<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
June 6, 1996
Date of Report
(Date of earliest event reported)
OCCUPATIONAL HEALTH + REHABILITATION INC
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
02-21428 13-3464527
(Commission File Number) (IRS Employer Identification No.)
175 Derby Street, Suite 36
Hingham, Massachusetts 02043-5048
(Address of principal executive offices) (Zip Code)
(617) 741-5175
(Registrant's telephone number, including area code)
Telor Ophthalmic Pharmaceuticals, Inc.
790 Turnpike Street, Suite 202
North Andover, Massachusetts 01845
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On June 6, 1996, Telor Ophthalmic Pharmaceuticals, Inc. ("Telor")
merged (the "Merger") with Occupational Health + Rehabilitation Inc ("OH+R"),
with Telor being the surviving company (the "Company"). In connection with the
Merger, the Company changed its name to Occupational Health + Rehabilitation
Inc. Prior to the Merger, Telor had no operating business. OH+R is an early
stage company that develops, owns and operates multi-disciplinary, outpatient
healthcare centers for the prevention, treatment and management of work-related
injuries and illnesses. As a result of the Merger, the Company's primary
business is the business of OH+R. The Merger is being accounted for as a
"reverse acquisition" whereby OH+R will be deemed to have acquired Telor for
financial reporting purposes.
In conjunction with the Merger, the Company issued to the former
stockholders of OH+R 681,415 shares of its common stock in exchange for all
outstanding shares of OH+R capital stock. In addition, outstanding options held
by employees, directors and consultants of OH+R to purchase 832,000 shares of
OH+R common stock now entitle the holders to purchase approximately 117,807
shares of Company common stock. Warrants to purchase 148,150 shares of OH+R
common stock now entitle the holders to acquire 20,975 shares of Company common
stock.
The number of shares of Company common stock that each holder of the
OH+R capital stock received in the Merger was determined by multiplying the
number of shares of OH+R capital stock held by each holder by a fraction, the
numerator of which was equal to the total number of issued and outstanding
shares of capital stock of Telor (assuming the exercise of all Telor options),
and the denominator of which was equal to the total number of issued and
outstanding shares of capital stock of OH+R (assuming the exercise of all OH+R
options and warrants).
Since the transaction was structured as a merger, the Company did not
need or obtain funds from third parties in order to consummate the Merger. Prior
to the Merger, Prince Venture Partners, III L.P. ("Prince III") was a
stockholder of Telor and OH+R, and one general partner of Prince III served on
Telor's board of directors and another general partner of Prince III served on
OH+R's board of directors. There was no other material relationship between the
former stockholders of OH+R and Telor or any of Telor's affiliates, officers or
directors (or any associates thereof).
- 2 -
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial statements of business acquired.
(i) Audited financial statements of OH+R for the
following periods:
Consolidated Balance Sheets at December 31, 1995 and
1994
Consolidated Statements of Operations for the years
ended December 31, 1995, 1994 and 1993
Consolidated Statements of Common Stockholders'
Equity (Deficit) and Redeemable Stock for the years
ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(ii) Unaudited financial statements of OH+R for the
following periods:
Consolidated Balance Sheets at March 31, 1996 and
1995
Consolidated Statements of Operations for the
three months ended March 31, 1996 and 1995
Consolidated Statements of Common Stockholders'
Equity (Deficit) and Redeemable Stock for the three
months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 and 1995
Notes to Unaudited Consolidated Financial Statements
The foregoing financial statements, together with the Report of
Independent Auditors, are included on pages F-1 through F-28 of this
report.
(b) Pro forma financial information.
(i) Unaudited Pro Forma Combined Financial Information
(ii) Unaudited Pro Forma Combined Balance Sheet at March
31, 1996
(iii) Unaudited Pro Forma Combined Statement of Operations
for the year ended December 31, 1995
(iv) Unaudited Pro Forma Combined Statement of Operations
for the three months ended March 31, 1996
(v) Notes to Unaudited Pro Forma Combined Financial
Information
The foregoing pro forma financial information is included on pages P-1
through P-7 of this report.
- 3 -
<PAGE> 4
(c) Exhibits.
2.1(a) Agreement and Plan of Merger, by and between Telor
and OH+R, dated as of February 22, 1996 (Filed as
Exhibit 10.50 to Form 10-K for the year ended
December 31, 1995, File No. 0-21428 and incorporated
by reference herein).
2.1(b) Amendment No. 1 to the Agreement and Plan of Merger,
dated as of April 30, 1996 (Filed herewith).
2.1(c) Amendment No. 2 to the Agreement and Plan of Merger,
dated as of May 10, 1996 (Filed herewith).
4.1 Restated Certificate of Incorporation (Filed
herewith).
23.1 Consent of Ernst & Young LLP (Filed herewith).
- 4 -
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 13, 1996 OCCUPATIONAL HEALTH +
REHABILITATION INC
/s/ John C. Garbarino
-----------------------------
John C. Garbarino
President and Chief Executive
Officer
- 5 -
<PAGE> 6
ERNST & YOUNG LLP 200 Clarendon Street Phone: 617 266-2000
Boston Fax: 617 266-5843
Massachusetts 02116-5072
Report of Independent Auditors
Board of Directors
Occupational Health + Rehabilitation Inc
We have audited the accompanying consolidated balance sheets of Occupational
Health + Rehabilitation Inc and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Occupational Health + Rehabilitation Inc and subsidiaries at December 31, 1995
and 1994, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
January 23, 1996, except for Note 13,
as to which the date is March 4, 1996
F-1
<PAGE> 7
Occupational Health + Rehabilitation Inc
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1995 1994
-----------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 368,959 $1,211,285
Accounts receivable, less allowance for
doubtful accounts of $75,155 and $72,766
in 1995 and 1994, respectively 236,875 533,949
Prepaid expenses 103,406 76,081
Other accounts receivable 62,625
Due from related party 680,445
Other assets 166,056
-----------------------------
Total current assets 1,555,741 1,883,940
Property and equipment, net 1,058,311 559,911
Intangible assets, net 1,565,179 899,611
Deposits 40,864 36,495
Other assets 29,167 125,000
-----------------------------
Total assets $4,249,262 $3,504,957
=============================
Liabilities, redeemable stock and stockholders' equity
(deficit)
Current liabilities:
Accounts payable and accrued expenses $1,001,768 $ 353,788
Current portion of obligations under capital leases 99,490 72,627
Current maturities of long-term debt 91,667 240,673
Current portion of obligations under
noncompetition agreements 325,000
Due to related party 377,862
-----------------------------
Total current liabilities 1,895,787 667,088
Long-term debt, less current maturities 744,779
Obligations under capital leases 122,621 82,827
Obligations under noncompetition agreements 293,153 587,486
-----------------------------
Total liabilities 3,056,340 1,337,401
Minority interest 201,106
</TABLE>
F-2
<PAGE> 8
<TABLE>
<CAPTION>
December 31
1995 1994
-----------------------------
<S> <C> <C>
Redeemable stock:
Redeemable convertible preferred stock,
Series 1, $.01 par value -- 1,600,000
shares authorized, issued and outstanding 2,700,000 2,500,000
Redeemable convertible preferred stock,
Series 2, $.01 par value -- 3,000,000
shares authorized, 2,537,843 shares
issued and outstanding 4,479,221 3,518,545
-----------------------------
Total redeemable stock 7,179,221 6,018,545
Stockholders' equity (deficit):
Common stock, $01 par value--8,000,000 shares
authorized, issued and outstanding 671,855
shares in 1995 and 651,855 in 1994 6,719 6,519
Additional paid-in capital 11,022 6,222
Accumulated deficit (6,205,146) (3,863,730)
-----------------------------
Total stockholders' equity (deficit) (6,187,405) (3,850,989)
-----------------------------
Total liabilities, redeemable stock and
stockholders' equity (deficit) $ 4,249,262 $ 3,504,957
=============================
</TABLE>
See accompanying notes.
F-3
<PAGE> 9
Occupational Health + Rehabilitation Inc
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C>
Net patient service revenue $ 5,798,037 $ 2,570,636 $ 1,618,242
Management fee income 189,323 108,580 88,655
Other income 36,587 13,146 30,942
-----------------------------------------------------
Total revenue 6,023,947 2,692,362 1,737,839
Operating and administrative
expenses
(7,697,903) (3,865,263) (3,043,429)
Depreciation and amortization (365,486) (222,274) (219,616)
Interest expense (96,746) (53,408) (55,822)
Interest income 37,566 38,154 43,109
Minority interest in net loss of
subsidiary 322,211
-----------------------------------------------------
Loss before income taxes 1,776,411 (1,410,429) (1,537,919)
Deferred income tax benefit 32,860
-----------------------------------------------------
Net loss $(1,776,411) $(1,410,429) $(1,505,059)
=====================================================
Net loss available to common stock $(2,337,087) $(1,830,542) $(1,796,726)
=====================================================
Net loss per share $ (3.53) $ (2.81) $ (2.76)
=====================================================
Weighted-average common shares
and common share equivalents
outstanding
661,855 651,855 651,855
=====================================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 10
Occupational Health + Rehabilitation Inc
Consolidated Statements of Common Stockholders' Equity (Deficit)
and Redeemable Stock
<TABLE>
<CAPTION>
Total Redeemable Redeemable
Additional Stockholders' Convertible Convertible
Common Stock Paid-in Accumulated Equity Preferred Stock Preferred Stock
Shares Amount Capital Deficit (Deficit) Series 1 Series 2
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 651,855 $6,519 $6,222 $ (193,985) $ (181,244) $2,100,000 $ 0
Issuance of redeemable
preferred stock (42,477) (42,477) 2,000,001
Dividends on redeemable
preferred stock (291,667) (291,667) 200,000 91,667
Net loss (1,505,059) (1,505,059)
-----------------------------------------------------------------------------------------------
Balance at December 31, 1993 651,855 6,519 6,222 (2,033,188) (2,020,447) 2,300,000 2,091,668
Issuance of redeemable
preferred stock 1,206,764
Dividends on redeemable
preferred stock (420,113) (420,113) 200,000 220,113
Net loss (1,410,429) (1,410,429)
------------------------------------------------------------------------------------------------
Balance at December 31, 1994 651,855 6,519 6,222 (3,863,730) (3,850,989) 2,500,000 3,518,545
Issuance of common stock 20,000 200 4,800 5,000
Issuance of redeemable
preferred stock (4,329) (4,329) 600,000
Dividends on redeemable
preferred stock (560,676) (560,676) 200,000 360,676
Net loss (1,776,411) (1,776,411)
------------------------------------------------------------------------------------------------
Balance at December 31, 1995 671,855 $6,719 $11,022 $(6,205,146) $(6,187,405) $2,700,000 $4,479,221
================================================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 11
Occupational Health + Rehabilitation Inc
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
-------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $(1,776,411) $(1,410,429) $(1,505,059)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 365,486 222,274 219,616
Amortization of discount 30,667 29,145 26,414
Minority interest in loss of subsidiary (322,211)
Loss on sale of equipment 1,800
Deferred income tax benefit (32,860)
Changes in operating assets and
liabilities:
Accounts receivable 297,074 (145,251) 19,578
Prepaid expenses and other
current assets (130,756) (7,688) (111,034)
Due from related party, net 105,556
Deposits and other noncurrent assets 91,464 (10,749) (113,913)
Accounts payable and accrued
expenses 543,072 90,659 94,713
-------------------------------------------------
Net cash used in operating activities (794,259) (1,232,039) (1,402,545)
Investing activities
Property and equipment additions (161,570) (73,266) (233,589)
Cash paid for acquisitions (336,278) (41,174)
-------------------------------------------------
Net cash used in investing activities (497,848) (114,440) (233,589)
Financing activities
Proceeds from sale of preferred stock, net 595,671 1,000,000 1,957,524
Proceeds from line of credit 75,000 262,591
Payments of long-term debt (240,693) (115,959) (164,430)
Payments of capital lease obligations (101,197) (48,409) (49,447)
Cash received by partnership 196,000
-------------------------------------------------
Net cash provided by financing activities 449,781 910,632 2,006,238
-------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (842,326) (435,847) 370,104
Cash and cash equivalents at beginning of
year 1,211,285 1,647,132 1,277,028
-------------------------------------------------
Cash and cash equivalents at end of year $ 368,959 $ 1,211,285 $ 1,647,132
=================================================
</TABLE>
F-6
<PAGE> 12
Occupational Health + Rehabilitation Inc
Consolidated Statements of Cash Flows (continued)
Supplemental Disclosure of Noncash Items:
- --The Company entered into capital lease obligations during 1995, 1994 and 1993
totaling $167,854, $87,872 and $165,438, respectively.
- --During 1995, 1994 and 1993, the Company accrued dividends in kind to preferred
shareholders of $560,676, $420,113 and $291,667, respectively.
- --In 1994, $206,764 of the acquisition of Link Performance and Recovery Systems,
Inc. was financed through the issuance of 137,842 shares of Series 2 Preferred
Stock.
- --In 1995, $5,000 of the acquisition of Family Health Care, P.A. was financed
through the issuance of 20,000 shares of Common Stock as part of a
noncompetition agreement.
See accompanying notes.
F-7
<PAGE> 13
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements
December 31, 1995
1. Summary of Significant Accounting Policies
Business
Occupational Health + Rehabilitation Inc, formerly Occupational Health, Inc.
(the Company), a Delaware corporation, was incorporated on May 15, 1992 for
purposes of acquiring Occupational Orthopedic Center, Inc. (OOC) on July 1,
1992. The Company had no significant operations prior to that date.
The Company develops and operates outpatient medical centers specializing in the
prevention, treatment and management of work-related injuries and illnesses. The
Company operates the centers under long-term service agreements with physician
and physical therapy groups that practice exclusively through such centers.
Effective April 1, 1995, the Company entered into a partnership agreement with
NEB Enterprises, Inc., forming NEB Occupational Health (NEBOH), to provide
management and related services to the centers established by the partnership
(see Note 2).
Basis of Presentation
The Company's consolidated financial statements have been presented on a
going-concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
generated losses of $1,776,411 during the year ended December 31, 1995 and
cumulative net losses of $4,691,899 during the three-year period then ended. As
an early-stage company, the Company has predictably generated losses as it has
developed its network of rehabilitation centers. The Company's cash flow needs
have been met through the infusion of capital from venture capital investors
through the sale of preferred stock. At December 31, 1995, management's plan for
the 1996 year indicates that another infusion of capital will be necessary to
meet both operational needs and requirements for potential acquisitions. As more
fully described in Note 14, the Company has signed a letter of intent to merge
into Telor Ophthalmic Pharmaceuticals, Inc. (Telor). Telor has adequate cash
resources to ensure that the Company can continue as a going concern through
December 31, 1996. Should the merger with Telor not be consummated, management
will seek funding through the Company's venture capital investors or other
financing sources.
Principles of Consolidation
The consolidated financial statements include the accounts of Occupational
Health + Rehabilitation Inc, its wholly-owned subsidiary and its majority-owned
partnership, NEBOH. All significant intercompany accounts and transactions have
been eliminated.
F-8
<PAGE> 14
1. Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at date of purchase to be cash equivalents.
Property and Equipment
Property and equipment is stated on the basis of cost. Depreciation of property
and equipment is calculated using the straight-line and declining-balance
methods over the estimated useful lives of the assets. Leasehold improvements
are amortized on a straight-line basis over the shorter of the lease term or the
estimated useful life of the asset. Amortization of assets under capital lease
is included with depreciation.
Intangible Assets
Excess Cost of Net Assets Acquired
The excess of cost over the fair value of the net assets of businesses acquired
(goodwill) is amortized using the straight-line method over periods of 20 to 40
years.
Noncompetition Agreements
Covenants not-to-compete are amortized over the term of the noncompetition
agreement, which is currently five years.
Organization Costs
Costs of organizing the Company are being amortized over a period of five years.
The carrying value of intangible assets will be reviewed if the facts and
circumstances suggest that it may be impaired. If this review indicates that an
intangible asset will not be recoverable, an impairment loss is recognized to
the extent the sum of the undiscounted expected future cash flows is less than
the carrying amount of the asset. Measurement of impairment should be based on
the fair value of the asset. No such impairment exists at December 31, 1995.
F-9
<PAGE> 15
1. Summary of Significant Accounting Policies (continued)
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
establishes criteria for the recognition and measurement of impairment loss
associated with long-lived assets. The Company will be required to adopt this
Standard in the first quarter of 1996. Based on the Company's initial
evaluation, adoption is not expected to have a material impact on the Company's
financial position or results of operations.
Net Patient Service Revenue
Net patient service revenue for all centers is recorded at established rates
reduced by allowances for doubtful accounts and contractual adjustments, which
amounted to $801,076, $321,168 and $321,896 for the years ended December 31,
1995, 1994 and 1993, respectively.
Professional Liability Coverage
The Company maintains professional liability insurance coverage on a claims-made
basis in Maine and Rhode Island, and on an occurrence basis in Massachusetts and
Vermont. Management is unaware of any claims that may result in a loss in excess
of amounts covered by its existing insurance.
Stock Option Accounting
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, "Accounting for Stock Issued to Employees," and intends to
continue to do so.
Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities, if any, at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-10
<PAGE> 16
1. Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses, long-term debt and
obligations under noncompetition agreements. The Company believes that the
carrying value of its financial instruments approximates fair value. The Company
has made this determination for its fixed-rate long-term debt based upon
interest rates currently available to it to refinance such debt.
Net Loss Per Common Share
Net loss per share of common stock is computed by dividing net loss, adjusted
for preferred stock dividends, by the weighted-average number of shares of
common stock outstanding during each period presented. The effect of options and
warrants is not considered as it would be antidilutive.
Reclassifications
Certain reclassifications of 1994 amounts have been made to permit comparison.
2. Acquisitions and Joint Ventures
During 1994, the Company purchased substantially all the net assets of Link
Performance and Recovery Systems, Inc., an outpatient medical center located in
Maine. The purchase price was $247,938 which was paid in cash and 137,842 shares
of Series 2 preferred stock. The transaction was accounted for as a purchase.
Effective April 1995, the Company entered into a partnership, NEBOH, with NEB
Enterprises, Inc. (NEBE), a wholly-owned subsidiary of New England Baptist
Hospital, to provide management and related services to the centers established
by the partnership. The Company made a capital contribution to NEBOH of $204,000
in cash and has a partnership interest equal to 51%. In addition, OH+R has
control of the business and affairs of the partnership through its majority
control of the Management Committee. The Management Committee consists of two
persons designated by NEBE (the minority shareholder) and three persons
designated by OH+R. Therefore, OH+R has majority voting control of the
partnership and consolidates the partnership in its financial statements. Under
the terms of a related agreement, the Company issued a promissory note payable
to NEBE in the amount of $536,446 and incurred a short-term obligation of
$104,908 to NEBE for the purchase of 51% of the assets, properties and rights,
both tangible and intangible, in the Waltham center owned by NEBE and operated
by the
F-11
<PAGE> 17
2. Acquisitions and Joint Ventures (continued)
Company. NEBE acquired from the Company a 49% interest in certain of the
Company's Boston center assets. These exchanges of assets of the Waltham center
and Boston center were consummated at the fair value of the tangible and
intangible net assets of the centers. Goodwill of $337,464 was recorded by OH+R
in connection with these transactions. Both the Company and NEBE contributed
their respective interests in the Waltham and Boston centers to the partnership.
The promissory note, at the option of the holder, may be converted into shares
of common stock of the Company. As a result of the Company's interest to merge
with Telor (see Note 14), the seller has agreed to waive the right to convert
the note into shares of common stock of the Company.
In May 1995, the Company purchased substantially all of the assets (excluding
accounts receivable) of Family Health Care, P.A., a physician practice located
in Bangor, Maine. The purchase price was $105,000, consisting of 20,000 common
stock shares of the Company and a promissory note. At the option of the holder,
principal payments may be made in shares of common stock of the Company. As a
result of the Company's intent to merge with Telor (see Note 14), the seller has
agreed to waive the right to receive such shares under the promissory note. The
note is secured by certain assets of the Company. This transaction was accounted
for as a purchase.
In June 1995, the Company purchased substantially all of the assets (excluding
accounts receivable) of Green Mountain Sports Physical Therapy, an outpatient
therapy center located in Vermont. The purchase price was $400,000, consisting
of cash and a promissory note. At the option of the holder, principal payments
may be made in shares of common stock of the Company. As a result of the
Company's intent to merge with Telor (see Note 14), the seller has agreed to
waive the right to receive shares under the promissory note. The note is secured
by certain assets of the Company. This transaction was accounted for as a
purchase.
Certain purchase agreements require additional payments if specific financial
targets are met. In 1995, no additional payments were made.
F-12
<PAGE> 18
3. Management Agreements
New England Baptist Hospital
On April 1, 1993, the Company entered into a management agreement with New
England Baptist Hospital in Boston, Massachusetts. Under the agreement, the
Company operated an outpatient medical center in Waltham, Massachusetts in
return for management fees. The management agreement terminated when the Company
entered into a partnership agreement with NEBE (see Note 2). Management fees of
$21,555, $108,580 and $88,655 were earned in 1995, 1994 and 1993, respectively,
under this agreement.
NEB Occupational Health
Effective April 1995, NEBOH entered into a management agreement with New England
Baptist Hospital. Under the terms of the agreement, NEBOH operates an outpatient
medical center in Waltham, Massachusetts in return for a fee equal to the net
revenue (as defined) of the center, less certain primary expenses. Fees earned
during 1995 were $589,363, comprised of $705,411 of net revenue, less primary
expenses of $116,048. Such revenue and expenses are included in net patient
service revenue, and cost of services and administrative expenses, respectively,
in the consolidated statement of operations.
Effective April 1995, the Company entered into a submanagement agreement with
NEBOH. Under the terms of the agreement, the Company operates outpatient medical
centers in Waltham and Boston, Massachusetts in return for management fees.
Management fees of $167,768 were earned in 1995 under this agreement.
4. Sale of Accounts Receivable
In June 1995, the Company entered into an agreement with NPF-WL, Inc.
(Purchaser) and National Premier Financial Services, Inc. (Servicer) of Dublin,
Ohio for the sale of receivables from certain Company centers. Under the terms
of this agreement, certain eligible medical receivables are sold to the
Purchaser on a weekly basis. Up to $1,200,000, ongoing, is available to the
Company. Total proceeds during 1995 were $1,857,978 under this agreement. The
Company is required to maintain credit reserves with the Purchaser equal to 17%
of the total outstanding purchase and to pay interest equal to 1.17% per month
on the outstanding purchase balance. The Company paid $72,134 in interest during
1995. At December 31, 1995, the outstanding purchase was $626,897 and was
appropriately recorded as a deduction of accounts receivable. The Company
maintained credit reserves of $116,056 at December 31, 1995 in other current
assets.
F-13
<PAGE> 19
5. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31
1995 1994
-------------------------
<S> <C> <C>
Vehicles $ 13,000
Medical equipment 911,058 $489,857
Furniture and office equipment 451,631 313,943
Leasehold improvements 220,504 122,244
-------------------------
1,596,193 926,044
Less accumulated depreciation 537,882 366,133
-------------------------
$1,058,311 $559,911
=========================
</TABLE>
The cost of certain equipment leased under capital lease agreements was $420,727
and $252,873 at December 31, 1995 and 1994, respectively. Accumulated
depreciation on these capitalized lease assets was $81,813 and $37,233 at
December 31, 1995 and 1994, respectively.
6. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31
1995 1994
-------------------------
<S> <C> <C>
Excess cost of net assets acquired $1,299,067 $ 540,614
Noncompetition agreements 632,144 617,144
Organization costs 208,420 121,929
-------------------------
2,139,631 1,279,687
Less accumulated amortization 574,452 380,076
-------------------------
$1,565,179 $ 899,611
=========================
</TABLE>
F-14
<PAGE> 20
7. Long-Term Debt and Noncompetition Agreements
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31
1995 1994
--------------------
<S> <C> <C>
Note payable to NEBE $536,446
Promissory note, bearing interest at 9% due in
three annual installments through June 1998 200,000
Promissory note, bearing interest at 8.5% due
in four annual installments through June 1999 100,000
Line of credit with bank, bearing interest at the
bank's prime rate plus 1% $150,000
Term loan payable to bank, bearing interest at the
bank's prime rate plus 1%, due June 1996 67,340
Note payable to bank, bearing interest at the
bank's prime rate plus 1%, due February 1996 23,333
--------------------
836,446 240,673
Less current portion 91,667 240,673
--------------------
$744,779 $ 0
====================
</TABLE>
In June, 1995, the Company repaid certain amounts outstanding under its debt
agreements with the proceeds of an accounts receivable factoring agreement (see
Note 4).
In connection with its investment in NEBOH, on April 1, 1995, the Company
entered into a convertible subordinated note agreement with NEBE in the amount
of $536,446. The note carries interest at 9.75% and requires payment of interest
only, in arrears, on April 1, 1996, 1997 and 1998. Beginning October 1, 1999,
the Company is required to make semi-annual payments of interest, in arrears, on
each October 1st and April 1st. Beginning April 1, 1999, the Company is required
to make five equal installments of principal of $107,293 on each April 1 until
final maturity on April 1, 2003. Payments of principal may be deferred at the
option of the payee. At the option of NEBE the note may be converted into shares
of the Company's common stock at a price of $1.50 per share, subject to
adjustment in certain circumstances. The note will automatically convert in the
event of an initial public offering, merger or sale of the Company, subject to
certain conditions. The note is secured by a special distribution of certain
assets of NEBOH.
F-15
<PAGE> 21
7. Long-Term Debt and Noncompetition Agreements (continued)
Obligations under noncompetition agreements of $618,153 are net of unamortized
discount of $31,847 at December 31, 1995 (effective interest rate 5.22%). These
obligations consist of amounts due to five individuals in connection with the
acquisition of OOC and are payable in equal installments of $325,000 during 1996
and 1997.
Maturities of obligations under noncompetition agreements are as follows:
1996--$325,000 and 1997--$293,153.
Aggregate maturities of obligations under long-term debt agreements are as
follows:
<TABLE>
<S> <C>
1996 $ 91,667
1997 91,667
1998 91,666
1999 132,293
2000 107,293
Thereafter 321,860
--------
$836,446
========
</TABLE>
Interest paid in 1995, 1994 and 1993 amounted to $113,903, $50,676 and $29,408,
respectively.
8. Leases
The Company maintains operating leases for commercial property and office
equipment. The commercial leases contain renewal options and require the Company
to pay certain utilities and taxes over established base amounts. Operating
lease expense amounted to $717,804, $392,862 and $295,733 for 1995, 1994 and
1993, respectively.
In 1995, 1994 and 1993, the Company entered into various capital lease
agreements for the purchase and installation of certain therapy equipment,
office equipment, computer equipment and software (see Note 5).
F-16
<PAGE> 22
8. Leases (continued)
Future minimum lease payments under capital leases and noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
Capital Leases Operating Leases
------------------------------------
<C> <C> <C>
1996 $123,067 $ 673,082
1997 99,131 509,381
1998 32,729 245,928
1999 3,665 248,839
2000 79,344
-------------------------------
Total minimum lease payments 258,592 $1,756,574
==========
Amounts representing interest 36,481
--------
Present value of net minimum lease payments $222,111
========
</TABLE>
9. Income Taxes
The Company provides for income taxes under the liability method. Deferred
income taxes arise principally from temporary differences related to accrued
bonuses, net operating losses, bad debt reserves and use of accelerated
depreciation for tax return purposes. The components of the Company's deferred
income taxes at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
December 31
1995 1994
------------------------------
<S> <C> <C>
Deferred tax assets $ 1,906,225 $ 1,199,241
Less valuation allowance (1,852,874) (1,144,967)
----------- -----------
Deferred tax asset after valuation allowance $ 53,351 $ 54,274
=========== ===========
Deferred tax liability $ (53,351) $ (54,274)
=========== ===========
</TABLE>
At December 31, 1995, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $4,624,878 which begin to expire in
2008. For financial reporting purposes, a valuation allowance of $1,862,901 has
been recognized to offset deferred tax assets related to this carryforward since
uncertainty exists with respect to future realization of such carryforwards.
F-17
<PAGE> 23
10. Stockholders' Equity and Redeemable Preferred Stock
In April 1995, the Company adopted a Certificate of Amendment of their
Certificate of Incorporation which increased the authorized number of shares of
Common Stock of the Company from 6,000,000 to 8,000,000 shares and Series 2
Preferred Stock from 2,500,000 to 3,000,000 shares. The Company has reserved
5,514,575 shares of Common Stock for future issuance under the terms of the
Preferred Stock, Warrant, Stock Option and NEBE Note Agreements.
Preferred Stock
Each share of Series 1 and Series 2 Preferred Stock (Preferred Stock) is
convertible into one share of common stock, subject to certain anti-dilution
requirements, and will automatically convert immediately prior to the closing of
an initial public offering at a price of at least $4.50 per share. Each share of
Preferred Stock is entitled to one vote. Dividends are payable when and if
declared by the Board of Directors and accrue at an annual cumulative rate of
$.125 and $.150 per share on the Preferred Stock, respectively. Dividends
accrued on the Series 1 Preferred Stock totaled $200,000 in each of 1995, 1994
and 1993. Dividends accrued on the Series 2 Preferred Stock totaled $360,676,
$220,113 and $91,667 for 1995, 1994 and 1993, respectively.
In the event of voluntary or involuntary liquidation, distribution of assets,
dissolution or winding up of the Company, and after payment in full of all debts
and other obligations of the Company, the holders of the Preferred Stock are
entitled to receive an amount equal to $1.25 and $1.50, respectively, per share
plus all accrued but unpaid dividends, whether or not declared.
At any time after July 1998, any holder of Preferred Stock shall have the right,
at such holder's option, to require the Company to redeem all or part of the
Preferred Stock at a redemption value of $1.25 plus all unpaid dividends for the
Series 1 Preferred Stock and $1.50 plus all unpaid dividends for the Series 2
Preferred Stock.
At any time after July 1999, the Company may redeem all, but not less than all,
of the Preferred Stock at the same redemption values noted in the previous
paragraph.
In April 1995, the Company issued 400,000 shares of Series 2 Preferred Stock and
received proceeds of $600,000.
Common Stock
On July 1, 1992, the Company sold 651,855 shares of $.01 par value common stock
to its founders for $6,519. These shares are subject to certain vesting and
repurchase agreements.
F-18
<PAGE> 24
10. Stockholders' Equity and Redeemable Preferred Stock (continued)
During 1995, the Company issued 20,000 of its common stock at $.25 per share as
part of a noncompetition agreement.
Warrants
In conjunction with the acquisition of OOC and the sale of Series 1 Preferred
Stock (see Note 1 and Preferred Stock section above), the Company issued stock
purchase warrants. The warrants provide the holders the right to purchase an
aggregate of 148,150 shares of common stock at $1.25 per share. The warrants are
exercisable in part or whole from July 1, 1997 until August 31, 1997.
Stock Plan
The Company's Stock Plan provides the opportunity for employees, related
corporations, directors and consultants to be granted options to purchase,
receive awards or make direct purchases of up to 870,951 shares of the Company's
common stock. Options granted under the Plan may be "incentive stock options" or
"nonqualified options" under the applicable provisions of the Internal Revenue
Code. The exercise price of "incentive stock options" granted under the plan may
not be less than the fair market value of the Company's common stock at the date
of grant. "Nonqualified options" may not be granted at less than 50% of fair
market value.
Option activity under the plan was as follows:
<TABLE>
<CAPTION>
Number of Option Price
Shares Per Share
-------------------------
<S> <C> <C>
Outstanding at December 31, 1992 0 $.25
Granted 560,065 .25
Canceled (123,050) .25
-------------------------
Outstanding at December 31, 1993 437,015 .25
Granted 180,260 .25
Canceled (77,400) .25
-------------------------
Outstanding at December 31, 1994 539,875 .25
Granted 71,850 .25-.50
Canceled (55,700) .25
-------------------------
Outstanding at December 31, 1995 556,025 $.25-.50
=========================
</TABLE>
F-19
<PAGE> 25
10. Stockholders' Equity and Redeemable Preferred Stock (continued)
No options were exercised in 1995, 1994 or 1993. At December 31, 1995, options
covering 210,070 shares were exercisable. All options granted vest over a
four-year period.
In January 1996, options covering an additional 317,100 shares were granted at
$.50 per share. All options granted vest over a two to four-year period, except
for 200,000 options which vest upon the occurrence of certain events.
11. Employee Benefit Plan
The Company has a qualified 401(k) plan (the Plan) for all employees meeting
certain eligibility requirements. The Company contributes a stipulated
percentage based on employee contributions. Company contributions to the Plan
were $38,118, $26,269 and $15,799 during 1995, 1994 and 1993, respectively.
12. Transactions with Related Parties
Amounts due to NEBOH from New England Baptist Hospital consist of cash collected
from certain accounts related to a management agreement and from certain
accounts contributed to NEBOH under a partnership agreement effective April 1,
1995. Amounts owed to NEBOH at December 31, 1995 were $680,445.
Amounts payable to New England Baptist Hospital from NEBOH consist of certain
operating expenses paid by New England Baptist Hospital during the year. Amounts
owed to New England Baptist Hospital at December 31, 1995 were $377,862.
The Company rents certain fixed assets to NEBOH. Equipment rent expense for 1995
was $14,569.
13. Subsequent Events
In January 1996, NEBOH obtained a line of credit with a bank which provided for
borrowings of up to $300,000. The line of credit is secured by certain accounts
receivable of the partnership. The proceeds of the line are to be used for
general operating expenses. The line bears interest at prime plus 3/4%.
F-20
<PAGE> 26
On March 4, 1996, the Company signed a promissory note with one of its investors
to provide for borrowings of up to $350,000. The proceeds of the note are to be
used for the payment of certain outstanding debt. The note is due and payable on
the earlier of the closing of the merger (see Note 14) or January 15, 1997 and
bears interest at 9%. The note is unsecured.
14. Merger
On December 6, 1995, the Company signed a letter of intent to merge into Telor.
Under the terms of the merger, all of the outstanding shares of common stock and
convertible preferred stock of the Company at the effective date of the merger
will be converted into shares of Telor common stock, $.001 par value. All of the
outstanding warrants and options to purchase shares of Company common stock will
upon the merger become warrants and options to purchase shares of Telor common
stock.
Immediately after the consummation of the merger, the Company stockholders will
hold or have the right to receive upon exercise of options or warrants fifty
percent (50%) of the outstanding shares of Telor stock on a fully diluted basis.
The name of the surviving corporation will be Occupational Health +
Rehabilitation Inc. It is expected that the merger will be accounted for as a
reverse purchase and is intended to qualify as a tax-free reorganization.
F-21
<PAGE> 27
Occupational Health + Rehabilitation Inc
Consolidated Balance Sheets
(UNAUDITED)
<TABLE>
<CAPTION>
March 31
1996 1995
---------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 122,887 $ 736,568
Accounts receivable, net 432,480 525,881
Prepaid expenses 123,051 114,329
Other accounts receivable 6,568 79,013
Due from related party 687,949
Other assets 151,887
---------------------------
Total current assets 1,524,822 1,455,791
Property and equipment, net 1,015,136 615,858
Intangible assets, net 1,575,411 862,277
Deposits 38,117 161,990
Other assets 27,000
---------------------------
Total assets $4,180,486 $3,095,916
===========================
LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 934,083 $ 388,085
Current portion of obligations under capital leases 89,220 97,214
Current maturities of long-term debt 391,668 210,864
Current portion of obligations under
noncompetition agreements 325,000
Due to related party 535,475
---------------------------
Total current liabilities 2,275,446 696,163
Long-term debt, less current maturities 744,779 14,177
Obligations under capital leases 101,224 111,889
Obligations under noncompetition agreements 300,820 595,153
---------------------------
Total liabilities 3,422,269 1,417,382
Minority interest 123,305
</TABLE>
F-22
<PAGE> 28
<TABLE>
<CAPTION>
March 31
1996 1995
---------------------------
<S> <C> <C>
Redeemable stock:
Redeemable convertible preferred stock,
Series 1, $.01 par value -- 1,600,000
shares authorized, issued and outstanding 2,750,000 2,550,000
Redeemable convertible preferred stock,
Series 2, $.01 par value -- 3,000,000
shares authorized, issued and outstanding
2,537,843 shares in 1996 and 2,137,843
shares in 1995 4,574,390 3,598,714
----------- -----------
Total redeemable stock 7,324,390 6,148,714
Stockholders' equity (deficit):
Common stock, $.01 par value--8,000,000 shares
authorized, issued and outstanding 674,605
shares in 1996 and 651,855 shares in 1995 6,744 6,519
Additional paid-in capital 11,622 6,222
Accumulated deficit (6,707,844) (4,482,921)
----------- -----------
Total stockholders' equity (deficit) (6,689,478) (4,470,180)
----------- -----------
Total liabilities, redeemable stock and
stockholders' equity (deficit) $ 4,180,486 $ 3,095,916
=========== ===========
</TABLE>
See accompanying notes.
F-23
<PAGE> 29
Occupational Health + Rehabilitation Inc
Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Net patient service revenue $ 1,936,596 $ 833,618
Management fee income 39,124 16,753
Other income 2,589
------------------------------
Total revenue 1,978,309 850,371
Operating and administrative expenses (2,253,605) (1,274,716)
Depreciation and amortization (100,028) (68,002)
Interest expense (60,006) (15,965)
Interest income 19,290
Minority interest in net loss of subsidiary 77,801
------------------------------
Net loss before income taxes (357,529) (489,022)
Income taxes 0 0
------------------------------
Net loss $ (357,529) $ (489,022)
==============================
Net loss available to common stock $ (502,698) $ (619,191)
==============================
Net loss per share $ (0.75) $ (0.95)
==============================
Weighted-average common shares and common share
equivalents outstanding 674,355 651,855
==============================
</TABLE>
See accompanying notes.
F-24
<PAGE> 30
Occupational Health + Rehabilitation Inc
Consolidated Statements of Common Stockholders' Equity (Deficit) and Redeemable
Stock
<TABLE>
<CAPTION>
Total Redeemable Redeemable
Additional Stockholders' Convertible Convertible
Common Stock Paid-in Accumulated Equity Preferred Stock Preferred Stock
Shares Amount Capital Deficit (Deficit) Series 1 Series 2
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 671,855 $6,719 $11,022 $(6,205,146) $(6,187,405) $2,700,000 $4,479,221
Issuance of common stock 2,500 25 600 625
Dividends on redeemable
preferred stock (145,169) (145,169) 50,000 95,169
Net loss (357,529) (357,529)
--------------------------------------------------------------------------------------------------
Balance at March 31, 1996 674,355 $6,744 $11,622 $(6,707,844) $(6,689,478) $2,750,000 $4,574,390
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Total Redeemable Redeemable
Additional Stockholders' Convertible Convertible
Common Stock Paid-in Accumulated Equity Preferred Stock Preferred Stock
Shares Amount Capital Deficit (Deficit) Series 1 Series 2
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 651,855 $6,519 $6,222 $(3,863,730) $(3,850,989) $2,500,000 $3,518,545
Dividends on redeemable
preferred stock (130,169) (130,169) 50,000 80,169
Net loss (489,022) (489,022)
--------------------------------------------------------------------------------------------------
Balance at March 31, 1995 651,855 $6,519 $6,222 $(4,482,921) $(4,470,180) $2,550,000 $3,598,714
==================================================================================================
</TABLE>
F-25
<PAGE> 31
Occupational Health + Rehabilitation Inc
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(357,529) $ (489,022)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 100,028 68,002
Amortization of discount 7,668 7,667
Minority interest in loss of subsidiary (77,801) 0
Changes in operating assets and liabilities:
Accounts receivable (195,605) 8,068
Prepaid expenses and other current assets (12,044) (54,636)
Due from related party, net 150,109
Deposits and other noncurrent assets 4,914 (495)
Accounts payable and accrued expenses (67,685) 34,297
---------------------------
Net cash used in operating activities (447,945) (426,119)
INVESTING ACTIVITIES:
Property and equipment additions (3,812) (11,476)
Additions to goodwill (63,273)
---------------------------
Net cash used in investing activities (67,085) (11,476)
FINANCING ACTIVITIES:
Proceeds from sale of preferred stock, net 625
Proceeds from line of credit and loans payable 300,000
Payments of long-term debt (31,667) (37,122)
---------------------------
Net cash provided (used) by financing activities 268,958 (37,122)
---------------------------
Net decrease in cash and cash equivalents (246,072) (474,717)
Cash and cash equivalents at beginning of period 368,959 1,211,285
---------------------------
Cash and cash equivalents at end of period $ 122,887 $ 736,568
===========================
</TABLE>
See accompanying notes.
F-26
<PAGE> 32
Occupational Health + Rehabilitation Inc
Notes to Interim Consolidated Financial Statements
(UNAUDITED)
March 31, 1996
1. Basis of Presentation
The accompanying unaudited interim financial statements of Occupational Health +
Rehabilitation Inc ("OH+R" or the "Company") have been prepared in accordance
with Rule 10.01 of Regulation S-X pertaining to interim financial statements and
do not include all financial information and disclosures required by generally
accepted accounting principles. The interim financial statements presented
herein reflect all adjustments (consisting of normal recurring adjustments)
which, in the opinion of management, are considered necessary for a fair
presentation of the Company's financial condition as of March 31, 1996 and 1995
and results of operations for the three months ended March 31, 1996 and 1995.
The results of operations for the three months ended March 3l, 1996 are not
necessarily indicative of the results that may be expected for the full year.
2. Subsequent Events
Mergers:
Telor Ophthalmic Pharmaceuticals, Inc. Effective June 6, 1996, the Company
merged (the "Merger") with Telor Ophthalmic Pharmaceuticals, Inc. ("Telor"),
with Telor being the surviving company (the "Surviving Company"). Telor had
historically been involved in the development of ophthalmic pharmaceuticals. In
connection with the Merger, the Surviving Company changed its name to
Occupational Health + Rehabilitation Inc and assumed the business of OH+R. In
conjunction with the Merger, the Surviving Company issued 681,415 shares of its
common stock in exchange for all outstanding shares of OH+R capital stock.
Outstanding options held by employees, directors and consultants of OH+R to
purchase 832,000 shares of OH+R common stock were converted into options to
purchase approximately 117,807 shares of the Surviving Company's common stock.
Warrants to purchase 148,150 shares of OH+R common stock now entitle the holders
to acquire 20,975 shares of the Surviving Company's common stock.
Effective June 7, 1996, the Surviving Company was listed on the Nasdaq SmallCap
Market under the symbol OHRI.
The Merger was accounted for as a reverse acquisition whereby OH+R was deemed to
have acquired Telor for financial reporting purposes. Consistent with the
reverse acquisition accounting treatment, historical financial statements for
the Surviving Company for periods prior to the date of the Merger will be those
of OH+R. Under the purchase method of accounting, balances and
F-27
<PAGE> 33
results of operations of Telor will be included in the Surviving Company's
financial statements from the date of the Merger forward.
In July 1994, Telor entered into a ten-year lease agreement for a facility in
Wilmington, Massachusetts. The Company is conducting no operations in this
facility but is responsible for its share of operating costs of the facility,
including taxes, insurance, maintenance and subject to certain limitations,
repairs. The Company has the right to terminate the lease after five years and
payment of a fee of approximately $60,000. In connection with the lease, the
landlord financed $600,000 of leasehold improvements. This obligation is payable
in monthly payments of principal and interest of $7,601 through October 31,
2004. If the Company terminates the lease at the end of five years, the unpaid
balance of the obligation is due on the lease termination date.
The Company is actively seeking to obtain one or more subleases for its facility
in Wilmington, Massachusetts or to terminate the lease by securing one or more
replacement tenants. On May 6, 1996, the Company signed one sublease agreement.
The Company cannot predict if and when a second sublease will be concluded or
that negotiations will result in favorable terms for the Company.
The Company is required to have secured letters of credit aggregating $360,000
for a portion of the unpaid obligation. The cash which secured the letters of
credit is classified as restricted cash in the accompanying balance sheets and
is included in non-current other assets.
Pending Acquisition:
The Health Center. The Company executed a letter of intent dated May 21, 1996
to purchase 90% of the assets (excluding accounts receivable) of The Health
Center, an ambulatory care facility owned and operated by Advanced Health
Services, Inc. (Seller) located in Lewiston, Maine. The Company and the Seller
plan to form a limited liability company (LLC). OH+R plans to contribute to the
LLC the assets purchased from the Seller and the Seller plans to contribute the
remaining 10% of the assets of The Health Center to the LLC. The terms of the
purchase would consist of cash and a promissory note aggregating $140,000 and an
earn out provision to earn up to $100,000 over a period not to exceed eight
years following the closing.
F-28
<PAGE> 34
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Telor Ophthalmic Pharmaceuticals, Inc. and
Occupational Health + Rehabilitation Inc
The following Unaudited Pro Forma Combined Balance Sheet at March 31,
1996 and the Unaudited Pro Forma Combined Statements of Operations for the year
ended December 31, 1995 and the three months ended March 31, 1996 give effect to
the Merger accounted for under the reverse acquisition purchase method of
accounting. The financial information for the year ended December 31, 1995 for
Telor has been obtained from the financial statements of Telor which have been
audited by Arthur Andersen LLP. The consolidated financial information for the
year ended December 31, 1995 for OH+R has been obtained from the consolidated
financial statements of OH+R which have been audited by Ernst & Young LLP.
The Unaudited Pro Forma Combined Financial Information is based on the
historical financial statements of Telor and OH+R under the assumptions and
adjustments set forth in the accompanying Notes to the Unaudited Pro Forma
Combined Financial Information. The Unaudited Pro Forma Combined Balance Sheet
assumes that the Merger was consummated on December 31, 1995, and the Unaudited
Pro Forma Combined Statements of Operations assume that the Merger was
consummated at the beginning of the periods indicated.
The Pro Forma adjustments are based on the reverse acquisition method
of accounting, which provides that the net assets of the acquired company
(Telor) be recorded at their historical cost, which approximates fair value.
The Unaudited Pro Forma Combined Financial Information may not be
indicative of the results that actually would have occurred if the Merger had
been in effect on the dates indicated or which may be expected in the future.
The Unaudited Pro Forma Combined Financial Information should be read in
conjunction with the historical financial statements and accompanying notes of
Telor and OH+R.
P-1
<PAGE> 35
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
AND
OCCUPATIONAL HEALTH + REHABILITATION INC
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
March 31, 1996
<TABLE>
<CAPTION>
Pro Forma
OH+R Telor Adjustments Pro Forma
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 122,887 $ 3,716,294 $ $3,839,181
Short-term investments - 1,027,800 1,027,800
Accounts receivable, net 432,480 27,953 460,433
Due from related party 687,949 - 687,949
Other current assets 281,506 53,343 334,849
----------- ------------ ----------- ----------
Total current assets 1,524,822 4,825,390 0 6,350,212
Property and equipment, net 1,015,136 19,378 1,034,514
Intangible assets, net 1,575,411 - 1,575,411
Other assets 65,117 360,000 425,117
----------- ------------ ----------- ----------
$ 4,180,486 $ 5,204,768 0 $9,385,254
=========== ============ =========== ==========
Liabilities, Redeemable Stock And Stockholders'
Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses $ 934,087 $ 589,511 $ $1,523,598
Current portion of obligations under 89,220 44,185 133,405
capital leases
Current maturities of long-term debt 391,668 - 391,668
Current portion of obligations under
noncompetition agreements 325,000 - 325,000
Due to related party 535,475 - 535,475
----------- ------------ ----------- ----------
Total current liabilities 2,275,450 633,696 0 2,909,146
Long-term debt, less current maturities 744,779 744,779
Obligations under capital leases 101,224 497,970 599,194
Obligations under noncompetition
agreements 300,820 - 300,820
----------- ------------ ----------- ----------
3,422,273 1,131,666 0 4,553,939
Minority interest 123,305 - 123,305
</TABLE>
P-2
<PAGE> 36
<TABLE>
<CAPTION>
Pro Forma
OH+R Telor Adjustments Pro Forma
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Redeemable stock: 7,179,221 - (7,179,221)(B) 0
Stockholders' equity (deficit)
Common stock 6,744 786 (6,064)(B) 1,466
Additional paid-in capital 11,622 35,652,937 (25,767,792)(B) 9,896,767
Accumulated deficit (6,562,679) (31,580,621) 32,953,077 (B) (5,190,223)
----------- ------------ ----------- ----------
Total stockholders' equity (deficit) (6,544,313) 4,073,102 7,179,221 4,708,010
----------- ------------ ----------- ----------
Total liabilities, redeemable stock and
stockholders' equity (deficit) $ 4,180,486 $ 5,204,768 0 $9,385,254
=========== ============ =========== ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
P-3
<PAGE> 37
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
AND
OCCUPATIONAL HEALTH + REHABILITATION INC
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
Pro Forma
OH+R Telor Adjustments Pro Forma
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 6,023,947 $ $ $ 6,023,947
Operating and administrative expenses (7,697,903) (7,718,628) (15,416,531)
Depreciation and amortization (365,486) (219,605) (585,091)
Interest expense (96,746) - (96,746)
Interest income 37,566 383,721 421,287
Minority interest in net loss of subsidiary 322,211 - 322,211
--------------------------------------------------------------
Net loss $(1,776,411) $(7,554,512) $ 0 $ (9,330,923)
==============================================================
Net loss available to common stock $(2,337,087) $(7,554,512) $ 0 $ (9,330,923)
==============================================================
Net loss per share $ (3.53) $ (9.67) $ 0 $ (6.47)
==============================================================
Weighted average common shares and
common share equivalents outstanding 661,855 780,886 (549) 1,442,192
==============================================================
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
P-4
<PAGE> 38
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
AND
OCCUPATIONAL HEALTH + REHABILITATION INC
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the three months ended March 31, 1996
<TABLE>
<CAPTION>
Pro Forma
OH+R Telor Adjustments Pro Forma
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 1,978,309 $ 1,978,309
Operating and administrative expenses (2,253,605) (576,652) (2,830,257)
Depreciation and amortization (100,028) - (100,028)
Interest expense (60,006) - (60,006)
Interest income - 63,092 63,092
Minority interest in net loss of subsidiary $ 77,801 - 77,801
-----------------------------------------------------------
Net loss $ (357,529) $(513,560) $ 0 $ (871,089)
===========================================================
Net loss available to common stock $ (502,698) $(513,560) $ 0 $ (871,089)
===========================================================
Net loss per share $ (0.75) $ (0.65) $ 0 $ (0.59)
===========================================================
Weighted average common shares and
common share equivalents outstanding 674,355 785,621 7,023 1,466,999
===========================================================
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
P-5
<PAGE> 39
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
AND
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION
A. Basis of Presentation
The Unaudited Pro Forma Combined Balance Sheet assumes that the Merger
was consummated on March 31, 1996, and the Unaudited Pro Forma Combined
Statements of Operations assume that the Merger was consummated at the beginning
of the periods indicated. The Merger has been accounted for in the accompanying
Unaudited Pro Forma Combined Financial Information under the reverse acquisition
purchase method of accounting.
B. Balance Sheet Adjustments
The adjustments to redeemable stock and stockholders' equity (deficit)
comprise the following:
<TABLE>
<S> <C>
- Redeemable Stock:
Waiver of accrued preferred stock dividends
on OH+R Preferred Stock............................................................... $ (1,372,456)
Conversion of 1,600,000 shares of OH+R Series 1 Preferred Stock......................... (2,000,000)
Conversion of 2,537,843 shares of OH+R Series 2 Preferred Stock......................... (3,806,765)
------------
$ (7,179,221)
- Common Stock:
Reversal of OH+R par value ($.01) of 674,605 shares..................................... $ (6,744)
Recording of Telor par value ($.001) of newly issued shares............................. 680
============
$ (6,064)
- Additional paid-in capital:
Conversion of OH+R preferred shares to common........................................... $ 5,806,179
Elimination of Telor accumulated deficit................................................ (31,580,621)
Reversal of OH+R additional paid-in capital on common shares............................ 6,650
------------
$(25,767,792)
</TABLE>
P-6
<PAGE> 40
<TABLE>
<S> <C>
- Accumulated deficit:
Waiver of accrued preferred stock dividends
on OH+R Preferred Stock............................................................... $ 1,372,456
Elimination of Telor accumulated deficit................................................ 31,580,621
----------
$32,953,077
==========
</TABLE>
C. Adjustments to Statement of Operations
The adjustment to weighted average common shares and common share
equivalents outstanding for purposes of computing pro forma net loss per share
reflects the conversion of shares of OH+R Common Stock and OH+R Preferred Stock
into Telor Stock at a conversion ratio of 0.1415957.
P-7
<PAGE> 41
Exhibit Index
Exhibit No. Description
----------- -----------
2.1(a) Agreement and Plan of Merger, by and between Telor
and OH+R, dated as of February 22, 1996 (Filed as
Exhibit 10.50 to Form 10-K for the year ended
December 31, 1995, File No. 0-21428 and incorporated
by reference herein).
2.1(b) Amendment No. 1 to the Agreement and Plan of Merger,
dated as of April 30, 1996 (Filed herewith).
2.1(c) Amendment No. 2 to the Agreement and Plan of Merger,
dated as of May 10, 1996 (Filed herewith).
4.1 Restated Certificate of Incorporation (Filed
herewith).
23.1 Consent of Ernst & Young LLP (Filed herewith).
<PAGE> 1
Exhibit 2.1(b)
AMENDMENT NO. 1
TO THE
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 to the Agreement and Plan of Merger (the
"Amendment") is made and entered into as of April 30, 1996, by and between Telor
Ophthalmic Pharmaceuticals, Inc., a Delaware corporation ("Telor") and
Occupational Health + Rehabilitation Inc, a Delaware corporation ("OH+R").
WHEREAS, Telor and OH+R entered into an Agreement and Plan of Merger as
of February 22, 1996 (the "Merger Agreement"); and
WHEREAS, Telor and OH+R desire to amend certain provisions of the
Merger Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowleged, the parties hereto agree as
follows:
1. The date of April 30, 1996 in Section 6.12 shall be deleted and
replaced with the date of June 30, 1996.
2. The date of April 30, 1996 in Section 7.10 shall be deleted and
replaced with the date of June 30, 1996.
3. The date of April 30, 1996 in clause (ii) of subsection (b) of
Section 8.01 shall be deleted and replaced with the date of June
30, 1996.
4. The date of April 30, 1996 in clause (i) of subsection (c) of
Section 8.01 shall be deleted and replaced with the date of June
30, 1996.
5. The date of April 30, 1996 in subsection (d) of Section 8.01 shall
be deleted and replaced with the date of June 30, 1996.
6. This Amendment shall become effective immediately. All other
provisions of the Merger Agreement shall remain unchanged and shall
continue in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the date first written above.
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
By:/s/ John K. Herdklotz, Ph.D.
--------------------------------------------
John K. Herdklotz, Ph.D.
President and Acting Chief Executive Officer
OCCUPATIONAL HEALTH + REHABILITATION INC
By:/s/ John C. Garbarino
--------------------------------------------
John C. Garbarino
President and Chief Executive Officer
-2-
<PAGE> 1
Exhibit 2.1(c)
AMENDMENT NO. 2
TO THE
AGREEMENT AND PLAN OF MERGER
This Amendment No. 2 to the Agreement and Plan of Merger (the
"Amendment No. 2") is made and entered into as of May 10, 1996, by and between
Telor Ophthalmic Pharmaceuticals, Inc., a Delaware corporation ("Telor") and
Occupational Health + Rehabilitation Inc, a Delaware corporation ("OH+R").
WHEREAS, Telor and OH+R entered into an Agreement and Plan of Merger
dated as of February 22, 1996, as amended by Amendment No. 1 dated as of April
30, 1996 (the "Merger Agreement"); and
WHEREAS, Telor and OH+R desire to amend certain provisions of the
Merger Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowleged, the parties hereto agree as
follows:
1. The Merger Agreement is hereby amended by deleting Section 7.15 in
its entirety and inserting in its place the following:
SECTION 7.15 Cash Balance. Telor shall have cash, cash equivalents and
short-term investments, including certificates of deposit securing the
Letters of Credit, immediately prior to the Effective Time of not less
than an aggregate of $4,800,000, net of all liabilities due and payable
and all liabilities for goods delivered and services rendered to Telor
prior to the Effective Time regardless if an invoice has been rendered
to Telor as of immediately prior to the Effective Time, excluding (i)
all expenses related to the premises in Wilmington, Massachusetts,
including, without limitation, the subleasing thereof; (ii) any
premium paid or due for directors and officers liability insurance;
(iii) the amount, if any, due to Pharmatech, Inc.; and (iv) fees and
disbursements of counsel to Telor accrued after May 15, 1996.
2. Except as expressly provided herein, the Merger Agreement is hereby
ratified and confirmed and shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be
executed as of the date first written above.
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
By:/s/ John K. Herdklotz, Ph.D.
--------------------------------------------
John K. Herdklotz, Ph.D.
President and Acting Chief Executive Officer
OCCUPATIONAL HEALTH + REHABILITATION INC
By:/s/ John C. Garbarino
--------------------------------------------
John C. Garbarino
President and Chief Executive Officer
-2-
<PAGE> 1
Exhibit 4.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
OCCUPATIONAL HEALTH + REHABILITATION INC
The certificate of incorporation of Occupational Health +
Rehabilitation Inc (the "Corporation"), as originally filed with the Secretary
of State of the State of Delaware on April 19, 1988 with the original name of
Eyegene, Inc., is hereby restated only, integrating and not further amending the
provisions of the Corporation's certificate of incorporation, as heretofore
amended and supplemented, and there is no discrepancy between those provisions
and the provisions of this Restated Certificate of Incorporation. This Restated
Certificate of Incorporation was duly adopted by the Board of Directors in
accordance with Section 245 of the General Corporation Law of Delaware.
THE UNDERSIGNED does hereby certify as follows:
FIRST: The name of the Corporation (hereinafter referred to as the
"Corporation") is
OCCUPATIONAL HEALTH + REHABILITATION INC
SECOND: The registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: A. Designation and Number of Shares.
The total number of shares of stock which the Corporation is authorized
to issue is Fifteen Million (15,000,000) shares, consisting of:
10,000,000 shares of Common Stock, par value of one-tenth of one cent
($.001) per share (the "Common Stock"); and
5,000,000 shares of Preferred Stock, par value of one-tenth of one cent
($.001) per share (the "Preferred Stock").
The relative powers, designations, preferences, special rights,
restrictions and other matters relating to such Common Stock and Preferred Stock
are as set forth below in this Article FOURTH.
B. Common Stock.
<PAGE> 2
1. General. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
Preferred Stock, if any.
2. Voting. The holders of the Common Stock are entitled to one vote for
each share held. There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors, subject to any provision of this Restated Certificate of
Incorporation, as amended from time to time, and subject to the relative rights
and preferences of any shares of Preferred Stock authorized and issued
hereunder.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject, however, to the liquidation rights of the holders of
Preferred Stock authorized and issued hereunder.
C. Preferred Stock.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of shares of Preferred Stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware (such certificate being hereinafter referred to as a "Preferred
Stock Designation"), to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof. The Board of Directors is also expressly authorized to
increase or decrease the number of shares of any such series prior to the issue
of shares of that series. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number thereof then outstanding) by
the affirmative vote of the holders of a majority of the Common Stock, without a
vote of the holders of the Preferred Stock, or of any series thereof, unless a
vote of any such holders is required pursuant to the terms of any Preferred
Stock then outstanding, subject in any event to the provisions of Article
ELEVENTH of this Restated Certificate of Incorporation.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Restated
Certificate of Incorporation or the by-laws of the
-2-
<PAGE> 3
Corporation, the directors are hereby empowered to exercise all such powers and
do all such acts and things as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written
ballot unless the by-laws so provide.
C. Any action required or permitted to be taken by the stockholders of
the Corporation may be effected only at a duly called annual or special meeting
of stockholders of the Corporation.
D. Special meetings of stockholders of the Corporation may be called
only by the Chairman of the Board, if any, the Chief Executive Officer, the
President of the Corporation or by the Board of Directors pursuant to a
resolution adopted by a majority of the Whole Board. For purposes of this
Restated Certificate of Incorporation, the term "Whole Board" shall mean the
total number of authorized directors whether or not there exist any vacancies in
previously authorized directorships.
SIXTH: A. Subject to the rights of the holders of any series of
Preferred Stock then outstanding to elect additional directors under specified
circumstances, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board.
B. On or prior to the date on which the Corporation first provides
notice of an annual meeting of the stockholders (or a special meeting in lieu
thereof) in 1993 or solicits actions by written consent in lieu thereof, the
Board of Directors of the Corporation shall divide the directors nominated for
election at such meeting into three classes, as nearly equal in number as
reasonably possible, with the term of office of the first class to expire at the
1994 annual meeting of stockholders or any special meeting in lieu thereof, the
term of office of the second class to expire at the 1995 annual meeting of
stockholders or any special meeting in lieu thereof, and the term of office of
the third class to expire at the 1996 annual meeting of stockholders or any
special meeting in lieu thereof. At each annual meeting of stockholders or
special meeting in lieu thereof following such initial classification, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
or special meeting in lieu thereof after their election and until their
successors are duly elected and qualified.
C. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director.
In the event of any increase or decrease in the authorized number of directors,
(i) each director then serving as such shall nevertheless continue as a director
of the class of which he is a member until the expiration of his current term or
his prior death, retirement, removal or resignation and (ii) the newly created
or eliminated directorships resulting from such increase or decrease shall if
-3-
<PAGE> 4
reasonably possible be apportioned by the Board of Directors among the three
classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent reasonably possible,
consistent with the foregoing rule, any newly created directorships shall be
added to those classes whose terms of office are to expire at the latest dates
following such allocation and newly eliminated directorships shall be subtracted
from those classes whose terms of office are to expire at the earliest dates
following such allocation, unless otherwise provided for from time to time by
resolution adopted by a majority of the directors then in office, although less
than a quorum. In the event of a vacancy in the Board of Directors, the
remaining directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
D. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
by-laws of the Corporation.
E. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any director, or the entire Board of Directors, may be
removed from office at any time by the affirmative vote of the holders of at
least seventy percent (70%) of the voting power of all of the then outstanding
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, with or without cause. A director
may be removed for cause only after a reasonable notice and opportunity to be
heard before the body proposing to remove him.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend
or repeal by-laws of the Corporation. Any adoption, amendment or repeal of the
by-laws of the Corporation by the Board of Directors shall require the approval
of a majority of the Whole Board. The stockholders shall also have power to
adopt, amend or repeal the by-laws of the Corporation; provided, however, that,
in addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Restated Certificate of Incorporation,
the affirmative vote of the holders of at least seventy percent (70%) of the
voting power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required for the stockholders to adopt,
amend or repeal any provision of the by-laws of the Corporation.
EIGHTH: A. In addition to any affirmative vote required by law or this
Restated Certificate of Incorporation, and except as otherwise expressly
provided in this Article EIGHTH:
1. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder who was an Interested Stockholder immediately
prior to such merger or consolidation; or
-4-
<PAGE> 5
2. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder, or any Affiliate of any Interested
Stockholder, of any assets of the Corporation or any Subsidiary (as
hereinafter defined) having an aggregate Fair Market Value (as
hereinafter defined) equaling or exceeding ten percent (10%) or more of
the assets of the Corporation; or
3. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in exchange
for cash, securities or other property (or a combination thereof)
having an aggregate Fair Market Value (as hereinafter defined) equaling
or exceeding ten percent (10%) of the combined Fair Market Value of the
then-outstanding shares of stock of the Corporation entitled to vote
generally in the election of directors ( for purposes of this Article
EIGHTH, the "Voting Stock") of the Corporation, except for (a) any
issuance or transfer pursuant to an employee benefit plan of the
Corporation or any Subsidiary thereof (including, without limitation of
the immediately foregoing, issuances pursuant to such a plan to
directors or consultants who are not employees), or (b) any issuance or
transfer which does not have the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder, except as a
result of immaterial changes due to fractional share adjustments; or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
5. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any Interested
Stockholder, except as a result of immaterial changes due to fractional
share adjustments; shall require the affirmative vote of the holders
of shares of voting stock of the Corporation representing at least
seventy percent (70%) of the voting power of all the Voting Stock,
voting together as a single class. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law or by any other provision
of this Restated Certificate of Incorporation, as amended or restated
from time to time, or any Preferred Stock Designation or in any
agreement with any national securities exchange or otherwise.
-5-
<PAGE> 6
The term "Business Combination" as used in this Article EIGHTH
shall mean any transaction which is referred to in any one or more of
paragraphs 1 through 5 of Section A of this Article EIGHTH.
B. The provisions of Section A of this Article EIGHTH shall
not be applicable to any particular Business Combination, and such
Business Combination shall require only such vote, if any, of the
outstanding shares of capital stock as is required by law or by any
other provision of this Restated Certificate of Incorporation, if, the
Business Combination shall have been approved by a majority of the
Disinterested Directors (as hereinafter defined); provided, however,
that this condition shall not be capable of satisfaction unless there
are at least two Disinterested Directors.
C. For the purposes of this Article EIGHTH:
1. "Person" means any individual, corporation,
partnership, association, bank, joint stock company, trust,
syndicate, unincorporated organization or similar company, or
a group of "persons" acting or agreeing to act together for
the purpose of acquiring, holding, voting or disposing of
securities or their voting or other interest in the capital
stock or other securities of the Corporation for a common
purpose, pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written
or otherwise; provided, that a group of "persons" shall not
include the Board of Directors of the Corporation in its
solicitation of proxies under Regulation 14A of the General
Rules and Regulations under the Securities Exchange Act of
1934 or under applicable state law.
2. "Interested Stockholder" shall mean any Person
(other than the Corporation or any holding company or
Subsidiary thereof) who or which:
(a) is the beneficial owner, directly or
indirectly, of more than fifteen percent (15%) of
the voting power of the outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and
at any time within the shorter of (i) the two-year
period immediately prior to the date in question or
(ii) the period commencing on May 11, 1993 and
ending immediately prior to the date in question,
was the beneficial owner, directly or indirectly, of
fifteen percent (15%) or more of the voting power of
the then outstanding Voting Stock; or
(c) is an assignee of or has otherwise
succeeded to any shares of Voting Stock which were
at any time within the two-year period immediately
prior to the date in question beneficially owned by
any Interested Stockholder, if such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not
-6-
<PAGE> 7
involving a public offering within the meaning of the
Securities Act of 1933, as amended (or any successor
statute).
3. "Beneficial ownership" shall be determined
pursuant to Rule 13d-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934 (or any successor
rule or statutory provision), or, if said Rule 13d-3 shall be
rescinded and there shall be no successor rule or statutory
provision thereto, pursuant to said Rule 13d-3 as in effect on
May 11, 1993; provided, however, that a Person shall, in any
event, also be deemed the "beneficial owner" of any Voting
Stock:
(a) which such person or any of its
Affiliates beneficially owns, directly or indirectly;
or
(b) which such Person or any of its
Affiliates has (i) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time), pursuant to any agreement,
arrangement or understanding (but shall not be deemed
to be the beneficial owner of any voting shares
solely by reason of an agreement, contract, or other
arrangement with the Corporation to effect any
transaction which is described in any one or more of
clauses 1 through and including 5 of Section A of
this Article EIGHTH) or upon the exercise of
conversion rights, exchange rights, warrants, or
options or otherwise, or (ii) sole or shared voting
or investment power with respect thereto pursuant to
any agreement, arrangement, understanding,
relationship or otherwise (but shall not be deemed to
be the beneficial owner of any voting shares solely
by reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a
public solicitation of proxies for such meeting, with
respect to shares of which neither such Person nor
any such Affiliate is otherwise deemed the beneficial
owner); or
(c) which are beneficially owned, directly
or indirectly, by any other Person with which such
first mentioned Person or any of its Affiliates acts
as a partnership, limited partnership, syndicate or
other group pursuant to any agreement, arrangement or
understanding for the purpose of acquiring, holding,
voting or disposing of any shares of capital stock of
the Corporation; and provided further, however, that
(1) no director or officer of the Corporation (or any
Affiliate of any such director or officer) shall,
solely by reason of any or all of such directors or
officers acting in their capacities as such, be
deemed, for any purposes hereof, to beneficially own
any Voting Stock beneficially owned by any other such
director or officer (or any Affiliate thereof), and
(2) neither any employee stock ownership or similar
plan of the Corporation or any Subsidiary of the
Corporation, nor any trustee with respect thereto or
any Affiliate of such trustee (solely by reason of
such capacity of such trustee), shall be deemed, for
any purposes
-7-
<PAGE> 8
hereof, to beneficially own any Voting Stock held
under any such plan. For purposes of computing the
percentage beneficial ownership of Voting Stock of a
Person, the outstanding Voting Stock shall include
shares deemed owned by such Person through
application of this subsection but shall not include
any other Voting Stock which may be issuable by the
Corporation pursuant to any agreement, or upon
exercise of conversion rights, warrants or options,
or otherwise. For all other purposes, the outstanding
Voting Stock shall include only Voting Stock then
outstanding and shall not include any Voting Stock
which may be issuable by the Corporation pursuant to
any agreement, or upon the exercise of conversion
rights, warrants or options, or otherwise.
4. "Affiliate" shall have the meaning ascribed to
that term in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on May
11, 1993.
5. "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or
indirectly, by the Corporation; provided, however, that for
the purposes of the definition of Interested Stockholder set
forth in Paragraph 2 of this Section C, the term "Subsidiary"
shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by
the Corporation.
6. "Disinterested Director" means any member of the
Board of Directors who is unaffiliated with the Interested
Stockholder and was a member of the Board of Directors prior
to the time that the Interested Stockholder became an
Interested Stockholder, and any director who is thereafter
chosen to fill any vacancy on the Board of Directors or who is
elected and who, in either event, is unaffiliated with the
Interested Stockholder and in connection with such directors'
initial assumption of office is recommended for appointment or
election by a majority of Disinterested Directors then on the
Board of Directors.
7. "Fair Market Value" means: (a) in the case of
stock, the highest closing sales price of the stock during the
30-day period immediately preceding the date in question of a
share of such stock on the National Association of Securities
Dealers Automated Quotation System or any system then in use,
or, if such stock is admitted to trading on a principal United
States securities exchange registered under the Securities
Exchange Act of 1934, Fair Market Value shall be the highest
sale price reported during the 30-day period preceding the
date in question, or, if no such quotations are available, the
Fair Market Value on the date in question of a share of such
stock as determined by a majority of the Disinterested
Directors in good faith, in each case with respect to any
class of stock, appropriately adjusted for any dividend or
distribution in shares of such stock or any stock split or
reclassification of outstanding shares of such
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stock into a greater number of shares of such stock or any
combination or reclassification of outstanding shares of such
stock into a smaller number of shares of such stock, and (b)
in the case of property other than cash or stock, the Fair
Market Value of such property on the date in question as
determined by a majority of the Disinterested Directors in
good faith.
D. A majority of the Disinterested Directors of the
Corporation shall have the power and duty to determine for the purposes
of this Article EIGHTH, on the basis of information known to them after
reasonable inquiry: (a) whether a Person is an Interested Stockholder;
(b) the number of shares of Voting Stock beneficially owned by any
Person; (c) whether a Person is an Affiliate of another; and (d)
whether the assets which are the subject of any Business Combination
have, or the consideration to be received for the issuance or transfer
of securities by the Corporation or any Subsidiary in any Business
Combination has an aggregate Fair Market Value equaling or exceeding
ten percent (10%) of the assets of the Corporation or equaling or
exceeding ten percent (10%) of the combined Fair Market Value of the
Voting Stock of the Corporation. A majority of the Disinterested
Directors shall have the further power to interpret all of the terms
and provisions of this Article EIGHTH.
E. Nothing contained in this Article EIGHTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
NINTH: The Corporation shall, to the fullest extent permitted
by Section 145 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented, indemnify and advance
expenses to, (i) its directors and officers, and (ii) any person who at
the request of the Corporation is or was serving as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by
said section, provided, however, that except with respect to
proceedings to enforce rights to indemnification, the By-laws of the
Corporation may provide that the Corporation shall indemnify any
director, officer or such person in connection with a proceeding (or
part thereof) initiated by such director, officer or such person only
if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. The Corporation, by action of its Board
of Directors, may provide indemnification or advance expenses to
employees and agents of the Corporation or other persons only on such
terms and conditions and to the extent determined by the Board of
Directors in its sole and absolute discretion. The indemnification
provided for herein shall not be deemed exclusive of any other rights
to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
TENTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director notwithstanding any provision of law
imposing such liability; provided, however, that this
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provision shall not eliminate the liability of a director, to the
extent that such liability is imposed by applicable law, (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 or successor provisions of the Delaware General
Corporation Law or (iv) for any transaction from which the director
derived an improper personal benefit. This provision shall not
eliminate the liability of a director for any act or omission occurring
prior to the date upon which this provision becomes effective. No
amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or
with respect to any acts or omissions of such director occurring prior
to such amendment or repeal. If the Delaware General Corporation Law is
amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
ELEVENTH: The Corporation reserves the right to amend or
repeal any provision contained in this Restated Certificate of
Incorporation in the manner prescribed by the laws of the State of
Delaware and all rights conferred upon stockholders are granted subject
to this reservation, provided, however, that in addition to the vote of
the holders of any class or series of stock of the Corporation required
by law or by this Restated Certificate of Incorporation, the
affirmative vote of the holders of shares of voting stock of the
Corporation representing at least seventy percent (70%) of the voting
power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors,
voting together as a single class, shall be required to (i) reduce or
eliminate the number of authorized shares of Common Stock or the number
of authorized shares of Preferred Stock set forth in Article FOURTH or
(ii) amend or repeal, or adopt any provision inconsistent with, Section
D of Article FOURTH and Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH,
TENTH and this Article ELEVENTH of this Restated Certificate of
Incorporation.
TWELFTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on
the application in a summary way of this Corporation or of any creditor
or stockholder thereof or on the application of any receiver or
receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for
this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case
may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the
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court to which the said application has been made, be binding on all
the creditors or class of creditors, and/or on all the stockholders or
class of stockholders, of this Corporation, as the case may be, and
also on this Corporation.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by John C. Garbarino, its President, this 30th day of July, 1996.
OCCUPATIONAL HEALTH +
REHABILITATION INC
By:/s/ John C. Garbarino
--------------------------------------
John C. Garbarino, President
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Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-5253) pertaining to the Occupational Health + Rehabilitation Inc
1993 Stock Plan of our report dated January 23, 1996, with respect to the
consolidated financial statements of Occupational Health + Rehabilitation Inc
included in the Current Report on Form 8-K dated June 6, 1996.
ERNST & YOUNG LLP
Boston, Massachusetts
August 8, 1996
