<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use Of The Commission Only (As Permitted By
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
OCCUPATIONAL HEALTH + REHABILITATION INC
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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OCCUPATIONAL HEALTH + REHABILITATION INC
175 Derby Street, Suite 36
Hingham, MA 02043-4058
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 30, 1999
To Our Stockholders:
The 1999 Annual Meeting of Stockholders of Occupational Health +
Rehabilitation Inc (the "Company") will be held at the Company's corporate
offices located at 175 Derby Street, Suite 36, Hingham, Massachusetts 02043-4058
on November 30, 1999, at 9:00 A.M. (local time) for the following purposes:
1. To elect three directors for a term to expire at the 2002 Annual Meeting of
Stockholders; and
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Only stockholders of record at the close of business on October 15, 1999 are
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
By order of the Board of Directors,
Richard P. Quinlan
Secretary
Dated: October 25, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
ANY PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME PRIOR TO ITS
EXERCISE AND, IF PRESENT AT THE MEETING, MAY WITHDRAW IT AND VOTE IN PERSON.
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
175 Derby Street, Suite 36
Hingham, MA 02043-4058
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 30, 1999
__________________________
This Proxy Statement is furnished to the stockholders of Occupational Health
+ Rehabilitation Inc (the "Company") in connection with the solicitation of
proxies by the Board of Directors for use at the Annual Meeting of Stockholders
of the Company to be held on November 30, 1999 and any adjournments or
postponements thereof (the "Annual Meeting"). This Proxy Statement, the
foregoing Notice of Annual Meeting, the enclosed form of proxy and the Company's
1998 Annual Report to Stockholders are first being mailed or given to
stockholders on or about October 25, 1999.
PROXIES
A stockholder giving a proxy may revoke it at any time before it is voted by
giving another proxy bearing a later date, by notifying the Secretary of the
Company in writing of such revocation, or by attending the Annual Meeting in
person and casting a ballot. Any properly executed proxy returned to the
Company will be voted in accordance with the instructions indicated thereon. If
no instructions are indicated on the proxy, the proxy will be voted for the
election of the nominees for director named herein.
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of proxies by mail, proxies may be solicited by directors,
officers or regular employees of the Company in person, by telephone or by other
means. Such persons will not receive any additional compensation for such
activities.
VOTING SECURITIES
The record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting was the close of business on October 15, 1999
(the "Record Date"). On the Record Date, there were 1,479,444 shares of Common
Stock (the "Common Stock") and 1,416,667 shares of Series A Convertible
Preferred Stock (the "Preferred Stock") outstanding and entitled to vote. Each
share of Common Stock is entitled to one vote and, other than with respect to
the election of three directors, the Common Stock and the Preferred Stock shall
vote together as a single class with respect to any matter which may properly
come before the Annual Meeting. A majority of such shares, present in person or
represented by proxy, shall constitute a quorum at the Annual Meeting. A
majority of the shares of Common Stock, present in person or represented by
proxy, shall constitute a quorum at the Annual Meeting for the purpose of
electing three directors as more fully described below. Abstentions and broker
non-votes will be included in the calculation of the number of votes represented
at the Annual Meeting for purposes of determining whether a quorum has been
achieved. Votes will be tabulated at the Annual Meeting by one or more
inspectors of election appointed by the Board of Directors.
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP
OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of Record Date by (i) each person
known by the Company to own beneficially more than five percent of the
outstanding Common Stock of the Company, (ii) each director and nominee for
director of the Company, (iii) each executive officer of the Company named in
the Summary Compensation Table on page 9 and (iv) all directors and executive
officers of the Company as a group. Except as otherwise indicated, all shares
are
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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
Beneficially Percent
Name and Address of Beneficial Owner Owned (1) of Class
- ------------------------------------ -------- --------
<S> <C> <C>
Cahill, Warnock Strategic Partners Fund, L.P. (2)................. 679,042 31.5%
One South Street, Suite 2150
Baltimore, MD 21202
Prince Venture Partners III, L.P. (3).............................. 400,045 27.0%
10 South Wacker Drive
Chicago, IL 60606
Partech International Entities (4) ............................. 283,333 16.1%
50 California Street, Suite 3200
San Francisco, CA 94111
Venrock Associates (5)............................................ 246,784 15.0%
30 Rockefeller Plaza, Room 5508
New York, NY 10112
BancBoston Ventures, Inc. (6)..................................... 215,636 13.7%
100 Federal Street
Boston, MA 02110
The Venture Capital Fund of
New England III, L.P. (7)......................................... 182,303 11.8%
70 Walnut Street, Suite 120
Wellesley Hills, MA 02481-2175
Asset Management Associates 1989, L.P. (8)........................ 173,685 11.1%
2275 East Bayshore Road
Palo Alto, CA 94303
State of Wisconsin Investment Board (9)........................... 74,850 5.1%
P.O. Box 7842
Madison, WI 53707
John C. Garbarino (10)............................................ 201,609 12.5%
175 Derby Street, Suite 36
Hingham, MA 02043
Lynne M. Rosen (11)............................................... 50,568 3.4%
Richard P. Quinlan (12)........................................... 40,000 2.6%
H. Nicholas Kirby (13)............................................ 26,746 1.8%
Kevin J. Dougherty (14)........................................... 2,000 *
Angus M. Duthie (15).............................................. 2,000 *
Edward L. Cahill (16)............................................. 2,000 *
Donald W. Hughes (17)............................................. 1,200 *
Frank H. Leone (18)............................................... 5,000 *
Steven W. Garfinkle (19).......................................... 5,000 *
</TABLE>
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<TABLE>
<S> <C> <C>
All directors and executive officers as a group................... 343,123 20.0%
(11 persons) (20)
</TABLE>
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Less than 1%
(1) Each of the stockholders who is a party to a certain Stockholders'
Agreement (the "Stockholders' Agreement") dated as of November 6, 1996 by
and among the Company and certain of its stockholders may be deemed to
share voting power with respect to, and may be deemed to beneficially own,
all of the shares of the Preferred Stock and Common Stock subject to the
Stockholders' Agreement. Such stockholders disclaim such beneficial
ownership.
(2) Consists of 679,042 shares of Common Stock issuable upon conversion of
shares of 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.
(3) 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.
(4) Consists of 86,667 shares of Common Stock issuable upon conversion of
shares of Preferred Stock held by Axa U.S. Growth Fund, LLC (the "Axa
Conversion Shares"), 173,334 shares of Common Stock issuable upon
conversion of shares of Preferred Stock held by U.S. Growth Fund Partners,
C.V. (the "GFP Conversion Shares"), 16,667 shares of Common Stock issuable
upon conversion of shares of Preferred Stock held by Double Black Diamond
II, LLC (the "DBD Conversion Shares") and 6,665 shares of Common Stock
issuable upon conversion of shares of Preferred Stock held by Almanori
Limited (the "Almanori Conversion Shares"). As the investment managing
member of Axa U.S. Growth Fund, LLC, PAX V, LLC may be deemed to
beneficially own the Axa Conversion Shares. Based on a Schedule 13G dated
February 10, 1998, AXA-UAP may also be deemed to beneficially own the AXA
Conversion Shares. As the investment general partner of U.S. Growth Fund
Partners, C.V., PAR V V.O.F. may be deemed to beneficially own the GFP
Conversion Shares. As non-managing members of PAX V, LLC and a general
partner of PAR V V.O.F., David Sherry and Glenn Solomon may be deemed to
beneficially own the Axa Conversion Shares and the GFP Conversion Shares.
As a managing member of PAX V, LLC and PAR V V.O.F., PAR SF, LLC may be
deemed to beneficially own the Axa Conversion Shares and the GFP Conversion
Shares. As a managing member of PAR SF, LLC and Double Black Diamond II,
LLC, Vincent Worms may be deemed to beneficially own the Axa Conversion
Shares, the GFP Conversion Shares and the DBD Conversion Shares. As a
managing member of PAR SF, LLC and Double Black Diamond II, LLC, Thomas
McKinley may be deemed to beneficially own the Axa Conversion Shares, the
GFP Conversion Shares and the DBD Conversion Shares. As non-managing
members of PAX V, LLC, Scott Matson and Philippe Cases may be deemed to
own the Axa Conversion Shares. Each of PAX V, LLC, PAR SF, LLC, Vincent
Worms, Thomas McKinley, Scott Matson, Philippe Cases, David Sherry and
Glenn Solomon disclaims beneficial ownership of the Axa Conversion Shares,
except to the extent of their respective proportionate pecuniary interests
therein. Each of PAR V V.O.F., PAR SF, LLC, Vincent Worms, Thomas
McKinley, David Sherry and Glenn Solomon disclaims beneficial ownership of
the GFP Conversion Shares, except to the extent of their respective
proportionate pecuniary interests therein. Each of Vincent Worms and
Thomas McKinley disclaims beneficial ownership of the DBD Conversion
Shares, except to the extent of their respective proportionate pecuniary
interests therein.
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(5) 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, Ted H. McCourtney, Anthony B.
Evnin, David R. Hathaway, Anthony Sun, Kimberley A. Rummelsberg and Ray A.
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.
(6) Includes 100,000 shares of Common Stock issuable upon conversion of shares
of Preferred Stock.
(7) 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.
(8) 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 voting and investment 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.
(9) Shares reported as beneficially owned by State of Wisconsin Investment
Board in a Schedule 13G filed with the SEC dated January 29, 1999.
(10) Includes 129,540 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999.
(11) Includes 27,787 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999.
(12) Includes 35,000 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999.
(13) Includes 19,746 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999.
(14) Consists entirely of shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999. Mr.
Dougherty disclaims any beneficial ownership in the shares held by The
Venture Capital Fund of New England III, L.P. See Note 7.
(15) Consists entirely of shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999. Mr.
Duthie disclaims any beneficial ownership in the shares held by Prince
Venture Partners III, L.P. See Note 3.
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(16) Consists entirely of shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999. 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 2) 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.
(17) Consists entirely of shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999.
(18) Consists entirely of shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999.
(19) Consists entirely of shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 15, 1999.
(20) Includes an aggregate of 236,273 shares of Common Stock issuable upon the
exercise of options that are exercisable within 60 days of October 15,
1999. Does not include an aggregate of 515,681 shares of Common Stock and
an aggregate of 783,334 shares of Common Stock issuable upon conversion of
shares of Preferred Stock with respect to which certain directors disclaim
beneficial ownership. See Notes #2, #3, #7, #14, #15 and #16.
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, 1998, all such reports were timely filed except
Forms 3 were filed late with respect to the appointment to the Board of
Directors of Frank H. Leone and Steven W. Garfinkle and an amended Form 5 was
filed late with respect to a transfer of shares held by John C. Garbarino
to certain of his family members as a gift during December 1998 for tax planning
purposes.
1. ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the Board
of Directors shall be divided into three classes, as nearly equal in number as
possible, with each class having a three-year term. The Board of Directors,
pursuant to the Company's Restated Certificate of Incorporation, has fixed the
number of directorships at seven. Pursuant to the terms of the Preferred Stock,
the holders of such stock, voting as a single class, are entitled to elect two
of such directors. Pursuant to the terms of the Stockholders' Agreement,
certain of the Company's 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
(currently, John C. Garbarino); (b) a person designated by the Telor Principal
Stockholders, as defined in the Stockholders' Agreement (currently, Angus M.
Duthie); (c) a person designated by the OH+R Principal Stockholders, as defined
in the Stockholders' Agreement (currently, Kevin J. Dougherty); (d) two persons
designated by Cahill, Warnock Strategic Partners Fund, L.P. (currently, Edward
L. Cahill and Donald W. Hughes); and (e) two persons unaffiliated with the
management of the Company (the "Independent Directors") and mutually agreeable
to all of the other directors (currently, Steven W. Garfinkle and Frank H.
Leone).
At the Annual Meeting, three directors will be elected. The Board of
Directors have nominated John C. Garbarino, Angus M. Duthie and Steven W.
Garfinkle to serve until the 2002 Annual Meeting of Stockholders of the
Company. Mr. Garbarino is the current Chief Executive Officer of the Company.
Mr. Duthie shall serve as the
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director designated by the Telor Principal Stockholders and Mr. Garfinkle shall
serve as one of the Independent Directors. If elected, each of Messrs.
Garbarino, Duthie and Garfinkle shall continue in office until his successor has
been elected and qualified. Messrs. Garbarino, Duthie and Garfinkle are
currently directors of the Company. Each has indicated a willingness to serve as
a director, but if for any reason he should be unavailable to serve as a
director at the time of the Annual Meeting, a contingency which the Board of
Directors does not expect, a different person designated by the Board of
Directors may be nominated in his stead.
If a quorum of the holders of Common Stock is present at the Annual Meeting,
the election of Messrs. Garbarino, Duthie and Garfinkle as directors will
require the affirmative vote of a plurality of the shares of Common Stock
present in person or represented by proxy and entitled to vote. Abstentions by
holders of such shares and broker non-votes with respect to the election of a
director will be included in determining the presence of such quorum but will
not be included in determining whether the nominee has received the vote of such
plurality.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR SUCH
---
NOMINEES.
The following sets forth certain information regarding the nominees named
above and the other directors of the Company whose terms will continue after the
Annual Meeting.
Nominees for Three-Year Term Expiring 2002
John C. Garbarino, age 46, a founder of Occupational Health + Rehabilitation
Inc ("OH+R"), has served as President, Chief Executive Officer and a director of
the Company since the merger of OH+R with and into the Company (then known as
Telor Ophthalmic Pharmaceuticals, Inc ("Telor")) (the "Merger") in June 1996 and
previously served as the President and Chief Executive Officer of OH+R from its
formation in July 1992 to the Merger. From February 1991 through June 1992, Mr.
Garbarino served as President and Chief Executive Officer of Occupational
Orthopedic Systems, Inc., a management company that operated Occupational
Orthopedic Center, Inc., a company which was the initial acquisition of OH+R.
From 1985 to January 1991, Mr. Garbarino was associated in various capacities
with Foster Management Company ("Foster"), a private investment company
specializing in developing businesses to consolidate fragmented industries. In
his association with Foster, Mr. Garbarino was a general partner and consultant
and held various senior executive positions (including Chief Executive Officer,
Chief Operating Officer and Chief Financial Officer) in Chartwell Group Ltd., a
Foster portfolio company organized to consolidate through acquisitions the
highly fragmented premium priced segment of the interior furnishings industry.
Previously, Mr. Garbarino participated in the venture capital industry as a
founder and general partner of Fairfield Venture Partners, L.P. and as vice
president and treasurer of Business Development Services, Inc., a venture
capital subsidiary of General Electric Company. Mr. Garbarino is a C.P.A. and
previously worked at Ernst & Whinney (a predecessor to Ernst & Young LLP).
Angus M. Duthie, age 59, has served as a director of the Company since the
Merger and previously served as a director of OH+R from June 1992 to 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.
Steven W. Garfinkle, age 41, has served as director of the Company since
July 1998. Mr. Garfinkle, who is currently a private health care consultant,
served as Chairman and Chief Executive Officer of Prism Health Group Inc.
("Prism"), an operator of skilled nursing facilities and related services, from
1992 until Prism was sold to Mariner Health, Inc. in 1997. Mr. Garfinkle also
served as President of New England Health Strategies from 1991 to 1992. From
1982 to 1991, Mr. Garfinkle served as Chief Operating Officer and in several
senior management positions for the Mediplex Group, Inc.
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Continuing Directors
Terms Expiring in 2000:
Edward L. Cahill, age 46, has served as a director of the Company since
November 1996. Mr. Cahill is a founding partner of Cahill, Warnock & Company,
LLC ("Cahill, Warnock"), an asset management firm established to invest in small
public companies. Prior to founding Cahill, Warnock in July 1995, Mr. Cahill
had been a Managing Director at Alex. Brown & Sons Incorporated where, from 1986
through 1995, he headed the firm's Health Care Investment Banking Group. Mr.
Cahill is also a director of GENEMEDICINE, INC., Jay Jacobs, Inc. and Md/Bio.
Donald W. Hughes, age 48, has served as a director of the Company since
December 1997. Mr. Hughes has been the Vice President and Chief Financial
Officer of Cahill, Warnock since February 1997. From December 1995 to February
1997, Mr. Hughes served as Vice President, Chief Financial Officer and Secretary
of Capstone Pharmacy Services, Inc. (Nasdaq: DOSE) and served as Executive Vice
President and Chief Financial Officer of Broventure Company, Inc., a closely-
held investment management company, from July 1984 to November 1995.
Terms Expiring in 2001:
Kevin J. Dougherty, age 53, has served as a director of the Company since the
Merger and previously served as a director of OH+R from July 1993 to the Merger.
Mr. Dougherty is currently a General Partner of The Venture Capital Fund of New
England, a venture capital firm he joined in April 1986. Previously, he
participated in the venture capital industry as Vice President of 3i Capital
Corporation from 1985 to 1986, and as Vice President of Massachusetts Capital
Resource Company from 1981 to 1985. Prior to that, Mr. Dougherty served as a
commercial banker at Bankers Trust Company and the First National Bank of
Boston. He currently serves on the board of directors of Inspectron
Corporation.
Frank H. Leone, age 55, has served as a director of the Company since July
1998. In 1985, Mr. Leone founded and has since served as President/Chief
Executive Officer of RYAN Associates, a national occupational health consulting
firm, and he is the founder and Executive Director of the National Association
of Occupational Health Professionals (N.A.O.H.P.). Mr. Leone is also the
executive editor of four leading occupational health periodicals: "VISIONS",
"Partners", the "Workers' Compensation Managed Care Bulletin", and the "Clinical
Care Update".
Board of Directors Committees and Meetings
The standing committees of the Board of Directors are the Audit Committee and
the Compensation Committee. The Board of Directors does not have a standing
nominating committee.
The Audit Committee is currently comprised of Kevin J. Dougherty, Angus M.
Duthie and Donald W. Hughes. The Audit Committee oversees the Company's system
of internal accounting controls, recommends to the Board of Directors the
appointment of a firm of independent certified auditors to conduct the annual
audit of the Company's financial statements, reviews the scope of the audit,
reviews reports from the independent certified auditors, and makes such
recommendations to the Board of Directors in connection with the annual audit as
it deems appropriate. The Audit Committee met twice during 1998.
The Compensation Committee is currently comprised of Edward L. Cahill and
Angus M. Duthie. The Compensation Committee reviews the compensation of
officers of the Company and the Company's compensation policies and practices.
The Compensation Committee also administers the 1988, 1993, 1996 and 1998 Stock
Plans, including recommending the grant of stock options thereunder. The
Compensation Committee met three times during 1998.
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The Board of Directors held six meetings during 1998. Each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors and (ii) the total number of meetings held by all
committees of the Board on which such director served.
Directors' Compensation
Except for the Independent Directors, the Company's directors do not
receive any cash compensation for service on the Board of Directors or any
committee thereof, but all directors are reimbursed for expenses actually
incurred in connection with attending meetings of the Board of Directors and any
committee thereof. Commencing on January 1, 1999, each of the Independent
Directors receives $1,200 for each meeting of the Board of Directors he attends.
Pursuant to the Company's 1993 Stock Plan (subject to the availability of shares
thereunder), each director who is not an employee of the Company is granted a
non-qualified stock option on the date of his or her first 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. In addition, pursuant to the Company's 1993 Stock Plan (subject to the
availability of shares thereunder), at each annual meeting of stockholders or
special meeting in lieu thereof, each director who is not then an employee of
the Company and who has been in continued and uninterrupted service of the
Company as a director for at least the last six months is granted a non-
qualified stock option to purchase 800 shares of the Company's Common Stock of
the date of grant. Such option has term of ten years and is immediately
exercisable in full as of the date of the next annual meeting of stockholders or
special meeting in lieu thereof following the annual meeting or special meeting
in lieu thereof in which the option was granted, whether or not such director is
re-elected at that meeting, provided that such director has been in the
continued and uninterrupted service of the Company as a director from the date
of grant through the day prior to the subsequent annual meeting. The Company has
exhausted the available shares of Common Stock under the 1993 Stock Plan.
Upon election to the Board, each Independent Director was granted a
non-qualified stock option to purchase 20,000 shares of the Company's Common
Stock. The exercise price of each such option was the fair market value of the
Company's Common Stock on the date of grant. Such options vest ratably over four
years on each of the first four anniversary dates of the grant date and are
exercisable for a period of ten years.
-8-
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information regarding the
compensation paid by the Company for the years ended December 31, 1998, 1997 and
1996 to the Company's Chief Executive Officer and the only other executive
officers whose salary and bonus exceeded $100,000 in 1998 (together, the "Named
Executive Officers") for services rendered in all capacities to the Company and
its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Awards
------
Securities (1)
Annual Compensation Underlying All Other
-------------------
Name and Principal Position Year Salary ($) Bonus ($) Options (#) Compensation ($)
- --------------------------- ---- ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
John C. Garbarino...................... 1998 180,000 --- 60,000 3,494
President and Chief Executive Officer 1997 180,000 --- --- 6,170
1996 174,088 25,000 128,319 3,670
Richard P. Quinlan (2)................. 1998 140,000 10,000 10,000 7,138
Chief Financial Officer, Treasurer, 1997 140,000 --- --- 7,674
Secretary and General Counsel 1996 19,923 --- 45,000 936
Lynne M. Rosen......................... 1998 139,711 --- 10,000 2,922
Sr. Vice President, Planning and 1997 108,654 --- --- 2,915
Development 1996 99,115 27,080 1,938
H. Nicholas Kirby...................... 1998 129,515 --- 20,000 1,609
Senior Vice President, 1997 87,907 --- --- 1,485
Corporate Development 1996 78,509 688 18,496 1,500
</TABLE>
(1) Includes primarily the Company's contribution under the Company's
401(k) plan and car allowances.
(2) Mr. Quinlan joined the Company in November 1996.
-9-
<PAGE>
Option Grants
The following table sets forth information with respect to stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------
Number of % of Total
Securities Options Potential
Underlying Granted to Realizable Value at
Options Employees Assumed Annual Rates of
Granted in Exercise Expiration Stock Price Appreciation
Name (#) 1998 Price ($/SH) Date for
Option Term (1)
---------------
5% ($) 10%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John Garbarino.............. 60,000 (2) 21.90% $3.00 01/16/08 $113,400 $286,800
Richard P. Quinlan.......... 5,000 (2) 1.82% $3.00 01/16/08 $ 9,450 $ 23,900
5,000 (3) 1.82% $3.00 01/16/08 $ 9,450 23,900
Lynne M. Rosen.............. 5,000 (2) 1.82% $3.00 01/16/08 $ 9,450 $ 23,900
5,000 (3) 1.82% $3.00 01/16/08 $ 9,450 $ 23,900
H. Nicholas Kirby........... 5,000 (2) 1.82% $3.00 01/16/08 $ 9,450 $ 23,900
15,000 (3) 5.47% $3.00 01/16/08 $ 28,350 $ 71,700
</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) Options granted vest fully on December 31, 1999 if various goals and other
criteria are achieved.
(3) Options granted vest ratably over four (4) years on each of the first four
anniversary dates of the grant date.
-10-
<PAGE>
Option Exercises and Year - End Values
The following table sets forth information concerning option holdings as of
December 31, 1998 with respect to the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-the-
Shares Value Underlying Unexercised Money Options
Acquired on Realized Options at FY-End (#) at FY-End ($) (1)
--------------------- -----------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----- ------------ --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Garbarino.......... --- --- 104,540 110,000 64,965 52,500
Richard P. Quinlan......... --- --- 22,500 32,500 --- 8,750
Lynne M. Rosen............ --- --- 21,537 23,540 11,825 8,750
H. Nicholas Kirby.......... --- --- 11,372 29,248 5,936 18,965
</TABLE>
(1) Based on the fair market value of the Company's Common Stock as of
December 31, 1998 ($3.875) minus the exercise price of options.
Employment Agreements
John C. Garbarino has an employment agreement with the Company dated June
6, 1996. The term of the agreement is two years from such date and renews
automatically for successive one-year periods until terminated. The agreement
provides for an annual salary of $180,000, subject to increase on an annual
basis in the discretion of the Board of Directors, and bonus as may be
determined by the Compensation Committee of the Board of Directors. Mr.
Garbarino is subject to a covenant not to compete with the Company for six
months after the termination of his employment. If the Company terminates the
agreement without "cause" (as defined in the agreement), or if Mr. Garbarino
become incapacitated, or if Mr. Garbarino resigns from the Company for "just
cause" (as defined in the agreement), then the Company is obligated to pay to
Mr. Garbarino six months' base salary in consideration of his covenant not to
compete.
Compensation Committee Report
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two directors, Edward L. Cahill and Angus M. Duthie, both of whom
are non-employee and outside directors. The Committee is responsible for setting
and monitoring the effectiveness of the compensation provided to senior
management employees and executive officers of the Company and making
recommendations concerning the same to the Company's Board of Directors.
Compensation Philosophy
The Company's compensation philosophy is premised upon three basic goals:
(1) to attract and retain qualified individuals who shall provide skills and
leadership that will result in both short and long-term success for the Company;
(2) to reinforce strategic performance objectives through the use of incentive
compensation programs; and (3) to create a mutuality of interest between
executive officers and stockholders through compensation structures that create
a direct link between executive compensation and stockholder return.
-11-
<PAGE>
The Company's compensation system has been designed to achieve these basic
goals by providing three separate forms of compensation consisting of base
salary, incentive-based cash compensation and equity-based compensation in the
form of stock option grants. In determining the levels of each of these aspects
of compensation, the Committee reviews available public data published by its
competitors and information gathered by the Company through conversations with
consultants in the executive recruiting industry. Through this process, the
Committee attempts to create a survey that it believes is indicative of the
Company's industry competitors after giving due regard to the relative sizes of
other companies in the occupational healthcare industry.
Base Salary
Base salary levels for the Company's executive officers and senior
management are competitively set relative to the Committee's survey results
after taking into account each executive's areas and level of responsibility,
the individual's historical performance, compensation, tenure with the Company
and the recommendations of such individual's superiors. Base salary increases
are generally modest and consistent with increases in the consumer price index.
If, however, the Committee believes that the future needs of the Company warrant
it, the Committee may prudently increase base salaries above relative ranges
within the Company or above local competitors in order to ward off any potential
departures by personnel to competitors that the Committee believes would have an
adverse consequence to the Company.
Incentive Compensation
Executive officers and senior management may be awarded discretionary cash
bonuses based on the Committee's assessment of the Company's performance in the
preceding fiscal year as determined by reference to, among other factors,
qualitative and quantitative performance measures and the individual's region or
center performance against its fiscal year budget. Cash bonuses are not
determined by a formula but are determined on an individual basis pursuant to
the basic premise of fairly compensating individuals of relatively similar value
within the Company.
Incentive compensation, in the opinion of the Committee, is an excellent
means by which it can reward and motivate short-term performance by its
executive officers and senior managers, which in the opinion of the Committee
will enhance the Company's value. The Committee believes that this mechanism is
particularly successful with senior management personnel who may have relatively
lower base salaries as a percentage of overall compensation but have direct
supervision and management responsibilities over the Company's operating regions
or centers so that their activities can have an immediate impact on such
region's or center's financial performance.
Equity-Based Compensation
The Committee believes that in order to enhance long-term stockholder value
it must provide incentives that provide both short-term and long-term results.
Since the Company is still in a relatively early stage of development, the
Committee believes that its executive officers and senior management have a
tremendous opportunity to develop and obtain significant rewards by enhancing
the Company's long-term market value. Thus, a prime objective of the Company's
stock plans is to align the interests of executive officers and senior managers
with stockholders by enabling such officers and managers to develop and maintain
long-term stock ownership positions in the Company's Common Stock thereby
creating a strong and direct link between executive pay and stockholder return.
Options are typically granted annually. Individual grant sizes are
determined based on a variety of factors, which primarily include practices for
similar positions in the occupational healthcare industry, the Company's and
individual's overall performance, and finally such individual's relative level
of authority and responsibility within the Company. Before actually determining
individual grants, however, the Committee establishes distinct levels of options
pursuant to which a specific number of options are granted to each individual
assigned to such level. Then, upon weighing an individual's performance against
the foregoing factors, each executive officer and senior manager is assigned to
one of the established levels. At the discretion of the Committee, and based on
the recommendation of management, options may also be used as an incentive for
candidates recruited to fill key positions, or serve as special retention
incentives for employees with significant future potential.
-12-
<PAGE>
Chief Executive Officer Compensation
During 1998 the Company's most highly compensated executive officer was its
Chief Executive Officer, John C. Garbarino. Mr. Garbarino is a party to an
employment agreement described above but otherwise participates in the same
executive compensation program provided to other executive officers and senior
management of the Company as described above. In 1998, Mr. Garbarino received a
base salary of $180,000, which remained consistent with his base salary in 1997.
Conclusion
The Committee believes that its methodology and actual compensation
provided for fiscal 1998 was appropriate and will ensure that the Company's
executive officers and senior managers will continue to be motivated to act in a
manner that will enhance the long-term interests of the Company and its
stockholders.
Submitted by,
Edward L. Cahill
Angus M. Duthie
-13-
<PAGE>
Stock Performance Graph
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the return on the Total Return Index for the Nasdaq
Stock Market (U.S.) and the Nasdaq Health Services Index. The measurement
assumes a $100 investment as of June 6, 1996 (the date of the Merger) with all
dividends reinvested. Index comparisons begin as of May 31, 1996. The data
presented are on a semi-annual basis from the time of the Merger (or May 31,
1996 for index comparisons) to the end of fiscal 1998.
[GRAPH APPEARS HERE]
INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
selected Ernst & Young LLP ("Ernst & Young") as independent certified auditors
to audit the consolidated financial statements of the Company for the fiscal
year ending December 31, 1999. Ernst & Young served as the Company's independent
certified auditors for the fiscal year ended December 31, 1998 and has reported
on the Company's consolidated financial statements for such year.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions from stockholders.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before the
Annual Meeting. If, however, any other business should properly come before the
Annual Meeting, the persons named in the accompanying proxy will vote the proxy
as in their discretion they may deem appropriate, unless they are directed by
the proxy to do otherwise.
-14-
<PAGE>
STOCKHOLDERS PROPOSALS FOR 2000
Any proposal intended to be presented by a stockholder at the Company's
2000 Annual Meeting of Stockholders must comply with the procedures set forth in
the Company's by-laws and must be presented to the Company within a reasonable
time prior to the solicitation of proxies related to the meeting. Proposals
should be addressed to Richard P. Quinlan, Occupational Health + Rehabilitation
Inc, 175 Derby Street, Suite 36, Hingham, Massachusetts 02043-4058.
By order of the Board of Directors,
Richard P. Quinlan
Secretary
Hingham, MA
October 25, 1999
-15-
