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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OCCUPATIONAL HEALTH + REHABILITATION INC
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:...........
2) Aggregate number of securities to which transaction applies:..............
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined.):.............................
4) Proposed maximum aggregate value of transaction:..........................
5) Total fee paid:...........................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement no:
3) Filing Party:
4) Date Filed:
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OCCUPATIONAL HEALTH + REHABILITATION INC
175 DERBY STREET, SUITE 36
HINGHAM, MA 02043-4058
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 15, 1997
To Our Stockholders:
The 1997 Annual Meeting of Stockholders of Occupational Health +
Rehabilitation Inc (the "Company") will be held at the Company's corporate
offices located at 175 Derby Street, Suite 36, Hingham, Massachusetts 02043-4058
on December 15, 1997, at 9:00 A.M. (local time) for the following purposes:
1. To elect four people to the Board of Directors, two for two-year terms
expiring in 1999 and two for three-year terms expiring in 2000.
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Only stockholders of record at the close of business on November 12, 1997 are
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
By order of the Board of Directors,
Richard P. Quinlan
Secretary
Dated: November 17, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
ANY PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME PRIOR TO ITS
EXERCISE AND, IF PRESENT AT THE MEETING, MAY WITHDRAW IT AND VOTE IN PERSON.
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OCCUPATIONAL HEALTH + REHABILITATION INC
175 DERBY STREET, SUITE 36
HINGHAM, MA 02043-4058
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 15, 1997
---------------------------
This Proxy Statement is furnished to the stockholders of Occupational Health +
Rehabilitation Inc (the "Company") in connection with the solicitation of
proxies by the Board of Directors for use at the Annual Meeting of Stockholders
of the Company to be held on December 15, 1997, and any adjournments thereof
(the "Annual Meeting"). This Proxy Statement, the foregoing Notice of Annual
Meeting, the enclosed form of proxy and the Company's 1996 Annual Report to
Stockholders are first being mailed or given to stockholders on or about
November 17, 1997.
PROXIES
A stockholder giving a proxy may revoke it at any time before it is voted by
giving another proxy bearing a later date, by notifying the Secretary of the
Company in writing of such revocation, or by attending the Annual Meeting in
person and casting a ballot. Any properly executed proxy returned to the
Company will be voted in accordance with the instructions indicated thereon. If
no instructions are indicated on the proxy, the proxy will be voted for the
election of the nominees for directors named herein and in favor of the other
proposals set forth in the Notice of Annual Meeting.
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of proxies by mail, proxies may be solicited by directors,
officers or regular employees of the Company in person or by telephone, or by
other means. Such persons will not receive any additional compensation for such
activities.
VOTING SECURITIES
The record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting was the close of business on November 12, 1997
(the "Record Date"). On the Record Date, there were 1,579,479 shares of Common
Stock and 1,416,667 shares of Series A Convertible Preferred Stock (the
"Preferred Stock"), outstanding and entitled to vote. Each share of Common
Stock and each share of Preferred Stock is entitled to one vote. A majority of
such shares, present in person or represented by proxy, shall constitute a
quorum at the Annual Meeting. A majority of such shares of Common Stock,
present in person or represented by proxy, shall constitute a quorum at the
Annual Meeting for the purpose of electing two of the directors as more fully
described below. A majority of such shares of Preferred Stock, present in
person or represented by proxy, shall constitute a quorum at the Annual Meeting
for the purpose of electing two of the directors as more fully described below.
Votes will be tabulated at the Annual Meeting by one or more inspectors of
election appointed by the Board of Directors.
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP
OF MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of Record Date by (i) each person
known by the Company to own beneficially more than five percent of the Common
Stock of the Company, (ii) each director and nominee for director of the
Company, (iii) the Company's Chief Executive Officer and (iv) all directors and
executive officers of the Company as a group. Except as otherwise indicated,
all shares are owned directly. Except as indicated by footnote, and subject to
community
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property laws where applicable, the Company believes that the persons named in
the table have sole voting and investment power with respect to all shares of
Common Stock indicated.
<TABLE>
<CAPTION>
Percent
Shares of
Name and Address of Beneficial Owner Beneficially Owned (13) Class
- ------------------------------------------------- ------------------------ ---------------
<S> <C> <C>
Cahill, Warnock Strategic Partners Fund, L.P. (1) 679,042 30.1%
10 North Calvert Street, Suite 735
Baltimore, MD 21202
Prince Venture Partners III, L.P. (2) 400,045 25.3%
10 South Wacker Drive
Chicago, IL 60606
Partech International Entities (3) 283,333 15.2%
50 California Street, Suite 3200
San Francisco, CA 94111
Venrock Entities (4) 246,784 14.1%
30 Rockefeller Plaza, Room 5508
New York, NY 10112
BancBoston Ventures, Inc. (5) 215,636 12.8%
100 Federal Street
Boston, MA 02110
The Venture Capital Fund of 182,303 11.1%
New England III, L.P. (6)
160 Federal Street, 23rd Floor
Boston, MA 02110
Asset Management Associates 1989, L.P. (7) 173,685 10.4%
2275 East Bayshore Road
Palo Alto, CA 94303
Argosy Health, L.P. 100,502 6.4%
120 Gibraltar Road, Suite 310
Horsham, PA 19044
John C. Garbarino (8) 131,196 7.9%
175 Derby Street, Suite 36
Hingham, MA 02043
Kevin J. Dougherty (9) 400 *
Angus M. Duthie (10) 400 *
Edward L. Cahill (11) 400 *
Donald W. Hughes - *
All directors and executive officers as a group 198,181 11.6%
(9 persons) (12)
_________________________
</TABLE>
* Less than 1%
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(1) Consists of 679,042 shares of Common Stock issuable upon conversion of
shares of the Company's Series A Convertible Preferred Stock (the
"Preferred Stock"). Edward L. Cahill, a director of the Company, is a
General Partner of Cahill, Warnock Strategic Partners, L.P., the General
Partner of Cahill, Warnock Strategic Partners Fund, L.P. David L. Warnock
is also a General Partner of Cahill, Warnock Strategic Partners, L.P. The
General Partners of Cahill, Warnock Strategic Partners, L.P. share voting
and investment power with respect to the shares held by Cahill, Warnock
Strategic Partners Fund, L.P. and may be deemed to be the beneficial owners
of such shares. Each of the General Partners of Cahill, Warnock Strategic
Partners, L.P. disclaims beneficial ownership of the shares held by Cahill,
Warnock Strategic Partners Fund, L.P.
(2) Angus M. Duthie, a director of the Company, is a General Partner of Prince
Ventures, L.P., the General Partner of Prince Venture Partners III, L.P.
James W. Fordyce, Mark J. Gabrielson and Gregory F. Zaic are also General
Partners of Prince Ventures, L.P. The General Partners of Prince Ventures,
L.P. share voting and investment power with respect to the shares held by
Prince Venture Partners III, L.P. and may be deemed to be the beneficial
owners of such shares. Each of the General Partners of Prince Ventures,
L.P. disclaims beneficial ownership of the shares held by Prince Venture
Partners III, L.P.
(3) Consists of 86,667 shares of Common Stock issuable upon conversion of
shares of Preferred Stock held by Axa U.S. Growth Fund, LLC (the "Axa
Conversion Shares"), 173,334 shares of Common Stock issuable upon
conversion of shares of Preferred Stock held by U.S. Growth Fund Partners,
C.V. (the "GFP Conversion Shares"), 16,667 shares of Common Stock issuable
upon conversion of shares of Preferred Stock held by Double Black Diamond
II, LLC (the "DBD Conversion Shares") and 6,665 shares of Common Stock
issuable upon conversion of shares of Preferred Stock held by Almanori
Limited the "Almanori Conversion Shares"). As the investment managing
member of Axa U.S. Growth Fund, LLC, PAX V, LLC may be deemed to
beneficially own the Axa Conversion Shares. As the investment general
partner of U.S. Growth Fund Partners, C.V., PAR V V.O.F. may be deemed to
beneficially own the GFP Conversion Shares. As a non-managing member of
PAX V, LLC and a general partner of PAR V V.O.F., Randy Scherago may be
deemed to beneficially own the Axa Conversion Shares and the GFP Conversion
Shares. As a managing member of PAX V, LLC and PAR V V.O.F., PAR SF, LLC
may be deemed to beneficially own the Axa Conversion Shares and the GFP
Conversion Shares. As a managing member of PAR SF, LLC and Double Black
Diamond II, LLC, Vincent Worms may be deemed to beneficially own the Axa
Conversion Shares, the GFP Conversion Shares and the DBD Conversion Shares.
As a managing member of PAR SF, LLC and Double Black Diamond II, LLC,
Thomas McKinley may be deemed to beneficially own the Axa Conversion
Shares, the GFP Conversion Shares and the DBD Conversion Shares. As a non-
managing member of PAR SF, LLC, Roland Van der Meer may be deemed to
beneficially own the Axa Conversion Shares and the GFP Conversion Shares.
Each of PAX V, LLC, Randy Scherago, PAR SF, LLC, Vincent Worms, Thomas
McKinley and Roland Van der Meer disclaims beneficial ownership of the Axa
Conversion Shares, except to the extent of their respective proportionate
pecuniary interests therein. Each of PAR V V.O.F., Randy Scherago, PAR SF,
LLC, Vincent Worms, Thomas McKinley and Roland Van der Meer disclaims
beneficial ownership of the GFP Conversion Shares, except to the extent of
their respective proportionate pecuniary interests therein. Each of
Vincent Worms and Thomas McKinley disclaims beneficial ownership of the DBD
Conversion Shares, except to the extent of their respective proportionate
pecuniary interests therein.
(4) Consists of 55,316 shares of Common Stock and 66,667 shares of Common Stock
issuable upon conversion of shares of Preferred Stock held by Venrock
Associates and 24,801 shares of Common Stock and 100,000 shares of Common
Stock issuable upon conversion of shares of Preferred Stock held by Venrock
Associates II, L.P. Patrick F. Latterell, Peter O. Crisp, Ted H.
McCourtney, Anthony B. Evnin, David R. Hathaway, Anthony Sun, Kimberley A.
Rummelsberg, and Ray A. Rothrock and Mark W. Bailey are General Partners of
Venrock Associates and of Venrock Associates II, L.P. The General Partners
of Venrock Associates and of Venrock Associates II, L.P. share voting and
investment power with respect to the shares held by Venrock Associates and
by Venrock Associates II, L.P. and may be deemed to be the beneficial
owners of such shares. Each of the General Partners of Venrock Associates
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and Venrock Associates II, L.P. disclaims beneficial ownership of the
shares held by Venrock Associates and Venrock Associates II, L.P.
(5) Includes 100,000 shares of Common Stock issuable upon conversion of shares
of Preferred Stock.
(6) Includes 66,667 shares of Common Stock issuable upon conversion of shares
of Preferred Stock. Kevin J. Dougherty, a director of the Company, is a
General Partner of FH&Co. III, L.P., the General Partner of The Venture
Capital Fund of New England III, L.P. Richard A. Farrell, Harry J. Healer,
Jr. and William C. Mills III are also General Partners of FH&Co. III, L.P.
The General Partners of FH&Co. III, L.P. share voting and investment power
with respect to the shares held by The Venture Capital Fund of New England
III, L.P. and may be deemed to be the beneficial owners of such shares.
Each of the General Partners of FH&Co. III, L.P. disclaims beneficial
ownership of the shares held by The Venture Capital Fund of New England
III, L.P.
(7) Includes 83,333 shares of Common Stock issuable upon conversion of shares
of Preferred Stock. Craig C. Taylor, Franklin P. Johnson Jr., John F.
Shoch and W. Ferrell Sanders are General Partners of AMC Partners 89, L.P.,
the General Partner of Asset Management Associates 1989, L.P. The General
Partners of AMC Partners 89, L.P. share and investment voting power with
respect to the shares held by Asset Management Associates 1989, L.P. and
may be deemed to be the beneficial owners of such shares. Each of the
General Partners of AMC Partners 89, L.P. disclaims beneficial ownership of
the shares held by Asset Management Associates 1989, L.P.
(8) Includes 72,460 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of the Record Date.
(9) Consists of 400 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of the Record Date. Mr.
Dougherty disclaims any beneficial ownership in the shares held by The
Venture Capital Fund of New England III, L.P. See Note 6.
(10) Consists of 400 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of the Record Date. Mr. Duthie
disclaims any beneficial ownership in the shares held by Prince Venture
Partners III, L.P. See Note 2.
(11) Consists of 400 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of the Record Date. Does not
include 679,042 shares of Common Stock issuable upon conversion of shares
of Preferred Stock held by Cahill, Warnock Strategic Partners Fund, L.P.
(see Note 1) and 37,625 shares of Common Stock issuable upon conversion of
shares of Preferred Stock held by Strategic Associates, L.P. Mr. Cahill is
a Member of Cahill Warnock & Company, LLC, the General Partner of Strategic
Associates, L.P. Mr. Cahill disclaims any beneficial ownership of the
shares held by Cahill, Warnock Strategies Partners Fund, L.P. and Strategic
Associates, L.P.
(12) Includes an aggregate of 198,181 shares of Common Stock issuable upon the
exercise of options that are exercisable within 60 days of the Record Date.
Does not include an aggregate of 466,712 shares of Common Stock and an
aggregate of 794,678 shares of Common Stock issuable upon conversion of
shares of Preferred Stock with respect to which certain directors disclaim
beneficial ownership. See Notes 1, 2, 6, 9, 10 and 11.
(13) Each of the stockholders who is a party to a certain Stockholders'
Agreement (the "Stockholders' Agreement") dated as of November 6, 1996 by
and among the Company and certain of its stockholders may be deemed to
share voting power with respect to, and may be deemed to beneficially own,
all of the shares of the Company's Preferred Stock and Common Stock subject
to the Stockholders' Agreement. Such stockholders disclaim such beneficial
ownership.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who beneficially own
more than ten percent of the Company's Common Stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Based
solely on reports and other information submitted by the executive officers,
directors and such beneficial owners, the Company believes that during the
fiscal year ended December 31, 1996, all such reports were timely filed except
(a) a Form 5 was filed late with respect to grants by the Company of stock
options in October 1996 or in connection with a person's date of hire or
appointment to the Board of Directors of the Company pursuant to the Company's
1993 and 1996 Stock Plans for those executive officers listed in Item 10 and
Angus Duthie and Edward Cahill, and (b) a Form 3, Form 4 or Form 5 was filed
late with respect to the purchase of shares of the Company's Series A
Convertible Preferred Stock in a private placement in November 1996 for
BancBoston Ventures, Inc., Asset Management Associates 1989, L.P., The Venture
Capital Fund of New England III, L.P., the Venrock Entities, the Partech
International Entities and Kevin Dougherty (who disclaimed beneficial ownership
of such shares).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 6, 1996, Occupational Health + Rehabilitation Inc ("OH+R") merged with
and into the Company (then known as Telor Ophthalmic Pharmaceuticals, Inc.) (the
"Merger") and, simultaneously with the Merger, the Company's name was changed to
Occupational Health and Rehabilitation Inc. To provide working capital to OH+R
prior to the Merger, Prince Ventures III, Limited Partnership ("Prince III")
extended a line of credit to OH+R in the amount of $350,000. Angus M. Duthie, a
director of the Company, is a general partner of Prince Ventures, L.P., the
general partner of Prince III. OH+R borrowed $200,000 under the line of credit,
which the Company repaid promptly after the Merger.
1. ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the Board of
Directors shall be divided into three classes, as nearly equal in number as
possible, with each class having a three-year term. The Board, pursuant to the
Company's Restated Certificate of Incorporation, has fixed the number of
directorships at seven. Pursuant to the terms of the Preferred Stock, which
terms are contained in a Certificate of Designation, filed with the Delaware
Secretary of State on November 6, 1996, the holders of such stock, voting as a
single class, are entitled to elect two of such directors. Pursuant to the
terms of a Stockholders' Agreement (the "Stockholders' Agreement") dated as of
November 6, 1996 by and among the Company and certain of the Company's
stockholders, such stockholders have agreed to vote all of their shares of
Preferred Stock and Common Stock to elect certain nominees to the Company's
Board of Directors. The Stockholders' Agreement provides that such nominees are
to be determined as follows: (a) the Chief Executive Officer of the Company
(presently, John C. Garbarino); (b) a person designated by the Telor Principal
Stockholders, as defined in the Stockholders' Agreement (presently, Angus M.
Duthie); (c) a person designated by the OH+R Principal Stockholders, as defined
in the Stockholders' Agreement (presently, Kevin J. Dougherty); (d) two persons
designated by Cahill, Warnock Strategic Partners Fund, L.P. (presently, Edward
L. Cahill); and (d) two persons unaffiliated with the management of the Company
and mutually agreeable to all of the other directors.
At the Annual Meeting, three directors will be elected. The Board has
nominated Edward L. Cahill and Donald W. Hughes to serve until the 2000 Annual
Meeting of Stockholders of the Company as the two directors elected by the
holders of Preferred Stock and designated by Cahill Warnock Strategic Partners
Fund, L.P. under the Stockholders' Agreement. The Board also has nominated
Angus M. Duthie and John C. Garbarino, both of whose terms expired in 1996, but
who continue to serve as directors until their successors are duly elected and
qualified, to serve until the 1999 Annual Meeting of the Stockholders of the
Company. For purposes of the Stockholders' Agreement, Mr. Duthie would serve as
the director designated by the Telor Principal Stockholders (as defined in the
Stockholders' Agreement), and Mr. Garbarino would serve as the director who is
the Chief Executive Officer. Each director elected shall continue in office
until a successor has been elected and qualified. Each nominee is
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currently a director of the Company. All of the nominees have indicated a
willingness to serve as directors, but if for any reason any nominee should be
unavailable to serve as a director at the time of the Annual Meeting, a
contingency which the Board of Directors does not expect, a different person
designated by the Board of Directors may be nominated in his stead. Three
directorships, one in each class of directors, are presently vacant. The Board
is searching for qualified candidates to fill these vacancies. If elected, Mr.
Hughes would fill one of these vacancies.
If a quorum of the holders of Common Stock is present at the Annual Meeting,
the election of Mr. Duthie and Mr. Garbarino as directors will require the
affirmative vote of a plurality of the shares of Common Stock present in person
or represented by proxy and entitled to vote. If a quorum of the holders of
Preferred Stock is present at the Annual Meeting, the election of Mr. Cahill and
Mr. Hughes as directors will require the affirmative vote of a plurality of the
shares of Preferred Stock present in person or represented by proxy and entitled
to vote. Abstentions by holders of such shares and broker non-votes with respect
to the election of directors will be included in determining the presence of
either such quorum but will not be included in determining whether nominees have
received the vote of either such plurality.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR SUCH NOMINEES.
The following sets forth the name and age of each nominee and continuing
director and the positions and offices held by him, his principal occupation and
business experience during the past five years and the year of the commencement
of his term as a director of the Company.
NOMINEES FOR TWO-YEAR TERMS EXPIRING 1999
JOHN C. GARBARINO, age 44, a founder of OH+R, was its President and Chief
Executive Officer since its formation in July 1992 and has been President and
Chief Executive Officer of the Company since the Merger. From February 1991
through June 1992, Mr. Garbarino served as President and Chief Executive Officer
of Occupational Orthopaedic Systems, Inc., a management company that operated
Occupational Orthopaedic Center, Inc., a company which was the initial
acquisition of OH+R. From 1985 to January 1991, Mr. Garbarino was associated in
various capacities with Foster Management Company ("Foster"), a private
investment company specializing in developing businesses to consolidate
fragmented industries. In his association with Foster, Mr. Garbarino was a
general partner and consultant and held various senior executive positions
(including Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer) in Chartwell Group Ltd., a Foster portfolio company organized to
consolidate through acquisitions the highly fragmented premium priced segment of
the interior furnishings industry. Previously, Mr. Garbarino participated in
the venture capital industry as a founder and general partner of Fairfield
Venture Partners, L.P. and as vice president and treasurer of Business
Development Services, Inc., a venture capital subsidiary of General Electric
Company. Mr. Garbarino is a C.P.A. and previously worked at Ernst & Whinney (a
predecessor to Ernst & Young LLP).
ANGUS M. DUTHIE, age 57, has served as a director of OH+R since June 1992 and
has been a director of the Company since the Merger. Mr. Duthie is currently a
General Partner of Prince Ventures, L.P., a venture capital firm he co-founded
in 1978. Mr. Duthie has over 28 years of experience involving portfolio
management. He currently serves on the board of directors of KENETECH, Inc.
NOMINEES FOR THREE-YEAR TERMS EXPIRING 2000
EDWARD L. CAHILL, age 44, has served as a director of the Company since
November 1996. Mr. Cahill is a founding partner of Cahill, Warnock & Company,
LLC ("Cahill, Warnock"), an asset management firm established to invest in small
public companies. Prior to founding Cahill, Warnock in July 1995, Mr. Cahill
had been a Managing Director at Alex. Brown & Sons Incorporated where, from 1986
through 1995, he headed the firm's Health Care Investment Banking Group. Mr.
Cahill is also a director of GENEMEDICINE, INC., Prism Health Group, Inc. and
The Maryland Bioprocessing Center and a trustee of St. John's Preparatory
School.
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DONALD W. HUGHES, age 47, is Vice President and Chief Financial Officer of
Cahill, Warnock. Prior to joining Cahill, Warnock in February 1997, Mr. Hughes
served as Vice President, Chief Financial Officer and Secretary of Capstone
Pharmacy Services, Inc. (Nasdaq:DOSE) since December 1995 and as Executive Vice
President and Chief Financial Officer of Broventure Company, Inc., a closely-
held investment management company from July 1984 to November 1995.
CONTINUING DIRECTOR
KEVIN J. DOUGHERTY, age 51, has served as a director of OH+R since July 1993
and has been a director of the Company since the Merger. Mr. Dougherty is
currently a General Partner of The Venture Capital Fund of New England, a
venture capital firm he joined in April 1986. Previously, he participated in
the venture capital industry as Vice President of 3i Capital Corporation from
1985 to 1986, and as Vice President of Massachusetts Capital Resource Company
from 1981 to 1985. Prior to that, Mr. Dougherty served as a commercial banker
at Bankers Trust Company and the First National Bank of Boston. He currently
serves on the board of directors of Inspectron Corporation.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
The standing committees of the Board of Directors are the Audit Committee and
the Compensation Committee. The Board of Directors does not have a standing
nominating committee. The number of meetings stated below reflect the time
period from June 6, 1996 (the date of the Merger) through December 31, 1996
since the Merger was treated as a "reverse acquisition" as if OH+R acquired
Telor.
The Audit Committee is currently comprised of Kevin J. Dougherty and Angus M.
Duthie. The Audit Committee oversees the Company's system of internal
accounting controls, recommends to the Board of Directors and the stockholders
the appointment of a firm of independent certified auditors to conduct the
annual audit of the Company's financial statements, reviews the scope of the
audit, reviews reports from the independent certified auditors, and makes such
recommendations to the Board of Directors in connection with the annual audit as
it deems appropriate. The Audit Committee met once during 1996.
The Compensation Committee is currently comprised of Edward L. Cahill and
Angus M. Duthie. The Compensation Committee reviews the compensation of
officers of the Company and the Company's compensation policies and practices.
The Compensation Committee also administers the 1988, 1993 and 1996 Stock Plans,
including recommending the grant of stock options thereunder. The Compensation
Committee met four times during 1996.
The Board of Directors held four meetings during 1996. Each director attended
at least 75% of the aggregate of (i) the total number of meetings of the Board
of Directors and (ii) the total number of meetings held by all committees of the
Board on which such director served.
DIRECTORS' COMPENSATION
The Company's directors do not receive any cash compensation for service on
the Board of Directors or any committee thereof but are reimbursed for expenses
incurred in connection with attending meetings of the Board of Directors and any
committee thereof. Pursuant to the Company's 1993 Stock Plan (subject to the
availability of shares thereunder), each director who is not an employee of the
Company is granted on the date of his or her election a non-qualified stock
option to purchase 1,200 shares of Common Stock. The exercise price for each
stock option is the fair market value of the Common Stock on the date of grant.
Such options vest ratably over three years on each of the first three
anniversary dates of the grant date and are exercisable for a period of ten
years. In addition, pursuant to the Company's 1993 Stock Plan (subject to the
availability of shares thereunder), each director who is not an employee of the
Company and who has been in the continued and uninterrupted service of the
Company as a director for at least the last six months is granted a non-
qualified stock option to purchase 800
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shares of Common Stock. The exercise price for each such stock option is the
fair market value of the Common Stock on the date of grant. Such options have a
term of ten years and become immediately exercisable in full as of the date of
the next annual meeting of stockholders (or special meeting in lieu thereof)
following the annual meeting (or special meeting in lieu thereof) at which the
option was granted, whether or not such director is re-elected at that meeting,
provided that such director has been in the continued and uninterrupted service
of the Company as a director from the date of that grant through the day prior
to the subsequent annual meeting.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information regarding the compensation
paid by the Company to John C. Garbarino, the Company's Chief Executive Officer,
for services rendered in all capacities to the Company and its subsidiaries for
the fiscal year ended December 31, 1996. No other executive officer of the
Company received cash compensation in fiscal 1996 that exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
---------------------
Annual Compensation Securities
-------------------------------- Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options (#) Compensation
- ---------------------------------- -------- --------------- ------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
John C. Garbarino 1996 $174,088 $25,000 128,319 $ 3,670/(1)/
President, Chief Executive 1995 $152,191 -- -- $ 3,305
Officer and Director 1994 $152,191 -- -- $ 3,245
</TABLE>
__________
(1) Includes $312 for premiums paid for a life insurance policy of which the
Company is not the beneficiary and $3,358 for the Company's contribution
under the Company's 401(k) plan.
OPTION GRANTS
The following table sets forth information with respect to stock options
granted to Mr. Garbarino during the fiscal year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Individual Grants Realizable Value at
------------------------------------------------------------------ Assumed Annual
Number of % of Total Rates of Stock
Securities Options Price Appreciation
Underlying Granted to Exercise for Option Term (1)
Options Employees Price Expiration ------------------------------
Name Granted(#) in 1996 ($/sh) Date 5% ($) 10% ($)
- ------------------- ----------------- -------------- ------------ ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Garbarino 28,319(2) 7.7% $3.53 01/23/06 $ 62,868 $159,286
100,000(3) 27.3% $6.00 11/06/06 $377,337 $956,246
</TABLE>
__________
(1) The dollar amounts under these columns are the result of calculations
assuming 5% and 10% growth rates as set by the Securities and Exchange
Commission and, therefore, are not intended to forecast future price
appreciation, if any, of the Company's Common Stock.
(2) 50% vested immediately prior to the consummation of the Merger, 25% vests on
the first anniversary date of the Merger and 25% vests on the second
anniversary date of the Merger.
(3) Options granted vest ratably over four (4) years on each of the first four
anniversary dates of the grant date.
-9-
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information concerning option holdings as of
December 31, 1996 with respect to John C. Garbarino.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised in-the Money Options
Acquired Options at FY-End (#) at FY-End ($)(1)
on Value -------------------------- --------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ---------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Garbarino -- -- 33,826 120,714 $147,760 $168,325
</TABLE>
__________
(1) Based on the fair market value of the Company's Common Stock as of December
31, 1996 ($6.875) minus the exercise price of the options.
EMPLOYMENT AGREEMENTS
John C. Garbarino has an employment agreement with the Company dated June 6,
1996. The term of the agreement is two years from such date and renews
automatically for successive one-year periods until terminated. The agreement
provides for an annual salary of $180,000, subject to increase on an annual
basis in the discretion of the Board of Directors, and bonus as may be
determined by the Compensation Committee of the Board of Directors. Mr.
Garbarino is subject to a covenant not to compete with the Company for six
months after the termination of his employment. If the Company terminates the
agreement without "cause" (as defined in the agreement), or if Mr. Garbarino
becomes incapacitated, or if Mr. Garbarino resigns from the Company for "just
cause" (as defined in the agreement), then the Company shall be obligated to pay
to Mr. Garbarino six months' base salary in consideration of his covenant not to
compete.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two directors, Edward L. Cahill and Angus M. Duthie, both of whom
are non-employee directors. The Committee is responsible for setting and
monitoring the effectiveness of the compensation provided to senior management
employees and executive officers of the Company and making recommendations
concerning the same to the Company's Board of Directors.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is premised upon three basic goals:
(1) to attract and retain qualified individuals who shall provide skills and
leadership that will result in both short and long-term success for the Company;
(2) to reinforce strategic performance objectives through the use of incentive
compensation programs; and (3) to create a mutuality of interest between
executive officers and stockholders through compensation structures that create
a direct link between executive compensation and stockholder return.
The Company's compensation system has been designed to achieve these basic
goals by providing three separate forms of compensation consisting of base
salary, incentive-based cash compensation and equity-based compensation in the
form of stock options grants. In determining the levels of each of these
aspects of compensation, the Committee reviews available public data published
by its competitors and information gathered by the Company through conversations
with consultants in the executive recruiting industry. Through this process,
-10-
<PAGE>
the Committee attempts to create a survey that it believes is indicative of the
Company's industry competitors after giving due regard to the relative sizes of
other companies in the occupational healthcare industry.
BASE SALARY
Base salary levels for the Company's executive officers and senior
management are competitively set relative to the Committee's survey results
after taking into account each executive's areas and level of responsibility,
the individual's historical performance, compensation, tenure with the Company
and the recommendations of such individual's superiors. Base salary increases
are generally modest and consistent with increases in the consumer price index.
If, however, the Committee believes that the future needs of the Company warrant
it, the Committee may prudently increase base salaries above relative ranges
within the Company or above local competitors in order to ward off any potential
departures by personnel to competitors that the Committee believes would have an
adverse consequence to the Company.
INCENTIVE COMPENSATION
Executive officers and senior management were awarded discretionary cash
bonuses based on the Committee's assessment of the Company's performance in
fiscal 1996 as determined by reference to, among other factors, qualitative and
quantitative performance measures and the individual's region or center
performance against its fiscal year budget. Cash bonuses are not determined by
a formula but are determined on an individual basis pursuant to the basic
premise of fairly compensating individuals of relatively similar value within
the Company.
Incentive compensation, in the opinion of the Committee, is an excellent
means by which it can reward and motivate short-term performance by its
executive officers and senior managers, which in the opinion of the Committee
will enhance the Company's value. The Committee believes that this mechanism is
particularly successful with senior management personnel who may have relatively
lower base salaries as a percentage of overall compensation but have direct
supervision and management responsibilities over the Company's operating regions
or centers so that their activities can have an immediate impact on such
region's or center's financial performance.
EQUITY-BASED COMPENSATION
The Committee believes that in order to enhance long-term stockholder value
it must provide incentives that provide both short-term and long-term results.
Since the Company is still in a relatively early stage of development, the
Committee believes that its executive officers and senior management have a
tremendous opportunity to develop and obtain significant rewards by enhancing
the Company's long-term market value. Thus, a prime objective of the Company's
stock plans is to align the interests of executive officers and senior managers
with stockholders by enabling such officers and managers to develop and maintain
long-term stock ownership positions in the Company's Common Stock thereby
creating a strong and direct link between executive pay and stockholder return.
Options are typically granted annually. Individual grant sizes are
determined based on a variety of factors, which primarily include practices for
similar positions in the occupational healthcare industry, the Company's and
individual's overall performance, and finally such individual's relative level
of authority and responsibility within the Company. Before actually determining
individual grants, however, the Committee establishes distinct levels of options
pursuant to which a specific number of options are granted to each individual
assigned to such level. Then, upon weighing an individual's performance against
the foregoing factors, each executive officer and senior manager is assigned to
one of the established levels. At the discretion of the Committee, and based on
the recommendation of management, options may also be used as an incentive for
candidates recruited to fill key positions, or serve as special retention
incentives for employees with significant future potential.
-11-
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
During 1996, the Company's most highly compensated executive officer was
its Chief Executive Officer, John C. Garbarino. Mr. Garbarino is a party to an
employment agreement described above but otherwise participates in the same
executive compensation program provided to other executive officers and senior
management of the Company as described above. In 1996, Mr. Garbarino received a
base salary of $174,088, which included a 14% increase over his base salary in
1995. Mr. Garbarino also received a cash bonus for 1996 of $25,000 based upon
the achievement of specified objectives during 1996.
CONCLUSION
The Committee believes that its methodology and actual compensation
provided for fiscal 1996 was appropriate and will ensure that the Company's
executive officers and senior managers will continue to be motivated to act in a
manner that will enhance the long-term interests of the Company and its
stockholders.
Submitted by,
Edward L. Cahill
Angus M. Duthie
-12-
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the return on the Total Return Index for the Nasdaq
Stock Market (U.S.) and the Nasdaq Health Services Index. The measurement
assumes a $100 investment as of June 6, 1996 (the date of the Merger) with all
dividends reinvested. Index comparisons begin as of May 31, 1996. The data
presented are on a quarterly basis from the time of the Merger (or May 31, 1996
for index comparisons) to the end of fiscal 1996.
[GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE RETURN
AMONG OCCUPATIONAL HEALTH & REHABILITATION, INC.,
THE NASDAQ STOCK MARKET (U.S.) AND THE NASDAQ HEALTH SERVICES INDEX
<TABLE>
<CAPTION>
6/6/96 6/30/96 9/30/96 12/31/96
------ ------- ------- --------
<S> <C> <C> <C> <C>
OCCUPATIONAL HEALTH
& REHABILITATION, INC. $100 $129 $129 $196
NASDAQ STOCK MARKET $100 $ 95 $ 99 $104
NASDAQ HEALTH SERVICES
INDEX $100 $ 95 $ 94 $ 83
</TABLE>
-13-
<PAGE>
INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as independent certified
auditors to audit the consolidated financial statements of the Company for the
fiscal year ending December 31, 1997. Ernst & Young LLP served as the Company's
independent certified auditors for the fiscal year ended December 31, 1996 and
has reported on the Company's consolidated financial statements for such year.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions from stockholders.
On September 24, 1996, the Board of Directors of the Company, upon the
recommendation of the Audit Committee, dismissed its prior independent
accountants, Arthur Andersen LLP ("Arthur Andersen"), and appointed Ernst &
Young LLP ("Ernst & Young") as the independent public accountants to audit the
financial statements of the Company and its consolidated subsidiaries for the
fiscal year ended December 31, 1996. This change in the Company's auditing firm
was due to the Merger, effective June 6, 1996 of OH+R with Telor, with the
Company being the surviving corporation. Prior to the Merger, Arthur Andersen
served as independent accountants for Telor, and Ernst & Young served as
independent accountants for OH+R. 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 Company for periods prior to
the date of the Merger are those of OH+R. Because the financial statements of
the Company are substantially the financial statements of OH+R, the Board of
Directors of the Company considered it appropriate to engage Ernst & Young
rather than Arthur Andersen as the Company's independent accountants.
The reports of Arthur Andersen on the consolidated financial statements of
Telor as of and for the years ended December 31, 1995 and 1994 did not contain
any adverse opinion or disclaimer of opinion, and were not qualified or modified
as to uncertainty, audit scope or accounting principles, nor during the same
period of time or the subsequent interim periods through September 24, 1996 have
there been any disagreements with Arthur Andersen on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to their satisfaction, would
have caused them to make reference to the subject matter of the disagreement in
connection with their reports. Furthermore, during the last two fiscal years of
Telor and the subsequent interim periods through September 24, 1996, there were
no "reportable events" as described in Paragraph 304(a)(1)(v) of Regulation S-K.
During the Company's two most recent fiscal years and the subsequent
interim periods through September 24, 1996, neither the Company nor anyone on
its behalf consulted Ernst & Young regarding either (i) the application of
accounting principles to a specified transaction (whether completed or proposed)
except as described below, or the type of audit opinion that might be rendered
on the Company's financial statements, or (ii) any matter that was either the
subject of a disagreement (as described in Paragraph 304(a)(1)(iv) of Regulation
S-K) or a reportable event (as described in Paragraph 304(a)(1)(v) of Regulation
S-K). In connection with the consummation of the Merger, OH+R consulted with
Ernst & Young regarding the "reverse acquisition" treatment of the transaction.
Compliance with the elements of that accounting treatment impacted the structure
of the transaction for the Company. In addition, subsequent to the Merger, the
Company consulted with Ernst & Young (i) to determine the appropriate financial
statements to be filed as part of the Form 8-K/A reporting the Merger; (ii) to
consider whether various proposed acquisitions required the filing of a Form 8-
K; and (iii) to advise the Company on the relevant criteria for consolidation of
subsidiaries resulting from proposed acquisitions for financial reporting
purposes. Ernst & Young did not provide the Company with written reports
related to these issues. The Company did not consult with Arthur Andersen
regarding these issues.
The Company previously reported these events on a Current Report on Form 8-
K dated September 24, 1996.
-14-
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before the
Annual Meeting. If, however, any other business should properly come before the
Annual Meeting, the persons named in the accompanying proxy will vote the proxy
as in their discretion they may deem appropriate, unless they are directed by
the proxy to do otherwise.
STOCKHOLDERS PROPOSALS FOR 1998
Any proposal intended to be presented by a stockholder at the Company's 1998
Annual Meeting of Stockholders must be presented to the Company within a
reasonable time prior to the solicitation related to the meeting. Proposals
should be addressed to Richard P. Quinlan, Occupational Health + Rehabilitation
Inc, 175 Derby Street, Suite 36, Hingham, Massachusetts 02043-4058.
By order of the Board of Directors,
Richard P. Quinlan
Secretary
Hingham, MA
November 17, 1997
-15-
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 15, 1997
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoint(s) John C. Garbarino
and Richard P. Quinlan, and each of them, with full power of substitution, as
proxies to represent and vote as designated herein, all shares of capital stock
of Occupational Health + Rehabilitation Inc (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the Company's corporate
offices located at 175 Derby Street, Suite 36, Hingham, Massachusetts 02043-
4058, on December 15, 1997 at 9:00 a.m., local time, and at any adjournment
thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS PROPERLY MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1. The undersigned may revoke this proxy at any time before
it is voted by executing and delivering to the Company a proxy bearing a later
date, by delivering a written notice to the Secretary of the Company stating
that the proxy is revoked, or by voting in person at the meeting.
--------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
--------------
<PAGE>
[X] Please mark votes as in this example.
1. To elect directors.
NOMINEES FOR ELECTION BY HOLDERS OF COMMON STOCK:
John C. Garbarino FOR WITHHELD
[ ] [ ]
Angus M. Duthie FOR WITHHELD
[ ] [ ]
Sign as name appears on stock certificate. Joint owners must both sign.
Attorney, executor, administrator, trustee or guardian must give title. A
corporation or partnership must sign in its name by an authorized person.
Signature: Date:
----------------------------- --------------
Signature: Date:
----------------------------- --------------
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 15, 1997
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoint(s) John C. Garbarino
and Richard P. Quinlan, and each of them, with full power of substitution, as
proxies to represent and vote as designated herein, all shares of capital stock
of Occupational Health + Rehabilitation Inc (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the Company's corporate
offices located at 175 Derby Street, Suite 36, Hingham, Massachusetts 02043-
4058, on December 15, 1997 at 9:00 a.m., local time, and at any adjournment
thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS PROPERLY MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1. The undersigned may revoke this proxy at any time before
it is voted by executing and delivering to the Company a proxy bearing a later
date, by delivering a written notice to the Secretary of the Company stating
that the proxy is revoked, or by voting in person at the meeting.
[X] Please mark votes as in this example.
1. To elect directors.
NOMINEES FOR ELECTION BY HOLDERS OF PREFERRED STOCK:
--------------------------
Edward L. Cahill FOR WITHHELD
[_] [_]
Donald W. Hughes FOR WITHHELD
[_] [_]
Sign as name appears on stock certificate. Joint owners must both sign.
Attorney, executor, administrator, trustee or guardian must give title. A
corporation or partnership must sign in its name by an authorized person.
Signature: Date:
---------------------------- ---------------------
Signature: Date:
---------------------------- ---------------------
