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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended: December 31, 1996
OR
[_]Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number: 0-21428
OCCUPATIONAL HEALTH + REHABILITATION INC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3464527
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
175 DERBY STREET, SUITE 36
HINGHAM, MASSACHUSETTS 02043
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(617) 741-5175
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
None Not Applicable
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.001 par value
------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_] .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 4, 1997 was $4,341,725 based on the closing price of $6.25
per share. The number of shares outstanding of the registrant's Common Stock
as of March 4, 1997 was 1,571,979.
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OCCUPATIONAL HEALTH + REHABILITATION INC
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
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PAGE
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<C> <S> <C>
PART I
Item 1. Business................................................... 3
Item 2. Properties................................................. 13
Item 3. Legal Proceedings.......................................... 13
Item 4. Submission of Matters to a Vote of Security Holders........ 13
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 14
Item 6. Selected Financial Data.................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Item 8. Financial Statements and Supplementary Data................ 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 20
PART III
Item 10. Directors and Executive Officers of the Registrant......... 21
Item 11. Executive Compensation..................................... 23
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 26
Item 13. Certain Relationships and Related Transactions............. 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 29
Index to Consolidated Financial Statements and Financial Statement
Schedules.............................................................. F-1
Signatures.............................................................. S-1
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PART I
ITEM 1. BUSINESS
GENERAL
Occupational Health + Rehabilitation Inc (the "Company") is a leading
physician practice management company specializing in occupational health care
in the Northeast. The Company develops and operates multidisciplinary,
outpatient healthcare centers and provides on-site services to employers for
the prevention, treatment and management of work-related injuries and
illnesses. The Company currently operates twelve occupational healthcare
centers in four states serving over 2,500 employers and also provides on-site
services in over 100 employer locations throughout the Northeast. The
Company's centers provide high quality patient care and a high level of
service, which combined reduce workers' compensation costs for employers. The
Company believes it is the dominant provider of occupational health services
in its established markets as a result of these commitments to quality care
and service.
The Company has developed a system of clinical and operating protocols as
well as proprietary information systems to track the resulting patient
outcomes (the "OH+R System"), all focused on reducing the cost of work-related
injuries. The most effective way to reduce cost is to prevent injuries from
occurring. The OH+R System includes a full array of services designed to
reduce the frequency and severity of work-related injuries and to assure
regulatory compliance. Many of these services may also be delivered on-site.
Prevention and compliance services include pre-placement examinations, medical
surveillance, drug and alcohol testing and work-site safety programs.
The Company's treatment approach is based on documented, proprietary
clinical protocols and integrates state-of-the-art medical, rehabilitation,
psychological and case management services in a "one-stop shop" focused on
solving the problems of both employers and employees. Employers' costs are
reduced, and their workers are back on the job more quickly compared to
national averages. Employees receive better care, maintain a positive attitude
and have a greatly reduced probability of developing chronic problems.
Utilizing the OH+R System which continues to evolve, the Company's
occupational medicine physicians and other clinical staff have consistently
generated substantial, documented savings as compared to national averages in
both the lost work days and the medical costs associated with work-related
injuries and illnesses.
The Company's strategic plan is to expand its network of centers throughout
the Northeast, principally through joint ventures with hospitals, acquisition
of occupational medicine practices, and to continue expanding its on-site
programs. The Company currently has five hospital affiliations in place.
The Company was incorporated in Delaware in 1988. On June 6, 1996,
Occupational Health + Rehabilitation Inc ("OH+R") merged with and into (the
"Merger") Telor Ophthalmic Pharmaceuticals, Inc. ("Telor"). Telor initially
operated as an ophthalmic pharmaceutical company. Following the failure of its
lead product candidate, Telor curtailed its research and development programs
and sought a merger candidate. Pursuant to the terms of the Merger, Telor was
the surviving corporation. Simultaneously with the Merger, however, Telor's
name was changed to Occupational Health + Rehabilitation Inc, and the business
of the surviving corporation was changed to the business of OH+R. The Merger
was accounted for as a "reverse acquisition" whereby OH+R was deemed to have
acquired Telor for financial reporting purposes. The Company maintains its
principal executive offices at 175 Derby Street, Suite 36, Hingham,
Massachusetts 02043, telephone number (617) 741-5175.
INDUSTRY OVERVIEW
Work-related injuries and illnesses are a large and rapidly increasing
source of lost productivity and rising costs for businesses in the United
States. In 1994, workers' compensation costs in the U.S. totaled approximately
$70 billion--more than double the 1985 total of $30 billion. These costs are
projected to double again by the year 2000. Medical costs represent
approximately 40 percent of these direct costs with the remainder being
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principally wage replacement (indemnity) costs. Not accounted for in these
figures are the indirect costs, such as lost productivity, hiring and
training, which are estimated to be three to four times the amount of direct
costs. Workers' compensation costs in the Northeast were approximately $8.2
billion in 1994. Medical expenses represented approximately $3.2 billion of
these costs.
The reasons for the escalation of workers' compensation costs are complex
and multifaceted:
. Lack of proper injury prevention and employee education programs
. Inappropriate management of injured employees
. Lack of proper medical and rehabilitation systems to treat injured workers
. Lack of physicians properly trained and specializing in work-related
injuries and illnesses
. Disincentives for quality medical providers to treat workers' compensation
patients
. Lack of coordination among the employer, employee and care providers
. No co-payment or deductibles to encourage moderate use of medical care
. Shifting of medical costs from group health plans to the workers'
compensation system
The rapid increase of workers' compensation costs has resulted in employers
taking a more active role in preventing and managing workplace injuries. This
employer involvement typically includes the establishment of safety
committees, emphasis on ergonomics in the workplace, and drug testing to
reduce the number of injuries; establishment of preferred provider
relationships to insure prompt and appropriate treatment of work-related
injuries; and, for larger employers, becoming self-insured to capture savings
from their efforts to reduce and better manage injuries.
The occupational healthcare market is highly fragmented, consisting
primarily of individual or small-group practices and hospital-based programs.
Greater capital requirements, the need for more sophisticated management and
marketing, and changes in the competitive environment, including the formation
of larger integrated networks such as the Company's, have created increased
interest in affiliating with larger, professionally managed organizations. As
a result of these factors, the Company believes that there is an opportunity
to consolidate private practices and hospital programs in the Northeast.
STRATEGY
The Company's objective is to develop a comprehensive regional network of
occupational healthcare centers and to expand its on-site services dedicated
to reducing the cost of work-related injuries and illnesses through high-
quality care and outstanding service.
The Company intends to build its network of centers through:
. Joint ventures with and acquisitions of existing hospital occupational
health departments.
. Acquisitions of existing occupational medicine and physical therapy
practices.
. Start-up of Company centers in strategic locations.
. Strategic alliances with workers' compensation insurers and managed care
companies, provider groups such as integrated delivery systems, and
group health insurers and health maintenance organizations.
Subsequent to an acquisition or joint venture, new centers are converted to
the Company's practice model through implementation of the OH+R System. New
services are added as required to provide the Company's full-service offering.
On-site services are often delivered to employers within the service area of a
center and are a natural extension of center operations. The Company's direct
sales efforts and word-of-mouth recommendations from satisfied clients are the
source of on-site service opportunities not proximate to a center.
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The Company's operating strategy is based upon:
. Integration of Services--Prevention and compliance services provide
important baseline information to clinicians as well as knowledge of the
work site, which make the treatment of subsequent injuries more
effective. Close management and coordination of all aspects of an
injured worker's care are essential to ensuring the earliest possible
return to work. Management and coordination are difficult, if not
impossible, when clinicians are not working within an integrated system.
A "one-stop shop" significantly reduces the number of communications
required for a given case and eases the coordination effort, while
enhancing patient convenience.
. Quality Care and Outstanding Service--For a number of reasons, injured
workers often receive second-class care. A lack of quality care is
costly to the worker because of longer recovery time and the employer
since it leads to lost work days. The Company is committed to providing
outstanding service--to patients, to employers and to third parties.
From van pick-ups for injured workers to custom services addressing an
employer's specific needs, the Company attempts to deliver the level of
service that is expected from companies noted for extraordinary service
but typically not provided by healthcare providers.
. Outcome Tracking and Reporting--The OH+R System is focused on achieving
successful outcomes--cost-effectively returning injured workers back to
the job as quickly as possible while minimizing the risk of re-injury.
Since the inception of its first center, the Company has tracked outcome
statistics. The Company believes these extensive outcome statistics
demonstrate its ability to return injured workers back to the job faster
and for costs substantially lower than the national averages.
. Low Cost Provider--The Company believes that future success in virtually
any segment of healthcare services will require delivery of quality care
at the lowest possible price. The Company believes it is a low cost
provider, and it continuously is working to further reduce the cost of
providing care by increasing the productivity of clinicians and
administrative personnel. The Company routinely refines and revises the
OH+R System to increase efficiency and effectiveness.
. ""At Risk" Reimbursement--The Company believes that case rates,
capitation and eventually outcome-based reimbursement will become more
prevalent in workers' compensation. The Company offers case rates,
capped fee-for-service programs and other innovative pricing programs,
which differentiate the Company from its competitors. The Company
believes its outcome data and management information systems enable it
to properly price and manage "at risk" reimbursement programs, enhancing
the Company's profitability while providing increased accountability for
results to client employers.
SERVICES
The Company's centers provide a "one-stop shop" for the prevention,
treatment and management of work-related injuries and illnesses. Centers are
staffed with multidisciplinary teams, including physicians, physician
assistants, psychologists, physical and occupational therapists, exercise
physiologists and athletic trainers, as well as a manager, a client relations
director and support personnel. Each center also establishes relationships
with local specialty physicians for the provision of needed services.
Clinicians at the Company's centers specialize in work-related injuries and
illnesses and are trained to implement the OH+R System which is derived from a
sports medicine philosophy and consists of an integrated set of proprietary
protocols covering injury prevention and every aspect of injury treatment and
management from the initial visit through return to work. Over the last five
years of its evolution, the OH+R System has been proven effective in reducing
lost work days. The principal tenets of the OH+R System are:
. Prevention--The least costly work-related injuries are those that never
happen. The Company offers a full range of prevention programs from on-
site job analysis to back schools and vaccination programs.
. Early, Appropriate Care--An injured worker should be evaluated as soon
as possible after an injury and receive appropriate treatment. Early
intervention by a qualified provider is critical for "damage control"
and to get the injured worker on track for the earliest possible return
to work.
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. Objective Testing--In addition to identifying the minority of injured
workers who are malingerers, objective testing is important for
determining starting points, measuring progress and focusing treatment
on physical findings and functionality rather than complaints of pain.
. Active, Time-Limited Rehabilitation--Early mobilization, active exercise
and goal-oriented rehabilitation are most effective in restoring
function. Physical and/or functional therapy provides diminishing
returns after a certain amount of time, at which point, it must be
curtailed to control costs.
. On-Site Services--The actual job site often can be the most effective
and expedient location to render prevention services or to treat an
injured worker when circumstances permit such services to be delivered
cost-effectively.
Specific services provided by the Company include:
Prevention
The Company offers a full array of services to employers, either at Company
centers or on-site at employer locations, which are designed to prevent
injuries before they happen and for regulatory compliance. Specifically, the
Company offers:
. Pre-placement exams . On-site job analysis
. Drug and alcohol testing . Wellness and evaluation programs
. Annual physicals . Medical review officers
. Medical monitoring programs . Occupational health consulting
. Americans with Disabilities Act . Travel medicine
compliance services
Treatment
Urgent Medical Care provides immediate access to specialized medical care
for work-related injuries and illnesses. The occupational medicine physicians
at the Company's centers provide timely, quality care to injured employees
that is cost-effective and act as gatekeepers for other medical services.
Rehabilitation Programs are utilized when appropriate and necessary to
assist in the return-to-work effort. Physical therapy, hand therapy and job
simulation activities are provided, at Company centers or on-site at employer
locations, to injured employees through defined programs that are goal-
oriented and time-limited. The Company employs a "sports medicine" approach to
rehabilitation. As with other athletes, "industrial athletes" require early
intervention, active exercise and the proper motivational atmosphere to get
them "back in the game" as quickly and safely as possible.
Management
Proper management of work-related injuries is an essential part of
successfully returning injured employees to productivity. The Company's case
management system consists of two distinct components:
Case Management provides critical communications to all "key" players
involved in the return-to-work effort, including the employee, employer and
insurance representative.
Care Management encompasses control and coordination of all aspects of the
injured employee's care. The Company's medical and rehabilitation team members
are located in the same facility and work within an integrated system of
formal, defined protocols. This approach allows superior, ongoing
communication among clinician team members regarding the most appropriate
treatment plan and eliminates "system delays" (i.e., time lost as patients
deal with several, unrelated providers).
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Other Services
For those injured employees who are not Company patients, the Company can
assist employers in determining the proper course of action to follow by
providing: Independent Medical Exams, Functional Capacity Evaluations, and
Fitness for Duty Exams.
FUTURE SERVICE OFFERINGS
The Company's internal development strategy is to build on its existing
relationships with client employers by continuing to add other healthcare
services that assist them in controlling healthcare costs.
The Company is currently developing service offerings that assist employers
in reducing non-work-related disability costs. These services leverage the
Company's injury evaluation and treatment expertise and its experience in
early return to work. The addition of these services fits with the current
trend of employers coordinating both work-related and non-work-related
disability management.
Disease management--preventative care and enhanced treatment regimens for
high cost chronic diseases--is becoming a major focus of employers and their
health insurers as the next step in reducing group healthcare costs. By
providing prevention and monitoring services for chronic diseases at the work
site, compliance increases thereby increasing effectiveness. The Company's on-
site medical and rehabilitation clinicians are well suited to provide many of
these services in addition to occupational health services currently provided.
The Company is also developing programs in other markets in which its core
clinical competencies are relevant. For example, many states are implementing
legislation providing premium discounts on auto insurance for consumers
agreeing to use specified preferred provider networks if they are injured in
an accident. The Company's expertise in treating and managing work-related
musculoskeletal injuries within the medicolegal environment of workers'
compensation positions it well to address the high costs of auto injuries.
AGREEMENTS WITH MEDICAL PROVIDERS
Medical and other professional services at the Company's centers are
provided through independently organized professional corporations or licensed
satellite clinics (collectively, the "Medical Providers") that enter into
management agreements with the Company or its affiliated joint ventures, which
subcontract with the Company. The Company provides a wide array of business
services under these management and submanagement agreements, such as
providing personnel, practice and facilities management, real estate services,
billing and collection, accounting, tax and financial management, human
resource management, risk management, insurance, marketing and information-
based services such as process management and outcome analysis. The Company
provides services under these management agreements as an independent
contractor, and the medical personnel at the centers under the direction of
the Medical Providers provide all medical services and retain sole
responsibility for all medical decisions. The management agreements grant the
Medical Providers a non-exclusive license to use the Company's service mark "
Occupational Health + Rehabilitation." The management agreements have
automatically renewing terms and specific termination rights.
MARKETING
The Company markets through a direct sales force primarily to employers, but
also to insurers and third-party administrators. These parties strongly
influence (and in many instances direct) an injured worker's choice of
provider. In addition, employers select providers for prevention services. The
direct sales effort is supported by direct mail programs, selective
advertising and by a strong public relations effort focused on reinforcing the
Company's position as a leader in the field.
The client relations director, or CRD, of each center directs the marketing
effort. The CRD also handles client service problems, client training and the
development of customized services to address unique client needs. CRDs often
have experience in health care, preferably as salespersons of managed care
services.
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EXPANSION PLAN
The Company's objective is to build a comprehensive regional network of
centers through joint venturing and affiliations, acquiring practices,
entering into strategic alliances and establishing start-up centers. The
Company's management team is comprised of healthcare executives who are
experienced in corporate development as well as the integration and operation
of the resulting acquisitions, ventures and alliances. In addition, the OH+R
System with its documented protocols covering all aspects of center and on-
site operations facilitates smooth assimilation. The Company believes that
occupational health services, like all other segments of the healthcare
industry, will begin to feel the pressure of managed care and other cost
containment efforts from employers. These pressures and the expected
continuance of regulatory complexities in the workers' compensation system
will cause a need, in the Company's opinion, for physicians and hospitals with
occupational health programs to seek affiliations with larger, professionally
managed organizations such as the Company so that they may provide convenient,
cost-effective quality care. Because of the many factors involved in building
such a network, there can be no assurance that the Company will be successful
in meeting its expansion goals.
EVALUATION CRITERIA
The key criteria for evaluating expansion opportunities are:
. Quality of care
. Market share and reputation in local markets
. Sources of patient flow
. Willingness to implement the OH+R System
. Range of services provided
. Ease of conversion/addition of services
HOSPITAL JOINT VENTURES AND AFFILIATIONS
One of the Company's intended principal methods of expansion is entering
into joint ventures or affiliations with hospitals to operate the hospitals'
occupational health programs, which are then converted to full-service Company
centers. There are approximately 1500 hospital-based occupational health
programs in the United States, 300 of which are in the New England and Middle
Atlantic states.
Most hospital occupational health programs have developed by default.
Employers and injured employees have naturally looked to the local hospital
for treatment of work-related injuries. In addition, as OSHA and other safety
and health regulations came into existence, hospitals again were the logical,
and often only, place for employers to turn for service. The majority of the
occupational health services offered by hospitals are delivered by functional
departments where occupational health is a small percentage of the services
rendered. Management of care, employer communications and, ultimately,
successful outcomes are extremely difficult to accomplish. Therefore, many
hospitals are looking to acknowledged experts in the field such as the Company
for effective outsourcing of their occupational health programs.
By affiliating with the Company, hospitals benefit from:
. The OH+R System--a proven clinical and operating system
. Access to the Company's regional network of multi-location clients
. The Company's expertise in delivering high quality care and outstanding
service that enhances a hospital's reputation with employers
. The Company's entrepreneurial work environment that provides incentives
for performance
. Off-campus facilities providing outposts in geographic market segments
that can generate inpatient referrals
. Minimizing capital requirements
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Hospital affiliations allow the Company to leverage the name and position of
the institution within a community to ease market entry and expedite building
market share. In addition, as healthcare reform proceeds, either with or
without government intervention, integrated healthcare delivery systems are
expected to develop around networks of hospitals. Employers will contract with
these systems to provide for all the healthcare needs of their employees,
including the prevention and treatment of work-related injuries and illnesses.
It is strategically important for the Company to have links to these systems
to be well-positioned to become the occupational health provider for a system.
The Company's first joint venture was established in April, 1995 as a
partnership with an affiliate of New England Baptist Hospital ("NEBH"), a
leading hospital in the Boston area for the treatment of musculoskeletal
injuries. This partnership operates two occupational healthcare centers
located in the Greater Boston area. During 1996, the Company continued the
implementation of its strategy through consummation of a joint venture with a
subsidiary of Central Maine Medical Center ("CMMC"), a 132-bed general medical
and surgical hospital in Lewiston, Maine. The venture was formed in August
1996 to operate CMMC's occupational health program.
The Company's joint venture/affiliation strategy has continued to gain
momentum in the first quarter of 1997 with the addition of strategic
relationships with Eastern Maine Health Care ("EMH"), Maine Medical Center and
Kent County Memorial Hospital ("Kent"). EMH is the parent of Eastern Maine
Medical Center, a 348-bed general medical and surgical hospital in Bangor,
Maine, which provides tertiary care throughout Northern Maine. Through an
exclusive affiliation with EMH and related parties, the Company provides
comprehensive occupational health services to employers and their employees in
Northern and Eastern Maine. Maine Medical Center is the largest tertiary care
hospital in Maine with 598-beds and over 500 active physicians on its medical
staff. By way of a joint venture, the Company and Maine Medical Center
combined their respective occupational health operations located in Portland,
Maine to become the dominant occupational healthcare provider in the Portland
area. Kent is a 359-bed general medical and surgical hospital located in
Warwick, Rhode Island and is a teaching facility affiliated with Brown
University Medical School. Kent combined its existing occupational health
operations with the Company's Warwick, Rhode Island center by way of a joint
venture. This combined entity commenced operations in mid-March 1997.
The Company's typical joint venture model consists of the Company's
retaining an ownership interest of at least 51% of the venture. The Company
provides all necessary personnel and assumes management responsibility for the
day-to-day operation of the venture. In return for such services, the Company
will receive a fee customarily including a component based upon the net
revenue attained by the venture and a reimbursement of all of the Company's
personnel costs and other expenses incurred with regard to such management
services. Further, in an attempt to assure the venture's success, it is not
unusual that the joint ventures participants mutually agree not to separately
provide competing services within a defined geographic radius.
The Company is continuously discussing and exploring the establishment of
similar arrangements with other hospitals located throughout the Northeast.
ACQUISITIONS, STRATEGIC ALLIANCES AND START-UPS
By acquiring private practices - either occupational medicine or physical
therapy practices - the Company can enter a new geographical area or
consolidate its position within an existing market. Therapy practices receive
referrals of injured workers from local specialty physicians which can
complement the Company's direct marketing to employers. Alternatively,
occupational medicine practices have established relationships with employers
to whom the Company's more comprehensive services may be provided.
In September 1996, the Company expanded its platform of services to include
an innovative program of on-site occupational and physical therapy and related
assessments, evaluations and injury prevention programs. This expansion was
accomplished by the Company's acquisition of certain assets of ArgosyHealth
("Argosy"), an occupational health services company headquartered in Horsham,
Pennsylvania, which were subsequently
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contributed to a joint venture between the Company and Argosy. The goal of the
joint venture is to provide these convenient on-site services for employers
located throughout the Northeast and several Mid-Atlantic states. The joint
venture has provided services at over 100 employer sites situated in Maine,
Vermont, Massachusetts, Rhode Island, New Jersey, Delaware, Pennsylvania,
Maryland, Virginia and the District of Columbia.
In the first quarter of 1997, the Company has continued to implement its
acquisition strategy through its purchases of Immediate Care Health Center
("ICHC") and Business Health Management ("BHM"). ICHC is a leading provider of
occupational medicine and urgent care services in the Burlington, Vermont
area. BHM provides medical consulting services regarding occupational and
environmental health issues, on-site contract medical services, medical
surveillance programs, and drug testing programs. BHM's client list includes
various Fortune 500 employers.
The Company will also consider establishing start-up centers. This approach
is most suitable for geographic areas proximate to existing Company centers
where a large source of patients can be assured through arrangements with
large employers and third party administrators or where competition is
limited.
COMPETITION
Most organizations providing care for work-related injuries and illnesses in
the Northeast are local providers or hospitals. The fundamental difference
between the Company and these providers is the Company's focus on combining
multiple disciplines to address the needs of a single market segment--work-
related injuries and illnesses. Other providers are generally organized to
provide services, such as physical therapy, to a wide variety of market
segments with differing needs regardless of the source of the injury or type
of patient or injury.
The vast majority of the Company's competitors are local operations and
typically provide only some of the services required to successfully resolve
work-related injuries and illnesses. Hospitals typically provide most of the
required services but not as part of a tightly integrated, formal care system.
Injured workers tend to be a small segment of the patients seen by the
individual hospital departments involved, and department personnel tend not to
have any particular training or expertise in work-related injuries and
illnesses.
OccuSystems, Inc. states that it is the nation's largest physician practice
management company focusing on occupational healthcare. The Company further
understands that other large and diversified national healthcare companies
including HEALTHSOUTH Corporation and NovaCare, Inc. have stated their
intention to become occupational health providers and have begun
implementation of such services. Although the Company has not yet seen a
significant occupational healthcare presence from these companies in the
markets in which the Company currently operates and many of the other markets
it is exploring in the Northeast, there can be no assurance that these
competitors will not establish such services in these markets. These companies
are larger than the Company and have greater financial resources.
LAWS AND REGULATIONS
General
As a participant in the healthcare industry, the Company's operations and
relationships are subject to extensive and increasing regulation by a number
of governmental entities at the federal, state and local levels. The Company
is also subject to laws and regulations relating to business corporations in
general. The Company believes that its operations are in material compliance
with applicable laws. Nevertheless, because of the special nature of the
Company's relationship with the Medical Providers, many aspects of the
Company's business operations have not been the subject of state or federal
regulatory interpretation, and there can be no assurance that a review of the
Company's or the Medical Providers' business by courts or regulatory
authorities will not result in a determination that could adversely affect the
operations of the Company or the Medical Providers or that the healthcare
regulatory environment will not change so as to restrict the Company's or the
Medical Providers' existing operations or their expansion.
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Workers' Compensation Legislation
The federal government and each state in which the Company does business
administer workers' compensation programs, which require employers to cover
medical expenses, lost wages and other costs resulting from work-related
injuries, illnesses and disabilities. Medical costs are paid to healthcare
providers through the employers' purchase of insurance from private workers'
compensation carriers, participation in a state fund or by self-insurance.
Changes in workers' compensation laws or regulations may create a greater or
lesser demand for some or all of the Company's services, require the Company
to develop new or modified service or ways of doing business to meet the needs
of the marketplace and compete effectively or modify the fees that the Company
may charge for its services.
Many states are considering or have enacted legislation reforming their
workers' compensation laws. These reforms generally give employers greater
control over who will provide medical care to their employees and where those
services will be provided, and attempt to contain medical costs associated
with workers' compensation claims. Some states have implemented diagnosis-
specific fee schedules that set maximum reimbursement levels for healthcare
services. The federal government and certain states provide for a
"reasonableness" review of medical costs paid or reimbursed by workers'
compensation.
When not governed by a fee schedule, the Company adjusts its charges to the
usual and customary levels authorized by the payor.
Corporate Practice of Medicine and Other Laws
Most states limit the practice of medicine to licensed individuals or
professional organizations comprised of licensed individuals. Many states also
limit the scope of business relationships between business entities such as
the Company and licensed professionals and professional corporations,
particularly with respect to the sharing of fees between a physician and
another person or entity and non-physicians exercising control over physicians
engaged in the practice of medicine.
Laws and regulations relating to the practice of medicine, the sharing of
fees and similar issues vary widely from state to state, are often vague and
are seldom interpreted by courts or regulatory agencies in a manner that
provides guidance with respect to business operations such as those of the
Company. Although the Company attempts to structure all of its operations so
that they comply with the relevant state statutes and believes that its
operations and planned activities do not violate any applicable medical
practice, the sharing of fees or similar laws, there can be no assurance that
(i) courts or governmental officials with the power to interpret or enforce
these laws and regulations will not assert that the Company or certain
transactions in which it is involved are in violation of such laws and
regulations and (ii) future interpretations of such laws and regulations will
not require structural and organizational modifications of the Company's
business. In addition, the laws and regulations of some states could restrict
expansion of the Company's operations into those states.
Fraud and Abuse Laws
A federal law (the "Anti-Kickback Statute") prohibits any offer, payment,
solicitation or receipt of any form of remuneration to induce or in return for
the referral of Medicare or state health program patients or patient care
opportunities, or in return for the purchase, lease or order of, or arranging
for, items or services that are covered by Medicare or state health programs.
Violations of the statute can result in the imposition of substantial civil
and criminal penalties. In addition, as of January 1, 1995, certain anti-
referral provisions (the "Stark Amendments") prohibit a physician with a
"financial interest" in an entity from referring a patient to that entity for
the provision of certain "designated medical services"; some of which are
provided by the Medical Providers that engage the Company's management
services.
Most states have statutes, regulations or professional codes that restrict a
physician from accepting various kinds of remuneration in exchange for making
referrals. Several states are considering legislation that would prohibit
referrals by a physician to an entity in which the physician has a specified
financial interest.
11
<PAGE>
All of the foregoing laws are subject to modification and interpretation,
have not often been interpreted by appropriate authorities in a manner
directly relevant to the Company's business and are enforced by authorities
vested with broad discretion. The Company has attempted to structure all of
its operations so that they comply with all applicable federal and state anti-
referral prohibitions. The Company also continually monitors developments in
this area. If these laws are interpreted in a manner contrary to the Company's
interpretation, reinterpreted or amended, or if new legislation is enacted
with respect to healthcare fraud and abuse or similar issues, the Company will
seek to restructure any affected operations so as to maintain compliance with
applicable law. No assurance can be given that such restructuring will be
possible, or, if possible, will not adversely affect the Company's business.
Uncertainties Related to Changing Healthcare Environment
Over the last several years, the healthcare industry has experienced change.
Although managed care has yet to become a major factor in occupational
healthcare, the Company anticipates that managed care programs, including
capitation plans, may play an increasing role in the delivery of occupational
healthcare services. Further, competition in the occupational healthcare
industry may shift from individual practitioners to specialized provider
groups such as those managed by the Company, insurance companies, health
maintenance organizations and other significant providers of managed care
products. To facilitate the Company's managed care strategy, the Company is
offering risk-sharing products for the workers' compensation industry that
will be marketed to employers, insurers and managed care organizations. No
assurance can be given that the Company will prosper in the changing
healthcare environment or that the Company's strategy to develop managed care
programs will succeed in meeting employers' and workers' occupational
healthcare needs.
Environmental
The Company and the Medical Providers are subject to various federal, state
and local statutes and ordinances regulating the disposal of infectious waste.
If any environmental regulatory agency finds the Company's facilities to be in
violation of waste laws, penalties and fines may be imposed for each day of
violation, and the affected facility could be forced to cease operations. The
Company believes that its waste handling and discharge practices are in
material compliance with applicable law.
SEASONALITY
The Company is subject to the natural seasonal swing that impacts the
various employers and employees it services. Although the Company hopes that
as it continues its growth and development efforts it may be able to
anticipate the effect of these swings and provide services aimed to ameliorate
this impact, there can be no assurance that it can completely alleviate the
effects of seasonality. Historically, the Company has noticed these impacts in
portions of the first and fourth quarters. Traditionally, net revenues are
lower during these periods since patient visits decrease due to the occurrence
of plant closings, vacations, holidays, a reduction in new employee hirings
and the impact of severe weather conditions in the Northeast. These activities
also cause a decrease in drug and alcohol testings, medical monitoring
services and pre-hire examinations. The Company has also noticed similar
impacts during the summer months, but typically to a lesser degree than during
the first and fourth quarters.
EMPLOYEES
As of February 21, 1997, the Company employed 215 individuals on a full and
part-time basis. None of the Company's employees are covered by collective
bargaining agreements. The Company has not experienced any work stoppages and
considers its relations with its employees to be good.
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this Annual Report on Form 10-K, including in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," contain forward-looking statements within the
12
<PAGE>
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, which statements are intended to be subject to the "safe-harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements are based on management's current expectations and
are subject to many risks and uncertainties, which could cause actual results
to differ materially from such statements. Such statements include statements
regarding the Company's objective to develop a comprehensive regional network
of occupational healthcare centers providing integrated services through
multi-disciplinary teams. Among the risks and uncertainties that will affect
the Company's actual results in achieving this objective are locating and
identifying suitable acquisition candidates, the ability to consummate
acquisitions on favorable terms, the success of such acquisitions, if
completed, the costs and delays inherent in managing growth, the ability to
attract and retain qualified professionals and other employees to expand and
complement the Company's services, the availability of sufficient financing
and the attractiveness of the Company's capital stock to finance acquisitions,
strategies pursued by competitors, the restrictions imposed by government
regulation, changes in the industry resulting from changes in workers'
compensation laws and regulations and in the healthcare environment generally
and other risks described in this Annual Report on Form 10-K.
ITEM 2. PROPERTIES
The Company rents approximately 5,250 square feet of office space for its
corporate offices in Hingham, Massachusetts. The Company's centers range in
sizes from approximately 725 square feet to 15,239 square feet and have lease
terms of three years to six years with varying renewal or extension rights.
A typical center ranges in size from approximately 4,000 to 10,000 square
feet and has four to eight rooms used for examination and trauma, a
laboratory, an x-ray room and ancillary areas for reception, drug testing
collection, rehabilitation, client education and administration. The centers
generally are open from nine to twelve hours per day at least five days per
week.
The Company believes that its facilities are adequate for its reasonably
foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings and is not
aware of any threatened litigation that could have a material adverse effect
upon its business, operating results or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended December 31, 1996.
13
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to the Merger on June 6, 1996, Telor's common stock was traded on the
Nasdaq National Market under the symbol TELR. Since that date, the Company's
Common Stock has been traded on the Nasdaq SmallCap Market under the symbol
OHRI. The following table sets forth the high and low bid quotations for the
Company's Common Stock (which have been retroactively adjusted for the one-
for-ten reverse stock split effective November 15, 1995) as reported by Nasdaq
during the periods shown below.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Quarter ended March 31, 1995............................. $17 1/2 $ 7 1/2
Quarter ended June 30, 1995.............................. 23 1/8 12 1/2
Quarter ended September 30, 1995......................... 20 5/8 5
Quarter ended December 31, 1995.......................... 8 1/2 2 1/2
Quarter ended March 31, 1996............................. 6 5/8 3 1/2
Quarter ended June 30, 1996.............................. 5 1/2 3 1/8
Quarter ended September 30, 1996......................... 5 1/2 3 1/8
Quarter ended December 31, 1996.......................... 6 7/8 4
</TABLE>
The foregoing represent inter-dealer prices, without retail mark-up, mark-
down or commission and may not necessarily represent actual transactions. As
of February 28, 1997, there were approximately 60 holders of record of the
Company's Common Stock.
The Company has never paid any cash dividends on its Common Stock. The
Company currently intends to retain earnings, if any, for use in its business
and does not anticipate paying any cash dividends in the foreseeable future.
The payment of future dividends will be at the discretion of the Board of
Directors of the Company and will depend, among other things, upon the
Company's earnings, capital requirements and financial condition. In addition,
the consent of holders of the members of the Board of Directors nominated
solely by the holders of Series A Convertible Preferred Stock is required
before any dividends (other than dividends payable in Common Stock) may be
declared and paid upon or set aside for the Common Stock of the Company in any
year.
The transfer agent and registrar for the Company's Common Stock is Boston
EquiServe, L.P.
During the fiscal year ended December 31, 1996, the Company sold the
following securities without registration under the Securities Act of 1933, as
amended (the "Securities Act"):
(i) On June 6, 1996, the Company issued 681,415 shares of its Common
Stock to stockholders of OH+R in connection with the Merger in reliance
upon the exemption from the registration requirements of the Securities Act
by Section 3(b) of the Securities Act and Rule 505 of Regulation D
promulgated thereunder.
(ii) On January 6, 1997, the Company issued 100,502 shares of its Common
Stock, valued at a price of $4.975 per share, to Argosy Health, L.P. in
connection with the purchase by the Company of certain assets of Argosy
Health, L.P. on September 11, 1996 and in reliance upon the exemption from
registration requirements of the Securities Act by Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated thereunder.
(iii) On November 6, 1996, the Company issued 1,416,667 shares of its
Series A Convertible Preferred Stock, for a purchase price of $6.00 per
share, to certain venture capital funds in reliance upon the exemption from
the registration requirements of the Securities Act by Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated thereunder.
14
<PAGE>
In claiming the exemptions under Sections 3(b) and 4(2), the Company relied
in part on the following facts: (1) each of the purchasers represented that
such purchaser (a) had the requisite knowledge and experience in financial and
business matters to evaluate the merits and risk of an investment in the
Company; (b) was able to bear the economic risk of an investment in the
Company; (c) had access to or was furnished with the kinds of information that
registration under the Securities Act would have provided; (d) acquired the
shares for the purchaser's own account in a transaction not involving any
general solicitation or general advertising, and not with a view to the
distribution thereof; and (2) a restrictive legend was placed on each
certificate or other instrument evidencing the shares.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The consolidated statement of operations data set forth below with respect
to the years ended December 31, 1996, 1995, and 1994 and the consolidated
balance sheet data as of December 31, 1996 and 1995 are derived from, and are
qualified by reference to, the audited Consolidated Financial Statements
included elsewhere in this report and should be read in conjunction with those
financial statements and notes thereto. The consolidated financial statement
of operations data for the year ended December 31, 1993 and the six months
ended December 31, 1992 and the consolidated financial balance sheet data at
December 31, 1994, 1993 and 1992 are derived from financial statements not
included herein. Due to the "reverse acquisition" accounting treatment of the
Merger, the data for periods prior to the Merger represent the financial
results of OH+R rather than Telor. Historical results should not be taken as
necessarily indicative of the results that may be expected for any future
period.
<TABLE>
<CAPTION>
SIX MONTH
ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31,
--------------------------------------------------- ------------
1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net patient service rev-
enue................... $ 9,041,199 $ 5,798,037 $ 2,570,636 $ 1,618,242 $ 805,522
Management fee income... 187,339 189,323 108,580 88,655 0
Other income............ 0 36,587 13,146 30,942 11,322
------------ ----------- ----------- ----------- ----------
Total revenue........... 9,228,538 6,023,947 2,692,362 1,737,839 816,844
Operating and
administrative
expenses............... (10,820,308) (7,697,903) (3,865,263) (3,043,429) (824,375)
Depreciation and amorti-
zation................. (449,170) (365,486) (222,274) (219,616) (97,826)
Interest expense........ (252,054) (96,746) (53,408) (55,822) (23,139)
Interest income......... 135,192 37,566 38,154 43,109 19,895
Minority interest in net
loss of subsidiary..... 308,215 322,211 0 0 0
------------ ----------- ----------- ----------- ----------
Loss before income tax-
es..................... (1,849,587) (1,776,411) (1,410,429) (1,537,919) (108,601)
Deferred income tax ben-
efit................... 32,860 43,440
------------ ----------- ----------- ----------- ----------
Net loss available to
common stock........... $ (1,849,587) $(1,776,411) $(1,410,429) $(1,505,059) $ (65,161)
============ =========== =========== =========== ==========
Net loss per share...... $ (1.64) $ (2.69) $ (2.68) $ (3.73) $ (.20)
============ =========== =========== =========== ==========
Weighted-average common
shares and common share
equivalents
outstanding............ 1,129,611 661,306 526,685 403,164 318,853
<CAPTION>
DECEMBER 31
-----------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital......... $ 8,845,989 $ (340,046) $ 1,216,852 $ 1,574,668 $1,320,664
Total assets............ 15,476,137 4,249,262 3,504,957 3,576,257 2,821,373
Long-term debt less,
current portion........ 745,328 1,160,553 670,313 721,105 626,242
Redeemable Convertible
Preferred Stock........ 8,423,003 7,179,221 6,018,545 4,391,668 2,100,000
Stockholders' equity
(deficit).............. 3,415,343 (6,187,405) (3,850,989) (2,020,447) (181,244)
</TABLE>
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is the surviving corporation of the Merger of OH+R into Telor.
Pursuant to the Merger, the ophthalmic pharmaceutical business of Telor
ceased, and the business of the surviving corporation was changed to the
business of OH+R.
The Company is a physician practice management company specializing in
occupational health care. The Company develops and operates multidisciplinary
outpatient healthcare centers and provides on-site services to employers for
the prevention, treatment and management of work-related injuries and
illnesses. The Company operates the centers under management and submanagement
agreements with Medical Providers that practice exclusively through such
centers.
The Company's operations have been funded primarily through venture capital
investments and the Merger. The Company's growth has resulted predominantly
from the formation of joint ventures, acquisitions and development of
businesses principally engaged in occupational health care.
The following table sets forth, for the periods indicated, the relative
percentages which certain items in the Company's consolidated statements of
operations bear to total revenue. The following information should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this report. Historical results and percentage
relationships are not necessarily indicative of the results that may be
expected for any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Total revenue.............................. 100.0 % 100.0 % 100.0 %
Operating and administrative expenses...... (117.2) (127.8) (143.6)
Depreciation and amortization.............. (4.9) (6.0) (8.2)
Interest expense........................... (2.7) (1.6) (2.0)
Interest income............................ 1.5 0.6 1.4
Minority interest in net loss of subsidi-
ary....................................... 3.3 5.3 --
Loss before income taxes................... (20.0) (29.5) (52.4)
Income taxes............................... 0.0 0.0 0.0
Net loss................................... (20.0)% (29.5)% (52.4)%
======= ======= =======
</TABLE>
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994.
Revenue
During 1996, the Company devoted significant time and resources to the
Merger and to raising capital. Notwithstanding these efforts, total revenue
increased 53.2% to approximately $9,229,000 in 1996 from $6,024,000 in 1995.
Total revenue increased 123.8% from 2,692,000 in 1994. Net patient service
revenue, which represents the most significant component of total revenue,
increased 55.9% to approximately $9,041,000 in 1996 from $5,798,000 in 1995.
Net patient service revenue increased 125.5% from $2,571,000 in 1994. Of the
increase in net patient service revenue from 1995 to 1996, $1,191,000 resulted
from practices acquired and developed in 1996; $710,000 (21.9%) resulted in
increased business in the Company's already existing markets and $1,342,000
resulted from three practices acquired/developed in 1995. Of the increase in
net patient service revenue in 1995, $1,775,000 resulted from practices
acquired during 1995, $293,000 (9.1%) resulted in increased business in the
Company's already existing markets and $1,159,000 resulted from two practices
acquired/developed in 1994.
17
<PAGE>
Operating and Administrative Expenses
Operating expenses increased 40.6% to $10,820,000 from $7,698,000 in 1995.
Operating expenses in 1995 increased 99.2% from $3,865,000 in 1994. These
increases were principally due to the acquisition and development of
additional practices. As a percentage of total net revenues, these costs were
117.1%, 127.8% and 143.6% in 1996, 1995, and 1994, respectively. The Company
believes that as additional acquisitions are completed further leveraging of
existing management will occur and, as a result, operating and administrative
expenses will further decline as a percentage of total revenue.
Depreciation and Amortization
Depreciation and amortization expense increased 23.0% to $449,000 in 1996
from $365,000 in 1995 and 64.4% from $222,000 in 1994. These increases are as
a result of the Company's growth through center acquisitions and development.
As a percentage of revenue, depreciation and amortization decreased to 4.9% in
1996 from 6.0% in 1995 and from 8.2% in 1994.
Interest Expense
Interest expense increased 159.8% to $252,000 in 1996 from $97,000 in 1995
and 83.0% from $53,000 in 1994. These increases were due to the incurrence of
certain debt as consideration for several acquisitions. Additionally, in June
1995, the Company sold certain accounts receivable to provide operating cash
and to pay down certain term loans and notes payable. As a percentage of total
revenues, interest expense was 2.7% in 1996, 1.6% in 1995, and 2.0% in 1994.
Interest Income
Interest income is generated primarily from cash invested in highly liquid
funds with a maturity of three months or less. Interest income increased
255.3% to approximately $135,000 in 1996 from $38,000 in 1995. Interest income
remained unchanged in 1995 from $38,000 in 1994. The increase in 1996 was
related to additional funds received by the Company as a result of the Merger
and the sale of preferred stock through a private placement.
Minority Interest
Minority interest represents the share of profits and losses of certain
investors in certain joint ventures with the Company. For the year ended
December 31, 1996, the minority interest in net profits/losses of subsidiaries
decreased by 4.3% to approximately $308,000 from approximately $322,000 in
1995. The Company had no ownership interest in any joint ventures during 1994.
SEASONALITY
The Company is subject to the natural seasonal swing that impacts the
various employers and employees it services. Although the Company hopes that
as it continues its growth and development efforts it may be able to
anticipate the effect of these swings and provide services aimed to ameliorate
this impact, there can be no assurance that it can completely alleviate the
effects of seasonality. Historically, the Company has noticed these impacts in
portions of the first and fourth quarters. Traditionally, net revenues are
lower during these periods since patient visits decrease due to the occurrence
of plant closings, vacations, holidays, a reduction in new employee hirings
and the impact of severe weather conditions in the Northeast. These activities
also cause a decrease in drug and alcohol testings, medical monitoring
services and pre-hire examinations. The Company has also noticed similar
impacts during the summer months, but typically to a lesser degree than during
the first and fourth quarters.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, OH+R's funding requirements have been met through a
combination of issuances of capital stock, long-term debt and other
commitments, the utilization of capital leases and loans to finance equipment
18
<PAGE>
purchases, the sale of certain accounts receivable and the sale of a minority
interest in NEB Occupational Health. Net proceeds from the sale of capital
stock have totalled approximately $14 million, including the Company's private
placement of its Series A Convertible Preferred Stock on November 6, 1996. The
proceeds from the sale of this preferred stock provided the Company with cash
proceeds of approximately $8.4 million, net of expenses. The Company intends
to use the funds in its expansion effort and for working capital. During 1996
and 1995, the Company received approximately $3.8 million and $1.8 million,
respectively, from the sale of certain accounts receivable. At December 31,
1996, the Company had $8.8 million in working capital, an increase of $9.2
million from December 31, 1995. The Company's principal sources of liquidity
as of December 31, 1996 consisted of (i) cash and cash equivalents aggregating
$8.6 million and (ii) accounts receivable of $1.5 million.
Net cash used in operating activities by the Company during 1996 was
approximately $2,700,000 as compared to approximately $795,000 for 1995 and
$1,232,000 in 1994. The principal use of cash was to fund the Company's
operations for centers in early stages of development, to provide working
capital to centers acquired and, in 1996, to fund certain expenses related to
the Merger. These operating losses were offset by non-cash expenses, such as
depreciation and amortization and by fluctuations in working capital during
those periods. Working capital fluctuations have been primarily from increases
in accounts receivable and other current assets offset by increases in
accounts payable and accrued expenses.
The Company's investing activities for 1996 included the Merger, pursuant to
which the Company received approximately $4.5 million of cash. During 1996,
the Company also invested approximately $892,000 in cash for the acquisition
of an ambulatory care facility and a rehabilitation business. In the previous
year, the Company also invested approximately $336,000 in cash for the
acquisition of several occupational medicine businesses. In 1994, the Company
invested approximately $41,000 for the purchase of an outpatient medical
center. The Company spent approximately $131,000 for the purchase of equipment
during 1996 as compared to approximately $162,000 in 1995 and $73,000 in 1994.
For the year ended December 31, 1996, cash of $ 8.0 million, net, was
provided by financing activities primarily as a result of sale of preferred
stock through a private placement. Advances of $300,000 under a bank line of
credit and $200,000 in other short-term loans were offset by payments of
existing loans payable, noncompete agreements and capital lease obligations
aggregating approximately $746,000. In 1995, the Company generated
approximately $600,000 from the sale of preferred stock and received $196,000
through a partnership contribution. The net uses of cash in 1995 were
primarily the pay down of certain bank loans and capital lease obligations
totaling approximately $342,000. In 1994, cash of $911,000 was provided by
financing activities primarily as a result of the sale of preferred stock and
proceeds from a line of credit. In 1994, payments of long-term debt and
capital lease obligations aggregated $164,000.
The Company expects that its principal use of funds in the near future will
be in connection with acquisitions, working capital requirements, debt
repayments and purchases of property and equipment. The Company expects that
the cash received as the result of the Merger, proceeds received upon the sale
of 1,416,667 shares of its Series A Convertible Preferred Stock, and cash
generated from operations, will be adequate to provide working capital
requirements and debt obligations and to finance any necessary capital
expenditures through December 31, 1997. However, the Company believes that the
level of financial resources available to it is an important competitive
factor and may seek additional financing prior to the end of that period. The
Company will consider raising additional capital on an on-going basis as
market factors and its needs suggest, which additional capital may be
necessary to fund acquisitions by the Company. The Company is currently
pursuing obtaining a working capital line of credit. Subject to the
satisfaction of various conditions, prior to May 6, 1997, the Company may sell
additional shares of its Series A Convertible Preferred Stock to the original
purchasers thereof for gross proceeds to the Company of $1,500,000.
19
<PAGE>
INFLATION
The Company does not believe that inflation had a significant impact on its
results of operations during the last three years. Further, inflation is not
expected to adversely affect the Company in the future unless it increases
substantially, and the Company is unable to pass through the increases in its
billings and collections.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The auditors' reports, consolidated financial statements and financial
statement schedules that are listed in the Index to Consolidated Financial
Statements and Financial Statement Schedules on page F-1 hereof are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by this Item has been previously reported by the
Company in Form 8-K dated September 24, 1996.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
John C. Garbarino....... 44 President, Chief Executive Officer and Director
Richard P. Quinlan...... 38 Chief Financial Officer, Treasurer, Secretary and General Counsel
James R. Salandi........ 50 Senior Vice President, Corporate Development
Joseph J. Travia, Jr.... 44 Senior Vice President, Operations
Lynne M. Rosen.......... 35 Vice President and Assistant Secretary
H. Nicholas Kirby....... 48 Vice President, Corporate Development
David R. McLarnon....... 42 Vice President, Operations
Kathryn G. Converse..... 46 Corporate Controller and Assistant Secretary
Edward L. Cahill........ 44 Director
Kevin J. Dougherty...... 50 Director
Angus M. Duthie......... 57 Director
</TABLE>
John C. Garbarino, 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).
Richard P. Quinlan joined the Company as Chief Financial Officer, Treasurer,
Secretary and General Counsel in November 1996. From December 1991 to October
1996, Mr. Quinlan was Senior Vice President and General Counsel of
AdvantageHEALTH Corporation, a provider of physical rehabilitation services,
subacute services, home health services, and senior living/assisted living
services in the Northeast United States, and now a wholly-owned subsidiary of
HEALTHSOUTH Corporation, a provider of outpatient and rehabilitative
healthcare services. From June 1985 to November 1991, he practiced law with
Nutter, McClennen & Fish in Boston, Massachusetts and served as a partner
during his final two years there.
James R. Salandi joined the Company as Senior Vice President, Corporate
Development in December 1996. From April 1992 to November 1996, Mr. Salandi
was Executive Vice President of Corporate Development at AdvantageHEALTH
Corporation, now a wholly-owned subsidiary of HEALTHSOUTH Corporation. During
that time, AdvantageHEALTH grew from approximately 30 locations in 5 states to
over 150 locations in 10 states. Over the previous 13 years, Mr. Salandi held
similar senior positions with American Medical International and National
Medical Enterprises, Inc., two multi-hospital companies. Mr. Salandi has over
20 years experience in healthcare sales, marketing and corporate development.
21
<PAGE>
Joseph J. Travia, Jr. joined OH+R as Senior Vice President, Operations in
March 1996 and has continued in that position since the Merger. From April
1991 to January 1996, Mr. Travia was Senior Vice President, Operations of
Apogee, Inc., a national behavioral health care company. He also served as a
director of Apogee, Inc. from December 1991 to December 1994. From May 1990 to
March 1991, he acted as a consultant to third party administrators, insurance
carriers, and marketers involved in the health care industry. From 1978 to
1990, Mr. Travia was with the Arthur D. Little, Inc. family of companies. He
was President and Chief Executive Officer of Arthur D. Little's national third
party administrator subsidiary from 1984 through 1990, and from 1981 to 1984
was Vice President and Chief Financial Officer of an Arthur D. Little company
which provided services to the health care industry through consulting and the
design, development and implementation of health care systems. Mr. Travia is a
past President and former director of the Insurance Institute and is also a
member of the American Institute of Certified Public Accountants.
Lynne M. Rosen, a founder of OH+R, was its Vice President since its
formation in July 1992 and has been Vice President and Assistant Secretary of
the Company since the Merger. From April 1988 through June 1992, Ms. Rosen
held various positions with the Occupational Orthopaedic Center, Inc.,
including general manager. Ms. Rosen was an athletic trainer at the University
of Pennsylvania Sports Medicine Center from 1986 to March 1988 and at the
University of Rhode Island from 1985 to 1986. She has published several papers
and made a number of presentations in the area of orthopedic rehabilitation.
H. Nicholas Kirby, has served as Vice President, Corporate Development of
the Company since June 1996. From August 1994 to June 1996, he was OH+R's
Director of Operations in Maine. Mr. Kirby was a founder and President of LINK
Performance and Recovery Systems, Inc. ("LINK") from January 1986 until the
sale of the company to OH+R in August 1994. LINK was an occupational health
company headquartered in Portland, Maine, which focused on testing and
evaluation of injured and ill workers as well as providing ergonomic and
workers' compensation cost control consulting services.
David R. McLarnon joined the Company as Vice President, Operations in
December 1996. From January 1994 to November 1996, Mr. McLarnon was Corporate
Vice President, Ambulatory Division of AdvantageHEALTH Corporation and was
responsible for outpatient rehabilitation operations in a seven-state region.
Prior to his position with AdvantageHEALTH Corporation, Mr. McLarnon held
positions with The Mediplex Group, pursuant to which he served as an
administrator of outpatient rehabilitation services for the company's
operations in Denver, Colorado as well as provided development and
administrative services for certain of the company's comprehensive outpatient
rehabilitation facilities in Florida. Previously, Mr. McLarnon co-founded and
operated a five center physical therapy practice in the Denver, Colorado area.
Mr. McLarnon has twenty years of orthopedic, sports and industrial
rehabilitation experience.
Kathryn G. Converse joined OH+R as Corporate Controller in July 1992 and has
been Corporate Controller of the Company since the Merger. From 1989 to July
1992, Ms. Converse was Regional Manager of Finance for Medical West Community
Health Center, Inc. ("Medical West"), a health maintenance organization
wholly-owned by Blue Cross and Blue Shield of Massachusetts, Inc. She was a
Site Financial Manager for a Medical West staff model health center from 1986
to 1989. From 1979 to 1986, Ms. Converse was in public accounting.
Edward L. Cahill 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 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.
Kevin J. Dougherty 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
22
<PAGE>
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 two private companies, Sierra
Research & Technology, Inc. and High Road, Inc.
Angus M. Duthie 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.
All directors are elected to a three year term or until their successors
have been duly elected and qualified. The terms of Angus M. Duthie and John C.
Garbarino expired in 1996, but both persons continue to serve as directors
until their successors are duly elected and qualified. The term of Edward L.
Cahill expires at the 1997 Annual Meeting of Stockholders and the term of
Kevin J. Dougherty expires at 1998 Annual Meeting of Stockholders.
Pursuant to the terms of the Series A Convertible Preferred Stock contained
in the Company's Restated Certificate of Incorporation, as amended, the
holders of the Series A Convertible Preferred Stock, voting as a single class,
are entitled to elect two directors of the Company. Mr. Cahill currently
serves as one of those two directors, with the other directorship vacant.
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 (e) two persons unaffiliated
with the management of the Company and mutually agreeable to all of the other
directors.
Executive officers serve at the discretion of the Company's Board of
Directors. There are no family relationships among the executive officers and
directors nor are there any arrangements or understandings between any
executive officer and any other person pursuant to which the executive officer
was selected.
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).
ITEM 11. 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
23
<PAGE>
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
Officer and Director 1995 $152,191 -- -- $3,305
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.
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.
24
<PAGE>
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.
DIRECTOR 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 actually incurred in connection with attending meetings of the Board
of Directors and any committee thereof. Pursuant to the Company's 1993 Stock
Plan, each director who is not an employee of the Company is granted a non-
qualified stock option on the date of his or her election to purchase 1,200
shares of the Company's Common Stock. The exercise price for each such option
is the fair market value of the Company's 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.
25
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 28, 1997 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 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
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>
SHARES
BENEFICIALL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (14) PERCENT OF CLASS
- ------------------------------------ ----------- ----------------
<S> <C> <C>
Cahill, Warnock Strategic Partners Fund, L.P. (1)...... 679,042 30.2%
10 North Calvert Street, Suite 735
Baltimore, MD 21202
Prince Venture Partners III, L.P. (2).................. 400,045 25.4%
10 South Wacker Drive
Chicago, IL 60606
Partech International Entities (3)..................... 283,333 15.3%
50 California Street, Suite 3200
San Francisco, CA 94111
Venrock Entities (4)................................... 246,784 14.2%
30 Rockefeller Plaza, Room 5508
New York, NY 10112
BancBoston Ventures, Inc. (5).......................... 215,636 12.9%
100 Federal Street
Boston, MA 02110
The Venture Capital Fund of New England III, L.P. (6).. 182,303 11.1%
160 Federal Street, 23rd Floor
Boston, MA 02110
Asset Management Associates 1989, L.P. (7)............. 173,685 10.5%
2275 East Bayshore Road
Palo Alto, CA 94303
John C. Garbarino (8).................................. 92,562 5.8%
175 Derby Street, Suite 36
Hingham, MA 02043
Einar Paul Robsham (9)................................. 78,419 5.0%
P.O. Box 5151
Cochituate, MA 01778
Kevin J. Dougherty (10)................................ -- *
160 Federal Street, 23rd Floor
Boston, MA 02110
Angus M. Duthie (11)................................... -- *
10 South Wacker Drive
Chicago, IL 60606
Edward L. Cahill (12).................................. -- *
10 North Calvert Street, Suite 735
Baltimore, MD 21202
All directors and executive officers a group........... 125,796 8.0%
(11 persons) (13)
</TABLE>
- --------
* Less than 1%
26
<PAGE>
(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, 173,334
shares of Common Stock issuable upon conversion of shares of Preferred
Stock held by U.S. Growth Fund Partners, C.V., 16,667 shares of Common
Stock issuable upon conversion of shares of Preferred Stock held by
Double Black Diamond II, LLC and 6,665 shares of Common Stock issuable
upon conversion of shares of Preferred Stock held by Almanori Limited.
(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 Raymond Rothrock 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 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 33,826 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of February 28, 1997.
(9) The shares shown as beneficially owned by Mr. Robsham were those reported
as beneficially owned by him in a Schedule 13D filed with the SEC dated
January 11, 1996.
27
<PAGE>
(10) Mr. Dougherty disclaims any beneficial ownership in the shares held by
The Venture Capital Fund of New England III, L.P. See Note 6.
(11) Mr. Duthie disclaims any beneficial ownership in the shares held by
Prince Venture Partners III, L.P. See Note 2.
(12) 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.
(13) Includes an aggregate of 50,279 shares of Common Stock issuable upon the
exercise of options that are exercisable within 60 days of February 28,
1997. 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, 10, 11 and 12.
(14) Each of the stockholders who is a party to the Stockholders' Agreement
described in Item 10 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.
ITEM L3. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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.
28
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) Financial Statements and Schedules
The auditors' report, consolidated financial statements and financial
statement schedules listed in the Index to Consolidated Financial Statements
and Financial Statement Schedules on page F-1 hereof are filed as part of this
report, commencing on page F-2 hereof.
(a)(3) Exhibits
<TABLE>
<C> <S>
2.01(a) Agreement and Plan of Merger by and between the Company and
Occupational Health + Rehabilitation Inc 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).
(b) Amendment No. 1 to the Agreement and Plan of Merger, dated as of
April 30, 1996 (Filed as Exhibit 2.1(b) to Form 8-K/A dated June 6,
1996, File No. 0-21428, and incorporated by reference herein).
(c) Amendment No. 2 to the Agreement and Plan of Merger, dated as of May
10, 1996 (Filed as Exhibit 2.1(c) to Form 8-K/A dated June 6, 1996,
File No. 0-21428, and incorporated by reference herein).
2.02 Asset Purchase Agreement by and between Argosy Health, L.P. and the
Company dated as of September 11, 1996 (Filed as Exhibit 2.01 to Form
8-K dated as of September 11, 1996, File No. 0-21428, and
incorporated by reference herein).
3.01(a) Restated Certificate of Incorporation (Filed as Exhibit 4.1 to Form
8-K/A dated June 6, 1996, File No. 0-21428, and incorporated by
reference herein).
(b) Certificate of Designations (Filed as Exhibit 4.1 to Form 8-K dated
November 6, 1996, File No. 0-21428, and incorporated by reference
herein).
3.02 Restated Bylaws, as amended.*
4.01 Form of Common Stock Certificate (Filed as Exhibit 4.01 to Form 10-Q
dated June 30, 1996, File No. 0-21428, and incorporated by reference
herein).
4.02 Form of Series A Convertible Preferred Stock Certificate (Filed as
Exhibit 4.2 to Form 8-K dated November 6, 1996, File No. 0-21428, and
incorporated by reference herein).
10.01 Form of Common Stock Purchase Warrant to purchase 4,195 shares of the
Company's Common Stock, held by each of Stephan Deutsch, Mark DeNino,
Mehrdad Motamed, Ira Singer and Steven Blazar.*
10.02 Termination Agreement among the Company and certain securityholders
dated as of June 1, 1996.*
10.03 Employment Agreement by and between the Company and John C. Garbarino
dated as of June 6, 1996 (Filed as Exhibit 10.02 to Form 10-Q dated
June 30, 1996, File No. 0-21428, and incorporated by reference
herein).
10.04(a) Registration Rights Agreement among the Company and certain
securityholders dated as of June 6, 1996 (Filed as Exhibit 10.01 to
Form 10-Q dated June 30, 1996, File No. 0-21428, and incorporated by
reference herein).
(b) Amendment No. 1 to Registration Rights Agreement among the Company
and certain securityholders dated as of November 6, 1996.*
</TABLE>
29
<PAGE>
<TABLE>
<C> <S>
10.05(a) Registration Rights Agreement between the Company and Argosy Health,
L.P. dated as of September 11, 1996.*
(b) Amendment No. 1 to Registration Rights Agreement between the Company
and Argosy Health, L.P. dated as of November 6, 1996.*
10.06(a) Series A Convertible Preferred Stock Purchase Agreement among the
Company and certain securityholders dated as of November 6, 1996.*
(b) Stockholders' Agreement among the Company and securityholders of
Series A Convertible Preferred Stock dated as of November 6, 1996.*
(c) Registration Rights Agreement between the Company and securityholders
of Series A Convertible Preferred Stock dated as of November 6,
1996.*
11.01 Statement re Computation of Per Share Earnings.*
21.01 Subsidiaries of the Company.*
23.01 Consent of Ernst & Young LLP.*
27.01 Financial Data Schedule.*
</TABLE>
- --------
*Filed herewith.
The Company agrees to furnish to the Commission a copy of any instrument
evidencing long-term debt, which is not otherwise required to be filed.
(b) Reports on Form 8-K
On November 20, 1996, the Company filed a Current Report on Form 8-K dated
November 6, 1996, reporting in Item 5 thereof the sale of 1,416,667 shares of
Series A Convertible Preferred Stock in a private placement at a purchase
price of $6.00 per share.
30
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Financial Statements.........................................
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) and Redeemable
Stock.................................................................... F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
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 (the Company) as of December 31,
1996 and 1995, and the related consolidated statements of operations,
stockholders' equity (deficit) and redeemable stock, and cash flows for each
of the three years in the period ended December 31, 1996. 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,
1996 and 1995, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
March 26, 1997
Boston, Massachusetts
F-2
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents:
Unrestricted..................................... $ 8,615,731 $ 368,959
Restricted....................................... 345,320
Accounts receivable, less allowance for doubtful
accounts of $78,136 and $75,155 in 1996 and 1995,
respectively...................................... 1,702,415 352,931
Prepaid expenses................................... 398,567 103,406
Due from related party............................. 226,328 680,445
Other assets....................................... 12,401 50,000
----------- -----------
Total current assets........................... 11,300,762 1,555,741
Property and equipment, net.......................... 1,119,338 1,058,311
Excess cost of net assets acquired, net.............. 2,849,158 1,226,186
Noncompetition agreements, net....................... 71,880 198,310
Organization costs, net.............................. 63,052 140,683
Deposits............................................. 69,947 40,864
Other assets......................................... 2,000 29,167
----------- -----------
Total assets....................................... $15,476,137 $ 4,249,262
=========== ===========
LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses.............. $ 1,315,394 $ 1,001,768
Current portion of obligations under capital
leases............................................ 107,431 99,490
Current maturities of long-term debt............... 425,166 91,667
Current portion of obligations under noncompetition
agreements........................................ 316,938 325,000
Due to related party............................... 289,844 377,862
----------- -----------
Total current liabilities........................ 2,454,773 1,895,787
Long-term debt, less current maturities.............. 686,613 744,779
Obligations under capital leases..................... 58,715 122,621
Obligations under noncompetition agreements.......... 293,153
Obligation to issue common stock..................... 500,000
Other long-term liabilities.......................... 25,320
----------- -----------
Total liabilities.................................... 3,725,421 3,056,340
Minority interest.................................... (87,630) 201,106
Redeemable stock:
Redeemable convertible preferred stock, Series 1,
$.01 par value--1,600,000 shares authorized,
issued and outstanding............................ 2,700,000
Redeemable convertible preferred stock, Series 2,
$.01 par value--3,000,000 shares authorized,
2,537,843 shares issued and outstanding........... 4,479,221
Redeemable convertible preferred stock, Series A,
$.001 par value, $8,500,002 liquidation value,
5,000,000 shares authorized, 1,416,667 shares
issued and outstanding............................ 8,423,003
----------- -----------
Total redeemable stock........................... 8,423,003 7,179,221
Stockholders equity (deficit):
Common stock, $.001 par value--10,000,000 shares
authorized, issued and outstanding 1,471,477
shares in 1996 and 671,855 shares in 1995......... 1,471 6,719
Additional paid-in capital......................... 10,096,149 11,022
Accumulated deficit................................ (6,682,277) (6,205,146)
----------- -----------
Total stockholders equity (deficit).............. 3,415,343 (6,187,405)
----------- -----------
Total liabilities, redeemable stock and
stockholders' equity (deficit).................. $15,476,137 $ 4,249,262
=========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Net patient service revenue........... $ 9,041,199 $ 5,798,037 $ 2,570,636
Management fee income................. 187,339 189,323 108,580
Other income.......................... 36,587 13,146
------------ ----------- -----------
Total revenue......................... 9,228,538 6,023,947 2,692,362
Operating and administrative
expenses............................. (10,820,308) (7,697,903) (3,865,263)
Depreciation and amortization......... (449,170) (365,486) (222,274)
Interest expense...................... (252,054) (96,746) (53,408)
Interest income....................... 135,192 37,566 38,154
Minority interest in net loss of
subsidiary........................... 308,215 322,211
------------ ----------- -----------
Total expenses........................ (11,078,125) (7,800,358) (4,102,791)
------------ ----------- -----------
Net loss.............................. $ (1,849,587) $(1,776,411) $(1,410,429)
============ =========== ===========
Net loss per share.................... $ (1.64) $ (2.69) $ (2.68)
============ =========== ===========
Weighted-average common shares
outstanding.......................... 1,129,611 661,306 526,685
============ =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND
REDEEMABLE STOCK
<TABLE>
<CAPTION>
REDEEMABLE REDEEMABLE REDEEMABLE
TOTAL CONVERTIBLE CONVERTIBLE CONVERTIBLE
ADDITIONAL ACCUMU- STOCKHOLDERS' PREFERRED PREFERRED PREFERRED
COMMON STOCK PAID-IN LATED EQUITY STOCK STOCK STOCK
------------------ ----------- ----------- ------------- ----------- ----------- -----------
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT) SERIES 1 SERIES 2 SERIES A
--------- ------- ----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Exercise of stock
options................ 6,810 31 8,354 8,385
Exchange of OH+R common
stock for Telor common
shares................. 785,995 786 4,263,943 4,264,729
Waiver of preferred
stock dividend......... 1,372,456 1,372,456 (700,000) (672,456)
Conversion of 4,137,843
shares of OH+R Series 1
and 2 preferred stock.. 585,901 586 5,806,179 5,806,765 (2,000,000) (3,806,765)
Conversion of 674,605
shares of OH+R common
stock.................. (579,084) (6,651) 6,651
Issuance of redeemable
preferred stock (less
issuance costs of
$76,999)............... $8,423,003
Net loss................ (1,849,587) (1,849,587)
--------- ------- ----------- ----------- ----------- ---------- ---------- ----------
BALANCE AT DECEMBER 31,
1996................... 1,471,477 $ 1,471 $10,096,149 $(6,682,277) $ 3,415,343 $ -0- $ -0- $8,423,003
========= ======= =========== =========== =========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................... $(1,849,587) $(1,776,411) $(1,410,429)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization........ 449,170 365,486 222,274
Amortization of discount............. 23,245 30,667 29,145
Minority interest in loss of
subsidiary.......................... (308,215) (322,211)
Loss on sale of equipment............ 1,800
Changes in operating assets and
liabilities:
Accounts receivable................ (1,325,262) 297,074 (145,251)
Prepaid expenses and other current
assets............................ (47,977) (130,756) (7,688)
Due from related party, net........ 366,099 105,556
Deposits and other noncurrent
assets............................ 398,084 91,464 (10,749)
Accounts payable and accrued
expenses and other long-term
liabilities....................... (401,441) 543,072 90,659
----------- ----------- -----------
Net cash used in operating activities.. (2,695,884) (794,259) (1,232,039)
INVESTING ACTIVITIES
Funding of restricted cash............. (345,320)
Cash paid for intangibles.............. (285,623)
Property and equipment additions....... (130,625) (161,570) (73,266)
Cash received in (paid for)
acquisitions.......................... 3,519,069 (336,278) (41,174)
----------- ----------- -----------
Net cash provided (used) by investing
activities............................ 2,757,501 (497,848) (114,440)
FINANCING ACTIVITIES
Proceeds from sale of preferred stock,
net................................... 8,423,003 595,671 1,000,000
Proceeds from sale of common stock..... 8,385
Proceeds from long-term debt........... 500,000 75,000
Payments of obligations under
noncompetition agreements............. (325,000)
Payments of long-term debt............. (313,590) (240,693) (115,959)
Payments of capital lease obligations.. (107,643) (101,197) (48,409)
Cash received by partnership........... 196,000
----------- ----------- -----------
Net cash provided by financing
activities............................ 8,185,155 449,781 910,632
----------- ----------- -----------
Net increase (decrease) in unrestricted
cash and cash equivalents............. 8,246,772 (842,326) (435,847)
Unrestricted cash and cash equivalents
at beginning of year.................. 368,959 1,211,285 1,647,132
----------- ----------- -----------
Unrestricted cash and cash equivalents
at end of year........................ $ 8,615,731 $ 368,959 $ 1,211,285
=========== =========== ===========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH ITEMS:
--The Company entered into capital lease obligations during 1996, 1995 and
1994 totaling $33,147, $167,854 and $87,872, respectively.
--During 1995 and 1994, the Company accrued dividends in kind to preferred
shareholders of $560,676 and $420,113, 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.
--In 1996, $500,000 of the acquisition price of Argosy Health was financed
through the obligation to issue Common Stock. These shares were issued on
January 7, 1997.
See accompanying notes.
F-6
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION
Occupational Health + Rehabilitation Inc (formerly Telor Ophthalmic
Pharmaceuticals, Inc.) (the Company) was organized to develop ophthalmic
pharmaceuticals. In June 1996, Occupational Health + Rehabilitation Inc (OH+R)
merged with and into (the Merger) Telor Ophthalmic Pharmaceuticals, Inc.
(Telor), with Telor being the surviving corporation. In connection with the
Merger, Telor changed its name to Occupational Health + Rehabilitation Inc and
assumed the business of OH+R in exchange for all outstanding shares of OH+R
capital stock, outstanding options held by employees, directors and
consultants and warrants to purchase shares of OH+R common stock (see Note
10). 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. Under the purchase method of accounting, balances and results
of operations of Telor will be included in the Company's financial statements
from the date of the Merger forward. Effective June 7, 1996, the Company was
listed on the Nasdaq SmallCap Market under the symbol "OHRI."
The Company is a physician practice management company specializing in
occupational health care in various centers and on-site locations throughout
the Northeastern United States. The Company develops and operates
multidisciplinary, outpatient health care centers and provides on-site
services to employers for the prevention, treatment and management of work-
related injuries and illnesses. The Company operates the centers under
management and submanagement agreements with professional corporations and
licensed satellite clinics that practice exclusively through such centers.
The Company has entered into certain joint ventures to provide management
and related services to the centers established by the joint ventures (see
Note 2).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Occupational
Health + Rehabilitation Inc, its wholly-owned subsidiary and its majority-
owned subsidiaries, joint ventures and partnerships. All significant
intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, demand deposits and short-
term investments with original maturities of three months or less.
RESTRICTED CASH
Restricted bank deposits are held by banks that require such deposits be
maintained in support of certain letters of credit made by the Company. The
letters of credit expire on May 22, 1997 and total $320,000.
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 leases is included with depreciation.
F-7
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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, 1996.
Accumulated amortization on intangible assets was $816,164 and $574,452 at
December 31, 1996 and 1995, respectively.
REVENUE RECOGNITION
Revenue is recorded at estimated net amounts to be received from employers,
third-party payors and others for services rendered. The Company operates in
certain states that regulate the amounts which the Company can charge for its
services associated with work-related injuries and illnesses.
PROFESSIONAL LIABILITY COVERAGE
The Company maintains professional liability insurance coverage on a claims-
made basis in Rhode Island and Maine and on an occurrence basis in all other
states it operates in. Management is unaware of any claims that may result in
a loss in excess of amounts covered by its existing insurance.
STOCK COMPENSATION ARRANGEMENTS
The Company accounts for its stock compensation arrangements under the
provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees",
and intends to continue to do so.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation". These provisions require the Company to disclose pro forma net
income and earnings per share amounts as if compensation expense related to
grants of stock options were recognized based on new fair value accounting
rules (see Note 11).
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-8
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
restricted cash, 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 by the
weighted-average number of shares of common stock outstanding during each
period presented and assumes the retroactive conversion of the series 1 and 2
preferred stock and common stock in connection with the Merger (see Notes 1
and 10). The effect of options and warrants is not considered as it would be
antidilutive.
3. ACQUISITIONS AND JOINT VENTURES
1996 Joint Ventures
Effective September 1, 1996, the Company purchased a 70% undivided interest
in the assets (excluding accounts receivable) of a business division of Argosy
Health, L.P. (Argosy), which provides industrial on-site occupational and
physical therapy and related assessments in certain Mid-Atlantic states. In
connection with the transaction, the Company and Argosy formed a general
partnership by the name of Argosy Health Northeast (the Partnership).
The Company contributed to the Partnership the assets purchased from Argosy
(excluding goodwill) and Argosy contributed the remaining 30% undivided
interest of the business division's assets (excluding goodwill). The aggregate
purchase price was approximately $1,300,000. The aggregate purchase price was
financed through available cash resources and shares of Common Stock of the
Company. Additional purchase payments may be required if certain financial
objectives are attained. Goodwill recognized in this transaction was $764,000.
During 1996, the Company also consummated a joint venture for aggregate
consideration of $160,000, payable in cash and notes, and additional
contingent consideration of up to $100,000. Goodwill recognized in this
transaction was $120,000.00.
1995 Acquisitions and Joint Ventures
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%. OH+R
has control of the business and affairs of the partnership through its
majority control of the Management Committee. 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 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.
F-9
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1995, the Company also consummated two other purchase transactions
with an aggregate purchase price of $505,000, payable in cash, notes and
20,000 shares of common stock of the Company.
In conjunction with certain acquisitions, the Company has entered into
contractual arrangements whereby the selling parties are entitled to receive
contingent consideration payments in cash based upon the achievement of
certain minimum operating results. Obligations related to these contingencies
are reflected as increases to goodwill in the period they become known. Any
quantifiable unpaid balances are reflected as liabilities in the accompanying
consolidated financial statements. During 1996, no additional payments were
made.
These acquisitions have been accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based upon their estimated fair values at the
dates of acquisition. The results of operations of the acquired practices are
included in the consolidated financial statements from the respective dates of
acquisition.
The pro forma results of operations as if the Merger and the 1996 and 1995
acquisitions and joint ventures had occurred at the beginning of the preceding
fiscal year are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Total revenue...................................... $11,665,378 $10,557,618
=========== ===========
Net loss........................................... $(2,224,481) $(9,466,174)
=========== ===========
Net loss per share................................. $ (1.42) $ (6.13)
=========== ===========
</TABLE>
The pro forma financial information is not necessarily indicative of the
results of operations as they would have been had the transactions been
effected on the assumed dates, or of the future results of operations of the
combined entities.
4. MANAGEMENT AGREEMENTS
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.
Net fees earned during 1996 and 1995 were $881,663 and $589,363, respectively.
The Company is involved in several management and sub-management agreements.
Under the terms of the agreements, management fees of $187,339 and $167,768
were earned in 1996 and 1995, respectively.
5. SALE OF ACCOUNTS RECEIVABLE
In June 1995, the Company entered into an agreement (the "Sales Agreement")
with NPF-WL, Inc. (Purchaser) and National Premier Financial Services, Inc.
(Services) of Dublin, Ohio for the sale of receivables from certain Company
centers.
Under the terms of the Sales 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 1996 were
F-10
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$3,774,156 and $1,857,978 in 1995 under the Sales 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 $74,383 and $72,134 in interest
during 1996 and 1995, respectively. At December 31, 1996, the outstanding
purchase was $236,439 and was appropriately recorded as a reduction of
accounts receivable. The Company maintained credit reserves in other current
assets of $50,303 and $116,056 at December 31, 1996 and 1995, respectively.
In November 1996, the Company agreed to terminate the sales agreement (the
"Termination Agreement") with an effective date of January 1997. Upon receipt
of the buy out totaling approximately $220,000, OH+R shall have fully
satisfied and complied with the terms and provisions of the Sales Agreement.
The Termination Agreement requires the Company to repurchase all outstanding
accounts receivable as of the date of the termination.
6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1996 1995
---------- ----------
<S> <C> <C>
Medical equipment..................................... $1,082,747 $ 911,058
Furniture and office equipment........................ 671,873 451,631
Leasehold improvements................................ 224,535 220,504
Vehicles.............................................. 13,000 13,000
---------- ----------
1,992,155 1,596,193
Less accumulated depreciation......................... 872,817 537,882
---------- ----------
$1,119,338 $1,058,311
========== ==========
</TABLE>
The cost of certain equipment leased under capital lease agreements was
$467,597 and $420,727 at December 31, 1996 and 1995, respectively. Accumulated
depreciation on these capitalized lease assets was $137,504 and $81,813 at
December 31, 1996 and 1995, respectively. Depreciation expense was $207,459 in
1996 and $171,110 in 1995.
7. LONG-TERM DEBT AND NONCOMPETITION AGREEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1996 1995
---------- --------
<S> <C> <C>
Note payable to NEBE.................................... $ 536,446 $536,446
Promissory note, bearing interest at 9.0% due in three
annual installments through June 1998.................. 133,333 200,000
Promissory note, bearing interest at 8.5% due in four
annual installments through June 1999.................. 75,000 100,000
Line of credit with bank, bearing interest at prime plus
0.75%, secured by accounts receivable of NEBOH......... 300,000
Promissory note, bearing interest at 8.25%, with
principal due in two equal installments through August
1998................................................... 67,000
---------- --------
1,111,779 836,446
Less current portion.................................... 425,166 91,667
---------- --------
$ 686,613 $744,779
========== ========
</TABLE>
F-11
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with its investment in NEBOH, on April 1, 1995 (see Note 3),
the Company entered into a 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 semiannual payments of interest, in arrears, on
each October 1 and April 1. Beginning April 1, 1999, the Company is required
to make annually four equal installments of principal of $107,293 and one
installment of $107,274 at final maturity on April 1, 2003. Payments of
principal may be deferred at the option of the payee. The Note is secured by a
special distribution of certain assets of NEBOH.
Aggregate maturities of obligations under long-term debt agreements are as
follows:
<TABLE>
<S> <C>
1997.......................................................... $ 425,166
1998.......................................................... 125,167
1999.......................................................... 132,289
2000.......................................................... 107,289
2001.......................................................... 107,289
Thereafter.................................................... 214,579
----------
$1,111,779
==========
</TABLE>
Obligations under noncompetition agreements of $316,938 are net of
unamortized discount of $8,060 at December 31, 1996 (effective interest rate
of 5.22%). These obligations consist of amounts due to five individuals in
connection with the acquisition in July 1992 of Occupational Orthopedic
Center, Inc. and are payable in equal installments of $325,000, with one
remaining installment in 1997.
Interest paid in 1996, 1995 and 1994 amounted to $217,607, $113,903 and
$50,676, 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 $925,267, $717,804 and $392,862 for 1996,
1995 and 1994, respectively.
Future minimum lease payments under capital leases and noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
OPERATING
CAPITAL LEASES LEASES
-------------- ----------
<S> <C> <C>
1997.......................................... $124,530 $ 614,586
1998.......................................... 50,913 349,085
1999.......................................... 10,052 353,546
2000.......................................... 538 79,344
-------- ----------
Total minimum lease payments.................. 186,033 $1,396,561
==========
Amounts representing interest................. 19,887
--------
Present value of net minimum lease payments... $166,146
========
</TABLE>
F-12
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets.......................... $ 2,754,694 $ 1,906,225
Less valuation allowance..................... (2,661,885) (1,852,874)
----------- -----------
Deferred tax asset after valuation
allowance................................... $ 92,809 $ 53,351
=========== ===========
Deferred tax liability....................... $ (92,809) $ (53,351)
=========== ===========
</TABLE>
At December 31, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of $6,665,506 which begin to expire in 2008. For
financial reporting purposes, a valuation allowance of $2,661,885 has been
recognized to offset deferred tax assets related to this carryforward since
uncertainty exists with respect to future realization of such carryforwards.
10. STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK
STOCK CONVERSION PURSUANT TO THE MERGER (SEE NOTE 2)
Effective on the date of the Merger, the outstanding equity of OH+R were
canceled and converted at a rate of .1415957 to 1 as follows:
. Outstanding OH+R Common Stock, aggregating 674,605 shares, were
converted and exchanged for 95,514 shares of the Company's common stock.
. Outstanding OH+R Series 1 and Series 2 Preferred Stock, aggregating
4,137,843 shares, were converted and exchanged for 585,901 shares of the
Company's common stock.
. Outstanding options held by employees, directors and consultants of OH+R
to purchase 832,000 shares of OH+R common stock were converted to
options to purchase 117,808 shares of the Company's common stock.
. Outstanding warrants to purchase 148,150 shares of OH+R common stock at
$1.25 per share were converted to warrants to purchase 20,975 shares of
the Company's common stock at $8.83 per share.
The number of shares of common stock, $.001 par value, outstanding after the
Merger was 1,467,417.
In connection with the Merger, the Company amended its certificate of
incorporation to decrease the authorized number of shares of common stock by
15,000,000 from 25,000,000 to 10,000,000. At December 31, 1996, 5,000,000
shares of preferred stock $.001 par value, were authorized, with 1,666,667 of
such shares designated as Series A Convertible Preferred Stock.
PREFERRED STOCK
On November 6, 1996, the Company issued 1,416,667 shares of Series A
Convertible Preferred Stock (Series A Preferred Stock) in a private placement
at a purchase price of $6.00 per share. Subject to certain conditions, the
Company may require the purchasers to purchase up to an additional 250,000
shares of Series A Preferred Stock prior to May 1997.
F-13
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Each share of Series A Preferred Stock is convertible, at the option of the
holder, into one share of Common Stock (subject to adjustment upon the
occurrence of certain specified events). The holders of the Series A Preferred
Stock are entitled to vote as a single class with the holders of the Common
Stock, and each share of Series A Preferred Stock is entitled to the number of
votes that is equal to the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such vote. The holders
of Series A Preferred Stock are entitled to certain registration rights with
respect to the Common Stock into which the Series A Preferred Stock is
convertible. Dividends will be payable on the shares of Series A Preferred
Stock when and if declared by the Board of Directors after three years from
the date of issuance and will thereafter accrue at an annual cumulative rate
of $.048 per share, subject to certain adjustments.
Holders of shares of Series A Preferred Stock constituting a majority of the
then outstanding shares of Series A Preferred Stock may, by giving notice to
the Company at any time after November 5, 2001 require the Company to redeem
all of the outstanding shares of Series A Preferred Stock at $6.00 per share
plus an amount equal to all dividends accrued or declared but unpaid thereon,
in four equal installments over a four-year period.
In the event of voluntary or involuntary liquidation, dissolution or winding
up of the Company the holders of shares of Series A Preferred Stock shall be
paid an amount equal to the greater of (i) $6.00 per share plus all accrued
but unpaid dividends or (ii) the amount per share had each such share been
converted to Common Stock immediately prior to such liquidation, dissolution
or winding up.
COMMON STOCK
On September 11, 1996, the Company promised 100,502 shares of Common Stock
with a purchase price of $4.975 as partial consideration for the purchase of a
70% interest in a division of Argosy Health, L.P. (Seller) (see Note 2). The
shares were delivered to Seller on January 6, 1997. At December 31, 1996, the
Company has recorded $500,000 as a liability in order to properly accrue for
the amount due to the Seller. During 1996, the par value of the Company's
common stock was changed from $.01 to $0.001 and the number of authorized
shares was increased from 8,000,000 to 10,000,000.
SHARES RESERVED FOR FUTURE ISSUANCE
At December 31, 1996, the Company has reserved shares of common stock for
future issuance for the following purposes:
<TABLE>
<S> <C>
Series A Preferred Stock........... 1,416,667
Stock Plans........................ 542,354
Warrants........................... 20,975
---------
1,979,996
=========
</TABLE>
WARRANTS
The Company has issued stock purchase warrants which, subsequent to the
conversion pursuant to the Merger, provide the holders the right to purchase
an aggregate of 20,975 shares of Common Stock at $8.83 per share. The warrants
are exercisable in part or whole from July 1, 1997 until August 31, 1997.
11. BENEFIT PLANS
STOCK PLANS
1996 Stock Plan: In October 1996, the Company's board of directors adopted
the 1996 Stock Plan, which provides for the granting of up to 265,000
nonqualified stock options, "incentive stock options" (ISOs) and stock
appreciation rights to employees, directors and consultants of the Company.
F-14
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Nonqualified options granted may not be at a price less than 50% of fair
market value of the common stock, and ISOs granted may not be at a price of
less than 100% of fair market value of the common stock on the date of grant.
Granting of incentive stock options is subject to the approval of the 1996
Stock Plan by the Company's stockholders.
1993 Stock Plan: The Company's 1993 Stock Plan provided for the granting of
options to purchase up to 140,000 shares of the Company's Common Stock. Upon
consummation of the Merger, the Plan was amended to increase the aggregate
number of shares of the Company's common stock which may be granted to
245,000.
1988 Stock Plan: Pursuant to the 1988 Stock Plan, the Company may grant
incentive stock options, nonqualified stock options and common stock purchase
rights. The Company has reserved 32,354 shares of common stock for issuance
under this plan.
The options in all of the above plans generally become exercisable over a
four-year period and expire over a period not exceeding ten years.
A summary of the activity under the stock plans follows. The number of
options outstanding at December 31, 1996, 1995 and 1994 assumes the
retroactive conversion related to the Merger (see Note 10):
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
1996 PRICE 1995 PRICE 1994 PRICE
------- --------- ------ --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of the year............ 78,731 $ 1.78 76,444 $1.77 61,879 $1.77
Options assumed in
connection with the
Merger................. 34,205 28.78
Granted................. 366,783 5.55 10,174 1.86 25,524 1.77
Exercised............... 4,448 1.88
Canceled................ (45,398) 13.23 (7,887) 1.77 (10,959) 1.77
------- ------ ------ ----- ------- -----
Outstanding at end of
the year............... 438,769 $ 5.75 78,731 $1.78 76,444 $1.77
======= ====== ====== ===== ======= =====
</TABLE>
Related information for options outstanding and exercisable as of December
31, 1996 under the stock plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
RANGE OF EXERCISE OPTIONS OPTIONS REMAINING LIFE
PRICE OUTSTANDING EXERCISABLE (YEARS)
----------------- ----------- ----------- ----------------
<S> <C> <C> <C>
$1.77-$ 2.50.................. 60,638 40,982 7.54
$3.50-$ 3.53.................. 56,048 21,364 9.20
$4.50-$ 6.00.................. 310,833 9.80
$8.75-$81.25.................. 11,250 8,034 7.25
</TABLE>
PRO FORMA INFORMATION FOR STOCK-BASED COMPENSATION
Pro forma information regarding net income and earnings per share, as if the
Company had used the fair value method of SFAS 123 to account for stock
options issued under its stock plans, is presented below. The fair value of
stock activity under these plans was estimated at the date of grant using the
minimum value method for options granted prior to the date of the Merger (see
Note 1) and the Black-Scholes option pricing model for options granted on and
subsequent to the date of the Merger. The following weighted-average
assumptions were used to determine the fair value for 1996, 1995 and 1994,
respectively; risk-free interest rates of 6.3%, 6.3% and 6.2%, an expected
dividend yield of 0% each year, an average volatility factor of the expected
market price of
F-15
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Company's common stock over the expected life of the option of 1.276 (for
options granted on or subsequent to the date of the Merger only) and a
weighted-average expected life of the options of six years.
For purposes of pro forma disclosures, the estimated fair value of options
is amortized to expense over the related vesting period. Pro forma information
is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Pro forma net loss..................... $2,281,110 $1,792,679 $1,421,452
Pro forma net loss per share........... (2.02) (2.71) (2.70)
</TABLE>
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 $66,814, $38,118 and $26,269 during 1996, 1995 and 1994, respectively.
12. TRANSACTIONS WITH RELATED PARTIES
Amounts due to NEBOH from New England Baptist Hospital at December 31, 1996
and 1995 were $226,328 and $680,445, respectively, and consist of cash
collected from certain accounts related to a management agreement (see Note 4)
and from certain accounts contributed to NEBOH under a partnership agreement
(see Note 3).
Amounts due to New England Baptist Hospital from NEBOH at December 31, 1996
and 1995 were $187,101 and $377,862, respectively, and consist of certain
operating expenses paid by New England Baptist Hospital during the year.
Amounts due to Argosy Health, LP from Argosy Health Northeast at December 31,
1996 were $102,743.
The Company rents certain fixed assets to NEBOH. Equipment rent expense for
1996 and 1995 was $52,200 and $14,569, respectively.
13. SUBSEQUENT EVENTS
In January and March 1997, the Company consummated the purchase of two
physician practices, with an aggregate purchase consideration of $1,075,000,
payable in cash and notes. Additional purchase payments may be required if
certain objectives are attained.
In February and March 1997, the Company consummated two joint ventures, with
aggregate purchase consideration of $200,000 in cash. In both cases, the
Company has an equity interest in excess of 51% and controls the joint venture
through its majority control of the management committee.
F-16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Occupational Health + Rehabilitation
Inc
March 26, 1997
/s/ John C. Garbarino
By: _________________________________
JOHN C. GARBARINO PRESIDENT, CHIEF
EXECUTIVE OFFICER AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ John C. Garbarino President, Chief March 26, 1997
- ------------------------------------- Executive Officer
JOHN C. GARBARINO (principal
executive officer)
/s/ Richard P. Quinlan Chief Financial March 26, 1997
- ------------------------------------- Officer,Treasurer,
RICHARD P. QUINLAN Secretary and
General Counsel
(principal
financial officer)
/s/ Edward L. Cahill Director March 26, 1997
- -------------------------------------
EDWARD L. CAHILL
/s/ Kevin J. Dougherty Director March 26, 1997
- -------------------------------------
KEVIN J. DOUGHERTY
/s/ Angus M. Duthie Director March 26, 1997
- -------------------------------------
ANGUS M. DUTHIE
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
3.02 Restated Bylaws, as amended.
10.01 Form of Common Stock Purchase Warrant to purchase 4,195
shares of the Company's Common Stock, held by each of
Stephan Deutsch, Mark DeNino, Mehrdad Motamed, Ira
Singer and Steven Blazar.
10.02 Termination Agreement among the Company and certain
securityholders dated as of June 1, 1996.
10.04(b) Amendment No. 1 to Registration Rights Agreement among
the Company and certain securityholders dated as of
November 6, 1996.
10.05(a) Registration Rights Agreement between the Company and
Argosy Health, L.P. dated as of September 11, 1996.
(b) Amendment No. 1 to Registration Rights Agreement between
the Company and Argosy Health, L.P. dated as of November
6, 1996.
10.06(a) Series A Convertible Preferred Stock Purchase Agreement
among the Company and certain securityholders dated as
of November 6, 1996.
(b) Stockholders' Agreement among the Company and
securityholders of Series A Convertible Preferred Stock
dated as of November 6, 1996.
(c) Registration Rights Agreement between the Company and
securityholders of Series A Convertible Preferred Stock
dated as of November 6, 1996.
11.01 Statement re Computation of Per Share Earnings.
21.01 Subsidiaries of the Company.
23.01 Consent of Ernst & Young LLP.
27.01 Financial Data Schedule.
</TABLE>
<PAGE>
EXHIBIT 3.02
------------
OCCUPATIONAL HEALTH + REHABILITATION INC
RESTATED BY-LAWS
ARTICLE I - STOCKHOLDERS
--------- ------------
Section 1. Annual Meeting. An annual meeting of the stockholders, for
--------- --------------
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix.
Section 2. Special Meetings. Special meetings of the stockholders, for
--------- ----------------
any purpose or purposes prescribed in the notice of the meeting, may be called
by the Chairman of the Board, if any, the Chief Executive Officer, if any, the
President or the Board of Directors, by the affirmative vote of a majority of
the Whole Board. Such request shall state the purpose or purposes of the
proposed meeting. Special meetings of the stockholders shall be held at such
place, on such date, and at such time as shall be fixed by the Board of
Directors or the person calling the meeting. The term "Whole Board" shall mean
the total number of authorized directors, whether or not there exists any
vacancies in previously authorized directorships.
Section 3. Notice of Meetings. Written notice of the place, date, and
--------- ------------------
time of all meetings of the stockholders shall be given, not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation, as amended and restated from time to time).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted that might have been
transacted at the original meeting.
Section 4. Quorum. At any meeting of the stockholders, the holders of a
--------- ------
majority of the voting power of the outstanding shares of the stock entitled to
vote at the meeting present, in person or by proxy, shall constitute a quorum
for all purposes, unless or except to the extent that the presence of a larger
number may be required by law. Where a separate vote by a class or classes, or
series thereof, is required, the holders of a majority of the voting power of
the
<PAGE>
outstanding shares of such class or classes, or series, present, in person or by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the voting power of the shares of stock
entitled to vote who are present, in person or by proxy, may adjourn the meeting
to another place, date, or time.
Section 5. Organization. Such person as the Board of Directors may have
--------- ------------
designated or, in the absence of such a person, the Chairman of the Board, if
any, or, in his absence, the Chief Executive Officer, if any, or, in his
absence, the President, or, in his absence, such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person
or by proxy, shall call to order any meeting of the stockholders and act as
chairman of the meeting. In the absence of the Secretary of the Corporation, the
secretary of the meeting shall be such person as the chairman of the meeting
appoints.
Section 6. Conduct of Business. The chairman of any meeting of
--------- -------------------
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as may seem to him in order. The date and time of the opening and
closing of the polls for each matter upon which the stockholders will vote at
the meeting shall be announced at the meeting.
Section 7. Notice of Stockholder Business and Nominations.
--------- ----------------------------------------------
A. Annual Meetings of Stockholders.
-------------------------------
(1) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the stockholders may
be made at an annual meeting of stockholders (a) pursuant to the Corporation's
notice of meeting, (b) by or at the direction of the Board of Directors or (c)
by any stockholder of the Corporation who was a stockholder of record at the
time of giving of notice provided for in this Section, who is entitled to vote
at the meeting and who complies with the notice procedures set forth in this
Section.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Section, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
sixtieth (60) day nor earlier than the close of business on the ninetieth (90th)
day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is more
than thirty (30) days before or more than sixty (60) days after such an
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the ninetieth (90) day prior to such
annual meeting and not later than the close of business on the later of the
sixtieth (60th) day prior to such annual meeting or the close of business on the
tenth (10th) day following the day on which public announcement of the date of
such meeting is first made by
-2-
<PAGE>
the Corporation. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case, pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation that are owned
beneficially and held of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section to the contrary, in the event that the number
of directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at least
seventy (70) days prior to such annual meeting), a stockholder's notice required
by this Section shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive office of the Corporation
not later than the close of business on the tenth (10th) day following the day
on which such public announcement is first made by the Corporation.
B. Special Meetings of Stockholders.
--------------------------------
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (a)
by or at the direction of the Board of Directors or (b) provided that the Board
of Directors has determined that directors shall be elected at such meeting, by
any stockholder of the Corporation who is a stockholder of record at the time of
giving of notice of the special meeting, who shall be entitled to vote at the
meeting and who complies with the notice procedures set forth in this Section.
In the event the Corporation calls a special meeting of stockholders for the
purpose of electing one or more directors to the Board of Directors, any such
stockholder may nominate a person or persons (as the case may be), for election
to such position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this Section shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the ninetieth (90th) day prior to such special meeting nor
later than the close of business on the later of the sixtieth (60th) day prior
to such special meeting, or the tenth (10th) day following the day
-3-
<PAGE>
on which public announcement is first made of the date of the special meeting
and of the nominees proposed by the Board of Directors to be elected at such
meeting.
C. General.
-------
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Section. Except as otherwise provided by law or these by-laws, the chairman
of the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made or proposed,
as the case may be, in accordance with the procedures set forth in this Section
and, if any proposed nomination or business is not in compliance herewith to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Section, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section,
a stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in this Section shall be deemed to affect any rights (i)
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors under specified
circumstances.
Section 8. Proxies and Voting. At any meeting of the stockholders,
--------- ------------------
every stockholder entitled to vote may vote in person or by proxy authorized by
an instrument in writing or by a transmission permitted by law filed in
accordance with the procedure established for the meeting. Any copy, facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this Section may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by voice vote. Any vote not taken by voice
shall be taken by ballots, each of which shall state the name of the stockholder
or proxy voting and such other information as may be required under the
procedure established for the meeting. The Corporation may, and to the extent
required by law, shall, in advance of any meeting of stockholders, appoint one
or more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the person presiding at the meeting may, and to the
extent required by law, shall, appoint one or more inspectors to act at the
-4-
<PAGE>
meeting. Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability.
Except as otherwise provided in the terms of any class or series of
Preferred Stock of the Corporation, all elections shall be determined by a
plurality of the votes cast, and except as otherwise required by law, all other
matters shall be determined by a majority of the votes cast affirmatively or
negatively.
Section 9. Stock List. A complete list of stockholders entitled to vote
--------- ----------
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in such stockholder's name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
ARTICLE II - BOARD OF DIRECTORS
---------- ------------------
Section 1. General Powers, Number and Term of Office. The business and
--------- -----------------------------------------
affairs of the Corporation shall be managed by or under the direction of its
Board of Directors. The number of directors who shall constitute the Whole Board
shall be such number as the Board of Directors shall from time to time have
designated. Commencing with the Corporation's annual meeting of stockholders or
any special meeting in lieu thereof in 1993, the Board of Directors shall be
divided into three classes, as nearly equal in number as reasonably possible.
The term of office of the first class shall expire at the annual meeting of
stockholders or any special meeting in lieu thereof in 1994, the term of office
of the second class shall expire at the annual meeting of stockholders or any
special meeting in lieu thereof in 1995, the term of office of the third class
shall expire at the annual meeting of stockholders or any special meeting in
lieu thereof in 1996, and with respect to each class, until their successors are
duly elected and qualified. 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.
-5-
<PAGE>
Section 2. Vacancies and Newly Created Directorships. Subject to the
--------- -----------------------------------------
rights of the holders of any class or series of Preferred Stock, and except as
otherwise determined by the Board of Directors or required by law, 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, though less than a
quorum, or the sole remaining director; a director so chosen shall hold office
for a term expiring at the annual meeting of stockholders at which the term of
office of the class to which he has been elected expires, if applicable, and if
no such classes have been established, at the next annual meeting of
stockholders and until such director's successor shall have been duly elected
and qualified. 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 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. No decrease in the number of authorized directors constituting
the Board shall shorten the term of any incumbent director.
Section 3. Resignation. Any director may resign at any time upon
--------- -----------
written notice to the Corporation at its principal place of business or to the
Chief Executive Officer or Secretary. Such resignation shall be effective upon
receipt unless it is specified to be effective at some other time or upon the
happening of some other event.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
--------- ----------------
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. A notice of each regular meeting shall not be required.
Section 5. Special Meetings. Special meetings of the Board of Directors
--------- ----------------
may be called by any of the following: (i) any two (2) directors; (ii) the
Chairman of the Board, if any; (iii) the Chief Executive Officer; or (iv) the
President. Such special meetings shall be held at such place, on such date, and
at such time as they, he or she shall fix. Notice of the place, date, and time
of each such special meeting shall be given each director by whom it is not
waived by mailing written notice not less than five (5) days before the meeting,
by sending written notice by recognized overnight courier service not less than
two (2) days before the meeting or by telegraphing or telexing or by facsimile
transmission of the same not less than twenty-four (24) hours before the
meeting. Unless otherwise indicated in the notice thereof, any and all business
may be transacted at a special meeting.
-6-
<PAGE>
Section 6. Quorum. At any meeting of the Board of Directors, a majority
--------- ------
of the Whole Board shall constitute a quorum for all purposes. If a quorum shall
fail to attend any meeting, a majority of those present may adjourn the meeting
to another place, date, or time, without further notice or waiver thereof.
Section 7. Participation in Meetings by Conference Telephone. Members
--------- -------------------------------------------------
of the Board of Directors, or of any committee thereof, may participate in a
meeting of the Board of Directors or committee by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other and such participation shall constitute
presence in person at such meeting.
Section 8. Conduct of Business. At any meeting of the Board of
--------- -------------------
Directors, business shall be transacted in such order and manner as the Board of
Directors may from time to time determine, and all matters shall be determined
by the vote of a majority of the directors present, except as otherwise provided
herein or required by law. Action may be taken by the Board of Directors without
a meeting if all members of the Board of Directors who are then in office
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors.
Section 9. Powers. The Board of Directors may, except as otherwise
--------- ------
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, to borrow funds and guarantee obligations,
and to do all things necessary in connection therewith;
(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and
-7-
<PAGE>
(8) To adopt from time to time regulations not inconsistent herewith,
for the management of the Corporation's business and affairs.
Section 10. Compensation of Directors. Directors, as such, may receive,
--------- --------------------------
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
ARTICLE III - COMMITTEES
----------- ----------
Section 1. Committees of the Board of Directors. The Board of
--------- ------------------------------------
Directors, by a vote of a majority of the Whole Board, may from time to time
designate committees of the Board of Directors, with such lawfully delegable
powers and duties as it thereby confers, to serve at the pleasure of the Board
of Directors and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of a committee. Any committee so designated
may exercise the power and authority of the Board of Directors to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law if the resolution that designates the committee or a supplemental resolution
of the Board of Directors shall so provide. In the absence or disqualification
of any member of any committee and any alternate member in his place, the member
or members of the committee present at the meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may by unanimous vote
appoint another member of the Board of Directors to act at the meeting in the
place of the absent or disqualified member.
Section 2. Conduct of Business. Each committee of the Board of
--------- -------------------
Directors may determine the procedural rules for meeting and conducting its
business and shall act in accordance therewith, except as otherwise provided
herein or required by law. Adequate provisions shall be made for notice to
members of all meetings of committees. One-third (1/3) of the members of any
committee shall constitute a quorum unless the committee shall consist of one
(1) or two (2) members, in which event one (1) member shall constitute a quorum;
and all matters shall be determined by a majority vote of the members present.
Action may be taken by any committee without a meeting if all members thereof
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of such committee.
ARTICLE IV - OFFICERS
---------- --------
Section 1. Generally. The officers of the Corporation shall consist of
--------- ---------
a President, one or more Vice Presidents, a Secretary, a Treasurer and such
other officers as may from time to time be appointed by the Board of Directors,
including, without limiting the generality of the foregoing, a Chairman of the
Board, a Chief Executive Officer, a Vice Chairman of the Board and
-8-
<PAGE>
one or more Assistant Secretaries and Assistant Treasurers. Officers shall be
elected by the Board of Directors, which shall consider that subject at its
first meeting after every annual meeting of stockholders. The Chief Executive
Officer may be empowered to appoint from time to time Vice Presidents, Assistant
Secretaries and Assistant Treasurers. Each officer shall hold office until his
successor is elected and qualified or if earlier, until he dies, resigns, is
removed or becomes disqualified, unless a shorter term is specified by the Board
of Directors at the time of election of such officer. Any number of offices may
be held by the same person.
Section 2. Chairman of the Board. Unless otherwise provided by
--------- ---------------------
resolution of the Board of Directors, the Chairman of the Board, if any, shall
preside at all meetings of the stockholders and all meeting of the Board of
Directors at which he is present and shall have such authority and perform such
duties as may be prescribed by these by-laws or from time to time determined by
the Board of Directors. The Chairman of the Board shall have power to sign all
stock certificates, contracts and other instruments of the Corporation which are
authorized.
Section 3. Vice Chairman of the Board. The Vice Chairman of the Board,
--------- --------------------------
if any, shall have such powers and duties as may be delegated to him by the
Board of Directors. To the extent not otherwise provided herein, the Vice
Chairman of the Board shall perform the duties and exercise the powers of the
Chairman of the Board in the event of the Chairman's absence or disability.
Section 4. Chief Executive Officer. The Chief Executive Officer shall
--------- -----------------------
be the chief executive officer of the Corporation and shall, subject to the
direction of the Board of Directors, have general supervision and control of its
business. Unless otherwise provided by resolution of the Board of Directors, in
the absence of the Chairman of the Board, if any, the Chief Executive Officer
shall preside at all meetings of the stockholders and, if a director, meetings
of the Board of Directors. The Chief Executive Officer shall have general
supervision and direction of all of the officers, employees and agents of the
Corporation.
Section 5. President. Except for meetings at which the Chief Executive
--------- ---------
Officer or the Chairman of the Board, if any, presides, the President shall, if
present, preside at all meetings of stockholders, and if a director, at all
meetings of the Board of Directors. The President shall, subject to the control
and direction of the Chief Executive Officer and the Board of Directors, have
and perform such powers and duties as may be prescribed by these by-laws or from
time to time be determined by the Chief Executive Officer or the Board of
Directors. The President shall have power to sign all stock certificates,
contracts and other instruments of the Corporation which are authorized. In the
absence of a Chief Executive Officer, the President shall be the chief executive
officer of the Corporation and shall, subject to the direction of the Board of
Directors, have general supervision and control of its business and shall have
general supervision and direction of all of the officers, employees and agents
of the Corporation.
Section 6. Vice President. Each Vice President shall have such powers
--------- --------------
and duties as may be delegated to him by the Board of Directors, the Chief
Executive Officer and the President. One (1) Vice President shall be designated
by the Board of Directors to perform the duties and exercise the powers of the
President in the event of the President's absence or disability.
-9-
<PAGE>
Section 7. Treasurer. The Treasurer shall have the responsibility for
--------- ---------
maintaining the financial records of the Corporation. The Treasurer shall make
such disbursements of the funds of the Corporation as are authorized and shall
render from time to time an account of all such transactions and of the
financial condition of the Corporation. The Treasurer shall also perform such
other duties as the Board of Directors may from time to time prescribe.
Section 8. Secretary. The Secretary shall issue all authorized notices
--------- ---------
for, and shall keep minutes of, all meetings of the stockholders and the Board
of Directors. The Secretary shall have charge of the corporate books and shall
perform such other duties as the Board of Directors may from time to time
prescribe.
Section 9. Delegation of Authority. The Board of Directors may from
--------- -----------------------
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provisions hereof.
Section 10. Removal. Any officer of the Corporation may be removed at
---------- -------
any time, with or without cause, by the Board of Directors. Any officer elected
or appointed by the Chief Executive Officer may be removed at any time by the
Board of Directors or by the Chief Executive Officer.
Section 11. Resignation. Any officer may resign by giving written
---------- -----------
notice of his resignation to the Chairman of the Board, if any, the Chief
Executive Officer, if any, the President, or the Secretary, or to the Board of
Directors at a meeting of the Board, and such resignation shall become effective
at the time specified therein.
Section 12. Bond. If required by the Board of Directors, any officer
---------- ----
shall give the Corporation a bond in such sum and with such surety or sureties
and upon such terms and conditions as shall be satisfactory to the Board of
Directors, including without limitation a bond for the faithful performance of
the duties of his office and for the restoration to the Corporation of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control and belonging to the Corporation.
Section 13. Action with Respect to Securities of Other Corporations.
---------- -------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or the Chief
Executive Officer or any officer of the Corporation authorized by the President
or the Chief Executive Officer shall have power to vote and otherwise act on
behalf of the Corporation, in person or by proxy, at any meeting of stockholders
of or with respect to any action of stockholders of any other corporation in
which this Corporation may hold securities and otherwise to exercise any and all
rights and powers which this Corporation may possess by reason of its ownership
of securities in such other corporation.
-10-
<PAGE>
ARTICLE V - INDEMNIFICATION OF DIRECTORS AND OFFICERS
--------- -----------------------------------------
Section 1. Right to Indemnification. Each person who was or is made a
--------- ------------------------
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or an officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "Indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
Indemnitee in connection therewith; provided, however, that, except as provided
in Section 3 of this Article with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Indemnitee in
connection with a proceeding (or part thereof) initiated by such Indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
Section 2. Right to Advancement of Expenses. The right to
--------- --------------------------------
indemnification conferred in Section 1 of this Article shall include the right
to be paid by the Corporation the expenses (including attorney's fees) incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, an advancement
of expenses incurred by an Indemnitee in his capacity as a director or officer
(and not in any other capacity in which service was or is rendered by such
Indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such Indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such Indemnitee is not entitled to be indemnified
for such expenses under this Section 2 or otherwise. The rights to
indemnification and to the advancement of expenses conferred in Sections 1 and 2
of this Article shall be contract rights and such rights shall continue as to an
Indemnitee who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the Indemnitee's heirs, executors and administrators.
Any repeal or modification of any of the provisions of this Article shall not
adversely affect any right or protection of an Indemnitee existing at the time
of such repeal or modification.
Section 3. Right of Indemnitees to Bring Suit. If a claim under
--------- ----------------------------------
Section 1 or 2 of this Article is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the Indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If
-11-
<PAGE>
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Indemnitee shall also be entitled to be paid the expenses of
prosecuting or defending such suit. In (i) any suit brought by the Indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
Indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
Indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
Section 4. Non-Exclusivity of Rights. The rights to indemnification
--------- -------------------------
and to the advancement of expenses conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of Incorporation as amended
from time to time, these by-laws, any agreement, any vote of stockholders or
disinterested directors or otherwise.
Section 5. Insurance. The Corporation may maintain insurance, at its
--------- ---------
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the
--------- ----------------------------------------------
Corporation. The Corporation may, to the extent authorized from time to time by
- -----------
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
-12-
<PAGE>
ARTICLE VI - STOCK
---------- -----
Section 1. Certificates of Stock. Each stockholder shall be entitled
--------- ---------------------
to a certificate signed by, or in the name of the Corporation by, the Chairman
or Vice-Chairman of the Board of Directors, the President or a Vice President,
and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, certifying the number of shares owned by him. Any or all of the
signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock. Transfers of stock shall be made only
--------- ------------------
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4
of this Article, an outstanding certificate for the number of shares involved
shall be surrendered for cancellation before a new certificate is issued
therefor.
Section 3. Record Date. In order that the Corporation may determine
--------- -----------
the stockholders entitled to notice of or to vote at any meeting of
stockholders, or to receive payment of any dividend or other distribution or
allotment of any rights or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date on which the resolution fixing the record date is adopted and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of any meeting of stockholders, nor more than sixty (60) days
prior to the time for such other action as hereinbefore described; provided,
however, that if no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held, and, for
determining stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or to exercise any rights of change,
conversion or exchange of stock or for any other purpose, the record date shall
be at the close of business on the day on which the Board of Directors adopts a
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates. In the event of
--------- --------------------------------------
the loss, theft or destruction of any certificate of stock, another may be
issued in its place pursuant to such regulations as the Board of Directors may
establish concerning proof of such loss, theft or destruction and concerning the
giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations. The issue, transfer, conversion and
--------- -----------
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
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<PAGE>
ARTICLE VII - NOTICES
----------- -------
Section 1. Notices. Except as otherwise specifically provided herein
--------- -------
or required by law, all notices required to be given to any stockholder,
director, officer, employee or agent shall be in writing and may in every
instance be effectively given by hand delivery to the recipient thereof, by
depositing such notice in the mails, postage paid, or by sending such notice by
recognized courier service, prepaid telegram, telex, mailgram or by facsimile
transmission. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his last known address as the same appears on the
books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails, by courier or by
telegram, telex, facsimile transmission or mailgram, shall be the time of the
giving of the notice.
Section 2. Waivers. A written waiver of any notice, signed by a
--------- -------
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
ARTICLE VIII - MISCELLANEOUS
------------ -------------
Section 1. Facsimile Signatures. In addition to the provisions for
--------- --------------------
use of facsimile signatures elsewhere specifically authorized in these by-laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal. The Board of Directors may provide a
--------- --------------
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the
Secretary or Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records. Each director,
--------- ----------------------------------------
each member of any committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees or committees
of the Board of Directors so designated, or by any other person as to matters
which such director or committee member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
--------- -----------
as fixed by the Board of Directors.
Section 5. Time Periods. In applying any provision of these by-laws
--------- ------------
that requires that an act be done or not be done a specified number of days
prior to an event or that an act be done
-14-
<PAGE>
during a period of a specified number of days prior to an event, calendar days
shall be used, the day of the doing of the act shall be excluded, and the day of
the event shall be included.
Section 6. Pronouns. Whenever the context may require, any pronouns
--------- --------
used in these by-laws shall include the corresponding masculine, feminine or
neuter forms.
ARTICLE IX - AMENDMENTS
---------- ----------
These by-laws may be amended or repealed by the affirmative vote of a
majority of the Whole Board at any meeting or by the stockholders by the
affirmative vote of eighty percent (80%) of the outstanding voting power of the
then-outstanding shares of capital stock of the Corporation, entitled to vote
generally in the election of directors, at any meeting at which a proposal to
amend or repeal these by-laws is properly presented.
-15-
<PAGE>
EXHIBIT 10.01
-------------
As a result of the Merger between Telor Ophthalmic Pharmaceuticals, Inc.
("Telor") and Occupational Health + Rehabilitation Inc pursuant to which Telor
was the surviving corporation and changed its name to "Occupational Health +
Rehabilitation Inc," this warrant now entitles the holder to purchase 4,195
shares of common stock of Occupational Health + Rehabilitation Inc at an
exercise price of $8.83 per share.
OCCUPATIONAL HEALTH, INC.
COMMON STOCK PURCHASE WARRANT
The Transferability of this Warrant Is
Restricted as Provided in Article 3
___________________________, or any assignee, transferee or other
holder of this Warrant (a "holder") hereby is granted the right to purchase, at
any time from July 1, 1997 until 5:00 p.m., Providence, Rhode Island time, on
August 31, 1997, Up to 29,630 fully paid and non-assessable shares of the Common
Stock, par value $.01 per share (the "Common Stock"), of Occupational Health,
Inc., a Delaware corporation (the "Company"), provided, however, that the
-------- -------
Company may exercise its "call", as more fully described in Section 11(a)
hereof, prior to the date on which the holder is entitled to exercise this
Warrant or at any time thereafter.
This Warrant has been issued to the Holder at a purchase price of
$.05 per Share for a total purchase price of $1,481.50, the receipt of which is
hereby acknowledged, and is exercisable at a price (the "Purchase Price") of
$1.25 per share of Common Stock issuable hereunder payable in cash or by check,
subject to adjustment as provided in Article 5 hereof. Upon surrender of this
Warrant with the annexed Subscription Form duly executed, together with payment
of the Purchase Price (as hereinafter defined) for the shares of Common Stock
purchased, at the Company's principal executive offices (presently located at
588 Pawtucket Avenue, Pawtucket, Rhode Island 02860), the holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased.
1. Exercise of Warrant.
-------------------
The purchase rights represented by this Warrant are exercisable at
the option of the holder hereof, in whole or in part (but not as to fractional
shares of the Common Stock), during any period in which this Warrant may be
exercised as set forth above. In the case of the purchase of less than all the
shares of Common Stock purchasable under this Warrant, the Company shall cancel
this Warrant upon the surrender hereof and shall execute and deliver a new
Warrant of like tenor for the balance of the shares of Common Stock purchasable
hereunder.
<PAGE>
2. Issuance of Stock Certificates.
------------------------------
The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the holder hereof
including, without limitation, any tax which may be payable in respect thereof,
and such certificates shall (subject to the provisions of Article 3 hereof) be
issued in the name of, or in such names as may be directed by, the holder
hereof; provided, however, that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder and the
Company shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
3. Restriction on Transfer of Warrant.
----------------------------------
3.1 The holder shall not transfer, sell or otherwise dispose of this
Warrant in any transaction except within the purview of the Securities Act of
1933, as amended (the "Act") and in compliance therewith.
3.2 Unless the shares of Common Stock issuable upon exercise of this
Warrant (the "Warrant Shares") may, at the time of the exercise of this Warrant,
be lawfully resold in accordance with a then currently effective registration
statement or post-effective amendment to a registration statement under the Act,
the Company may require, as a condition to the delivery of any Warrant Shares to
be issued upon exercise of this Warrant:
(a) that the Company receive an appropriate investment letter
evidencing that the holder or his/her permitted assignee is acquiring such
Warrant Shares for investment and not with a view to the distribution or public
offering of all or any portion thereof, or any interest therein, and an
agreement to the effect that the holder or his/her permitted assignee shall make
no sale or other disposition of such Warrant Shares unless and until: (i) the
Company shall have received an opinion of legal counsel to the holder or his/her
permitted assignee (in form and substance satisfactory to the Company) to the
effect that such sale or other disposition may be made without registration
under the then applicable provisions of the Act and the rules and regulations of
the Securities and Exchange Commission thereunder; or (ii) such Warrant Shares
shall thereafter be included in a currently effective registration statement or
post-effective amendment to a registration statement under the Act; and
(b) that the certificate or certificates issued to evidence
such Warrant Shares bear an appropriate legend indicating such securities law
restrictions on the further sale or other disposition thereof.
(c) that the Holder execute a copy of the company's
Stockholders Agreement, substantially in the form of the Stockholders Agreement
(the "Stockholders Agreement") dated as of June 30, 1992, previously circulated
to the holder, and in the form of Exhibit A hereto, imposing certain additional
restrictions on the transferability of the Warrant Shares.
<PAGE>
4. Price.
-----
4.1 Initial and Adjusted Purchase Price. The initial Purchase Price
-----------------------------------
shall be $1.25 per share of Common Stock. The adjusted purchase price shall be
the price which shall result from time to time from any and all adjustments of
the initial purchase price in accordance with the provisions of Article 5
hereof.
4.2 Purchase Price. The term "Purchase Price" herein shall mean the
--------------
initial purchase price or the adjusted purchase price, depending upon the
context.
5. Adjustments of Purchase Price and Number of Shares.
--------------------------------------------------
5.1 Subdivision and Combination. In case the Company shall at any
---------------------------
time subdivide or combine the outstanding shares of Common Stock, the Purchase
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
5.2 Adjustment in Number of Shares. Upon each adjustment of the
------------------------------
Purchase Price pursuant to the provisions of this Article 5, the number of
shares of Common Stock issuable upon the exercise of each Warrant shall be
adjusted to the nearest full share by multiplying the Purchase Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of the Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Purchase Price.
5.3 Reclassification, Consolidation, Merger, etc. In case of any
--------------------------------------------
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value to no par value, or from no par value to par value, or as
a result of a subdivision or combination), or in the case of any consolidation
of the Company with, or merger of the Company into, another corporation (other
than a consolidation or merger in which the Company is the surviving corporation
and which does not result in any reclassification or change of the outstanding
shares of Common Stock, except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or in the
case of a sale or conveyance to another corporation of the property of the
Company as an entirety, the holder of this Warrant shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale of conveyance at a price equal to the product of (x) the number of
shares issuable upon exercise of this Warrant and (y) the Purchase Price in
effect immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such holder had exercised this
Warrant.
5.4 No Adjustment of Purchase Price in Certain Cases. No adjustment
------------------------------------------------
of the Purchase Price shall be made:
(a) Upon the issuance or sale of the Warrants or the Warrant
Shares; or
<PAGE>
(b) Upon the issuance or sale of shares of Common Stock or upon
the issuance or exercise of options, rights or warrants, or upon the conversion
or exchange of convertible or exchangeable securities; or
(c) If the amount of said adjustment shall be less than 10
cents per share; provided, however, that in such case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment which, together
with any adjustment so carried forward, shall amount to at least 10 cents per
share.
6. Registration Rights.
-------------------
6.1 Piggyback Registration. If, at any time commencing on the date
----------------------
hereof and expiring five (5) years after the date hereof the Company proposes to
register any of its securities under the Securities Act of 1933, as amended (the
"Act") (other than in connection with a merger, acquisition or employee stock
option or other benefit plan), it will give written notice, at least thirty (30)
days prior to the filing of each such registration statement, to holder of its
intention to do so. If holder notifies the Company within twenty (20) days after
receipt of any such notice of its desire to include the Warrant Shares in such
proposed registration statement, the Company shall afford holder the opportunity
to have the Warrant Shares registered under such registration statement;
provided, however, if in the written opinion of the managing underwriter, if
any, of the offering to be made pursuant to the proposed registration statement,
the registration of all or a portion of the Warrant Shares pursuant to the
proposed registration statement would have an adverse effect on the offering,
then the Company may exclude the Warrant Shares from such registration
statement.
Notwithstanding the provisions of this Section 6.1, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 6.1 (irrespective of whether a written request for inclusion of
Warrant Shares shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
6.2 Covenant of the Company with Respect to Registration.
----------------------------------------------------
In connection with any registration under Section 6.1 hereof, the Company agrees
to use its best efforts to have any registration statement declared effective at
the earliest possible time, and shall furnish such number of prospectuses as
shall reasonably be requested by the holder.
7. Exchange and Replacement of Warrant.
-----------------------------------
This Warrant is exchangeable, without expense, upon the surrender
hereof by the registered holder at the principal executive office of the
Company, for a new Warrant of like tenor and date representing in the aggregate
the right to purchase the same number of shares as are purchasable hereunder in
such denominations as shall be designated by the registered holder hereof at the
time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and in case of
loss, theft or destruction, of
<PAGE>
indemnity or security reasonably satisfactory to it, and reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will make and deliver a
new Warrant of like tenor, in lieu of this Warrant.
8. Elimination of Fractional Interests.
-----------------------------------
The Company shall not be required to issue stock certificates
representing fractions of shares of Common Stock, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated.
9. Reservation of Shares.
---------------------
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise hereof. The Company covenants and agrees that, upon
exercise of this Warrant and payment of the Purchase Price therefor, all shares
of Common Stock issuable upon such exercise shall be duly and validly issued,
fully paid and non-assessable.
10. Notices to Warrant Holders.
--------------------------
Nothing contained in this Warrant shall be construed as conferring
upon the holder hereof the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the expiration of
the Warrant and prior to its exercise, any of the following events shall occur:
(a) The Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) The Company shall offer to the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) A dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
<PAGE>
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
11. Call Agreement.
--------------
(a) Subject to all of the provisions of Section 11 hereof, the
Company shall be entitled in its sole discretion, upon at least 30 days' notice
to the holder hereof or to the holder of Warrant Stock, to purchase all, but not
less than all, of the Warrants and the Warrant Stock, at any time on or after
June 1, 1997, but before August 31, 1997, at the Repurchase Price as defined in
the Stockholders Agreement for the Common Stock purchasable with this Warrant or
part thereof, or of such Warrant Stock, as the case may be, less the aggregate
unpaid exercise price in the case of Warrants, purchased by the Company pursuant
to the provisions of this Section 11, allocated among the holders of Warrants
and Warrant Stock pro-rata as their interests may appear.
(b) Promptly after giving notice pursuant to subsection 11(a)
above, the Company, at its own expense, shall compute the Repurchase Price, as
of the latest practical date, pursuant to Exhibit A of the Stockholders
Agreement. Any purchase of the Warrants or Warrant Shares shall take place at
the offices of the Company pursuant to the provisions of the Stockholders
Agreement.
12. Control Offers.
--------------
If a so called "Control Offer" as defined in the Stockholders
Agreement is given, then the holders of this Warrant shall be entitled to the
benefits of and shall be obligated by the provisions of Section 5 of the
Stockholders Agreement, provided they tender payment of purchase price of the
Warrant, against surrender thereof in respect of any closing of transactions
contemplated by Section 5 of the Stockholders Agreement.
13. Notices.
-------
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested:
(a) If to the registered holder of this Warrant, to the address
of such holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth on the first
page of this Warrant.
14. Successors.
----------
Any holder may assign its rights hereunder to its stockholders upon
its liquidation or dissolution, provided such assignee agrees in writing to be
bound by all of the terms and provisions of this Common Stock Purchase Warrant.
All the covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, personal
representatives, successors and assigns.
<PAGE>
15. Headings.
--------
The Article and Section headings in this Warrant are inserted for
purposes of convenience only and shall have no substantive effect.
16. Law Governing.
-------------
This Warrant is delivered in the State of Rhode Island and shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware.
WITNESS the seal of the Company and the signature of its duly
authorized Chairman of the Board and President.
OCCUPATIONAL HEALTH, INC.
By /s/ John C. Garbarino
---------------------------------
John C. Garbarino
President
<PAGE>
SUBSCRIPTION FORM
____________________, 19___
TO: OCCUPATIONAL HEALTH, INC.
The undersigned hereby irrevocably elects to exercise the attached
Common Stock Purchase Warrant to the extent of ________________ Shares of Common
Stock of OCCUPATIONAL HEALTH, INC and hereby makes payment of $____________ in
payment of the purchase price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
------------------------------------------------------
(Please typewrite or print in block letters)
Address:
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
By:
------------------------------------
<PAGE>
Holders of OH+R Warrants
------------------------
Each person named below holds a warrant to purchase 4,195 shares of the
registrant's common stock at an exercise price of $8.83 per share.
Stephan D. Deutsch
Mark J. DeNino
Mehrdad Motamed
Ira J. Singer
Steven L. Blazar
<PAGE>
EXHIBIT 10.02
-------------
TERMINATION AGREEMENT
This TERMINATION AGREEMENT (the "Agreement") is made as of June 1,
1996, by and between Occupational Health + Rehabilitation Inc ("OH+R") and the
following parties (collectively referred to herein as the "OH+R Security
Holders") (i) the signatories to that certain First Amended and Restated
Stockholders Agreement ("Stockholders Agreement') dated as of July 15, 1993,
among OH+R and its stockholders, as amended, (ii) recipients of Common Stock
Purchase Warrants ("Warrants") of OH+R, and (iii) the signatories to that
certain Securities Purchase Agreement dated July 15, 1993 among OH+R and the
Investors named therein ("Securities Purchase Agreement"), as supplemented by
the Supplemental Securities Purchase Agreement dated November 1, 1994 and the
Second Supplemental Securities Purchase Agreement dated April 27, 1995.
WITNESSETH:
WHEREAS, OH+R has entered into an Agreement and Plan of Merger (the
"Merger Agreement") dated as of February 22, 1996, as amended, with Telor
Ophthalmic Pharmaceuticals, Inc. ("Telor") pursuant to which OH+R will merge
with and into Telor and Telor will become the surviving corporation (the
"Merger"); and
WHEREAS, pursuant to the terms of the Merger Agreement, the OH+R
Security Holders will receive shares of Common Stock of Telor in exchange for
their shares of Common or Preferred Stock of OH+R or will receive the right to
receive shares of Telor Common Stock upon exercise of options or warrants of
OH+R held by them; and
WHEREAS, pursuant to the terms of the Merger Agreement and effective
upon the closing of the Merger, the OH+R Security Holders will become parties to
a certain Registration Rights Agreement with respect to the shares of Telor
Common Stock substantially in the form of Exhibit 6.15 to the Merger Agreement;
and
WHEREAS, as a condition to the Merger, OH+R must terminate all
agreements with the OH+R Security Holders pertaining to rights associated with
the equity securities of OH+R held by them, including, without limitation,
voting rights, rights of first refusal, preemptive rights, registration rights
and antidilution rights ("Rights"); and
WHEREAS, the OH+R Security Holders are entitled to certain Rights
under agreements with OH+R to which they are a party and desire to terminate
such Rights in exchange for the opportunity to exchange their OH+R securities
for shares of Telor Common Stock or the right to purchase shares of Telor Common
Stock in accordance with the Merger Agreement.
NOW THEREFORE, in consideration of the Merger of OH+R with and into
Telor and the corresponding exchange of OH+R securities for Telor securities and
grant of registration
<PAGE>
rights with respect to the shares of Telor Common Stock as contemplated by the
Merger Agreement, the parties hereto agree that, effective immediately prior to
consummation of the Merger, the following agreements and/or portions of
agreements to which OH+R and certain of the undersigned are parties shall be
terminated and all obligations of OH+R thereunder shall be of no further force
or effect: (i) the Stockholders Agreement; (ii) Sections 3.2(c), 6, 11 and 12 of
the Warrants (relating to registration rights and the Stockholders Agreement);
(iii) Articles V and VI of the Securities Purchase Agreement (relating to
covenants and registration rights).
If the Merger is not consummated within one hundred eighty (180) days
of the date set forth above, this Agreement shall be null and void and of no
further force or effect. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of Massachusetts.
[Intentionally Left Blank]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Termination
Agreement to be duly executed as of the date first written above.
OCCUPATIONAL HEALTH +
REHABILITATION INC
By:
------------------------------------
John C. Garbarino
Its President
---------------------------------------
Mark J. DeNino
---------------------------------------
Mehrdad Motamed
---------------------------------------
Ira J. Singer
---------------------------------------
Stephan D. Deutsch
---------------------------------------
Steven L. Blazar
The Venture Capital Fund of New England
III, L.P.
By: FH & Co. III, L.P.
Its General Partner
By:
------------------------------------
Name:
----------------------------------
Title: Its General Partner
-3-
<PAGE>
BancBoston Ventures, Inc.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Prince Venture Partners III, Limited
Partnership
By: Prince Venture Partners III
By:
------------------------------------
Name:
----------------------------------
Title: Its General Partner
Boston Capital Ventures Limited
Partnership
By: BC & V Limited Partnership
Its General Partner
By: Boston Capital Partners
Its General Partner
By:
------------------------------------
Name:
----------------------------------
Title: Its General Partner
Boston Capital Ventures II Limited
Partnership
By: Boston Capital Partners II
Its General Partner
By:
------------------------------------
Name:
----------------------------------
Title: Its General Partner
-4-
<PAGE>
---------------------------------------
John C. Garbarino
---------------------------------------
Lynne M. Rosen
---------------------------------------
Konstantine N. Tsiongas
---------------------------------------
Anne Marie Warren
Family Health Care, P.A.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-5-
<PAGE>
EXHIBIT 10.04(b)
----------------
AMENDMENT NO. 1 TO
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT (the
"Amendment") is made and entered into as of the 6th day of November, 1996, by
and between OCCUPATIONAL HEALTH + REHABILITATION INC, a Delaware corporation
(the "Company") and the undersigned holders (the "Amending Holders"), which
holders hold at least two-thirds of the aggregate number of outstanding shares
of Restricted Stock of the Company, pursuant to the terms of that certain
Registration Rights Agreement dated as of June 6, 1996 (the "Original
Agreement") by and between the Company and the holders listed on Schedules I, II
and III thereto. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Original Agreement.
WITNESSETH
WHEREAS, the Company and certain holders of the Company's Restricted
Stock, including the Amending Holders, entered into the Original Agreement; and
WHEREAS, simultaneously with the execution of this Amendment, in
connection with and as a condition to the Company's sale of its Series A
Convertible Preferred Stock, the Company will enter into that certain
Registration Rights Agreement dated as of the date hereof (the "Investor Rights
Agreement") with certain investors of the Company listed on Schedule A thereto;
and
WHEREAS, the Investor Rights Agreement includes certain provisions
relating to underwriter cutbacks which are inconsistent with the Original
Agreement and provides certain additional rights to holders with Rule 144
rights; and
WHEREAS, the Amending Holders hold at least two-thirds of the
aggregate number of outstanding shares of Restricted Stock held of record by the
Holders or their permitted successors and assigns; and
WHEREAS, the Company and the Amending Holders desire to amend the
Original Agreement pursuant to Section 12(d) thereof in order to improve the
consistency among the registration rights granted by the Company;
NOW THEREFORE, the Original Agreement is hereby amended as follows,
effective as of the date and year first above written:
<PAGE>
1. The parenthetical "(the "Demand Holders")" is hereby added after the words
"from the date of receipt of a notice from requesting Holders pursuant to this
Section 4" in the last sentence of Section 4(c) of the Original Agreement.
2. The following is hereby added to the end of Section 4(c) of the Original
Agreement:
provided, however, that following receipt of any notice under this Section
-------- -------
4, the Company shall immediately notify all holders of the Company's Common
Stock who have contractual rights to demand registrations pursuant to the
terms of any other registration rights agreement to which the Company is a
party. Upon the written request of such demand rights holders constituting
the requisite percentages of shares to initiate a demand under any such
other registration rights agreement, specifying the number of shares to be
registered, which request shall be deemed to be an exercise of a demand
right under the terms of the registration rights agreement to which they
are parties, such demand rights holders shall be deemed to be Demand
Holders and the shares requested to be registered by such Demand Holders
shall be deemed to be Registrable Shares, in each case, for purposes of
Section 4(d), provided that such written requests are received by the
--------
Company within 30 days of the giving of notice by the Company.
3. A new Section 4(d) is hereby added to the Original Agreement:
(d) If, in the opinion of the managing underwriter, the
inclusion in a registration statement to be filed under this Section of any
shares other than the Registrable Shares requested to be registered under
this Section by Demand Holders would adversely affect the marketing of such
shares, then, in such event (a) such other shares may be included in such
registration only if all of the Registrable Shares requested to be
registered by Demand Holders hereunder are included, and (b) such other
shares shall be subject to the provisions of Section 5 and the first
sentence of Section 4(c) as to priority of inclusion. If, in the opinion of
the managing underwriter, the inclusion of the Registrable Shares requested
to be registered under this Section by Demand Holders would adversely
affect the marketing of such Registrable Shares, Registrable Shares to be
sold by the Demand Holders shall be excluded in such manner that the
Registrable Shares to be excluded shall first be the Registrable Shares of
Demand Holders who are not affiliates (as defined in Rule 144 of the
Securities Act) of the Company (the "Affiliate Holders") and whose
Registrable Shares are then saleable under Rule 144(e) or Rule 144(k) under
the Securities Act and then pro rata among them, and if further reduction
is necessary, shall next be pro rata among the remaining Registrable Shares
of the Demand Holders who are Affiliate Holders or whose Registrable Shares
are not then saleable under Rule 144(e) or Rule 144(k), provided, however,
-------- -------
that notwithstanding anything in this Agreement to the contrary, in respect
of the first underwritten public offering following the date of
<PAGE>
the Investor Rights Agreement, no reduction shall reduce the number of
shares which may be sold by requesting holders who are parties to the
Investor Rights Agreement to less than 25% of the shares to be sold in such
offering.
4. The last sentence of Section 5 of the Original Agreement entitled
"Incidental Registration" is hereby deleted in its entirety and the following
substituted in lieu thereof:
In the event that any registration pursuant to this Section 5 shall be, in
whole or in part, an underwritten public offering of Common Stock, the
number of shares of Restricted Stock to be included in such an underwriting
may be reduced if and to the extent that the managing underwriter shall be
of the opinion that such inclusion would adversely affect the marketing of
the securities to be sold by the Company or the requesting party therein or
that such reduction is otherwise advisable, provided, however, that after
any shares to be sold by selling holders that do not have contractual
rights to have shares included in such registration have been excluded,
shares to be sold by the Holders shall be excluded in such manner that the
shares to be excluded shall first be the shares of selling Holders and
other requesting holders who, in each case, are not Affiliate Holders and
whose shares are then saleable under Rule 144(e) or Rule 144(k) under the
Securities Act and then pro rata among them, and if further reduction is
necessary, shall next be pro rata among the remaining shares of the selling
Holders and other requesting holders who are Affiliate Holders or whose
shares are not then saleable under Rule 144(e) or Rule 144(k), unless such
registration is pursuant to the exercise of a demand right of another
securityholder, in which event such securityholder shall be entitled to
include all shares it desires to have so included before any shares of
Restricted Stock or shares of any other holder are included therein and
provided, however, that notwithstanding anything in this Agreement to the
-------- -------
contrary, in respect of the first underwritten public offering following
the date of the Investor Rights Agreement, no reduction shall reduce the
number of shares which may be sold by requesting holders who are parties to
the Investor Rights Agreement to less than 25% of the shares to be sold in
such offering.
5. The last paragraph of Section 11 of the Original Agreement is hereby
deleted in its entirety and the following substituted in lieu thereof:
The Company shall not be required to effect a registration
pursuant to Section 4, 5 or 6 hereof for any Holder desiring to participate
in such registration who (a) may then dispose of all of its shares of
Restricted Stock pursuant to Rule 144 within the three-month period
following such proposed registration; and (b) holds less than 1% of the
outstanding capital stock of the Company (on a common stock-equivalent
basis) at the time of such registration.
<PAGE>
6. The term "Agreement" as used in the Original Agreement shall mean the
Original Agreement, as amended by this Amendment.
7. As so amended by this Amendment, the Original Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, each party hereto has caused this Amendment to be
signed in counterpart or otherwise by its duly authorized officer or partner, as
the case may be, as of the date and year first written above.
COMPANY:
OCCUPATIONAL HEALTH +
REHABILITATION INC
By:
----------------------------------
John C. Garbarino
Its President and Chief Executive
Officer
AMENDING HOLDERS:
THE VENTURE CAPITAL FUND OF
NEW ENGLAND III, L.P.
By: FH + Co. III, L.P.
Its General Partner
By:
-----------------------------
Name:
------------------------
Title: Its General Partner
<PAGE>
BANCBOSTON VENTURES, INC.
By:
------------------------------
Name:
-------------------------
Title:
------------------------
PRINCE VENTURE PARTNERS III,
LIMITED PARTNERSHIP
By:
------------------------------
Name:
-------------------------
Title: Its General Partner
ASSET MANAGEMENT ASSOCIATES,
1989, L.P.
By: AMC Partners 89, L.P.
Its General Partner
By:
-----------------------------
By:
----------------------------------
John C. Garbarino
By:
----------------------------------
Lynne M. Rosen
<PAGE>
EXHIBIT 10.05(a)
----------------
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement"), dated as of
September 11, 1996, by and between Occupational Health + Rehabilitation Inc, a
Delaware corporation (the "Company"), and Argosy Health, L.P., a Pennsylvania
limited partnership (the "Holder").
WHEREAS, the Company and the Holder are entering into this Agreement
to provide for the registration of certain shares of the Company's common stock
which the Holder is acquiring pursuant to an Asset Purchase Agreement (the
"Purchase Agreement") dated September 11, 1996;
NOW, THEREFORE, in consideration of the terms and conditions as set
forth herein, the Company covenants and agrees with the Holder as follows:
1. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission,
------------
or any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of
--------------
the Company, as constituted as of the date of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
--------------
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean the person who is the then record owner of
--------
Restricted Stock.
"Registration Expenses" shall mean the expenses so described in
-----------------------
Section 6.
"Restricted Stock" shall mean the Shares, excluding shares which
------------------
have been (a) registered under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in accordance with the
registration statement covering them or (b) publicly sold pursuant to Rule 144
under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
----------------
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
<PAGE>
"Shares" shall mean the shares of Common Stock issued pursuant
--------
to the Purchase Agreement.
2. Restrictive Legend. Each certificate representing the Restricted
------------------
Stock shall bear a legend stating in substance:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND SUCH LAWS
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS THEREOF OR UNLESS
SOLD PURSUANT TO RULE 144 PROMULGATED UNDER SAID ACT.
A certificate shall not be required to bear such legend if in the
opinion of counsel satisfactory to the Company, the securities represented
thereby may be publicly sold without registration under the Securities Act.
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
---------------------------
Restricted Stock (other than under the circumstances described in Section 4),
the Holder thereof shall give written notice to the Company of its intention to
effect such transfer. Each such notice shall describe the manner of the proposed
transfer and, if requested by the Company, shall be accompanied by an opinion of
counsel satisfactory to the Company to the effect that the proposed transfer may
be effected without registration under the Securities Act, whereupon the Holder
of such stock shall be entitled to transfer such stock in accordance with the
terms of its notice; provided, however, that no such opinion of counsel shall be
required for a distribution by a partnership to its partners of such stock in
respect of such interest. Each certificate for shares of Restricted Stock
transferred as above provided shall bear the legend set forth in Section 2,
except that such certificate shall not bear such legend if (i) such transfer is
in accordance with the provisions of Rule 144 (or any other rule permitting
public sale without registration under the Securities Act) or (ii) the opinion
of counsel referred to above is to the further effect that the transferee and
any subsequent transferee (other than an affiliate of the Company) would be
entitled to transfer such securities in a public sale without registration under
the Securities Act. The restrictions provided for in this Section 3 shall not
apply to securities which are not required to bear the legend prescribed by
Section 2 in accordance with the provisions of that Section.
4. Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other securityholders or both
(except with respect to registration statements on Forms S-4, S-8 or another
form not available for registering the Restricted Stock for sale to the public),
each such time the Company will give written notice to all Holders of
outstanding Restricted Stock of its intention to do so. Upon the written request
of any such Holder received by the
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<PAGE>
Company within 30 days of the giving of any such notice by the Company to
register any of such Holder's Restricted Stock (which request shall state the
intended method of disposition thereof), the Company will use its reasonable
best efforts to cause the Restricted Stock as to which registration shall have
been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
requisite to permit the sale or other disposition by the Holder (in accordance
with such Holder's written request) of such Restricted Stock so registered. In
the event that any registration pursuant to this Section 4 shall be, in whole or
in part, an underwritten public offering of Common Stock, the number of shares
of Restricted Stock to be included in such an underwriting may be reduced if and
to the extent that the managing underwriter shall be of the opinion that such
inclusion would adversely affect the marketing of the securities to be sold by
the Company or the requesting party therein or that such reduction is otherwise
advisable, provided, however, any such reduction shall be accomplished as
follows: as among the requesting Holders and any other holders of securities of
the Company who have exercised their contractual rights to have shares included
in such registration, pro rata based upon the number of shares of Common Stock
owned by or issuable to such requesting Holders and other requesting holders,
unless such registration is pursuant to the exercise of a demand right of
another securityholder, in which event such securityholder shall be entitled to
include all shares it desires to have so included before any shares of
Restricted Stock or shares of any other holder are included therein.
5. Registration Procedures. If and whenever the Company is required
-----------------------
by the provisions of Section 4 to use its reasonable best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use its reasonable best efforts to cause
such registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its reasonable best efforts to register or qualify the
Restricted Stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions as the sellers of Restricted Stock or, in
the case of an underwritten public offering, the managing
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<PAGE>
underwriter reasonably shall request, provided, however, that the Company shall
-------- -------
not for any such purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) use its reasonable best efforts to list the Restricted Stock
covered by such registration statement with any securities exchange on which the
Common Stock is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock as provided herein, use its reasonable best efforts to
furnish on the date that Restricted Stock is delivered to the underwriters for
sale pursuant to such registration: (i) an opinion dated such date of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters and to such seller, stating that such registration statement has
become effective under the Securities Act and that (A) to the knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
threatened under the Securities Act, (B) the registration statement, the related
prospectus and each amendment or supplement thereof comply as to form in all
material respects with the requirements of the Securities Act (except that such
counsel need not express any opinion as to financial statements, schedules and
other financial or statistical information contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters or
by such seller or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
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<PAGE>
(h) make available for inspection by each seller of Restricted Stock,
any underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
For purposes of Section 5(a) and 5(b), the period of distribution of
Restricted Stock included therein shall be deemed to extend until the first to
occur of (i) each underwriter's completion the distribution of all securities
purchased by it, and (ii) one hundred and twenty (120) days.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Section 4 covering
an underwritten public offering, the Company and each seller agree to enter into
a written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
No Holder of shares of Restricted Stock included in a registration
statement shall (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update a registration statement or prospectus; but the
obligations of the Company with respect to maintaining any registration
statement current and effective shall be extended by a period of days equal to
the period such suspension is in effect unless (i) such extension would result
in the Company's inability to use the financial statements in the registration
statement as initially filed and (ii) such correction or update did not result
from the Company's acts or failures to act.
At the end of the period during which the Company is obligated to
keep the registration statement current and effective as described above (and
any extensions thereof required by the preceding sentence), the Holders of
shares of Restricted Stock included in the registration statement shall
discontinue sales of shares pursuant to such registration statement upon receipt
of notice from the Company of its intention to remove from registration the
shares covered by such registration statement which remain unsold, and such
Holders shall notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.
6. Expenses. All expenses incurred by the Company in complying with
--------
Section 4 including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel to the Company and
independent public accountants for the Company,
-5-
<PAGE>
fees and expenses (including counsel fees) incurred in connection with complying
with state securities or "blue sky" laws, fees of the National Association of
Securities Dealers, Inc., transfer taxes, fees of transfer agents and
registrars, costs of insurance, shall be borne by the Company, except that all
expenses, fees and disbursements of any counsel retained by the Holders (to be
paid pro rata according to the quantity of the securities registered by the
Holders who retained such counsel, or as shall be otherwise agreed by such
Holders) and all underwriting discounts and commissions for securities
registered for sale by them shall be borne by the Holders of the securities
registered pursuant to such registration, pro rata according to the quantity of
their securities so registered.
7. Indemnification and Contribution.
--------------------------------
(a) To the extent permitted by law, in the event of a registration of
any of the Restricted Stock under the Securities Act pursuant to Section 4, the
Company will indemnify and hold harmless each seller of such Restricted Stock
thereunder, each underwriter of such Restricted Stock thereunder and each other
person, if any, who controls such seller or underwriter within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances in which
they were made, or arise out of any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or inaction required of the Company in connection with such
registration and will reimburse each such seller, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus, and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement or alleged
untrue statement or omission or alleged omission made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
Commission at the time the registration statement becomes effective or in the
amended prospectus filed with the Commission pursuant to Rule 424(b) or in the
prospectus subject to completion and term sheet under Rule 434 of the Securities
Act, which together meet the requirements of Section 10(a) of the Securities Act
(the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any such seller, any such underwriter or any such controlling person,
if a copy of the Final Prospectus was not furnished to the person or
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<PAGE>
entity asserting the loss, liability, claim or damage at or prior to the time
such furnishing is required by the Securities Act; provided, further, that this
-------- -------
indemnity shall not be deemed to relieve any underwriter of any of its due
diligence obligations.
(b) To the extent permitted by law, in the event of a registration
of any of the Restricted Stock under the Securities Act pursuant to Section 4,
each seller of such Restricted Stock thereunder, severally and not jointly, will
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, each officer of the Company
who signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer, director, underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Restricted Stock was registered under the Securities Act pursuant to
Section 4, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances in which they were made, and will reimburse the
Company and each such officer, director, underwriter or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in reliance upon and in conformity with information
pertaining to such seller furnished in writing to the Company by such seller
specifically for use in such registration statement or prospectus, and provided,
further, that the foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any such untrue statement or alleged untrue
statement or omission or alleged omission made in the preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the Commission at
the time the registration statement becomes effective or in the Final
Prospectus, such indemnity agreement shall not inure to the benefit of the
Company, any controlling person or any underwriter, if a copy of the Final
Prospectus was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act; provided, further, that this indemnity shall not be
-------- -------
deemed to relieve any underwriter of any of its due diligence obligations; and
provided, further, that in no event shall any indemnity by a seller under this
- -------- -------
Section 7(b) exceed the gross proceeds from the offering received by such
seller.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from
-7-
<PAGE>
any liability which it may have to such indemnified party other than under this
Section 7 and shall only relieve it from any liability which it may have to such
indemnified party under this Section 7 if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 7 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
- -------- -------
indemnified party and the indemnifying party and counsel to the indemnified
party shall have reasonably concluded that there are reasonable defenses
available to the indemnified party which are different from or additional to
those available to the indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred. No indemnifying party, in the defense of any
such claim or litigation, shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any Holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 7 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
7; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such Holder will be
-------- -------
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
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<PAGE>
8. Changes in Common Stock. If, and as often as, there is any
-----------------------
change in the Common Stock by way of a stock split, stock dividend, combination
or reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
9. Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Stock to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each Holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such Holder to sell any Restricted Stock without
registration.
The Company shall not be required to effect a registration pursuant to
Section 4 hereof for any Holder desiring to participate in such registration who
may then dispose of all of its shares of Restricted Stock pursuant to Rule 144
within the three-month period following such proposed registration.
10. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any of the shares of Restricted Stock), whether so
expressed or not, provided, however, that registration rights conferred herein
on the Holders of shares of Restricted Stock shall only inure to the benefit of
a transferee of shares of Restricted Stock if such transferee, in the Company's
reasonable judgment, is not a competitor of the Company, and (i) there is
transferred to such transferee at least 20% of the total shares of Restricted
Stock originally issued to the direct or indirect transferor of such transferee
by the Company or (ii) such transfer is made in connection with the distribution
by a Holder to such Holder's beneficial owners (including, without limitation,
to partners of a general or limited partnership, shareholders of a corporation
and beneficiaries of a trust) of securities of the Holder or to the partners or
employees of the Holder, provided that at the Company's request, one person
shall be designated by such transferees as their agent for purposes of their
rights hereunder and
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<PAGE>
the provision of a notice by the Company to such agent in accordance with the
provisions hereof shall be deemed compliance with such provisions for all such
beneficial owners, partners and employees, and following such request by the
Company, the Company shall have no obligation under said provisions with respect
to such transferees until it shall have been notified of the name and address of
such agent.
(b) Each Holder agrees that it will provide notice to the Company of
any transfer or assignment of its rights or interests hereunder. Any failure by
the Company to fulfill a covenant or obligation hereunder which is the direct
result of a failure by a Holder to provide such notice shall not be deemed to be
a breach of any covenant or obligation hereunder.
Nothing in this Agreement shall be construed to create any rights or
obligations except among the parties hereto and their respective and permitted
successors and assigns, and no person or entity shall be regarded as a
third-party beneficiary of this Agreement.
Except as provided in Section 10(a) above, all notices, requests,
consents and other communications hereunder shall be in writing, shall be
addressed to the receiving party's address set forth below or to such other
address as a party may designate by notice hereunder, and shall be either (i)
delivered by hand, (ii) sent by overnight courier, with a receipt obtained or
(iii) sent by registered or certified mail, return receipt requested, postage
prepaid.
If to the Company: Occupational Health + Rehabilitation Inc
175 Derby Street, Suite 36
Hingham, MA 02043-5048
Attn: John C. Garbarino, President and
Chief Executive Officer
If to the Holder: Argosy Health, L.P.
120 Gibraltar Road, Suite 310
Horsham, PA 19044
Attn: G. Linton Sheppard
All notices, requests, consents and other communications hereunder shall
be deemed to have been given (i) if by hand, at the time of the delivery thereof
to the receiving party at the address of such party set forth above, (ii) if
sent by overnight courier, on the next business day following the day such
notice is delivered to the courier service, or (iii) if sent by registered or
certified mail, on the 5th business day following the day such mailing is made.
(c) This Agreement shall be governed and construed in accordance with
the law of the Commonwealth of Massachusetts, without giving effect to the
conflict of laws principles thereof.
(d) This Agreement may be amended or modified, and any provision hereof
may be waived in whole or in part, but only by the written consent of the
Company and the holders of at
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<PAGE>
least two-thirds of the aggregate number of outstanding shares of Restricted
Stock held of record by the Holders or their permitted successors and assigns.
This Agreement may be terminated by written agreement of the Company and the
holders of at least two-thirds of the aggregate number of outstanding shares of
Restricted Stock held of record by the Holders or their permitted successors and
assigns.
(e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) Except as otherwise expressly provided herein, the obligations of
the Company to register shares of Restricted Stock under Section 4 as provided
herein shall terminate on the third anniversary of the date of this Agreement.
(g) If requested by the underwriter or underwriters for an underwritten
public offering of securities of the Company which offering is by the Company,
each Holder of Restricted Stock who is a party to this Agreement (including,
without limitation, a successor or permitted assignee of a party) shall agree
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any shares of Restricted Stock or any other shares of
Common Stock (other than shares being registered in such offering), without the
consent of such underwriter or underwriters, for a period of not more than 90
days following the effective date of the registration statement relating to such
offering (unless in any event such underwriter or underwriters shall, based on
then current market conditions, agree to a shorter period), provided, however,
with respect to each such offering, that all persons entitled to registration
rights in such offering who are not parties to this Agreement, all other persons
selling shares of Common Stock in such offering and all executive officers of
the Company shall also have agreed to be bound by provisions pertaining to the
sale of their shares of Common Stock following such offering which provisions
are substantially similar to the provisions binding upon the Holders of
Restricted Stock obligated under this Agreement with respect to the sale of
their shares following such offering.
(h) The Company shall be permitted to require any Holders requesting
registration under Section 4 to delay any request for registration or to cease
sales under any effective registration statement if the Company is then
contemplating a transaction that could reasonably be expected to be adversely
affected or the Company would be required to make public disclosure of
information, the disclosure of which at such time could reasonably be expected
to cause a material adverse effect upon the Company's business.
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
In the event that any court of competent jurisdiction shall determine
that any provision, or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any
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<PAGE>
respect, then such provision shall be deemed limited to the extent that such
court deems it reasonable and enforceable, and as so limited shall remain in
full force and effect.
(j) The headings and captions of the various subdivisions of this
Agreement are for convenience of reference only and shall in no way modify, or
affect the meaning or construction of any of the terms or provisions hereof.
11. Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding among the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
related to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereof have caused this Registration
Rights Agreement to be executed under seal as of the date first above written.
OCCUPATIONAL HEALTH +
REHABILITATION INC
By:
---------------------------
John C. Garbarino
Its President and
Chief Executive Officer
ARGOSY HEALTH, L.P.
By: Gwynedd Partners, Inc.
By:
-----------------------
Name:
---------------------
Title:
--------------------
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<PAGE>
EXHIBIT 10.05(b)
----------------
AMENDMENT NO. 1 TO
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT (the
"Amendment") is made and entered into as of the 6th day of November, 1996, by
and between OCCUPATIONAL HEALTH + REHABILITATION INC, a Delaware corporation
(the "Company") and Argosy Health, L.P., a Pennsylvania limited partnership (the
"Holder"), pursuant to the terms of that certain Registration Rights Agreement
dated as of September 11, 1996 (the "Original Agreement") by and between the
Company and the Holder. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Original Agreement.
WITNESSETH
WHEREAS, the Company and the Holder entered into the Original
Agreement; and
WHEREAS, simultaneously with the execution of this Amendment, in
connection with and as a condition to the Company's sale of its Series A
Convertible Preferred Stock, the Company will enter into that certain
Registration Rights Agreement dated as of the date hereof (the "Investor Rights
Agreement") with certain investors of the Company listed on Schedule A thereto;
and
WHEREAS, the Investor Rights Agreement includes certain provisions
relating to underwriter cutbacks which are inconsistent with the Original
Agreement and provides certain additional rights to holders with Rule 144
rights; and
WHEREAS, the Holder holds at least two-thirds of the aggregate number
of outstanding shares of Restricted Stock held by the Holders or their permitted
successors and assigns; and
WHEREAS, the Company and the Holder desire to amend the Original
Agreement pursuant to Section 10(d) thereof in order to improve the consistency
among the registration rights granted by the Company;
NOW THEREFORE, the Original Agreement is hereby amended as follows,
effective as of the date and year first above written:
<PAGE>
1. The last sentence of Section 4 of the Original Agreement entitled
"Incidental Registration" is hereby deleted in its entirety and the following
substituted in lieu thereof:
In the event that any registration pursuant to this Section 4 shall
be, in whole or in part, an underwritten public offering of Common
Stock, the number of shares of Restricted Stock to be included in
such an underwriting may be reduced if and to the extent that the
managing underwriter shall be of the opinion that such inclusion
would adversely affect the marketing of the securities to be sold by
the Company or the requesting party therein or that such reduction is
otherwise advisable, provided, however, that after any shares to be
sold by selling holders that do not have contractual rights to have
shares included in such registration have been excluded, shares to be
sold by the Holders shall be excluded in such manner that the shares
to be excluded shall first be the shares of selling Holders and other
requesting holders who, in each case, are not affiliates (as defined
in Rule 144 of the Securities Act) of the Company (the "Affiliate
Holders") and whose shares are then saleable under Rule 144(e) or
Rule 144(k) under the Securities Act and then pro rata among them,
and if further reduction is necessary, shall next be pro rata among
the remaining shares of the selling Holders and other requesting
holders who are Affiliate Holders or whose shares are not then
saleable under Rule 144(e) or Rule 144(k), unless such registration
is pursuant to the exercise of a demand right of another security
holder, in which event such security holder shall be entitled to
include all shares it desires to have so included before any shares
of Restricted Stock or shares of any other holder are included
therein and provided, however, that notwithstanding anything in this
Agreement to the contrary, in respect of the first underwritten
public offering following the date of the Investor Rights Agreement,
no reduction shall reduce the number of shares which may be sold by
requesting holders who are parties to the Investor Rights Agreement
to less than 25% of the shares to be sold in such offering.
2. The last paragraph of Section 9 of the Original Agreement is hereby
deleted in its entirety and the following substituted in lieu thereof:
The Company shall not be required to effect a registration
pursuant to Section 4 hereof for any Holder desiring to participate
in such registration who (a) may then dispose of all of its shares of
Restricted Stock pursuant to Rule 144 within the three-month period
following such proposed registration; and (b) holds less than 1% of
the outstanding capital stock of the Company (on a common
stock-equivalent basis) at the time of such registration.
3. The term "Agreement" as used in the Original Agreement shall mean the
Original Agreement, as amended by this Amendment.
4. As so amended by this Amendment, the Original Agreement shall remain
in full force and effect.
-2-
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Amendment to be
signed in counterpart or otherwise by its duly authorized officer or partner, as
the case may be, as of the date and year first written above.
COMPANY:
OCCUPATIONAL HEALTH +
REHABILITATION INC
By:
-----------------------------------
John C. Garbarino
Its President and Chief Executive Officer
HOLDER:
ARGOSY HEALTH, L.P.
By: Gwynedd Partners, Inc.
By:
--------------------------------
Name:
---------------------------
Title: Its President
-3-
<PAGE>
EXHIBIT 10.06(a)
----------------
================================================================================
OCCUPATIONAL HEALTH + REHABILITATION INC
Series A Convertible Preferred Stock Purchase Agreement
Dated as of November 6, 1996
================================================================================
<PAGE>
Occupational Health + Rehabilitation Inc
175 Derby Street, Suite 36
Hingham, Massachusetts 02043-5048
As of November 6, 1996
TO: The Persons listed on Schedule I hereto
----------
Re: Series A Convertible Preferred Stock
------------------------------------
Ladies and Gentlemen:
Occupational Health + Rehabilitation Inc, a Delaware corporation (the
"Company"), agrees with each of you as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.01 The Initial Preferred Shares. The Company has authorized the issuance
--- ------- --------- ------
and sale of 1,416,667 shares (the "Initial Preferred Shares") of its previously
authorized but unissued shares of Series A Convertible Preferred Stock, $.001
par value (the "Series A Preferred Stock") at a purchase price of $6.00 per
share to the persons (collectively, the "Purchasers" and, individually, a
"Purchaser") and in the respective amounts set forth in Schedule I hereto. The
----------
designation, rights, preferences and other terms and conditions relating to the
Series A Preferred Stock shall be as set forth on Exhibit 1.01A hereto (the
-------------
"Certificate of Designations").
1.02 The Additional Preferred Shares. Subject to the terms and conditions
--- ---------- --------- ------
hereof, the Company has authorized the issuance at an Additional Closing (as
hereinafter defined) of up to an additional 250,000 shares of Series A Preferred
Stock (said additional 250,000 shares of Series A Preferred Stock being
sometimes collectively referred to in this Agreement as the "Additional
Preferred Shares;" and the Initial Preferred Shares and the Additional Preferred
Shares being sometimes collectively referred to as the "Purchased Shares").
1.03 The Converted Shares. The Company has authorized and has reserved and
--- --------- ------
covenants to continue to reserve, free of preemptive rights and other
preferential rights, a sufficient number of its previously authorized but
unissued shares of Common Stock to satisfy the rights of conversion of the
holders of the Purchased Shares. Any shares of Common Stock issuable upon
conversion of the Purchased Shares, and such shares when issued, are herein
referred to as the "Converted Shares."
<PAGE>
-2-
1.04 The Shares. The Purchased Shares and the Converted Shares are
--- ------
sometimes collectively referred to herein as the "Shares."
1.05 Purchase Price and Closings.
-------- ----- --- --------
(a) The Company agrees to issue and sell to the Purchasers
and, subject to and in reliance upon the representations, warranties, covenants,
terms and conditions of this Agreement, the Purchasers, severally but not
jointly, agree to purchase that number of the Initial Preferred Shares set forth
opposite their respective names in Schedule I. The aggregate purchase price of
----------
the Initial Preferred Shares being purchased by each Purchaser is set forth
opposite such Purchaser's name in Schedule I. The initial purchase and sale
----------
shall take place at a closing (the "Initial Closing") to be held at the offices
of Messrs. Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street,
Boston, Massachusetts 02110, on November 6, 1996, at 10:00 A.M., or at such
other location, on such other date and at such time as may be mutually agreed
upon. At the Initial Closing, the Company will issue and deliver certificates
evidencing the Initial Preferred Shares to be sold at such Initial Closing to
each of the Purchasers (or its nominee) against payment of the full purchase
price therefor by wire transfer or check payable to the order of the Company.
(b) The Additional Closing. Provided that the Company is not
----------------------
then in default under this Agreement and subject to the provisions of Section
2.04, the Company may, with the written consent of a majority in interest of the
Purchasers, upon not less than 10 days' notice given prior to May 6, 1997, offer
to the Purchasers the option to purchase, and each Purchaser may, at its option,
so purchase, subject to and in reliance upon the representations, warranties,
terms and conditions of this Agreement and upon the terms and conditions
hereinafter set forth, that number of Additional Preferred Shares set forth
opposite the name of such Purchaser on Schedule I attached hereto, under the
----------
heading "Additional Preferred Shares." Any Additional Preferred Shares not
subscribed for by the Purchasers pursuant to the previous sentence (the
"Shortfall Shares") may be purchased by the Purchasers that did subscribe for
Additional Preferred Shares pursuant to the previous sentence (the
"Participating Purchasers"). Each Participating Purchaser shall have the right
to purchase up to that number of Shortfall Shares as shall be determined by
multiplying the total number of Shortfall Shares by a fraction the numerator of
which shall be the sum of the Initial Preferred Shares and the Additional
Preferred Shares subscribed for by such Participating Purchaser, and the
denominator of which shall be the total number of Initial Preferred Shares and
Additional Preferred Shares, in each case subscribed for by all such
Participating Purchasers. Any Shortfall Shares not so subscribed for pursuant to
this Section 1.05(b) shall be subscribed for by Cahill, Warnock Strategic
Partners Fund, L.P. and/or Strategic Associates, L.P. in proportions to be
determined in the sole discretion of Cahill, Warnock & Company, LLC. In the
event that the Shortfall Shares to be subscribed for by a Participating
Purchaser is determined to include fractional shares, such Participating
Purchaser shall be permitted to purchase the number of shares determined by
rounding such Participating Purchaser's allocated number of Shortfall Shares to
the nearest whole number. The per share purchase price for each such Additional
Preferred Share (as constituted on the date hereof) to be purchased pursuant to
this Agreement shall be $6.00. Such purchase and sale of Additional Preferred
<PAGE>
-3-
Shares, if any, shall take place at a closing (the "Additional Closing") at the
offices of Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street,
Boston, Massachusetts 02110, on such date or dates as the Company and the
Purchasers may agree, but in all events on or prior to May 6, 1997. At the
Additional Closing the Company will issue and deliver the certificates
evidencing the Additional Preferred Shares sold at such Additional Closing to
each of the Purchasers (or its nominee) against payment of the full purchase
price therefor by wire transfer or check payable to the order of the Company.
1.06 Use of Proceeds. The Company shall use the proceeds from the
--- -- --------
sale of the Purchased Shares for working capital and general corporate purposes.
ARTICLE II
CONDITIONS TO PURCHASERS' OBLIGATION
The obligation of each Purchaser to purchase and pay for the
Purchased Shares to be purchased by it at the Initial Closing is subject to the
following conditions:
2.01 Representations and Warranties. Each of the representations
--------------- --- ----------
and warranties of the Company set forth in Article III hereof shall be true and
correct on the date of the Initial Closing.
2.02 Documentation at Initial Closing. The Purchasers shall have
------------- -- ------- -------
received prior to or at the Initial Closing all of the following documents or
instruments, or evidence of completion thereof, each in form and substance
satisfactory to the Purchasers and their special counsel:
(a) A copy of the Certificate of Incorporation of the Company,
certified by the Secretary of State of the State of Delaware together with a
certified copy of the Certificate of Designations, a copy of the resolutions of
the Board of Directors and, if required, the stockholders of the Company
evidencing the adoption of the Company's Certificate of Designations, the
approval of this Agreement, the issuance of the Purchased Shares and the other
matters contemplated hereby, and a copy of the By-laws of the Company, all of
which shall have been certified by the Secretary of the Company to be true,
complete and correct in every particular, and certified copies of all documents
evidencing other necessary corporate or other action and governmental approvals,
if any, with respect to this Agreement and the Shares.
(b) The opinion of Shipman & Goodwin LLP, counsel to the
Company, substantially to the effect that:
(i) The Company and its corporate subsidiary are
corporations duly incorporated, validly existing and in good standing
under the laws of their respective jurisdictions of incorporation.
The Company's limited liability company
<PAGE>
-4-
subsidiary is a limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and is not licensed or qualified as a foreign limited
liability company in any jurisdiction. To the knowledge of such
counsel, Schedule III to this Agreement contains a complete list of
------------
all subsidiaries of the Company and the Company's equity interest
therein. The Company is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in
Massachusetts, Rhode Island, Vermont, Maine, New Jersey, New York,
Pennsylvania and each other jurisdiction in which it owns or leases
real property. Each of the Company and its subsidiaries has the
corporate power or entity power, as the case may be, and authority to
own and hold its properties and to carry on its business as currently
conducted. The Company has the corporate power and authority to
execute, deliver and perform this Agreement, the Registration Rights
Agreement and the Stockholders' Agreement, to issue, sell and deliver
the Purchased Shares and, upon conversion thereof, to issue and
deliver the Converted Shares.
(ii) This Agreement, the Registration Rights Agreement and
the Stockholders' Agreement have been duly authorized, executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their
respective terms (subject, as to enforcement of remedies, to the
discretion of courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting the rights of creditors generally), except that such
counsel need not express any opinion as to the validity or
enforceability of the indemnification and contribution provisions of
the Registration Rights Agreement.
(iii) The execution and delivery by the Company of this
Agreement, the Registration Rights Agreement and the Stockholders'
Agreement, the performance by the Company of its obligations
hereunder and thereunder, the issuance, sale and delivery of the
Purchased Shares and, upon conversion thereof, the issuance and
delivery of the Converted Shares, will not violate any provision of
law, the Charter or By-laws, as amended, of the Company, any order of
any court or other agency of government or any indenture, agreement
or other instrument known to such counsel to which the Company, its
subsidiaries or any of their respective properties or assets is
bound, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation
or imposition of any lien, charge, restriction, claim or encumbrance
of any nature whatsoever upon any of the properties or assets of the
Company or its subsidiaries. In rendering the foregoing opinion, such
counsel may assume full disclosure to the Purchasers of all material
facts and, with respect to performance by the Company of its
obligations under the Registration Rights Agreement, may assume
compliance by the Company at such time with the registration
requirements of the Securities Act and with applicable state
securities laws and may disclaim any opinion as to the validity or
<PAGE>
-5-
enforceability of the indemnification and contribution provisions of
the Registration Rights Agreement.
(iv) The authorized capital stock of the Company consists of
(i) 5,000,000 shares of Preferred Stock, of which 1,666,667 shares
have been designated Series A Convertible Preferred Stock, and (ii)
10,000,000 shares of Common Stock. Immediately prior to the Closing,
1,471,480 shares of Common Stock will be duly authorized, validly
issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof and no shares of Preferred Stock
will have been issued. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class
or series of authorized capital stock of the Company are as set forth
in the Charter, and all such designations, powers, preferences,
rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable laws
(subject, as to enforcement, to the discretion of courts in awarding
equitable relief and to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of
creditors generally). Except as set forth in Schedule IV, to the
-----------
knowledge of such counsel, immediately prior to the Closing no
subscription, warrant, option, convertible security, or other right
(contingent or other) to purchase or acquire equity securities of the
Company will be authorized or outstanding and there will be no
commitment by the Company to issue shares, subscriptions, warrants,
options, convertible securities, or other such rights or to
distribute to holders of any of its equity securities any evidence of
indebtedness or asset. Except as set forth in Schedule IV or as
-----------
provided for in the Charter, to the knowledge of such counsel the
Company has no obligation (contingent or other) to purchase, redeem
or otherwise acquire any of its equity securities or any interest
therein or to pay any dividend or make any other distribution in
respect thereof.
(v) The issuance, sale and delivery of the Purchased Shares
and the issuance and delivery of the Converted Shares upon conversion
of the Purchased Shares have been duly authorized by all required
corporate action. Upon payment therefore in accordance with this
Agreement, the Purchased Shares will have been validly issued, are
fully paid and nonassessable with no personal liability attaching to
the ownership thereof and, to the knowledge of such counsel, are free
and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in
the Registration Rights Agreement and the Stockholders' Agreement and
as imposed by applicable federal and state securities laws; and the
Converted Shares have been duly reserved for issuance upon conversion
of the Purchased Shares and, when so issued, will be validly issued,
fully paid and nonassessable with no personal liability attaching to
the ownership thereof and, to the knowledge of such counsel, will be
free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in
the Registration Rights Agreement and the Stockholders' Agreement and
as imposed by applicable federal and state securities laws. Neither
the issuance, sale or delivery of the Purchased Shares nor the
issuance or delivery
<PAGE>
-6-
of the Converted Shares is subject to any preemptive right of
stockholders of the Company arising under law or the Charter or By-
laws of the Company, each as amended, or, to the knowledge of such
counsel, to any contractual right of first refusal or other right in
favor of any person.
(vi) Except as described in Schedule II, to the knowledge of
-----------
such counsel there is no (A) action, suit, claim, proceeding or
investigation pending or threatened against or affecting the Company
or any of its subsidiaries, at law or in equity, or before or by any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, (B) arbitration proceeding relating to the Company or any of
its subsidiaries pending under collective bargaining agreements or
(C) governmental inquiry pending or threatened against or affecting
the Company or any of its subsidiaries (including, without
limitation, any inquiry as to the qualification of the Company or any
of its subsidiaries to hold or receive any license or permit). To the
knowledge of such counsel, neither the Company nor any of its
subsidiaries is in default with respect to any order, writ,
injunction or decree known to such counsel of any court or of any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign.
(vii) Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Article III, no
registration or filing with, and no consent or approval of, or other
action by any federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution,
delivery and performance by the Company of this Agreement, the
Registration Rights Agreement and the Stockholders' Agreement, the
issuance, sale and delivery of the Purchased Shares or, upon
conversion thereof, the issuance and delivery of the Converted
Shares, other than filings pursuant to state securities laws (all of
which filings, other than those which are required to be made after
the Closing, have been made by the Company). In rendering the
foregoing opinion with respect to performance by the Company of its
obligations under the Registration Rights Agreement, such counsel may
assume compliance by the Company at such time with the registration
requirements of the Securities Act and with applicable state
securities laws and may disclaim any opinion as to the validity or
enforceability of the indemnification and contribution provisions of
the Registration Rights Agreement.
(c) A certificate of the Secretary or an Assistant Secretary of
the Company which shall certify the names of the officers of the Company
authorized to sign this Agreement, the certificates for the Purchased Shares and
the other documents, instruments or certificates to be delivered pursuant to
this Agreement by the Company or any of its officers, together with the true
signatures of such officers. The Purchasers may conclusively rely on such
certificate until they shall receive a further certificate of the Secretary or
an Assistant Secretary of the Company cancelling or amending the prior
certificate and submitting the signatures of the officers named in such further
certificate.
<PAGE>
-7-
(d) A certificate of the President of the Company stating that the
representations and warranties of the Company contained in Article III hereof
and otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct and that all conditions required to be
performed prior to or at the Initial Closing have been performed as of the
Initial Closing.
(e) The Restated Certificate of Incorporation of the Company (the
"Charter") shall provide for the designation of the rights and preferences of
the Series A Preferred Stock in the form set forth in Exhibit 1.01A attached
-------------
hereto.
(f) A Stockholders' Agreement in the form set forth in Exhibit 2.02F
-------------
(the "Stockholders' Agreement") shall have been executed by the parties named
therein.
(g) Certificates of Good Standing for the Company from the Secretaries
of State of Delaware, Massachusetts, Rhode Island, Vermont, Maine, New Jersey,
New York, Pennsylvania and all other jurisdictions in which the Company is
qualified to do business as a foreign corporation shall have been provided to
the Purchasers and their special counsel.
(h) Payment for the costs, expenses, taxes and filing fees identified
in Section 8.04.
(i) The Board of Directors of the Company following the Initial
Closing shall consist of seven (7) members, of which the current members shall
be: John C. Garbarino, Angus M. Duthie, Kevin J. Dougherty, John K. Herdklotz
and Edward L. Cahill, with the remaining members to be designated in accordance
with the Stockholders' Agreement.
(j) The Company and the Purchasers shall have entered into a
Registration Rights Agreement in the form set forth in Exhibit 2.02J (the
------------------
"Registration Rights Agreement").
- --------------------------------
(k) The Company's By-laws shall be in form and substance reasonably
satisfactory to the Purchasers and their special counsel.
(l) Participation of all Purchasers specified on Schedule I hereto in
----------
the transactions.
2.03 Consents, Waivers, Etc. Prior to the Initial Closing, the Company shall
-------- ------- ---
have obtained all consents or waivers, if any, necessary to execute and deliver
this Agreement, issue the Initial Preferred Shares and to carry out the
transactions contemplated hereby and thereby, and all such consents and waivers
shall be in full force and effect. All corporate and other action and
governmental filings necessary to effectuate the terms of this Agreement, the
Initial Preferred Shares and other agreements and instruments executed and
delivered by the Company in connection herewith shall have been made or taken,
except for any post-sale filing that may be required under federal or state
securities laws. In addition to the documents set
<PAGE>
-8-
forth above, the Company shall have provided to the Purchasers any other
information or copies of documents that they may reasonably request.
2.04 Conditions Precedent to Additional Closings. The respective
---------- --------- -- ---------- --------
several obligations of the Purchasers to purchase and pay for the Additional
Preferred Shares to be purchased at the Additional Closing are subject to (i)
the written consent of a majority in interest of the Purchasers, (ii) the
continuing performance in all material respects of all agreements by the Company
contained in this Agreement and the Stockholders' Agreement, and (iii) the
delivery to each Purchaser of a certificate, dated the date of such Additional
Closing, signed by the President of the Company, to the effect that (A) other
than as disclosed in a schedule, which shall be reasonably satisfactory to a
majority in interest of the Purchasers, attached to such certificate or as
contemplated by this Agreement, the representations and warranties of the
Company contained in Article III hereof were true and correct when made and are
true and correct in all material respects on and as of the date of such
Additional Closing (it being understood that, in the latter case, any reference
to the Closing contained in said Article III shall be deemed to be a reference
to such Additional Closing), (B) the Company has performed and complied in all
material respects with all covenants, agreements and conditions contained in
this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement required to be performed or complied with by it on or prior to the
date of the Additional Closing, and (C) since the date of the Initial Closing,
there has not occurred (or is likely to occur) any material adverse event with
respect to the Company or its operations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company, together with its subsidiaries, represents and warrants to
the Purchasers that, except as set forth in the Disclosure Schedule attached as
Schedule II (which Disclosure Schedule makes explicit reference to the
- -----------
particular representation or warranty as to which exception is taken, which in
each case shall constitute the sole representation and warranty as to which such
exception shall apply):
3.01 Organization, Qualifications and Corporate Power.
------------------------------------------------
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification and where the failure to be so
qualified would have a material adverse effect on the Company. The Company has
the corporate power and authority to own and hold its properties and to carry on
its business as now conducted and as proposed to be conducted, to execute,
deliver and perform this Agreement, the Registration Rights Agreement and the
Stockholders' Agreement to issue, sell and deliver the Preferred Shares and to
issue and deliver the Converted Shares.
<PAGE>
-9-
(b) The attached Schedule III contains a list of all subsidiaries of
------------
the Company and its equity interest therein. Except for such subsidiaries, the
Company does not (i) own of record or beneficially, directly or indirectly, (A)
any shares of capital stock or securities convertible into capital stock of any
other corporation or (B) any participating interest in any partnership, joint
venture or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity. Each of the Company's corporate subsidiary and
limited liability company subsidiary is a corporation or limited liability
company duly incorporated or organized, as the case may be, validly existing and
in good standing under the laws of its respective jurisdiction of incorporation
or organization, as the case may be, and is duly licensed or qualified to
transact business as a foreign corporation or limited liability company, as the
case may be, and is in good standing in each jurisdiction in which the nature of
the business transacted by it or the character of the properties owned or leased
by it requires such licensing or qualification and where the failure to be so
qualified would have a material adverse effect on the Company. Each of the
subsidiaries referenced above has the corporate power or entity power, as the
case may be, and authority to own and hold its properties and to carry on its
business as now conducted and as proposed to be conducted. All of the
outstanding shares of capital stock or equity interests, as the case may be, of
each of the subsidiaries are owned beneficially and of record by the Company,
one of its other subsidiaries, or any combination of the Company and/or one or
more of its other subsidiaries, in each case free and clear of any liens,
charges, restrictions, claims or encumbrances of any nature whatsoever; and
there are no outstanding subscriptions, warrants, options, convertible
securities, or other rights (contingent or other) pursuant to which any of the
subsidiaries is or may become obligated to issue any shares of its capital stock
or equity interests, as the case may be, to any person other than the Company or
one of the other subsidiaries.
3.02 Authorization of Agreements, Etc.
--------------------------------
(a) The execution and delivery by the Company of this Agreement, the
Registration Rights Agreement and the Stockholders' Agreement, the performance
by the Company of its obligations hereunder and thereunder, the issuance, sale
and delivery of the Purchased Shares and the issuance and delivery of the
Converted Shares have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Charter or the By-laws of the Company, as amended, or any
provision of any indenture, agreement or other instrument to which the Company,
any of its subsidiaries or any of their respective properties or assets is
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company or any of its subsidiaries. To the best of
the Company's knowledge, no provision of the Stockholders' Agreement violates,
conflicts with, results in a breach of or constitutes (with due notice or lapse
of time or both) a default by any other party under any other indenture,
agreement or instrument.
<PAGE>
-10-
(b) The Purchased Shares have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Series A Preferred Stock with no personal liability
attaching to the ownership thereof and will be free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the Company
except as set forth in the Registration Rights Agreement and the Stockholders'
Agreement and as imposed by applicable federal and state securities laws. The
Converted Shares have been duly reserved for issuance upon conversion of the
Purchased Shares and, when so issued, will be duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock with no personal liability
attaching to the ownership thereof and will be free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the Company
except as set forth in the Registration Rights Agreement and the Stockholders'
Agreement and as imposed by applicable federal and state securities laws.
Neither the issuance, sale or delivery of the Purchased Shares nor the issuance
or delivery of the Converted Shares is subject to any preemptive right of
stockholders of the Company or to any right of first refusal or other right in
favor of any person.
3.03 Validity. This Agreement has been duly executed and delivered by
--------
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally). The Registration
Rights Agreement and the Stockholders' Agreement, when executed and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms (subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally).
3.04 Authorized Capital Stock. The authorized capital stock of the Company
------------------------
consists of (i) 5,000,000 shares of Preferred Stock, $.001 par value (the
"Preferred Stock"), of which 1,666,667 shares have been designated Series A
Preferred Stock, and (ii) 10,000,000 shares of Common Stock. Immediately prior
to the Closing, 1,471,480 shares of Common Stock will be validly issued and
outstanding, fully paid and nonassessable with no personal liability attaching
to the ownership thereof and no shares of Preferred Stock will have been issued.
The stockholders of record owning more than 5% of the outstanding shares of the
Common Stock of the Company and holders of subscriptions, warrants, options,
convertible securities, and other rights (contingent or other) to purchase or
otherwise acquire equity securities of the Company, and the number of shares of
Common Stock and the number of such subscriptions, warrants, options,
convertible securities, and other such rights held by each, are as set forth in
the attached Schedule IV. The designations, powers, preferences, rights,
-----------
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of the Company are as set forth in the Charter and
Certificate of Designations, a copy of which is attached as Exhibit 1.01A, and
-------------
all such designations, powers, preferences, rights, qualifications, limitations
and restrictions are valid, binding and enforceable and in accordance with all
applicable laws. Except as set forth in the attached Schedule IV, (i) no
-----------
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of the Company is
authorized or outstanding and (ii) there
<PAGE>
-11-
is no commitment by the Company to issue shares, subscriptions, warrants,
options, convertible securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of indebtedness or asset.
Except as provided for in the Charter or as set forth in the attached Schedule
--------
IV, the Company has no obligation (contingent or other) to purchase, redeem or
- --
otherwise acquire any of its equity securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof. Except for the
Stockholders' Agreement, to the best of the Company's knowledge there are no
voting trusts or agreements, stockholders' agreements, pledge agreements, buy-
sell agreements, rights of first refusal, preemptive rights or proxies relating
to any securities of the Company or any of its subsidiaries (whether or not the
Company or any of its subsidiaries is a party thereto). All of the outstanding
securities of the Company were issued in compliance with all applicable federal
and state securities laws.
3.05 Financial Statements. The Company has furnished to the
--------------------
Purchasers the audited consolidated balance sheet of Telor Ophthalmic
Pharmaceuticals, Inc., Occupational Health + Rehabilitation Inc and their
subsidiaries (collectively, the "Predecessor Companies") as of December 31, 1995
and the related audited consolidated statements of income, stockholders' equity
and cash flows of the Predecessor Companies for the year ended December 31,
1995, the Unaudited Pro Forma Combined Financial Information as of December 31,
1995 as disclosed in the Offering Memorandum and Proxy Statement dated May 15,
1996 (the "Proxy Statement"), the unaudited consolidated balance sheet of the
Company and its subsidiaries as of June 30, 1996 (the "Balance Sheet") and the
related unaudited consolidated statements of income, stockholders' equity and
cash flows of the Company and its subsidiaries for the 6 months ended June 30,
1996. All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except that such
unaudited financial statements do not contain all of the required footnotes and
interim statements do not contain year-end adjustments), or where different from
generally accepted accounting principles, SEC requirements, and fairly present
the consolidated financial position of the Predecessor Companies, the Company
and its subsidiaries as of December 31, 1995 and June 30, 1996, respectively,
and the consolidated results of their operations and cash flows of the
Predecessor Companies, the Company and its subsidiaries for the year ended
December 31, 1995 and the 6 months ended June 30, 1996, respectively. Since the
date of the Balance Sheet, (i) there has been no change in the assets,
liabilities or financial condition of the Company and its subsidiaries (on a
consolidated basis) from that reflected in the Balance Sheet except for changes
in the ordinary course of business which in the aggregate have not been
materially adverse and (ii) none of the business, prospects, financial
condition, operations, property or affairs of the Company and its subsidiaries
(on a consolidated basis) has been materially adversely affected by any
occurrence or development, individually or in the aggregate, whether or not
insured against.
3.06 Events Subsequent to the Date of the Balance Sheet. Since the
--------------------------------------------------
date of the Balance Sheet, the Company has not (i) issued any stock, bond or
other corporate security, (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred
<PAGE>
-12-
or paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Balance Sheet and current liabilities incurred
since the date of the Balance Sheet in the ordinary course of business, (iv)
declared or made any payment or distribution to stockholders or purchased or
redeemed any share of its capital stock or other security, (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or cancelled any debt or claim, (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service mark, copyright, trade secret or other
intangible asset, (viii) suffered any loss of property or waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation except in the ordinary course of business and
consistent with past practice, (x) made any material change in the manner of
business or operations of the Company, (xi) entered into any transaction except
in the ordinary course of business or as otherwise contemplated hereby or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
3.07 Litigation; Compliance with Law. There is no (i) action, suit,
-------------------------------
claim, proceeding or investigation pending or, to the best of the Company's
knowledge, threatened against or affecting the Company, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii)
arbitration proceeding relating to the Company pending under collective
bargaining agreements or otherwise or (iii) governmental inquiry pending or, to
the best of the Company's knowledge, threatened against or affecting the Company
(including without limitation any inquiry as to the qualification of the Company
to hold or receive any license or permit), and, to the best of the Company's
knowledge, there is no basis for any of the foregoing. The Company has not
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business, prospects, financial
condition, operations, property or affairs. The Company is not in default with
respect to any order, writ, injunction or decree known to or served upon the
Company of any court or of any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign. There is no action or suit by the Company pending, or threatened or
contemplated against others. The Company has complied in all material respects
with all laws, rules, regulations and orders applicable to its business,
operations, properties, assets, products and services, the Company has all
necessary permits, licenses and other authorizations required to conduct its
business as conducted and as proposed to be conducted, and the Company has been
operating its business pursuant to and in compliance with the terms of all such
permits, licenses and other authorizations. There is no existing law, rule,
regulation or order, and the Company after due inquiry is not aware of any
proposed law, rule, regulation or order, whether federal, state, county or
local, which would prohibit or restrict the Company from, or otherwise
materially adversely affect the Company in, conducting its business in any
jurisdiction in which it is now conducting business or in which it proposes to
conduct business.
<PAGE>
-13-
3.08 Proprietary Information of Third Parties. To the best of the
----------------------------------------
Company's knowledge, no third party has claimed or has reason to claim that any
person employed by or affiliated with the Company has (a) violated or may be
violating any of the terms or conditions of his or her employment,
non-competition or non-disclosure agreement with such third party, (b) disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or (c) interfered
or may be interfering in the employment relationship between such third party
and any of its present or former employees. No third party has requested
information from the Company which suggests that such a claim might be
contemplated. To the best of the Company's knowledge, no person employed by or
affiliated with the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer, and to
the best of the Company's knowledge, no person employed by or affiliated with
the Company has violated any confidential relationship which such person may
have had with any third party, in connection with the development, manufacture
or sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such employment or violation. To the best of the
Company's knowledge, none of the execution or delivery of this Agreement, or the
carrying on of the business of the Company as officers, employees or agents by
any officer, director or key employee of the Company, or the conduct or proposed
conduct of the business of the Company, will conflict with or result in a breach
of the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which any such person is obligated.
3.09 Patents, Trademarks, Etc. Set forth in Schedule II is a list and
------------------------ -----------
brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names and registered copyrights, and all applications for
such which are in the process of being prepared, owned by or registered in the
name of the Company, or of which the Company is a licensor or licensee or in
which the Company has any right, and in each case a brief description of the
nature of such right. The Company owns or possesses adequate licenses or other
rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, copyrights,
manufacturing processes, formulae, trade secrets, customer lists and know how
(collectively, "Intellectual Property") necessary or desirable to the conduct of
its business as conducted and as proposed to be conducted, and no claim is
pending or, to the best of the Company's knowledge, threatened to the effect
that the operations of the Company infringe upon or conflict with the asserted
rights of any other person under any Intellectual Property, and, to the best of
the Company's knowledge, there is no basis for any such claim (whether or not
pending or threatened). No claim is pending or, to the best of the Company's
knowledge, threatened to the effect that any such Intellectual Property owned or
licensed by the Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company, and, to the best of the Company's
knowledge, there is no basis for any such claim (whether or not pending or
threatened). To the best of the Company's knowledge, all technical information
developed by and belonging to the Company which has not been patented has been
kept confidential. The Company has not granted or assigned to any other person
or entity any right to manufacture, have manufactured,
<PAGE>
-14-
assemble or sell the products or proposed products or to provide the services or
proposed services of the Company.
3.10 Title to Properties. The Company and its subsidiaries have good,
-------------------
clear and marketable title to their respective properties and assets reflected
on the Balance Sheet or acquired by them since the date of the Balance Sheet
(other than properties and assets disposed of in the ordinary course of business
since the date of the Balance Sheet), and all such properties and assets are
free and clear of mortgages, pledges, security interests, liens, charges,
claims, restrictions and other encumbrances (including without limitation,
easements and licenses), except for liens for or current taxes not yet due and
payable and minor imperfections of title, if any, not material in nature or
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed operations of
the Company and its subsidiaries, including without limitation, the ability of
the Company and its subsidiaries to secure financing using such properties and
assets as collateral. To the best of the Company's knowledge after due inquiry,
there are no condemnation, environmental, zoning or other land use regulation
proceedings, either instituted or planned to be instituted, which would
adversely affect the use or operation of the Company's and its subsidiaries'
properties and assets for their respective intended uses and purposes, or the
value of such properties, and neither the Company nor any subsidiary has
received notice of any special assessment proceedings which would affect such
properties and assets.
3.11 Leasehold Interests. Each lease or agreement to which the
-------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement, duly authorized and entered into, without
any default of the Company thereunder and, to the best of the Company's
knowledge, without any default thereunder of any other party thereto. No event
has occurred and is continuing which, with due notice or lapse of time or both,
would constitute a default or event of default by the Company under any such
lease or agreement or, to the best of the Company's knowledge, by any other
party thereto. The Company's possession of such property has not been disturbed
and, to the best of the Company's knowledge after due inquiry, no claim has been
asserted against the Company adverse to its rights in such leasehold interests.
3.12 Insurance. The Company holds valid policies covering all of
---------
the insurance required to be maintained by it under Section 4.04.
3.13 Taxes. The Company has filed all tax returns, federal, state,
-----
county and local, required to be filed by it, and the Company has paid all taxes
shown to be due by such returns as well as all other taxes, assessments and
governmental charges which have become due or payable (and are not the subject
of a valid extension of time), including without limitation all taxes which the
Company is obligated to withhold from amounts owing to employees, creditors and
third parties. The Company has established adequate reserves for all taxes
accrued but not yet payable. The Company has not received notice that its
federal income tax returns have been audited by the Internal Revenue Service. No
deficiency assessment with respect to or proposed adjustment of the Company's
federal, state, county or local taxes is pending or, to
<PAGE>
-15-
the best of the Company's knowledge, threatened. There is no tax lien (other
than for current taxes not yet due and payable), whether imposed by any federal,
state, county or local taxing authority, outstanding against the assets,
properties or business of the Company.
3.14 Other Agreements. Except as set forth in the attached Schedule
---------------- --------
V(A), the Company is not a party to or otherwise bound by any written or oral
- ----
agreement, instrument, commitment or restriction which individually or in the
aggregate has, or which the Company believes is likely to, materially adversely
affect the business, prospects, financial condition, operations, property or
affairs of the Company. Except as set forth in the attached Schedule V(B), the
-------------
Company is not a party to or otherwise bound by any written or oral:
(a) sales agency or similar agreement which is not terminable on
less than ninety (90) days' notice without cost or other liability to the
Company (except for agreements which, in the aggregate, are not material
to the business of the Company);
(b) agreement which entitles any customer to a rebate or right of
set-off, or which varies in any material respect from the Company's
standard form agreements;
(c) agreement with any labor union (and, to the knowledge of the
Company, no organizational effort is being made with respect to any of
its employees);
(d) agreement with any supplier or customer containing any provision
permitting any party other than the Company to renegotiate the price or
other terms, or containing any pay-back or other similar provision;
(e) agreement for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its
normal operating requirements;
(f) agreement for the employment of any officer, employee or other
person (whether of a legally binding nature or in the nature of informal
understandings) on a full-time or consulting basis which is not
terminable on notice without cost or other liability to the Company,
except normal severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option or other plan, agreement or
understanding pursuant to which benefits are provided to any employee of
the Company (other than group insurance plans which are not self-insured
and are applicable to employees generally);
(h) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security
interest on, any asset of the Company;
(i) voting trust or agreement, stockholders' agreement, pledge
agreement, buy-sell agreement or first refusal or preemptive rights
agreement relating to any securities of the Company;
<PAGE>
-16-
(j) agreement or obligation (contingent or otherwise) to issue, sell
or otherwise distribute or to repurchase or otherwise acquire or retire
any share of its capital stock or any of its other equity securities;
(k) assignment, license or other agreement with respect to any form
of intangible property;
(l) agreement under which it has granted any person any registration
rights, other than the Registration Rights Agreement;
(m) agreement under which it has limited or restricted its right to
compete with any person in any respect;
(n) other agreement or group of related agreements with the same
party involving more than $10,000 or continuing over a period of more
than six months from the date or dates thereof (including renewals or
extensions optional with another party), which agreement or group of
agreements is not terminable by the Company without penalty upon notice
of thirty (30) days or less, but excluding any agreement or group of
agreements with a customer of the Company for the Company's products or
services if such agreement or group of agreements was entered into by the
Company in the ordinary course of business; or
(o) other agreement, instrument, commitment, plan or arrangement, a
copy of which would be required to be filed with the Securities and
Exchange Commission (the "Commission") as an exhibit to a registration
statement on Form S-1 if the Company were registering securities under
the Securities Act of 1933, as amended (the "Securities Act") which has
not yet been filed with the Commission and a copy delivered to counsel
for the Purchasers.
The Company, and to the best of the Company's knowledge after due inquiry, each
other party thereto have in all material respects performed all the obligations
required to be performed by them to date (or each non-performing party has
received a valid, enforceable and irrevocable written waiver with respect to its
non-performance), have received no notice of default and are not in default
(with due notice or lapse of time or both) under any agreement, instrument,
commitment, plan or arrangement to which the Company is a party or by which it
or its property may be bound. The Company has no present expectation or
intention of not fully performing all its obligations under each such agreement,
instrument, commitment, plan or arrangement, and the Company has no knowledge of
any breach or anticipated breach by the other party to any agreement,
instrument, commitment, plan or arrangement to which the Company is a party. The
Company is in full compliance with all of the terms and provisions of its
Charter and By-laws, as amended.
3.15 Loans and Advances. The Company does not have any outstanding
------------------
loans or advances to any person and is not obligated to make any such loans or
advances, except, in each case, for advances to employees of the Company in
respect of reimbursable business
<PAGE>
-17-
expenses anticipated to be incurred by them in connection with their performance
of services for the Company.
3.16 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
--------------------------------------------------------------
The Company has not assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on any indebtedness of any other person (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor, or otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
3.17 Significant Customers and Suppliers. No customer or supplier
-----------------------------------
which was significant to the Company during the period covered by the financial
statements referred to in Section 3.05 or which has been significant to the
Company thereafter, has terminated, materially reduced or threatened to
terminate or materially reduce its purchases from or provision of products or
services to the Company, as the case may be.
3.18 Governmental Approvals. Subject to the accuracy of the
----------------------
representations and warranties of the Purchasers set forth in Article V, no
registration or filing with, or consent or approval of or other action by, any
federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement, the Registration Rights Agreement or the Stockholders'
Agreement, the issuance, sale and delivery of the Purchased Shares or, upon
conversion thereof, the issuance and delivery of the Converted Shares, other
than (i) filings pursuant to state securities laws (all of which filings have
been made by the Company, other than those which are required to be made after
the Closing and which will be duly made on a timely basis) in connection with
the sale of the Purchased Shares and (ii) with respect to the Registration
Rights Agreement, the registration of the shares covered thereby with the
Commission and filings pursuant to state securities laws.
3.19 Disclosure. Neither this Agreement, nor any Schedule or Exhibit
----------
to this Agreement, nor the Proxy Statement, nor the income summaries by center
and summaries regarding patient visits and revenue by center through August 31,
1996, nor the consolidated balance sheet of the Company as of August 31, 1996
contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading as
of the date hereof. None of the statements, documents, certificates or other
items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not disclosed to the Purchasers and their
counsel in writing and of which the Company is aware which materially and
adversely affects or could materially and adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company
or any of its subsidiaries. The financial projections and other estimates
provided to the Purchasers were prepared by the Company based on the Company's
experience in the industry and on assumptions of fact and opinion as to future
events which the Company believes to be
<PAGE>
-18-
reasonable, but which the Company cannot and does not assure or guarantee the
attainment of in any manner. As of the date hereof, no facts have come to the
attention of the Company which would, in its opinion, require the Company to
revise or amplify the assumptions underlying such projections and other
estimates or the conclusions derived therefrom.
3.20 Offering of the Purchased Shares. Neither the Company nor any
--------------------------------
person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Purchased Shares or any
security of the Company similar to the Purchased Shares has offered the
Purchased Shares or any such similar security for sale to, or solicited any
offer to buy the Purchased Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with Purchased Shares under the
Securities Act or the rules and regulations of the Commission thereunder), in
either case so as to subject the offering, issuance or sale of the Purchased
Shares to the registration provisions of the Securities Act.
3.21 Brokers. The Company has no contract, arrangement or
-------
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
3.22 Officers. Set forth in Schedule II is a list of the names of the
-------- -----------
officers of the Company, together with the title or job classification of each
such person and the total compensation anticipated to be paid to each such
person by the Company and its subsidiaries in 1996. None of such persons has an
employment agreement or understanding, whether oral or written, with the Company
or any of its subsidiaries, which is not terminable on notice by the Company or
such subsidiary without cost or other liability to the Company or such
subsidiary.
3.23 Transactions With Affiliates. No director, officer, employee or
----------------------------
stockholder of the Company, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with the Company, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm, other than employment-at-will
arrangements in the ordinary course of business.
3.24 Employees. Each of the officers of the Company, each key
---------
employee and each other employee now employed by the Company who has access to
confidential information of the Company has executed a Confidentiality Agreement
(collectively, the "Confidentiality Agreements"), and such agreements are in
full force and effect. No officer or key employee of the Company has advised the
Company (orally or in writing) that he or she intends to terminate employment
with the Company. The Company has complied in all material respects
<PAGE>
-19-
with all applicable laws relating to the employment of labor, including
provisions relating to wages, hours, equal opportunity, collective bargaining
and the payment of Social Security and other taxes., and with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
3.25 U.S. Real Property Holding Corporation. The Company is not now
--------------------------------------
and has never been a "United States real property holding corporation," as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Treasury
Regulations and the Company has filed with the Internal Revenue Service all
statements, if any, with its United States income tax returns which are required
under Section 1.897-2(h) of such Regulations.
3.26 Environmental Protection. The Company has not caused or allowed,
------------------------
or contracted with any party for, the generation, use, transportation,
treatment, storage or disposal of any Hazardous Substances (as defined below) in
connection with the operation of its business or otherwise which could
reasonably be expected to result in a claim or liability of a material adverse
nature. The Company, the operation of its business, and any real property that
the Company owns, leases or otherwise occupies or uses (the "Premises") are in
compliance in all material respects with all applicable Environmental Laws (as
defined below) and orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws, including, without limitation, any
Environmental Laws or orders or directives with respect to any cleanup or
remediation of any release or threat of release of Hazardous Substances. The
Company has not received any citation, directive, letter or other communication,
written or oral, or any notice of any proceeding, claim or lawsuit, from any
person arising out of the ownership or occupation of the Premises, or the
conduct of its operations, and the Company is not aware of any basis therefor.
The Company has obtained and is maintaining in full force and effect all
material permits, licenses and approvals required by all Environmental Laws
applicable to the Premises and the business operations conducted thereon, and is
in material compliance with all such permits, licenses and approvals. The
Company has not caused or allowed a release, or a threat of release, of any
Hazardous Substance unto, at or near the Premises, and, to the best of the
Company's knowledge, the Premises has never been subject to a release, or a
threat of release, of any Hazardous Substance. For the purposes of this
Agreement, the term "Environmental Laws" shall mean any Federal, state or local
law or ordinance or regulation pertaining to the protection of human health or
the environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901,
et seq. For purposes of this Agreement, the term "Hazardous Substances" shall
include oil and petroleum products, asbestos, polychlorinated biphenyls, urea
formaldehyde and any other materials classified as hazardous or toxic under any
Environmental Laws.
3.27 ERISA.
-----
(a) Schedule II lists each Employee Plan that covers any employee of
-----------
the Company, copies or descriptions of all of which have previously been made
available or furnished to the
<PAGE>
-20-
Purchasers. With respect to each Employee Plan, the Company has provided the
most recently filed Form 5500 and an accurate summary description of such plan.
(b) Schedule II also includes a list of each Benefit Arrangement of
-----------
the Company, copies or descriptions of all of which have been made available or
furnished previously to the Purchasers.
(c) No Employee Plan is a Multiemployer Plan and no Employee Plan is
subject to Title IV of ERISA. The Company and its Affiliates have not incurred
any liability under Title IV of ERISA arising in connection with the termination
of any plan covered or previously covered by Title IV of ERISA.
(d) None of the Employee Plans or other arrangements listed on
Schedule II covers any non-United States employee or former non-United States
- -----------
employee of the Company.
(e) No "prohibited transaction," as defined in Section 406 of ERISA
or Section 4975 of the Code, has occurred with respect to any Employee Plan.
(f) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. The Company has
furnished to the Purchasers copies of the most recent Internal Revenue Service
determination letters with respect to each such plan, including a letter with
respect to amendments required by the Tax Reform Act of 1986. Each Employee Plan
has been maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such plan.
(g) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan and Benefit Arrangement.
(h) Except as disclosed in writing to the Purchasers prior to the
date hereof, there has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any of its ERISA
Affiliates relating to, or change in employee participation or coverage under,
any Employee Plan or Benefit Arrangement that would increase materially the
expense of maintaining such Employee Plan or Benefit Arrangement above the level
of the expense incurred in respect thereof for the fiscal year ended prior to
the date hereof.
(i) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code.
<PAGE>
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(j) No tax under Section 4980B of the Code has been incurred in
respect of any Employee Plan that is a group health plan, as defined in Section
5000(b)(1) of the Code.
(k) With respect to the employees and former employees of the
Company, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code.
(l) No employee of the Company will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
(m) The Company does not have, nor is it reasonably expected to have,
any liability under Title IV of ERISA.
3.28 Foreign Corrupt Practices Act. The Company has not taken any
-----------------------------
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules and regulations thereunder. To the best of
the Company's knowledge after due inquiry, there is not now, and there has never
been, any employment by the Company of, or beneficial ownership in the Company
by, any governmental or political official in any country in the world.
3.29 Federal Reserve Regulations. The Company is not engaged in the
---------------------------
business of extending credit for the purpose of purchasing or carrying margin
securities (within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of the Preferred Shares
will be used to purchase or carry any margin security or to extend credit to
others for the purpose of purchasing or carrying any margin security or in any
other manner which would involve a violation of any of the regulations of the
Board of Governors of the Federal Reserve System.
3.30 Additional Information. The Company has filed in a timely manner
----------------------
all documents that the Company was required to file under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") during the 12 months
preceding the date of this Agreement. The following documents complied in all
material respects with the requirements of the Exchange Act as of their
respective filing dates, and the information contained therein was true and
correct in all material respects as of the date of such documents, and each of
the following documents as of the date thereof did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading:
(a) The Company's Quarterly Report on Form 10-Q for the
quarter year ended June 30, 1996; and
(b) all other documents, if any, filed by the Company with
the Securities and Exchange Commission (the "Commission") since the filing of
the Quarterly Report on
<PAGE>
-22-
Form 10-Q for the fiscal quarter ended June 30, 1996 pursuant to the reporting
requirements of the Exchange Act.
3.31 Securities Act of 1933. The Company has complied and will comply
----------------------
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Shares. Neither the Company nor anyone acting on
its behalf has or will sell, offer to sell or solicit offers to buy the Shares
or similar securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto with, any
Person, so as to bring the issuance and sale of the Shares under the
registration provisions of the Securities Act and applicable state securities
laws.
ARTICLE IV
COVENANTS OF THE COMPANY
The Company, together with its subsidiaries, covenants and agrees
with each of the Purchasers that:
4.01 Financial Statements, Reports, Etc. The Company shall furnish
-----------------------------------
to each Purchaser:
(a) within the time periods required for the furnishing thereof,
copies of the Company's reports filed on Form 10-K, Form 10-Q and any
successor form or forms;
(b) within thirty (30) days after the end of each month in each
fiscal year (other than the last month in each fiscal year) a
consolidated balance sheet of the Company and its subsidiaries, if any,
the related consolidated statements of income, stockholders' equity and
cash flows, income summaries by center, receivable aging tables by center
and monthly center operating data unaudited but prepared in accordance
with generally accepted accounting principles (except for notes and
year-end adjustments) and certified by the Chief Financial Officer of the
Company, such consolidated balance sheet to be as of the end of such
month and such consolidated statements of income, stockholders' equity
and cash flows to be for such month and for the period from the beginning
of the fiscal year to the end of such month, in each case with
comparative statements for the prior fiscal year, provided that the
Company's obligations under this Section 4.01(b) shall terminate upon the
completion of a firm commitment underwritten public offering of the
Company's securities;
(c) at the time of delivery of each annual financial statement
pursuant to Section 4.01(a), a certificate executed by the Chief
Financial Officer of the Company stating that such officer has caused
this Agreement and the Series A Convertible Preferred Stock to be
reviewed and has no knowledge of any default by the Company in the
performance or observance of any of the provisions of this Agreement or
the Series A Convertible Preferred Stock or, if such officer has such
knowledge, specifying such default and the nature thereof;
<PAGE>
-23-
(d) at the time of delivery of each monthly statement pursuant to
Section 4.01(b), a management narrative report explaining all significant
variances from forecasts and all significant current developments in
staffing, marketing, sales and operations;
(e) no later than thirty (30) days prior to the start of each fiscal
year, consolidated capital and operating expense budgets, cash flow
projections and income and loss projections for the Company and its
subsidiaries in respect of such fiscal year, all itemized in reasonable
detail, by center (other than cash flow projections and prepared on a
monthly basis, and, promptly after preparation, any revisions to any of
the foregoing;
(f) promptly following receipt by the Company, each audit response
letter, accountant's management letter and other written report submitted
to the Company by its independent public accountants in connection with
an annual or interim audit of the books of the Company or any of its
subsidiaries;
(g) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries of the type
described in Section 3.07 that could materially adversely affect the
Company or any of its subsidiaries;
(h) promptly upon sending, making available or filing the same, all
press releases, reports and financial statements that the Company sends
or makes available to its stockholders or directors or files with the
Commission;
(i) at the time of delivery to the Company's Board of Directors,
reports, minutes, consents, waivers or such other information
substantially similar to such reports, minutes, consents, waivers or
other information delivered to the members of the Company's Board of
Directors provided that each Purchaser understands that it could be
subject to fines, penalties and other liabilities under applicable
securities laws in the event of trading in the Company's securities while
in the possession of any material, non-public information concerning the
Company and agrees to abide by these legal prohibitions on tipping and
trading; and
(j) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or affairs
of the Company and its subsidiaries as such Purchaser reasonably may
request.
4.02 Reserve for Conversion Shares. The Company shall at all times
-----------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Purchased Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Purchased Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Purchased Shares or otherwise to comply with the terms of this
Agreement,
<PAGE>
-24-
the Company will forthwith take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes. The Company will obtain any
authorization, consent, approval or other action by or make any filing with any
court or administrative body that may be required under applicable state
securities laws in connection with the issuance of shares of Common Stock upon
conversion of the Purchased Shares.
4.03 Existence. The Company shall maintain and cause each of its
---------
subsidiaries (if any) to maintain, their respective corporate or legal
existence, rights and franchises in full force and effect.
4.04 Properties, Business, Insurance. The Company shall maintain and
-------------------------------
cause each of its subsidiaries (if any) to maintain as to their respective
properties and business, with financially sound and reputable insurers,
insurance against such casualties and contingencies and of such types and in
such amounts as is customary for companies similarly situated, which insurance
shall be deemed by the Company to be sufficient. The Company shall also use its
best efforts to obtain within 45 days of the Initial Closing Date and thereafter
maintain in effect a "key person" life insurance policy, payable to the Company,
on the life of John Garbarino (so long as he remains an employee of the
Company), in the amount of $1,000,000. The Company shall not cause or permit any
assignment or change in beneficiary and shall not borrow against any such
policy. If requested by Purchasers holding at least a majority of the
outstanding Purchased Shares, the Company will add one designee of such
Purchasers as a notice party for each such policy and shall request that the
issuer of each policy provide such designee with ten (10) days' notice before
such policy is terminated (for failure to pay premiums or otherwise) or assigned
or before any change is made in the beneficiary thereof.
4.05 Inspection, Consultation and Advice. The Company shall permit
-----------------------------------
and cause each of its subsidiaries (if any) to permit each Purchaser and such
persons as it may designate, at such Purchaser's expense, to visit and inspect
any of the properties of the Company and its subsidiaries, examine their books
and take copies and extracts therefrom, discuss the affairs, finances and
accounts of the Company and its subsidiaries with their officers, employees and
public accountants (and the Company hereby authorizes said accountants to
discuss with such Purchaser and such designees such affairs, finances and
accounts), and consult with and advise the management of the Company and its
subsidiaries as to their affairs, finances and accounts, all at reasonable times
and upon reasonable notice.
4.06 Restrictive Agreements Prohibited. Neither the Company nor any
---------------------------------
of its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement, the Registration Rights
Agreement, the Stockholders' Agreement or the Charter.
4.07 Transactions with Affiliates. Except for transactions
----------------------------
contemplated by this Agreement or as otherwise approved by the Board of
Directors, neither the Company nor any of its subsidiaries shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock
<PAGE>
-25-
of the Company or any of its subsidiaries, member of the family of any such
person, or any corporation, partnership, trust or other entity in which any such
person, or member of the family of any such person, is a director, officer,
trustee, partner or holder of more than 5% of the outstanding capital stock
thereof, except for transactions on customary terms related to such person's
employment.
4.08 Expenses of Directors. The Company shall promptly reimburse in
---------------------
full, each director of the Company who is not an employee of the Company and who
was elected as a director solely or in part by the holders of Series A
Convertible Preferred Stock, for all of his or her reasonable out-of-pocket
expenses incurred in attending each meeting of the Board of Directors of the
Company or any Committee thereof.
4.09 Board of Directors Meetings. The Company shall use its best
---------------------------
efforts to ensure that meetings of its Board of Directors are held at least four
times each year and at least once each quarter.
4.10 Compensation. The Company shall not pay to its management
------------
compensation in excess of that compensation customarily paid to management in
companies of similar size, of similar maturity, and in similar businesses
without the unanimous written consent of those members of the Company's Board of
Directors elected solely by the holders of Series A Convertible Preferred Stock.
4.11 By-laws. The Company shall use its best efforts, as promptly as
-------
reasonably practicable after the Initial Closing Date, to cause its By-laws to
provide that, unless otherwise required by the laws of the State of Delaware,
any two directors shall have the right to call a meeting of the Board of
Directors. The Company shall at all times maintain provisions in its By-laws
and/or Charter indemnifying all directors against liability and absolving all
directors from liability to the Company and its stockholders to the maximum
extent permitted under the laws of the State of Delaware.
4.12 Reserved Employee Shares. From and after the Closing Dates
------------------------
contemplated by this Agreement, the Company shall cause to be reserved for
issuance to directors, officers, employees and consultants of the Company on the
date hereof at least the same percentage of the fully diluted capital stock of
the Company as existed immediately prior to the Initial Closing Date, and the
Company shall also cause to be reserved for issuance to directors, officers,
employees and consultants of the Company commencing such relationship with the
Company after the date hereof an additional 5% of the fully diluted capital
stock of the Company (collectively, the "Reserved Employee Shares"), such
Reserved Employee Shares to be issued at a price equal to or greater than the
Series A Conversion Price (as defined in paragraph 6 of the Company's
Certificate of Designations filed with the Secretary of State of the State of
Delaware on the date hereof), pursuant to stock purchase, stock grant or stock
option arrangements pursuant to which such Reserved Employee Shares will not
become fully exercisable less than three years nor more than five years from the
date of such grant without the unanimous written consent of those members of the
Company's Board of Directors elected solely by the holders of Series A
Convertible Preferred Stock.
<PAGE>
-26-
4.13 Employee Confidentiality Agreements. The Company shall use its
-----------------------------------
best efforts to obtain, and shall cause its subsidiaries (if any) to use their
best efforts to obtain, Confidentiality Agreement from all future officers, key
employees and other employees who will have access to confidential information
of the Company or any of its subsidiaries, upon their employment by the Company
or any of its subsidiaries.
4.14 Compliance with Laws. The Company shall comply, and cause each
--------------------
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
4.15 Keeping of Records and Books of Account. The Company shall keep,
---------------------------------------
and cause each subsidiary to keep, adequate records and books of account, in
which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
4.16 U.S. Real Property Interest Statement. The Company shall provide
-------------------------------------
prompt written notice to each Purchaser following any "determination date" (as
defined in Treasury Regulation Section 1.897-2(c)(i)) on which the Company
becomes a United States real property holding corporation. In addition, upon a
written request by any Purchaser, the Company shall provide such Purchaser with
a written statement informing the Purchaser whether such Purchaser's interest in
the Company constitutes a U.S. real property interest. The Company's
determination shall comply with the requirements of Treasury Regulation Section
1.897-2(h)(1) or any successor regulation, and the Company shall provide timely
notice to the Internal Revenue Service, in accordance with and to the extent
required by Treasury Regulation Section 1.897-2(h)(2) or any successor
regulation, that such statement has been made. The Company's written statement
to any Purchaser shall be delivered to such Purchaser as soon as practicable but
in any event within thirty (30) days of such Purchaser's written request
therefor. The Company's obligation to furnish a written statement pursuant to
this Section 4.16 shall continue notwithstanding the fact that a class of the
Company's stock may be regularly traded on an established securities market.
4.17 Compensation and Audit Committees. The Company shall, by
---------------------------------
amending its By-laws or otherwise, establish and maintain a Compensation
Committee and an Audit Committee of the Board of Directors, each of which shall
consist of at least three directors. The three directors serving on the
Compensation Committee of the Company shall initially be Edward L. Cahill, Angus
M. Duthie and one other director of the Company unaffiliated with management of
the Company who shall be appointed after the Initial Closing Date. Except for
arrangements existing on the date hereof, no compensation or other remuneration
at an annual rate in excess of $100,000 shall be paid to, and no capital stock
of the Company shall be issued or granted to, any director, officer or employee
of, or any consultant or adviser to, the Company or any of its subsidiaries,
without the approval of the Compensation Committee. No employee stock option
plan, employee stock purchase plan, employee restricted stock plan or
<PAGE>
-27-
other employee stock plan shall be established without the approval of the
Compensation Committee. The Audit Committee shall select (subject to the
approval of the Board of Directors) and provide instructions to the Company's
auditors.
4.18 Listing. The Company shall use its best efforts to comply with
-------
all requirements of the National Association of Securities Dealers, Inc. (the
"NASD") and the Nasdaq SmallCap Market with respect to the issuance of the
Shares and the listing of the Company's Common Stock on the Nasdaq SmallCap
Market.
4.19 Termination of Covenants. The covenants set forth herein shall
------------------------
terminate and be of no further force or effect as to each of the Purchasers when
such Purchaser no longer holds any shares of Series A Convertible Preferred
Stock.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE PURCHASERS
(a) Each of the Purchasers, severally and not jointly,
represents and warrants to, and covenants with, the Company, as of the date
hereof, the Initial Closing Date and as of the Additional Closing Date, that:
(i) it will acquire the Purchased Shares to be acquired by it for its own
account and that the Purchased Shares are being and will be acquired by it for
the purpose of investment and not with a view to distribution or resale thereof;
(ii) the execution of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of the Purchaser, and this Agreement has been duly executed and delivered,
and constitutes a valid, legal, binding and enforceable agreement of the
Purchaser; (iii) it is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated under the Securities Act and was not organized for
the specific purpose of acquiring the Purchased Shares; (iv) it has taken no
action which would give rise to any claim by any other person for any brokerage
commissions, finders' fees or the like relating to this Agreement or the
transactions contemplated hereby; (v) it has sufficient knowledge and experience
in investing in companies similar to the Company in terms of the Company's stage
of development so as to be able to evaluate the risks and merits of its
investment in the Company and it is able financially to bear the risks thereof;
(vi) without limiting the representations or warranties of the Company in
Article III hereof, it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management, and it has been
furnished with copies of documents which it has requested; and (vii) it is not
an "Interested Stockholder" of the Company as that term is defined in the
Company's Charter and Section 203 of the Delaware General Corporation law.
(b) Each of the Purchasers, severally and not jointly,
further represents and warrants to, and covenants with, the Company that (i) the
Purchaser has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and
<PAGE>
-28-
performance of this Agreement, and (ii) upon the execution and delivery of this
Agreement, this Agreement shall constitute a valid and binding obligation of the
Purchaser enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Purchaser
herein may be legally unenforceable.
(c) Each of the Purchasers further represents that it
understands and agrees that, until registered under the Securities Act or
transferred pursuant to the provisions of Rule 144 as promulgated by the
Commission, all certificates evidencing any of the Shares, whether upon initial
issuance or upon any transfer thereof, shall bear a legend, prominently stamped
or printed thereon, reading substantially as follows, together with any legends
that may be required under applicable state securities laws:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or applicable state securities laws.
These securities have been acquired for investment and not with a view to
distribution or resale, and may not be sold, mortgaged, pledged, hypothecated or
otherwise transferred [for non U.S. persons add: in the United States or to U.S.
persons] without an effective registration statement for such securities under
the Securities Act of 1933 and applicable state securities laws, or the
availability of an exemption from the registration provisions of the Securities
Act of 1933 and applicable state securities laws."
ARTICLE VI
RIGHT OF FIRST REFUSAL
6.01 Right of First Refusal. The Company shall not issue, sell or
----------------------
exchange, agree or obligate itself to issue, sell or exchange, or reserve or set
aside for issuance, sale or exchange, for a price equal to or less than the then
applicable "Series A Conversion Price" (as defined in paragraph 6 of the
Company's Certificate of Designations filed with the Secretary of State of the
State of Delaware on the date hereof) any (i) shares of Common Stock, (ii) any
other equity security of the Company, including without limitation, shares of
Series A Preferred Stock, (iii) any debt security which by its terms is
convertible into or exchangeable for any equity security of the Company, (iv)
any security of the Company that is a combination of debt and equity, or (v) any
option, warrant or other right to subscribe for, purchase or otherwise acquire
any such equity security or any such debt security of the Company, unless in
each case the Company shall have first offered to sell such securities (the
"Offered Securities") to the Purchasers as follows: The Company shall offer to
sell to each Purchaser (a) that portion of the Offered Securities as the number
of shares of Purchased Shares and Converted Shares then held by such Purchaser,
as the case may be, bears to the total number of shares of Common Stock,
Purchased Shares and Converted Shares outstanding on such date (the "Basic
<PAGE>
-29-
Amount"), and (b) such additional portion of the Offered Securities as such
Purchaser shall indicate it will purchase should the other Purchasers subscribe
for less than their Basic Amounts (the "Undersubscription Amount"), at a price
and on such other terms as shall have been specified by the Company in writing
delivered to such Purchaser (the "Offer"), which Offer by its terms shall remain
open and irrevocable for a period of twenty (20) days from receipt of the Offer.
6.02 Notice of Acceptance. Notice of each Purchaser's intention to
--------------------
accept, in whole or in part, any Offer made pursuant to Section 6.01 shall be
evidenced by a writing signed by such Purchaser and delivered to the Company
prior to the end of the 20-day period of such Offer, setting forth such of the
Purchaser's Basic Amount as such Purchaser elects to purchase and, if such
Purchaser shall elect to purchase all of its Basic Amount, such
Undersubscription Amount as such Purchaser shall elect to purchase (the "Notice
of Acceptance"). If the Basic Amounts subscribed for by all Purchasers are less
than the total Offered Securities, then each Purchaser who has set forth
Undersubscription Amounts in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, all Undersubscription
Amounts it has subscribed for; provided, however, that should the
Undersubscription Amounts subscribed for exceed the difference between the
Offered Securities and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Purchaser who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Undersubscription Amount subscribed
for by such Purchaser bears to the total Undersubscription Amounts subscribed
for by all Purchasers, subject to rounding by the Board of Directors to the
extent it reasonably deems necessary.
6.03 Conditions to Acceptances and Purchase.
--------------------------------------
(a) Permitted Sales of Refused Securities. In the event that
-------------------------------------
Notices of Acceptance are not given by the Purchasers in respect of all the
Offered Securities, the Company shall have seventy-five (75) days from the
expiration of the period set forth in Section 6.01 to close the sale of all or
any part of such Offered Securities as to which a Notice of Acceptance has not
been given by the Purchasers (the "Refused Securities") to the Person or Persons
specified in the Offer, but only for cash and/or debt securities and otherwise
in all respects upon terms and conditions, including, without limitation, unit
price and interest rates, which are no more favorable, in the aggregate, to such
other Person or Persons or less favorable to the Company than those set forth in
the Offer.
(b) Reduction in Amount of Offered Securities. In the event
-----------------------------------------
the Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 6.03(a) above),
then each Purchaser may, at its sole option and in its sole discretion, reduce
the number, or other units, of the Offered Securities specified in its
respective Notices of Acceptance to an amount which shall be not less than the
amount of the Offered Securities which the Purchaser elected to purchase
pursuant to Section 6.02 multiplied by a fraction, (i) the numerator of which
shall be the amount of Offered Securities which the Company actually proposes to
sell, and (ii) the denominator of which shall be the amount of all Offered
Securities. In the event that any Purchaser so elects to reduce the
<PAGE>
-30-
number or amount of Offered Securities specified in its respective Notices of
Acceptance, the Company may not sell or otherwise dispose of more than the
reduced amount of the Offered Securities until such securities have again been
offered to the Purchasers in accordance with Section 6.01.
(c) Closing. Upon the closing, which shall include full payment to
-------
the Company, of the sale to such other Person or Persons of all or less than all
the Refused Securities, the Purchasers shall purchase from the Company, and the
Company shall sell to the Purchasers, the number of Offered Securities specified
in the Notices of Acceptance, as reduced pursuant to Section 6.03(b) if the
Purchasers have so elected, upon the terms and conditions specified in the
Offer. The purchase by the Purchasers of any Offered Securities is subject in
all cases to the preparation, execution and delivery by the Company and the
Purchasers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Purchasers and their
respective counsel.
6.04 Further Sale. In each case, any Offered Securities not purchased
------------
by the Purchasers or other Person or Persons in accordance with Section 6.03 may
not be sold or otherwise disposed of until they are again offered to the
Purchasers under the procedures specified in Sections 6.01, 6.02 and 6.03.
6.05 Exception. The rights of the Purchasers under this Article VI
---------
shall not apply to:
(a) Common Stock issued as a stock dividend to holders of
Common Stock or upon any subdivision or combination of shares of Common Stock,
(b) Series A Preferred Stock issued as a dividend to holders of
Series A Preferred Stock upon any subdivision or combination of shares of Series
A Preferred Stock,
(c) the Converted Shares,
(d) the Additional Preferred Shares,
(e) any Reserved Employee Shares,
(f) Common Stock issued pursuant to the exercise or conversion
of options, warrants and convertible securities outstanding on the Initial
Closing Date,
(g) Common Stock issued pursuant to the acquisition of another
entity by the Company by merger (whereby the Company or its shareholders
immediately prior to such merger own no less than 51% of the voting power of the
acquired entity or the surviving corporation after such merger) or purchase of
substantially all of its stock or assets (including the Common Stock to be
issued to Argosy Health, L.P.), and
(h) any securities issued pursuant to a firm commitment
underwritten public offering.
<PAGE>
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ARTICLE VII
DEFINITIONS AND ACCOUNTING TERMS
7.01 Certain Defined Terms. As used in this Agreement, the
------- ------- -----
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Additional Preferred Shares" shall have the meaning attributable to
it in Section 1.02 of the Agreement.
"Agreement" means this Series A Convertible Preferred Stock Purchase
Agreement as from time to time amended and in effect between the parties,
including all Exhibits and Schedules hereto.
"Benefit Arrangement" means each employment, severance or other
similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan and (ii) covers any employee or former employee of the Company.
"Board of Directors" means the board of directors of the Company as
constituted from time to time.
"Common Stock" includes (a) the Company's Common Stock, $.001 par
value, as authorized on the date of this Agreement, (b) any other capital stock
of any class or classes (however designated) of the Company, authorized on or
after the date hereof, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies or in the absence of any
provision to the contrary in the Company's Charter be entitled to vote for the
election of a majority of directors of the Company (even though the right so to
vote has been suspended by the happening of such a contingency or provision),
and (c) any other securities into which or for which any of the securities
described in (a) or (b) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" means and shall include Occupational Health +
Rehabilitation Inc, a Delaware corporation and its predecessors, successors and
assigns.
<PAGE>
-32-
"Consolidated" and "consolidating" when used with reference to any
term defined herein mean that term as applied to the accounts of the Company and
its Subsidiaries consolidated in accordance with generally accepted accounting
principles.
"Converted Shares" shall have that meaning attributable to it in
Section 1.03 of this Agreement.
"Employee Plan" means each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, that (A)(i) is subject to any provision of
ERISA and (ii) is maintained or contributed to by the Company, or (B)(i) is
subject to any provision of Title IV of ERISA and (ii) is maintained or
contributed to by any of the Company's ERISA Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Initial Closing" and "Initial Closing Date" shall have the
respective meanings attributable to them in Section 1.05 of this Agreement.
"Initial Preferred Shares" shall have the meaning attributable to it
in Section 1.01 of this Agreement.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
"Person" means an individual, corporation, partnership, joint
venture, trust, limited liability company or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Purchased Shares" shall have that meaning attributable to it in
Section 1.02 of this Agreement.
"Purchaser" and "Purchasers" shall have that meaning attributable to
it in Section 1.01 of this Agreement and shall include the original Purchasers
and also any other holder of any of the Shares.
"Reserved Employee Shares" shall have the meaning attributable to it
in Section 4.12 of this Agreement.
"Securities Act" means the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Securities and Exchange
Commission (or of any other Federal agency then administering the Securities
Act) thereunder, all as the same shall be in effect at the time.
<PAGE>
-33-
"Series A Preferred Stock" means the Series A Convertible Preferred
Stock of the Company, $.001 par value, having the rights, powers, privileges and
preferences set forth in Exhibit 1.01A hereto.
-------------
"Shares" shall have that meaning attributable to it in Section 1.04
of this Agreement.
"Subsidiary" or "Subsidiaries" means any Person of which the Company
and/or any of its other subsidiaries (as herein defined) directly or indirectly
owns at the time at least fifty percent (50%) of the outstanding equity interest
of such Person other than directors' qualifying shares.
7.02 Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with generally accepted accounting
principles consistently applied, and all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
ARTICLE VIII
MISCELLANEOUS
8.01 No Waiver; Cumulative Remedies. No failure or delay on the part
-- ------ ---------- --------
of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
8.02 Amendments, Waivers and Consents. Any provision in this
---------- ------- --- --------
Agreement to the contrary notwithstanding, and except as hereinafter provided,
changes in or additions to this Agreement may be made, and compliance with any
covenant or provision set forth herein may be omitted or waived, if the Company
(i) shall obtain consent thereto in writing from the holder or holders of at
least a majority in interest of the Shares, and (ii) shall deliver copies of
such consent in writing to any holders who did not execute such consent. Any
waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Notwithstanding anything
to the contrary contained herein, any amendment which (x) increases any
Purchaser's obligations hereunder or increases the purchase price or number of
Additional Preferred Shares, or (y) grants to any one or more Purchasers any
rights more favorable than any rights granted to all other Purchasers hereunder,
must be approved by each Purchaser so as to be effective against such Purchaser.
8.03 Addresses for Notices. All notices, requests, demands and other
--------- --- -------
communications provided for hereunder shall be in writing (including electronic
communication) and delivered personally, or by overnight courier, or by
facsimile or other
<PAGE>
-34-
electronic means or sent by certified or registered United States mail, postage
prepaid, return receipt requested and addressed as follows:
If to any holder of the Shares: at such holder's address for notice
as set forth in the register maintained by the Company, or, as to each of the
foregoing, at the addresses set forth on Schedule I hereto or at such other
----------
address as shall be designated by such Person in a written notice to the other
parties complying as to delivery with the terms of this Section, with a copy to
Leslie E. Davis, Esq., Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125
High Street, Boston, Massachusetts 02110.
If to the Company: at the address set forth on page 1 hereof, or at
such other address as shall be designated by the Company in a written notice to
the other parties complying as to delivery with the terms of this Section, with
a copy to Donna L. Brooks, Esq., Shipman & Goodwin LLP, One American Row,
Hartford, CT 06103.
All such notices, requests, demands and other communications shall be
effective three days after deposited in the mails or upon receipt when delivered
electronically, by facsimile, by hand or by overnight courier, respectively,
addressed as aforesaid, unless otherwise provided herein.
8.04 Costs, Expenses and Taxes. The Company agrees to pay in
----- -------- --- -----
connection with the preparation, execution and delivery of this Agreement and
the issuance of the Purchased Shares, the reasonable fees and out-of-pocket
expenses collectively (not to exceed $25,000) of Testa, Hurwitz & Thibeault,
LLP, special counsel for the Purchasers, and other consultants. In addition, the
Company shall pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement, the
issuance of the Purchased Shares and the other instruments and documents to be
delivered hereunder or thereunder, and agrees to save the Purchasers harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
8.05 Binding Effect; Assignment. This Agreement shall be binding
------- ------ ----------
upon and inure to the benefit of the Company and the Purchasers and their
respective heirs, successors and assigns, except that the Company shall not have
the right to delegate any of its respective obligations hereunder or to assign
its respective rights hereunder or any interest herein without the prior written
consent of the holders of at least a majority in interest of the Shares.
8.06 Survival of Representations and Warranties. All representations
-------- -- --------------- --- ----------
and warranties made in this Agreement, the Shares, or any other instrument or
document delivered in connection herewith or therewith, shall survive the
execution and delivery hereof or thereof.
8.07 Prior Agreements. This Agreement constitutes the entire
----- ----------
agreement between the parties and supersedes any prior understandings or
agreements concerning the purchase and sale of the Shares.
<PAGE>
-35-
8.08 Severability. The provisions of this Agreement and the terms of
------------
the Series A Preferred Stock are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of a provision contained in this Agreement or the Series A Preferred Stock
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement or the terms of the
Series A Preferred Stock; but this Agreement and the terms of the Series A
Preferred Stock shall be reformed and construed as if such invalid or illegal or
unenforceable provision, or part of a provision, had never been contained
herein, and such provisions or part reformed so that it would be valid, legal
and enforceable to the maximum extent possible.
8.09 Governing Law. This Agreement shall be construed and enforced
--------- ---
in accordance with and governed by the General Corporation Law of the State of
Delaware as to matters within the scope thereof, and as to all other matters
shall be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts.
8.10 Headings. Article, Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
8.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.12 Further Assurances. From and after the date of this Agreement,
------------------
upon the request of any Purchaser or the Company, the Company and the Purchasers
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and all ancillary documents,
instruments or certificates delivered therewith and the Shares.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-36-
IN WITNESS WHEREOF, the parties hereto have caused this Series A
Preferred Stock Purchase Agreement to be executed as of the date first above
written.
THE COMPANY: PURCHASERS:
OCCUPATIONAL HEALTH + CAHILL, WARNOCK STRATEGIC
REHABILITATION INC PARTNERS FUND, L.P.
By: Cahill, Warnock Strategic Partners, L.P.
By: By:
------------------------- -------------------------------
John C. Garbarino Title: General Partner
----------------------------
President and Chief Executive Officer
STRATEGIC ASSOCIATES, L.P.
By: Cahill, Warnock & Company, LLC
By:
-------------------------------
Title: Managing Member
----------------------------
AXA U.S. GROWTH FUND, LLC
By:
-------------------------------
Title: Managing Member
----------------------------
U.S. GROWTH FUND PARTNERS, C.V.
By:
-------------------------------
Title: General Partner
----------------------------
DOUBLE BLACK DIAMOND II, LLC
By:
-------------------------------
Title: Managing Member
----------------------------
ALMANORI LIMITED
By:
-------------------------------
Title: Attorney-in-Fact
----------------------------
<PAGE>
-37-
THE VENTURE CAPITAL FUND OF
NEW ENGLAND III, L.P.
By: FH & Co. III, L.P., Its General Partner
By:
-------------------------------
BANCBOSTON VENTURES, INC.
By:
-------------------------------
VENROCK ASSOCIATES
By:
-------------------------------
VENROCK ASSOCIATES II, L.P.
By:
-------------------------------
ASSET MANAGEMENT ASSOCIATES,
1989, L.P.
By: AMC Partners 89, L.P., General Partner
By:
-------------------------------
<PAGE>
-38-
OCCUPATIONAL HEALTH + REHABILITATION INC
----------------------------------------
SCHEDULE I
----------
<TABLE>
<CAPTION>
Initial Additional
Name and Preferred Purchase Preferred Purchase
Address of Purchasers Shares Price Shares Price
- --------------------- ------ ----- ------ -----
<S> <C> <C> <C> <C>
Cahill, Warnock Strategic 679,042 $4,074,252 119,750 $ 718,500
Partners Fund, L.P.
10 North Calvert Street
Suite 735
Baltimore, Maryland 21202
Attn: Mr. Edward L. Cahill
Strategic Associates, L.P. 37,625 225,750 6,750 40,500
10 North Calvert Street
Suite 735
Baltimore, Maryland 21202
Attn: Mr. Edward L. Cahill
Axa U.S. Growth Fund, LLC 86,667 520,002 15,250 91,500
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
U.S. Growth Fund Partners, 173,334 1,040,004 30,500 183,000
C.V.
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
Double Black Diamond II, LLC 16,667 100,002 3,000 18,000
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
</TABLE>
<PAGE>
-39-
<TABLE>
<CAPTION>
Initial Additional
Name and Preferred Purchase Preferred Purchase
Address of Purchasers Shares Price Shares Price
- --------------------- ------ ----- ------ -----
<S> <C> <C> <C> <C>
Almanori Limited 6,665 39,990 1,250 7,500
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
Asset Management Associates, 83,333 499,998 14,500 87,000
1989, L.P.
2275 East Bayshore Road
Palo Alto, CA 94303
Attn: Mr. Craig C. Taylor
Venrock Associates 66,667 400,002 11,800 70,800
Room 5508
30 Rockefeller Plaza
New York, New York 10112
Attn: Mr. Patrick F. Latterell
Venrock Associates II, L.P. 100,000 600,000 17,700 106,200
Room 5508
30 Rockefeller Plaza
New York, New York 10112
Attn: Mr. Patrick F. Latterell
The Venture Capital Fund of 66,667 400,002 11,750 70,500
New England, III, L.P.
160 Federal Street, 23rd Floor
Boston, MA 02110
Attn: Mr. Kevin J. Dougherty
BancBoston Ventures, Inc. 100,000 600,000 17,750 106,500
100 Federal Street
Boston, MA 02110
Attn: Ms. Marcia T. Bates
TOTAL 1,416,667 $8,500,002 250,000 $1,500,000
</TABLE>
<PAGE>
EXHIBIT 10.06(b)
----------------
STOCKHOLDERS' AGREEMENT
-----------------------
AGREEMENT made this 6th day of November , 1996, by and among (i)
Occupational Health + Rehabilitation Inc, a Delaware corporation (the
"Company"), (ii) the individuals and entities listed under the heading "Holders"
on Schedule I attached hereto, and (iii) those persons whose names are set forth
----------
under the heading "Investors" on Schedule I hereto (the "Investors").
----------
WHEREAS, the Investors are acquiring up to an aggregate of 1,666,667
shares of the Series A Preferred Stock, $.001 par value per share, of the
Company (the "Series A Preferred Stock") pursuant to a certain Series A
Convertible Preferred Stock Purchase Agreement dated as of November 6, 1996, by
and among the Investors and the Company (the "Purchase Agreement");
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company, the Holders and the Investors
agree as follows:
1. Election of Directors.
----------------------
Each of the parties hereto agrees to vote all of the
Stock (as hereinafter defined) of the Company now owned or hereafter acquired by
such party (and attend, in person or by proxy, all meetings of stockholders
called for the purpose of electing directors), and the Company agrees to take
all actions (including, but not limited to the nomination of specified persons)
to cause and maintain the election to the Board of Directors of the Company, to
the extent permitted pursuant to the Company's Restated Certificate of
Incorporation, as amended, the following:
(a) the Chief Executive Officer of the Company, who
shall initially be John C. Garbarino;
(b) a person designated by those persons designated
as Telor Principal Stockholders on Schedule II hereto by a majority in interest
of Stock held by them, who shall initially be Angus M. Duthie;
(c) a person designated by those persons designated
as OH+R Principal Stockholders on Schedule II hereto by a majority in interest
of Stock held by them, who shall initially be Kevin J. Dougherty;
(d) two persons designated by Cahill, Warnock
Strategic Partners Fund, L.P., one of whom shall initially be Edward L. Cahill
and the other of whom shall be designated at a later date, and
<PAGE>
-2-
(e) two persons who shall be unaffiliated with the
management of the Company and mutually agreeable to all of the other directors.
Each of the parties further covenants and agrees to vote,
to the extent possible, all shares of Stock of the Company now owned or
hereafter acquired by such party so that the Company's Board of Directors shall
consist of no more than seven (7) members. For the purposes of this Agreement,
"Stock" shall mean and include all Series A Preferred Stock and all shares of
Common Stock, and all other securities of the Company which may be exchangeable
for or issued in exchange for or in respect of shares of Common Stock (whether
by way of stock split, stock dividend, combination, reclassification,
reorganization or any other means).
In the absence of any designation from the persons or
groups so designating directors as specified above, the director previously
designated by them and then serving shall be reelected if still eligible to
serve as provided herein.
No party hereto shall vote to remove any member of the
Board of Directors designated in accordance with the aforesaid procedure unless
the persons or groups so designating directors as specified above so vote, and,
if such persons or groups so vote then the non-designating party or parties
shall likewise so vote.
Any vacancy on the Board of Directors created by the
resignation, removal, incapacity or death of any person designated under this
Section 1 shall be filled by another person designated in a manner so as to
preserve the constituency of the Board as provided above.
If any party to this Agreement shall fail to vote such
party's Stock as provided in this Agreement, without further action by such
party, the President of the Company shall be, and hereby is, irrevocably
constituted the attorney-in-fact and proxy of such party for the purpose of
voting the shares of such Stock and shall vote the same in accordance with the
terms of this Agreement and is hereby authorized to revoke any proxy providing
for any other vote of such shares with respect to the election of directors.
2. Termination. This Agreement, and the respective rights and
-----------
obligations of the parties hereto, shall terminate upon the earliest to occur of
the following: (i) the expiration of ten years from the date first written
above; (ii) a Mandatory Conversion pursuant to the terms of Paragraph 6O of the
Company's Certificate of Designations; or (iii) the sale of the Company, whether
by merger, sale, or transfer of more than eighty percent (80%) of its capital
stock, or sale of substantially all of its assets.
3. Notices. All notices, requests, demands and other
-------
communications provided for hereunder shall be in writing (including electronic
communication) and delivered personally, or by overnight courier, or by
facsimile or other electronic means or sent by certified or
<PAGE>
-3-
registered United States mail, postage prepaid, return receipt requested and
addressed as follows:
If to any Investor: at such Investor's address for notice as set
forth in the register maintained by the Company, or, as to each of the
foregoing, at the addresses set forth on Schedule I hereto or at such other
----------
address as shall be designated by such Person in a written notice to the other
parties complying as to delivery with the terms of this Section, with a copy to
Leslie E. Davis, Esq., Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125
High Street, Boston, Massachusetts 02110.
If to the Company: at 175 Derby Street, Suite 36, Hingham,
Massachusetts 02043, or at such other address as shall be designated by the
Company in a written notice to the other parties complying as to delivery with
the terms of this Section, with a copy to Donna L. Brooks, Esq., Shipman &
Goodwin LLP, One American Row, Hartford, CT 06103.
All such notices, requests, demands and other communications shall be
effective three days after deposited in the mails or upon receipt when delivered
electronically, by facsimile, by hand or by overnight courier, respectively,
addressed as aforesaid, unless otherwise provided herein.
4. Specific Performance. The rights of the parties under this
--------------------
Agreement are unique and, accordingly, the parties shall, in addition to such
other remedies as may be available to any of them at law or in equity, have the
right to enforce their rights hereunder by actions for specific performance to
the extent permitted by law.
5. Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings between them or any of them as to such
subject matter, including, without limitation, that certain Voting Agreement of
the Company dated as of June 6, 1996.
6. Waivers and Further Agreements. Any of the provisions of this
------------------------------
Agreement may be waived with the consent of the Investors holding at a majority
in interest of the issued and outstanding shares of Series A Preferred Stock
(including shares of Common Stock into which any such shares may have been
converted) then held or deemed to be held by all Investors by an instrument in
writing. Any waiver by any party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach of that
provision or of any other provision hereof. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such further
action as any other party may reasonably require in order to effectuate the
terms and purposes of this Agreement. Notwithstanding the foregoing, no waiver
approved in accordance herewith shall be effective if and to the extent that
such waiver grants to any one or more Investors any rights more favorable than
any rights granted to all other Investors or otherwise treats any one or more
Investors differently than all other Investors.
<PAGE>
-4-
7. Amendments. Except as otherwise expressly provided herein,
----------
this Agreement may not be amended except by an instrument in writing executed by
(i) the Company, (ii) Investors holding a majority in interest of the issued and
outstanding shares of Series A Preferred Stock (including shares of Common Stock
into which any such shares may have been converted), and (iii) Holders holding a
majority of the shares of Common Stock subject to this Agreement.
Notwithstanding the foregoing, no such amendment shall be effective if and to
the extent that such amendment creates any additional affirmative obligations to
be complied with by any or all of the Investors.
8. Assignment; Successors and Assigns. This Agreement shall
----------------------------------
be binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, legal representatives, successors and permitted
transferees.
9. Severability. In case any one or more of the provisions
------------
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, and such invalid,
illegal and unenforceable provision shall be reformed and construed so that it
will be valid, legal, and enforceable to the maximum extent permitted by law.
10. Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. Section Headings. The headings contained in this
----------------
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
12. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with and governed by the General Corporation Law of the State of
Delaware as to matters within the scope thereof, and as to all other matters
shall be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts.
13. Legend. The certificates representing the shares of
------
Series A Preferred Stock shall bear a legend substantially in the following
form:
"The shares represented by this certificate are subject to the terms
and conditions of a Stockholders' Agreement dated as of November 6, 1996, a copy
of which will be furnished to any interested party upon written request without
charge."
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-5-
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders' Agreement as a sealed instrument as of the day and date first
above written.
INVESTORS: THE COMPANY:
CAHILL, WARNOCK STRATEGIC OCCUPATIONAL HEALTH +
PARTNERS FUND, L.P. REHABILITATION INC
By: Cahill, Warnock Strategic
Partners, L.P. By:
___________________________________
By:
------------------------------
Title: General Partner
---------------------------
HOLDERS:
STRATEGIC ASSOCIATES, L.P. PRINCE VENTURE PARTNERS III
LIMITED PARTNERSHIP
By: Cahill, Warnock & Company,
LLC
By: Prince Ventures, L.P., General Partner
By:
------------------------------
Title: Managing Member
---------------------------
By:
___________________________________
AXA U.S. GROWTH FUND, LLC *THE VENTURE CAPITAL FUND OF
NEW ENGLAND III, L.P.
By: By: FH & Co. III, L.P., Its General Partner
------------------------------
Title: Managing Member
---------------------------
By:
___________________________________
U.S. GROWTH FUND PARTNERS,
C.V.
*BANCBOSTON VENTURES, INC.
By:
------------------------------
Title: General Partner
---------------------------
By:
___________________________________
DOUBLE BLACK DIAMOND II, LLC
LLC
--------------------------------------
John C. Garbarino
<PAGE>
-6-
By:
------------------------------
Title: Managing Member
---------------------------
--------------------------------------
Lynne M. Rosen
ALMANORI LIMITED
*VENROCK ASSOCIATES
By:
------------------------------
Title: Attorney-in-Fact
---------------------------
By:
___________________________________
*VENROCK ASSOCIATES II, L.P.
By:
___________________________________
*ASSET MANAGEMENT ASSOCIATES,
1989, L.P.
By: AMC Partners 89, L.P., General
Partner
By:
___________________________________
* In their capacities as Holders and Investors hereunder.
<PAGE>
-7-
SCHEDULE I
OCCUPATIONAL HEALTH + REHABILITATION INC
HOLDERS
-------
Prince Venture Partners III Limited Partnership
The Venture Capital Fund of New England III, L.P.
BancBoston Ventures, Inc.
John C. Garbarino
Lynne M. Rosen
Venrock Associates
Venrock Associates II, L.P.
Asset Management Associates, 1989, L.P.
INVESTORS
---------
Cahill, Warnock Strategic Partners Fund, L.P.
10 North Calvert Street
Suite 735
Baltimore, Maryland 21202
Attn: Mr. Edward L. Cahill
Strategic Associates, L.P.
10 North Calvert Street
Suite 735
Baltimore, Maryland 21202
Attn: Mr. Edward L. Cahill
Axa U.S. Growth Fund, LLC
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
U.S. Growth Fund Partners, C.V.
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
<PAGE>
-8-
Double Black Diamond II, LLC
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
Almanori Limited
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
Asset Management Associates, 1989, L.P.
2275 East Bayshore Road
Palo Alto, CA 94303
Attn: Mr. Craig C. Taylor
Venrock Associates
Room 5508
30 Rockefeller Plaza
New York, New York 10112
Attn: Mr. Patrick F. Latterell
Venrock Associates II, L.P.
Room 5508
30 Rockefeller Plaza
New York, New York 10112
Attn: Mr. Patrick F. Latterell
The Venture Capital Fund of New England, III,
L.P.
160 Federal Street, 23rd Floor
Boston, MA 02110
Attn: Mr. Kevin J. Dougherty
BancBoston Ventures, Inc.
100 Federal Street
Boston, MA 02110
Attn: Ms. Marcia T. Bates
<PAGE>
-9-
SCHEDULE II
OCCUPATIONAL HEALTH + REHABILITATION INC
OH+R Principal Stockholders
---------------------------
Prince Venture Partners III Limited Partnership
The Venture Capital Fund of New England III, L.P.
BancBoston Ventures, Inc.
Telor Principal Stockholders
----------------------------
Prince Venture Partners III, Limited Partnership
Venrock Associates
Venrock Associates II, L.P.
Asset Management Associates, 1989, L.P.
<PAGE>
EXHIBIT 10.06(c)
----------------
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement"), dated as of
November 6, 1996, is by and among Occupational Health + Rehabilitation Inc (the
"Company"), and the parties listed under the heading of Investors on Schedule A
attached hereto (the "Investors").
WHEREAS, the Investors and the Company are, on the date hereof,
entering into a Series A Convertible Preferred Stock Purchase Agreement (the
"Series A Purchase Agreement") pursuant to which the Company is issuing to the
Investors up to 1,666,667 shares of Series A Convertible Preferred Stock, par
value $.001 per share, of the Company (the "Series A Preferred Shares"); and
WHEREAS, the Company has agreed to grant to the Investors, as an
inducement to enter into the Series A Purchase Agreement, certain rights with
respect to the Series A Preferred Shares;
NOW, THEREFORE, in consideration of the premises set forth herein,
the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following
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terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission,
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or any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of
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the Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued or
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issuable upon conversion of the Series A Preferred Shares, and any shares of
capital stock received in respect thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean the person who is the then record owner of
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Restricted Stock.
"Registrable Shares" shall mean the shares of Restricted Stock.
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"Registration Expenses" shall mean the expenses so described in
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Section 8.
"Restricted Stock" shall mean the Conversion Shares, excluding
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shares which have been (a) registered under the Securities Act pursuant to an
effective registration statement filed thereunder and disposed of in accordance
with the registration statement covering them or (b) publicly sold pursuant to
Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
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amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
2. Restrictive Legend.
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Each certificate representing the Restricted Stock shall bear a
legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED [FOR NON
U.S. PERSONS ADD: IN THE UNITED STATES OR TO U.S. PERSONS] WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, OR THE
AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS.
A certificate shall not be required to bear such legend if, in the
opinion of counsel satisfactory to the Company, the securities represented
thereby may be publicly sold without registration under the Securities Act.
3. Notice of Proposed Transfer.
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Prior to any proposed transfer of any Restricted Stock (other than
under the circumstances described in Section 4, 5 or 6), the Holder thereof
shall give written notice to the Company of its intention to effect such
transfer. Each such notice shall describe the manner of the proposed transfer
and, if requested by the Company, shall be accompanied by an opinion of counsel
satisfactory to the Company to the effect that the proposed transfer may be
effected without registration under the Securities Act, whereupon the Holder of
such stock shall be entitled to transfer such stock in accordance with the terms
of its notice; provided, however, that no such opinion of counsel shall be
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required for a distribution by a partnership to its partners of such stock in
respect of such interest. Each certificate for shares of Restricted Stock
transferred as above provided shall bear the legend set forth in Section 2,
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except that such certificate shall not bear such legend if (i) such transfer is
in accordance with the provisions of Rule 144 (or any other rule permitting
public sale without registration under the Securities Act) or (ii) the opinion
of counsel referred to above is to the further effect that the transferee and
any subsequent transferee (other than an affiliate of the Company) would be
entitled to transfer such securities in a public sale without registration under
the Securities Act. The restrictions provided for in this Section 3 shall not
apply to securities which are not required to bear the legend prescribed by
Section 2 in accordance with the provisions of that Section.
4. Required Registration.
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(a) At any time prior to November 6, 2001, the Holders of
Registrable Shares constituting at least 51% of the total shares of Registrable
Shares then outstanding may request the Company to register under the Securities
Act all or any portion of the Registrable Shares held by such requesting Holder
or Holders for sale in the manner specified in such notice, provided that the
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Registrable Shares for which registration has been requested shall constitute at
least 25% of the total Registrable Shares originally issued if such Holder or
Holders shall request the registration of less than all Registrable Shares then
held by such Holder or Holders. Notwithstanding anything to the contrary
contained herein, no request may be made under this Section 4 within 180 days
after the effective date of a registration statement filed by the Company
covering a firm commitment underwritten public offering in which the Holders of
Registrable Shares shall have been entitled to join pursuant to Section 5 or 6
and in which there shall have been effectively registered all Registrable Shares
to which registration shall have been requested.
(b) Following receipt of any notice under this Section 4, the
Company shall immediately notify all Holders of Registrable Shares from whom
notice has not been received and shall use its reasonable best efforts to
register under the Securities Act, for public sale in accordance with the method
of disposition specified in such notice from requesting Holders, the number of
Registrable Shares specified in such notice (and in all notices received by the
Company from other Holders within 30 days after the giving of such notice by the
Company). If such method of disposition shall be an underwritten public
offering, the Holders of a majority of the Registrable Shares to be sold in such
offering may designate the managing underwriter of such offering, subject to the
approval of the Company, which approval shall not be unreasonably withheld or
delayed. The Company shall be obligated to register Registrable Shares pursuant
to this Section 4 on two occasions only, provided, however, that such obligation
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shall be deemed satisfied only when a registration statement, which covers all
Registrable Shares specified in notices received as aforesaid and with respect
to which the request for registration has not been withdrawn and provides for
sale of such shares in accordance with the method of disposition specified by
the requesting Holders, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares
shall have been sold pursuant thereto.
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 4, for sale in accordance with the method
of disposition specified by
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the requesting Holders, shares of Common Stock to be sold by the Company for its
own account, except as and to the extent that, in the opinion of the managing
underwriter (if such method of disposition shall be an underwritten public
offering), such inclusion would adversely affect the marketing of the
Registrable Shares to be sold. Except for registration statements on Form S-4,
S-8 or any successor thereto, the Company will not file with the Commission any
other registration statement with respect to its Common Stock, whether for its
own account or that of other stockholders, from the date of receipt of a notice
from requesting Holders pursuant to this Section 4 (the "Demand Holders")until
the first to occur of (i) withdrawal of such registration statement or (ii) the
effectiveness of such registration statement unless such registration statement
relates to a firm commitment underwritten public offering, then the completion
of the period of distribution of the registration contemplated thereby;
provided, however, that following receipt of any notice under this Section 4,
the Company shall immediately notify all holders of the Company's Common Stock
who have contractual rights to demand registrations pursuant to the terms of any
other registration rights agreement to which the Company is a party. Upon the
written request of such demand rights holders constituting the requisite
percentages of shares to initiate a demand under such other registration rights
agreement specifying the number of shares to be registered, which request shall
be deemed to be an exercise of a demand right under the terms of the
registration rights agreement to which they are parties, such demand rights
holders shall be deemed to be Demand Holders and the shares requested to be
registered by such Demand Holders shall be deemed to be Registrable Shares, in
each case, for purposes of Section 4(d), provided that such written request is
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received by the Company within 30 days of the giving of notice by the Company.
(d) If, in the opinion of the managing underwriter, the inclusion in a
registration statement to be filed under this Section of any shares other than
the Registrable Shares requested to be registered under this Section by Demand
Holders would adversely affect the marketing of such shares, then, in such event
(a) such other shares may be included in such registration only if all of the
Registrable Shares requested to be registered by Demand Holders hereunder are
included, and (b) such other shares shall be subject to the provisions of
Section 5 and the first sentence of Section 4(c) as to priority of inclusion.
If, in the opinion of the managing underwriter, the inclusion of the Registrable
Shares requested to be registered under this Section by Demand Holders would
adversely affect the marketing of such Registrable Shares, Registrable Shares to
be sold by the Demand Holders shall be excluded in such manner that the
Registrable Shares to be excluded shall first be the Registrable Shares of
Demand Holders who are not affiliates (as defined in Rule 144 of the Securities
Act) of the Company (the "Affiliate Holders") and whose Registrable Shares are
then saleable under Rule 144(e) or Rule 144(k) under the Securities Act and then
pro rata among them, and if further reduction is necessary, shall next be pro
rata among the remaining Registrable Shares of the Demand Holders who are
Affiliate Holders or whose Registrable Shares are not then saleable under Rule
144(e) or Rule 144(k) , provided, however, that, notwithstanding anything in
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this Agreement to the contrary, in respect of the first underwritten public
offering following the date of this Agreement, no reduction shall reduce the
number of shares which may be sold by requesting Holders to less than 25% of the
shares to be sold in such offering.
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5. Incidental Registration.
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If the Company at any time (other than pursuant to Section 4 or
Section 6) proposes to register any of its securities under the Securities Act
for sale to the public, whether for its own account or for the account of other
securityholders or both (except with respect to registration statements on Forms
S-4, S-8 or another form not available for registering the Restricted Stock for
sale to the public), each such time the Company will give written notice to all
Holders of outstanding Restricted Stock of its intention to do so. Upon the
written request of any such Holder received by the Company within 30 days of the
giving of any such notice by the Company to register any of such Holder's
Restricted Stock (which request shall state the intended method of disposition
thereof), the Company will use its reasonable best efforts to cause the
Restricted Stock as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale or
other disposition by the Holder (in accordance with such Holder's written
request) of such Restricted Stock so registered. In the event that any
registration pursuant to this Section 5 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of shares of Restricted
Stock to be included in such an underwriting may be reduced if and to the extent
that the managing underwriter shall be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company or
the requesting party therein or that such reduction is otherwise advisable,
provided, however, that after any shares to be sold by holders that do not have
contractual rights to have shares included in such registration have been
excluded, shares to be sold by the Holders shall be excluded in such manner that
the shares to be excluded shall first be the shares of selling Holders and other
requesting holders who, in each case, are not Affiliate Holders and whose shares
are then saleable under Rule 144(e) or Rule 144(k) under the Securities Act and
then pro rata among them, and if further reduction is necessary, shall next be
pro rata among the remaining shares of the selling Holders and other requesting
holders who are Affiliate Holders or whose shares are not then saleable under
Rule 144(e) or Rule 144(k), unless such registration is pursuant to the exercise
of a demand right of another securityholder, in which event such securityholder
shall be entitled to include all shares it desires to have so included before
any shares of Restricted Stock or shares of any other holder are included
therein and provided, however, that, notwithstanding anything in this Agreement
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to the contrary, in respect of the first underwritten public offering following
the date of this Agreement, no reduction shall reduce the number of shares which
may be sold by requesting Holders to less than 25% of the shares to be sold in
such offering.
6. Registration on Form S-3.
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If at any time prior to November 6, 2001 (i) a Holder or Holders of
Registrable Shares request that the Company file a registration statement on
Form S-3 or any successor thereto for a public offering of all or any portion of
the Registrable Shares held by such requesting Holder or Holders, the reasonably
anticipated aggregate price to the public of at least $500,000, and (ii) the
Company is a registrant entitled to use Form S-3 or any successor thereto to
register such shares, then the Company shall use its reasonable best efforts to
register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the
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method of disposition specified in such notice, the number of Registrable Shares
specified in such notice. Whenever the Company is required by this Section 6 to
use its reasonable best efforts to effect the registration of Registrable
Shares, each of the procedures and requirements of Section 4 (including but not
limited to the requirement that the Company notify all Holders of Registrable
Shares from whom notice has not been received and provide them with the
opportunity to participate in the offering) shall apply to such registration,
provided, however, that there shall be up to five (5) registrations on Form S-3
which may be requested and obtained under this Section 6, and the Company shall
not be obligated to register Registrable Shares pursuant to this Section 6 on
more than one occasion per twelve (12) month period, and provided, further,
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however, that the requirements contained in the first sentence of Section 4(a)
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shall not apply to any registration on Form S-3 which may be requested and
obtained under this Section 6.
7. Registration Procedures.
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If and whenever the Company is required by the provisions of Section
4, 5 or 6 to use its reasonable best efforts to effect the registration of any
shares of Restricted Stock under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant to
Section 4, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its reasonable best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its reasonable best efforts to register or qualify the
Restricted Stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions as the sellers of Restricted Stock or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request, provided, however, that the Company shall not for any such
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purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
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(e) use its reasonable best efforts to list the Restricted
Stock covered by such registration statement with any securities exchange on
which the Common Stock is then listed;
(f) immediately notify each seller of Restricted Stock and
each underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and promptly
prepare and furnish to such seller a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Restricted Stock, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) if the offering is underwritten and at the request of any
seller of Restricted Stock as provided herein, use its reasonable best efforts
to furnish on the date that Restricted Stock is delivered to the underwriters
for sale pursuant to such registration: (i) an opinion dated such date of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters and to such seller, stating that such registration
statement has become effective under the Securities Act and that (A) to the
knowledge of such counsel, no stop order suspending the effectiveness thereof
has been issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Securities Act, (B) the registration statement,
the related prospectus and each amendment or supplement thereof comply as to
form in all material respects with the requirements of the Securities Act
(except that such counsel need not express any opinion as to financial
statements, schedules and other financial or statistical information contained
therein) and (C) to such other effects as reasonably may be requested by counsel
for the underwriters or by such seller or its counsel; and (ii) a letter dated
such date from the independent public accountants retained by the Company,
addressed to the underwriters and to such seller, stating that they are
independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including information as
to the period ending no more than five business days prior to the date of such
letter) with respect to such registration as such underwriters reasonably may
request;
(h) make available for inspection by each seller of Restricted
Stock, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by
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any such seller, underwriter, attorney, accountant or agent in connection with
such registration statement;
(i) cooperate with the selling holders of Restricted Stock and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Restricted Stock to be sold, such
certificates to be in such denominations and registered in such names as such
holders or the managing underwriters may request at least two business days
prior to any sale of Restricted Stock; and
(j) permit any holder of Restricted Stock which holder, in the
sole and exclusive judgment, exercised in good faith, of such holder, might be
deemed to be a controlling person of the Company, to participate in good faith
in the preparation of such registration or comparable statement and to require
the insertion therein of material, furnished to the Company in writing, which in
the reasonable judgment of such holder and its counsel should be included.
For purposes of Section 7(a) and 7(b) and of Section 4(c), the period
of distribution of Restricted Stock included therein shall be deemed to extend
until the first to occur of (i) each underwriter's completion of the
distribution of all securities purchased by it, and (ii) one hundred and twenty
(120) days.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Section 4, 5 or 6
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
No Holder of shares of Restricted Stock included in a registration
statement shall (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update a registration statement or prospectus; but the
obligations of the Company with respect to maintaining any registration
statement current and effective shall be extended by a period of days equal to
the period such suspension is in effect unless (i) such extension would result
in the Company's inability to use the financial statements in the registration
statement as initially filed and (ii) such correction or update did not result
from the Company's acts or failures to act.
At the end of the period during which the Company is obligated to
keep the registration statement current and effective as described above (and
any extensions thereof required by the preceding sentence), the Holders of
shares of Restricted Stock included in the registration
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statement shall discontinue sales of shares pursuant to such registration
statement upon receipt of notice from the Company of its intention to remove
from registration the shares covered by such registration statement which remain
unsold, and such Holders shall notify the Company of the number of shares
registered which remain unsold immediately upon receipt of such notice from the
Company.
8. Expenses.
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All expenses incurred by the Company in complying with Sections 4, 5
and 6, including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance, and fees and disbursements
of one counsel for the sellers of Restricted Stock, but excluding any Selling
Expenses, are called "Registration Expenses." All underwriting discounts and
selling commissions applicable to the sale of Restricted Stock are called
"Selling Expenses."
The Company will pay all Registration Expenses in connection with
each registration statement under Sections 4, 5 or 6. All Selling Expenses in
connection with each registration statement under Sections 4, 5 or 6 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
9. Indemnification and Contribution.
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(a) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Sections 4, 5 or 6, the Company will
indemnify and hold harmless each seller of such Restricted Stock thereunder, its
officers and directors, each underwriter of such Restricted Stock thereunder and
each other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller, officer, director,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such Restricted Stock was registered under the Securities
Act pursuant to Sections 4, 5 or 6, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, (ii) any
blue sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the Restricted
Stock under the securities laws thereof (any such application, document or
information herein called a "Blue Sky Application"), (iii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, (iv) any violation
by the Company or its agents of any rule or regulation promulgated under the
Securities Act applicable to the
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Company or its agents and relating to action or inaction required of the Company
in connection with such registration, or (v) any failure to register or qualify
the Restricted Stock in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company (the undertaking
of any underwriter chosen by the Company being attributed to the Company) will
undertake such registration or qualification on the seller's behalf (provided
that in such instance the Company shall not be so liable if it has undertaken
its best efforts to so register or qualify the Restricted Stock) and will
reimburse each such seller, and such officer and director, each such underwriter
and each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the Company will not
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be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such seller, any such underwriter or any such
controlling person in writing specifically for use in such registration
statement or prospectus, and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the Commission at the time the registration statement becomes
effective or in the amended prospectus filed with the Commission pursuant to
Rule 424(b) or in the prospectus subject to completion and term sheet under Rule
434 of the Securities Act, which together meet the requirements of Section 10(a)
of the Securities Act (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of any such seller, any such underwriter or any such
controlling person, if such seller, underwriter or controlling person was
obligated under law to provide a copy of the Final Prospectus to the person or
entity asserting the loss, liability, claim or damage and failed to do so after
sufficient copies of the Final Prospectus were delivered by the Company to such
seller, underwriter or controlling person in sufficient time to deliver the
Final Prospectus within the period required by the Securities Act; provided,
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further, that this indemnity shall not be deemed to relieve any underwriter of
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any of its due diligence obligations.
(b) To the extent permitted by law, in the event of a registration of
any of the Restricted Stock under the Securities Act pursuant to Section 4, 5 or
6, each seller of such Restricted Stock thereunder, severally and not jointly,
will indemnify and hold harmless the Company, each person, if any, who controls
the Company within the meaning of the Securities Act, each officer of the
Company who signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer, director, underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Restricted Stock was registered under the Securities Act pursuant to
Section 4, 5 or 6, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein
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not misleading in the light of the circumstances in which they were made, and
will reimburse the Company and each such officer, director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that such seller will be liable
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hereunder in any such case if and only to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in reliance
upon and in conformity with information pertaining to such seller furnished in
writing to the Company by such seller specifically for use in such registration
statement or prospectus, and provided, further, that the foregoing indemnity
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agreement is subject to the condition that, insofar as it relates to any such
untrue statement or alleged untrue statement or omission or alleged omission
made in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the Final Prospectus, such indemnity agreement shall not
inure to the benefit of the Company, any controlling person or any underwriter,
if the Company, underwriter or controlling person was obligated under law to
provide a copy of the Final Prospectus to the person or entity asserting the
loss, liability, claim or damage and failed to do so within the period required
by the Securities Act; provided, further, that this indemnity shall not be
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deemed to relieve any underwriter of any of its due diligence obligations; and
provided, further, that in no event shall any indemnity by a seller under this
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Section 9(b) exceed the gross proceeds from the offering received by such
seller.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 9 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
--------
however, that, if the defendants in any such action include both the indemnified
- -------
party and the indemnifying party and counsel to the indemnified party shall have
reasonably concluded that there are reasonable defenses available to the
indemnified party which are different from or additional to those available to
the indemnifying party or if the interests of the indemnified party reasonably
may be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred. No indemnifying party, in the
<PAGE>
-12-
defense of any such claim or litigation, shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any Holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for Indemnification pursuant to this
Section 9 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
9; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such Holder will be
-------- -------
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
10. Changes in Common Stock or Series A Preferred Stock. If, and as often
---------------------------------------------------
as, there is any change in the Common Stock or Series A Preferred Stock by way
of a stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock or Series A Preferred Stock as so changed.
11. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
<PAGE>
-13-
(c) furnish to each Holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such Holder to sell any Restricted Stock without
registration.
The Company shall not be required to effect a registration pursuant
to Section 4, 5 or 6 hereof for any Holder desiring to participate in such
registration who (a) may then dispose of all of its shares of Restricted Stock
pursuant to Rule 144 within the three-month period following such proposed
registration; and (b) holds less than 1% of the outstanding capital stock of the
Company (on a common stock-equivalent basis) at the time of such registration.
12. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by
the Company have been duly authorized by all requisite corporate action and will
not violate any provision of law, any order of any court or other agency of
government, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally), except to the extent
the indemnification provisions herein may be deemed not enforceable.
(c) The Company has not granted any registration rights, and no
such registration rights exist, that conflict with the registrations rights set
forth herein or contemplated hereby. All registration rights agreements relating
to the capital stock of the Company permit, or have been amended to permit, the
transactions and rights set forth herein and contemplated hereby.
13. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any of the shares of Restricted Stock), whether so
expressed or not, provided, however, that registration rights conferred herein
-------- -------
on the Holders of shares of Restricted Stock shall only
<PAGE>
-14-
inure to the benefit of a transferee of shares of Restricted Stock if such
transferee, in the Company's reasonable judgment, is not a competitor of the
Company, and (i) there is transferred to such transferee at least 20% of the
total shares of Restricted Stock originally issued to the direct or indirect
transferor of such transferee by the Company or (ii) such transfer is made in
connection with the distribution by a Holder to such Holders beneficial owners
(including, without limitation, to partners of a general or limited partnership,
shareholders of a corporation and beneficiaries of a trust) of securities of the
Holder or to the partners or employees of the Holder, provided that at the
Company's request, one person shall be designated by such transferees as their
agent for purposes of their rights hereunder and the provision of a notice by
the Company to such agent in accordance with the provisions hereof shall be
deemed compliance with such provisions for all such beneficial owners, partners
and employees, and following such request by the Company, the Company shall have
no obligation under said provisions with respect to such transferees until it
shall have been notified of the name and address of such agent.
(b) Each Holder agrees that it will provide notice to the Company
of any transfer or assignment of its rights or interests hereunder. Any failure
by the Company to fulfill a covenant or obligation hereunder which is the direct
result of a failure by a Holder to provide such notice shall not be deemed to be
a breach of any covenant or obligation hereunder.
Nothing in this Agreement shall be construed to create any rights or
obligations except among the parties hereto and their respective and permitted
successors and assigns, and no person or entity shall be regarded as a third-
party beneficiary of this Agreement.
Except as provided in Section 13(a) above, all notices, requests, consents
and other communications hereunder shall be in writing, shall be addressed to
the receiving party's address set forth below or to such other address as a
party may designate by notice hereunder, and shall be either (i) delivered by
hand, (ii) sent by overnight courier, with a receipt obtained or (iii) sent by
registered or certified mail, return receipt requested, postage prepaid.
If to the Company: Occupational Health + Rehabilitation Inc.
175 Derby Street, Suite 36
Hingham, MA 02043-5048
Attn: Chief Executive Officer
If to an Investor: To such Investor at the address of such
Investor set forth in Schedule I to the
Series A Purchase Agreement
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if sent
by overnight courier, on the next business day following the day such notice is
delivered to the courier service, or (iii) if sent by registered or certified
mail, on the 5th business day following the day such mailing is made.
<PAGE>
-15-
(c) This Agreement shall be governed and construed in accordance
with the law of the Commonwealth of Massachusetts, without giving effect to the
conflict of laws principles thereof.
(d) This Agreement may be amended or modified, and any provision
hereof may be waived in whole or in part, but only by the written consent of the
Company and the holders of a majority of the aggregate number of outstanding
shares of Restricted Stock held of record by the Holders or their permitted
successors and assigns. This Agreement may be terminated by written agreement of
the Company and the holders of at least a majority of the aggregate number of
outstanding shares of Restricted Stock held of record by the Holders or their
permitted successors and assigns.
(e) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) Except as otherwise expressly provided herein, the obligations
of the Company to register shares of Restricted Stock under Section 4, 5 or 6 as
provided herein shall terminate on November 6, 2001.
(g) If requested by the underwriter or underwriters for an
underwritten public offering of securities of the Company which offering is by
the Company, each Holder of Restricted Stock who is a party to this Agreement
(including, without limitation, a successor or permitted assignee of a party)
shall agree not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any shares of Restricted Stock or any other
shares of Common Stock (other than shares being registered in such offering),
without the consent of such underwriter or underwriters, for a period of not
more than 90 days following the effective date of the registration statement
relating to such offering (unless in any event such underwriter or underwriters
shall, based on then current market conditions, agree to a shorter period),
provided, with respect to each such offering, that all persons entitled to
- --------
registration rights in such offering who are not parties to this Agreement, all
other persons selling shares of Common Stock in such offering and all executive
officers of the Company shall also have agreed to be bound by provisions
pertaining to the sale of their shares of Common Stock following such offering
which provisions are substantially similar to the provisions binding upon the
Holders of Restricted Stock obligated under this Agreement with respect to the
sale of their shares following such offering.
(h) The Company shall be permitted to require any Holders
requesting registration under Section 4, 5 or 6 to delay any request for
registration or to cease sales under any effective registration statement if the
Company is then contemplating a transaction that could reasonably be expected to
be adversely affected or the Company would be required to make public disclosure
of information, the disclosure of which at such time could reasonably be
expected to cause a material adverse effect upon the Company's business.
<PAGE>
-16-
In addition, if at the time of any request to register Registrable Shares
pursuant to Section 4 or Section 6 hereof, the Company is engaged or has fixed
plans to engage within ninety (90) days of the time of the request in a
registered public offering as to which such Holders may include Registrable
Shares pursuant to Section 5 hereof, then the Company may at its option direct
that such request be delayed.
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
In the event that any court of competent jurisdiction shall determine that
any provision, or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any respect, then such provision shall be
deemed limited to the extent that such court deems it reasonable and
enforceable, and as so limited shall remain in full force and effect.
(j) The headings and captions of the various subdivisions of this
Agreement are for convenience of reference only and shall in no way modify, or
affect the meaning or construction of any of the terms or provisions hereof.
14. Entire Agreement.
----------------
This Agreement embodies the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings related to the subject
matter hereof; except that certain Holders are also parties to the Registration
Rights Agreement of the Company dated as of June 6, 1996, as amended on the date
hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-17-
IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement as a sealed instrument as of the day and year first written above.
THE COMPANY: INVESTORS:
OCCUPATIONAL HEALTH + CAHILL, WARNOCK STRATEGIC
REHABILITATION INC. PARTNERS FUND, L.P.
By: Cahill, Warnock Strategic Partners, L.P.
By: By:
--------------------------- ------------------------------------------
Title: Title: General Partner
------------------------ ---------------------------------------
STRATEGIC ASSOCIATES, L.P.
By: Cahill, Warnock & Company, LLC
------------------------------------------
By:
------------------------------------------
Title: Managing Member
---------------------------------------
AXA U.S. GROWTH FUND, LLC
By:
------------------------------------------
Title: Managing Member
---------------------------------------
U.S. GROWTH FUND PARTNERS, C.V.
By:
------------------------------------------
Title: General Partner
---------------------------------------
DOUBLE BLACK DIAMOND II, LLC
By:
------------------------------------------
Title: Managing Member
---------------------------------------
<PAGE>
-18-
ALMANORI LIMITED
By:
------------------------------------------
Title: Attorney-in-Fact
---------------------------------------
THE VENTURE CAPITAL FUND OF
NEW ENGLAND III, L.P.
By: FH & Co. III, L.P., Its General Partner
By:
------------------------------------------
BANCBOSTON VENTURES, INC.
By:
------------------------------------------
VENROCK ASSOCIATES
By:
------------------------------------------
VENROCK ASSOCIATES II, L.P.
By:
------------------------------------------
ASSET MANAGEMENT ASSOCIATES,
1989, L.P.
By: AMC Partners 89, L.P., General Partner
By:
------------------------------------------
<PAGE>
-19-
SCHEDULE A
INVESTORS
---------
Cahill, Warnock Strategic Partners Fund, L.P.
10 North Calvert Street
Suite 735
Baltimore, Maryland 21202
Attn: Mr. Edward L. Cahill
Strategic Associates, L.P.
10 North Calvert Street
Suite 735
Baltimore, Maryland 21202
Attn: Mr. Edward L. Cahill
Axa U.S. Growth Fund, LLC
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
U.S. Growth Fund Partners, C.V.
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
Double Black Diamond II, LLC
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
Almanori Limited
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley
<PAGE>
-20-
Asset Management Associates, 1989, L.P.
2275 East Bayshore Road
Palo Alto, CA 94303
Attn: Mr. Craig C. Taylor
Venrock Associates
Room 5508, 30 Rockefeller Plaza
New York, NY 10112
Attn: Messrs. Anthony Evnin and Patrick F.
Latterell
Venrock Associates II, L.P.
Room 5508, 30 Rockefeller Plaza
New York, NY 10112
Attn: Messrs. Anthony Evnin and Patrick F.
Latterell
The Venture Capital Fund of New England, III,
L.P.
160 Federal Street, 23rd Floor
Boston, MA 02110
Attn: Mr. Kevin J. Dougherty
BancBoston Ventures, Inc.
100 Federal Street
Boston, MA 02110
Attn: Ms. Marcia T. Bates
<PAGE>
EXHIBIT 11.01
-------------
OCCUPATIONAL HEALTH + REHABILITATION INC
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
PRIMARY
Weighted average OH+R common stock outstanding during
the period, as converted 97,028 93,716 92,300 92,300 92,300
Conversion of OH+R preferred stock into common stock 585,901 567,590 434,385 310,864 226,553
Weighted average Telor common stock from date of merger 446,682 0 0 0 0
------------ ------------ ------------ ------------- --------------
Total 1,129,611 661,306 526,685 403,164 318,853
============ ============ ============ ============= ==============
Net loss $(1,849,587) $(1,776,411) $(1,410,429) $ (1,505,059) $ (65,161)
============ ============ ============ ============= ==============
Loss per share $ (1.64) $ (2.69) $ (2.68) $ (3.73) $ (0.20)
============ ============ ============ ============= ==============
FULLY DILUTED
Weighted average OH+R common stock outstanding during
the period, as converted 97,028 93,716 92,300 92,300 92,300
Conversion of OH+R preferred stock into common stock 585,901 567,590 434,385 310,864 226,553
Weighted average Telor common stock from date of merger 446,682 0 0 0 0
Series A Convertible Preferred Stock 217,352 0 0 0 0
------------ ------------ ------------ ------------- --------------
Total 1,346,963 661,306 526,685 403,164 318,853
============ ============ ============ ============= ==============
Net loss $(1,849,587) $(1,776,411) $(1,410,429) $ (1,505,059) $ (65,161)
============ ============ ============ ============= ==============
Loss per share - fully diluted $ (1.37) $ (2.69) $ (2.68) $ (3.73) $ (0.20)
============ ============ ============ ============= ==============
</TABLE>
Notes:
The weighted average number of shares outstanding for the years ended 1996,
1995, 1994, 1993, and 1992, respectively are based on the number of OH+R shares
of Common Stock exchanged for common shares of the Company, and assumed the
retroactive conversion of OH+R's Preferred Stock.
The effect of options and warrants is not considered as it would be
antidilutive.
<PAGE>
EXHIBIT 21.01
-------------
Subsidiaries of
Occupational Health + Rehabilitation Inc
Occupational Orthopaedic Center, Inc.,
a Rhode Island corporation
NEB Occupational Health,
a Massachusetts general partnership
CM Occupational Health, Limited Liability Company,
a Maine limited liability company
(also doing business as The Health Center)
Argosy Health Northeast,
a Massachusetts general partnership
OHR/MMC, Limited Liability Company,
a Maine limited liability company
(also doing business as OH+R, an affiliate of Maine Health (an LLC))
Kent/OH+R, LLC,
a Rhode Island limited liability company
<PAGE>
EXHIBIT 23.01
-------------
Consent of Ernst & Young LLP
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-71462; Form S-8 No. 333-05253; and Form S-8 No. 333-15191)
pertaining to Occupational Health + Rehabilitation Inc of our report dated March
11, 1997, with respect to the financial statements of Occupational Health +
Rehabilitation Inc included in the Annual Report (Form 10-K) for the year ended
December 31, 1996.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
March 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 8,961,051 368,959
<SECURITIES> 0 0
<RECEIVABLES> 1,702,415 352,931
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,300,762 1,555,741
<PP&E> 1,992,155 1,723,674
<DEPRECIATION> 872,817 665,363
<TOTAL-ASSETS> 15,476,137 4,249,262
<CURRENT-LIABILITIES> 2,454,773 1,895,787
<BONDS> 0 0
0 0
0 0
<COMMON> 1,471 0
<OTHER-SE> 18,519,192 7,196,962
<TOTAL-LIABILITY-AND-EQUITY> 15,476,137 4,249,405
<SALES> 9,041,199 5,798,037
<TOTAL-REVENUES> 9,228,538 6,023,947
<CGS> 10,820,308 7,697,903
<TOTAL-COSTS> 10,820,308 7,697,903
<OTHER-EXPENSES> (308,215) (322,211)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 252,054 96,746
<INCOME-PRETAX> (1,849,587) (1,776,411)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,849,587) (1,776,411)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,849,587) (1,776,411)
<EPS-PRIMARY> (1.64) (2.69)
<EPS-DILUTED> (1.37) (2.69)
</TABLE>
