCKHOLDER. A Non-Employee Director shall have all
voting, dividend, liquidation, and other rights with respect to Stock received
by him as a Restricted Stock Award under this Section in accordance with its
terms.
5.7 RETENTION AS DIRECTOR. Nothing contained in the Plan or in any
Restricted Stock Award granted under the Plan shall interfere with or limit in
any way the right of the stockholders of the Corporation to remove any
Non-employee Director from the Board in accordance with applicable law (and the
Corporation's governing documents) or confer upon any Non-Employee Director any
right to continue in the service of the Corporation.
5.8 ENFORCEMENT OF RESTRICTIONS. The Committee shall cause a legend to be
placed on the Stock certificates issued pursuant to each Restricted Stock Award
referring to the restrictions imposed in the Plan and, in addition, may in its
sole discretion require one or more of the following methods of enforcing such
restrictions: (a) requiring the Non-employee Director to keep the Stock
certificates, duly endorsed, in the custody of the Corporation while the
restrictions remain in effect; (b) requiring that the Stock certificates, duly
endorsed, be held in the custody of a third party while the restrictions remain
in effect.
5.9 RIGHTS TO SUBSCRIBE. If the Corporation shall at any time grant to the
holders of its Stock rights to subscribe pro rata for additional shares thereof
or for any other securities of the Corporation or of any other corporation,
there shall be reserved with respect to the shares then outstanding pursuant to
any Restricted Stock Award the Stock or other securities that the Non-employee
Director would have been entitled to subscribe for if immediately prior to such
grant the restrictions applicable to such Restricted
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Stock Award had lapsed. Upon the lapse of all restrictions applicable to Stock
held pursuant to a Restricted Stock Award, the Non-employee Director shall be
provided the opportunity to subscribe for the additional shares or other
securities issuable with respect to such shares of Stock.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan shall comply with, and the related Option
Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 6 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth in
Paragraph 10.1 and Section 11; PROVIDED, HOWEVER, that the Committee may
authorize an Option Agreement that expressly contains terms and provisions that
differ from the terms and provisions of Section 11. The Committee may also
authorize an Option Agreement that contains any or all of the terms and
provisions of Paragraphs 10.2 and 10.3 or that contains terms and provisions
dealing with similar subject matter differently than do those Paragraphs;
nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any such
differing term or provision) shall apply to an Option Agreement unless the
Option Agreement expressly states that such term or provision applies.
6.1 NUMBER OF SHARES. Each Option Agreement shall state the total number
of shares of Stock to which it relates.
6.2 VESTING. Each Option Agreement shall state the time, periods or other
conditions on which the right to exercise the Option or a portion thereof shall
vest and the number (or method of determining the number) of shares of Stock for
which the right to exercise the Option shall vest at each such time, period or
satisfaction of condition.
6.3 EXPIRATION OF OPTIONS. Nonstatutory Options and Incentive Options may
be exercised during the term determined by the Committee and set forth in the
Option Agreement; provided that no Incentive Option shall be exercised after the
expiration of a period of ten years commencing on the Date of Grant of the
Incentive Option.
6.4 EXERCISE PRICE. Each Option Agreement shall state the exercise price
per share of Stock (the "EXERCISE PRICE"). The exercise price per share of Stock
subject to an Incentive Option shall not be less than the greater of (a) the par
value per share of the Stock or (b) 100% of the Fair Market Value per share of
the Stock on the Date of Grant of the Option. The exercise price per share of
Stock subject to a Nonstatutory Option shall not be less than the greater of (a)
the par value per share of the Stock or (b) eighty-five percent of the Fair
Market Value per share of the Stock on the Date of Grant of the Option.
6.5 METHOD OF EXERCISE. Each Option shall be exercisable only by written,
recorded electronic or other notice of exercise in the manner specified by the
Committee from time to time (the "EXERCISE NOTICE") delivered to the Corporation
or to the Person designated by the Committee during the term of the Option,
which notice shall (a) state the number of shares of Stock with respect to which
the Option is being exercised, (b) be signed or otherwise given by the Holder of
the Option or by the person authorized to exercise the Option in the event of
the Holder's death or disability, (c) be accompanied by the Exercise Price for
all shares of Stock for which the Option is exercised, unless provision for the
payment of the Exercise Price has been made pursuant to Paragraph 6.7 or 6.8 or
in another manner permitted by law and approved in advance by the Committee, and
(d) include such other information, instruments, and documents as may be
required to satisfy any other condition to exercise contained in the Option
Agreement. The Option shall not be deemed to have been exercised unless all of
the requirements of the preceding provisions of this Paragraph 6.5 have been
satisfied.
6.6 INCENTIVE OPTION EXERCISES. During the Holder's lifetime, only the
Holder may exercise an Incentive Option. The Holder of an Incentive Option shall
immediately notify the Corporation in writing of any disposition of the Stock
acquired pursuant to the Incentive Option that would disqualify the Incentive
Option from the incentive option tax treatment afforded by Section 422 of the
Code. The notice
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shall state the number of shares disposed of, the dates of acquisition and
disposition of the shares, and the consideration received upon that disposition.
6.7 MEDIUM AND TIME OF PAYMENT. The Exercise Price of an Option shall be
payable in full upon the exercise of the Option (a) in cash or by an equivalent
means (such as that specified in Paragraph 6.8) acceptable to the Committee, (b)
on the Committee's prior consent, with shares of Stock owned by the Holder
(including shares received upon exercise of the Option or restricted shares
already held by the Holder) and having a Fair Market Value at least equal to the
aggregate Exercise Price payable in connection with such exercise, or (c) by any
combination of clauses (a) and (b). If the Committee chooses to accept shares of
Stock in payment of all or any portion of the Exercise Price, then (for purposes
of payment of the Exercise Price) those shares of Stock shall be deemed to have
a cash value equal to their aggregate Fair Market Value determined as of the
date of the delivery of the Exercise Notice. If the Committee elects to accept
shares of restricted Stock in payment of all or any portion of the Exercise
Price, then an equal number of shares issued pursuant to the exercise shall be
restricted on the same terms and for the restriction period remaining on the
shares used for payment.
6.8 PAYMENT WITH SALE PROCEEDS. In addition, at the request of the Holder
and to the extent permitted by applicable law, the Committee may (but shall not
be required to) approve arrangements with a brokerage firm under which that
brokerage firm, on behalf of the Holder, shall pay to the Corporation the
Exercise Price of the Option being exercised (either as a loan to the Holder or
from the proceeds of the sale of Stock issued pursuant to that exercise of the
Option), and the Corporation shall promptly cause the exercised shares to be
delivered to the brokerage firm. Such transactions shall be effected in
accordance with the procedures that the Committee may establish from time to
time.
6.9 RELOAD PROVISIONS. Options may contain a provision pursuant to which a
Holder who pays all or a portion of the Exercise Price of an Option or the tax
required to be withheld pursuant to the exercise of an Option by surrendering
shares of Stock shall automatically be granted an Option for the purchase of the
number of shares of Stock equal to the number of shares surrendered (a "RELOAD
OPTION"). The Date of Grant of the Reload Option shall be the date on which the
Holder surrenders the shares of Stock in respect of which the Reload Option is
granted. The Reload Option shall have an Exercise Price equal to the Fair Market
Value of a share of Stock on the Date of Grant of the Reload Option and shall
have a term that is no longer than the original term of the underlying Option.
6.10 LIMITATION ON AGGREGATE VALUE OF SHARES THAT MAY BECOME FIRST
EXERCISABLE DURING ANY CALENDAR YEAR UNDER AN INCENTIVE OPTION. Except as is
otherwise provided in subparagraph 10.2(b), with respect to any Incentive Option
granted under this Plan, the aggregate Fair Market Value of shares of Stock
subject to an Incentive Option and the aggregate Fair Market Value of shares of
Stock or stock of any parent or Subsidiary corporation within the meaning of
Section 424(e) and (f) of the Code (or a predecessor of the Corporation or a
Subsidiary) subject to any other incentive stock option (within the meaning of
Section 422 of the Code) of the Corporation or a parent or Subsidiary
corporation within the meaning of Section 424(e) and (f) of the Code (or a
predecessor corporation of any such corporation) that first become purchasable
by a Holder in any calendar year may not (with respect to that Holder) exceed
$100,000, or such other amount as may be prescribed under Section 422 of the
Code or applicable regulations or rulings from time to time. As used in the
previous sentence, Fair Market Value shall be determined as of the date the
Incentive Option is granted. For purposes of this Paragraph 6.10 "predecessor
corporation" means (a) a corporation that was a party to a transaction described
in Section 424(a) of the Code (or which would be so described if a substitution
or assumption under that Section had been effected) with the Corporation, (b) a
corporation which, at the time the new incentive stock option (within the
meaning of Section 422 of the Code) is granted, is a Subsidiary of the
Corporation or a predecessor corporation of any such corporations, or (c) a
predecessor corporation of any such corporations. Failure to comply with this
provision shall not impair the enforceability or exercisability of any Option,
but shall cause the excess amount of shares to be reclassified in accordance
with the Code.
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6.11 NO FRACTIONAL SHARES. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same fraction
(as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
6.12 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions of and within the limitations of the Plan and any applicable law,
and any consent required by the last two sentences of this Paragraph 6.12, the
Committee may (a) modify, extend or renew outstanding Options granted under the
Plan, (b) accept the surrender of Options outstanding hereunder (to the extent
not previously exercised) and authorize the granting of new Options in
substitution for outstanding Options (to the extent not previously exercised),
and (c) amend the terms of an Incentive Option at any time to include provisions
that have the effect of changing the Incentive Option to a Nonstatutory Option.
Nevertheless, without the consent of the Holder, the Committee may not modify
any outstanding Options so as to specify a higher Exercise Price or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher Exercise Price. In
addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, materially alter or impair any rights of the Holder or
materially increase the obligations of a Holder under any Option theretofore
granted hereunder to that Holder under the Plan except, with respect to
Incentive Options, as may be necessary to satisfy the requirements of Section
422 of the Code or as permitted in clause (c) of this Paragraph 6.12.
6.13 OTHER AGREEMENT PROVISIONS. The Option Agreements authorized under
the Plan shall contain such provisions in addition to those required by the Plan
(including, without limitation, restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable. Each Option Agreement shall
identify the Option evidenced thereby as an Incentive Option or Nonstatutory
Option, as the case may be, and no Option Agreement shall cover both an
Incentive Option and a Nonstatutory Option. Each Agreement relating to an
Incentive Option granted hereunder shall contain such limitations and
restrictions upon the exercise of the Incentive Option to which it relates as
shall be necessary for the Incentive Option to which such Agreement relates to
constitute an incentive stock option, as defined in Section 422 of the Code.
SECTION 7. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply with, and
the related Award Agreements shall be deemed to include and be subject to, the
terms and conditions set forth in this Section 7 (to the extent each term and
condition applies to the form of Stock Appreciation Right) and also to the terms
and conditions set forth in Paragraph 10.1 and Section 11; PROVIDED, HOWEVER,
that the Committee may authorize an Award Agreement relating to a Stock
Appreciation Right that expressly contains terms and provisions that differ from
the terms and provisions of Section 11. The Committee may also authorize an
Award Agreement relating to a Stock Appreciation Right that contains any or all
of the terms and provisions of Paragraphs 10.2 and 10.3 or that contains terms
and provisions dealing with similar subject matter differently than do those
Paragraphs; nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any
such differing term or provision) shall apply to an Award Agreement relating to
a Stock Appreciation Right unless the Award Agreement expressly states that such
term or provision applies.
7.1 FORM OF RIGHT. A Stock Appreciation Right may be granted to an
Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) without relation to
an Option.
7.2 RIGHTS RELATED TO OPTIONS. A Stock Appreciation Right granted pursuant
to an Option shall entitle the Holder, upon exercise, to surrender that Option
or any portion thereof, to the extent unexercised, and to receive payment of an
amount computed pursuant to Subparagraph 7.2(b). That
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Option shall then cease to be exercisable to the extent surrendered. Stock
Appreciation Rights granted in connection with an Option shall be subject to the
terms of the Award Agreement governing the Option, which shall comply with the
following provisions in addition to those applicable to Options:
(a) Exercise and Transfer. Subject to Paragraph 11.10, a Stock
Appreciation Right granted in connection with an Option shall be exercisable
only at such time or times and only to the extent that the related Option is
exercisable and shall not be transferable except to the extent that the
related Option is transferable. To the extent that an Option has been
exercised, the Stock Appreciation Rights granted in connection with that
Option shall terminate.
(b) Value of Right. Upon the exercise of a Stock Appreciation Right
related to an Option, the Holder shall be entitled to receive payment from
the Corporation of an amount determined by multiplying:
(i) The difference obtained by subtracting the Exercise Price of a
share of Stock specified in the related Option from the Fair Market Value
of a share of Stock on the date of exercise of the Stock Appreciation
Right, by
(ii) The number of shares as to which that Stock Appreciation Right
has been exercised.
7.3 RIGHT WITHOUT OPTION. A Stock Appreciation Right granted without
relationship to an Option shall be exercisable as determined by the Committee
and set forth in the Award Agreement governing the Stock Appreciation Right,
which Award Agreement shall comply with the following provisions:
(a) NUMBER OF SHARES. Each Award Agreement shall state the total number
of shares of Stock to which the Stock Appreciation Right relates.
(b) VESTING. Each Award Agreement shall state the time, periods or other
conditions on which the right to exercise the Stock Appreciation Right or a
portion thereof shall vest and the number of shares of Stock for which the
right to exercise the Stock Appreciation Right shall vest at each such time,
period or satisfaction of condition.
(c) EXPIRATION OF RIGHTS. Each Award Agreement shall state the date at
which the Stock Appreciation Rights shall expire if not previously
exercised.
(d) VALUE OF RIGHT. A Stock Appreciation Right granted without
relationship to an Option shall entitle the Holder, upon exercise of the
Stock Appreciation Right, to receive payment of an amount determined by
multiplying:
(i) The difference obtained by subtracting the SAR Exercise Price
from the Fair Market Value of a share of Stock on the date of exercise of
that Stock Appreciation Right, by
(ii) The number of rights as to which the Stock Appreciation Right
has been exercised.
7.4 LIMITATIONS ON RIGHTS. Notwithstanding Subparagraph 7.2(b) and
Subparagraph 7.3(d), the Committee may limit the amount payable upon exercise of
a Stock Appreciation Right. Any such limitation must be determined as of the
Date of Grant and be noted on the instrument evidencing the Stock Appreciation
Right.
7.5 PAYMENT OF RIGHTS. Payment of the amount determined under Subparagraph
7.2(b) or Subparagraph 7.3(d) and Paragraph 7.4 may be made solely in whole
shares of Stock valued at Fair Market Value on the date of exercise of the Stock
Appreciation Right or, in the sole discretion of the Committee, solely in cash
or a combination of cash and Stock. If the Committee decides to make full
payment in shares of Stock and the amount payable results in a fractional share,
payment for the fractional share shall be made in cash.
7.6 OTHER AGREEMENT PROVISIONS. The Award Agreements authorized relating
to Stock Appreciation Rights shall contain such provisions in addition to those
required by the Plan (including, without
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limitation, restrictions or the removal of restrictions upon the exercise of the
Stock Appreciation Right and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable.
SECTION 8. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with, and
the related Award Agreements shall be deemed to include, and be subject to the
terms and conditions set forth in this Section 8 and also to the terms and
conditions set forth in Paragraph 10.1 and Section 11; PROVIDED, HOWEVER, that
the Committee may authorize an Award Agreement relating to a Restricted Stock
Award that expressly contains terms and provisions that differ from the terms
and provisions of Section 11. The Committee may also authorize an Award
Agreement relating to a Restricted Stock Award that contains any or all of the
terms and provisions of Paragraphs 10.2 and 10.3 or that contains terms and
provisions dealing with similar subject matter differently than do those
Paragraphs; nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any
such differing term or provision) shall apply to an Award Agreement relating to
a Restricted Stock Award unless the Award Agreement expressly states that such
term or provision applies.
8.1 RESTRICTIONS. All shares of Restricted Stock Awards granted or sold
pursuant to the Plan shall be subject to the following conditions:
(a) TRANSFERABILITY. The shares may not be sold, transferred or
otherwise alienated or hypothecated until the restrictions are removed or
expire.
(b) CONDITIONS TO REMOVAL OF RESTRICTIONS. Conditions to removal or
expiration of the restrictions may include, but are not required to be
limited to, continuing employment or service as a director, officer,
consultant, or advisor or achievement of performance objectives described in
the Award Agreement.
(c) LEGEND. Each certificate representing Restricted Stock Awards
granted pursuant to the Plan shall bear a legend making appropriate
reference to the restrictions imposed.
(d) POSSESSION. At its sole discretion, the Committee may (i) authorize
issuance of a certificate for shares in the Holder's name only upon lapse of
the applicable restrictions, (ii) require the Corporation, transfer agent or
other custodian to retain physical custody of the certificates representing
Restricted Stock Awards during the restriction period and may require the
Holder of the Award to execute stock powers, endorsed or in blank, for those
certificates and deliver those stock powers to the Corporation, transfer
agent or custodian, or (iii) may require the Holder to enter into an escrow
agreement providing that the certificates representing Restricted Stock
Awards granted or sold pursuant to the Plan shall remain in the physical
custody of an escrow holder until all restrictions are removed or expire.
The Corporation may issue shares subject to stop-transfer restrictions or
may issue such shares subject only to the restrictive legend described in
subparagraph 8.1(c).
(e) OTHER CONDITIONS. The Committee may impose other conditions on any
shares granted or sold as Restricted Stock Awards pursuant to the Plan as it
may deem advisable, including, without limitation, (i) restrictions under
the Securities Act or Exchange Act, (ii) the requirements of any securities
exchange upon which the shares or shares of the same class are then listed,
and (iii) any state securities law applicable to the shares.
8.2 EXPIRATION OF RESTRICTIONS. The restrictions imposed in Paragraph 8.1
on Restricted Stock Awards shall lapse as determined by the Committee and set
forth in the applicable Award Agreement, and the Corporation shall promptly
cause to be delivered to the Holder of the Restricted Stock Award a certificate
representing the number of shares for which restrictions have lapsed, free of
any restrictive legend relating to the lapsed restrictions. Each Restricted
Stock Award may have a different restriction period, in the discretion of the
Committee. The Committee may, in its discretion, prospectively reduce the
restriction period applicable to a particular Restricted Stock Award. The
foregoing notwithstanding, no restriction not required by law shall remain in
effect for more than ten years after the date of the Award.
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8.3 CHANGES IN ACCOUNTING RULES. Notwithstanding any other provision of
the Plan to the contrary, if, during the term of the Plan, any changes in the
financial or tax accounting rules applicable to Restricted Stock Awards shall
occur that, in the sole judgement of the Board of Directors, may have a material
adverse effect on the reported earnings, assets, or liabilities of the
Corporation, the Committee shall have the right and power to modify as necessary
any then outstanding Restricted Stock Awards as to which the applicable
restrictions have not been satisfied.
8.4 RIGHTS AS STOCKHOLDER. Subject to the provisions of Paragraphs 8.1 and
11.11, the Committee may, in its discretion, determine what rights, if any, the
Holder shall have with respect to the Restricted Stock Awards granted or sold,
including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
8.5 OTHER AGREEMENT PROVISIONS. The Award Agreements relating to
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 9. PERFORMANCE UNITS
All Performance Units granted under the Plan shall comply with, and the
related Award Agreements shall be deemed to include and be subject to, the terms
and conditions set forth in this Section 9 (to the extent each term and
condition applies to the form of Performance Unit) and also to the terms and
conditions set forth in Paragraph 10.1 and Section 11; PROVIDED, HOWEVER, that
the Committee may authorize an Award Agreement related to a Performance Unit
that expressly contains terms and provisions that differ from the terms and
provisions of Section 11. The Committee may also authorize an Award Agreement
related to a Performance Unit that contains any or all of the terms and
provisions of Paragraphs 10.2 and 10.3 or that contains terms and provisions
dealing with similar subject matter differently than do those Paragraphs;
nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any such
differing term or provision) shall apply to an Award Agreement related to a
Performance Unit unless the Award Agreement expressly states that such term or
provision applies.
9.1 MULTIPLE GRANTS. The Committee may make grants of Performance Units in
such a manner that more than one Performance Period is in progress
simultaneously. At or before the beginning of each Performance Period, the
Committee will establish the contingent value of each Performance Unit, if any,
for that Performance Period, which may vary depending on the degree to which
performance objectives established by the Committee are met.
9.2 PERFORMANCE STANDARDS. At or before the beginning of each Performance
Period, the Committee will (a) establish the beginning and ending dates of the
Performance Period, (b) establish for that Performance Period specific
performance objectives as the Committee (in its sole discretion) believes are
relevant to the Corporation's overall business objectives, (c) determine the
minimum and maximum value of a Performance Unit and the value of a Performance
Unit based on the degree to which performance objectives are achieved, exceeded
or not achieved, (d) determine a minimum performance level below which
Performance Units will be assigned a value of zero, and a maximum performance
level above which the value of Performance Units will not increase, and (e)
notify each Holder of a Performance Unit for that Performance Period in writing
of the established performance objectives and minimum, target, and maximum
Performance Unit value for that Performance Period.
9.3 MODIFICATION OF STANDARDS. If the Committee determines in its sole
discretion that the established performance measures or objectives are no longer
suitable to the Corporation's objectives because of a change in the
Corporation's business, operations, corporate structure, capital structure, or
other conditions the Committee deems to be material, the Committee may modify
the performance measures and objectives as it considers appropriate and
equitable.
9.4 PAYMENT. The basis for payment of Performance Units for a given
Performance Period will be the achievement of those performance objectives
determined by the Committee at the beginning of the
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Performance Period. If minimum performance is not achieved or exceeded for a
Performance Period, no payment will be made and all contingent rights will
cease. If minimum performance is achieved or exceeded, the value of a
Performance Unit will be based on the degree to which actual performance
exceeded the pre-established minimum performance standards. The amount of
payment will be determined by multiplying the number of Performance Units
granted at the beginning of the Performance Period by the final Performance Unit
value. Payments will be made in cash or Stock as soon as administratively
possible following the close of the applicable Performance Period.
9.5 OTHER AGREEMENT PROVISIONS. The Award Agreements, if any, authorized
relating to Performance Units shall contain such provisions in addition to those
required by the Plan (including, without limitation, restrictions or the removal
of restrictions upon the transfer of shares thereby acquired) as the Committee
may deem advisable.
SECTION 10. ADJUSTMENT PROVISIONS
The Committee may authorize an Award that contains any or all of the terms
and provisions of this Section 10 or, with respect to Paragraphs 10.2 and 10.3,
that contains terms and provisions dealing with similar subject matter
differently than do those Paragraphs; nevertheless, no term or provision of
Paragraph 10.2 or 10.3 (or any such differing term or provision) shall apply to
an Award Agreement unless the Award Agreement expressly states that such term or
provision applies.
10.1 ADJUSTMENT OF AWARDS AND AUTHORIZED STOCK. The terms of an Award, the
number of shares of Stock authorized pursuant to Paragraph 2.1 for issuance
under the Plan, and the number shares of Stock that constitute the individual
limitations in Paragraph 2.7 shall be subject to adjustment, from time to time,
in accordance with the following provisions:
(a) If at any time or from time to time, the Corporation shall subdivide
as a whole (by reclassification, by a Stock split, by the issuance of a
distribution on Stock payable in Stock or otherwise) the number of shares of
Stock then outstanding into a greater number of shares of Stock, then (i)
the maximum number of shares of Stock available for the Plan and for any
individual as provided in Paragraph 2.1 and Paragraph 2.7, respectively,
shall be increased proportionately, and the kind of shares or other
securities available for the Plan shall be appropriately adjusted, (ii) the
number of shares of Stock (or other kind of shares or securities) that may
be acquired under any Award shall be increased proportionately, and (iii)
the price (including Exercise Price) for each share of Stock (or other kind
of shares or unit of other securities) subject to then outstanding Awards
shall be reduced proportionately, without changing the aggregate purchase
price or value as to which outstanding Awards remain exercisable or subject
to restrictions.
(b) If at any time or from time to time the Corporation shall
consolidate as a whole (by reclassification, reverse Stock split, or
otherwise) the number of shares of Stock then outstanding into a lesser
number of shares of Stock, (i) the maximum number of shares of Stock
available for the Plan and for any individual as provided in Paragraph 2.1
and Paragraph 2.7, respectively shall be decreased proportionately, and the
kind of shares or other securities available for the Plan shall be
appropriately adjusted, (ii) the number of shares of Stock (or other kind of
shares or securities) that may be acquired under any Award shall be
decreased proportionately, and (iii) the price (including Exercise Price)
for each share of Stock (or other kind of shares or unit of other
securities) subject to then outstanding Awards shall be increased
proportionately, without changing the aggregate purchase price or value as
to which outstanding Awards remain exercisable or subject to restrictions.
(c) Whenever the number of shares of Stock subject to outstanding Awards
and the price for each share of Stock subject to outstanding Awards are
required to be adjusted as provided in this Paragraph 10.1, the Committee
shall promptly prepare a notice setting forth, in reasonable detail, the
event requiring adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the change in price and the number
of shares of Stock, other securities, cash or
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property purchasable subject to each Award after giving effect to the
adjustments. The Committee shall promptly give each Holder such a notice.
(d) Adjustments under Paragraph 10(a) and (b) shall be made by the
Committee, and its determination as to what adjustments shall be made and
the extent thereof shall be final, binding and conclusive. No fractional
interest shall be issued under the Plan on account of any such adjustments.
10.2 CHANGES IN CONTROL. Upon the occurrence of a Change in Control with
respect to Awards held by Participants who are employees of the Corporation or
its Subsidiaries or directors of the Corporation upon the occurence of a Change
in Control, (a) all outstanding Stock Appreciation Rights and Options shall
immediately become fully vested and exercisable in full, including that portion
of any Stock Appreciation Award or Option that pursuant to the terms and
provisions of the applicable Award Agreement had not yet become exercisable (the
total number of shares of Stock as to which a Stock Appreciation Right or Option
is exercisable upon the occurrence of a Change in Control is referred to herein
as the "TOTAL SHARES"); (b) the restriction period of any Restricted Stock Award
shall immediately be accelerated and the restrictions shall expire; and (c) the
target payout opportunity attainable under the Performance Units will be deemed
to have been fully earned for all Performance Periods upon the occurrence of the
Change in Control and the Holder will be paid a pro rata portion of all
associated targeted payout opportunities (based on the number of complete and
partial calendar months elapsed as of the occurrence of the Change in Control)
in cash within thirty days following the Change in Control or in Stock effective
as of the Change in Control, for cash and stock-based Performance Units,
respectively. If a Change in Control involves a Restructure or occurs in
connection with a series of related transactions involving a Restructure and if
such Restructure is in the form of a Non-Surviving Event and as a part of such
Restructure shares of stock, other securities, cash or property shall be
issuable or deliverable in exchange for Stock, then the Holder of an Award shall
be entitled to purchase or receive (in lieu of the Total Shares that the Holder
would otherwise be entitled to purchase or receive), as appropriate for the form
of Award, the number of shares of stock, other securities, cash or property to
which that number of Total Shares would have been entitled in connection with
such Restructure (and, for Options, at an aggregate exercise price equal to the
Exercise Price that would have been payable if that number of Total Shares had
been purchased on the exercise of the Option immediately before the consummation
of the Restructure). Nothing in this Paragraph 10.2 shall impose on a Holder the
obligation to exercise any Award immediately before or upon the Change of
Control, nor shall the Holder forfeit the right to exercise the Award during the
remainder of the original term of the Award because of a Change in Control or
because the Holder's employment is terminated for any reason following a Change
in Control.
10.3 RESTRUCTURE AND NO CHANGE IN CONTROL. In the event a Restructure
should occur at any time while there is any outstanding Award hereunder and that
Restructure does not occur in connection with a Change in Control or in
connection with a series of related transactions involving a Change in Control,
then:
(a) no Holder of an Option shall automatically be granted corresponding
Stock Appreciation Rights;
(b) neither any outstanding Stock Appreciation Rights nor any
outstanding Options shall immediately become fully vested and exercisable in
full merely because of the occurrence of the Restructure;
(c) the restriction period of any Restricted Stock Award shall not
immediately be accelerated and the restrictions expire merely because of the
occurrence of the Restructure;
(d) the target payout opportunity, attainable under the Performance
Units will not be deemed to have been fully earned for all Performance
Periods merely because of the occurrence of the Restructure; and
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(e) at the option of the Committee, the Corporation may (but shall not
be required to) take any one or more of the following actions:
(i) grant each Holder of an Option corresponding Stock or cash Stock
Appreciation Rights;
(ii) accelerate in whole or in part the time of the vesting and
exercisability of any one or more of the outstanding Stock Appreciation
Rights and Options so as to provide that those Stock Appreciation Rights
and Options shall be exercisable before, upon, or after the consummation
of the Restructure;
(iii) accelerate in whole or in part the expiration of some or all of
the restrictions on any Restricted Stock Award so that the Stock subject
to that Restricted Stock Award shall be owned by the Holder without
restriction or risk of forfeiture;
(iv) treat the outstanding Performance Units as having fully or
partially met their targets and pay, in full or in part, the targeted
payout;
(v) if the Restructure is in the form of a Non-Surviving Event, cause
the surviving entity to assume in whole or in part any one or more of the
outstanding Awards upon such terms and provisions as the Committee deems
desirable; or
(vi) redeem in whole or in part any one or more of the outstanding
Awards (whether or not then exercisable) in consideration of a cash
payment, as such payment may be reduced for tax withholding obligations
as contemplated in the section governing the particular form of Award, in
an amount equal to:
(A) for Options and Stock Appreciation Rights granted in
connection with Options, the excess of (1) the Fair Market Value,
determined as of the date immediately preceding the consummation of
the Restructure, of the aggregate number of shares of Stock subject
to the Award and as to which the Award is being redeemed over (2) the
Exercise Price for that number of shares of Stock;
(B) for Stock Appreciation Rights not granted in connection with
an Option, the excess of (1) the Fair Market Value, determined as of
the date immediately preceding the consummation of the Restructure,
of the aggregate number of shares of Stock subject to the Award and
as to which the Award is being redeemed over (2) the Fair Market
Value of the number of shares of Stock on the Date of Grant;
(C) for Restricted Stock Awards, the Fair Market Value,
determined as of the date immediately preceding the consummation of
the Restructure, of the aggregate number of shares of Stock subject
to the Award and as to which the Award is being redeemed; and
(D) for Performance Units, the amount per Performance Unit as the
Committee in its sole discretion may determine (which may be zero
dollars).
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Paragraph 10.3. In the event of any election
or action taken by the Corporation pursuant to this Paragraph 10.3 that requires
the amendment or cancellation of any Award Agreement as may be specified in any
notice to the Holder thereof, that Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or cancellation to be
implemented by the Corporation and the Committee. The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence shall not in any manner effect the validity or enforceability of any
action taken by the Corporation and the Committee under this Paragraph 10.3,
including, without limitation, any redemption of an Award as of the consummation
of a Restructure. Any cash payment to be made by the Corporation pursuant to
this Paragraph 10.3 in connection with the redemption of any outstanding Awards
shall be paid to the Holder thereof currently with the delivery to the
Corporation of
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the Award Agreement evidencing that Award; provided, however, that any such
redemption shall be effective upon the consummation of the Restructure
notwithstanding that the payment of the redemption price may occur subsequent to
the consummation. If all or any portion of an outstanding Award is to be
exercised or accelerated upon or after the consummation of a Restructure that is
in the form of a Non-Surviving Event and as a part of that Restructure shares of
stock, other securities, cash or property shall be issuable or deliverable in
exchange for Stock, then the Holder of the Award shall thereafter be entitled to
purchase or receive (in lieu of the number of shares of Stock that the Holder
would otherwise be entitled to purchase or receive) the number of shares of
stock, other securities, cash or property to which such number of shares of
Stock would have been entitled in connection with the Restructure (and, for
Options, at an aggregate exercise price equal to the Exercise Price that would
have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the Restructure).
10.4 NOTICE OF CHANGE IN CONTROL OR RESTRUCTURE. The Corporation shall
attempt to keep all Holders informed with respect to any Change in Control or
Restructure or of any potential Change in Control or Restructure to the same
extent that the Corporation's stockholders are informed by the Corporation of
any such event or potential event.
SECTION 11. ADDITIONAL PROVISIONS
11.1 TERMINATION OF EMPLOYMENT. Subject to the last sentence of Paragraph
10.2, if a Holder is an Eligible Individual because the Holder is an Employee
and if that employment relationship is terminated for any reason other than
Normal Retirement or that Holder's death or Disability, then the following
provisions shall apply to all Awards held by that Holder that were granted
because that Holder was an Employee:
(a) If the termination is by the Holder's employer, then the following
provisions shall apply: (i) if the termination is in breach of the terms and
provisions of any written employment agreement between that Holder and the
Holder's employer, then all Awards held by that Holder shall become
immediately exercisable, all restrictions on those Awards shall immediately
lapse, and the Awards shall survive the termination of employment; or (ii)
if the termination is not in breach of the terms and provisions of any
written employment agreement between that Holder and the Holder's employer
(or if there is no existing written employment agreement between that Holder
and the Holder's employer), then that portion, if any, of any and all Awards
held by that Holder that are not yet exercisable (or for which restrictions
have not lapsed) as of the date of the termination shall become null and
void as of the date of the termination; provided, however, that the portion,
if any, of any and all Awards held by that Holder which are exercisable (or
for which restrictions have lapsed) as of the date of such termination shall
survive such termination.
(b) If such termination is by the Holder, then the following provisions
shall apply: (i) if the termination is in breach of the terms and provisions
of any written employment agreement between that Holder and the Holder's
employer or if there is no existing written employment agreement between
that Holder and the Holder's employer, then any and all Awards held by that
Holder, whether or not then exercisable and whether or not restrictions
thereon have lapsed (except in full), shall become null and void as of the
date of the termination; or (ii) if the termination is in accordance with a
right of termination granted to a Holder pursuant to the terms and
provisions of any written employment agreement between that Holder and his
employer, then all Awards held by that Holder shall become immediately
exercisable (and all restrictions thereon shall lapse) and shall survive the
termination of employment.
With respect to any Option or Stock Appreciation Right that survives the
termination of employment pursuant to this Paragraph 11.1, the right to exercise
that Option or Stock Appreciation Right shall
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terminate in all cases on the 180th day following the last date of employment
with the Corporation or its Subsidiary.
11.2 OTHER LOSS OF ELIGIBILITY. If a Holder is an Eligible Individual
because the Holder is serving in a capacity other than as an Employee and if
that capacity is terminated for any reason other than the Holder's death, then
that portion, if any, of any and all Awards held by the Holder that were granted
because of that capacity which are not yet exercisable (or for which
restrictions have not lapsed) as of the date of the termination shall become
null and void as of the date of the termination; provided, however, that the
portion, if any, of any and all of the Awards held by the Holder that are
exercisable (or for which restrictions have lapsed) as of the date of the
termination shall survive the termination.
11.3 DEATH. Upon the death of a Holder, then any and all Awards held by
the Holder that are not yet exercisable (or for which restrictions have not
lapsed) as of the date of the Holder's death shall become null and void as of
the date of death; provided, however, that the portion, if any, of any and all
Awards held by the Holder that are exercisable as of the date of death shall be
exercisable by that Holder's legal representatives, legatees or distributees for
a period of the lesser of (a) the remainder of the term of the Award or (b) 180
days following the date of the Holder's death. Any portion of an Award not
exercised upon the expiration of the periods specified in (a) or (b) shall be
null and void. Except as expressly provided in this Paragraph 11.3, all Awards
held by a Holder shall not be exercisable after the death of that Holder.
11.4 RETIREMENT. If a Holder is an Eligible Individual because the Holder
is an Employee and if that employment relationship is terminated by reason of
the Holder's Normal Retirement, then the portion, if any, of any and all Awards
held by the Holder that are not yet exercisable (or for which restrictions have
not lapsed) as of the date of that retirement shall become null and void as of
the date of retirement; provided, however, that the portion, if any, of any and
all Awards held by the Holder that are exercisable as of the date of that
retirement shall survive the retirement for their original term.
11.5 DISABILITY. If a Holder is an Eligible Individual because the Holder
is an Employee and if that employment relationship is terminated by reason of
the Holder's Disability, then the portion, if any, of any and all Awards held by
the Holder that are not yet exercisable (or for which restrictions have not
lapsed) as of the date of that termination for Disability shall become null and
void as of the date of termination; provided, however, that the portion, if any,
of any and all Awards held by the Holder that are exercisable as of the date of
that termination shall survive the termination for its original term and shall
be exercisable by the Holder, his guardian, or his legal representative.
"Disability" shall have the meaning given it in the employment agreement of the
Holder; provided, however, that if that Holder has no employment agreement,
"Disability" shall mean a physical or mental impairment of sufficient severity
that, in the opinion of the Corporation, either the Holder is unable to continue
performing the duties he performed before such impairment or the Holder's
condition entitles him to disability benefits under any insurance or employee
benefit plan of the Corporation or its Subsidiaries and that impairment or
condition is cited by the Corporation as the reason for termination of the
Holder's employment.
11.6 LEAVE OF ABSENCE. With respect to an Award, the Committee may, in its
sole discretion, determine that any Holder who is on leave of absence for any
reason will be considered to still be in the employ of the Corporation, provided
that rights to that Award during a leave of absence will be limited to the
extent to which those rights were earned or vested when the leave of absence
began.
11.7 TRANSFERABILITY OF AWARDS. In addition to such other terms and
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative. An Award requiring
exercise shall not be transferrable other than by will or the laws of descent
and distribution, except as permitted in accordance with Paragraph 3.5.
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11.8 FORFEITURE AND RESTRICTIONS ON TRANSFER. Each Award Agreement may
contain or otherwise provide for conditions giving rise to the forfeiture of the
Stock acquired pursuant to an Award or otherwise and may also provide for those
restrictions on the transferability of shares of the Stock acquired pursuant to
an Award or otherwise that the Committee in its sole and absolute discretion may
deem proper or advisable. The conditions giving rise to forfeiture may include,
but need not be limited to, the requirement that the Holder render substantial
services to the Corporation or its Subsidiaries for a specified period of time.
The restrictions on transferability may include, but need not be limited to,
options and rights of first refusal in favor of the Corporation and stockholders
of the Corporation other than the Holder of such shares of Stock who is a party
to the particular Award Agreement or a subsequent holder of the shares of Stock
who is bound by that Award Agreement.
11.9 DELIVERY OF CERTIFICATES OF STOCK. Subject to Paragraph 11.10, the
Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested; (b) a Stock
Appreciation Right has been exercised and upon receipt by the Corporation of any
tax withholding as may be requested; (c) restrictions have lapsed with respect
to a Restricted Stock Award and upon receipt by the Corporation of any tax
withholding as may be requested; and (d) performance objectives have been
achieved during a Performance Period relating to a Performance Unit for Stock.
The value of the shares of Stock, cash or notes transferable because of an Award
under the Plan shall not bear any interest owing to the passage of time, except
as may be otherwise provided in an Award Agreement. If a Holder is entitled to
receive certificates representing Stock received for more than one form of Award
under the Plan, separate Stock certificates shall be issued with respect to each
such Award and for Incentive Options and Nonstatutory Stock Options separately.
11.10 CONDITIONS TO DELIVERY OF STOCK. Nothing herein or in any Award
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award or Performance Unit, the Corporation may, as a condition precedent to the
exercise of such Option or Stock Appreciation Right or vesting of any Restricted
Stock Award or Performance Unit, require from the Holder of the Award (or in the
event of his death, his legal representatives, heirs, legatees, or distributees)
such written representations, if any, concerning the Holder's intentions with
regard to the retention or disposition of the shares of Stock being acquired
pursuant to the Award and such written covenants and agreements, if any, as to
the manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by that Holder (or
in the event of the Holder's death, his legal representatives, heirs, legatees,
or distributees) will not involve a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable state or
federal statute or regulation, or any rule of any applicable securities exchange
or securities association, as then in effect.
11.11 CERTAIN DIRECTORS AND OFFICERS. With respect to Holders who are
directors or officers of the Corporation or any Subsidiary and who are subject
to Section 16(b) of the Exchange Act, Awards shall contain such other terms and
conditions as may be required by Rule 16b-3 unless the majority of the Board of
Directors or the Holder has determined not to have the Award comply with Rule
16b-3.
11.12 SECURITIES ACT LEGEND. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions endorsed thereon and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
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STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF
PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION
OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION
WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
11.13 LEGEND FOR RESTRICTIONS ON TRANSFER. Each certificate representing
shares issued to a Holder pursuant to an Award granted under the Plan shall, if
such shares are subject to any transfer restriction, including a right of first
refusal, provided for under this Plan or an Award Agreement, bear a legend that
complies with applicable law with respect to the restrictions on transferability
contained in this Paragraph 11.13, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
ENTITLED "CONCENTRA MANAGED CARE, INC. 1997 LONG-TERM INCENTIVE PLAN" AS
ADOPTED BY CONCENTRA MANAGED CARE, INC. (THE "CORPORATION") ON ,
1997, AND AN AGREEMENT THEREUNDER BETWEEN THE CORPORATION AND [HOLDER]
DATED , , AND MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE
DISPOSED OF EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL FURNISH A
COPY OF SUCH INSTRUMENT AND AGREEMENT TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
11.14 RIGHTS AS A STOCKHOLDER. A Holder shall have no right as a
stockholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 10. Nevertheless,
dividends and dividend equivalent rights may be extended to and made part of any
Award denominated in Stock or units of Stock, subject to such terms, conditions,
and restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred cash
payments and dividend equivalents for deferred payment denominated in Stock or
units of Stock.
11.15 FURNISH INFORMATION. Each Holder shall furnish to the Corporation
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
11.16 OBLIGATION TO EXERCISE. The granting of an Award hereunder shall
impose no obligation upon the Holder to exercise the same or any part thereof.
11.17 ADJUSTMENTS TO AWARDS. Subject to the general limitations set forth
in Sections 6, 7 and 10, the Committee may make any adjustment in the exercise
price of, the number of shares subject to or the terms of a Nonstatutory Option
or Stock Appreciation Right by canceling an outstanding Nonstatutory Option or
Stock Appreciation Right and regranting a Nonstatutory Option or Stock
Appreciation Right. Such adjustment shall be made by amending, substituting or
regranting an outstanding Nonstatutory Option or Stock Appreciation Right. Such
amendment, substitution or regrant may result in terms and conditions that
differ from the terms and conditions of the original Nonstatutory Option or
Stock Appreciation Right. The Committee may not, however, impair the rights of
any Holder to previously granted Nonstatutory
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Options or Stock Appreciation Rights without that Holder's consent. If such
action is effected by amendment, the effective date of such amendment shall be
the date of the original grant.
11.18 REMEDIES. The Corporation shall be entitled to recover from a Holder
reasonable attorneys' fees incurred in connection with the enforcement of the
terms and provisions of the Plan and any Award Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.
11.19 INFORMATION CONFIDENTIAL. As partial consideration for the granting
of each Award hereunder, the Holder shall agree with the Corporation that he
will keep confidential all information and knowledge that he has relating to the
manner and amount of his participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Holder's spouse, tax and financial advisors, or to a financial
institution to the extent that such information is necessary to secure a loan.
In the event any breach of this promise comes to the attention of the Committee,
it shall take into consideration that breach in determining whether to recommend
the grant of any future Award to that Holder, as a factor militating against the
advisability of granting any such future Award to that individual.
11.20 CONSIDERATION. No Option or Stock Appreciation Right shall be
exercisable, no restriction on any Restricted Stock Award shall lapse, and no
Performance Unit shall be settled in Stock with respect to a Holder unless and
until the Holder shall have paid cash or property to, or performed services for,
the Corporation or any of its Subsidiaries that the Committee believes is equal
to or greater in value than the par value of the Stock subject to such Award.
11.21 PAYMENT OF TAXES. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of an Award, the amount that the Committee deems necessary to satisfy the
Corporation's or its Subsidiary's current or future obligation to withhold
federal, state or local income or other taxes that the Holder incurs by
exercising an Award. Upon the exercise of an Award requiring tax withholding, a
Holder may (a) direct the Corporation to withhold from the shares of Stock to be
issued to the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date of exercise; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value at date of
exercise) to satisfy the Corporation's tax withholding obligations, based on the
shares' Fair Market Value as of the date of exercise; or (c) deliver sufficient
cash to the Corporation to satisfy its tax withholding obligations. Holders who
elect to use such a stock withholding feature must make the election at the time
and in the manner that the Committee prescribes. The Committee may, at its sole
option, deny any Holder's request to satisfy withholding obligations through
Stock instead of cash. In the event the Committee subsequently determines that
the aggregate Fair Market Value (as determined above) of any shares of Stock
withheld as payment of any tax withholding obligation is insufficient to
discharge that tax withholding obligation, then the Holder shall pay to the
Corporation, immediately upon the Committee's request, the amount of that
deficiency.
SECTION 12. DURATION AND AMENDMENT OF PLAN
12.1 DURATION. No Awards may be granted hereunder after the date that is
ten (10) years from the date the last amendment to this Plan involving an
increase in authorized shares is approved by the stockholders of the
Corporation.
12.2 AMENDMENT. The Board of Directors may, insofar as permitted by law,
with respect to any shares which, at the time, are not subject to Awards,
suspend or discontinue the Plan or revise or amend it in any respect whatsoever,
and may amend any provision of the Plan or any Award Agreement to make the Plan
or the Award Agreement, or both, comply with Section 16(b) of the Exchange Act
and the
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exemptions therefrom, the Code, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the regulations promulgated under the Code or ERISA,
or any other law, rule or regulation that may affect the Plan. The Board of
Directors may also amend, modify, suspend or terminate the Plan for the purpose
of meeting or addressing any changes in other legal requirements applicable to
the Corporation or the Plan or for any other purpose permitted by law. The Plan
may not be amended without the consent of the holders of a majority of the
shares of Stock then outstanding to increase materially the aggregate number of
shares of Stock that may be issued under the Plan (except for adjustments
pursuant to Section 10 of the Plan).
SECTION 13. GENERAL
13.1 APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of shares pursuant to Awards shall be used for general corporate
purposes. 13.2 Right of the Corporation and Subsidiaries to Terminate
Employment. Nothing contained in the Plan, or in any Award Agreement, shall
confer upon any Holder the right to continue in the employ of the Corporation or
any Subsidiary, or interfere in any way with the rights of the Corporation or
any Subsidiary to terminate his or her employment at any time.
13.3 NO LIABILITY FOR GOOD FAITH DETERMINATIONS. Neither the members of
the Board of Directors nor any member of the Committee shall be liable for any
act, omission, or determination taken or made in good faith with respect to the
Plan or any Award granted under it, and members of the Board of Directors and
the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors and officers liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on, any other indemnification rights any member of the
Board of Directors or the Committee may have.
13.4 OTHER BENEFITS. Participation in the Plan shall not preclude the
Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension, profit
sharing retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the stockholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
13.5 EXCLUSION FROM PENSION AND PROFIT-SHARING COMPENSATION. By acceptance
of an Award (whether in Stock or cash), as applicable, each Holder shall be
deemed to have agreed that the Award is special incentive compensation that will
not be taken into account in any manner as salary, compensation or bonus in
determining the amount of any payment under any pension, retirement or other
employee benefit plan of the Corporation or any Subsidiary. In addition, each
beneficiary of a deceased Holder shall be deemed to have agreed that the Award
will not affect the amount of any life insurance coverage, if any, provided by
the Corporation or a Subsidiary on the life of the Holder that is payable to the
beneficiary under any life insurance plan covering employees of the Corporation
or any Subsidiary.
13.6 EXECUTION OF RECEIPTS AND RELEASES. Any payment of cash or any
issuance or transfer of shares of Stock or other property to the Holder, or to
his legal representative, heir, legatee, or distributee, in accordance with the
provisions hereof, shall, to the extent thereof, be in full satisfaction of all
claims of such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or
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distributee, as a condition precedent to such payment, to execute a release and
receipt therefor in such form as it shall determine.
13.7 UNFUNDED PLAN. Insofar as it provides for Awards of cash and Stock,
the Plan shall be unfunded. Although bookkeeping accounts may be established
with respect to Holders who are entitled to cash, Stock, other property or
rights thereto under the Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Corporation shall not be required to segregate any
assets that may at any time be represented by cash, Stock, other property or
rights thereto, nor shall the Plan be construed as providing for such
segregation, nor shall the Corporation nor the Board of Directors nor the
Committee be deemed to be a trustee of any cash, Stock, other property or rights
thereto to be granted under the Plan. Any liability of the Corporation to any
Holder with respect to a grant of cash, Stock, other property or rights thereto
under the Plan shall be based solely upon any contractual obligations that may
be created by the Plan and any Award Agreement; no such obligation of the
Corporation shall be deemed to be secured by any pledge or other encumbrance on
any property of the Corporation. Neither the Corporation nor the Board of
Directors nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
13.8 NO GUARANTEE OF INTERESTS. The Board of Directors, the Committee and
the Corporation do not guarantee the Stock of the Corporation from loss or
depreciation.
13.9 PAYMENT OF EXPENSES. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Subsidiaries; provided,
however, the Corporation or a Subsidiary may recover any and all damages, fees,
expenses, and costs arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under this Plan.
13.10 CORPORATION RECORDS. Records of the Corporation or its Subsidiaries
regarding the Holder's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment, and other matters shall be
conclusive for all purposes hereunder, unless determined by the Committee to be
incorrect.
13.11 INFORMATION. The Corporation and its Subsidiaries shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished, all of the information or documentation which is necessary or
required by the Committee to perform its duties and functions under the Plan.
13.12 CORPORATION ACTION. Any action required of the Corporation shall be
by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
13.13 SEVERABILITY. If any provision of this Plan is held to be illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but such provision shall be fully severable and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein. If any of the terms or provisions of this Plan
conflict with the requirements of Rule 16b-3 (as those terms or provisions are
applied to Eligible Individuals who are subject to Section 16(b) of the Exchange
Act) or Section 422 of the Code (with respect to Incentive Options), then those
conflicting terms or provisions shall be deemed inoperative to the extent they
so conflict with the requirements of Rule 16b-3 or Section 422 of the Code
unless the Committee has determined that the Plan should not comply with such
requirements. With respect to Incentive Options, if this Plan does not contain
any provision required to be included herein under Section 422 of the Code, that
provision shall be deemed to be incorporated herein with the same force and
effect as if that provision had been set out at length herein; provided,
further, that, to the extent any Option that is intended to qualify as an
Incentive Option cannot so qualify, that Option (to that extent) shall be deemed
a Nonstatutory Option for all purposes of the Plan.
13.14 NOTICES. Whenever any notice is required or permitted hereunder
other than any Exercise Notice or notice to exercise an Stock Appreciation
Right, such notice must be in writing and personally delivered or sent by mail.
Any such notice required or permitted to be delivered hereunder shall be
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deemed to be delivered on the date on which it is personally delivered, or,
whether actually received or not, on the third Business Day after it is
deposited in the United States mail, certified or registered, postage prepaid,
addressed to the person who is to receive it at the address which such person
has theretofore specified by written notice delivered in accordance herewith.
The Corporation or a Holder may change, at any time and from time to time, by
written notice to the other, the address which it or he had previously specified
for receiving notices. Until changed in accordance herewith, the Corporation and
each Holder shall specify as its and his address for receiving notices the
address set forth in the Award Agreement pertaining to the shares to which such
notice relates. Any Exercise Notice or notice to exercise and Stock Appreciation
Right shall be valid only when it is in fact received by the Corporation or the
Person it designates in accordance with procedures that the Committee may adopt
from time to time.
13.15 WAIVER OF NOTICE. Any person entitled to notice hereunder may waive
such notice.
13.16 SUCCESSORS. The Plan shall be binding upon the Holder, his legal
representatives, heirs, legatees, and distributees, upon the Corporation, its
successors, and assigns, and upon the Committee, and its successors.
13.17 HEADINGS. The titles and headings of Sections and Paragraphs are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
13.18 GOVERNING LAW. All questions arising with respect to the provisions
of the Plan shall be determined by application of the laws of the State of
Delaware except to the extent Delaware law is preempted by federal law.
Questions arising with respect to the provisions of an Award Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Award Agreement, except to the extent Delaware corporate law conflicts with
the contract law of such state, in which event Delaware corporate law shall
govern. The obligation of the Corporation to sell and deliver Stock hereunder is
subject to applicable laws and to the approval of any governmental authority
required in connection with the authorization, issuance, sale, or delivery of
such Stock.
13.19 WORD USAGE. Words used in the masculine shall apply to the feminine
where applicable, and wherever the context of this Plan dictates, the plural
shall be read as the singular and the singular as the plural.
IN WITNESS WHEREOF, Concentra Managed Care, Inc., acting by and through its
officer hereunto duly authorized, has executed this Concentra Managed Care, Inc.
1997 Long-Term Incentive Plan this day of , 1997.
CONCENTRA MANAGED CARE, INC.
By:
- --------------------------------------------------------------------------------
Donald J. Larson
President and Chief Executive
Officer
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ANNEX A TO
CONCENTRA INCENTIVE PLAN
CONCENTRA MANAGED CARE, INC.
INCENTIVE PLAN
AWARD AGREEMENT FOR NON-EMPLOYEE DIRECTORS
<TABLE>
<S> <C>
To: Date of Grant:
Number of Shares: Exercise Price Per Share:
</TABLE>
A. OPTION. CONCENTRA MANAGED CARE, INC., a Delaware corporation (the
"CORPORATION"), is pleased to grant you a Nonstatutory Option (the "OPTION") to
purchase shares of the Corporation's common stock, par value $.01 per share. The
number of shares subject to this Option and the exercise price per share are
stated above. This Option is granted under Paragraph 5.2 of the Concentra
Managed Care, Inc. 1997 Long-Term Incentive Plan dated , 1997 (the "PLAN")
and is governed by the terms of the Plan. All terms having their initial letters
capitalized have the meanings given them in the Plan unless otherwise defined in
this Agreement or unless the context requires otherwise.
THIS OPTION IS NOT BINDING ON THE CORPORATION UNTIL YOU COMPLETE YOUR
ADDRESS FOR NOTICE IN PARAGRAPH 7, SIGN THIS DOCUMENT, AND RETURN IT TO THE
CORPORATION'S HUMAN RESOURCES DEPARTMENT.
1. VESTING AND EXERCISABILITY. This Option will vest and will be
exercisable at the times and with respect to the number of shares of Stock as
set forth in the Plan.
In accordance with the preceding schedule, the Option may be exercised, from
time to time, in whole or in part.
2. METHOD OF EXERCISE. The Option shall be exercisable only by written or
recorded electronic notice of exercise delivered to the Corporation's Human
Resources Department or designee, in accordance with instructions generally
applicable to all optionholders, during the term of the Option. The notice must
(a) state the number of shares of Stock with respect to which the Option is
being exercised, (b) be signed or otherwise given by you (or by your legal
representative, legatee, or distributes in the case of your death or by your
guardian or legal representative in case of your disability), (c) be accompanied
by the Exercise Price for all shares of Stock for which the Option is exercised
(unless you have provided for the payment of such Exercise Price pursuant to
Paragraph 6.7 of the Plan (regarding cashless exercises)), and (d) be
accompanied by the amount that the Corporation is required to withhold for
federal income or other tax purposes. The Option shall not be deemed to have
been exercised unless all of these requirements are satisfied.
3. DURATION. The Option will terminate on the earliest of (a) 11.59 p.m.,
Boston, Massachusetts, time, on the date ten years from the Date of Grant; (b)
immediately when you cease to be a director of the Corporation, if the Board of
Directors of the Corporation demands or requests your resignation from the Board
of Directors; (c) 11:59 p.m. Boston, Massachusetts, time, on the date 90 days
after you cease to be a director of the Corporation for any reason other than
the reasons specified in the preceding clause (b) or the following clause (d);
or (d) 11:59 p.m., Boston, Massachusetts, time, on the date one year after you
cease to be a director because of your death or Disability. In this Option,
"Disability" means a physical or mental impairment of sufficient severity such
that, in the opinion of a physician selected by the Corporation (which may be
your physician or any other physician), you are unable to continue to serve as a
director of the Corporation and that in fact results in the cessation of your
service.
4. TRANSFERABILITY. This Option is not transferable other than by will or
the laws of descent and distribution.
5. RIGHTS AS A STOCKHOLDER. You will have no right as a stockholder with
respect to any shares subject to this Option until a certificate representing
those shares is issued in your name. No adjustment will be made for dividends
(ordinary or extraordinary, whether in cash or other property) or distributions
or other
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rights for which the record date is before the date that certificate is issued,
except as contemplated by the Plan.
B. RESTRICTED STOCK AWARD. The Corporation hereby grants to you an
aggregate of shares of Common Stock, par value $.01 per share, of the
Corporation (the "Restricted Shares") pursuant to Section 5 of the Plan. This
award is subject to your acceptance of and agreement to all of the terms,
conditions and restrictions described in the Plan that are applicable to Awards
under Section 5 and to your acceptance of and agreement to the further terms,
conditions and restrictions described in this Award Agreement (the "Agreement").
To the extent that any provision of this Agreement conflicts with the expressly
applicable terms of the Plan, it is hereby acknowledged and agreed that those
terms of the Plan shall control and, if necessary, the applicable provisions of
this Agreement shall be hereby deemed amended so as to carry out the purpose and
intent of the Plan. Terms that have their initial letters capitalized but that
are not otherwise defined in this Agreement shall have the meanings given them
in the Plan in effect as of the date of this Agreement.
1. ESCROW OF RESTRICTED SHARES. The Corporation shall issue in your name a
certificate or certificates for the Restricted Shares and retain that
certificate or those certificates during the restriction period. You shall
execute stock powers in blank for those certificates and deliver those stock
powers to the Corporation. You hereby agree that the Corporation shall hold the
Restricted Shares and the related stock powers pursuant to the terms of this
Agreement until such time as the Restricted Shares are either delivered to you
or canceled pursuant to Section 4 of this Agreement.
2. OWNERSHIP OF RESTRICTED SHARES. You are entitled to all the rights of
absolute ownership of the Restricted Shares, including the right to vote those
shares and to receive dividends thereon if, as, and when declared by the Board
of Directors of the Corporation, subject, however, to the terms, conditions and
restrictions described in the Plan and in this Agreement.
3. RESTRICTIONS. Until the restrictions set forth in this Section 3 shall
lapse pursuant to Section 4, the Restricted Shares that are still subject to
such restrictions:
(a) shall not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, and
(b) shall be returned to the Corporation, and all of your rights to
those Restricted Shares shall terminate without any payment of consideration
by the Corporation, if your continuous service as a director of the
Corporation shall terminate for any reason, except as provided in Section
4(a) or (b). If your interest in any Restricted Shares shall terminate
pursuant to this Section 3(b), those Restricted Shares shall be cancelled;
provided, however, that the portion, if any, of any and all of the
Restricted Shares held by you for which restrictions have lapsed as of the
date of the termination shall survive the termination.
4. LAPSE OF RESTRICTIONS. Except as set forth in the following paragraphs
of this Section 4, the restrictions set forth in Section 3 shall lapse in
accordance with the terms of the Plan. The Date of Grant of this Restricted
Stock Award is the date first set forth above.
(a) Any provision of Section 3 to the contrary notwithstanding, if,
having been in the continuous service as a director of the Corporation since
the Date of Grant of this Restricted Stock Award, you shall while in that
status die or terminate that status by reason of Disability (hereafter
defined), then the restrictions set forth in Section 3 shall lapse on the
date of that event.
(b) As used in this Section 4, Disability means a physical or mental
impairment of sufficient severity such that, in the opinion of a physician
selected by the Corporation (which may be your physician or any other
physician), you are unable to continue to serve as a director of the
Corporation and that in fact results in the cessation of your service.
5. AGREEMENT RESPECTING TAXES. You agree that:
(a) You will pay to the Corporation, or make arrangements satisfactory
to the Corporation regarding payment of any federal, state or local taxes of
any kind required by law to be withheld by the Corporation with respect to
the Restricted Shares; provided, however, that you shall not be entitled or
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permitted to satisfy this obligation by the Corporation's withholding of
Stock that is subject to this Agreement or by your transfer of other shares
of Stock to the Corporation; and
(b) the Corporation shall, to the extent permitted by law, have the
right to deduct from any payments of any kind otherwise due to you,
including, but not limited to, those to be made pursuant to Section 7
hereof, any federal, state or local taxes of any kind required by law to be
withheld with respect to those Restricted Shares.
6. ADJUSTMENT OF SHARES. The number of shares of Restricted Stock subject
to this Agreement shall be adjusted as provided in Paragraph 10.1 of the Plan.
7. AGREEMENT RESPECTING SECURITIES ACT OF 1933. You hereby represent and
agree that you will not sell Restricted Shares except pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or pursuant
to an exemption from registration under the Securities Act.
8. RESTRICTIVE LEGEND. You hereby acknowledge that the certificate or
certificates for the Restricted Shares bear a legend noted conspicuously thereon
referring to the terms, conditions and restrictions described in the Plan and in
this Agreement. Any attempt to dispose of any Restricted Shares in contravention
of the terms, conditions and restrictions described in the Plan or in this
Agreement shall be ineffective.
C. INCORPORATION OF PLAN. The terms and provisions of the Plan are hereby
expressly incorporated herein and made a part of this Agreement and shall be
applicable for all purposes under this Agreement with any necessary changes in
points of detail.
D. NOTICE. For purposes of notice hereunder, which shall be given in
accordance with Paragraph 13.14 of the Plan, the Corporation, the Committee, and
you agree that any notices shall be given to the Corporation or you at the
following addresses:
<TABLE>
<S> <C>
Corporation or Concentra Managed Care, Inc.
Committee: 3010 LBJ Freeway, Suite 400
Dallas, Texas 75234
Attn: Legal Department
You: -------------------------------------------
-------------------------------------------
-------------------------------------------
</TABLE>
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The Corporation or you may change the address previously specified for
receiving notices at any time and from time to time by written notice to the
other in accordance with Paragraph 13.14 of the Plan.
CONCENTRA MANAGED CARE, INC.
By:
------------------------------------------------------------------------------
Name:
------------------------------------------------------------------------------
Title:
------------------------------------------------------------------------------
DIRECTOR
------------------------------------------------------------------------------
Name:
------------------------------------------------------------------------------
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APPENDIX H
CONCENTRA MANAGED CARE, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
PURPOSE OF PLAN
The purpose of the Concentra Managed Care, Inc. 1997 Employee Stock Purchase
Plan (the "PLAN") is to provide eligible employees with an incentive to advance
the interests of Concentra Managed Care, Inc. (the "CORPORATION") by affording
an opportunity to purchase stock of the Corporation at a favorable price.
SECTION 1. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee (the "COMMITTEE") of, and
appointed by, the Board of Directors of the Corporation (the "BOARD OF
DIRECTORS"). Subject to the provisions of the Plan, the Committee shall
interpret and construe the Plan and all options granted under the Plan, shall
make such rules as it deems necessary for the proper administration of the Plan,
shall make all other determinations necessary or advisable for the
administration of the Plan, including the determination of eligibility to
participate in the Plan and the amount of a participant's option under the Plan,
and shall correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option granted under the Plan in the manner
and to the extent that the Committee deems desirable to carry the Plan or any
option into effect. The Committee shall, in its sole discretion exercised in
good faith, make such decisions or determinations and take such actions as it
deems appropriate, and all such decisions, determinations and actions taken or
made by the Committee pursuant to this and the other sections of the Plan shall
be conclusive on all parties. The Committee shall not be liable for any
decision, determination or action taken in good faith in connection with the
administration of the Plan.
SECTION 2. PARTICIPATING COMPANIES
Each present and future parent or subsidiary corporation of the Corporation
(within the meaning of Sections 424(e) and (f) of the Internal Revenue Code of
1986, as amended (the "CODE")) that is eligible by law to participate in the
Plan shall be a "PARTICIPATING COMPANY" during the period that such corporation
is such a parent or subsidiary corporation; PROVIDED, HOWEVER, that the
Committee may at any time and from time to time, in its sole discretion,
terminate a Participating Company's Plan participation. Any Participating
Company may, by appropriate action of its Board of Directors, terminate its
participation in the Plan. Transfer of employment among the Corporation and
Participating Companies (and among any other parent or subsidiary corporation of
the Corporation) shall not be considered a termination of employment hereunder.
SECTION 3. ELIGIBILITY
All employees of the Corporation and the Participating Companies who have
been employed by the Corporation or any Participating Company (including any
predecessor company) for at least five (5) months (including any authorized
leave of absence meeting the requirements of Treasury Regulation Section 1.421
- -7(h)(2)) as of the applicable date of grant (defined below) and who are
customarily employed at least 20 hours per week and at least 5 months per year
shall be eligible to participate in the Plan; PROVIDED, HOWEVER, that no option
shall be granted to an employee if such employee, immediately after the option
is granted, owns stock possessing five percent or more of the total combined
voting power or value of all classes of stock of the Corporation or of its
parent or subsidiary corporation (within the meaning of Sections 423(b)(3) and
424(d) of the Code) ("ELIGIBLE EMPLOYEE").
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SECTION 4. STOCK SUBJECT TO THE PLAN
Subject to the provisions of Section 11 (relating to adjustment upon changes
in stock), the aggregate number of shares which may be sold pursuant to options
granted under the Plan shall not exceed Five Hundred Thousand (500,000) shares
of the authorized $.01 par value common stock of the Corporation ("STOCK"),
which shares may be unissued shares or reacquired shares or shares bought on the
market for purposes of the Plan. Should any option granted under the Plan expire
or terminate prior to its exercise in full, the shares theretofore subject to
such option may again be subject to an option granted under the Plan. Any shares
which are not subject to outstanding options upon the termination of the Plan
shall cease to be subject to the Plan.
SECTION 5. GRANT OF OPTIONS
5.1 GENERAL STATEMENT; "DATE OF GRANT"; "OPTION PERIOD"; "DATE OF
EXERCISE". Upon the effective date of the Plan and continuing while the Plan
remains in force, the Corporation shall offer options under the Plan to all
Eligible Employees to purchase shares of Stock. Except as otherwise determined
by the Committee, the Plan shall be implemented by one offering during each six
(6) month period of the Plan, commencing on January 1, 1998, and, continuing
thereafter until terminated in accordance with Section 15. These options shall
be granted on the first day of January and the first day of June of each
subsequent year (each of which dates is herein referred to as a "DATE OF
GRANT"). The term of each option granted shall be for a period of six (6) months
ending on May 31 and December 31, respectively (each such six (6)-month period
is herein referred to as an "OPTION PERIOD"), which term shall begin on a date
of grant. The last day of each option period is herein referred to as a "DATE OF
EXERCISE." The number of shares subject to each option shall be the quotient of
the sum of the payroll deductions withheld on behalf of each participant in
accordance with Paragraph 5.2, the payments made by such participant pursuant to
Paragraph 5.6 during the option period and any amount carried forward from the
preceding option period pursuant to Paragraph 6.1, divided by the "option price"
(defined in Paragraph 6.2) of the Stock, excluding all fractions; PROVIDED,
HOWEVER, that the maximum number of shares that may be subject to any option may
not exceed ( ) (subject to adjustment as provided in Section 11).
5.2 ELECTION TO PARTICIPATE; PARTICIPATE DEDUCTION AUTHORIZATION. Except
as provided in Paragraph 5.6, an Eligible Employee may participate in the Plan
only by means of payroll deduction. Except as provided in Paragraph 5.6, each
Eligible Employee who elects to participate in the Plan shall deliver to the
Corporation, within the time period prescribed by the Committee, a written
payroll deduction authorization on a form prepared by the Committee whereby he
gives notice of his election to participate in the Plan as of the next following
date of grant, and whereby he designates an integral percentage or specific
amount of his "eligible compensation" (as defined in Paragraph 5.4) to be
deducted from his compensation for each pay period and credited to a book entry
account established in his name. The designated percentage or specific amount
may not result in a deduction during any payroll period of an amount less than
$20.00. The designated percentage or specific amount may not exceed either of
the following: (i) 15% of the amount of eligible compensation from which the
deduction is made; or (ii) an amount which will result in noncompliance with the
$25,000 limitation stated in Paragraph 5.5.
5.3 CHANGES IN PAYROLL AUTHORIZATION. Except as provided in Paragraph 7.1,
the payroll deduction authorization referred to in Paragraph 5.2 may not be
changed during the option period.
5.4 "ELIGIBLE COMPENSATION" DEFINED. The term "ELIGIBLE COMPENSATION"
means the gross (before taxes are withheld) total of all wages, salaries,
commissions, and bonuses received during the option period, except that such
term shall include elective contributions made on an employee's behalf by the
Corporation or a Participating Company that are not includable in income under
Section 125 or Section 402(e)(3) of the Code. Notwithstanding the foregoing,
"eligible compensation" shall not include (i) employer contributions to or
payments from any deferred compensation program, whether such program is
qualified under Section 401(a) of the Code (other than amounts considered as
employee
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contributions under Section 402(e)(3) of the Code) or nonqualified, (ii) amounts
realized from the receipt or exercise of a stock option that is not an incentive
stock option within the meaning of Section 422 of the Code, (iii) amounts
realized at the time property described in Section 83 of the Code is freely
transferable or no longer subject to a substantial risk of forfeiture, (iv)
amounts realized as a result of an election described in Section 83(b) of the
Code, and (v) any amount realized as a result of a disqualifying disposition
within the meaning of Section 421(a) of the Code.
5.5 $25,000 LIMITATION. No Eligible Employee shall be granted an option
under the Plan to the extent such grant would permit his rights to purchase
Stock under the Plan and under all other employee stock purchase plans of the
Corporation and its parent and subsidiary corporations (as such terms are
defined in Section 424(e) and (f) of the Code) to accrue at a rate which exceeds
$25,000 of fair market value of Stock (determined at the time the option is
granted) for each calendar year in which any such option granted to such
employee is outstanding at any time (within the meaning of Section 423(b)(8) of
the Code).
5.6 LEAVES OF ABSENCE. During a paid leave of absence approved by the
Corporation and meeting the requirements of Treasury Regulation Section
1.421-7(h)(2), a participant's elected payroll deductions shall continue. If a
participant takes an unpaid leave of absence that is approved by the Corporation
or a Participating Company and meets the requirements of Treasury Regulation
Section 1.421-7(h)(2), then such participant may continue participation in the
Plan by cash payments to the Corporation on his normal pay days equal to the
reduction in his payroll deductions caused by his leave. If a participant on
such leave fails to make such payments, or if a participant takes a leave of
absence that is not described in the preceding provisions of this Paragraph 5.6,
then the Committee shall determine whether the participant shall be considered
to have withdrawn from the Plan pursuant to the provisions of Section 7 hereof
or whether the participant's payroll deductions shall remain subject to the Plan
and used to exercise options on the next following date of exercise.
5.7 CONTINUING ELECTION. A participant (i) who has elected to participate
in the Plan pursuant to Paragraph 5.2 as of a date of grant and (ii) who takes
no action to change or revoke such election as of the next following date of
grant and/or as of any subsequent date of grant prior to any such respective
date of grant, shall be deemed to have made the same election, including the
same attendant payroll deduction authorization, for such next following and/or
subsequent date(s) of grant as was in effect for the date of grant for which he
made such election to participate. A participant who wants to discontinue
participation in the Plan for a subsequent option period shall deliver to the
Corporation a notice of withdrawal, on a form prepared by the Committee, at
least thirty (30) days prior to the beginning of the option period.
SECTION 6. EXERCISE OF OPTIONS
6.1 GENERAL STATEMENT. Each Eligible Employee who is a participant in the
Plan, automatically and without any act on his part, shall be deemed to have
exercised his option on each date of exercise to the extent that the cash
balance then in his account under the Plan is sufficient to purchase at the
"option price" (as defined in Paragraph 6.2) whole shares of Stock. Any balance
remaining in his account after payment of the purchase price of those whole
shares shall be carried forward and used toward the purchase of whole shares in
the next following option period.
6.2 "OPTION PRICE" DEFINED. The option price per share of Stock to be paid
by each optionee on each exercise of his option shall be an amount equal to the
lesser of 85% of the fair market value of the Stock on the date of exercise or
on the date of grant. For all purposes under the Plan, the "FAIR MARKET VALUE"
of a share of Stock means, for a particular day:
(a) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange
at the date of determining the Fair Market Value, then the last reported
sale price, regular way, on the composite tape of that exchange on that
business day
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or, if no such sale takes place on that business day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to unlisted trading privileges on that
securities exchange or, if no such closing prices are available for that
day, the last reported sale price, regular way, on the composite tape of
that exchange on the last business day before the date in question; or
(b) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subparagraph 6.2(a) and if sales
prices for shares of Stock of the same class in the over-the-counter market
are reported by the National Association of Securities Dealers, Inc.
Automated Quotations, Inc ("NASDAQ") National Market System at the date of
determining the Fair Market Value, then the last reported sales price so
reported on that business day or, if no such sale takes place on that
business day, the average of the high bid and low asked prices so reported
or, if no such prices are available for that day, the last reported sale
price so reported on the last business day before the date in question; or
(c) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subparagraph 6.2(a) and sales
prices for shares of Stock of the same class are not reported by the NASDAQ
National Market System (or a similar system then in use) as provided in
Subparagraph 6.2(b), and if bid and asked prices for shares of Stock of the
same class in the over-the-counter market are reported by NASDAQ (or, if not
so reported, by the National Quotation Bureau Incorporated) at the date of
determining the Fair Market Value, then the average of the high bid and low
asked prices on that business day or, if no such prices are available for
that day, the average of the high bid and low asked prices on the last
business day before the date in question; or
(d) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subparagraph 6.2(a) and sales
prices or bid and asked prices therefor are not reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subparagraph 6.2(b)
or Subparagraph 6.2(c) at the date of determining the Fair Market Value,
then the value determined in good faith by the Committee, which
determination shall be conclusive for all purposes; or
(e) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges as provided in Subparagraph 6.2(a) or sales
prices or bid and asked prices therefor are reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subparagraph 6.3(b)
or Subparagraph 6.2(c) at the date of determining the Fair Market Value, but
the volume of trading is so low that the Board of Directors determines in
good faith that such prices are not indicative of the fair value of the
Stock, then the value determined in good faith by the Committee, which
determination shall be conclusive for all purposes notwithstanding the
provisions of Subparagraphs 6.2(a), 6.2(b) or 6.2(c).
6.3 DELIVERY OF SHARE CERTIFICATES. As soon as practicable after each date
of exercise, the Corporation shall arrange for the delivery to each participant,
as appropriate, of a certificate representing the number of whole shares of
Stock purchased upon exercise of the option. In the event the Corporation is
required to obtain from any commission or agency authority to issue any such
certificate, the Corporation shall seek to obtain such authority. Inability of
the Corporation to obtain from any such commission or agency authority which
counsel for the Corporation deems necessary for the lawful issuance of any such
certificate shall relieve the Corporation from liability to any participant in
the Plan except to return to him the amount of the balance in his account. The
Corporation may cause the Stock certificates issued in connection with the
exercise of options under the Plan to bear such legend or legends, and the
Corporation may take such other actions, as it deems appropriate in order to
reflect the provisions of this Paragraph 6.3 and to assure compliance with
applicable securities laws. Neither the Corporation nor the Committee shall have
any liability with respect to a delay in the delivery of a Stock certificate
pursuant to this Paragraph 6.3.
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SECTION 7. WITHDRAWAL FROM THE PLAN
7.1 GENERAL STATEMENT. Any participant may withdraw in whole from the Plan
at any time prior to 30 days before the exercise date relating to a particular
option period. Partial withdrawals shall not be permitted. A participant who
wishes to withdraw from the Plan must timely deliver to the Corporation a notice
of withdrawal on a form prepared by the Committee. The Corporation, promptly
following the time when the notice of withdrawal is delivered, shall refund to
the participant the amount of the cash balance in his account under the Plan;
and thereupon, automatically and without any further act on his part, his
payroll deduction authorization and his interest in unexercised options under
the Plan shall terminate.
7.2 ELIGIBILITY FOLLOWING WITHDRAWAL. A participant who withdraws from the
Plan shall not be eligible to participate in the Plan during the then current
option period (if any), but shall be eligible to participate again in the Plan
in a subsequent option period (provided that he is otherwise eligible to
participate in the Plan at such time).
SECTION 8. TERMINATION OF EMPLOYMENT
If the employment of a participant terminates for any reason whatsoever, his
participation in the Plan automatically and without any act on his part shall
terminate as of the date of the termination of his employment. The Corporation
shall refund to him the amount of the cash balance in his account under the
Plan, and thereupon his interest in unexercised options under the Plan shall
terminate.
SECTION 9. RESTRICTION UPON ASSIGNMENT OF OPTION
An option granted under the Plan shall not be transferable otherwise than by
will or the laws of descent and distribution. Each option shall be exercisable,
during his lifetime, only by the employee to whom granted. The Corporation shall
not recognize and shall be under no duty to recognize any assignment or
purported assignment by an employee of his option or of any rights under his
option, and any such attempt may be treated by the Corporation as an election to
withdraw from the Plan.
SECTION 10. RIGHTS OF STOCKHOLDERS
With respect to shares of Stock subject to an option, an participant shall
not be deemed to be a stockholder, and he shall not have any of the rights or
privileges of a stockholder. A participant shall have the rights and privileges
of a stockholder upon, but not until, a certificate for shares has been issued
on his behalf following exercise of his option.
SECTION 11. ADJUSTMENTS
11.1 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any
change in the number or kind of outstanding shares of Stock subject to options
hereunder effected without receipt of consideration therefor by the Corporation,
by reason of a stock dividend, stock split, combination, exchange of shares or
other recapitalization, merger, or otherwise, in which the Corporation is the
surviving corporation, an appropriate and proportionate adjustment shall be made
in the number or kind of shares as to which options are or may be granted
hereunder. A corresponding adjustment changing the number or kind of shares
allocated to unexercised options or portions thereof, which shall have been
granted prior to any such change, shall likewise be made. Any such adjustment,
however, in the outstanding options shall be made without change in the total
price applicable to the unexercised potion of the option but with a
corresponding adjustment, if appropriate, in the price for each share of Stock
covered by the option. In the event of a dispute concerning such adjustment, the
decision of the Committee shall be conclusive. The number of shares subject to
any option granted hereunder shall be automatically reduced by any fraction
included therein which results from any adjustment made pursuant to this
Paragraph 11.1.
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11.2 TRANSFER OF CONTROL. Further, in the event of a sale of all or
substantially all of the assets of the Corporation; a merger or consolidation
(other than a merger effecting a reincorporation of the Corporation in another
state or any other merger or a consolidation in which the stockholders of the
surviving corporation and their proportionate interests therein immediately
after the merger or consolidation are substantially identical to the
stockholders of the Corporation and their proportionate interests therein
immediately prior to the merger or consolidation) in which the Corporation is
not the surviving corporation; or any other transaction or series of
transactions resulting in a person or entity becoming the owner of 50% or more
of the total combined voting power of all classes of stock of the Corporation,
then the Committee shall, at its option, either (i) substitute for the shares
subject to the unexercised portions of such outstanding options an appropriate
number of shares of each class of stock or other securities of the reorganized
or merged or consolidated corporation which were distributed to the stockholders
of the Corporation with respect to such shares (or, as appropriate, in the case
of an acquisition of the Corporation by another corporation, substitute the
shares of the acquiring corporation for the shares of the Corporation), or (ii)
cancel all such options as of the effective date of any such transaction by
giving notice to each holder thereof or his personal representative of its
intention to do so and by permitting the exercise of all such outstanding
options, without regard to any other provisions of the Plan, during the 30-day
period immediately preceding such effective date, or (iii) allow the options
granted under the Plan to remain outstanding without any modifications or
amendments.
11.3 CHANGE OF CONTROL. The occurrence of any of the following events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (x) the then outstanding shares of
Common Stock of the Corporation (the "OUTSTANDING CORPORATION COMMON STOCK")
or (y) the combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of directors
(the "OUTSTANDING CORPORATION VOTING SECURITIES"); PROVIDED, HOWEVER, that
for purposes of this subparagraph 11.3(a), the following acquisitions shall
not constitute a Change of Control; (A) any acquisition directly from the
Corporation, (B) any acquisition by the Corporation, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation or (D) any
acquisition by any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of Subparagraph 11.3(c) below; or
(b) Individuals who, as of the date of this Plan, constitute the Board
of Directors (the "INCUMBENT BOARD") cease for any reason to constitute at
least a majority of the Board of Directors; PROVIDED, HOWEVER, that any
individual becoming a director subsequent to the date of this Plan whose
election, or nomination for election by the Corporation's stockholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Incumbent Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Corporation or an acquisition of assets of another corporation (a "BUSINESS
COMBINATION"), in each case, unless, following such Business Combination,
(A) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation Common Stock
and Outstanding Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a
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corporation which as a result of such transaction owns the Corporation or
all or substantially all of the Corporation's assets either directly or
through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination
and (C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board of Directors, providing for such Business
Combination; or
(d) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
SECTION 12. USE OF FUNDS; NO INTEREST PAID
All funds received or held by the Corporation under the Plan shall be
included in the general funds of the Corporation free of any trust or other
restriction, and may be used for any corporate purpose. No interest shall be
paid to any participant or credited to his account under the Plan.
SECTION 13. TERM OF PLAN
The Plan shall be effective as of January 1, 1998, provided the Plan is
approved by the stockholders of the Corporation within 12 months of the date of
adoption by the Board of Directors. Notwithstanding any provision in the Plan,
no option granted under the Plan shall be exercisable prior to such stockholder
approval, and, if the stockholders of the Corporation do not approve the Plan
within 12 months after its adoption by the Board of Directors, then the Plan
shall automatically terminate. If not sooner terminated under the provisions of
Section 15, the Plan shall terminate upon and no further options shall be
granted after December 31, 2007.
SECTION 14. AMENDMENT OR TERMINATION OF PLAN
The Board of Directors in its discretion may terminate the Plan at any time
with respect to any shares for which options have not theretofore been granted.
The Board of Directors shall have the right to alter or amend the Plan or any
part thereof from time to time; provided, that no change in any option
theretofore granted may be made which would impair the rights of the participant
without the consent of such participant; and provided, further, that the Board
of Directors may not make any alteration or amendment which would materially
increase the benefits accruing to participants under the Plan, increase the
aggregate number of shares which may be issued pursuant to the provisions of the
Plan (other than as a result of the anti-dilution provisions of the Plan),
change the class of individuals eligible to receive options under the Plan,
extend the term of the Plan, cause options issued under the Plan to fail to meet
the requirements for employee stock purchase plans as defined in Section 423 of
the Code, or otherwise modify the requirements as to eligibility for
participation in the Plan without the approval of the stockholders of the
Corporation.
SECTION 15. SECURITIES LAWS
The Corporation shall not be obligated to issue any Stock pursuant to any
option granted under the Plan at any time when the shares covered by such option
have not been registered under the Securities Act of 1933, as amended, and such
other state and federal laws, rules or regulations as the Corporation or the
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Committee deems applicable and, in the opinion of legal counsel for the
Corporation, there is no exemption from the registration requirements of such
laws, rules or regulations available for the issuance and sale of such shares.
Further, all Stock acquired pursuant to the Plan shall be subject to the
Corporation's policy or policies, if any, concerning compliance with securities
laws and regulations, as the same may be amended from time to time.
SECTION 16. NO RESTRICTION ON CORPORATE ACTION
Nothing contained in the Plan shall be construed to prevent the Corporation
or any subsidiary from taking any corporate action which is deemed by the
Corporation or such subsidiary to be appropriate or in its best interest,
whether or not such action would have an adverse effect on the Plan or any award
made under the Plan. No employee, beneficiary or other person shall have any
claim against the Corporation or any subsidiary as a result of any such action.
SECTION 17. GOVERNING LAW
The laws of the State of Delaware shall govern all matters relating to the
Plan except to the extent superseded by the laws of the United States.
EXECUTED this day of , 1997.
CONCENTRA MANAGED CARE, INC.
By:
Donald J. Larson
President and Chief Executive
Officer
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APPENDIX I
SECTIONS 86 TO 98 OF MASSACHUSETTS BUSINESS CORPORATION LAW
86 RIGHT OF APPRAISAL. If a corporation proposes to take a corporate
action as to which any section of this chapter provides that a stockholder who
objects to such action shall have the right to demand payment for his shares and
an appraisal thereof, sections eighty-seven to ninety-eight, inclusive, shall
apply except as otherwise specifically provided in any section of this chapter.
Except as provided in sections eighty-two and eighty-three, no stockholder shall
have such right unless (1) he files with the corporation BEFORE THE TAKING OF
THE VOTE OF THE SHAREHOLDERS ON SUCH CORPORATE ACTION, written objection to the
proposed action STATING THAT HE INTENDS TO DEMAND PAYMENT FOR HIS SHARES IF THE
ACTION IS TAKEN and (2) his shares are not voted in favor of the proposed
action.
87 NOTICE OF STOCKHOLDERS MEETING TO CONTAIN STATEMENT AS TO APPRAISAL
RIGHTS. The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the
meeting and effected by the corporation, any stockholder (1) who
files with the corporation BEFORE THE TAKING OF THE VOTE ON THE
APPROVAL OF SUCH ACTION, WRITTEN OBJECTION TO THE PROPOSED ACTION
STATING THAT HE INTENDS TO DEMAND PAYMENT FOR HIS SHARES IF THE
ACTION IS TAKEN AND (2) WHOSE SHARES ARE NOT VOTED IN FAVOR OF SUCH
ACTION HAS OR MAY HAVE THE RIGHT TO DEMAND IN WRITING FROM THE
CORPORATION (OR, IN THE CASE OF A CONSOLIDATION OR MERGER, THE NAME
OF THE RESULTING OR SURVIVING CORPORATION SHALL BE INSERTED), WITHIN
TWENTY DAYS AFTER THE DATE OF MAILING TO HIM OF NOTICE IN WRITING
THAT THE CORPORATE ACTION HAS BECOME EFFECTIVE, PAYMENT FOR HIS
SHARES AND AN APPRAISAL OF THE VALUE THEREOF. Such corporation and
any such stockholder shall in such cases have the rights and duties
and shall follow the procedure set forth in sections 88 to 98,
inclusive, of chapter 156B of the General Laws of Massachusetts."
88 NOTICE TO OBJECTING STOCKHOLDER THAT CORPORATE ACTION HAS BECOME
EFFECTIVE. The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed written objection MEETING THE REQUIREMENTS OF SECTION
EIGHTY-SIX AND WHOSE SHARES WERE NOT VOTED IN FAVOR OF THE APPROVAL OF SUCH
ACTION, THAT THE ACTION APPROVED AT THE MEETING OF THE CORPORATION OF WHICH HE
IS A STOCKHOLDER HAS BECOME EFFECTIVE. THE GIVING OF SUCH NOTICE SHALL NOT BE
DEEMED TO CREATE ANY RIGHTS IN ANY STOCKHOLDER RECEIVING THE SAME TO DEMAND
PAYMENT FOR HIS STOCK. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
89 DEMAND FOR PAYMENT BY OBJECTING STOCKHOLDER. If within twenty days
after the date of mailing a notice under subsection (e) of section eighty-two,
subsection (f) of section eighty-three, or section eighty-eight ANY STOCKHOLDER
TO WHOM THE CORPORATION WAS REQUIRED TO GIVE SUCH NOTICE SHALL demand in writing
from the corporation taking such action, or in the case of a consolidation or
merger from the resulting or surviving corporation, payment for his stock, the
corporation upon which such demand is made shall pay to him the fair value of
his stock within thirty days after the expiration of the period during which
such demand may be made.
I-1
<PAGE>
90 DETERMINATION OF VALUE OF STOCK BY SUPERIOR COURT. If during the
period of thirty days provided for in section eighty-nine the corporation upon
which such demand is made and any such objecting stockholder fail to agree as to
the value of such stock, such corporation or any such stockholder may within
four months after the expiration of such thirty-day period demand a
determination of the value of the stock of all such objecting stockholders by a
bill in equity filed in the superior court in the county where the corporation
in which such objecting stockholder held stock had or has its principal office
in the commonwealth.
91 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS
ON FAILURE TO AGREE ON VALUE THEREOF , ETC.; PARTIES TO BILL ETC.; SERVICE OF
BILL ON CORPORATION; NOTICE TO STOCKHOLDER PARTIES, ETC. If the bill is filed by
the corporation, it shall name as parties respondent all stockholders who have
demanded payment for their shares and with whom the corporation has not reached
agreement as to the value thereof. If the bill is filed by a stockholder, he
shall bring the bill in his own behalf and in behalf of all other stockholders
who have demanded payment for their shares and with whom the corporation has not
reached agreement as to the value thereof, and service of the bill shall be made
upon the corporation by subpoena with a copy of the bill annexed. The
corporation shall file with its answer a duly verified list of all such other
stockholders, and such stockholders shall thereupon be deemed to have been added
as parties to the bill. The corporation shall give notice in such form and
returnable on such date as the court shall order to each stockholder party to
the bill by registered or certified mail, addressed to the last known address of
such stockholder as shown in the record of the corporation, and the court may
order such additional notice by publication or otherwise as it deems advisable.
Each stockholder who makes demand as provided in section eighty-nine shall be
deemed to have consented to the provisions of this section relating to notice,
and the giving of notice by the corporation to any such stockholder in
compliance with the order of the court shall be a sufficient service of process
on him. Failure to give notice to any stockholder making demand shall not
invalidate the proceedings as to other stockholders to whom notice was properly
given, and the court may at any time before the entry of a final decree make
supplementary orders of notice.
92 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS
ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; ENTRY OF DECREE DETERMINING VALUE OF
STOCK; DATE ON WHICH VALUE IS TO BE DETERMINED. After hearing the court shall
enter a decree determining the fair value of the stock of those stockholders who
have become entitled to the valuation of and payment for their shares, and shall
order the corporation to make payment of such value, together with interest, if
any, as hereinafter provided, to the stockholders entitled thereto upon the
transfer by them to the corporation of the certificates representing such stock
IF CERTIFICATED OR IF UNCERTIFICATED, UPON RECEIPT OF AN INSTRUCTION
TRANSFERRING SUCH STOCK TO THE CORPORATION. For this purpose, the value of the
shares shall be determined as of the day preceding the date of the vote
approving the proposed corporate action and shall be exclusive of any element of
value arising from the expectation or accomplishment of the proposed corporate
action.
93 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS
ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; COURT MAY REFER BILL, ETC., TO
SPECIAL MASTER TO HEAR PARTIES, ETC. The court in its discretion may refer the
bill or any question arising thereunder to a special master to hear the parties,
make findings and report the same to the court, all in accordance with the usual
practice in suits in equity in the superior court.
94 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS
ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; STOCKHOLDER PARTIES MAY BE REQUIRED
TO SUBMIT THEIR STOCK CERTIFICATES FOR NOTATION THEREON OF PENDENCY OF BILL,
ETC. On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for notation thereon of the
pendency of the bill, and MAY ORDER THE CORPORATION TO NOTE SUCH PENDENCY IN ITS
RECORDS WITH RESPECT TO ANY UNCERTIFICATED SHARES HELD BY SUCH STOCKHOLDER
PARTIES, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
I-2
<PAGE>
95 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS
ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; TAXATION OF COSTS, ETC.; INTEREST ON
AWARD, ETC. The costs of the bill, including the reasonable compensation and
expenses of any master appointed by the court, but exclusive of fees of counsel
or of experts retained by any party, shall be determined by the court and taxed
upon the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
96 STOCKHOLDER DEMANDING PAYMENT FOR STOCK NOT ENTITLED TO NOTICE OF
STOCKHOLDERS' MEETINGS OR TO VOTE STOCK OR TO RECEIVE DIVIDENDS, ETC.;
EXCEPTIONS. Any stockholder who has demanded payment for his stock as provided
in this chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the corporation,
or in the case of a consolidation or merger, the resulting or surviving
corporation, deliver to it a written withdrawal of his objections to and an
acceptance of such corporate action.
NOTWITHSTANDING THE PROVISIONS OF CLAUSES (1) TO (3), INCLUSIVE, SAID
STOCKHOLDER SHALL HAVE ONLY THE RIGHTS OF A STOCKHOLDER WHO DID NOT SO DEMAND
PAYMENT FOR HIS STOCK AS PROVIDED IN THIS CHAPTER.
97 CERTAIN SHARES PAID FOR BY CORPORATION TO HAVE STATUS OF TREASURY
STOCK, ETC. The shares of the corporation paid for by the corporation pursuant
to the provisions of this chapter shall have the status of treasury stock or in
the case of a consolidation or merger the shares or the securities of the
resulting or surviving corporation into which the shares of such objecting
stockholder would have been converted had he not objected to such consolidation
or merger shall have the status of treasury stock or securities.
98 ENFORCEMENT BY STOCKHOLDER OF RIGHT TO RECEIVE PAYMENT FOR HIS SHARES
TO BE EXCLUSIVE REMEDY; EXCEPTION. The enforcement by a stockholder of his
right to receive payment for his shares in the manner provided in this chapter
shall be an exclusive remedy except that this chapter shall not exclude the
right of such stockholder to bring or maintain an appropriate proceeding to
obtain relief on the ground that such corporate action will be or is illegal or
fraudulent as to him.
I-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Eleventh of the Certificate of Incorporation of the Registrant
provides that the Registrant shall indemnify its directors and officers to the
maximum extent allowed by the Delaware General Corporation Law. Pursuant to
Section 145 of the Delaware General Corporation Law, the Registrant generally
has the power to indemnify its present and former directors and officers against
expenses and liabilities incurred by them in connection with any suit to which
they are, or are threatened to be made, a party by reason of their serving in
those positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and with respect to any criminal action, so long as they had no
reasonable cause to believe their conduct was unlawful. With respect to suits by
or in the right of the Registrant, however, indemnification is generally limited
to attorneys' fees and other expenses and is not available if the person is
adjudged to be liable to the Registrant, unless the court determines that
indemnification is appropriate. The statute expressly provides that the power to
indemnify authorized thereby is not exclusive of any rights granted under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
The Registrant also has the power to purchase and maintain insurance for its
directors and officers and has recently obtained such insurance. Additionally,
Article Eleventh of the Certificate of Incorporation provides that, in the event
that an officer or director files suit against the Registrant seeking
indemnification of liabilities or expenses incurred, the burden will be on the
Registrant to prove that the indemnification would not be permitted under the
Delaware General Corporation Law.
The preceding discussion of the Registrant's Restated Certificate of
Incorporation and Section 145 of the Delaware General Corporation Law is not
intended to be exhaustive and is qualified in its entirety by the Certificate of
Incorporation and Section 145 of the Delaware General Corporation Law.
The Registrant intends to enter into indemnity agreements with the
Registrant's directors and officers. Pursuant to such agreements, the Registrant
will, to the extent permitted by applicable law, indemnify such persons against
all expenses, judgments, fines and penalties incurred in connection with the
defense or settlement of any actions brought against them by reason of the fact
that they were directors or officers of the Registrant or assumed certain
responsibilities at the direction of the Registrant.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------------- -----------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Reorganization dated April 21, 1997 among CRA Managed Care, Inc. ("CRA"),
OccuSystems, Inc. ("OccuSystems") and the Registrant (filed as Appendix A to the Joint Proxy
Statement/Prospectus forming a part of this Registration Statement).
*3.1 Certificate of Incorporation dated April 21, 1997 of Registrant.
*3.2 Form of Amended and Restated Certificate of Incorporation to be filed by the Registrant.
*3.3 Bylaws of Registrant.
*4.1 Specimen Certificate for the Common Stock.
-4.2 Indenture dated as of December 24, 1996, between OccuSystems and United States Trust Company of
New York, as Trustee.
*4.3 Form of First Supplemental Indenture to be entered into between OccuSystems, United States
Trust Company of New York, as Trustee, and the Registrant.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------------- -----------------------------------------------------------------------------------------------
<C> <S>
*5.1 Opinion of Vinson & Elkins L.L.P. as to the legality of the securities to be registered.
*8.1 Opinion of Vinson & Elkins L.L.P. dated July 11, 1997 as to federal income tax consequences.
*8.2 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, dated July 11, 1997 as to
federal income tax consequences.
10.1 OccuSystems, Inc. Stock Option Agreement dated as of April 21, 1997 (filed as Appendix B to the
Joint Proxy Statement/Prospectus forming a part of this Registration Statement).
10.2 CRA Managed Care, Inc. Stock Option Agreement dated as of April 21, 1997 (filed as Appendix C
to the Joint Proxy Statement/Prospectus forming a part of this Registration Statement).
10.3 Concentra Managed Care, Inc. 1997 Long-Term Incentive Plan (filed as Appendix G to the Joint
Proxy Statement/Prospectus forming a part of this Registration Statement).
10.4 Concentra Managed Care, Inc. 1997 Employee Stock Purchase Plan (filed as Appendix H to the
Joint Proxy Statement/Prospectus forming a part of this Registration Statement).
*10.5 Form of Rights Agreement to be entered into between the Registrant and ChaseMellon Shareholder
Services, L.L.C.
+++10.6 Asset Purchase Agreement dated June 4, 1997, among CRA, FNS Acquisition Corp., First Notice
Systems and the shareholders of First Notice Systems.
*10.7 Employment Agreement dated April 21, 1997, between the Registrant and John K. Carlyle.
*10.8 Employment Agreement dated April 21, 1997, between the Registrant and Donald J. Larson.
*10.9 Employment Agreement dated April 21, 1997, between the Registrant and Joseph F. Pesce.
*10.10 Employment Agreement dated April 21, 1997, between the Registrant and John A. McCarthy, Jr.
*10.11 Employment Agreement dated April 21, 1997, between the Registrant and Richard A. Parr II.
*10.12 Employment Agreement dated April 21, 1997, between the Registrant and Daniel J. Thomas.
*10.13 Employment Agreement dated April 21, 1997, between the Registrant and W. Thomas Fogarty.
*10.14 Employment Agreement dated April 21, 1997, between the Registrant and Peter R. Gates.
*10.15 Employment Agreement dated April 21, 1997, between the Registrant and James M. Greenwood.
*10.16 Form of Indemnification Agreement to be entered into between the Registrant and each of its
executive officers and directors.
*10.17 Termination Agreement dated as of May 15, 1997, between the Registrant and Lois E. Silverman.
*10.18 Termination Agreement dated as of May 15, 1997, between the Registrant and Richard D. Rehm,
M.D.
*10.19 Agreement of Acceptance, dated as of July 29, 1997 among the Registrant, Donald J. Larson and
Lois E. Silverman.
++10.20 CRA 1995 Employee Stock Purchase Plan.
++10.21 CRA 1994 Non-Qualified Stock Option Plan for Non-Employee Directors.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------------- -----------------------------------------------------------------------------------------------
<C> <S>
++10.22 Form of Non-Qualified Stock Option Agreement pursuant to the CRA 1994 Non-Qualified Option Plan
for Non-Employee Directors.
++10.23 CRA 1994 Non-Qualified Time Accelerated Restricted Stock Option Plan.
++10.24 Form of Non-Qualified Stock Option Agreement pursuant to the CRA 1994 Non-Qualified Time
Accelerated Restricted Stock Option Plan.
++10.25 Software License Agreement between CompReview, Inc. and CRA, dated February 10, 1995
(confidential treatment granted).
+10.26 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 168 U.S. Route 1, Falmouth, ME 04105.
+10.27 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 46 Austin Street, Newtonville, MA 02160.
+10.28 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 312 Union Wharf, Boston, MA 02109.
+10.29 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 565 Turnpike Street, North Andover, MA 01845.
+10.30 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 15A Riverway Place, Bedford, NH 03110.
+10.31 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 509 Stillwells Corner Road, Freehold, NJ 07728.
+10.32 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 732 Thimble Shoals Blvd., Newport News, VA 23606.
+10.33 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 10132 Colvin Run Road, Suite A, Great Falls, VA 22066.
-10.34 Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993,
between OccuCenters, Inc. ("OCI") and Occupational Health Centers of Southwest, P.A., a Texas
professional association.
-10.35 Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993,
between OCI and Occupational Health Centers of the Southwest, P.A., an Arizona professional
association.
---10.36 Occupational Medicine Center Management and Consulting Agreement dated November 1, 1996,
between OCI and Occupational Health Centers of New Jersey, P.A.
---10.37 Amended and Restated Loan and Security Agreement dated January 3, 1995, among the Company, OCI
and the lenders named therein, and Creditanstalt-Bankverein, as Agent for the Lenders, together
with all amendments thereto.
--10.38 Form of OccuSystems, Inc. 1995 Long-Term Incentive Plan.
--10.39 First Amended and Restated OccuSystems, Inc. and its Subsidiaries and Affiliates Stock Option
and Restricted Stock Purchase Plan dated April 28, 1992.
--10.40 Form of Indemnification Agreement entered into between OccuSystems, Inc. and its executive
officers and directors.
---10.41 Warrant Agreement dated January 3, 1995, between OccuSystems and Creditanstalt-Bankverein.
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of Vinson & Elkins L.L.P. (set forth in Exhibit 5.1).
*23.2 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (set forth in Exhibit 8.2).
*23.3 Consent of Arthur Andersen LLP, Independent Auditors.
*23.4 Consent of Arthur Andersen LLP, Independent Auditors.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------------- -----------------------------------------------------------------------------------------------
<C> <S>
*24.1 The power of attorney of officers and directors of the Registrant is set forth on the signature
page of this Registration Statement.
*99.1 Consent of Robert W. O'Leary to be named as a director of the Registrant in this Registration
Statement.
*99.2 Consent of Robert A. Ortenzio to be named as a director of the Registrant in this Registration
Statement.
*99.3 Consent of Paul B. Queally to be named as a director of the Registrant in this Registration
Statement.
*99.4 Consent of Lois E. Silverman to be named as a director of the Registrant in this Registration
Statement.
*99.5 Consent of George H. Conrades to be named as a director of the Registrant in this Registration
Statement.
*99.6 Consent of Mitchell T. Rabkin, M.D. to be named as a director of the Registrant in this
Registration Statement.
*99.7 Consent of Donaldson, Lufkin & Jenrette Securities Corporation.
*99.8 Consent of Alex. Brown & Sons Incorporated.
*99.9 Form of Proxy for Special Meeting of Stockholders of OccuSystems.
*99.10 Form of Proxy for Special Meeting of Stockholders of CRA.
</TABLE>
- ------------------------
* Previously filed
+ Incorporated by reference to CRA's Registration Statement on Form S-3 (File
No. 33-90426), as filed on November 7, 1996
++ Incorporated by reference to CRA's Registration Statement on Form S-1 (File
No. 33-90426), as filed on March 17, 1995.
+++ Incorporated by reference to CRA's Current Report on Form 8-K dated June 18,
1997.
- - Incorporated by reference to OccuSystems' Annual Report on Form 10-K (File
No. 0-24440), as filed on March 29, 1996.
- -- Incorporated by reference to OccuSystems' Registration Statement on Form S-1
(File No. 33-79734), dated May 8, 1995.
- --- Incorporated by reference to OccuSystems' Registration Statement on Form
S-1 (File No. 33-01660), dated March 28, 1996.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required in Section 10(a) (3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts of events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range
II-4
<PAGE>
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) (Section 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to section 13(a)
or section 15(d) of the Exchange Act that is incorporated by reference in
the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 20
above, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(6) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(7) The undersigned registrant hereby undertakes to supply by means of
post-effective amendment all information by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Boston, Commonwealth of
Massachusetts, on July 31, 1997.
CONCENTRA MANAGED CARE, INC.
By: *
-----------------------------------------
Donald J. Larson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
* Chairman of the Board
- ------------------------------ July 31, 1997
John K. Carlyle
Director, President and
* Chief Executive Officer
- ------------------------------ (Principal Executive July 31, 1997
Donald J. Larson Officer)
Executive Vice President
* and Chief Financial
- ------------------------------ Officer July 31, 1997
Joseph F. Pesce (Principal Financial and
Accounting Officer)
* /s/ RICHARD A. Attorney-in-Fact
PARR II
- ------------------------------ July 31, 1997
Richard A. Parr II
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------------- -----------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Reorganization dated April 21, 1997 among CRA Managed Care, Inc. ("CRA"),
OccuSystems, Inc. ("OccuSystems") and the Registrant (filed as Appendix A to the Joint Proxy
Statement/Prospectus forming a part of this Registration Statement).
*3.1 Certificate of Incorporation dated April 21, 1997 of Registrant.
*3.2 Form of Amended and Restated Certificate of Incorporation to be filed by the Registrant.
*3.3 Bylaws of Registrant.
*4.1 Specimen Certificate for the Common Stock.
-4.2 Indenture dated as of December 24, 1996, between OccuSystems and United States Trust Company of
New York, as Trustee.
*4.3 Form of First Supplemental Indenture to be entered into between OccuSystems, United States
Trust Company of New York, as Trustee, and the Registrant.
*5.1 Opinion of Vinson & Elkins L.L.P. as to the legality of the securities to be registered.
*8.1 Opinion of Vinson & Elkins L.L.P. dated July 11, 1997 as to federal income tax consequences.
*8.2 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, dated July 11, 1997 as to
federal income tax consequences.
10.1 OccuSystems, Inc. Stock Option Agreement dated as of April 21, 1997 (filed as Appendix B to the
Joint Proxy Statement/Prospectus forming a part of this Registration Statement).
10.2 CRA Managed Care, Inc. Stock Option Agreement dated as of April 21, 1997 (filed as Appendix C
to the Joint Proxy Statement/Prospectus forming a part of this Registration Statement).
10.3 Concentra Managed Care, Inc. 1997 Long-Term Incentive Plan (filed as Appendix G to the Joint
Proxy Statement/Prospectus forming a part of this Registration Statement).
10.4 Concentra Managed Care, Inc. 1997 Employee Stock Purchase Plan (filed as Appendix H to the
Joint Proxy Statement/Prospectus forming a part of this Registration Statement).
*10.5 Form of Rights Agreement to be entered into between the Registrant and ChaseMellon Shareholder
Services, L.L.C.
+++10.6 Asset Purchase Agreement dated June 4, 1997, among CRA, FNS Acquisition Corp., First Notice
Systems and the shareholders of First Notice Systems.
*10.7 Employment Agreement dated April 21, 1997, between the Registrant and John K. Carlyle.
*10.8 Employment Agreement dated April 21, 1997, between the Registrant and Donald J. Larson.
*10.9 Employment Agreement dated April 21, 1997, between the Registrant and Joseph F. Pesce.
*10.10 Employment Agreement dated April 21, 1997, between the Registrant and John A. McCarthy, Jr.
*10.11 Employment Agreement dated April 21, 1997, between the Registrant and Richard A. Parr II.
*10.12 Employment Agreement dated April 21, 1997, between the Registrant and Daniel J. Thomas.
*10.13 Employment Agreement dated April 21, 1997, between the Registrant and W. Thomas Fogarty.
*10.14 Employment Agreement dated April 21, 1997, between the Registrant and Peter R. Gates.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------------- -----------------------------------------------------------------------------------------------
<C> <S>
*10.15 Employment Agreement dated April 21, 1997, between the Registrant and James M. Greenwood.
*10.16 Form of Indemnification Agreement to be entered into between the Registrant and each of its
executive officers and directors.
*10.17 Termination Agreement dated as of May 15, 1997, between the Registrant and Lois E. Silverman.
*10.18 Termination Agreement dated as of May 15, 1997, between the Registrant and Richard D. Rehm,
M.D.
*10.19 Agreement of Acceptance, dated as of July 29, 1997 among the Registrant, Donald J. Larson and
Lois E. Silverman.
++10.20 CRA 1995 Employee Stock Purchase Plan.
++10.21 CRA 1994 Non-Qualified Stock Option Plan for Non-Employee Directors.
++10.22 Form of Non-Qualified Stock Option Agreement pursuant to the CRA 1994 Non-Qualified Option Plan
for Non-Employee Directors.
++10.23 CRA 1994 Non-Qualified Time Accelerated Restricted Stock Option Plan.
++10.24 Form of Non-Qualified Stock Option Agreement pursuant to the CRA 1994 Non-Qualified Time
Accelerated Restricted Stock Option Plan.
++10.25 Software License Agreement between CompReview, Inc. and CRA, dated February 10, 1995
(confidential treatment granted).
+10.26 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 168 U.S. Route 1, Falmouth, ME 04105.
+10.27 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 46 Austin Street, Newtonville, MA 02160.
+10.28 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 312 Union Wharf, Boston, MA 02109.
+10.29 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 565 Turnpike Street, North Andover, MA 01845.
+10.30 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 15A Riverway Place, Bedford, NH 03110.
+10.31 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 509 Stillwells Corner Road, Freehold, NJ 07728.
+10.32 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 732 Thimble Shoals Blvd., Newport News, VA 23606.
+10.33 Lease Agreement, dated January 1, 1994, by and between Colonial Realty Trust and CRA for office
space located at 10132 Colvin Run Road, Suite A, Great Falls, VA 22066.
-10.34 Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993,
between OccuCenters, Inc. ("OCI") and Occupational Health Centers of Southwest, P.A., a Texas
professional association.
-10.35 Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993,
between OCI and Occupational Health Centers of the Southwest, P.A., an Arizona professional
association.
---10.36 Occupational Medicine Center Management and Consulting Agreement dated November 1, 1996,
between OCI and Occupational Health Centers of New Jersey, P.A.
---10.37 Amended and Restated Loan and Security Agreement dated January 3, 1995, among the Company, OCI
and the lenders named therein, and Creditanstalt-Bankverein, as Agent for the Lenders, together
with all amendments thereto.
--10.38 Form of OccuSystems, Inc. 1995 Long-Term Incentive Plan.
--10.39 First Amended and Restated OccuSystems, Inc. and its Subsidiaries and Affiliates Stock Option
and Restricted Stock Purchase Plan dated April 28, 1992.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------------- -----------------------------------------------------------------------------------------------
<C> <S>
--10.40 Form of Indemnification Agreement entered into between OccuSystems, Inc. and its executive
officers and directors.
---10.41 Warrant Agreement dated January 3, 1995, between OccuSystems and Creditanstalt-Bankverein.
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of Vinson & Elkins L.L.P. (set forth in Exhibit 5.1).
*23.2 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (set forth in Exhibit 8.2).
*23.3 Consent of Arthur Andersen LLP, Independent Auditors.
*23.4 Consent of Arthur Andersen LLP, Independent Auditors.
*24.1 The power of attorney of officers and directors of the Registrant is set forth on the signature
page of this Registration Statement.
*99.1 Consent of Robert W. O'Leary to be named as a director of the Registrant in this Registration
Statement.
*99.2 Consent of Robert A. Ortenzio to be named as a director of the Registrant in this Registration
Statement.
*99.3 Consent of Paul B. Queally to be named as a director of the Registrant in this Registration
Statement.
*99.4 Consent of Lois E. Silverman to be named as a director of the Registrant in this Registration
Statement.
*99.5 Consent of George H. Conrades to be named as a director of the Registrant in this Registration
Statement.
*99.6 Consent of Mitchell T. Rabkin, M.D. to be named as a director of the Registrant in this
Registration Statement.
*99.7 Consent of Donaldson, Lufkin & Jenrette Securities Corporation.
*99.8 Consent of Alex. Brown & Sons Incorporated.
*99.9 Form of Proxy for Special Meeting of Stockholders of OccuSystems.
*99.10 Form of Proxy for Special Meeting of Stockholders of CRA.
</TABLE>
- ------------------------
* Previously filed
+ Incorporated by reference to CRA's Registration Statement on Form S-3 (File
No. 33-90426), as filed on November 7, 1996
++ Incorporated by reference to CRA's Registration Statement on Form S-1 (File
No. 33-90426), as filed on March 17, 1995.
+++ Incorporated by reference to CRA's Current Report on Form 8-K dated June 18,
1997.
- - Incorporated by reference to OccuSystems' Annual Report on Form 10-K (File
No. 0-24440), as filed on March 29, 1996.
- -- Incorporated by reference to OccuSystems' Registration Statement on Form S-1
(File No. 33-79734), dated May 8, 1995.
- --- Incorporated by reference to OccuSystems' Registration Statement on Form
S-1 (File No. 33-01660), dated on March 28, 1996.
