Exhibit 10.23

 

EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

CONCENTRA OPERATING CORPORATION,

 

BRADY ACQUISITION CORP.

 

and

 

OCCUPATIONAL HEALTH + REHABILITATION INC

 

Dated as of August 8, 2005

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

          Page

--------------------------------------------------------------------------------

ARTICLE I      THE MERGER      1.1    The Merger; Effective Time of the Merger
   1 1.2    Closing    1 1.3    Effect of the Merger    2 1.4    Certificate of
Incorporation and Bylaws    2 1.5    Directors and Officers    2 ARTICLE II     
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE COMPANY AND MERGER SUB; EXCHANGE OF CERTIFICATES      2.1    Effect of
the Merger on Capital Stock    2 2.2    Treatment of Company Stock Options    5
2.3    Dissenting Stockholders    6 2.4    Payment for Securities    6 2.5   
Taking of Necessary Action; Further Action    9 ARTICLE III      REPRESENTATIONS
AND WARRANTIES      3.1    Representations and Warranties of the Company and the
Subsidiaries    9 3.2    Representations and Warranties of Parent and Merger Sub
   33 ARTICLE IV      COVENANTS RELATING TO CONDUCT
OF BUSINESS PENDING THE MERGER      4.1    Conduct of Business by the Company
Pending the Merger    36 4.2    No Solicitation    39 ARTICLE V      ADDITIONAL
AGREEMENTS      5.1    Preparation of Proxy Statement    42 5.2    Access to
Information    43 5.3    Stockholders Meeting    43 5.4    Other Approvals    43

 

i

--------------------------------------------------------------------------------

5.5    Agreement to Defend    44 5.6    Public Announcements    44 5.7    Advice
of Changes; SEC Filings    44 5.8    Conveyance Taxes    44 5.9    Withholding
Rights    44 5.10    Reasonable Efforts    45 5.11    Affiliate Agreements    45
5.12    Other Actions    45 5.13    Appraisal Rights    45 5.14   
Indemnification and Insurance    45 5.15    Payoff Letters    47 5.16   
Delivery of Estimates    47 5.17    Repayment of Capital Source Agreement    47
5.18    Stockholder Representative    47 5.19    Employee Matters    48 ARTICLE
VI      CONDITIONS PRECEDENT      6.1    Conditions to Each Party’s Obligation
to Effect the Merger    48 6.2    Conditions to Obligations of Parent and Merger
Sub    48 6.3    Conditions to Obligations of the Company    49 ARTICLE VII     
TERMINATION AND AMENDMENT      7.1    Termination    50 7.2    Effect of
Termination    52 7.3    Amendment    53 7.4    Extension; Waiver    53 ARTICLE
VIII      GENERAL PROVISIONS      8.1    Payment of Expenses    53 8.2   
Nonsurvival of Representations, Warranties and Agreements    53 8.3    Notices
   54 8.4    Interpretation    55 8.5    Counterparts    55 8.6    Entire
Agreement; No Third Party Beneficiaries    55 8.7    Governing Law    55 8.8   
No Remedy in Certain Circumstances    55 8.9    Assignment    55 8.10   
Schedule Definitions    56 8.11    Director and Officer Liability    56 8.12   
Waiver of Jury Trial    56

 

ii

--------------------------------------------------------------------------------

EXHIBITS:    

Exhibit A

  Option Surrender Agreement

Exhibit B

  Form of Promissory Note

 

DISCLOSURE SCHEDULES:

 

Company Disclosure Schedule:

 

Schedule 3.1(a)

   Organization, Good Standing, Etc.

Schedule 3.1(b)

   Capital Structure

Schedule 3.1(c)

   Authority; No Violations; Consents and Approvals

Schedule 3.1(f)

   Absence of Certain Changes or Events

Schedule 3.1(g)

   No Undisclosed Material Liabilities

Schedule 3.1(h)

   No Default

Schedule 3.1(j)

   Litigation

Schedule 3.1(k)

   Taxes

Schedule 3.1(l)

   Employee Benefit Plans; ERISA

Schedule 3.1(m)

   Labor Matters

Schedule 3.1(n)

   Property

Schedule 3.1(o)

   Environmental Matters

Schedule 3.1(p)

   Insurance

Schedule 3.1(t)

   Controls and Procedures; Corporate Governance

Schedule 3.1(v)

   Certain Contracts and Arrangements

Schedule 3.1(w)

   Certain Representations With Respect to the Business

Schedule 3.1(y)

   Indebtedness; Capital Leases

Schedule 3.1(z)

   Employee Payments

 

Schedules to the Merger Agreement:

 

Schedule 4.1

   Permitted Activities

Schedule 5.11

   Affiliate Agreements

Schedule 6.2(e)

   Executive Agreements

Schedule 8.4

   Knowledge Parties

 

iii

--------------------------------------------------------------------------------

INDEX OF DEFINED TERMS

 

Definition

--------------------------------------------------------------------------------

   Section

--------------------------------------------------------------------------------

Acquisition Proposal

   4.2(g)

Additional Merger Consideration

   2.1(d)(ii)

Affiliate

   4.1(i)

Affiliate Agreements

   5.11

Agreement

   Preamble

Applicable Laws

   3.1(e)

Baystate

   3.1(a)(i)

Business Day

   1.2

Bylaws

   1.4

Capital Lease

   2.1(b)(iii)

Capital Source Agreement

   4.1(m)

Cash on Hand

   2.1(b)(iv)

Certificate

   2.4(b)(i)(A)

Certificate of Merger

   1.1

Certification

   2.1(d)(ii)

Change of Recommendation

   4.2(d)

Charter Documents

   3.1(a)(ii)

Closing

   1.2

Closing Date

   1.2

CMOH

   3.1(a)(i)

COBRA

   3.1(l)(ix)

Code

   3.1(k)(iv)

Company

   Preamble

Company Charter

   1.4

Company Common Stock

   2.1

Company Contracts

   3.1(v)(i)

Company Disclosure Schedule

   3.1

Company Employee Benefit Plan

   3.1(l)(i)

Company Employee Pension Benefit Plan

   3.1(l)(i)

Company Employee Welfare Benefit Plan

   3.1(l)(i)

Company ERISA Affiliates

   3.1(l)(i)

Company Intangible Property

   3.1(n)(i)

Company Litigation

   3.1(j)

Company Material Adverse Effect

   3.1(c)(ii)

Company Order

   3.1(j)

Company Permits

   3.1(i)

Company Preferred Stock

   3.1(b)

Company SEC Documents

   3.1(d)(i)

Company Stock Option

   2.2

Company Stock Plans

   2.2

Confidentiality Agreement

   5.2

Debt

   2.1(b)(ii)

DGCL

   1.1

Dissenting Shares

   2.3

 

iv

--------------------------------------------------------------------------------

 

Definition

--------------------------------------------------------------------------------

   Section

--------------------------------------------------------------------------------

D&O Insurance

   5.14(c)

Effective Time

   1.1

Employee Payments

   3.1(z)

Environmental Laws

   3.1(o)(A)

ERISA

   3.1(l)(xv)

Exchange Act

   3.1(c)(iii)

Expense Reimbursement

   7.2(b)

Facility

   3.1(w)(i)(A)

Filings

   3.1(w)(i)(A)

Financial Advisor

   3.1(x)

GAAP

   3.1(d)(i)

Governmental Entity

   3.1(c)(iii)

Group

   4.2(g)

Hazardous Materials

   3.1(o)(B)

Health Care Programs

   3.1(w)(vii)(C)

HIPAA

   3.1(l)(xvi)

Indemnitees

   5.14(a)

Independent Accountant

   2.1(d)(i)

Initial Merger Consideration

   2.1(d)(i)

Injunction

   6.1(c)

IRS

   3.1(k)(ii)

Kent

   3.1(a)(i)

knowledge

   8.4

Knowledge

   8.4

Letter of Transmittal

   2.4(b)(i)(A)

Liens

   3.1(b)

Maximum Premium

   5.14(c)

Merger

   Recitals

Merger Consideration

   2.1(b)(i)

Merger Sub

   Preamble

Objection Notice

   2.1(d)(ii)

OHR/MMC

   3.1(a)(i)

OHR-SSM

   3.1(a)(i)

Option Consideration

   2.2

Option Surrender Agreement

   2.4(b)(i)(B)

Parent

   Preamble

Parent Litigation

   3.2(d)

Paying Agent

   2.4(a)

Payment

   3.1(w)(vii)(D)

Payment Fund

   2.4(a)

Person

   2.4(e)

Proxy Statement

   3.1(c)(iii)

Qualified Company Employee Benefit Plan

   3.1(l)(iii)

Release

   3.1(o)(C)

Remedial Action

   3.1(o)(D)

 

v

--------------------------------------------------------------------------------

Definition

--------------------------------------------------------------------------------

   Section

--------------------------------------------------------------------------------

Sarbanes-Oxley Act

   3.1(d)(iii)

SEC

   3.1(c)(iii)

Securities Act

   3.1(d)(i)

Stark Act

   3.1(w)(vii)(A)

State Health Care Program

   3.1(w)(vii)(C)

Stockholder Representative

   5.18

Stockholders Meeting

   5.3

subsidiary

   3.1(a)(i)

Subsidiary

   3.1(a)(i)

Superior Offer

   4.2(g)

Surviving Corporation

   1.3

Tax

   3.1(k)

Taxes

   3.1(k)

Tax Return

   3.1(k)

Termination Date

   7.1(c)

Termination Fee

   7.2(b)

Transaction Documents

   3.1(c)(i)

Voting Debt

   3.1(b)

 

vi

--------------------------------------------------------------------------------

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER, dated as of August 8, 2005 (this “Agreement”),
among Concentra Operating Corporation, a Nevada corporation (“Parent”), Brady
Acquisition Corp., a Delaware corporation and an indirect, wholly owned
subsidiary of Parent (“Merger Sub”), and Occupational Health + Rehabilitation
Inc, a Delaware corporation (the “Company”).

 

WHEREAS, the Company and Parent have determined to engage in a business
combination whereby Merger Sub will be merged with and into the Company, with
the Company continuing as the surviving corporation in such merger as a direct
wholly owned subsidiary of Parent (the “Merger”);

 

WHEREAS, in furtherance thereof, the respective Boards of Directors of Parent,
Merger Sub and the Company have approved this Agreement and the Merger; and

 

WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.

 

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties to this
Agreement agree as follows:

 

ARTICLE I

 

THE MERGER

 

1.1 The Merger; Effective Time of the Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as hereinafter defined),
Merger Sub shall be merged with and into the Company in accordance with the
General Corporation Law of the State of Delaware (the “DGCL”). As a part of the
Closing, the Company, Parent and Merger Sub shall cause a certificate of merger,
in a form and substance reasonably acceptable to Parent and the Company and
meeting the requirements of Section 251 of the DGCL (the “Certificate of
Merger”), to be properly executed and filed with the Secretary of State of the
State of Delaware in accordance with the terms and conditions of the DGCL and
shall take all such other and further actions as may be required by any
Applicable Law (as hereinafter defined) to make the Merger effective as promptly
as practicable. The Merger shall become effective at the time that the
Certificate of Merger is accepted for filing by the Secretary of State of
Delaware in accordance with the DGCL or at such later date and time as is
specified in the Certificate of Merger (such time and date being referred to
herein as the “Effective Time”).

 

1.2 Closing. The closing of the Merger (the “Closing”) shall take place at 9:30
a.m., Dallas, Texas time, on the date that is the last day of the calendar month
in which the Stockholders Meeting (as defined herein) is held, unless the
parties hereto agree in writing for the Closing to take place on another date.
The Closing shall take place after the satisfaction (or waiver in accordance
with this Agreement) of the latest to occur of the conditions set forth in
Article VI (other than any such conditions which by their nature cannot be
satisfied until the

--------------------------------------------------------------------------------

Closing Date, which shall be required to be so satisfied or (to the extent
permitted by Applicable Law (as hereinafter defined)) waived on the Closing
Date) and shall occur at the offices of Vinson & Elkins L.L.P. in Dallas, Texas,
unless another date or place is agreed to in writing by the parties (such date
on which the Closing occurs, the “Closing Date”). For purposes of this
Agreement, “Business Day” shall mean any day of the year other than (i) any
Saturday or Sunday or (ii) any other day on which banks located in the State of
New York generally are closed for business, other than the retail depository
business.

 

1.3 Effect of the Merger. At the Effective Time: (a) Merger Sub shall be merged
with and into the Company, the separate existence of Merger Sub shall cease and
the Company shall continue as the surviving corporation in the Merger (the
Company is sometimes referred to herein as the “Surviving Corporation”); and (b)
the name of the Surviving Corporation shall be “Occupational Health +
Rehabilitation Inc”. The Merger shall have the effects set forth in this
Agreement and the applicable provisions of the DGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations and duties of the Company and Merger Sub shall become
the debts, liabilities, obligations and duties of the Surviving Corporation.

 

1.4 Certificate of Incorporation and Bylaws. At the Effective time, the
Certificate of Incorporation of the Company (the “Company Charter”) and Bylaws
of the Company (the “Bylaws”) in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation and Bylaws of the Surviving
Corporation, until thereafter amended in accordance with their respective terms
and Applicable Law.

 

1.5 Directors and Officers. From and after the Effective Time, the directors and
officers of Merger Sub shall be the directors and officers of the Surviving
Corporation, and such directors and officers shall serve until their successors
have been duly elected or appointed and qualified or until their death,
resignation or removal in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation and the DGCL.

 

ARTICLE II

 

EFFECT OF THE MERGER ON THE CAPITAL STOCK

OF THE COMPANY AND MERGER SUB; EXCHANGE OF CERTIFICATES

 

2.1 Effect of the Merger on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any party or the holder of any
shares of common stock of the Company, par value $0.001 per share (the “Company
Common Stock”), or capital stock of Merger Sub, the following shall occur:

 

(a) Capital Stock of Merger Sub. Each share of capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable share
of common stock, par value $0.001 per share, of the Surviving Corporation, so
that, after the Effective Time, Parent shall be the indirect holder of all of
the issued and outstanding shares of the Surviving Corporation’s common stock.

 

2

--------------------------------------------------------------------------------

(b) Capital Stock of the Company. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than Company Common
Stock cancelled pursuant to the penultimate sentence of this Section 2.1(b) and
Dissenting Shares (as defined in Section 2.3)) shall be converted into the right
to receive the Merger Consideration (as hereinafter defined). All such shares of
Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration to be issued or paid in consideration therefor upon the surrender
of such certificates in accordance with Section 2.4, without interest. All
shares of Company Common Stock held by the Company as treasury shares or by any
of the Subsidiaries shall automatically be canceled and retired and shall cease
to exist as of the Effective Time, and no consideration shall be delivered or
deliverable in exchange therefor. For purposes of this Agreement,

 

(i) “Merger Consideration” shall be equal to the quotient (rounded to the fifth
decimal place) obtained by dividing

 

(A) an amount equal to

 

(1) $47,178,675, plus

 

(2) an amount equal to the aggregate exercise price of all Company Stock Options
outstanding as of the Closing to the extent that they both (i) have become
vested and exercisable in accordance with their terms at the time of the Closing
(including Company Stock Options that vest and become exercisable as a result of
the Merger) and (ii) are entitled to receive the Option Consideration pursuant
to Section 2.2 hereof, plus

 

(3) Cash on Hand (as calculated in accordance with Section 2.1(d), but in no
event more than $2,000,000), less

 

(4) the amount required to repay all Debt, excluding Capital Leases, that is
outstanding immediately prior to the Closing

 

by

 

(B) an amount equal to

 

(1) the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time, plus

 

(2) the number of shares of Company Common Stock issuable upon exercise of the
Company Stock Options described in clause (A)(2) above,

 

(ii) “Debt” means, without duplication, the aggregate amount of (a) all
indebtedness of the Company or any of the Subsidiaries (including the principal
amount thereof or, if applicable, the accreted amount thereof and the amount of
accrued and unpaid interest

 

3

--------------------------------------------------------------------------------

thereon), whether or not represented by bonds, debentures, notes or other
securities or similar instruments for borrowed money, (b) all deferred
indebtedness of the Company or any of the Subsidiaries for the payment of the
purchase price of property or assets, (c) all obligations of the Company or any
of the Subsidiaries to pay rent or other payment amounts under a lease of real
or personal property that is classified as a Capital Lease, (d) all conditional
sale obligations of and all obligations under any title retention agreements of
the Company or any of the Subsidiaries, (e) any outstanding reimbursement
obligation of the Company or any of the Subsidiaries with respect to letters of
credit, bankers’ acceptances or similar facilities issued for the account of the
Company or any of the Subsidiaries pursuant to which the applicable bank or
similar entity has paid obligations for which the Company or any of the
Subsidiaries is required to repay, (f) any payment obligation of the Company or
any of the Subsidiaries under any interest rate swap agreement, forward rate
agreement, interest rate cap or collar agreement or other financial agreement or
arrangement entered into for the purpose of limiting or managing interest rate
risks, (g) all indebtedness for borrowed money secured by any Lien existing on
property owned by the Company or any of the Subsidiaries, whether or not
indebtedness secured thereby shall have been assumed, (h) all guaranties,
endorsements, assumptions and other contingent obligations of the Company or any
of the Subsidiaries in respect of, or to purchase or to otherwise acquire,
indebtedness for borrowed money of others the repayment of which is guaranteed
by the Company or any of the Subsidiaries, (i) all other short-term and
long-term liabilities of the Company or any of the Subsidiaries for borrowed
money and (j) all premiums, penalties and change of control payments required to
be paid or offered in respect of any of the foregoing as a result of the
consummation of the transactions contemplated by the Transaction Documents.

 

(iii) “Capital Lease” means any obligation of the Company or any of the
Subsidiaries to pay rent or any payment amounts under a lease of real or
personal property that is required to be classified as a capital lease on a
balance sheet prepared in accordance with GAAP (as hereinafter defined).

 

(iv) “Cash on Hand” means all cash and cash equivalents of the Company
determined on a consolidated basis in accordance with GAAP (including the
consideration of all offsets and disbursements as set forth therein) immediately
prior to the Closing, and excluding (A) any amounts that would be accrued on the
basis of GAAP with respect to future estimated distributions, as of the
Effective Time, or are reserved, accrued or otherwise allocable, as of the
Effective Time, to the equity holders of the Subsidiaries (other than the
Company), but in any event only in accordance with the percentages and to the
Persons set forth on Schedule 3.1(a) or Schedule 3.1(b) of the Company
Disclosure Schedule, (B) any restricted balances, (C) any amounts held in escrow
for any reason, (D) the insurance or other proceeds of any casualty loss with
respect to any asset of the Company or any of the Subsidiaries, and (E) any
proceeds of any indemnification settlements.

 

(c) Impact of Stock Splits, etc. In the event of any change in the Company
Common Stock between the date of this Agreement and the Effective Time by reason
of any stock split, stock dividend, subdivision, reclassification,
recapitalization, combination, exchange of shares or the like, the Merger
Consideration to be paid for each share of Company Common Stock as provided in
this Agreement shall be appropriately adjusted to reflect such change.

 

4

--------------------------------------------------------------------------------

(d) Certain Calculations.

 

(i) Prior to the Effective Time, Parent and the Company shall calculate the
amount of the Merger Consideration, including, without limitation, the amount of
Debt to be reflected in such determination, but excluding the amount of Cash on
Hand (the “Initial Merger Consideration”). If Parent and the Company cannot
agree upon the amount of the Initial Merger Consideration on or prior to the
Effective Time, then the final Initial Merger Consideration shall be determined
by PricewaterhouseCoopers LLP or, if the parties otherwise mutually agree in
writing, any other “big four” national accounting firm or Grant Thornton LLP
(the “Independent Accountant”). The Independent Accountant’s determination of
the final Initial Merger Consideration shall be made within five Business Days
of the submission of the dispute to the Independent Accountant and shall be
final and binding for all purposes of this Agreement.

 

(ii) Within five Business Days after the Effective Time, the Stockholder
Representative shall deliver to Parent a written certification (the
“Certification”) setting forth the amount of Cash on Hand that existed as of
11:59 p.m. on the day immediately prior to the Effective Time and such
Certification shall also include a good faith detailed calculation of such Cash
on Hand amount and any other supporting documentation. Parent shall have five
Business Days from the date of Parent’s receipt of the Certification to review
such Certification. If Parent does not object in a written notice to the
Stockholder Representative (the “Objection Notice”) within such five Business
Day time period (such Objection Notice to also set forth Parent’s good faith
calculation of the amount of the Cash on Hand that existed as of 11:59 p.m. on
the day immediately prior to the Effective Time and any other supporting
documentation), the amount of the Cash on Hand set forth in the Certification
shall be final and binding for all purposes of this Agreement. The Stockholder
Representative and Parent shall cooperate in good faith to resolve any objection
to the amount of the Cash on Hand set forth in the Certification. If the
Stockholder Representative and Parent resolve such objection to their mutual
satisfaction in writing, the final amount of the Cash on Hand shall be as agreed
to in writing by the Stockholder Representative and Parent in connection with
such resolution. If, by the fifteenth Business Day after the Effective Time, the
final amount of Cash on Hand has not been agreed to by the Stockholder
Representative and Parent, then the final amount of Cash on Hand shall be
determined by the Independent Accountant. The Independent Accountant’s
determination of the amount of Cash on Hand shall be made within ten Business
Days of the submission of the dispute to the Independent Accountant and shall be
final and binding for all purposes of this Agreement. The final amount of the
Cash on Hand shall be the “Additional Merger Consideration.”

 

2.2 Treatment of Company Stock Options. Prior to the Effective Time, the Company
shall take such action as may be necessary to cause each option for the purchase
of Company Common Stock (a “Company Stock Option”) then outstanding, whether or
not exercisable, under each of the Company’s 1993 Stock Plan, the Company’s 1996
Stock Plan or the Company’s 1998 Stock Plan (together, the “Company Stock
Plans”), to become (if not then fully exercisable) fully exercisable, except for
Company Stock Options held by employees who have been terminated prior to the
Effective Time or by holders who have failed to achieve performance standards
necessary for the vesting of such Company Stock Options, and each such Company
Stock Option that is vested and exercisable shall thereafter represent the right
to receive, for each share of Company Common Stock subject to such Company Stock
Option, an amount in cash

 

5

--------------------------------------------------------------------------------

equal to the difference between (i) the Merger Consideration payable in respect
of a share of Company Common Stock and (ii) the per share exercise price of such
Company Stock Option, but only to the extent such difference is a positive
number (such amount in cash as described above being hereinafter referred to as
the “Option Consideration”). The parties agree that the cancellation of the
Company Stock Options in exchange for the right to receive the Option
Consideration pursuant to Section 2.2 and Section 2.4 is a transaction properly
allocable to the portion of the Company’s day occurring after the Closing
pursuant to Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) and,
consequently, shall be treated for Tax purposes as occurring at the beginning of
the day following the Closing and any deductions resulting therefrom are
properly reportable on Parent’s consolidated federal income tax return (and any
applicable state or local income tax returns). The parties shall, and shall
cause their respective Affiliates to, report consistently with the foregoing for
all Tax purposes

 

2.3 Dissenting Stockholders. Notwithstanding any other provisions of this
Agreement to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and that are held by stockholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who properly shall have demanded appraisal for such shares in accordance with
Section 262 of the DGCL (collectively, the “Dissenting Shares”) shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders instead shall be entitled to receive payment of the appraised value
of such shares of Company Common Stock held by them in accordance with the
provisions of Section 262 of the DGCL, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or otherwise lost their rights to appraisal of such shares of Company
Common Stock under Section 262 of the DGCL shall thereupon be deemed to have
been converted into and to have become exchangeable, as of the Effective Time,
for the right to receive, without any interest thereon, the Merger Consideration
upon surrender in the manner provided in Section 2.4 of the Certificate (as
hereinafter defined) representing such shares of Company Common Stock. The
Company shall give Parent (a) prompt notice of any notice or demand for
appraisal or payment for shares of Company Common Stock or attempted withdrawals
of such demands received by the Company and (b) the right to participate in all
negotiations and proceedings with respect to any such demands or notices.

 

2.4 Payment for Securities.

 

(a) Paying Agent. Parent shall deposit with a bank or trust company designated
by Parent and reasonably acceptable to the Company (the “Paying Agent”), for the
benefit of the holders of shares of Company Common Stock and Company Stock
Options, for payment in accordance with this Article II through the Paying
Agent, cash in an amount sufficient to permit payment of the aggregate Merger
Consideration payable pursuant to Section 2.1 and the aggregate Option
Consideration payable pursuant to Section 2.2 (the “Payment Fund”). The portion
of the Payment Fund composed of the Initial Merger Consideration shall be
deposited with the Paying Agent on the Closing Date. The portion of the Payment
Fund composed of the Additional Merger Consideration shall be deposited with the
Paying Agent within one Business Day following the determination of the final
Cash on Hand pursuant to Section 2.1(d)(ii). The Paying Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration payable pursuant to
Section 2.1 and the Option Consideration payable pursuant to Section 2.2, in
each case, out of the Payment Fund. The Payment Fund shall not be

 

6

--------------------------------------------------------------------------------

used for any other purpose; provided, the Paying Agent shall invest any cash
included in the Payment Fund in one or more bank accounts or in high-quality,
short-term investments, as directed by Parent, on a daily basis. Any interest or
other income resulting from such investments shall be paid to, and shall at all
times be the property of, Parent. Parent shall pay all fees and expenses of the
Paying Agent.

 

(b) Payment Procedures.

 

(i) As soon as reasonably practicable after Parent’s deposit of the Additional
Merger Consideration portion of the Payment Fund pursuant to Section 2.4(a)
hereof, the Paying Agent shall deliver:

 

(A) to each holder of record of a certificate or certificates that, immediately
prior to the Effective Time, represented outstanding shares of Company Common
Stock (each, a “Certificate”), which holder’s shares of Company Common Stock
were converted into the right to receive the Merger Consideration pursuant to
Section 2.1: (x) a customary form of letter of transmittal (the “Letter of
Transmittal”), reasonably acceptable to Parent and the Company, specifying that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent; and
(y) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration; and

 

(B) to each holder of an outstanding Company Stock Option entitled to receive
the Option Consideration: (x) an option surrender agreement (an “Option
Surrender Agreement”) that shall be in substantially the form attached hereto as
Exhibit A; and (y) instructions for use in effecting the surrender of such
Company Stock Option in exchange for the Option Consideration.

 

(ii) Upon surrender of a Certificate for cancellation to the Paying Agent,
together with the Letter of Transmittal, duly executed, or an “agent’s message”
in the case of a book entry transfer, and any other documents reasonably
required by Parent or the Paying Agent, (A) the holder of a Certificate shall be
entitled to receive in exchange therefor an amount equal to the product of the
Merger Consideration multiplied by the number of shares of Company Common Stock
formerly represented by the surrendered Certificate, and (B) the Certificate so
surrendered shall forthwith be canceled. Until surrendered as contemplated by
this Section 2.4, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
appropriate amount of Merger Consideration as contemplated by Section 2.1. In no
event shall the holder of any such surrendered Certificate be entitled to
receive any interest on any cash to be received in the Merger.

 

(iii) Upon surrender of a Company Stock Option for cancellation to the Paying
Agent, together with the Option Surrender Agreement, duly executed, and any
other documents reasonably required by Parent or the Paying Agent, (A) the
holder of the Company Stock Option shall be entitled to receive in exchange
therefor the amount of cash that such holder has the right to receive pursuant
to the provisions of Section 2.2, and (B) the Company Stock Option so
surrendered shall be canceled. Until surrendered in accordance with the
provisions of this Section 2.4, each outstanding Company Stock Option shall be
deemed at any time after the

 

7

--------------------------------------------------------------------------------

Effective Time to represent for all purposes only the right to receive the
Option Consideration. In no event shall the holder of any Company Stock Option
be entitled to receive any interest on any cash to be received in the Merger.

 

(c) Termination of Rights.

 

(i) All Merger Consideration paid upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been paid in full satisfaction of all rights pertaining to such Company Common
Stock. From and after the Effective Time, there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.

 

(ii) The surrender of a Company Stock Option in exchange for the Option
Consideration shall be deemed a release of any and all rights the holder had or
may have had in respect of such Company Stock Option. Prior to the Effective
Time, the Company shall use its commercially reasonable efforts to take all
action necessary (including causing the board of directors of the Company (or
any committees thereof) to take such actions as are allowed by the Company Stock
Plans) to ensure that, following the Effective Time, no participant in any
Company Stock Plan or any other plans, programs or arrangements shall have any
right thereunder to acquire or otherwise receive any capital stock of, or other
equity or similar interests in, the Company, the Surviving Corporation or any
affiliate thereof.

 

(d) Termination of Payment Fund. Any portion of the Payment Fund that remains
undistributed to the former stockholders or optionholders of the Company for 270
days after the Effective Time shall be delivered by the Paying Agent to the
Surviving Corporation, upon demand, and any stockholders or optionholders of the
Company who have not theretofore received the Merger Consideration or Option
Consideration to which they are entitled under this Article II shall thereafter
look only to the Surviving Corporation for payment of their claim for such
amounts.

 

(e) No Liability. None of the Surviving Corporation, Parent, the Paying Agent or
any other natural person, corporation, company, limited or general partnership,
joint stock company, joint venture, association, limited liability company,
trust, bank, trust company, land trust, business trust or other entity or
organization, whether or not a Governmental Entity (as hereinafter defined) (a
“Person”), shall be liable to any former holder of Company Common Stock or
Company Stock Option for any amount of Merger Consideration or Option
Consideration, as applicable, delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any amounts remaining
unclaimed by former holders of any Company Common Stock or Company Stock Options
after a period of three years following the Effective Time (or such earlier date
immediately prior to the time of which such amounts would otherwise escheat or
become the property of any Governmental Entity) shall, to the extent permitted
by Applicable Laws, become the property of Parent, free and clear of any claims
or interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.

 

8

--------------------------------------------------------------------------------

(f) Lost, Stolen, or Destroyed Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Paying Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the amount of Merger
Consideration payable in respect of the number of shares of Company Common Stock
represented by such Certificate pursuant to the provisions of this Article II.

 

2.5 Taking of Necessary Action; Further Action. Each of Parent, Merger Sub, and
the Company shall use all reasonable efforts to take all such actions as may be
necessary or appropriate in order to effect the Merger under the DGCL as
promptly as commercially practicable. If, at any time after the Effective Time,
any further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
both Merger Sub and the Company, the officers and directors of the Surviving
Corporation are fully authorized, in the name of the Surviving Corporation or
otherwise to take, and shall take, all such lawful and necessary action.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company and the Subsidiaries. The
Company represents and warrants to Parent and Merger Sub as follows (in each
case as qualified by matters reflected on the disclosure schedule dated as of
the date of this Agreement and delivered by the Company to Parent on or prior to
the date of this Agreement (the “Company Disclosure Schedule”) (with each
reference to such disclosure schedule qualifying the referenced representation
and warranty to the extent specified therein and such other representations and
warranties contained herein (regardless of whether or not such representation or
warranty contains a reference to such disclosure schedule) to the extent a
matter in such disclosure schedule is disclosed in such a way as to make its
relevance to the information called for by such other representation or warranty
readily apparent on its face)):

 

(a) Organization, Good Standing, Etc.

 

(i) The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Each of CM Occupational
Health, Limited Liability Company (“CMOH”) and OHR/MMC, Limited Liability
Company (“OHR/MMC”) is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Maine. Kent/OH+R,
LLC (“Kent”) is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Rhode Island. OHR/Baystate, LLC
(“Baystate”) is a limited liability company duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts. OHR-SSM,
LLC (“OHR-SSM” and, together with CMOH, OHR/MMC, Kent and Baystate, the
“Subsidiaries” and each, a “Subsidiary”) is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Missouri. The Subsidiaries are the

 

9

--------------------------------------------------------------------------------

only direct or indirect subsidiaries of the Company. As used in this Agreement,
the word “subsidiary” means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (1) such party or
any other subsidiary of such party is a general partner, or (2) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is,
directly or indirectly, owned or controlled by such party or by any one or more
of the subsidiaries, or by such party and any one or more of the subsidiaries.
Other than the Subsidiaries, none of the Company or any of the Subsidiaries owns
any capital stock of, or other equity interest in, any other Person, except as
set forth on Schedule 3.1(a) of the Company Disclosure Schedule. Set forth on
Schedule 3.1(a) of the Company Disclosure Schedule is (i) a list of all other
Persons that have any ownership interest in any of the Subsidiaries, and (ii) a
list of all required distributions relating to any of the Subsidiaries
(including the amounts and due dates of each such distribution) to be made to
any other Person that has any ownership interest in any of the Subsidiaries.

 

(ii) Each of the Company and the Subsidiaries has all requisite corporate or
limited liability company power and authority to own, lease and operate its
respective properties and to carry on its respective business as now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction listed on Schedule 3.1(a) of the Company Disclosure Schedule, which
jurisdictions represent every jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, other than such jurisdictions where the failure to so qualify or be
in good standing could not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect. The Company has
delivered to Parent or its representatives true, correct and complete copies of
the organizational and other governing documents (the “Charter Documents”) of
the Company (including the Company Charter and the Bylaws) and each of the
Subsidiaries, as in effect as the date of this Agreement. None of the Company or
any of the Subsidiaries is in violation of any provision of its respective
Charter Documents.

 

(b) Capital Structure. The authorized capital stock of the Company consists of
(i) 10,000,000 shares of Company Common Stock and (ii) 5,000,000 shares of
preferred stock, par value $0.001 per share (the “Company Preferred Stock”). At
the close of business on the date hereof: (1) 3,112,932 shares of Company Common
Stock were issued and outstanding and no shares of Company Preferred stock were
issued and outstanding; (2) 1,530,000 shares of Company Common Stock were
reserved for issuance pursuant to the Company Stock Plans, of which 1,351,259
shares of Company Common Stock were subject to issuance upon exercise of options
or awards granted to officers, directors or employees of the Company and the
Subsidiaries; and (3) no Voting Debt (as defined below) was issued or
outstanding. The term “Voting Debt” means bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into securities having the
right to vote) on any matters on which stockholders or other securityholders of
the Company or any of the Subsidiaries may vote. All outstanding shares of
Company Common Stock are validly issued, fully paid and nonassessable and are
not entitled to preemptive rights. Schedule 3.1(b) of the Company Disclosure
Schedule sets forth the authorized and issued or outstanding capital stock and
other equity securities of each of the Subsidiaries (and the record holder
thereof), and all of such capital stock or other equity securities of each of
the Subsidiaries are validly issued, fully paid and nonassessable and are not
entitled to preemptive rights. Schedule 3.1(b) of the Company Disclosure
Schedule sets forth

 

10

--------------------------------------------------------------------------------

any liens, pledges, charges, claims, mortgages, deeds of trust, security
interests, restrictions, rights of first refusal or offer, or other burdens or
options of any kind (collectively, “Liens”) applicable to the Company’s interest
in the equity securities of the Subsidiaries. Schedule 3.1(b) of the Company
Disclosure Schedule lists all outstanding options, warrants or other rights to
subscribe for, purchase or acquire from the Company, any of the Subsidiaries or
any other person any capital stock or other equity securities of the Company or
any of the Subsidiaries, or securities convertible into or exchangeable for
capital stock or other equity securities of the Company or any of the
Subsidiaries. Except as set forth in this Section 3.1(b) or on Schedule 3.1(b)
of the Company Disclosure Schedule, there are outstanding: (1) no shares of
capital stock, Voting Debt or other voting securities of the Company; (2) no
securities of the Company or any of the Subsidiaries convertible into or
exchangeable for shares of capital stock, Voting Debt or other voting securities
of the Company or any of the Subsidiaries, and (3) no options, warrants, calls,
rights (including preemptive rights), commitments or agreements to which the
Company or any of the Subsidiaries is a party or by which any of them are bound
in any case obligating the Company or any of the Subsidiaries to issue, deliver,
sell, purchase, redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of capital stock, Voting Debt
or other voting securities of the Company or of any of the Subsidiaries, or
obligating the Company or any of the Subsidiaries to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement. There are not
any stockholder agreements, voting trusts or other agreements or understandings
to which the Company is a party or by which it is bound relating to the voting
of any shares of the capital stock of the Company that will limit in any way the
solicitation of proxies by or on behalf of the Company from, or the casting of
votes by, the stockholders of the Company with respect to the Merger. There are
no restrictions on the Company to vote the equity securities of any of the
Subsidiaries. Except as set forth on Schedule 3.1(b) of the Company Disclosure
Schedule, there are no agreements requiring the Company or any of the
Subsidiaries to make contributions to the capital of, or lend or advance funds
to, any of the Subsidiaries.

 

(c) Authority; No Violations; Consents and Approvals.

 

(i) The Company has all requisite corporate power and authority to enter into
this Agreement and any other documents or agreements contemplated hereby
(together with this Agreement, the “Transaction Documents”) to which it is a
party and, subject, with respect to consummation of the Merger, to approval of
this Agreement and the Merger by the stockholders of the Company in accordance
with the DGCL and the Company Charter and the Bylaws, to consummate the
transactions contemplated hereby and thereby. The execution and delivery of the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company, subject, with respect to consummation of the Merger,
to approval of this Agreement and the Merger by the stockholders of the Company
in accordance with the DGCL and the Company Charter and Bylaws. Each of the
Transaction Documents has been duly executed and delivered by the Company and,
subject, with respect to consummation of the Merger, to approval of this
Agreement and the Merger by the stockholders of the Company in accordance with
the DGCL and the Company Charter and Bylaws, and assuming the Transaction
Documents constitute the valid and binding obligation of Parent and Merger Sub,
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general

 

11

--------------------------------------------------------------------------------

applicability relating to or affecting creditors’ rights and to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Company has delivered to Parent certified
copies of resolutions duly adopted by the Company’s board of directors
evidencing the approval and adoption of this Agreement and the approval of the
Merger and the other transactions contemplated hereby.

 

(ii) Except as set forth on Schedule 3.1(c) of the Company Disclosure Schedule,
the execution and delivery of the Transaction Documents do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of consent, approval, termination, cancellation
or acceleration of any obligation or to the loss of a benefit under, or give
rise to a right of purchase under, result in the creation of any Lien upon any
of the properties or assets of the Company or any of the Subsidiaries under, or
otherwise result in a material detriment to the Company or any of the
Subsidiaries under, any provision of (A) the Company Charter or Bylaws or any
provision of the Charter Documents of any of the Subsidiaries, (B) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of the Subsidiaries, (C) any joint venture or other ownership
arrangement, or (D) assuming the consents, approvals, authorizations or permits
and filings or notifications referred to in Section 3.1(c)(iii) are duly and
timely obtained or made and the approval of the Merger and this Agreement by the
stockholders of the Company has been obtained, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
the Subsidiaries or any of their respective properties or assets, other than, in
the case of clause (B) or (C), any such conflicts, violations, defaults, rights,
Liens or detriments that could not, individually or in the aggregate, reasonably
be expected to result in a Company Material Adverse Effect. For purposes of this
Agreement, the term “Company Material Adverse Effect” shall mean any change in,
or effect on, the business, operations, assets or condition (financial or
otherwise) of the Company or the Subsidiaries (whether or not known as of the
date of this Agreement, covered by insurance or manifested in the historical
financial statements of the Company or the Subsidiaries) that, when considered
either individually or in the aggregate together with all other adverse changes
or effects with respect to which such phrase is used in this Agreement, is
materially adverse to the business, operations, assets or condition (financial
or otherwise) of the Company and the Subsidiaries (taken as a whole) or
materially impairs the consummation of the transactions contemplated hereby or
the Company’s performance of its obligations under this Agreement; provided,
however, that a Company Material Adverse Effect shall exclude, and none of the
following shall be taken into account in determining whether there has been or
will be a Company Material Adverse Effect: (A) any change or effect relating to
the U.S. or any foreign economy in general to the extent that such change or
effect does not have a materially disproportionate effect on the Company and the
Subsidiaries taken as a whole; (B) any effect, change, event, occurrence or
circumstance to the extent arising out of or resulting from the announcement of
this Agreement, the existence of this Agreement or the fact that any of the
transactions contemplated hereby may be consummated (including any effect,
change, event occurrence or circumstance resulting from or relating to any
litigation, any loss of or delay in clients placing service contracts or any
departure or loss of employees, in each case to the extent arising out of or
resulting from the announcement of this Agreement, the existence of this
Agreement or the fact that any of the transactions contemplated hereby may be
consummated);

 

12

--------------------------------------------------------------------------------

(C) the failure of the Company to meet analysts’ expectations or projections (it
being understood, however, that the underlying circumstances giving rise to such
failure may be taken into account unless otherwise excluded pursuant to this
paragraph); and (D) any effect, change, event, occurrence or circumstance
resulting from any action taken by the Company in compliance with the terms of
this Agreement.

 

(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any court, governmental, regulatory
or administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a “Governmental Entity”), is required by
or with respect to the Company or any of the Subsidiaries in connection with the
execution and delivery of the Transaction Documents by the Company or the
consummation by the Company of the transactions contemplated hereby or thereby,
except for (A) the filing with the Securities and Exchange Commission (the
“SEC”) of (x) a proxy statement in preliminary and definitive form relating to
the meeting of the stockholders of the Company to be held in connection with the
Merger (the “Proxy Statement”) and (y) such reports under Section 13(a) of the
Securities Exchange Act of 1934 (the “Exchange Act”) and such other compliance
with the Exchange Act and the rules and regulations thereunder, as may be
required in connection with the Transaction Documents and the transactions
contemplated hereby, (B) the filing of the Certificate of Merger with and the
acceptance for the record of the Certificate of Merger by the Delaware Secretary
of State, and (C) any such consent, approval, order, authorization,
registration, declaration, filing, or permit that the failure to obtain or make
could not, individually or in the aggregate, reasonably be expected to result in
a Company Material Adverse Effect.

 

(d) SEC Documents.

 

(i) The Company has filed and furnished all required reports, schedules,
registration statements, definitive proxy statements and exhibits to the
foregoing documents with or to the SEC since December 31, 2001 (the “Company SEC
Documents”). As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933 (the
“Securities Act”) or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Documents, and
none of the Company SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. No Subsidiary is required to file any
forms, reports or other documents with the SEC pursuant to Section 13(a) or
15(d) of the Exchange Act. The financial statements of the Company included in
the Company SEC Documents were prepared from the books and records of the
Company and the Subsidiaries, complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present in
accordance with applicable requirements of GAAP (subject, in the case of the
unaudited statements, to normal, recurring adjustments, none of which are
material) the consolidated financial position of the Company and the

 

13

--------------------------------------------------------------------------------

Subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of the Company and the Subsidiaries
for the periods presented therein. Except as disclosed in the Company SEC
Documents, there are no agreements, arrangements or understandings between the
Company and any party who is at the date of this Agreement or was at any time
prior to the date hereof but after December 31, 2001, an Affiliate (as
hereinafter defined) of the Company that are required to be disclosed in the
Company SEC Documents.

 

(ii) The Company has not received written notice from the SEC or any other
Governmental Entity that any of its accounting policies or practices are or may
be the subject of any review, inquiry, investigation or challenge by the SEC or
any other Governmental Entity. Since December 31, 2001, the Company’s
independent public accounting firm has not informed the Company that it has any
material questions, challenges or disagreements regarding or pertaining to the
Company’s accounting policies or practices. Since December 31, 2001, to the
knowledge of the Company, no officer or director of the Company has received or
has become entitled to receive any material compensation from any entity that
has engaged in or is engaging in any material transaction with the Company or
any Subsidiary of the Company. There are no off-balance sheet special purpose
entities or financing arrangements of the Company or the Subsidiaries.

 

(iii) With respect to each annual report on Form 10-K, each quarterly report on
Form 10-Q and each amendment of any such report included in the Company SEC
Documents, the chief executive officer and chief financial officer of the
Company have made all certifications required by the Sarbanes-Oxley Act of 2002
(the “Sarbanes-Oxley Act”) and any related rules and regulations promulgated by
the SEC and the statements contained in any such certifications were correct
when made.

 

(e) Information Supplied. None of the information supplied or to be supplied by
the Company and included or incorporated by reference in the Proxy Statement
will, at the date mailed to stockholders of the Company, at the time of the
meeting of such stockholders to be held in connection with the Merger, or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement, insofar as it relates to the Company or the
Subsidiaries or other information supplied by the Company for inclusion therein,
will comply as to form in all material respects with the provisions of the
Exchange Act, the rules and regulations thereunder and all judgments, orders,
decrees, statutes, laws, ordinances, rules, regulations, writs or injunctions
applicable to the Company, any of the Subsidiaries, or any of their respective
assets or properties (collectively, “Applicable Laws”).

 

(f) Absence of Certain Changes or Events. Except as set forth on Schedule 3.1(f)
on the Company Disclosure Schedule or as disclosed in, or reflected in the
financial statements included in, the Company SEC Documents, or except as
contemplated by this Agreement, since March 31, 2005, there has not been (i) any
material damage, destruction or other casualty loss (whether or not covered by
insurance) affecting the business or assets owned or operated by the Company or
any of the Subsidiaries, (ii) any event, condition, action or occurrence that
would constitute a breach of Section 4.1 hereof, or (iii) any other transaction,
commitment, dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) that, individually
or in the aggregate, has resulted in or could reasonably be expected to result
in a Company Material Adverse Effect.

 

14

--------------------------------------------------------------------------------

(g) No Undisclosed Material Liabilities. Except as disclosed in the Company SEC
Documents or set forth on Schedule 3.1(g) of the Company Disclosure Schedule,
there are no liabilities of the Company or any of the Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, that, individually or in the aggregate, have resulted in or could
reasonably be expected to result in a Company Material Adverse Effect, other
than (i) liabilities adequately provided for on the balance sheet of the Company
dated as of March 31, 2005 (including the notes thereto) contained in the
Company’s Quarterly Report on Form 10-Q for the three months ended March 31,
2005, (ii) liabilities incurred in the ordinary course of business after March
31, 2005, and (iii) liabilities under this Agreement.

 

(h) No Default. Except as set forth on Schedule 3.1(h) of the Company Disclosure
Schedule, neither the Company nor any of the Subsidiaries is in default or
violation (and no event has occurred which, with notice or the lapse of time or
both, would constitute a default or violation) of any term, condition or
provision of (i) the Company Charter, the Bylaws or the Charter Documents of any
of the Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license to which the Company or any of the Subsidiaries is now a party or by
which the Company or any of the Subsidiaries or any of their respective
properties or assets is bound or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of the
Subsidiaries, except in the case of (ii) and (iii) for defaults or violations
that could not, individually or in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect.

 

(i) Compliance with Applicable Laws. The Company and the Subsidiaries hold all
permits, licenses, variances, exemptions, orders, franchises and approvals of
all Governmental Entities necessary for the lawful conduct of their respective
businesses (the “Company Permits”), except where the failure so to hold could
not, individually or in the aggregate, reasonably be expected to result in a
Company Material Adverse Effect. The Company and each of the Subsidiaries are in
compliance with the terms of the Company Permits, except where the failure so to
comply could not, individually or in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect. Except as disclosed in the Company
SEC Documents (including under the heading “Laws and Regulations” in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2004), the
respective businesses of the Company and the Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations that could not, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect. No investigation or review by any Governmental Entity with respect to
the Company or any of the Subsidiaries is pending or, to the knowledge of the
Company, threatened, other than those the outcome of which could not,
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect.

 

(j) Litigation. Except as disclosed in the Company SEC Documents or as set forth
on Schedule 3.1(j) of the Company Disclosure Schedule, there is no suit, action
or

 

15

--------------------------------------------------------------------------------

proceeding pending, or, to the knowledge of the Company, threatened against or
affecting the Company or any of the Subsidiaries (the “Company Litigation”), and
the Company and the Subsidiaries have no knowledge of any facts that are likely
to give rise to any Company Litigation, that (in any case) could, individually
or in the aggregate, reasonably be expected to result in a Company Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any of
the Subsidiaries (a “Company Order”) that could, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect.

 

(k) Taxes. Except as set forth on Schedule 3.1(k) of the Company Disclosure
Schedule:

 

(i) Each of the Company, the Subsidiaries and any affiliated, consolidated,
combined, unitary or similar group of which the Company or any of the
Subsidiaries is or was a member has (A) duly filed on a timely basis (taking
into account any extensions) all U.S. federal income Tax Returns (as hereinafter
defined), and all other material Tax Returns required to be filed or sent by or
with respect to it and all such Tax Returns are true, correct and complete in
all material respects, (B) duly paid or deposited on a timely basis all Taxes
(as hereinafter defined) that are due and payable with respect to such Tax
Returns, and all material Taxes that are otherwise due and payable for which the
Company or any of the Subsidiaries are reasonably likely to be liable, (C)
established reserves that are adequate for the payment of all material Taxes not
yet due and payable with respect to the results of operations of the Company and
each of the Subsidiaries through the date hereof, and (D) complied in all
material respects with all Applicable Laws, rules and regulations relating to
the reporting, payment and withholding of Taxes that are required to be withheld
from payments to employees, independent contractors, creditors, stockholders or
any other third party and has in all material respects timely withheld from
employee wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over.

 

(ii) Schedule 3.1(k) of the Company Disclosure Schedule sets forth (A) a list of
all jurisdictions in which the Company or any of the Subsidiaries has or is
required to file Tax Returns, (B) the last taxable period through which the
income Tax Returns of the Company and any of the Subsidiaries have been examined
by the Internal Revenue Service (the “IRS”) or the applicable foreign, state or
local taxing authority or for which the statute of limitations for assessment
has otherwise closed and (C) any affiliated, consolidated, combined, unitary or
similar group or Tax Return in which the Company or any of the Subsidiaries is
or has been a member or joins or has joined in the filing. Except to the extent
being contested in good faith, set forth on Schedule 3.1(k) of the Company
Disclosure Schedule, and adequately provided for in the Company’s financial
statements included in the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005, all material deficiencies asserted as a result of
any examination by any applicable taxing authority have been paid or fully
settled. No audits or other administrative proceedings or court proceedings are
pending, or to the knowledge of the Company, threatened, with regard to any
Taxes for which the Company or any of the Subsidiaries may be liable, and no
material deficiency for any Taxes has been proposed, asserted or assessed
(whether by examination report or prior to completion of examination by means of
notices of proposed adjustment or other similar requests or notices) against the
Company or any of the Subsidiaries by any taxing authority with respect to any
period. No claim is pending and

 

16

--------------------------------------------------------------------------------

no claim has ever been made that has not been resolved by an authority in a
jurisdiction where the Company or any of the Subsidiaries does not file Tax
Returns that the Company or such Subsidiary, as the case may be, is or may be
subject to Tax in that jurisdiction.

 

(iii) Schedule 3.1(k) of the Company Disclosure Schedule sets forth (A) as of
December 31, 2004 the amount of any net operating loss, net capital loss, unused
foreign tax credits or unused investment or other credits of the Company and any
of the Subsidiaries, which amounts are not subject to any limitations except as
set forth on Schedule 3.1(k) of the Company Disclosure Schedule, and (B) all
material Tax holidays, abatements, incentives and similar grants made or awarded
to the Company and any of the Subsidiaries by any taxing authority.

 

(iv) Neither the Company nor any of the Subsidiaries has executed or entered
into (or prior to the close of business on the Closing Date will execute or
enter into) with the IRS or any taxing authority (A) any agreement or other
document extending or having the effect of extending the period for assessment
or collection of any Taxes for which the Company or any of the Subsidiaries
would be liable or (B) a closing agreement pursuant to Section 7121 of the
United States Internal Revenue Code of 1986, as amended (the “Code”), or any
similar provision of state, local, foreign or other income tax law, that will
require any increase in taxable income or alternative minimum taxable income, or
any reduction in tax credits, for the Company or any of the Subsidiaries for any
taxable period ending after the Closing Date. Neither the Company nor any of the
Subsidiaries has received any private letter ruling of the IRS or comparable
ruling of other tax authorities that will be binding on the Company or any of
the Subsidiaries with respect to any period following the Closing Date. Neither
the Company nor any of the Subsidiaries has granted any power of attorney, that
is currently in force, with respect to any income, franchise, or similar Taxes
or any income, franchise or similar Tax Returns.

 

(v) Neither the Company nor any of the Subsidiaries is a party to, is bound by
or has any obligation under any tax sharing, indemnity or allocation agreement,
or similar agreement, arrangement or practice.

 

(vi) There are no requests for rulings or outstanding subpoenas from any taxing
authority for information with respect to Taxes of the Company or any of the
Subsidiaries and, to the knowledge of the Company, no material reassessments
(for property or ad valorem Tax purposes) of any assets or any property owned or
leased by the Company or any of the Subsidiaries have been proposed in written
form.

 

(vii) Neither the Company nor any of the Subsidiaries has agreed to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor provision)
by reason of any change in any accounting method of the Company or any of the
Subsidiaries, and neither the Company nor any of the Subsidiaries has any
application pending with any taxing authority requesting permission for any
changes in any accounting method of the Company or any of the Subsidiaries. To
the knowledge of the Company, neither the IRS nor any other taxing authority has
proposed in writing, and neither the Company nor any of the Subsidiaries is
otherwise required to make, any such adjustment or change in accounting method.

 

17

--------------------------------------------------------------------------------

(viii) There are no material excess loss accounts or deferred intercompany
transactions between the Company and/or any of the Subsidiaries within the
meaning of Treas. Reg. Section 1.1502-13 or 1.1502-19, respectively.

 

(ix) Neither the Company nor any of the Subsidiaries has constituted either a
“distributing corporation” or a “controlled corporation” (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355(a) of the Code (A) in the two years prior
to the date of this Agreement, or (B) in a distribution that could otherwise
constitute part of a “plan” or “series of related transactions” (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.

 

(x) None of the Company, the Subsidiaries or any affiliated, consolidated,
combined, unitary or similar group of which any of the Company or the
Subsidiaries is or was a member has participated, directly or indirectly, in any
(A) reportable transaction within the meaning of Treasury Regulation Section
1.6011-4(b) or (B) Tax shelter required to be registered under Section 6111 of
the Code. Each of the Company and the Subsidiaries has disclosed on its federal
income tax returns all positions taken therein that could, if not so disclosed,
give rise to a substantial understatement penalty within the meaning of Section
6662 of the Code.

 

(xi) Neither the Company nor any of the Subsidiaries is, or has been, a party to
any agreement that provides for the payment of, or has otherwise paid, any
amount that would constitute a “parachute payment” within the meaning of Section
280G of the Code, that would constitute compensation whose deductibility is
limited under Section 162(m) of the Code or that would be subject to tax under
Section 409A of the Code.

 

For purposes of this Agreement, “Tax” (and, with correlative meaning, “Taxes”)
means (i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
license, withholding on amounts paid by the Company or any of the Subsidiaries,
payroll, employment, excise, production, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest and/or any penalty, addition to tax or additional
amount imposed by any taxing authority, (ii) any liability of the Company or any
of the Subsidiaries for the payment of any amounts of the type described in (i)
as a result of being a member of an affiliated or consolidated group, or
arrangement whereby liability of the Company or any of the Subsidiaries for
payment of such amounts was determined or taken into account with reference to
the liability of any other person for any period and (iii) liability of the
Company or any of the Subsidiaries with respect to the payment of any amounts of
the type described in (i) or (ii) as a result of any express or implied
obligation to indemnify any other person. “Tax Return” means all returns,
declarations, reports, estimates, information returns and statements required to
be filed by or with respect to the Company or any of the Subsidiaries in respect
of any Taxes, including, without limitation, (i) any consolidated federal income
Tax return in which the Company or any of the Subsidiaries is included and (ii)
any state, local or foreign income Tax returns filed on a consolidated, combined
or unitary basis (for purposes of determining tax liability) in which the
Company or any of the Subsidiaries is included.

 

18

--------------------------------------------------------------------------------

(l) Employee Benefit Plans; ERISA. Except as set forth on Schedule 3.1(l) of the
Company Disclosure Schedule or in the Company SEC Documents:

 

(i) There are no Company Employee Benefit Plans established, maintained,
contributed to or required to be contributed to, by the Company or any entity
with which the Company is considered a single employer under Section 414(b),
(c), (m) or (o) of the Code (the “Company ERISA Affiliates”), and there are no
Company Employee Pension Benefit Plans that the Company or any Company ERISA
Affiliate has established, maintained, contributed to, or been required to
contribute to, within six years prior to date hereof. As used in this Agreement,
“Company Employee Benefit Plan” means any plan, program, policy, practice,
agreement or other arrangement providing compensation or benefits in any form to
any current or former employee, independent contractor, officer or director of
the Company or any of the Subsidiaries or any beneficiary or dependent thereof,
whether written or unwritten, formal or informal, including, without limitation,
any “employee welfare benefit plan” within the meaning of Section 3(1) of ERISA
(a “Company Employee Welfare Benefit Plan”), any “employee pension benefit plan”
within the meaning of Section 3(2) of ERISA (whether or not such plan is subject
to ERISA) (a “Company Employee Pension Benefit Plan”) and any other pension,
profit-sharing, savings, retirement, bonus, incentive compensation, deferred
compensation, executive compensation, vacation, sick pay, stock purchase, stock
option, phantom equity, equity compensation, severance, employment, consulting,
unemployment, hospitalization or other medical, life, or other insurance, long-
or short-term disability, change of control, material fringe benefit, or any
other similar plan, program, practice, commitment or policy.

 

(ii) With respect to each Company Employee Benefit Plan, the Company has
provided Parent with a true, correct and complete copy of (A) each writing
constituting a part of such Company Employee Benefit Plan (including, but not
limited to, the plan document(s), adoption agreements, prototype or volume
submitter documents, trust agreements, annuity contracts, third party
administrative contracts, and insurance contracts, as applicable) and all
amendments thereto, (B) the three most recent Annual Reports (Form 5500 Series)
including all applicable schedules and audited financial statements and
opinions, if required, (C) the current summary plan description and any material
modifications thereto, if required to be furnished under ERISA, or any written
summary provided to participants with respect to any plan for which no summary
plan description exists, (D) the most recent determination letter (or if
applicable, advisory or opinion letter) from the IRS, if any, or if an
application for a determination letter is pending, the application with all
attachments, (E) all notices given to such Company Employee Benefit Plan, the
Company, or any Company ERISA Affiliate by the IRS, Department of Labor, Pension
Benefit Guaranty Corporation, or other governmental agency relating to such
Company Employee Benefit Plan and any material communications with such entity
or agency, (F) the most recent actuarial valuation and annual asset statement,
and (G) a written description of each oral Company Employee Benefit Plan.

 

(iii) Each Company Employee Benefit Plan that is intended to be “qualified”
within the meaning of Section 401(a) of the Code and, to the extent applicable,
Section 401(k) of the Code (a “Qualified Company Employee Benefit Plan”), has
received a favorable determination letter (or if applicable, advisory or opinion
letter) from the IRS that has not been revoked, and no event has occurred and no
condition exists that could reasonably be expected to adversely affect the
qualified status of any such Company Employee Benefit Plan.

 

19

--------------------------------------------------------------------------------

Any favorable determination letters referenced in this Section 3.1(l)(iii) cover
“GUST” as defined in footnote 2 of IRS Notice 2003-49. Each Qualified Company
Employee Benefit Plan has timely made “good faith” amendments to comply with the
Economic Growth and Tax Reconciliation Relief Act of 2001 as required by IRS
Notice 2001-42. The trusts established under the Qualified Company Employee
Benefit Plans are exempt from federal income taxes under Section 501(a) of the
Code and any potential excise taxes.

 

(iv) The Company has (A) filed or caused to be filed all returns and reports on
the Company Employee Benefit Plans that are required to be filed and (B) paid or
made adequate provision for all fees, interest, penalties, assessments or
deficiencies that have become due pursuant to those returns or reports or
pursuant to any assessment or adjustment that has been made relating to those
returns or reports. All other material fees, interest, penalties and assessments
that are payable by or for the Company or any of the Subsidiaries relating to
the Company Employee Benefits Plans have been timely reported, fully paid and
discharged. There are no material unpaid fees, penalties, interest or
assessments due from the Company or, to the knowledge of the Company, from any
other person or entity, relative to any Company Employee Benefit Plan. The
Company and each of the Subsidiaries have collected or withheld all amounts that
are required to be collected or withheld by them to discharge their obligations
with respect to the Company Employee Benefit Plans, and all of those amounts
have been paid to the appropriate governmental authority or set aside in
appropriate accounts for future payment when due.

 

(v) The funding, if any, under each Company Employee Welfare Benefit Plan does
not exceed and has not exceeded the limitations under Sections 419A(b) and
419A(c) of the Code. None of the Company or any of the Subsidiaries are subject
to taxation on the income of any Company Employee Welfare Benefit Plan’s welfare
benefit fund (as such term is defined in Section 419(e) of the Code) under
Section 419A(g) of the Code.

 

(vi) Each Company Employee Benefit Plan has been operated and administered in
all material respects in accordance with its provisions. All contributions
required to be made to any Company Employee Benefit Plan (or to any person
pursuant to the terms thereof) have been timely made or the amount of such
payment or contribution obligation has been reflected in the Company SEC
Documents, which are publicly available prior to the date of this Agreement. All
such contributions representing participant contributions have been made within
the time required by Department of Labor regulation section 2510.3-102.

 

(vii) The Company and each of the Subsidiaries have complied, and are now in
compliance in all material respects with all provisions of ERISA, the Code and
all laws and regulations applicable to the Company Employee Benefit Plans.
Neither the Company nor any of the Subsidiaries has engaged in any material
prohibited transaction, within the meaning of Section 4975 of the Code or
Section 406 of ERISA, as a fiduciary or party in interest with respect to any
Company Employee Benefit Plan and, to the knowledge of the Company, (A) no
prohibited transaction has occurred with respect to any Company Employee Benefit
Plan and (B) no fiduciary has any liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or
investment of assets of any Company Employee Benefit Plan.

 

20

--------------------------------------------------------------------------------

(viii) Neither the Company nor any entity that is a Company ERISA Affiliate has
ever established, maintained, contributed to, or had an obligation to contribute
to, any employee benefit plan that is a “multiemployer plan,” as that term is
defined in Section 3(37) of ERISA, or that is subject to Title IV of ERISA, and
no liability under Title IV of ERISA (including a liability to pay premiums to
the Pension Benefit Guaranty Corporation) has been or is expected to be incurred
by the Company or any of the Subsidiaries. No Company Employee Welfare Plan is a
multiple employer welfare arrangement as defined in Section 3(40) of ERISA. No
Company Employee Benefit Plan is a multiple employer plan as defined in Section
413(c) of the Code or Sections 4063, 4064 or 4066 of ERISA.

 

(ix) The Company and each of the Subsidiaries have not offered to provide life,
health or medical benefits or insurance coverage to any individual, or to the
family members of any individual, for any period extending beyond the
termination of the individual’s employment, except to the extent required by the
health care continuation coverage (“COBRA”) provisions in ERISA and the Code or
similar provisions of state law.

 

(x) The consummation of the transactions contemplated by the Transaction
Documents will not, either alone or in connection with termination of
employment, (A) entitle any current or former employee, independent contractor,
director or officer of the Company or any of the Subsidiaries to severance pay,
any change in control payment or any other material payment other than pursuant
to an agreement with Parent or one of its current Affiliates, (B) accelerate the
time of payment or vesting, change the form or method of payment, or increase
the amount of compensation due, any such employee, independent contractor,
director or officer, other than with respect to the Company Stock Options as set
forth in Section 2.2 hereof, or (C) entitle any such employee, independent
contractor, director or officer to any gross-up or similar material payment in
respect of the excise tax described in Section 4999 of the Code. Neither the
Company nor any of the Subsidiaries has taken any action that would result in
its incurring any obligation for any payments or benefits described in
subsections (A), (B) or (C) of this Section 3.1(l)(x) (without regard to whether
the transactions contemplated by the Transaction Documents are consummated)
except to the extent required in a written contract or agreement.

 

(xi) there are no liens, suits, actions, proceedings, investigations, claims or
orders pending (other than routine claims for benefits) or, to the knowledge of
the Company, threatened against the Company, any of the Subsidiaries or any
Company Employee Benefit Plan related to any Company Employee Benefit Plan. To
the knowledge of the Company, no Company Employee Benefit Plan is subject to any
ongoing audit, investigation, or other administrative proceeding of any
governmental entity, and no Company Employee Benefit Plan is the subject of any
pending application for administrative relief under any voluntary compliance
program, closing agreement program or similar program of the IRS or the
Department of Labor. No assets of the Company are subject to any lien under
Section 302(f) of ERISA or Section 412(n) of the Code.

 

(xii) The Company has the right to amend or terminate each Company Employee
Benefit Plan at any time without incurring any liability other than with respect
to benefits that have already accrued under a Company Employee Pension Benefit
Plan.

 

21

--------------------------------------------------------------------------------

(xiii) Neither the Company nor any Company ERISA Affiliate has a formal plan,
commitment, or proposal, whether legally binding or not, nor has any of them
made a commitment to employees, officers, directors, consultants or independent
contractors to create any additional Company Employee Benefit Plan or modify,
change or terminate any existing Company Employee Benefit Plan, and no such
plan, commitment or proposal is under consideration. To the knowledge of the
Company, no events have occurred or are expected to occur with respect to any
Company Employee Benefit Plan that would cause a material change in the cost of
providing the benefits under such plan or would cause a material change in the
cost of providing for other liabilities of such plan.

 

(xiv) None of the assets of any Company Employee Pension Benefit Plan includes
“qualifying employer securities” or “qualifying employer real property” within
the meaning of Section 407(d) of ERISA.

 

(xv) As used in this Agreement, “ERISA” means the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder.

 

(xvi) Each Company Employee Benefit Plan that is a “group health plan,” as
defined in Section 607(1) of ERISA, Section 5000(b)(1) of the Code or 45 C.F.R.
160.103, has been operated at all times in material compliance with the
provisions of COBRA, HIPAA and any applicable, similar state law. As used in
this Agreement, “HIPAA” means the provisions of ERISA and the Code enacted by
the Health Insurance Portability and Accountability Act of 1996, including any
regulations thereunder, and the regulations promulgated by the United States
Department of Health and Human Services as set forth in 45 C.F.R. Parts 160,
162, and 164.

 

(xvii) Each Company Employee Pension Benefit Plan that is not qualified under
Section 401(a) of the Code is exempt from Part 2, 3 and 4 of Title I of ERISA as
an unfunded plan that is maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees pursuant to Section 201(2), 301(a)(3) and 401(a)(1) of ERISA. No
assets of the Company are allocated to or held in a “rabbi trust” or similar
vehicle with respect to any such plan.

 

(m) Labor Matters. Except as set forth on Schedule 3.1(m) of the Company
Disclosure Schedule or in the Company SEC Documents:

 

(i) Neither the Company nor any of the Subsidiaries has agreed to recognize any
labor union or organization or is a party to any collective bargaining agreement
or other current labor agreement with any labor union or organization, no labor
union or organization has been certified as the exclusive bargaining
representative of any employees of the Company or any of the Subsidiaries, and
there is no current labor union representation question involving employees of
the Company or any of the Subsidiaries, nor does the Company or any of the
Subsidiaries know of any activity or proceeding of any labor union or
organization (or representative thereof) or employee group (or representative
thereof) to organize any such employees.

 

22

--------------------------------------------------------------------------------

(ii) Since July 1, 2000, there has been no unfair labor practice charge or
complaint before any Governmental Entity, or grievance arising out of a
collective bargaining agreement or other grievance procedure, pending against
the Company or any of the Subsidiaries, nor, to the knowledge or the Company,
has any such charge, complaint or grievance been threatened.

 

(iii) There is no complaint, lawsuit or proceeding in any forum by or on behalf
of any present or former employee, any applicant for employment or any classes
of the foregoing alleging: any failure to pay wages, benefits or other
compensation; any breach of any express or implied contract of employment; any
violation of any Applicable Laws governing employment or the termination
thereof; or any other discriminatory, wrongful or tortious conduct in connection
with the employment relationship, against the Company or any of the Subsidiaries
pending, nor, to the knowledge of the Company, threatened.

 

(iv) There is no labor strike, dispute, slowdown, work stoppage or lockout
pending, or, to the knowledge of the Company, threatened, against or involving
the Company or any of the Subsidiaries, and neither the Company nor any of the
Subsidiaries has experienced any labor strikes or material labor disputes,
slowdowns, lockouts or stoppages since July 1, 2000.

 

(v) The Company and each of the Subsidiaries are in compliance with all
Applicable Laws respecting employment and employment practices, including but
not limited to, terms and conditions of employment, wages, hours of work,
occupational safety and health, plant closing and mass layoff, immigration,
worker’s compensation and unemployment compensation, except for non-compliance
that could not, individually or in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect.

 

(vi) There is no complaint, lawsuit or proceeding in any forum pending or, to
the knowledge of the Company, threatened, in respect to which any current or
former director, officer, employee or agent of the Company or any of the
Subsidiaries is or may be entitled to claim indemnification from the Company or
any of the Subsidiaries pursuant to (A) the Company Charter or Bylaws or any
provision of the Charter Documents of any of the Subsidiaries, (B) any
indemnification agreement to which the Company or any of the Subsidiaries is a
party or (C) Applicable Laws, in each case under clauses (A), (B) or (C) that,
individually or in the aggregate could reasonably be expected to result in a
Company Material Adverse Effect.

 

(n) Property. Except as set forth on Schedule 3.1(n) of the Company Disclosure
Schedule:

 

(i) The Company and each of the Subsidiaries possess or have adequate rights to
use all material trademarks, trade names, patents, service marks, brand marks,
brand names, computer programs, databases, industrial designs, domain names and
copyrights necessary for the operation of the respective businesses of each of
the Company and the Subsidiaries (collectively, the “Company Intangible
Property”), except where the failure to possess or have adequate rights to use
such properties could not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect. All of the Company

 

23

--------------------------------------------------------------------------------

Intangible Property is owned or licensed by the Company or one of the
Subsidiaries free and clear of any and all Liens, except those that could not,
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect, and neither the Company nor any such Subsidiary has
forfeited or otherwise relinquished any Company Intangible Property which
forfeiture, individually or in the aggregate, could reasonably be expected to
result in a Company Material Adverse Effect. To the knowledge of the Company,
the use of the Company Intangible Property by the Company or the Subsidiaries
does not, in any respect that, individually or in the aggregate, constitutes or
could reasonably be expected to result in a Company Material Adverse Effect,
conflict with, infringe upon, violate or interfere with or constitute an
appropriation of any right, title, interest or goodwill, including, without
limitation, any intellectual property right, trademark, trade name, patent,
service mark, brand mark, brand name, computer program, database, industrial
design, domain name, copyright or any pending application therefor of any other
person. There have been no claims made and neither the Company nor any of the
Subsidiaries has received any notice of any claim or otherwise knows that (A)
any of the Company Intangible Property is invalid or conflicts with the asserted
rights of any other person or (B) any of the Company Intangible Property has not
been used or enforced or has failed to have been used or enforced in a manner
that would result in the abandonment, cancellation or unenforceability of any of
the Company Intangible Property, except, in the case of clauses (A) and (B) of
this Section 3.1(n)(i), for any such conflict, infringement, violation,
interference, claim, invalidity, abandonment, cancellation or unenforceability
that could not, individually or in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect.

 

(ii) All major items of operating equipment owned or leased by the Company and
each of the Subsidiaries (A) are, in the aggregate, in a state of repair so as
to be adequate in all material respects for reasonably prudent operations in the
areas in which they are operated and (B) are adequate, together with all other
properties of the Company and each of the Subsidiaries, to comply in all
material respect with the requirements of all applicable contracts of each of
the Company and the Subsidiaries. Except for goods and other property sold, used
or otherwise disposed of since April 1, 2005 in the ordinary course of business,
the Company and the Subsidiaries have good and defensible title to all
properties, interests in properties and assets, real and personal, reflected in
the Company SEC Documents filed prior to the date of this Agreement as owned by
the Company and any of the Subsidiaries, free and clear of any Liens, except (A)
Liens reflected in the Company SEC Documents filed prior to the date of this
Agreement, (B) Liens for current taxes not yet due and payable, and (C) such
imperfections of title, easements, liens, government or tribal approvals or
other matters and failures of title as could not, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect. The leases and other agreements pursuant to which the Company and the
Subsidiaries lease or otherwise acquire or obtain operating rights affecting any
real or personal property are in good standing, valid and effective, and the
rentals due by the Company or any of the Subsidiaries to any lessor of any such
leases have been properly paid, except in each case as could not, individually
or in the aggregate, reasonably be expected to result in a Company Material
Adverse Effect.

 

24

--------------------------------------------------------------------------------

(o) Environmental Matters. For purposes of this Agreement:

 

(A) “Environmental Laws” means all federal, state and local laws (including
common laws), rules, regulations, ordinances, orders and decrees of any
Governmental Entity now in existence relating to pollution or the protection of
human health, safety or the environment of any jurisdiction in which the
applicable party hereto owns or operates assets or conducts business or owned or
operated assets or conducted business (whether or not through a predecessor
entity) (including, without limitation, ambient air, surface water, groundwater,
land surface, subsurface strata, natural resources or wildlife), including,
without limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of solid waste or Hazardous Materials, and any similar laws, rules,
regulations, ordinances, orders and decrees of any foreign jurisdiction in which
the applicable party hereto owns or operates assets or conducts business;

 

(B) “Hazardous Materials” means (x) any petroleum or petroleum products,
radioactive materials (including naturally occurring radioactive materials),
asbestos in any form that is or could become friable, urea formaldehyde foam
insulation, polychlorinated biphenyls or transformers or other equipment
containing polychlorinated biphenyls, (y) any chemicals, materials or substances
which are now defined as or included in the definition of “solid wastes,”
“hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely
hazardous substances,” “restricted hazardous wastes,” “toxic substances” or
“toxic pollutants,” or words of similar import, under any Environmental Law and
(z) any other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a jurisdiction
in which the Company or any of the Subsidiaries operates.

 

(C) “Release” means any spill, effluent, emission, leaking, pumping, pouring,
emptying, escaping, dumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment, or into or out of
any property owned, operated or leased by the Company or any of the
Subsidiaries; and

 

(D) “Remedial Action” means all actions, including, without limitation, any
capital expenditures, required by a Governmental Entity or required under any
Environmental Law to (i) clean up, remove, treat, or in any other way ameliorate
or address any Hazardous Materials or other substance in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not endanger or threaten to
endanger the public or employee health or welfare of the indoor or outdoor
environment; (iii) perform pre-remedial studies and investigations or
post-remedial monitoring and care pertaining or relating to a Release; or (iv)
bring the applicable party into compliance with any Environmental Law.

 

Except as disclosed in the Company SEC Documents:

 

(1) The operations of the Company and each of the Subsidiaries have been
conducted, are and, as of the Closing Date, will be, in compliance with all
Environmental Laws, except where the failure to so comply could not,
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect.

 

25

--------------------------------------------------------------------------------

(2) The Company and each of the Subsidiaries have obtained all permits, licenses
and registrations, or applications relating thereto, and have made all filings,
reports and notices required under applicable Environmental Laws for the
continued operations of their respective businesses, except such matters the
lack or failure of which could not, individually or in the aggregate, reasonably
be expected to result in a Company Material Adverse Effect.

 

(3) The Company and each of the Subsidiaries are not subject to any outstanding
written orders issued by, or contracts with, any Governmental Entity or other
person respecting (A) Environmental Laws, (B) Remedial Action, (C) any Release
or (D) an assumption of responsibility for environmental liabilities of another
person.

 

(4) To the knowledge of the Company, neither the Company nor any of the
Subsidiaries has received any communication alleging, with respect to any such
party, (i) the violation of or liability under any Environmental Law, or (ii) or
any liability (contingent or otherwise) with respect to the alleged exposure of
any employee or third party to Hazardous Materials that, in either case, could,
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect.

 

(5) To the knowledge of the Company, there is not now on or in any property of
the Company or the Subsidiaries or any property for which the Company or any of
the Subsidiaries is potentially liable any of the following (A) any underground
storage tanks or surface impoundments, or (B) any on-site disposal of Hazardous
Material, any of which ((A) or (B) preceding) could, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect.

 

(p) Insurance. Schedule 3.1(p) of the Company Disclosure Schedule sets forth an
insurance schedule of the Company’s and each of the Subsidiaries’ directors’ and
officers’ liability insurance, medical malpractice and professional liability
insurance policies, primary and excess casualty insurance policies, providing
coverage for bodily injury and property damage to third parties, including
products liability and completed operations coverage, and worker’s compensation,
in effect as of the date hereof. The Company maintains insurance in such amounts
and covering such risks as are in accordance with normal industry practice for
companies engaged in businesses similar to those of the Company and each of the
Subsidiaries. All such insurance policies are in full force and effect and all
related premiums that have come due have been paid to date. As of the Effective
Date, all such insurance policies (or comparable replacement policies) shall be
in full force and effect and all related premiums shall have been paid to date.

 

(q) Board Recommendation; Company Action; Vote Required. The board of directors
of the Company has, by resolutions duly adopted by such directors and not
subsequently rescinded or modified in any way, unanimously (i) determined that
the Transaction Documents, the Merger, in accordance with the terms of this
Agreement, and the other transactions contemplated hereby and thereby are
advisable and in the best interests of the

 

26

--------------------------------------------------------------------------------

Company, (ii) approved and adopted the Transaction Documents and approved the
Merger and the other transactions contemplated hereby, (iii) directed that the
Merger and this Agreement be submitted for consideration by the stockholders of
the Company at a meeting of the Company’s stockholders and (iv) recommended that
the stockholders of the Company approve the Merger and this Agreement. As of the
date of this Agreement, the directors of the Company have advised the Company
that, as of the date hereof, they intend to vote or cause to be voted all of the
shares of Company Common Stock beneficially owned by each of them and their
affiliates in favor of approval of the Merger and this Agreement. Assuming the
accuracy of the representations set forth in Section 3.2(e), the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock is the only vote of the holders of any class or series of Company capital
stock necessary to approve the Merger and this Agreement and the transactions
contemplated hereby. No “fair price,” “moratorium,” “control share acquisition”
or other antitakeover statute or similar statute or regulation applies or
purports to apply to this Agreement or the Merger or the other transactions
contemplated by this Agreement or the other Transaction Documents.

 

(r) Beneficial Ownership of Parent Common Stock. Neither the Company nor any of
the Subsidiaries “beneficially owns” (as defined in Rule 13d-3 under the
Exchange Act) any of the outstanding capital stock of Parent or any of Parent’s
outstanding debt securities.

 

(s) Brokers. Except for the fees and expenses payable to Adams Harkness, Inc.,
which fees are reflected in its engagement letter with the Company (a copy of
which has been delivered to Parent), no broker, investment banker, or other
Person is entitled to any broker’s, finder’s or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.

 

(t) Controls and Procedures; Corporate Governance.

 

(i) Each of the Company and the Subsidiaries maintains accurate books and
records reflecting its respective assets and liabilities and maintains proper
and adequate internal accounting controls that provide assurance that (A)
transactions are executed with management’s authorization, (B) transactions are
recorded as necessary to permit preparation of the consolidated financial
statements of the Company and to maintain accountability for Company’s
consolidated assets, (C) access to the Company’s and each of the Subsidiaries’
assets is permitted only in accordance with management’s authorization, (D) the
reporting of the Company’s and each of the Subsidiaries’ assets is compared with
existing assets at regular intervals, and (E) accounts, notes and other
receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and
timely basis. The Company and each of the Subsidiaries have made available to
Parent a summary of (A) any significant deficiencies in the design or operation
of internal controls that could adversely affect the Company’s or any of the
Subsidiaries’ ability to record, process, summarize and report financial data,
(B) any material weaknesses in the Company’s or any of the Subsidiaries’
internal controls, and (C) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s or
any of the Subsidiaries’ internal control over financial reporting.

 

27

--------------------------------------------------------------------------------

(ii) The Company and each of the Subsidiaries have established and maintain
disclosure controls and procedures (as such term is defined in Rule 13a-15(e) or
15d-15(e) under the Exchange Act); such disclosure controls and procedures are
designed to ensure that material information relating to the Company and each of
the Subsidiaries required to be disclosed in the Company’s Exchange Act reports
is made known to the Company’s principal executive officer and principal
financial officer by others within the Company and each of the Subsidiaries,
particularly during the periods in which the periodic reports required under the
Exchange Act are being prepared; and such disclosure controls and procedures are
effective in timely alerting the Company’s principal executive officer and its
principal financial officer to material information required to be included in
the Company’s periodic reports required under the Exchange Act. Schedule 3.1(t)
of the Company Disclosure Schedule lists, and the Company has delivered to
Parent, all written documentation relating to, all written descriptions of, and
all policies, manuals and other documents promulgating such disclosure controls
and procedures.

 

(iii) The Company is in compliance in all material respects, and will continue
to remain in compliance in all material respects from the date hereof until
immediately after the Effective Time, with all rules, regulations and
requirements of the Sarbanes-Oxley Act and the SEC applicable to the Company.

 

(iv) The Company has not, nor has any of the Subsidiaries, since July 20, 2002,
extended or maintained credit, arranged for an extension of credit or received
an extension of credit, in the form of a personal loan to or for any executive
officer of any of the Company or any of the Subsidiaries.

 

(u) Investment Company. Neither the Company nor any of the Subsidiaries is an
“investment company” or a company “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder.

 

(v) Certain Contracts and Arrangements.

 

(i) Schedule 3.1(v) of the Company Disclosure Schedule and the documents filed
or incorporated by reference in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004 set forth a true and complete list of each
agreement to which the Company or any of the Subsidiaries is subject (other than
this Agreement) that is of a type that would be required to be included as an
exhibit to an Annual Report on Form 10-K pursuant to the rules and regulations
of the SEC if such Annual Report on Form 10-K were filed by the Company on the
date hereof (collectively, the “Company Contracts”). Except as could not,
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect and except as set forth on Schedule 3.1(v) of the
Company Disclosure Schedule, neither the Company nor any of the Subsidiaries is
in breach or default under any Company Contract nor, to the knowledge of the
Company, is any other party to any such Company Contract in breach or default
thereunder.

 

(ii) Set forth on Schedule 3.1(v) of the Company Disclosure Schedule is complete
list of each management, employment, consulting or other agreement, contract or
commitment, whether oral or in writing, to which the Company or any of the
Subsidiaries is a

 

28

--------------------------------------------------------------------------------

party that provides for (i) the employment of any person or providing for
retention of management, executive or consulting services, or (ii) the payment
or accrual of any compensation or severance upon (A) a change in control of the
Company or any of the Subsidiaries or (B) any termination of such management,
employment, consulting or other relationship other than pursuant to an agreement
with Parent or one of its current Affiliates. All compensation earned pursuant
to the foregoing, including deferred compensation, has been fully and accurately
accrued for and reflected in the financial statements included in the Company
SEC Documents to the extent required therein. Set forth on Schedule 3.1(v) of
the Company Disclosure Schedule is a list (including the name of the parties
thereto and the date thereof) of all non-competition, non-solicitation or
similar agreements entered into between any Person and the Company or any of the
Subsidiaries that would (i) restrict any Person (other than the Company or any
of the Subsidiaries) from engaging or competing in any line of business in any
geographic area or from hiring or soliciting for hire any past or present
employee, consultant, officer or director of the Company or any of the
Subsidiaries or (ii) limits or otherwise restricts the Company or any of the
Subsidiaries, or that would reasonably be expected to, after the Effective Time,
limit or restrict Parent, the Surviving Corporation or any of Parent’s other
subsidiaries or any of their respective affiliates or any successor thereto,
from engaging or competing in any line of business in which it is currently
engaged or in any geographic area.

 

(w) Certain Representations With Respect to the Business.

 

(i) Medicare Participation/Accreditation.

 

(A) Except as set forth on Schedule 3.1(w) of the Company Disclosure Schedule,
no medical clinics, offices or other facilities owned, operated or managed by
the Company or any of the Subsidiaries that provide health care goods and
services reimbursable in whole or in part by any government healthcare program
(each, a “Facility”) participate in the Medicare, Medicaid, CHAMPUS or TRICARE
programs. The Facilities that are set forth on Schedule 3.1(w) are and have been
in compliance in all material respects with the conditions of participation in
such programs with respect to each participating Facility. Set forth on Schedule
3.1(w) of the Company Disclosure Schedule are all of the Company’s and each of
the Subsidiaries’ provider numbers and a list of the Facilities that have billed
for services utilizing such provider numbers. Neither the Company nor any of the
Subsidiaries has received any notice from any of the Medicare, Medicaid, CHAMPUS
or TRICARE programs of any pending or threatened investigation or survey under
any such programs (other than routine surveys in the ordinary course of
business), and neither the Company nor any of the Subsidiaries has reason to
believe that any such investigation or survey is pending or threatened.

 

(B) Neither the Company nor any of the Subsidiaries has received notice of any
pending or threatened investigation or inquiry (other than routine surveys and
audits that have not resulted in an investigation or inquiry) from any
Governmental Entity, fiscal intermediary, carrier or similar entity that
enforces or administers the statutory or regulatory provisions in respect of any
governmental health care program. There are no outstanding judgments, orders,
writs, injunctions or decrees of any Governmental Entity in respect of any
governmental health care program against the Company or any of the Subsidiaries
(whether or not covered by insurance).

 

29

--------------------------------------------------------------------------------

(C) None of the Facilities are accredited by the Joint Commission on
Accreditation of Healthcare Organizations.

 

(ii) Cost Reports and Other Filings.

 

(A) Each cost report and other required claim and governmental filing (the
“Filings”) with respect to Medicare required to be filed by or on behalf of the
Company or any of the Subsidiaries has been timely prepared and filed in
accordance with Applicable Law and all amounts shown on such cost reports as
owed by the Company or such Subsidiary have been paid timely. All of such
Filings were, when filed or as they have been subsequently amended, true and
complete in all material respects. The Company has made available for inspection
by Parent prior to the date of this Agreement each such Filing made after
December 31, 2000.

 

(B) Schedule 3.1(w) of the Company Disclosure Schedule lists the Medicare cost
reports duly filed by the Company and each of the Subsidiaries covering all open
cost reporting periods prior to the Closing Date and which of such cost reports
has been (1) audited but not fully settled and (2) neither audited nor settled,
and a brief description of any and all notices of program reimbursement,
proposed or pending audit adjustments, disallowances, appeals of disallowances,
and any and all other unresolved claims or disputes in respect of such cost
reports. Except as set forth on Schedule 3.1(w) of the Company Disclosure
Schedule, neither the Company nor any of the Subsidiaries has received notice,
or has knowledge of the existence, of any pending dispute between the Company
and/or any of the Subsidiaries and governmental authorities or the Medicare
fiscal intermediary regarding such cost reports for the remaining unaudited cost
reports, other than with respect to adjustments thereto made in the ordinary
course of business which do not involve individual line item adjustments in any
cost reporting period in excess of $20,000. Neither the Company nor any of the
Subsidiaries has received written notice of, and the Company does not have
knowledge of the existence of, any claims against the Company or any of the
Subsidiaries by any third-party payors other than routine Medicare audit
adjustments, which adjustments have not been and could not reasonably be
expected to be material. Neither the Company nor any of the Subsidiaries has
received any written notice that Medicare has any claims against it which could
result in offsets against future reimbursement in excess of that provided for in
the financial statements of Company and the Subsidiaries. The financial
statements contained in the Company SEC Documents reflect adequate reserves for
all open and unsettled cost reporting periods in accordance with GAAP.

 

(iii) Exclusion.

 

(A) Neither the Company nor any of the Subsidiaries nor, to the knowledge of the
Company, any Affiliate, any person who has a direct or indirect ownership
interest (as those terms are defined in 42 C.F.R. §1001.1001(a)(2)) in the
Company or any of the Subsidiaries of five percent (5%) or more or who has an
ownership or control interest (as defined in Section 1124(a)(3) of the Social
Security Act or any regulations promulgated thereunder) in the Company or any of
the Subsidiaries or any officer, director, employee, vendor or agent of the
Company or any of the Subsidiaries (a) has had a civil monetary penalty assessed
against it under Section 1128A of the Social Security Act or any regulations
promulgated thereunder, (b) has been excluded from participation under any
federal health care program, or (c) has been

 

30

--------------------------------------------------------------------------------

convicted (as that term is defined in 42 C.F.R. §1001.2) of any of the
categories of offenses as described in the Social Security Act Section 1128(a)
and (b)(1), (2), (3) or any regulations promulgated thereunder.

 

(B) No legal proceeding or investigation is pending or, to the knowledge of the
Company, threatened to suspend, limit, terminate or revoke the status of the
Company or any of the Subsidiaries as a provider in any federal health care
program. Neither the Company nor any of the Subsidiaries has received any notice
from any third-party payor of its intention to suspend, limit, terminate, revoke
or fail to renew any contractual arrangement with the Company or any of the
Subsidiaries.

 

(iv) Billing. Except as set forth in Schedule 3.1(w) of the Company Disclosure
Schedule, all billing by, or on behalf of, the Company or any of the
Subsidiaries to third-party payors, including, but not limited to, Medicare and
private insurance companies has been true, correct and complete in all material
respects. Neither the Company nor any of the Subsidiaries has received any
notice from any third-party payor, including, without limitation, Medicare, that
indicates that Parent could not continue to bill in substantially the same
manner and structure as the Company or any of the Subsidiaries is billing on the
date hereof.

 

(v) Reimbursement Matters. Except as disclosed on Schedule 3.1(w) of the Company
Disclosure Schedule, since January 1, 2001, (a) neither the Company nor any of
the Subsidiaries has received any written notice of denial of payment or
overpayment of a material nature from a federal health care program or any other
third party reimbursement source (inclusive of managed care organizations) with
respect to items or services provided by the Company and/or any of the
Subsidiaries, other than those that have been finally resolved in any settlement
for an amount less than $25,000, (b) to the knowledge of the Company, there is
no basis for the assertion of any such denial or overpayment claim and (c)
neither the Company nor any of the Subsidiaries has received written notice from
a federal health care program or any other third party reimbursement source
(inclusive of managed care organizations) of any pending or threatened legal
proceedings or surveys specifically with respect to, or arising out of, items or
services provided by the Company or any of the Subsidiaries, and to the
knowledge of the Company, no such investigation or survey is pending, threatened
or imminent. Neither the Company nor any of the Subsidiaries is subject to (i) a
“focused review” of claims by Medicare or (ii) a “Corporate Integrity Agreement”
or similar government-mandated compliance program.

 

(vi) No Criminal Proceedings. There are no pending legal proceedings or
investigations (other than unknown grand jury investigations) against the
Company or any of the Subsidiaries or, to the knowledge of the Company, their
agents, officers or employees with respect to their employment with the Company
or any of the Subsidiaries, that involve allegations of criminal violations of
any legal requirements by the Company or any of the Subsidiaries or their
agents, officers or employees acting on behalf of the Company or any of the
Subsidiaries, including, without limitation, Medicare.

 

31

--------------------------------------------------------------------------------

(vii) Compliance with Certain Laws. Except as set forth on Schedule 3.1(w) of
the Company Disclosure Schedule:

 

(A) neither the Company nor any of the Subsidiaries has submitted any claim in
connection with any referral to any Facility that violated any applicable
self-referral law, including, without limitation, the Ethics in Patient
Referrals Act, 42 U.S.C. §1395nn (the “Stark Act”), or any applicable state
self-referral law;

 

(B) neither the Company nor any of the Subsidiaries has submitted any claim for
payment to any payor source, either governmental or nongovernmental, in
violation of any false claim or fraud law, including, without limitation, the
False Claims Act, 31 U.S.C. §3729, or any other applicable federal or state
false claim or fraud law;

 

(C) neither the Company nor any of the Subsidiaries nor, to the knowledge of the
Company, any person providing professional or other services to the Company or
any Subsidiary is presently, or has, engaged in any activities that are cause
for criminal or civil penalties and/or mandatory or permissive exclusion from
any Health Care Program (as hereinafter defined), including, without limitation,
(A) knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or payment,
(B) knowingly and willfully making or causing to be made a false statement or
representation of a material fact for use in determining rights to any benefit
or payment, (C) presenting or causing to be presented a claim for reimbursement
under any Health Care Program that is (1) for an item or service the claimant
knows or should know was not provided as claimed, (2) for an item or service the
claimant knows or should know is false or fraudulent, or (3) for an item or
service the claimant knows or should know is not medically necessary, (D) any
failure by a claimant to disclose knowledge of the occurrence of any event
affecting the initial or continued right to any benefit or payment on its own
behalf or on behalf of another, with the intent to fraudulently secure such
benefit or payment, (E) knowingly or willfully soliciting or receiving any
bribe, rebate, payoff, influence payment, kickback or other payment of any
nature in violation of any legal requirement with respect to any Health Care
Program, or (F) knowingly and willfully making or causing to be made or inducing
or seeking to induce the making of any false statement or representation (or
omitting to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading) or a material fact with
respect to (1) the conditions or operations of a Facility in order that such
Facility may obtain certification, accreditation or similar approval under any
Federal Health Care Program (as defined at 42 U.S.C. §1320a-7b(f)) or any health
care program operated by or financed in whole or in part by any state or other
government jurisdiction in which the Company or any of the Subsidiaries is
authorized to do business (each a “State Health Care Program” and together with
the Federal Health Care Programs, the “Health Care Programs”), or (2)
information required to be provided under §1124A of the Social Security Act (42
U.S.C. §1320a-3); and

 

(D) neither the Company, any of the Subsidiaries, nor, to the knowledge of the
Company, any officer, director, employee or contracted agent (for or on behalf
of the Company or any of the Subsidiaries) of the Company or any of the
Subsidiaries, has, directly or indirectly, (A) offered, paid, solicited or
received any remuneration, in cash or in kind, to, or made any financial
arrangements with, any past or present customers, past or present suppliers,
contractors or third party payors of the Company or any of the Subsidiaries, in
order to obtain business or payments from such persons in violation of
Applicable Laws, (B) solicited, received, given or agreed to give, or is aware
that there has been made or that there is any

 

32

--------------------------------------------------------------------------------

agreement to make, any gift or gratuitous Payment (as hereinafter defined) of
any kind, nature or description to any customer or potential customer, supplier
or potential supplier, contractor, third party payor or any other person in
violation of any legal requirement, (C) made or agreed to make, or is aware that
there has been made or that there is any agreement to make, any contribution,
payment, gift or other distribution, whether in money, property or services (a
“Payment”) to, or for the private use of, any governmental official, employee or
agent where the Payment was in violation of Applicable Laws, (D) established or
maintained any unrecorded fund or asset for any purpose or made any false or
artificial entries on any of the books or records of the Company or any of the
Subsidiaries for any reason, (E) made, or agreed to make, or is aware that there
has been made or that there is any agreement to make, any Payment to any person
with the intention or understanding that any part of such Payment would be used
for any purpose other than that described in the documents supporting such
Payment, or (F) solicited, received, paid or offered any illegal remuneration
for any referral to any Facility in violation of any Applicable Laws, including,
without limitation, the Federal Anti-Kickback Statute, 42 U.S.C. §1320a-7b(b),
or any applicable state anti-kickback law.

 

(x) Opinion of Financial Advisor. The Company has received the opinion of Adams
Harkness, Inc., its financial advisor (the “Financial Advisor”), to the effect
that, subject to the various assumptions and qualifications set forth therein,
as of the date thereof, the Merger Consideration to be received by the holders
of Company Common Stock in the Merger is fair from a financial point of view to
such holders, and such opinion has not been withdrawn or modified. True,
complete and correct copies of all binding agreements between the Company or any
of the Subsidiaries and the Financial Advisor relating to the transactions
contemplated by this Agreement have been previously provided by the Company to
Parent.

 

(y) Debt. Schedule 3.1(y) of the Company Disclosure Schedule accurately sets
forth an itemized list of the amount of all of the Company’s and each of the
Subsidiaries’ Debt (including the name of the debtor or lessee (if such Debt is
a Capital Lease), the name of the creditor or lessor, the maturity date and a
description of the collateral, if any, securing the Debt and any premium,
prepayment penalty, change of control or similar payment required to be made or
offered thereunder as a result of the transactions contemplated by the
Transaction Documents).

 

(z) Employee Payments. Schedule 3.1(z) of the Company Disclosure Schedule
accurately sets forth the amount of all Employee Payments (as hereinafter
defined) and a listing of each contract, arrangement or understanding pursuant
to which any Employee Payment may be due and payable other than pursuant to an
agreement with Parent or one of its current Affiliates. For purposes of this
Agreement, “Employee Payments” means payments or other distributions required to
be made by any Person (other than Parent or one of its current Affiliates)
pursuant to any oral or written contracts or other agreements, to any directors,
officers, employees or agents of the Company or any of the Subsidiaries pursuant
to the terms of such contracts or agreements.

 

33

--------------------------------------------------------------------------------

3.2 Representations and Warranties of Parent and Merger Sub. Parent and Merger
Sub jointly and severally represent and warrant to the Company as follows:

 

(a) Organization, Good Standing, Etc. Each of Parent and Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of its respective state of incorporation. Each of Parent and Merger Sub has
all requisite corporate or company power and authority to own, lease and operate
its respective properties and to carry on its respective business as now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such
jurisdictions where the failure to so qualify would not, individually or in the
aggregate, be reasonably likely to materially impair the ability of Parent or
Merger Sub to consummate the transactions contemplated by this Agreement.

 

(b) Authority; No Violations; Consents and Approvals.

 

(i) Each of Parent and Merger Sub has all requisite corporate power and
authority to enter into this Agreement. The execution and delivery of the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of each of Parent and Merger Sub. The Transaction Documents have
been and each of the Transaction Documents will be duly executed and delivered
by each of Parent and Merger Sub, and, assuming this Agreement constitutes the
valid and binding obligation of the Company, constitutes a valid and binding
obligation of each of Parent and Merger Sub enforceable in accordance with its
terms, subject as to enforceability to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors’ rights and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law). Parent,
as the indirect owner of all of the outstanding shares of capital stock of
Merger Sub, has caused Concentra Health Services, Inc., a Nevada corporation, in
its capacity as the sole stockholder of Merger Sub, to approve this Agreement
and the Merger. Parent and Merger Sub have delivered to the Company certified
copies of resolutions duly adopted by the board of directors of each of Parent
and Merger Sub evidencing the approval and adoption of this Agreement and the
approval of the Merger and the other transactions contemplated hereby.

 

(ii) The execution and delivery of the Transaction Documents do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any material
obligation or to the loss of a material benefit under, or give rise to a right
of purchase under, or result in the creation of any Lien upon any of the
properties or assets of Parent or Merger Sub under, any provision of (A) the
charter or bylaws of Parent or Merger Sub, (B) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or Merger Sub or (C)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.2(b)(iii) are duly and timely obtained or
made, any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Merger Sub or any of their respective properties or
assets, other than, in the case of clauses (B) and (C), any such conflicts,
violations, defaults, rights or Liens that, individually or in the aggregate,
could not be reasonably likely to materially impair the ability of Parent or
Merger Sub to consummate the transactions contemplated by this Agreement.

 

34

--------------------------------------------------------------------------------

(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any Governmental Entity is required
by or with respect to Parent or Merger Sub in connection with the execution and
delivery of the Transaction Documents by Parent or Merger Sub or the
consummation by Parent or Merger Sub of the transactions contemplated hereby and
thereby except for (A) the filing with the SEC of such reports under Section
15(d) of the Exchange Act and such other compliance with the Securities Act and
the Exchange Act and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby, (B) the
filing of the Certificate of Merger with, and acceptance for record of the
Certificate of Merger by, the Delaware Secretary of State, (C) such filings and
approvals as may be required by any applicable environmental, health or safety
law, and (D) any such consent, approval, order, authorization, registration,
declaration, filing or permit that the failure to obtain or make could not,
individually or in the aggregate, reasonably be likely to materially impair the
ability of Parent or Merger Sub to consummate the transactions contemplated by
this Agreement.

 

(c) Information Supplied. None of the information supplied or to be supplied by
Parent or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement will, at the date mailed to stockholders of the Company or at the time
of the meeting of such stockholders to be held in connection with the Merger or
at the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading.

 

(d) Litigation. There is no suit, action or proceeding pending, or, to the
knowledge of Parent, threatened against or affecting Parent or Merger Sub (“the
Parent Litigation”), and Parent has no knowledge of any facts that are likely to
give rise to any Parent Litigation, in each case, that would adversely affect
the ability of Parent or Merger Sub to consummate the transactions contemplated
by this Agreement, nor is there any judgment, decree, injunction, rule or order
of any Governmental Entity or arbitrator outstanding against Parent or any
Subsidiary of Parent that would adversely affect the ability of the Company or
Merger Sub to consummate the transactions contemplated by this Agreement.

 

(e) Ownership of Company Capital Stock. Neither Parent nor Merger Sub owns of
record or beneficially or has, since July 1, 2002, owned of record or
beneficially any shares of capital stock of the Company.

 

(f) Capital Resources. Parent has, and will continue to have at the Effective
Time, sufficient cash resources to enable it to pay the aggregate Merger
Consideration and Option Consideration pursuant to this Agreement.

 

35

--------------------------------------------------------------------------------

ARTICLE IV

 

COVENANTS RELATING TO CONDUCT

OF BUSINESS PENDING THE MERGER

 

4.1 Conduct of Business by the Company Pending the Merger. At all times prior to
the Effective Time, the Company agrees as to itself and the Subsidiaries that
(except as set forth on Schedule 4.1 or to the extent that Parent shall
otherwise consent in writing):

 

(a) Ordinary Course. Each of the Company and the Subsidiaries shall carry on its
respective businesses in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and shall use commercially reasonable
efforts to preserve intact its present business organizations, keep available
the services of its current officers and employees, and endeavor to preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect at the Effective Time.

 

(b) Dividends; Changes in Stock. The Company shall not and it shall not permit
any of the Subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock or other equity securities,
provided that each Subsidiary may make distributions to its equity holders
consistent with past practice and in compliance with applicable governing
documents; (ii) split, combine or reclassify any of its capital stock or other
equity securities or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of capital
stock or other equity securities; or (iii) repurchase, redeem or otherwise
acquire, or permit any of the Subsidiaries to purchase, redeem or otherwise
acquire, any shares of its capital stock, except as required by the terms of its
securities outstanding on the date of this Agreement or as contemplated by any
existing Company Employee Benefit Plan.

 

(c) Issuance of Securities. The Company shall not, and it shall not permit any
of the Subsidiaries to, issue, deliver or sell, or authorize or propose to
issue, deliver or sell, any shares of its capital stock or other equity
securities or any Voting Debt or other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, equity securities, Voting Debt, other voting securities or convertible
securities, other than the issuance of Company Common Stock upon the exercise of
stock options granted under the Company Stock Plans that are outstanding on the
date of this Agreement, or in satisfaction of stock grants or other stock based
awards made prior to the date of this Agreement pursuant to the Company Stock
Plans.

 

(d) Governing Documents. The Company shall not amend or propose to amend the
Company Charter, the Bylaws or the Charter Documents of any of the Subsidiaries.

 

(e) No Acquisitions. Other than the acquisition by the Company of the minority
interest in OHR-SSM currently owned by the other member thereof for no more than
$300,000 (payable fully in cash), the Company shall not, and it shall not permit
any of the Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or any material
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof.

 

36

--------------------------------------------------------------------------------

(f) No Dispositions. Other than sales or other dispositions in the ordinary
course of business consistent with past practice that are not material,
individually or in the aggregate, to the Company and the Subsidiaries taken as a
whole, the Company shall not, and it shall not permit any of the Subsidiaries
to, sell, lease, encumber or otherwise dispose of, or agree to sell or otherwise
dispose of, any of its material assets.

 

(g) No Dissolution, Etc. The Company shall not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation or
dissolution of the Company or any of the Subsidiaries.

 

(h) Accounting. The Company shall not, and shall not permit any of the
Subsidiaries to, make any changes in its or their accounting methods that would
be required to be disclosed under the rules and regulations of the SEC, except
as required by law, rule, regulation or GAAP.

 

(i) Affiliate Transactions. The Company shall not, and shall not permit any of
the Subsidiaries to, enter into any agreement or arrangement with any of their
respective Affiliates (as such term is defined in Rule 405 under the Securities
Act, an “Affiliate”), other than between one of the Subsidiaries and the
Company.

 

(j) Insurance. The Company shall, and shall cause the Subsidiaries to, maintain
with financially responsible insurance companies insurance in such amounts and
against such risks and losses as in effect on the date hereof.

 

(k) Tax Matters. The Company shall not (i) make, change or rescind any material
express or deemed election relating to Taxes, (ii) settle or compromise any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or (iii) change in any
material respect any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of its
federal income Tax Returns that have been filed for prior taxable years, except
as may be required by Applicable Law.

 

(l) Certain Employee Matters. The Company shall not, and it shall not permit any
of the Subsidiaries to, (i) grant any increases in the compensation of any of
its directors, officers or employees, except increases with respect to
non-officer employees made in the ordinary course of business and in accordance
with past practice, (ii) pay or agree to pay to any director, officer or
employee, whether past or present, any material pension, retirement allowance or
other employee benefit not required or contemplated by any of the Company
Employee Benefit Plans, (iii) enter into any new, or amend any existing,
employment or severance or termination agreement with any director, officer or
employee, (iv) become obligated under any new Company Employee Benefit Plan that
was not in existence prior to the date of this Agreement, or amend any such plan
or arrangement in existence on the date of this Agreement if such amendment
would have the effect of materially enhancing any benefits thereunder except for
the acceleration of the Company Stock Options as contemplated by Section 2.2, or
(v) grant any options or other awards under the Company Stock Plans.

 

37

--------------------------------------------------------------------------------

(m) Indebtedness. The Company shall not, and shall not permit any of the
Subsidiaries to, (i) modify the terms of any existing Debt or security issued by
the Company or any of the Subsidiaries, (ii) incur any Debt or guarantee any
such Debt except, in each case, the incurrence of Debt in the ordinary course of
business under the Amended and Restated Revolving Credit and Security Agreement
dated as of December 15, 2003 (the “Capital Source Agreement”) with Capital
Source Finance, LLC or issue or sell any Debt securities or warrants or rights
to acquire any Debt securities of the Company or any of the Subsidiaries or
guarantee any Debt securities of others or (iii) except in the ordinary course
of business, enter into any lease (whether operating or capital) or create any
material mortgages, liens, security interests or other similar Liens on the
property of the Company or any of the Subsidiaries in connection with any Debt
thereof.

 

(n) Litigation. The Company shall not, nor shall the Company permit any of the
Subsidiaries to, settle, compromise or otherwise resolve any litigation or other
legal proceedings involving a payment of more than $25,000 individually or
$50,000 in the aggregate in any one case by or to the Company or any of the
Subsidiaries.

 

(o) Accounts Receivable; Payables. The Company shall not, nor shall the Company
permit any of the Subsidiaries to, (i) write off any accounts or notes
receivable, except in the ordinary course of business consistent with past
practice or as may be required by GAAP, or (ii) change any practices, policies,
procedures or activities regarding or relating to, or the timing of, the
collection of accounts receivable, billing of customers, pricing and payment
terms, cash collections, cash payments or terms with vendors or customers.

 

(p) Restrictions. The Company shall not, nor shall the Company permit any of the
Subsidiaries to, enter into any agreement, arrangement or commitment that limits
or otherwise restricts the Company or any of the Subsidiaries, or that would
reasonably be expected to, after the Effective Time, limit or restrict Parent,
the Surviving Corporation or any of Parent’s other subsidiaries or any of their
respective affiliates or any successor thereto, from engaging or competing in
any line of business in which it is currently engaged or in any geographic area.

 

(q) Certain Contracts. The Company shall not, and shall not permit any of the
Subsidiaries to, enter into any contracts outside the ordinary course of
business or inconsistent with past practice or any other contracts involving
aggregate annual payments in excess of $100,000, except for renewals of existing
real estate leases or renewals of or new physician employment agreements.

 

(r) Capital Expenditures. The Company shall not, and shall not permit any of the
Subsidiaries to, incur capital expenditures in excess of (i) $100,000
individually or (ii) $250,000 in the aggregate.

 

(s) Other Actions. The Company shall not, and shall not permit any of the
Subsidiaries to, engage in or permit any transaction or act which, if it had
been engaged in or permitted prior to the date of this Agreement, would have
rendered untrue in any material respect any of the representations and
warranties of the Company contained in this Agreement.

 

38

--------------------------------------------------------------------------------

(t) Agreements. The Company shall not, and shall not permit any of the
Subsidiaries to, agree in writing or otherwise to take any action inconsistent
with any of the foregoing.

 

4.2 No Solicitation.

 

(a) (i) The Company agrees that neither it nor any of the Subsidiaries nor any
of the officers and directors of it or any of the Subsidiaries shall, and that
it shall cause its and the Subsidiaries’ employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of the Subsidiaries) not to (and shall not authorize any of them to), directly
or indirectly (A) solicit, initiate, encourage, facilitate or induce any inquiry
with respect to, or the making, submission or announcement of, any Acquisition
Proposal (as hereinafter defined), (B) participate in any discussions or
negotiations regarding, or furnish to any person or entity any nonpublic
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to, any Acquisition Proposal (except as permitted pursuant to
Section 4.2(c)), (C) engage in discussions with any person or entity with
respect to any Acquisition Proposal (except as permitted pursuant to Section
4.2(c)), (D) approve, endorse or recommend any Acquisition Proposal (except to
the extent specifically permitted pursuant to Section 4.2(d) and Section
7.1(g)), or (E) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Proposal or transaction contemplated thereby with respect to itself
or any of the Subsidiaries (except as permitted pursuant to Section 4.2(d) and
Section 7.1(g)). The Company and each of the Subsidiaries shall, and the Company
shall cause its and each of the Subsidiaries’ officers, directors, employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of the Subsidiaries) to, cease immediately any
and all existing activities, discussions or negotiations with any third parties
conducted heretofore with respect to any Acquisition Proposal. The Company shall
ensure that its officers, directors and key employees and its investment
bankers, attorneys and other representatives are aware of the provisions of this
Section.

 

(ii) The Company agrees that it will not waive any provision of or amend in any
way any confidentiality or standstill agreements with any Person that has
heretofore executed a confidentiality or standstill agreement in connection with
its consideration of acquiring the Company or any of the Subsidiaries and the
Company shall at all times diligently enforce its rights thereunder. The Company
shall advise Parent (promptly after the execution and delivery of this Agreement
and to the extent permitted by the terms of such confidentiality or standstill
agreements) of the identity of each such Person and the material terms of any
such proposals or offers.

 

(b) (i) As promptly as practicable (but in no event later than 48 hours) after
receipt of any Acquisition Proposal or any request for nonpublic information or
inquiry that it reasonably believes could lead to an Acquisition Proposal, the
Company shall provide Parent with oral and written notice of the material terms
and conditions of such Acquisition Proposal,

 

39

--------------------------------------------------------------------------------

request or inquiry, and the identity of the Person or Group (as defined herein)
making any such Acquisition Proposal, request or inquiry and a copy of all
written materials about the Company or any of the Subsidiaries provided in
connection with such Acquisition Proposal, request or inquiry not previously
provided to Parent. The Company shall provide Parent as promptly as practicable
(but in no event later than 48 hours) oral and written notice setting forth all
such information as is reasonably necessary to keep Parent informed in all
material respects of the status and details (including material amendments or
proposed material amendments) of any Acquisition Proposal, request or inquiry
and shall promptly provide to Parent a copy of all material written materials
about the Company or any of the Subsidiaries subsequently provided to the Person
making the Acquisition Proposal in connection with such Acquisition Proposal,
request or inquiry to the extent not previously provided to Parent.

 

(ii) The Company shall provide Parent with 48 hours prior notice (or such lesser
prior notice as is provided to the members of its board of directors) of any
meeting of its board of directors at which its board of directors is reasonably
expected to consider any Acquisition Proposal.

 

(c) Notwithstanding anything to the contrary contained in Section 4.2(a) and
under circumstances in which the Company has complied with all of its
obligations under Section 4.2(a) and Section 4.2(b), in the event that, prior to
the approval of the Merger and this Agreement by the stockholders of the Company
as provided herein, the Company receives an unsolicited, bona fide written
Acquisition Proposal from a third party that its board of directors has in good
faith concluded (after consulting with its outside legal counsel) is, or is
reasonably likely to result in, a Superior Offer, it may then take the following
actions: (i) furnish nonpublic information to the third party making such
Acquisition Proposal, provided that (A) (1) prior to furnishing any such
nonpublic information to such party, its gives Parent written notice of its
intention to furnish nonpublic information and (2) it receives from the third
party an executed confidentiality and standstill agreement containing customary
limitations on the use and disclosure of all nonpublic written and oral
information furnished to such third party on its behalf, the terms of which are
at least as restrictive as the terms contained in the Confidentiality Agreement
(and containing additional provisions that expressly permit the Company to
comply with the provisions of this Section 4.2(c)) and (B) contemporaneously
with furnishing any material nonpublic information to such third party, it
furnishes such material nonpublic information to Parent (to the extent such
nonpublic information has not been previously so furnished); and (ii) engage in
negotiations with the third party with respect to the Acquisition Proposal,
provided that concurrently with entering into negotiations with such third
party, it gives Parent written notice of its intention to enter into
negotiations with such third party.

 

(d) In response to the receipt of a Superior Offer and notwithstanding any
provision hereof to the contrary, the board of directors of the Company may
withhold, withdraw, amend or modify, or propose or resolve to withdraw, amend or
modify, its recommendation in favor of the Merger, and, in the case of a
Superior Offer that is a tender or exchange offer made directly to the Company’s
stockholders, may recommend that the Company’s stockholders accept the tender or
exchange offer (any of the foregoing actions, whether by the board of directors
of the Company or a committee thereof, a “Change of Recommendation”). The
Company shall promptly provide a written notice to Parent in the event that it
intends to effect a Change of Recommendation.

 

40

--------------------------------------------------------------------------------

(e) Notwithstanding anything to the contrary contained in this Agreement, the
obligation of the Company to call, give notice of, convene and hold its
stockholders’ meeting as contemplated in Section 5.3 shall not be limited or
otherwise affected by the commencement, disclosure, announcement or submission
to it of any Acquisition Proposal with respect to it unless this Agreement is
terminated in accordance with the terms hereof. Notwithstanding anything to the
contrary contained in this Agreement, prior to the termination of this
Agreement, the Company shall not (i) submit to the vote of its stockholders any
Acquisition Proposal other than the Merger or (ii) enter into any agreement,
agreement in principle or letter of intent (other than the confidentiality
agreement referenced in Section 4.2(c)) with respect to or accept any
Acquisition Proposal other than the Merger (or resolve to or publicly propose to
do any of the foregoing).

 

(f) Nothing contained in this Agreement shall prohibit the Company or its board
of directors from taking and disclosing to its stockholders a position with
respect to a tender or exchange offer by a third party pursuant to Rules 14d-9
and 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange
Act to the extent required by Applicable Law; provided that the board of
directors or the Company shall not recommend that the stockholders of the
Company tender their Company Common Stock in connection with any such tender or
exchange offer unless the board of directors of the Company determines in good
faith (after consulting with its outside legal counsel and its financial
adviser) that such Acquisition Proposal is a Superior Offer.

 

(g) For purposes of this Agreement, the following terms shall have the following
meanings: (i) “Acquisition Proposal” shall mean any inquiry, offer or proposal
relating to any transaction or series of related transactions involving (A) any
purchase from the Company or acquisition by any person, entity or “Group” (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than 15% of the total outstanding voting securities of the
Company or any tender offer or exchange offer that if consummated would result
in any person, entity or Group beneficially owning 15% or more of the total
outstanding voting securities of the Company or any merger, consolidation,
business combination or similar transaction involving the Company, (B) any sale,
lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition or
disposition of more than fifteen percent (15%) of the assets of the Company and
the Subsidiaries, taken as a whole, or (C) any liquidation or dissolution of the
Company or any of the Subsidiaries, and (ii) “Superior Offer” shall mean an
unsolicited, bona fide written proposal made by a third party to acquire,
directly or indirectly, pursuant to a tender offer, exchange offer, merger,
consolidation or other business combination, all or substantially all of the
assets of the Company and the Subsidiaries or substantially all of the total
outstanding voting securities of the Company made on terms that the board of
directors of the Company has in good faith concluded (after consulting with its
outside legal counsel), taking into account, among other things, all legal,
financial, regulatory and other aspects of the offer and the person, entity or
Group making the offer, to be more favorable, from a financial point of view, to
the Company’s stockholders (in their capacities as stockholders) than the terms
of the Merger and is reasonably capable of being consummated.

 

(h) It is understood that any violations of the provisions and restrictions set
forth in this Section 4.2 by any officer, director, employee, agent or
representative (including any

 

41

--------------------------------------------------------------------------------

financial or legal advisor or other retained representative) of the Company or
any of the Subsidiaries or at the direction or consent of any of the foregoing,
shall be deemed to be a breach of this Section 4.2 by the Company.

 

ARTICLE V

 

ADDITIONAL AGREEMENTS

 

5.1 Preparation of Proxy Statement. The Company shall promptly prepare and file
with the SEC the preliminary Proxy Statement; provided, however, that the
Company shall furnish such preliminary Proxy Statement to Parent for review and
comment before such filing with the SEC and that such preliminary Proxy
Statement shall be subject to Parent’s prior approval of the preliminary Proxy
Statement, which approval shall not be unreasonably withheld or delayed;
provided that, notwithstanding the foregoing, the Company may file any such
preliminary Proxy Statement in the absence of such approval in the form the
Company in good faith believes is necessary to comply with Applicable Law. The
Company and Parent shall cooperate with each other in the preparation of the
Proxy Statement, and the Company shall notify Parent of the receipt of any
comments of the SEC with respect to the Proxy Statement and of any requests by
the SEC for any amendment or supplement thereto or for additional information
and shall provide to Parent promptly copies of all correspondence between the
Company or any representative of the Company and the SEC. As promptly as
practicable after comments are received from the SEC with respect to the
preliminary Proxy Statement, the Company shall use commercially reasonable
efforts to respond to the comments of the SEC. The Company shall give Parent and
its counsel the opportunity to review all amendments and supplements to the
Proxy Statement and all responses to requests for additional information and
replies to comments of the SEC prior to their being filed with or sent to the
SEC, and the amended or supplemented Proxy Statement shall be subject to
Parent’s prior approval, which approval shall not be unreasonably withheld or
delayed; provided that, notwithstanding the foregoing, the Company may file any
such amended or supplemented Proxy Statement in the absence of such approval in
the form the Company in good faith believes is necessary to comply with
Applicable Law. Parent shall promptly provide the Company with such information
as may be required to be included in the Proxy Statement or as may be reasonably
required to respond to any comment of the SEC. The Company hereby covenants and
agrees with Parent that the Proxy Statement (at the time it is first mailed to
stockholders of the Company and at the time of the meeting of the stockholders
of the Company contemplated in Section 5.3) will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading (provided, however, that
this sentence shall not apply to information contained in the Proxy Statement
that was supplied by Parent for inclusion therein). If, at any time prior to the
meeting of the stockholders of the Company contemplated in Section 5.3, any
event with respect to the Company, or with respect to other information supplied
by the Company for inclusion in the Proxy Statement, occurs and such event is
required to be described in a supplement to the Proxy Statement, the Company
shall promptly notify Parent of such occurrence and shall promptly prepare, file
and disseminate such supplement. After all the comments received from the SEC
have been cleared by the SEC staff and all information required to be contained
in the Proxy Statement has been included therein by the Company, the Company
shall file the definitive Proxy Statement with the SEC and cause the Proxy
Statement to be mailed to its stockholders of record, as of the record date
established by the board of directors of the Company, as promptly as practicable
thereafter.

 

42

--------------------------------------------------------------------------------

5.2 Access to Information. Upon reasonable notice, the Company shall, and shall
cause each of the Subsidiaries to, afford access to the officers, employees,
accountants, counsel and other representatives of Parent and Merger Sub
(including, if applicable, any financing sources (Parent hereby acknowledging
that the consummation of the Merger is not contingent on its receipt of
financing) and their employees, accountants, counsel and other representatives),
during normal business hours during the period prior to the Effective Time, to
all of its properties, books, contracts, commitments and records. If Parent or
Merger Sub requires environmental site assessments to any parcels of real
property owned or leased by the Company or any of the Subsidiaries, the Company
shall, and shall cause each of the Subsidiaries to, allow such assessments to be
performed. During the period prior to the Effective Time, the Company shall, and
shall cause each of the Subsidiaries to, promptly furnish to Parent (i) a copy
of each report, schedule, registration statement and other document filed by it
with the SEC, or received by it from the SEC, during such period, and (ii) all
other information concerning its business, properties and personnel as Parent
may reasonably request, including, without limitation, to confirm the accuracy
of Section 3.1(v). The Confidentiality Agreement dated as of January 12, 2005,
as amended, between Concentra Health Services, Inc. and the Company (the
“Confidentiality Agreement”) shall apply with respect to information furnished
pursuant to this Section 5.2.

 

5.3 Stockholders Meeting. (a) The Company shall call, hold and convene a meeting
of its stockholders (the “Stockholders Meeting”) to consider the approval of
this Agreement and the Merger, to be held as promptly as practicable after the
mailing of the Proxy Statement to the Company’s stockholders, (b) subject to
Section 4.2(d), the board of directors of the Company shall recommend that the
stockholders of the Company vote in favor of the approval of this Agreement and
the Merger at the Company’s stockholders’ meeting, and (c) subject to Section
4.2(d), the Proxy Statement shall include a statement to the effect that the
board of directors of the Company has recommended that the Company’s
stockholders vote in favor of approval of this Agreement and the Merger at the
Company’s stockholders’ meeting. The Company shall not postpone or adjourn the
Company’s stockholder meeting without the consent of Parent, which consent shall
not be unreasonably withheld or delayed. The Company shall ensure that its
stockholders meeting is called, noticed, convened, held and conducted, and that
all proxies solicited by it in connection with the stockholders meeting are
solicited, in compliance with the DGCL, the Company Charter and all other
Applicable Law.

 

5.4 Other Approvals.

 

(a) Promptly following the execution of this Agreement, the parties shall
proceed to prepare and file with the appropriate Governmental Authorities such
filings and notifications, and obtain such consents that are necessary in order
to consummate the transactions contemplated by this Agreement and shall
diligently and expeditiously prosecute, and shall cooperate fully with each
other in the prosecution of, such matters on a commercially reasonable basis.

 

43

--------------------------------------------------------------------------------

(b) The Company and its board of directors shall (i) take all action necessary
or otherwise reasonably requested by Parent to exempt the Merger from the
provisions of any applicable takeover, business combination, control share
acquisition or similar statute and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Merger or the other transactions
contemplated hereby, take all action necessary to ensure that the Merger and
such other transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger and the other transactions contemplated
hereby.

 

5.5 Agreement to Defend. In the event any claim, action, suit, investigation or
other proceeding by any Governmental Entity or other person or other legal or
administrative proceeding is commenced that questions the validity or legality
of the transactions contemplated hereby or seeks damages in connection
therewith, the parties hereto agree to cooperate and use their commercially
reasonable efforts to defend against and respond thereto.

 

5.6 Public Announcements. The parties hereto shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public statement without the consent of
the other party, except as may be required by Applicable Law or by obligations
pursuant to any listing agreement with any national securities exchange or
transaction reporting system so long as the other party is notified in advance
of such issuance or public statement by the disclosing party of such press
release or public statement.

 

5.7 Advice of Changes; SEC Filings. The Company and Parent, as the case may be,
shall confer on a regular basis with each other, shall report on operational
matters and shall promptly advise each other orally and in writing of any change
or event that, individually or in the aggregate, could reasonably be likely to
result in a Company Material Adverse Effect or materially impair the ability of
Parent or Merger Sub to consummate the transactions contemplated by this
Agreement, as the case may be. The Company and Parent shall promptly provide
each other (or their respective counsel) copies of all filings made by such
party or with the SEC or any other Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.

 

5.8 Conveyance Taxes. The Company and Parent shall (a) cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar Taxes that become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time, (b) cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any applicable exemptions to any such
Tax or fee, and (c) each pay one half of any such Tax or fee that becomes
payable by the Company on or before the Effective Time.

 

5.9 Withholding Rights. Parent, Merger Sub or the Paying Agent, as applicable,
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock or Company Stock Options such amounts as Parent, Merger Sub or the Paying
Agent, as applicable, is required to deduct and

 

44

--------------------------------------------------------------------------------

withhold with respect to the making of such payment under the Code or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by Parent, Merger Sub or the Paying Agent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock or Company Stock Options in respect which
such deduction and withholding was made by Parent, Merger Sub or the Paying
Agent.

 

5.10 Reasonable Efforts. Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees to use commercially reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable, under Applicable Laws or otherwise, to
consummate and make effective the transactions contemplated by this Agreement
and the other Transaction Documents, subject, if applicable, to the approval of
the stockholders of the Company, including cooperating fully with the other
parties. The Company shall use commercially reasonable efforts to obtain any
consent from third parties necessary to allow the Company to continue operating
its business as presently conducted as a result of the consummation of the
transactions contemplated hereby.

 

5.11 Affiliate Agreements. Schedule 5.11 sets forth a list of all agreements
between the Company or any of the Subsidiaries, on one hand, and any employee,
officer, director, consultant or Affiliate of the Company or any of the
Subsidiaries, on the other hand, pursuant to which any professional association
provides any professional or other services to the Company or any of the
Subsidiaries (the “Affiliate Agreements”). Prior to the Closing, the Company and
each of the Subsidiaries shall take all action to terminate (with no further
liability to the Company, any of the Subsidiaries, the Surviving Corporation,
Parent or Merger Sub) each Affiliate Agreement that has been designated for
termination in a written notice from Parent and delivered to the Company at
least 20 days prior to the Closing Date.

 

5.12 Other Actions. Except as expressly permitted by the terms of this
Agreement, the Company shall not take or agree or commit to take, nor will it
permit any of the Subsidiaries to take or agree to commit to take, any action
that is reasonably likely to result in any of the Company’s representations or
warranties hereunder being untrue in any material respect.

 

5.13 Appraisal Rights. The Company shall not settle or compromise any claim for
appraisal rights in respect of the Merger without the prior written consent of
Parent.

 

5.14 Indemnification and Insurance.

 

(a) From and after the Effective Time, the Surviving Corporation shall (and
Parent shall cause the Surviving Corporation to) indemnify, defend and hold
harmless, and advance expenses to, the individuals who at or prior to the
Effective Time were directors or officers of the Company or any of its
Subsidiaries (collectively, the “Indemnitees”) with respect to all acts or
omissions by them in their capacities as such at any time prior to the Effective
Time, to the fullest extent permitted by (i) the Charter Documents as in effect
on the date of this Agreement and (ii) any applicable contract as in effect on
the date of this Agreement which is disclosed to Parent and a copy of which has
been delivered to Parent prior to the date of this Agreement.

 

45

--------------------------------------------------------------------------------

(b) Without limiting the provisions of Section 5.14(a), during the period
commencing with the Effective Time and ending on the sixth anniversary of the
Effective Time, Parent and the Surviving Corporation jointly and severally shall
(i) indemnify and hold harmless each Indemnitee against and from any costs or
expenses (including attorneys’ fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, to the extent such claim, action, suit, proceeding or
investigation arises out of or pertains to (A) any action or omission or alleged
action or omission in such Indemnitee’s capacity as a director, officer or
employee of the Company or any of its Subsidiaries or (B) any of the
transactions contemplated by this Agreement and (ii) pay in advance of the final
disposition of any such claim, action, suit, proceeding or investigation the
expenses (including attorneys’ fees) of any Indemnitee upon receipt of an
undertaking by or on behalf of such Indemnitee to repay such amount if it shall
ultimately be determined that such Indemnitee is not entitled to be indemnified.
Notwithstanding anything to the contrary contained in this Section 5.14(b) or
elsewhere in this Agreement, neither Parent nor the Surviving Corporation shall
settle or compromise or consent to the entry of any judgment or otherwise seek
termination with respect to any claim, action, suit, proceeding or investigation
for which indemnification may be sought under this Section 5.14(b) unless such
settlement, compromise, consent or termination includes an unconditional release
of all Indemnitees from all liability arising out of such claim, action, suit,
proceeding or investigation. Notwithstanding the foregoing, nothing contained in
this Section 5.14 shall be deemed to grant any right to any Indemnitee that is
not permitted to be granted to any director or officer of the Company under the
DGCL, assuming for such purposes that the Charter Documents provide for the
maximum indemnification permitted by law.

 

(c) Parent will cause to be maintained for a period of not less than six years
from the Effective Time the Company’s current directors’ and officers’ insurance
and indemnification policy to the extent that it provides coverage for events
occurring prior to the Effective Time (the “D&O Insurance”) for all persons who
are directors and officers of the Company on the date of this Agreement and for
all former directors and officers of the Company, so long as the annual premium
therefor would not be in excess of 150% of the last annual premium therefor paid
prior to the date of this Agreement (the “Maximum Premium”); provided, however,
that Parent may, in lieu of maintaining such existing D&O Insurance as provided
above, cause coverage to be provided under any policy maintained for the benefit
of Parent or any of its affiliates, so long as the terms thereof are no less
advantageous to the intended beneficiaries thereof than the existing D&O
Insurance. If the existing D&O Insurance expires, is terminated or canceled
during such six-year period or cannot be obtained for the Maximum Premium,
Parent will use all reasonable efforts to cause to be obtained as much D&O
Insurance as can be obtained for the remainder of such period for an annualized
premium not in excess of the Maximum Premium, on terms and conditions no less
advantageous to the covered persons than the existing D&O Insurance. The Company
represents to Parent that the last annual premium for the Company’s D&O
Insurance was $70,142.

 

(d) The Indemnitees to whom this Section 5.14 applies shall be third party
beneficiaries of this Section 5.14. The provisions of this Section 5.14 are
intended to be for the benefit of each Indemnitee, his or her heirs and his or
her representatives.

 

46

--------------------------------------------------------------------------------

(e) In the event that the Surviving Corporation or any of its successors or
assigns consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
transfers or conveys all or a majority of its properties and assets to any
Person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation shall succeed to the
obligations set forth in this Section 5.14.

 

5.15 Payoff Letters. No later than three Business Days prior to the Closing
Date, the Company shall cause Capital Source Finance, LLC to prepare and deliver
to the Company and Parent a “payoff letter” or similar document specifying the
aggregate amount (including principal, interest, fees, expenses and other
amounts) payable to the lenders under the Capital Source Agreement that will be
outstanding as of the Closing Date under the Capital Source Agreement. Such
payoff letter shall confirm that payment of the amount specified therein by
Parent shall discharge all of the Company’s and each of the Subsidiaries’
obligations under the Capital Source Agreement and that upon receipt of the
applicable amount the lenders will release and discharge all Liens granted
thereunder. No later than three Business Days prior to the Closing Date, the
Company shall deliver to Parent a schedule detailing the aggregate amount
(including principal, interest, fees, expenses and other amounts) payable
pursuant to any items of Debt (other than the Debt incurred under the Capital
Source Agreement) including but not limited to any Debt incurred under any of
the Company’s subordinated promissory notes and any Debt incurred in connection
with the Company’s previous purchases of occupational health clinics or other
assets.

 

5.16 Delivery of Estimates. Not later than three Business Days prior to the
Closing Date, the Company shall deliver in writing to Parent the Company’s good
faith estimates of the amounts of Cash on Hand and Debt as of the Closing Date
and, prior to the Effective Time, shall furnish to Parent such financial
reports, information and other documents and evidence as Parent shall reasonably
request to enable Parent to evaluate the accuracy of such estimates.

 

5.17 Repayment of Capital Source Agreement. Simultaneously with the Closing,
Parent shall repay and discharge in full the Debt of the Company outstanding
under the Capital Source Agreement.

 

5.18 Stockholder Representative. John C. Garbarino (and any successor appointed
by him to act on his behalf or, if he has resigned, refused to serve, or become
incapable of serving (whether due to death, disability or otherwise) or has not,
in any such event, appointed a successor, any Person appointed by the Company
who was an executive officer of the Company prior to the Effective Time) (the
“Stockholder Representative”) hereby is appointed, authorized and empowered to
act as attorney-in-fact on behalf of the holders of the Company Common Stock and
Company Stock Options in connection with, and to facilitate the consummation of
the transactions contemplated by, this Agreement, including, but not limited to,
all actions to be performed in the negotiation and calculation of the Cash on
Hand and the Additional Merger Consideration pursuant to Section 2.1(d)(ii)
hereof. All actions taken by the Stockholder Representative shall conclusively
bind the holders of the Company Common Stock and Company Stock Options. Parent,
Merger Sub and the Surviving Corporation shall be entitled to rely exclusively
upon the communications of the Stockholder Representative relating to the
foregoing as the communications of the holders of the Company Common Stock and
Company Stock Options. Neither Parent, Merger Sub nor the Surviving Corporation
shall be held liable or accountable in any manner for any act or omission of the
Stock Representative in such capacity.

 

47

--------------------------------------------------------------------------------

5.19 Employee Matters. Parent agrees to cause the Company to make the payments
to be made by the Company as set forth on Schedule 4.1 in the amounts, at such
times and on such other terms and conditions, if any, as specifically set forth
on Schedule 4.1.

 

ARTICLE VI

 

CONDITIONS PRECEDENT

 

6.1 Conditions to Each Party’s Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:

 

(a) Company Stockholder Approval. The Merger and this Agreement shall have been
approved by the affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock entitled to vote thereon.

 

(b) Other Approvals. All filings required to be made prior to the Effective Time
with, and all consents, approvals, permits and authorizations required to be
obtained prior to the Effective Time from, any Governmental Entity in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been made or obtained.

 

(c) No Injunctions or Restraints. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction, no order of any Governmental Entity having jurisdiction over any
party hereto, and no other legal restraint or prohibition shall be in effect (an
“Injunction”) preventing or making illegal the consummation of the Merger.

 

(d) Certificate of Merger. The Certificate of Merger shall have been accepted
for filing by the Delaware Secretary of State.

 

6.2 Conditions to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions, any or all of which may be waived in whole or in part
by Parent:

 

(a) Representations and Warranties of the Company. Each of the representations
and warranties of the Company set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date (provided in
each case that any representation or warranty contained herein that is qualified
by a materiality standard or a Company Material Adverse Effect qualification
shall not be further qualified hereby). Parent shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to such effect.

 

48

--------------------------------------------------------------------------------

(b) Performance of Obligations of the Company. The Company shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Parent shall have received a
certificate signed on behalf of the Company by the Chief Executive Officer and
the Chief Financial Officer of the Company to such effect.

 

(c) Termination of Affiliate Agreements. Parent shall have received from the
Company and the Subsidiaries written evidence that any Affiliate Agreements
designated by Parent for termination pursuant to Section 5.11 have been
terminated prior to the Closing Date.

 

(d) FIRPTA Certificate. Parent shall have received a certification by the
Company meeting the requirements of Treasury Regulation Section 1.1445-2(c)(3)
and dated within 30 days prior to the Closing Date to the effect that the Common
Stock and the Company Stock Options do not constitute a U.S. real property
interest as the Company is not and has not been during the previous five years a
U.S. real property holding corporation.

 

(e) Executive Agreements. Parent or one of its Affiliates shall have entered in
the agreements specified on Schedule 6.2(e) with the Persons identified thereon
upon mutually agreeable terms, such agreements to be effective only at the
Effective Date.

 

(f) OHR-SSM. The Company shall have consummated the purchase of the minority
interest in OHR-SSM from the other member thereof, with the purchase price
therefor being no more than $300,000 (payable fully in cash) and the Company
owning 100% of the outstanding membership interests in OHR-SSM after such
purchase.

 

6.3 Conditions to Obligations of the Company. The obligation of the Company to
effect the Merger is subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by the Company:

 

(a) Representations and Warranties of Parent and Merger Sub. Each of the
representations and warranties of Parent and Merger Sub set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date (provided in each case that any representation or warranty
contained herein that is qualified by a materiality standard shall not be
further qualified hereby). The Company shall have received a certificate signed
on behalf of Parent by the Chief Executive Officer and the Chief Financial
Officer of Parent to such effect.

 

(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of Parent by the
Chief Executive Officer and the Chief Financial Officer of Parent to such
effect.

 

(c) OHR-SSM. Parent shall have advanced to the Company (immediately prior to the
Effective Time) funds in an amount not to exceed $300,000 in cash to effectuate
the purchase of the membership interest of the other member of OHR-SSM.

 

49

--------------------------------------------------------------------------------

ARTICLE VII

 

TERMINATION AND AMENDMENT

 

7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company (except with respect to Section 7.1(g), in which
case the termination must be prior to receipt of the approval of the Company’s
stockholders of this Agreement and the Merger):

 

(a) by mutual written consent of Parent and the Company;

 

(b) by either Parent or the Company if (i) any Governmental Entity shall have
issued any Injunction or taken any other action permanently restraining,
enjoining or otherwise prohibiting the consummation of the Merger and such
Injunction or other action shall have become final and nonappealable; or (ii)
the approval of the stockholders of the Company of this Agreement and the Merger
shall not have been obtained by reason of the failure to obtain the required
vote upon a vote held at a duly held meeting of stockholders, or at any
adjournment thereof;

 

(c) by Parent or the Company if the Merger shall not have been consummated by
March 31, 2006 or such other date as the Company and Parent shall agree in
writing (the “Termination Date”); provided, however, that the right to terminate
this Agreement under this Section 7.1(c) shall not be available to any party
whose breach of any representation or warranty or failure to fulfill any
covenant or agreement under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date;

 

(d) by Parent if (i) the Company shall have failed to comply in any respect with
Section 4.2 or shall have failed to comply in any material respect with any of
the other covenants or agreements contained in this Agreement to be complied
with or performed by the Company at or prior to such date of termination
(provided that (other than with respect to a breach of Section 4.2, which breach
shall not be subject to a cure right) such breach has not been cured within ten
days following receipt by the Company of notice of such breach and is existing
at the time of termination of this Agreement), or (ii) any representation or
warranty of the Company contained in this Agreement shall not be true and
correct in all material respects (provided that any representation or warranty
of the Company contained herein that is qualified by a materiality standard or a
Company Material Adverse Effect qualification shall not be further qualified
hereby) when made on or at the time of termination as if made on such date of
termination (except to the extent it relates to a particular date), provided
such breach has not been cured within ten days following receipt by the Company
of notice of such breach and is existing at the time of termination of this
Agreement;

 

(e) by the Company if (i) Parent shall have failed to comply in any material
respect with any of the covenants or agreements contained in this Agreement to
be complied with or performed by it at or prior to such date of termination
(provided such breach has not been cured within ten days following receipt by
Parent of notice of such breach and is existing at the time of termination of
this Agreement) or (ii) any representation or warranty of Parent contained

 

50

--------------------------------------------------------------------------------

in this Agreement shall not be true and correct in all material respects
(provided that any representation or warranty of Parent contained herein that is
qualified by a materiality standard shall not be further qualified hereby) when
made or on or at the time of termination as if made on such date of termination
(except to the extent it relates to a particular date), provided such breach has
not been cured within ten days following receipt by Parent of written notice of
such breach and is existing at the time of termination of this Agreement;

 

(f) by Parent in the event that (i) the board of directors of the Company shall
have failed to reaffirm publicly its approval, as soon as reasonably
practicable, and in no event later than three Business Days, after Parent’s
request for such reaffirmation, of the Merger and the transactions contemplated
by this Agreement, or shall have resolved not to reaffirm the Merger, or (ii)
the board of directors of the Company shall have failed to include in the Proxy
Statement its recommendation, without modification or qualification, that the
Company stockholders approve and adopt this Agreement and approve the Merger, or
(iii) the board of directors of the Company shall have withheld, withdrawn,
amended or modified, or proposed publicly to withdraw, amend or modify, in a
manner adverse to Parent, the recommendation of such board of directors to the
Company’s stockholders that they approve and adopt this Agreement and approve
the Merger, or (iv) the board of directors of the Company shall have made a
Change of Recommendation, or (v) the board of directors of the Company, within
ten Business Days after commencement of any tender or exchange offer for any
shares of Company Common Stock, shall have failed to recommend against
acceptance of such tender or exchange offer by its stockholders or shall have
taken no position with respect to the acceptance of such tender or exchange
offer by its stockholders; and

 

(g) by the Company if the board of directors of the Company has made a Change of
Recommendation in order to approve and permit the Company to accept a Superior
Offer; provided, however, that (i) the Company is not then in breach of Section
4.2, (ii) Parent does not make, within five Business Days after receipt of the
Company’s written notice pursuant to Section 4.2(d), an offer that the board of
directors of the Company shall have concluded in good faith (following
consultation with its financial advisor and outside legal counsel) is at least
as favorable, from a financial point of view, to the Company’s stockholders as
such Superior Offer and is reasonably capable of being consummated, (iii) the
board of directors of the Company authorizes the Company, subject to complying
with the terms of Section 4.2 and this clause (g), to enter into a binding
written agreement concerning a transaction that constitutes a Superior Offer and
the Company notifies Parent in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement to such notice,
and (iv) the Company shall have tendered to Parent payment in full of the
amounts specified in Section 7.2, or a promissory note in the form of Exhibit B
in lieu of the cash payment of the Termination Fee specified therein,
concurrently with delivery of notice of termination pursuant to this Section
7.1(g).

 

A terminating party shall provide written notice of termination to the other
party specifying the reason for such termination.

 

51

--------------------------------------------------------------------------------

7.2 Effect of Termination.

 

(a) In the event of termination of this Agreement by any party hereto as
provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto except (i)
with respect to this Section 7.2, the last sentence of Section 5.2, the
penultimate sentence of Section 5.4(b), and Article VIII and (ii) to the extent
that such termination results from the breach by a party hereto of any of its
representations or warranties or of any of its covenants or agreements contained
in this Agreement, in which case such party shall remain liable for its breach
notwithstanding such termination.

 

(b) (i) If Parent or the Company terminates this Agreement pursuant to Section
7.1(b)(ii) or Section 7.1(c) and prior to such termination, there has been
submitted to the Company’s board of directors or stockholders or publicly
announced an Acquisition Proposal (other than the Merger) and, within one year
of such termination, an Acquisition Proposal (whether or not such Acquisition
Proposal is the same Acquisition Proposal that had been publicly announced prior
to termination of this Agreement) is consummated or the Company shall enter into
an agreement with respect to an Acquisition Proposal or recommend approval of an
Acquisition Proposal (whether or not such Acquisition Proposal is the same
Acquisition Proposal that had been publicly announced prior to termination of
this Agreement), which Acquisition Proposal is subsequently consummated (whether
or not such consummation occurs within such one year period); or

 

(ii) If Parent shall terminate this Agreement pursuant to Section 7.1(f); or

 

(iii) If the Company shall terminate this Agreement pursuant to Section 7.1(g);

 

then the Company shall pay to Parent (A) an amount equal to $1,960,000 (the
“Termination Fee”), and (B) such amount, not to exceed $250,000 (the “Expense
Reimbursement”) as may be required to reimburse Parent and Merger Sub for all
reasonable out-of-pocket fees, costs and expenses incurred by Parent and/or
Merger Sub in connection with their due diligence efforts or the transactions
contemplated by this Agreement, including, without limitation, (1) fees, costs
and expenses of accountants, escrow agents, legal counsel, financial advisors
and other similar advisors, and (2) fees paid to any Governmental Entity. If the
Termination Fee and the Expense Reimbursement shall be payable pursuant to
subsection (b)(i) of this Section 7.2, the Termination Fee and the Expense
Reimbursement shall be paid in same day funds on the date of consummation of an
Acquisition Proposal. If the Termination Fee and the Expense Reimbursement shall
be payable pursuant to subsection (b)(ii) or (b)(iii) of this Section 7.2, the
Termination Fee and the Expense Reimbursement shall be paid in same day funds no
later than one Business Day after the date of termination of this Agreement or,
at the election of the Company, the Termination Fee may be paid by the delivery
of a duly executed promissory note in the form of Exhibit B attached hereto by
the Company to Parent or Parent’s designee and the Expense Reimbursement shall
be paid in same day funds, in each case, no later than one Business Day after
the date of termination of this Agreement. Any Termination Fee or Expense
Reimbursement payable under this Agreement shall be paid without reservation of
rights or protest and the Company and the Subsidiaries, upon making such
payment, shall be deemed to have released and waived any and all rights that any
of them may have to recover such amounts.

 

52

--------------------------------------------------------------------------------

(c) The parties hereto acknowledge that the agreements contained in paragraph
(b) of this Section 7.2 are an integral part of the transactions contemplated by
this Agreement, and that without these agreements, they would not enter into
this Agreement. Accordingly, if the Company fails to pay promptly any fee
payable by it pursuant to this Section 7.2, then the Company shall pay to Parent
or Parent’s designee the costs and expenses (including attorneys’ fees) of
Parent or Parent’s designee in connection with collecting such fee.

 

7.3 Amendment. This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective boards of directors, at any time before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company, but, after such approval, no amendment shall be
made which by law requires further approval by such stockholders without first
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.

 

7.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective boards of directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.

 

ARTICLE VIII

 

GENERAL PROVISIONS

 

8.1 Payment of Expenses. Except as specifically set forth herein to the
contrary, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby, whether or not the Merger shall be
consummated.

 

8.2 Nonsurvival of Representations, Warranties and Agreements. Subject to the
remaining provisions of this Section 8.2, the representations, warranties and
agreements in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any other party hereto,
any person controlling any such party or any of their officers, directors,
representatives or agents whether prior to or after the execution of this
Agreement. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time and any liability for breach or violation thereof
shall terminate absolutely and be of no further force and effect at and as of
the Effective Time, except for the agreements contained in Article II and this
Article VIII, Section 5.14 and Section 5.19. The Confidentiality Agreement shall
survive the execution and delivery of this Agreement, and the provisions of the
Confidentiality Agreement shall apply to all information and material delivered
hereunder.

 

53

--------------------------------------------------------------------------------

8.3 Notices. Any notice or communication required or permitted hereunder shall
be in writing and either delivered personally, telegraphed or telecopied or sent
by certified or registered mail, postage prepaid, and shall be deemed to be
given, dated and received (i) when so delivered personally, (ii) upon receipt of
an appropriate electronic answerback or confirmation when so delivered by
telegraph or telecopy (to such number specified below or another number or
numbers as such person may subsequently designate by notice given hereunder), or
(iii) five Business Days after the date of mailing to the following address or
to such other address or addresses as such person may subsequently designate by
notice given hereunder, if so delivered by mail:

 

if to Parent or Merger Sub, to:

 

Concentra Operating Corporation

5080 Spectrum Drive

Suite 400–West Tower

Addison, Texas 75001

Fax: 972-387-1938

Attention: Richard A. Parr II

                  General Counsel

 

with a copy to:

 

Vinson & Elkins L.L.P.

2001 Ross Avenue

Suite 3700

Dallas, Texas 75201

Fax: 214-999-7797

Attention: Jeffrey A. Chapman

 

if to the Company, to:

 

Occupational Health + Rehabilitation Inc

175 Derby Street

Suite 36

Hingham, Massachusetts 02043

Fax: 781-741-5499

Attention: John C. Garbarino

 

with a copy to:

 

Shipman & Goodwin LLP

One Constitution Plaza

Hartford, Connecticut 06103

Fax: 860-251-5211

Attention: Donna L. Brooks

 

54

--------------------------------------------------------------------------------

8.4 Interpretation. When a reference is made in this Agreement to Articles or
Sections, such reference shall be to an Article or a Section of this Agreement
unless otherwise indicated. The table of contents, glossary of defined terms and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the word “include,” “includes” or “including” is used in this Agreement, it
shall be deemed to be followed by the words “without limitation.” Unless the
context otherwise requires, “or” is disjunctive but not necessarily exclusive,
and words in the singular include the plural and in the plural include the
singular. For purposes of this Agreement, “knowledge” or “Knowledge” of a party
hereto means the actual knowledge of the officers listed on Schedule 8.4 to this
Agreement, after reasonable inquiry in each case.

 

8.5 Counterparts. This Agreement may be executed in two or more counterparts
(including by facsimile signature), all of which shall be considered one and the
same agreement and shall become effective when two or more counterparts have
been signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.

 

8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement (together
with the Confidentiality Agreement and any other documents and instruments
referred to herein) (a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) except as provided in Section
5.14 and Section 5.19 is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.

 

8.7 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.

 

8.8 No Remedy in Certain Circumstances. Each party agrees that, should any court
or other competent authority hold any provision of this Agreement or part
thereof to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby. Except as otherwise contemplated by this Agreement, to the
extent that a party hereto took an action inconsistent herewith or failed to
take action consistent herewith or required hereby pursuant to an order or
judgment of a court or other competent authority, such party shall not incur any
liability or obligation unless such party breached its obligations under the
Confidentiality Agreement or did not in good faith seek to resist or object to
the imposition or entering of such order or judgment.

 

8.9 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Any assignment in violation of the foregoing shall be null and void.
Subject to the preceding sentences, this Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.

 

55

--------------------------------------------------------------------------------

8.10 Schedule Definitions. All capitalized terms in the Company Disclosure
Schedule or the other schedules to this Agreement shall have the meanings
ascribed to them herein, unless the context otherwise requires or as otherwise
defined.

 

8.11 Director and Officer Liability. The respective directors, officers, and
stockholders, in their respective capacities as such, of Parent, Merger Sub and
their Affiliates shall not have any personal liability or obligation arising
under the Transaction Documents (including any claims that the Company may
assert) other than as an assignee of a Transaction Document. The respective
directors, officers, and stockholders, in their respective capacities as such,
of the Company and its Affiliates shall not have any personal liability or
obligation arising under the Transaction Documents (including any claims that
Parent or Merger Sub may assert) other than as an assignee of a Transaction
Document.

 

8.12 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

[Remainder of page is intentionally blank.]

 

56

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each party has caused this Agreement and Plan of Merger to
be signed by its respective officer thereunto duly authorized, all as of the
date first written above.

 

CONCENTRA OPERATING CORPORATION

By:

 

/s/ Daniel J. Thomas

--------------------------------------------------------------------------------

Name:

  Daniel J. Thomas

Title:

  President and CEO BRADY ACQUISITION CORP.

By:

 

/s/ Daniel J. Thomas

--------------------------------------------------------------------------------

Name:

  Daniel J. Thomas

Title:

  Chairman OCCUPATIONAL HEALTH + REHABILITATION INC

By:

 

/s/ John C. Garbarino

--------------------------------------------------------------------------------

Name:

  John C. Garbarino

Title:

  President and CEO