10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  

For the fiscal year ended: December 31, 2002

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  

For the transition period from                              to                                      

Commission file number: 0-21428

OCCUPATIONAL HEALTH + REHABILITATION INC

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	13-3464527 (I.R.S. Employer Identification No.)
175 Derby Street, Suite 36 Hingham, Massachusetts (Address of principal executive offices)	02043 (Zip Code)

(781) 741-5175

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class None Name of each exchange on which registered Not Applicable

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.    YES  x     NO  ¨.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this  Form 10-K    x.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)     YES  ¨    NO  x.

The aggregate market value of the voting Common Stock held by non-affiliates of the registrant on June 28, 2002 was $1,900,586 based on the closing price of $2.00 per share. The number of shares outstanding of the registrant’s Common Stock as of March 24, 2003 was 3,088,111.

OCCUPATIONAL HEALTH + REHABILITATION INC

Annual Report on Form 10-K

For the Fiscal Year Ended December 31, 2002

Table of Contents

PART I

		Page
Item 1.	Business	1
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Submission of Matters to a Vote of Security Holders	15
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	16
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	28
PART III
Item 10.	Directors and Executive Officers of the Registrant	29
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	35
Item 13.	Certain Relationships and Related Transactions	38
Item 14.	Controls and Procedures	38
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	39
Index to Consolidated Financial Statements and Financial Statement Schedules		41
Signatures		61
Certifications		62
Exhibit Index		64

PART I

ITEM 1.    BUSINESS

General

Occupational Health + Rehabilitation Inc (the “Company”), a leading national occupational healthcare provider, specializes in the prevention, treatment, and management of work-related injuries and illnesses, as well as regulatory compliance services. As of March 1, 2003, the Company operates thirty-six occupational health centers serving over 15,000 employer clients in ten states, and also delivers workplace health services at employer locations throughout the United States. The Company believes its centers provide high quality medical care and extraordinary service. This improves the health status of employees, reduces workers’ compensation costs, and assists employers in their compliance with state and federal regulations governing workplace health and safety. The Company believes it is the leading provider of occupational health services in most of its established markets as a result of its commitment to these core values and competencies.

The Company has developed a system of clinical and operating protocols as well as proprietary information systems to track the resulting patient outcomes (the “OH+R System”), all focused on reducing the cost of work-related injuries. The OH+R System includes a full array of proven protocols designed to reduce the frequency and severity of work-related injuries, to return injured employees to full duty in the shortest possible time, and to assure regulatory compliance. Many of these services may also be delivered on-site at the workplace. Prevention and compliance services include pre-placement examinations, medical surveillance services, fitness for duty and return to work evaluations, drug and alcohol testing, physical examinations, and work-site safety programs.

The Company’s treatment approach for work-related injuries and illnesses is based on documented, proprietary clinical protocols which combine state-of-the-art medical, rehabilitation, and care coordination services in an integrated system of care focused on addressing the needs of employers, employees, and payers. Under this approach, employees receive high quality care, maintain a positive attitude, and have a greatly reduced probability of developing chronic problems or being re-injured. Utilizing the OH+R System, which is being continually refined, occupational medicine physicians and other clinical staff have consistently generated substantial documented savings as compared to national averages for both lost work days and medical costs associated with work-related injuries and illnesses.

In recent years, the Company has expanded its operations beyond its base in New England into selected major metropolitan markets elsewhere in the United States. In selecting new markets, the Company looks for many factors, including a favorable regulatory environment, attractive reimbursement levels, fragmented competition and a good industrial base. The Company’s strategic plan is to expand its network of service delivery sites throughout the United States, principally through joint ventures and other contractual agreements with hospitals and development of its workplace health programs. The Company currently has thirteen health system affiliations in place.

The Company maintains its principal executive offices at 175 Derby Street, Suite 36, Hingham, Massachusetts 02043, telephone number (781) 741-5175.

Industry Overview

Work-related injuries and illnesses are a large source of lost productivity and costs for businesses in the United States. In a report issued in October 2002, The National Institute for Occupational Safety and Health estimated the cost to business each year of job related injuries to be $171 billion. Liberty Mutual’s 2002 Safety Index, based on 1999 data, estimated the total annual cost, inclusive of lost productivity, overtime, the cost of replacement workers, etc., to be between $120 billion and $240 billion, of which $40 billion related to the direct cost of workplace injuries, namely payments to injured workers and their medical care providers. The Company

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estimates that the primary occupational healthcare market (“Primary Occupational Healthcare”) represented $10 billion of the total outlays, of which $6 billion related to initial treatment of injuries and $4 billion to injury healthcare services, such as prevention and compliance services. Although Primary Occupational Healthcare accounts for only a small portion of these total expenditures, the Company believes it is a critical determinant of other costs. Functioning as the gatekeeper, the occupational medicine physician greatly influences both “down stream” medical costs and when an injured employee returns to work, thereby controlling lost work days.

The increase in workers’ compensation costs nationally in recent years, after a short period of relative stability, has resulted in employers taking a more active role in preventing and managing workplace injuries. This typically includes the establishment of safety committees, emphasis on ergonomics in the workplace, drug testing, and other efforts to reduce the number of injuries, and the establishment of preferred provider relationships to ensure prompt and appropriate treatment of work-related injuries when they do occur. Employer demand for comprehensive and sophisticated healthcare services to support these programs has been a key factor in the development of the occupational healthcare industry.

The occupational healthcare market is highly fragmented, consisting primarily of individual or small-group practices and hospital-based programs. Increasing capital requirements, the need for more sophisticated management of both information systems and direct sales and marketing, and changes in the competitive environment, including the formation of larger integrated networks such as the Company’s, have all created increased interest in affiliating with larger, professionally managed organizations. As a result of these factors, the Company believes there is an opportunity to consolidate hospital programs and private practices.

Strategy

The Company’s mission is to reduce the cost of work-related injuries and illnesses and other healthcare costs for employers and payers and to improve the health status of employees through high-quality care and extraordinary service. The Company’s strategic objectives are to develop a comprehensive national network of occupational healthcare delivery sites and to expand its workplace health services to become the leading occupational health provider in selected regional markets.

The Company intends to build its network of delivery sites through:

• Joint ventures and other contractual arrangements with health systems designed to augment existing occupational health programs and to create networks of occupational health service delivery sites throughout the health system and its affiliates.

• Acquisitions of existing occupational medicine, physical therapy and other related service practices.

• Start-up of Company-owned centers in strategic locations.

Subsequent to an acquisition, joint venture or other contractual relationship, new centers are converted to the Company’s practice model through implementation of the OH+R System. New services are added as required to provide the Company’s comprehensive offering. These additional services may be provided by contracting with affiliates of the newly-partnered health system or with local practitioners. Workplace health services are often delivered at employer locations within the service area of a center and are a natural extension of center operations. The Company’s direct sales efforts and word-of-mouth recommendations from satisfied clients are the source of workplace health opportunities not proximate to a center.

The Company’s operating strategy is based upon:

• Integration of Services—Prevention and compliance services provide important baseline information to clinicians, as well as knowledge of the work site, which makes the treatment of subsequent injuries more effective. Close management and coordination of all aspects of an injured worker’s care are

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essential to ensuring the earliest possible return to work. Management and coordination are difficult, if not impossible, when clinicians are not working within an integrated system. Such a system significantly reduces the number of communications required for a given case and eases the coordination effort, while enhancing the quality of care and patient convenience.

• Quality Care and Extraordinary Service—For a number of reasons, injured workers often receive less than optimal care. A lack of quality care is costly to both the injured/ill worker and the employer. The worker faces longer recovery time and the employer bears the burden of unnecessary lost work-days, including indemnity, lost production and staff replacement costs. The Company is committed to providing extraordinary service—to patients, to employers and to third parties. From proactive communications with all parties to custom services addressing an employer’s specific needs, the Company is dedicated to delivering a level of service that is expected from companies noted for extraordinary service, but atypical for healthcare providers.

• Outcome Tracking and Reporting—The OH+R System is focused on achieving successful outcomes, cost-effectively returning injured workers to the job as quickly as possible while minimizing the risk of re-injury. Since the inception of its first center, the Company has tracked outcome statistics. The Company believes these extensive outcome statistics demonstrate its ability to return injured workers to the job faster and for costs substantially lower than the national averages and, typically, those of other local occupational health providers.

• Low Cost Provider—The Company believes that future success in virtually any segment of healthcare services will require delivery of quality care at the lowest possible price. The Company believes it is a low cost provider, and it is continuously working to further reduce the cost of providing care by streamlining patient processing procedures thereby increasing the productivity of clinicians. The Company routinely refines and revises the OH+R System to increase efficiency and effectiveness.

• Provider Relations—The Company believes there is intense competition for occupational health providers who are interested in community-based practice. Consequently, it has implemented strategies to attract, recruit, and retain high quality providers who share the Company’s goals and culture. These strategies include proactive efforts to involve providers in the development of clinical protocols and policies through regular provider meetings and electronic communication, provider involvement in the operation of each center, and varieties of practice to suit individual providers’ interests. The Company uses physician assistants and nurse practitioners as integral parts of the clinical team.

• “Best Practices” Ethic—Core to the Company’s operating strategy is the belief that “best practices” in all aspects of occupational healthcare (clinical protocols and procedures, operations protocols, sales systems, service ethics, outcomes measurement, information systems, new site integration, and training and orientation systems) can be continuously improved. The Company constantly pursues enhancement of best practices in all aspects of its business.

Services

The Company’s services address the diverse healthcare needs and challenges faced by employers in the workplace. Specializing in the prevention, treatment and management of work-related injuries and illnesses, the Company is able to meet the needs of single site, regional multi-site or national employers and payers in the regions it serves. The Company’s services are delivered in a variety of venues including the Company’s full service centers, in the workplace, and through contract arrangements with providers or hospitals affiliated with its health system partners.

The Company, in conjunction with its health system partners, provides an integrated system of care. The Company’s full service centers provide primary occupational health services while its health system partners offer after-hours care, specialist services, and diagnostic testing, as needed. The integrated system provides a seamless continuum of services to employees and employers. The Company’s occupational health centers are

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typically staffed with multi-disciplinary teams, including physicians, physician assistants, nurse practitioners, and physical and occupational therapists, as well as a manager, a client relations director, a care coordinator, and support personnel.

In support of both center operations and workplace health initiatives, the Company also provides an after-hours program to coordinate treatment of second and third shift injuries through local emergency departments. This program ensures that the injured employee receives immediate medical attention and continuing treatment in the Company’s organized system of care. The Company also offers 24-hour nurse triage in selected markets.

The Company’s Medical Policy Board is the focal point for maintaining and enhancing the Company’s reputation for clinical excellence. The Medical Policy Board is comprised of physicians and other provider representatives employed by the Company who are established, recognized leaders in occupational healthcare. The Medical Policy Board oversees the establishment of “best practice” standards, the development of clinical protocols and quality assurance programs, and the recruitment, training, and monitoring of clinical personnel.

Specific services provided by the Company include:

Prevention/Compliance

A safe work environment is a critical factor impacting costs associated with work-related injuries and illnesses. To optimize workplace safety and productivity, the Company offers a full array of services designed to prevent injuries and to meet regulatory compliance requirements. The expertise and experience of the Company’s occupational health specialists differentiate the Company’s prevention and compliance services. Through treating work-related injuries, the Company’s clinicians gain significant insights into employers’ safety issues, thereby improving the efficacy of prevention programs. The Company’s expertise in health and safety regulatory matters provides employers with a critical resource to assist them in addressing increasingly complex federal and state regulations.

Specific prevention and compliance services include:

• Physical Examinations

— Preplacement

— Executive

— Department of Transportation (DOT)

— Annual

— Medical Monitoring/Surveillance

• Screenings

— Drug and Alcohol Testing

— Substance Abuse Program Development and Management

— Hazardous Substances Screening/Testing

— Pulmonary Function Tests

— Audiograms

— Job Specific Work Skills Screens

• Safety Programs

• Ergonomics Consultations

• Health Promotion

• Immunizations

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Treatment/Management

Where an injured worker receives initial treatment for a work-related injury or illness is critical to the eventual outcome of the case. The initial provider is the medical gatekeeper and single most important player in controlling case costs. When the Company acts as the gatekeeper, whether in a Company center, in the workplace, or through its network providers, it controls the cost of treatment provided as well as the costs of specialist and ancillary services by ensuring that referrals are appropriate and required. The Company’s prevention/compliance efforts support an in-depth understanding of the workplace and the workforce, facilitating optimal treatment plans and early return to work. Lost work-days are minimized when care is controlled and effectively coordinated.

The Company’s treatment protocols, which have been demonstrated to be effective through outcome studies documenting reduced medical costs and fewer lost work days, are based on a sports medicine philosophy of early intervention and aggressive treatment to maximize a patient’s recovery while minimizing the ultimate costs associated with the case.

As part of the Company’s injury treatment services, the multi-disciplinary clinical team controls and coordinates all aspects of an injured worker’s care. This includes referrals to specialists within a network of physicians who understand workers’ compensation and the special requirements of treating work-related injuries. In a typical Company full service center or a network of its contract providers, medical and rehabilitation team members work within an integrated system of formal, defined protocols. This approach facilitates superior, ongoing communication among clinician team members regarding the most appropriate treatment plan, thus eliminating time lost from delays in dealing with several unrelated providers.

Another element to successfully managing work-related injuries is continuous communication to all the “key players,” including the employer, employee, and third-party payers. With expectations and treatment plans clearly communicated to all involved, the Company’s commitment to goal-oriented, cost-effective, quality care is evident.

When an individual is not treating with the Company, specialty evaluations are often used to bring a case to closure and/or to create return to work programs for both work-related and non-work-related cases. The Company’s occupational medicine physicians and therapists bring a unique set of skills and experiences to these evaluations, including in-depth understanding of the workplace. Referrals for these services typically come from employers, insurers, or lawyers.

Treatment/management services include:

• Work-related Injury Treatment

• Physical and Occupational Therapy

• Specialist Referrals

• Care Coordination

• Specialty Evaluations

— Independent Medical Examinations

— Disability Examinations

— Fitness-for-Duty and Return-to-Work Examinations

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Workplace Health

The workplace is often the most effective place for the Company to deliver its services for work-related injuries/illnesses as well as to reduce other employee healthcare costs. Furthermore, many employers recognize the value of medical personnel managing integrated disability management programs that cover both work-related and non-work-related injuries and illnesses. The Company is a leader in workplace health services. It has assembled a fully integrated continuum of workplace health services that systematically address workplace safety and aim to minimize absenteeism of employees who have work-related and non-work-related injuries and illnesses. Employers may choose to have all or some of these services delivered at the workplace through staffing contracts or in conjunction with the Company’s center resources. The Company’s physical and occupational therapists provide job-specific, individualized treatment at the workplace, utilizing real work as the rehabilitation medium. The Company helps employees remain on the job while they receive therapy. Disability days decrease and return-to-work rates increase using this model of rehabilitative care.

Consulting/Advisory Services

Based on its depth of occupational medicine expertise, the Company provides a variety of consulting/advisory services for clients as follows:

• Healthcare Policy Development

• Regulatory Compliance

• Americans with Disabilities Act (ADA) Compliance

• Environmental Medicine

• Medical Review Officer (MRO)

Outcomes Measurement and Tracking

The Company has significant experience with data management and outcomes tracking and has created a sophisticated reporting tool that enables employers and third-party payers to track all costs and utilization of services received within the Company’s network of care. In addition, the system measures the Company’s return-to-work performance by measuring lost and modified work days per case. The Company believes that its multi-disciplinary clinical teams have consistently outperformed others by returning injured employees to work more quickly and at lower cost, while maintaining high patient satisfaction. The Company believes its ability and willingness to measure and be accountable for its performance to employers and third-party payers significantly differentiate the Company from its competitors.

Sales and Marketing

The Company markets through a direct sales force primarily to employers, but also to insurers and third-party administrators. The latter parties strongly influence (and in many instances direct) an injured worker’s choice of provider, while employers select providers for prevention and compliance services.

Through a sales planning and forecasting process, markets are analyzed and resources are allocated and consistently monitored to ensure maximum results. Client relations directors (“CRDs”), typically located at each Company center, are responsible for client retention and new client prospecting activities. The personal sales efforts of each CRD are supported by direct mail, selective advertising and public relations programs focused on reinforcing the Company’s position as a leader in occupational health. The successful establishment of partnership relationships with clients is a key ingredient to the Company’s success. During the sales process, the CRD routinely engages the expertise of the local provider team to enhance these efforts.

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Agreements with Medical Providers

In most cases, medical and other professional services at the Company’s centers are provided through professional corporations (collectively, the “Medical Providers”) that enter into management agreements with the Company or with its affiliated joint ventures which then subcontract with the Company. The Company provides a wide array of business services under these management and submanagement agreements, such as the provision of trained personnel, practice and facilities management, real estate services, billing and collection, accounting, tax and financial management, human resource management, risk management, insurance, sales, marketing, and information-based services such as process management and outcome analysis. The Company provides services under these management agreements as an independent contractor, and the medical personnel at the centers, under the direction of the Medical Providers, provide all medical services and retain sole responsibility for all medical decisions. The management agreements grant the Medical Providers a non-exclusive license to use the Company’s service mark “Occupational Health + Rehabilitation Inc.” These agreements typically have automatically renewing terms and specific termination rights. Management fees payable to the Company vary depending upon the particular circumstances and applicable legal requirements. These fees may include an assignment of certain accounts receivable, an allocation of a portion of net revenue, or a flat fee for each service provided by the Company.

Expansion Plan

The Company’s objective is to develop regional occupational healthcare systems in selected areas of the United States with full-service occupational health centers, workplace health sites, and a variety of network providers, typically affiliated with the Company’s health system partners. Forming ventures, alliances and other contractual relationships with hospitals, health systems, and providers in markets in which it operates is a key strategy for the Company. The Company’s management team, comprised primarily of seasoned healthcare executives, is experienced in corporate development as well as the integration and operation of the resulting acquisitions, ventures and alliances. In addition, the OH+R System, with its documented protocols covering all aspects of occupational health services delivery, facilitates effective assimilation of new operations. The Company believes that occupational health providers, like all other segments of the healthcare industry, have been subjected to the pressure of managed care and other cost containment efforts from employers and payers. These pressures and the expected continuance of regulatory complexities in the workers’ compensation and health and safety systems have caused a growing need, in the Company’s opinion, for physicians and hospitals with occupational health programs to seek affiliations with larger, professionally managed organizations, such as the Company that specialize in occupational healthcare. However, because of the many factors involved in building such a network, there can be no assurance that the Company will be successful in meeting its expansion goals.

Health System Joint Ventures, Affiliations and Network Service Agreements

The Company’s intended principal method of expansion is entering into joint ventures, affiliations, service agreements, or other contractual arrangements with health systems to develop and operate comprehensive occupational health programs based upon networks of delivery sites, including full-service centers, satellite locations and/or contract providers. There are about 3,200 hospital-owned occupational health programs in the United States. Approximately half of these programs are affiliated with one of the 270 multi-hospital health systems that offer occupational health services while the rest are operated by non-health system affiliated hospitals.

Most hospital occupational health programs have developed by default. Employers and injured employees have naturally looked to the local hospital for treatment of work-related injuries. In addition, as Occupational Safety and Health Administration (“OSHA”) and other safety and health regulations came into existence, hospitals again were the logical, and often only, place for employers to turn for service. The majority of the occupational health services offered by hospitals are delivered by functional departments where occupational

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health is a small percentage of the services rendered. Management of care, employer communications and, ultimately, successful outcomes are extremely difficult to accomplish. Because of their relatively small size in the context of the total hospital system, occupational health departments generally receive insufficient management attention, operate at a loss, and require constant funding. Consequently, many health systems are looking to acknowledged experts in the field, such as the Company, for effective outsourcing of their hospital-based occupational health programs.

By affiliating or contracting with the Company, health systems benefit from:

• The Company’s expertise in profitably delivering high quality care and extraordinary service at the center level

• Minimization of capital requirements

• The OH+R System—a proven clinical and operating system

• Retention of occupational health, and the resultant downstream services, as a service affiliated with the hospital, while transferring the operational responsibilities to an organization totally focused on successful operation of occupational health programs

• Increased ability to recruit qualified providers and integrate them into an established network

• The clinical expertise of the Company’s Medical Policy Board which helps ensure that the health system’s patients are receiving “best practice” care

• The Company’s entrepreneurial work environment that provides incentives for performance

• The Company’s expertise in sales and marketing to increase market share, occupational health revenues, and referrals for other health system services

• Access to the Company’s regional network of multi-location clients

• Enhanced relationships with employers, many of whom are becoming directly involved in contracting with health systems to provide healthcare for their employees

Health system relationships allow the Company to leverage the name and position of the institution within a community to expedite building market share. Moreover, as healthcare reform continues, many hospitals and health systems are re-thinking their scope of activities. As a result, health systems are concentrating more of their effort and capital on core services and are more open to outsourcing important yet ancillary services such as occupational health. It is strategically important for the Company to have links to these systems in order to be well positioned to become the occupational health provider for a system.

In March 2000, the Company formed a joint venture with SSM Health Care St. Louis to operate the latter’s existing network of occupational health centers located in and around St. Louis, Missouri. SSM Health Care St. Louis is a member of SSM Health Care, a leading provider of healthcare services in St. Louis and its environs. Effective August 1, 2002, the Company increased its ownership in the joint venture to 96% from 80%, and recognized $90,000 in goodwill on the transaction.

In October 2000, the Company entered into a long-term management contract with affiliates of Baptist Hospital System, Inc. in Nashville, Tennessee (“BHS”) to operate the Baptist Care Centers, seven ambulatory care centers located throughout the Nashville metropolitan area. BHS services central Tennessee through its flagship Baptist Hospital in Nashville, the largest not-for-profit tertiary care hospital in the region. The Company has decided that it will no longer offer urgent care services at its centers in Tennessee after March 31, 2003 and will focus instead solely on occupational health services. Due to declining revenue, a high incidence of bad debts, and other considerations relating to urgent care, the Company does not believe the elimination of these services will have a material negative effect on its operating profit, despite a projected loss of revenue of $2,500,000 for the nine months ending December 31, 2003 resulting from this decision. The Company has taken various

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measures to ensure that its urgent care patients will continue to receive appropriate medical care, including the conversion of two of its seven centers from mixed use sites to centers that provide only urgent care under the ownership of independent providers.

Under these health system affiliations, the Company typically provides all necessary personnel and assumes management responsibility for the day-to-day operation of the occupational health entity. In return for such services, the Company will receive fees customarily including a component based upon the net revenue attained by the entity and its operating profit performance, as well as reimbursement of all of the Company’s personnel costs and other expenses incurred. Moreover, in a typical joint venture, the Company will own 51% or more of the occupational health entity with the health system owning the remainder. The Company is continuously exploring potential health system affiliations but there can be no assurance that it will be successful in these efforts.

Acquisitions, Strategic Alliances and Selective Start-ups

By acquiring private practices that perform occupational medicine, physical therapy, or related services, the Company can enter a new geographical area or consolidate its position within an existing market. Therapy practices receive referrals of injured workers from local specialty physicians, which can complement the Company’s direct marketing to employers. Alternatively, occupational medicine practices, including medical consulting practices focused on occupational and environmental health issues, have established relationships with employers to whom the Company may provide its more comprehensive services.

In November 2001, OHR-SSM, LLC, a joint venture of the Company, purchased an occupational medicine business in St. Louis, Missouri for $77,000, and recognized goodwill of $57,000. The acquired revenue stream was incorporated into the Company’s existing Missouri centers.

In January 2002, the Company entered into an affiliation with a hospital system in New Jersey to operate its employee health and occupational health programs. In February 2002, the Company purchased two occupational health clinics located in New Jersey and transferred the hospital system’s occupational health programs to these centers. The combined purchase price of these entities was $610,000, of which $70,000 was in cash and the balance in the form of a subordinated note payable in varying installments through February 2005. The Company recognized goodwill of $621,000 on these transactions. Effective July 1, 2002, the Company assumed the 40% ownership interest of its joint venture partner in its Rochester, NY center, and recognized $193,000 in goodwill on the transaction.

Effective January 31, 2003, the Company terminated its long-term management contract with Eastern Rehabilitation Network (“ERN”), an affiliate of Hartford Hospital, Hartford, Connecticut, in exchange for transfer of title to the Company of ERN’s four occupational health centers in Connecticut which the Company had previously managed for ERN. In addition, ERN agreed to terminate its network provider agreement with Hartford Medical Group (“HMG”), also an affiliate of Hartford Hospital, under which the Company had managed seven occupational health centers owned by HMG. The Company agreed to pay ERN $25,000 for its share of the network’s assets. There will be a final settlement between the parties as of June 30, 2003 after the Company has collected all amounts owed to, and paid all amounts owed by, the network as of the termination date.

In 2002, the Company recognized revenue of $2,286,000 for the seven occupational health centers owned by HMG which it will no longer manage in 2003. Because a significant proportion of the revenue was paid to providers for services rendered, the Company does not expect the loss of revenue will have a material negative effect on its operating profit.

The Company will also consider establishing start-up centers when appropriate. This approach is most suitable for geographic areas proximate to existing Company centers or where a significant source of patients can

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be assured through arrangements with large employers and third-party administrators. Often, start-ups can be developed in concert with a local provider, enabling the Company to minimize its investments, particularly during the early growth phase of the site. The Company will continue to explore opportunities such as these throughout its marketplace when conditions warrant such an approach. However, there can be no assurance the Company will be successful in these efforts.

1999 Restructuring Plan

During the fourth quarter of 1999, the Company initiated measures designed to enhance its overall financial strength and success. These measures principally included the closure of Company centers that were either outside of the Company’s core occupational health focus or were not capable of achieving significant profitability due to specific market factors. In December 1999, the Company’s South Boston, Massachusetts occupational health and sports medicine center was closed and during the first quarter of 2000 its Wellesley Hills, Massachusetts occupational health and sports conditioning center and its Essex Junction, Vermont primary care location were closed. The restructuring plan also included the streamlining of certain other remaining operations and the elimination or combining of various positions within the Company. The plan resulted in restructuring and other charges of $2,262,000.

During 2000 and 2001, the Company negotiated buyout terms for some or all of the space at certain of the closed centers. At December 31, 2002, the Company’s obligation for future lease payments and other charges relating to the closed centers was $22,000.

Competition

Most organizations providing care for work-related injuries and illnesses in the eastern part of the United States are local providers or hospitals. The fundamental difference between the Company and these providers is the Company’s focused expertise in combining multiple disciplines to address the needs of a single market segment—work-related injuries and illnesses, and prevention and compliance services. Other providers are generally organized to provide services, such as physical therapy, to a wide variety of market segments with differing needs, regardless of the source of the injury or type of patient.

Most of the Company’s competitors are local operations and typically provide only some of the services required to successfully resolve work-related injuries and illnesses, and reduce employers’ costs. Hospitals typically provide most of the required services but not as part of a tightly integrated, formal care system. Injured workers tend to be a small segment of the patients seen by the individual hospital departments involved, and department personnel tend not to have any particular training or expertise in work-related injuries and illnesses.

Concentra, Inc. is the nation’s largest company providing occupational healthcare followed by U.S. HealthWorks, Inc. which in 2000 acquired the occupational health centers operated by HEALTHSOUTH Corporation, a large national provider of rehabilitation services which also offered occupational health services in certain locations. Although the Company has not yet seen a significant occupational healthcare presence from these companies in the markets in which it currently operates in the Northeast United States, it is beginning to see them as it moves into new markets. While the Company believes it can compete effectively with these companies on the basis of quality and service, there can be no assurance that these competitors will not establish similar services to those offered by the Company in all its markets. These companies are larger than the Company and have greater financial resources.

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Laws and Regulations

General

As a participant in the healthcare industry, the Company’s operations and relationships are subject to extensive and increasing regulation by a number of governmental entities at the federal, state, and local levels. The Company is also subject to laws and regulations relating to business corporations in general. The Company believes that its operations are in material compliance with applicable laws. Nevertheless, many aspects of the Company’s business operations, especially those related to the special nature of the Company’s relationship with the Medical Providers, have not been the subject of state or federal regulatory interpretation, and there can be no assurance that a review of the Company’s or the Medical Providers’ business by courts or regulatory authorities will not result in a determination that could adversely affect the operations of the Company or the Medical Providers or that the healthcare regulatory environment will not change so as to restrict the Company’s or the Medical Providers’ existing operations or their expansion.

Workers’ Compensation Legislation

Each state in which the Company operates has workers’ compensation programs requiring employers to cover medical expenses, lost wages, and other costs resulting from work-related injuries, illnesses, and disabilities. Medical costs are paid to healthcare providers through the employers’ purchase of insurance from private workers’ compensation carriers, participation in a state fund, or by self-insurance. Changes in workers’ compensation laws or regulations may create a greater or lesser demand for some or all of the Company’s services, require the Company to develop new or modified services or ways of doing business to meet the needs of the marketplace and compete effectively, or modify the fees that the Company may charge for its services.

Many states are considering or have enacted legislation reforming their workers’ compensation laws. These reforms generally give employers greater control over who will provide medical care to their employees and where those services will be provided, and attempt to contain medical costs associated with workers’ compensation claims. Some states have implemented procedure-specific fee schedules that set maximum reimbursement levels for healthcare services. The federal government and certain states provide for a “reasonableness” review of medical costs paid or reimbursed by workers’ compensation.

When not governed by a fee schedule, the Company adjusts its charges to the usual and customary levels authorized by the payer.

Corporate Practice of Medicine and Other Laws

Most states limit the practice of medicine to licensed individuals or professional organizations which are themselves comprised of licensed individuals and prohibit physicians and other licensed individuals from splitting professional fees with non-licensed persons. Many states also limit the scope of business relationships between business entities such as the Company and licensed professionals and professional corporations, particularly with respect to non-physicians exercising control over physicians engaged in the practice of medicine. Many states require regulatory approval, including certificates of need, before establishing certain types of healthcare facilities, offering certain services or making expenditures in excess of statutory thresholds for healthcare equipment, facilities or programs.

Laws and regulations relating to the corporate practice of medicine, the sharing of professional fees, certificates of need, and similar issues vary widely from state to state, are often vague, and are seldom interpreted by courts or regulatory agencies in a manner that provides guidance with respect to business operations such as those of the Company. Although the Company attempts to structure all of its operations so that they comply with the relevant state statutes and believes that its operations and planned activities do not violate any applicable medical practice, fee-splitting, certificates of need, or similar laws, there can be no assurance that (i) courts or

11

governmental officials with the power to interpret or enforce these laws and regulations will not assert that the Company or certain transactions in which it is involved are in violation of such laws and regulations, and (ii) future interpretations of such laws and regulations will not require structural and organizational modifications of the Company’s business. In addition, the laws and regulations of some states could restrict expansion of the Company’s operations into those states.

Federal regulations aimed at standardizing the format in which certain types of healthcare information is exchanged electronically and establishing standards for the security and privacy of protected healthcare information have been issued pursuant to the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). Further regulations under HIPAA, as well as modifications to and interpretations of existing regulations, are expected. Compliance with these regulations will be required beginning April 14, 2003 and at various dates thereafter for Covered Entities (as defined). Based principally upon the projected composition of its business at that date, most notably the elimination of its urgent care services in March 2003, and because it does not engage in Covered Transactions through electronic means, the Company has determined that it does not currently fall directly under the purview of HIPPA. However, the Company recognizes that a number of the standards established by HIPPA represent “best practices” for its own business and it intends to phase in those procedures over the next two years in addition to maintaining compliance with state privacy laws applicable to its business. The Company may also be expected to comply with some limited HIPAA standards under future contracts with health care providers and insurers. Moreover, there can be no assurance that the Company will not be required at some future time to comply fully with HIPPA in which event the Company may be called upon to devote substantial management effort and expenditures to achieving such compliance.

Fraud and Abuse Laws

A federal law (the “Anti-Kickback Statute”) prohibits any offer, payment, solicitation, or receipt of any form of remuneration to induce, or in return for, the referral of Medicare or other governmental health program patients or patient care opportunities, or in return for the purchase, lease or order of, or arranging for, items or services that are covered by Medicare or other governmental health programs. Violations of the statute can result in the imposition of substantial civil and criminal penalties. In addition, certain anti-referral provisions (the “Stark Amendments”) prohibit a physician with a “financial interest” in an entity from referring a patient to that entity for the provision of certain “designated health services,” some of which are provided by the Medical Providers that engage the Company’s management services.

Most states have statutes, regulations or professional codes that restrict a physician from accepting various kinds of remuneration in exchange for making referrals, some of which are similar to the Anti-Kickback Statute and are applicable to non-governmental programs. Several states are considering legislation that would prohibit referrals by a physician for certain types of healthcare services to an entity in which the physician has a specified financial interest.

All of the foregoing laws are subject to modification and interpretation, have not often been interpreted by appropriate authorities in a manner directly relevant to the Company’s business, and are enforced by authorities vested with broad discretion. The Company has attempted to structure all of its operations so that they comply with applicable federal and state anti-kickback and anti-referral prohibitions. The Company also monitors developments in this area. If these laws are interpreted in a manner contrary to the Company’s interpretation, or are reinterpreted or amended, or if new legislation is enacted with respect to healthcare fraud and abuse or similar issues, the Company will seek to restructure any affected operations so as to maintain compliance with applicable law. No assurance, however, can be given that such restructuring will be possible, or, if possible, will not adversely affect the Company’s business.

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Antitrust Laws

Federal, and many state, laws prohibit anti-competitive conduct, including price fixing, improper exercise of monopoly power, concerted refusals to deal, and division of markets. Violations of the Sherman Act, the primary federal antitrust statute, are felonies punishable by significant fines. While the Company believes that it is in compliance with relevant antitrust laws, no assurance can be given that the Company’s business practices will be interpreted by federal and state enforcement agencies to comply with such laws, and any violation of such laws could have a material adverse effect on the Company and its business.

Uncertainties Related to Changing Healthcare Environment

Over the last several years, the healthcare industry has experienced change. Although managed care has yet to become a major factor in occupational healthcare, the Company anticipates that managed care programs, including capitation plans, may play an increasing role in the delivery of occupational healthcare services. Further, competition in the occupational healthcare industry may shift from individual practitioners to specialized provider groups such as those managed by the Company, insurance companies, health maintenance organizations and other significant providers of managed care products. To facilitate the Company’s managed care strategy, the Company is offering risk-sharing products for the workers’ compensation industry that will be marketed to employers, insurers and managed care organizations. However, no assurance can be given that the Company will prosper in the changing healthcare environment or that the Company’s strategy to develop managed care programs will succeed in meeting employers’ and workers’ occupational healthcare needs.

Other changes in the healthcare environment may result from an Internal Revenue Service ruling related to whole-hospital joint ventures with tax-exempt organizations. The Company currently does not believe that this specific ruling will be extended to joint ventures concerning ancillary services such as occupational health for tax-exempt hospitals; however, if so extended, the Company’s structure for joint ventures with tax-exempt hospitals may differ from the Company’s typical model so as not to jeopardize the tax-exempt status of these hospitals.

Environmental

The Company and the Medical Providers are subject to various federal, state, and local statutes and ordinances regulating the disposal of infectious waste. If any environmental regulatory agency finds the Company’s facilities to be in violation of waste laws, penalties and fines may be imposed for each day of violation, and the affected facility could be forced to cease operations. The Company believes that its waste handling and discharge practices are in material compliance with the applicable law; however, any future claims or changes in environmental laws could have an adverse effect on the Company and its business.

Use of Provider Networks

The Company’s provision of comprehensive healthcare management and cost containment services depends in part on its ability to contract with or create networks of healthcare providers which share its objectives. For some of its clients, the Company offers injured workers access to networks of providers who are selected by the Company or its joint venture partners for quality of care and willingness to follow the OH+R System. Laws regulating the operation of managed care provider networks have been adopted by a number of states. These laws may apply to managed care provider networks having contracts with the Company or to provider networks that the Company may develop or acquire. To the extent these regulations apply to the Company, the Company may be subject to additional licensing requirements, financial oversight and procedural standards for beneficiaries and providers.

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Background

The Company was incorporated in Delaware in 1988. On June 6, 1996, Occupational Health + Rehabilitation Inc (“OH+R”) merged with and into (the “Merger”) Telor Opthalmic Pharmaceuticals, Inc. (“Telor”). Pursuant to the terms of the Merger, Telor was the surviving corporation. Concurrent with the Merger, however, Telor’s name was changed to Occupational Health + Rehabilitation Inc, and the business of the surviving corporation was changed to the business of OH+R. The Merger was accounted for as a “reverse acquisition” whereby OH+R was deemed to have acquired Telor for financial reporting purposes.

Economic Conditions

The Company’s success is influenced by a number of economic factors, principally employment levels and the rate of change thereof, and the general level of business activity. Adverse changes in these economic conditions may negatively affect the Company’s growth and profitability.

Seasonality

The Company is subject to the seasonal fluctuations that impact the various employers and their employees it serves. Historically, the Company has noticed these impacts in portions of the first and fourth quarters. Traditionally, revenues are lower during these periods since patient visits decrease due to the occurrence of plant closings, vacations, holidays, a reduction in new employee hirings, and inclement weather conditions. These activities also cause a decrease in drug and alcohol testings, medical monitoring services, and pre-employment examinations. Similar fluctuations occur during the summer months, but typically to a lesser degree than during the first and fourth quarters. The Company attempts to ameliorate the impact of these fluctuations through adjusting staff levels and ongoing efforts to add service lines with less seasonality.

Employees

As of February 28, 2003, the Company employed 543 individuals on a full and part-time basis. The total clinical professionals contracted or associated with the Company as of February 28, 2003 were 258, including physicians, physician assistants, nurse practitioners, nurses, medical assistants, physical and occupational therapists, and assistant physical and occupational therapists. None of the Company’s employees are covered by collective bargaining agreements. The Company has not experienced any work stoppages and considers its relations with its employees to be good.

Important Factors Regarding Forward-Looking Statements

Statements contained in this Annual Report on Form 10-K, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, which statements are intended to be subject to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on management’s current expectations and are subject to many risks and uncertainties which could cause actual results to differ materially from such statements. Such statements include statements regarding the Company’s objective to develop a national network of regional occupational healthcare systems providing integrated services through multi-disciplinary teams. Among the risks and uncertainties that will affect the Company’s actual results are locating and identifying suitable partnership candidates, the ability to consummate operating agreements on favorable terms, the success of such ventures, if completed, the costs and delays inherent in managing growth, the ability to attract and retain qualified professionals and other employees to expand and complement the Company’s services, the availability of sufficient financing, the attractiveness of the Company’s capital stock to finance its ventures, strategies pursued by competitors, the restrictions imposed by government regulation, changes in the industry resulting from changes in workers’ compensation laws and regulations and in the healthcare environment generally, and other risks described in this Annual Report on

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Form 10-K and the Company’s other filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date on which such statements are made. The Company assumes no duty to update such statements to reflect new, changing, or unanticipated events or circumstances.

ITEM 2.    PROPERTIES

The Company rents approximately 7,000 square feet of office space for its corporate offices in Hingham, Massachusetts.

The Company’s centers range in size from 750 square feet to approximately 15,000 square feet and generally have lease terms of between three years and six years with varying renewal or extension rights. A typical center ranges in size from approximately 4,000 to 10,000 square feet and has four to eight rooms used for examination and trauma, a laboratory, an x-ray room, and ancillary areas for reception, drug testing collection, rehabilitation, client education, and administration. Most centers are open from nine to ten hours per day for five days per week.

The Company believes that its facilities are adequate for its reasonably foreseeable needs.

ITEM 3.    LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings and is not aware of any threatened litigation that could have a material adverse effect upon its business, operating results, or financial condition.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER          MATTERS

The Company’s Common Stock is traded on the OTC Bulletin Board. The Company trades under the symbol OHRI. The following table sets forth the high and low bid quotations for the Company’s Common Stock as reported by the OTC Bulletin Board during the periods shown below.

	High		Low
Quarter ended March 31, 2001	$	2.250	$	1.250
Quarter ended June 30, 2001		5.350		2.187
Quarter ended September 30, 2001		4.000		2.050
Quarter ended December 31, 2001		2.900		1.900
Quarter ended March 31, 2002		3.050		1.950
Quarter ended June 30, 2002		3.000		1.650
Quarter ended September 30, 2002		2.050		1.200
Quarter ended December 31, 2002		1.650		0.950

The foregoing represent inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. As of March 14, 2003, the Company’s Common Stock was held by 70 stockholders of record and approximately 420 beneficial stockholders whose shares were held in “street” name.

The Company has never paid any cash dividends on its Common Stock. The Company currently intends to retain earnings, if any, for use in its business and does not anticipate paying any cash dividends in the foreseeable future. The payment of future dividends will be at the discretion of the Board of Directors of the Company and will depend, among other things, upon the Company’s earnings, capital requirements and financial condition. Compliance with various financial covenants imposed by one of the Company’s lenders could also limit the Company’s ability to pay dividends.

The transfer agent and registrar for the Company’s Common Stock is American Stock Transfer & Trust Company.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth certain information with respect to compensation plans (including individual compensation arrangements) under which the Company’s equity securities are authorized for issuance, as of December 31, 2002.

EQUITY COMPENSATION PLAN INFORMATION

Plan Category	Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders (1)	1,301,631	$	2.54	73,734
Equity compensation plans not approved by securityholders	—		—	—
Total	1,301,631	$	2.54	73,734

(1) Includes the Company’s 1993, 1996, and 1998 Stock Plans. The 1998 Stock Plan, as approved by the Company’s stockholders, reserved 150,000 shares of the Company’s Common Stock for the granting of non-qualified stock options, incentive stock options, and stock appreciation rights. The Company’s board of directors has subsequently approved, without stockholder approval, the reservation of an additional of 720,000 shares of the Company’s Common Stock under the 1998 Stock Plan for the granting of non-qualified stock options and stock appreciation rights.

During the fiscal year ended December 31, 2002, the Company did not make any sales of unregistered securities under the Securities Act of 1933, as amended (the “Securities Act”). However, on March 24, 2003, the Company paid a cash amount of $2,699,740.35 and issued 1,608,247 shares of its Common Stock, and promissory notes in the aggregate principal amount of $2,699,740.35 to repurchase 1,416,667 shares of its Series A Convertible Preferred Stock, from certain venture capital funds and other accredited investors (the “Sellers”) in reliance upon the exemption from the registration requirements of the Securities Act under Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

In claiming the exemption under Section 4(2) and Rule 506, the Company relied in part on the following facts: (1) each of the Sellers represented that such Seller (a) had the requisite knowledge and experience in financial and business matters to evaluate the merits and risk of an investment in the Company; (b) was able to bear the economic risk of an investment in the Company; (c) had access to or was furnished with the kinds of information that registration under the Securities Act would have provided; (d) acquired the shares for the Seller’s own account in a transaction not involving any general solicitation or general advertising, and not with a view to the distribution thereof; and (e) is an “accredited investor” as defined in Rule 502 of Regulation D; and (2) a restrictive legend was placed on each certificate or other instrument evidencing the shares and notes.

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ITEM 6.    SELECTED FINANCIAL DATA

The consolidated statement of operations data set forth below with respect to the years ended December 31, 2002, 2001 and 2000 and the consolidated balance sheet data as of December 31, 2002 and 2001 are derived from, and are qualified by reference to, the audited consolidated financial statements included elsewhere in this report and should be read in conjunction with those financial statements and notes thereto. The consolidated statement of operations data for the years ended December 31, 1999 and 1998 and the consolidated balance sheet data at December 31, 2000, 1999, and 1998 are derived from financial statements not included herein. Historical results should not be taken as necessarily indicative of the results that may be expected for any future period.

	Years Ended December 31,
	2002			2001			2000			1999			1998
	(in thousands except share and per share data)
Revenue	$	56,949		$	57,017		$	43,683		$	32,148		$	23,083
Expenses:
Operating		49,803			48,476			36,376			26,924			19,970
General and administrative		4,883			5,096			4,824			3,708			3,035
Depreciation and amortization		1,012			1,265			1,134			1,062			759
Restructuring		—			—			—			2,262			—
Gain from operations		55,698			54,837			42,334			33,956			23,764
		1,251			2,180			1,349			(1,808	)		(681	)
Nonoperating gains (losses):
Interest income		26			45			36			51			171
Interest expense		(423	)		(507	)		(535	)		(244	)		(179	)
Minority interest and contractual settlements, net		(496	)		(329	)		105			(590	)		(318	)
Recovery (write-off) of note receivable		—			—			248			(292	)		—
Income (loss) before income taxes and cumulative effect of change in accounting principle		358			1,389			1,203			(2,883	)		(1,007	)
Tax provision (benefit)		215			(2,695	)		34			—			—
Income (loss) before cumulative effect of change in accounting principle		143			4,084			1,169			(2,883	)		(1,007	)
Cumulative effect of change in accounting principle		—			—			—			—			(155	)
Net income (loss)	$	143		$	4,084		$	1,169		$	(2,883	)	$	(1,162	)
Net (loss) income available to common shareholders—basic	$	(537	)	$	3,390		$	473		$	(3,011	)	$	(1,177	)
Weighted average common shares outstanding—basic		1,479,864			1,479,591			1,479,510			1,479,450			1,479,141
(Loss) income before cumulative effect of change in accounting principle	$	(0.36	)	$	2.29		$	0.32		$	(2.04	)	$	(0.69	)
Cumulative effect of change in accounting principle		—			—			—			—			(0.11	)
Net (loss) income per common share	$	(0.36	)	$	2.29		$	0.32		$	(2.04	)	$	(0.80	)
Net (loss) income available to common shareholders—assuming dilution	$	(537	)	$	3,402		$	485		$	(3,011	)	$	(1,177	)
Weighted average common shares outstanding— assuming dilution		1,479,864			3,161,331			2,935,745			1,479,450			1,479,141
(Loss) income before cumulative effect of change in accounting principle	$	(0.36	)	$	1.08		$	0.17		$	(2.04	)	$	(0.69	)
Cumulative effect of change in accounting principle		—			—			—			—			(0.11	)
Net (loss) income per common share—assuming dilution	$	(0.36	)	$	1.08		$	0.17		$	(2.04	)	$	(0.80	)

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	December 31,
	2002		2001		2000			1999			1998
Consolidated Balance Sheet Data:
Working capital	$	4,049	$	4, 427	$	1,935		$	2,803		$	3,694
Total assets		24,397		24,198		22,148			17,160			14,479
Long-term debt, less current portion		1,982		1,229		1,614			2,906			1,116
Redeemable convertible preferred stock		10,653		9,973		9,279			8,583			8,455
Stockholders’ equity (deficit)		896		1,433		(1,957	)		(2,430	)		581

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company is a leading provider of occupational healthcare services to employers and their employees specializing in the prevention, treatment, and management of work related injuries and illnesses. The Company develops and operates multidisciplinary outpatient healthcare centers and contracts with other healthcare providers to develop integrated occupational healthcare delivery systems. The Company typically operates the centers under management and submanagement agreements with professional corporations that practice exclusively through such centers. Additionally, the Company has entered into joint ventures and long-term management agreements with health systems to provide management and related services to the centers and networks of providers established by the joint ventures.

The Company’s operations have been funded primarily through venture capital investments, the Merger, and lines of credit. The Company’s growth has resulted predominantly from the formation of joint ventures, long-term management agreements, acquisitions, and development of businesses principally engaged in occupational healthcare.

The discussion and analysis of the financial condition and results of operations of the Company are based on the Company’s consolidated financial statements, included elsewhere within this report, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates and judgments that affect the reported amounts and related disclosures of commitments and contingencies. The Company relies on historical experience and on various other assumptions that it believes to be reasonable under the circumstances to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

Critical Accounting Policies

Revenue Recognition

Revenue is recorded at estimated net amounts to be received from employers, third-party payers, and others for services rendered. The Company operates in certain states that regulate the amounts which the Company can charge for its services associated with work-related injuries and illnesses.

Provision for Doubtful Accounts

Accounts receivable consist primarily of amounts due from third-party payers (principally, managed care companies and commercial insurance companies) as well as amounts due from private individuals. Estimated provisions for doubtful accounts are recorded to the extent that it is probable that a portion or all of a particular account receivable will not be collected. The Company estimates the provision for doubtful accounts based on various factors including payer type, historical collection patterns, and the age of the receivable. Changes in estimates for particular accounts receivable are recorded in the period in which the change occurs.

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Impairment of Property and Equipment, Goodwill, and Intangible Assets

The Company reviews the carrying value of its property and equipment, goodwill, and intangible assets on a quarterly basis. The Company’s review is undertaken to determine if current facts and circumstances suggest that the assets have been impaired or that the life of the asset needs to be changed. As part of its review, the Company considers various factors including local market developments, changes in the regulatory environment, historical financial performance, recent operating results, and projected future cash flows. Any impairment would be recognized in operating results if a diminution in value considered to be other than temporary were to occur. During the years ended December 31, 2002 and 2001, the Company did not recognize any adjustments to the carrying value of its property and equipment, goodwill, and intangible assets.

Reserves for Employee Health Benefits

The Company retains a significant amount of self-insurance risk for its employee health benefits. The Company maintains stop-loss insurance which limits the Company’s liability for health insurance payments on both an individual and total group basis. At the end of each quarter, the Company records an accrued expense for estimated health benefit claims incurred but not reported at the end of such period. The Company estimates this accrual based on various factors including historical experience, industry trends, and recent claims history. This accrual is by necessity based on estimates and is subject to ongoing revision as conditions change and as new data present themselves. Adjustments to estimated liabilities are recorded in the accounting period in which the change in estimate occurs.

New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) 142, Goodwill and Other Intangible Assets, which was effective January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. Adoption of SFAS 142 by the Company on January 1, 2002 resulted in an increase in net income of approximately $186,000 for the year ended December 31, 2002 compared to the year ended December 2001.

In July 2001, the FASB issued SFAS 143, Accounting for Asset Retirement Obligations. Companies are required to adopt SFAS 143 in their fiscal year beginning after June 15, 2002. SFAS 143 requires that obligations associated with the retirement of a tangible long-lived asset be recorded as a liability when these obligations are incurred, with the amount of the liability initially measured at fair value. Upon recognizing a liability, an entity must capitalize the cost by recognizing an increase in the carrying amount of the related long-lived asset, accrete the liability over time to its present value each period, and depreciate the capitalized cost over the useful life of the related asset. Upon settlement of the liability, the obligation is either settled for its recorded amount or a gain or loss is recognized. The Company does not believe adoption of SFAS 143 will have a significant impact on its financial statements.

In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company adopted SFAS 144 for its fiscal year 2002. SFAS 144 changes the criteria that would have to be met to classify an asset as held-for-sale, revises the rules regarding reporting the effects of a disposal of a segment of a business, and requires expected future operating losses from discontinued operations to be displayed in discontinued operations in the periods in which the losses were incurred. The Company does not believe adoption of SFAS 144 will have a material impact on its financial statements.

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In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. Companies are required to adopt SFAS 145 in their fiscal year beginning after May 15, 2002. On matters with possible application to the Company, SFAS 145 rescinds, SFAS No. 4, “Reporting Gains and Losses from Extinguishments of Debt, and SFAS No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” SFAS 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate certain inconsistencies. It also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed circumstances. The Company does not believe adoption of SFAS 145 will have a material impact on its financial statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, rather than recognizing a liability when an entity commits to an exit plan. The statement also established that fair value is the objective for initial measurement of the liability. The provisions of SFAS 146 will be effective for exit or disposal activities initiated after December 31, 2002. The Company does not believe adoption of SFAS 146 will have a material impact on its financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of SFAS 123, Accounting for Stock Based Compensation. SFAS 148 provides additional transition guidance for those entities that elect to voluntarily adopt the accounting provisions of SFAS 123. SFAS does not change the provisions of SFAS 123 that permit entities to continue to apply the intrinsic value method of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.

SFAS 148 is intended to encourage the adoption of the accounting provisions of SFAS 123. Under the provisions of SFAS 148, companies that choose to adopt the accounting provisions of SFAS 123 will be permitted to select from three transition methods:

(a) Prospective method.    Apply the recognition provisions to all employee compensation awards granted, modified, or settled after the beginning of the fiscal year in which the recognition provisions are first applied. The prospective method, however, may no longer be applied for adoptions of the accounting provisions of SFAS 123 for periods beginning after December 15, 2003.

(b) Modified prospective method.    Recognize stock-based employee compensation cost from the beginning of the fiscal year in which the recognition provisions are first applied as if the fair value based accounting method had been used to account for all employee awards granted, modified, or settled in fiscal years beginning after December 15, 1994.

(c) Retroactive restatement method.    Restate all periods presented to reflect stock-based employee compensation cost under the fair value based accounting method for all employee awards granted, modified, or settled in fiscal years beginning after December 15, 1994.

The Company is currently evaluating the adoption of SFAS 148 and is in the process of determining the impact of the Statement on its financial statements. The Company does not believe the application of SFAS 148 will materially affect its results of operations in 2003.

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The following table sets forth, for the periods indicated, the relative percentages which certain items in the Company’s consolidated statements of operations bear to revenue. The following information should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report. Historical results and percentage relationships are not necessarily indicative of the results that may be expected for any future period.

	Years Ended December 31,
	2002		2001		2000
Revenue	100.0	%	100.0	%	100.0	%
Operating expenses	(87.5	)	(85.0	)	(83.3	)
General and administrative expenses	(8.6	)	(8.9	)	(11.0	)
Depreciation and amortization expense	(1.8	)	(2.2	)	(2.6	)
Interest income	0.0		0.1		0.1
Interest expense	(0.7	)	(0.9	)	(1.2	)
Minority interest and contractual settlements, net	(0.9	)	(0.6	)	0.2
Recovery of note receivable	—		—		0.6
Tax (provision) benefit	(0.3	)	4.7		(0.1	)
Net income	0.2	%	7.2	%	2.7	%

RESULTS OF OPERATIONS (dollar amounts in thousands)

Years Ended December 31, 2002 and 2001

Revenue

Revenue in 2002 decreased by $68, or 0.1%, to $56,949 from $57,017 in 2001. A decrease in revenue of $1,948, or 3.4%, at centers in operation for comparable periods in both years was offset by revenue of $2,245 generated by centers opened during 2002. Revenue in 2001 included $365 from non-core businesses which were closed during 2001. The decrease in same center revenue in 2002 was primarily due to the general economic recession which had an especially negative effect on urgent care services. Revenue for urgent care services, which are offered only at the Company’s centers in Tennessee, decreased by $1,038, or 22.1%, versus the prior year. Because of the declining revenue, a high incidence of bad debts, and other economic reasons, the Company has determined that it will no longer offer urgent care services in Tennessee after March 31, 2003.

Same center revenue in the Company’s core business of occupational medicine decreased 1.8% in 2002 compared to 2001. Including centers open less than a year, revenue in the Company’s core business increased $1,292, or 2.5%, with gains being recorded in all major categories other than prevention services. During periods of economic recession, prevention services generally decline in line with the magnitude of the slow down in economic activity. Although there can be no assurance that this will occur in the future, such a decline has historically reversed as the level of economic activity increases in the markets served by the Company.

Operating, General and Administrative Expenses

Operating expenses increased $1,327, or 2.7%, to $49,803 in 2002 from $48,476 in 2001. Same center operating expenses decreased $842 despite an increase of $444 in information services-related costs. To counter the downturn in its business as result of the weak economy, the Company reduced expenses in all facets of its operations including employee costs where same center costs decreased about 4% after significant increases in the cost of employee benefits. As a percentage of revenue, operating expenses increased by 2.5 percentage points to 87.5% in 2002 from 85.0% in 2001, primarily due to expected early stage losses at centers acquired in 2002 and an increase in rehabilitation services provided by subcontractors.

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General and administrative expenses decreased $213, or 4.2% to $4,883 in 2002 from $5,096 in 2001, primarily due to the elimination of a number of management positions as part of its company-wide program to reduce expenses. Because of the payment of severance costs, the full benefit of these actions will not be realized until 2003. As a percentage of revenue, general and administrative expenses declined by 0.3 percentage points to 8.6% in 2002 from 8.9% in 2001.

Depreciation and Amortization

Depreciation and amortization expense decreased 20.0% to $1,012 in 2002 from $1,265 in 2001. Depreciation expense increased to $961 in 2002 from $911 in 2001, primarily due to continued investment in information services-related equipment. Amortization expense decreased to $51 in 2002 from $354 in 2001 because the Company adopted SFAS 142 on January 1, 2002 and no longer amortizes its goodwill. As a percentage of revenue, depreciation and amortization fell to 1.8% in 2002 from 2.2% in 2001.

Interest Expense

Interest expense decreased to $423 in 2002 from $507 in 2001. The decrease was due primarily to lower interest rates. As a percentage of total revenue, interest expense fell to 0.7% in 2002 from 0.9% in 2001.

Minority Interest and Contractual Settlements

Minority interest represents the share of (profits) and losses of joint venture investors with the Company. In 2002, the minority interest in pre-tax profits of subsidiaries increased to $(891) from $(699) in 2001, reflecting the greater aggregate profits of the joint venture operations. Contractual settlements represent payments to, or receipts from, the Company’s partners under the Company’s management contracts in respect of the partners’ share of operating (profits) or losses, respectively. In 2002, the Company recorded receipt of $395 of funded operating losses and contractual settlements compared to $370 in 2001.

Tax Provision (Benefit)

There was a tax provision of $215 in 2002 compared to a net tax benefit of $(2,695) in 2001. The tax provision for 2002 includes $52 in respect of 2001 charges not previously recognized relating to an adjustment to the deferred tax benefit, and to state income taxes. These charges resulted in an increase in the Company’s effective tax rate to 60.1% from the normalized rate of 45.5%. At December 31, 2001, the Company, having determined that its operating results and forecasted future income supported an assertion that ultimate realization of its net deferred tax assets was more likely than not, fully released the valuation allowance which had in prior years offset such deferred tax assets, and recorded a deferred tax benefit of $2,768. The Company also recorded tax expense of $73 in 2001, primarily relating to state income taxes.

Years Ended December 31, 2001 and 2000

Revenue

Revenue increased 30.5% to $57,017 in 2001 from $43,683 in 2000. Of the total increase, $778 was attributable to a center brought under management during 2001. Revenue at centers in operation during all of 2001 and only a part of 2000 grew $13,186 or 30.8%. These increases were partially offset by the elimination of $630 of revenue generated in the prior year by centers which were subsequently closed. Revenue at centers in operation during all of 2001 and only part of 2000 grew $13,186, or 30.8%. Revenue at centers open for comparable periods in 2001 and 2000 increased 6.5%, primarily due to volume growth.

Operating, General and Administrative Expenses

Operating expenses increased 33.3% to $48,476 in 2001 from $36,376 in 2000. This increase primarily reflects a full year of expenses at centers brought under management during 2000. As a percentage of revenue, operating expenses increased by 1.7 percentage points to 85.0% in 2001 from 83.3% in 2000. In certain centers

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that are operated under joint venture or management contracts, the Company’s contractual partner is responsible for funding initial operating losses. The amount of such payments is recorded as a non-operating gain. Some of these early stage, unprofitable operations have taken longer than initially expected to achieve profitability, primarily due to the economic recession. Although there can be no assurance that this will occur in the current economic climate, full implementation of the Company’s operating model generally reduces operating expenses as a percentage of revenue resulting in the more profitable operations seen in mature centers.

General and administrative expenses increased 5.6% to $5,096 in 2001 from $4,824 in 2000. The increase was primarily due to an increase in field management expenses. As a percentage of revenue, general and administrative expenses declined by 2.1 percentage points to 8.9% in 2001 from 11.0% in 2000, reflecting the Company’s leveraging of its fixed costs on its revenue growth.

Depreciation and Amortization

Depreciation and amortization expense increased 11.6% to $1,265 in 2001 from $1,134 in 2000. The increase was primarily due to information services-related capital expenditures. As a percentage of revenue, depreciation and amortization decreased to 2.2% in 2001 from 2.6% in 2000, primarily due to the increase in revenue.

Interest Expense

Interest expense decreased to $507 in 2001 from $535 in 2000. The decrease was due both to lower interest rates and to lower average loan balances on the Company’s lines of credit. As a percentage of total revenue, interest expense decreased to 0.9% in 2001 from 1.2% in 2000.

Minority Interest and Contractual Settlements

Minority interest represents the share of (profits) and losses of joint venture investors with the Company. In 2001, the minority interest in pre-tax profits of the joint ventures increased to $(699) from $(510) in 2000, reflecting the greater aggregate profits of the joint venture operations. Contractual settlements represent payments to, or receipts from, the Company’s partners under the Company’s management contracts in respect of the partners’ share of operating (profits) or losses, respectively. In 2001, the Company recorded receipt of $370 of funded operating losses and contractual settlements compared to $615 in 2000, primarily reflecting the improved operating results of these early stage operations.

Recovery of Note Receivable

During the fourth quarter of 1999, the Company wrote off the outstanding balance of $292 on a note receivable due to collection uncertainties. Because it was in default of certain loan covenants with its lender, the payer of the note ceased making its quarterly principal payments after June 1999 while it attempted to restructure its debt. Subsequent to the sale of the payer’s business in February 2001, the Company received $248 in final settlement of all amounts due under the note and recognized the gain in its financial statements for the year ended December 31, 2000.

Tax Provision (Benefit)

At December 31, 2001, the Company, having determined that its operating results and forecasted future income supported an assertion that ultimate realization of its net deferred tax assets was more likely than not, fully released the valuation allowance which had in prior years offset such deferred tax assets, and recorded a deferred tax benefit of $2,768. The Company also recorded tax expense of $73 in 2001, primarily relating to state income taxes.

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Significant Accounting Contractual Obligations

The following summarizes the Company’s contractual obligations at December 31, 2002, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		4-5 Years		More Than Years
Long-term debt (1)	$	3,274	$	2,332	$	942	$	—	$	—
Capital lease obligations		1,620		590		1,016		14		—
Operating leases		6,267		2,326		2,741		1,078		122
Total contractual obligations	$	11,161	$	5,248	$	4,699	$	1,092	$	122

(1) As of December 31, 2002, the amount available under the lender’s borrowing base formula was $6,882, of which $1,896 was drawn down. See Note 4 in the consolidated notes to the financial statements.

Liquidity and Capital Resources

At December 31, 2002, the Company had $4,049 in working capital compared to $4,453 in 2001 and $1,935 in 2000. The Company’s principal sources of liquidity as of December 31, 2002 consisted of (i) cash and cash equivalents aggregating $1,674 and (ii) accounts receivable of $9,736.

Net cash provided (used) by operating activities in 2002 was $2,606 compared to $3,957 in 2001 and $(1,142) in 2000. The lower liquidity in 2002 compared to 2001 was primarily due to a decrease in profitability, after adjusting for non-cash charges.

Accounts receivable decreased to $9,736 in 2002 from $11,211 in 2001 and $11,015 in 2000. The reduction in accounts receivable in 2002 was attributable primarily to a reorganization of the Company’s centralized billing offices during the year. As a result, days sales outstanding at December 31, 2002 decreased to 62 from 72 at the end of 2001. Days sales outstanding at December 31, 2000 were 78 after annualizing revenue at centers added during the year.

Prepaid expenses and other assets increased $390 in 2002 from 2001, primarily due to the prepayment of one month’s estimated employee medical costs to the Company’s new medical insurance administrator. Prepaid expenses and other assets decreased $535 in 2001 from 2000, primarily due to final settlement in 2001 of amounts owed the Company by a hospital system partner responsible for funding first year working capital deficiencies and by a client under a managed care contract which expired in mid year.

Accounts payable and accrued expenses decreased to $5,949 in 2002 from $6,755 in 2001 and $6,403 in 2000. The decrease of $806 in accounts payable and accrued expenses in 2002 was primarily due to more prompt settlement of both medical claims by the Company’s new employee medical insurance administrator and amounts due to certain third-party providers who provide medical services to the Company’s patients, and to a smaller employee incentive pay liability. The increase of $352 in accounts payable and accrued expenses in 2001 over 2000 was primarily due to an increase in the estimated liability for employee medical insurance payments, and to an additional day of accrued payroll.

Net cash used in investing activities was $1,892, $934, and $292 in 2002, 2001, and 2000, respectively. The Company’s investing activities included fixed asset additions of $891, $993, and $687 in 2002, 2001, and 2000, respectively, primarily related to information services equipment.

During the twelve months ended December 31, 2002, 2001, and 2000, the Company paid cash of $886, $773, and $610, respectively, relating to distributions to its joint venture partners. Distributions of cash in joint ventures to the Company and its joint venture partners allow the Company access to its share of the cash accumulated by the joint ventures which it can then utilize for general corporate purposes. The Company expects to continue to make future distributions when the cash balances in the joint ventures permit.

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In 2002, net cash used in investing activities included $115, primarily relating to the purchase of two occupational health centers in New Jersey. In 2001, investing activities included the purchase of a physician business with a cash outlay of $77. In addition, the Company paid $211 and $270 in 2001 and 2000, respectively, relating to earnouts in connection with previously acquired businesses.

In 2001 and 2000, net cash used in investing activities also included receipt by the Company of $872 and $1,199, respectively, under an agreement with a hospital system to manage its ambulatory care centers where the system provided working capital necessary to fund the working capital deficiencies (as defined) during the first twelve months of operations. At December 31, 2001, the Company recognized a negative net intangible asset of $629 from this agreement, representing the net difference of payments made by, or committed to, each party to induce the other to enter into the management agreement. At December 31, 2000, the Company recognized a net intangible asset of $244 in respect of this agreement and recorded the amount payable by the Company of $2,000 as a non-cash transaction, net of a discount of $531. The amount is payable by the Company over a five year period. At December 31, 2002, the amount payable was $893, net of a discount of $307.

Net cash (used) provided by financing activities was $(647), $(2,859), and $1,365 in 2002, 2001, and 2000, respectively. In 2002 and 2001, the Company paid down $198 and $2,153, net of advances, respectively, under its line of credit. The pay down in 2001 was primarily due to the strong operating performance that year and the net receipt of $872 to fund certain working capital deficiencies.

Under lease arrangements with certain leasing companies, the Company accumulates its fixed asset purchases until the value of those purchases reach a certain minimum amount before requesting a draw down from its lease lines. In 2002 and 2001, cash proceeds of $766 and $398, respectively, were received under its lease lines, primarily to fund information services equipment. The Company used funds of $1,205, $1,072, and $766 in 2002, 2001, and 2000, respectively, for the payment of long-term debt and capital lease obligations.

In December 2000, the Company entered into an agreement with DVI Business Credit Corporation (DVI), a specialty finance company for healthcare providers, for a three-year revolving credit line of up to $7,250 (the “Credit Line”). In March 2003, DVI extended the term of the Credit Line to March 31, 2004. The facility is collateralized by present and future assets of certain operations of the Company. The borrowing base consists of a certain percentage of eligible accounts receivable. The interest rate under the Credit Line is the prime rate plus 1%. The Credit Line’s covenants include a quarterly tangible net worth requirement of $3,000 (defined as shareholders’ equity plus the Redeemable Series A Convertible Preferred Stock, subordinated debt, and minority interests less intangible assets, goodwill, deferred tax assets, leasehold improvements, deposits and certain prepayments), a leverage coverage ratio not greater than 5.0 to 1.0, and a fixed charge ratio not less than 1.25 to 1.0 as well as certain restrictions relating to the acquisition of new businesses without the prior approval of the lender. The Company did not meet its fixed charge covenant as of June 30, 2002 and was granted a waiver by DVI. The Company has been in compliance with all covenants since the third quarter of 2002. As of and for the year ended December 31, 2002, the Company’s tangible net worth, leverage coverage ratio, and fixed charge ratio were $5,096, 1.86, and 1.69, respectively, which were calculated under the terms of the agreement. At December 31, 2002, the maximum amount available under the borrowing base formula was $6,882 and the interest rate was 5.25%. The amount outstanding on the Credit Line at December 31, 2002 and 2001 was $1,896 and $2,094, respectively.

In March 2001, the Company entered into an agreement for an Equipment Facility (the “Lease Line”) of $750 to provide secured financing. Borrowings under the facility are repayable over 42 months. The interest rate is based upon the 31 month Treasury Note (“T-Note”) plus a spread and fluctuates with any change in the T-Note rate up until the time of payment commencement for each draw down. At December 31, 2002, the Company had utilized $678 of its Lease Line.

In August 2002, the Company entered into an agreement for secured equipment lease financing in the approximate amount of $1,600 with Somerset Capital Group, Ltd. (the “Somerset Line”). Borrowings under the

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facility are repayable over 36 months. The lease-rate factors are based upon the 36-month Treasury Note yield ten days prior to payment commencement for each draw down. At the end of the lease term, the Company may either purchase the equipment for its fair market value, renew the lease on a year-to-year basis at its then fair market value, or return the equipment with no further obligation. The Company intends to utilize this lease line primarily to fund its equipment needs relating to the upgrade of its practice management system. At December 31, 2002, the Company had utilized $1,098 of its Somerset Line.

On March 24, 2003, the Company repurchased all of its outstanding Series A Convertible Preferred Stock (“Preferred Stock”), namely 1,416,667 shares, for (i) $2,700 in cash at closing, (ii) subordinated promissory notes (the “Notes”) in the aggregate principal amount of $2,700, and (iii) 1,608,247 shares of the Company’s Common Stock. The Notes will bear interest at 8% and will be payable in three equal principal installments, together with interest accrued thereon, 12, 15 and 18 months after the date of issuance. In the event of a default, the interest rate will increase to 15% until the default is cured. The Company expects that this transaction will cause a debt covenant violation with respect to the tangible net worth requirement. Accordingly, on March 18, 2003, DVI reduced the tangible net worth requirement from $3,000 to $2,500.

Until this repurchase by the Company of the Preferred Stock, holders of the Preferred Stock constituting a majority of the then outstanding shares of the Preferred Stock, by giving notice to the Company, could have required the Company to redeem all of the outstanding shares of the Preferred Stock at $6.00 per share plus an amount equal to all dividends accrued or declared but unpaid thereon, payable in four equal annual installments. Had the holders of the Preferred Stock put their shares for redemption at December 31, 2002, the Company would have been obligated to pay the Preferred Stockholders $2,663, $2,833, $3,003, and $3,173 on January 31, 2003, 2004, 2005, and 2006, respectively.

The Company expects that its principal use of funds in the foreseeable future, after the cash payment on March 24, 2003 of $2,700 to the holders of Preferred Stock, will be for the repayment of the Notes, and for acquisitions and the formation of joint ventures, working capital requirements, other debt repayments, and purchases of property and equipment. The Company believes that the funds available to it under the Credit Line, the Lease Line, and the Somerset Line, together with cash generated from operations, and other sources of funds it anticipates will be available to it will be adequate to meet these projected needs. However, the Company recognizes that the level of financial resources available to it is an important competitive factor and it will consider additional financing sources as appropriate, including raising additional equity capital on an on-going basis as market factors and its needs suggest, since additional resources may be necessary to fund its expansion efforts.

Inflation

The Company does not believe that inflation had a significant impact on its results of operations during the last two years. Further, inflation is not expected to adversely affect the Company in the future unless it increases substantially and the Company is unable to pass through the increases in its billings.

Seasonality

The Company is subject to the seasonal fluctuations that impact the various employers and their employees it serves. Historically, the Company has noticed these impacts in portions of the first and fourth quarters. Traditionally, revenues are lower during these periods since patient visits decrease due to the occurrence of plant closings, vacations, holidays, a reduction in new employee hirings, and inclement weather conditions. These activities also cause a decrease in drug and alcohol testings, medical monitoring services, and pre-employment examinations. Similar fluctuations occur during the summer months, but typically to a lesser degree than during the first and fourth quarters. The Company attempts to ameliorate the impact of these fluctuations through adjusting staff levels and ongoing efforts to add service lines with less seasonality.

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Professional Liability Insurance Risk

The Company maintains professional liability insurance coverage both on the Company as an entity and in the name of its employed physicians, as well as an umbrella policy to supplement that coverage. In recent years, the Company, in line with the healthcare industry in general, has experienced significant increases in the cost of such insurance, and it is expected that these costs will continue to increase steeply at least through 2005. For its policy year commencing March 1, 2003, the cost to the Company’s for its professional liability and umbrella insurance increased to $644 from $329 in the prior policy year, despite the Company assuming more of the risk itself. Maintenance of an appropriate level of professional liability insurance coverage is critical to the Company in order to attract and retain competent clinical staff, the core of its business. While the Company currently believes that it will continue to be able to purchase such insurance, there can be no assurance that the cost of doing so will not have a serious negative effect on its operating results since the price it can charge for many of its services is dependent upon fee schedules set by the states in which it operates and changes in those schedules generally lag the increase in medical-related costs.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has considered the provisions of Financial Reporting Release No. 48, Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments. The Company had no holdings of derivative financial or commodity-based instruments or other market risk sensitive instruments entered into for trading purposes at December 31, 2002. As described in the following paragraph, the Company believes that it currently has no material exposure to interest rate risks in its instruments entered into for other than trading purposes.

Interest rates

The Company’s balance sheet includes a revolving credit facility and lease lines which are subject to interest rate risk. The revolving credit loan is priced at a floating rate of interest while the interest rates on the lease lines are subject to market fluctuations until a draw down is effected. As a result, at any given time, a change in interest rates could result in either an increase or decrease in the Company’s interest expense. The Company performed sensitivity analysis as of December 31, 2002 to assess the potential effect of a 100 basis point increase or decrease in interest rates and concluded that near-term changes in interest rates should not materially affect the Company’s consolidated financial position, results of operations, or cash flows.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The auditors’ reports, consolidated financial statements and financial statement schedules that are listed in the Index to Consolidated Financial Statements and Financial Statement Schedules on page 41 hereof are incorporated herein by reference.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

As of January 1, 2003, the executive officers and directors of the Company were:

Name	Age	Position with the Company
John C. Garbarino	50	President, Chief Executive Officer and Director
Lynne M. Rosen	41	Chief Operating Officer
H. Nicholas Kirby	53	Senior Vice President, Corporate Development
Keith G. Frey	63	Chief Financial Officer and Secretary
William B. Patterson, MD, MPH	54	Chief Medical Officer, Chair-Medical Policy Board
Edward L. Cahill	49	Director
Kevin J. Dougherty	56	Director
Angus M. Duthie	62	Director
Donald W. Hughes	52	Director
Frank H. Leone	58	Director
Steven W. Garfinkle	44	Director

John C. Garbarino, a founder of OH+R, was its President and Chief Executive Officer and a director since its formation in July 1992 and has been President, Chief Executive Officer and a director of the Company since the Merger. From February 1991 through June 1992, Mr. Garbarino served as President and Chief Executive Officer of Occupational Orthopaedic Systems, Inc., a management company that operated Occupational Orthopaedic Center, Inc., a company which was the initial acquisition of OH+R. From 1985 to January 1991, Mr. Garbarino was associated in various capacities with Foster Management Company (“Foster”), a private investment company specializing in developing businesses to consolidate fragmented industries. In his association with Foster, Mr. Garbarino was a general partner and consultant and held various senior executive positions (including Chief Executive Officer, Chief Operating Officer and Chief Financial Officer) in Chartwell Group Ltd., a Foster portfolio company organized to consolidate through acquisitions the highly fragmented premium priced segment of the interior furnishings industry. Previously, Mr. Garbarino participated in the venture capital industry as a founder and general partner of Fairfield Venture Partners, L.P. and as vice president and treasurer of Business Development Services, Inc., a venture capital subsidiary of General Electric Company. Mr. Garbarino is a Certified Public Accountant and previously worked at Ernst & Whinney (a predecessor to Ernst & Young LLP).

Lynne M. Rosen, a founder of OH+R, was appointed Chief Operating Officer in October 2001. She had served as Senior Vice President, Operations of the Company since March 1999. From 1997 to 1999, Ms. Rosen served as Senior Vice President, Planning and Development. Ms. Rosen had previously held the positions of Vice President and Assistant Secretary since the Merger. From April 1988 through June 1992, Ms. Rosen held various positions with Occupational Orthopaedic Center, Inc., including general manager. Ms. Rosen was an athletic trainer at the University of Pennsylvania Sports Medicine Center from 1986 to March 1988 and at the University of Rhode Island from 1985 to 1986.

H. Nicholas Kirby has served as Senior Vice President, Corporate Development since January 1998. Previously, he served as Vice President, Corporate Development of the Company from June 1996. From August 1994 to June 1996, he was OH+R’s Director of Operations in Maine. Mr. Kirby was a founder and President of LINK Performance and Recovery Systems, Inc. (“LINK”) from January 1986 until the sale of the company to OH+R in August 1994. LINK was an occupational health company headquartered in Portland, Maine.

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Keith G. Frey joined the Company as Vice President, Administration in 2000 and was appointed Chief Financial Officer and Secretary in October 2000. Prior to joining the Company, Mr. Frey served as a part-time consultant to the Company from September 1999. From 1991 until its sale in 1998, he was a principal in IL International Inc., a contemporary lighting company, and served as President of its North American operations. From 1987 to 1991, Mr. Frey was Chief Financial Officer of Chartwell Group Ltd., an interior furnishings company. From 1981 to 1987, he served as chief financial officer of two start-up operations. Mr. Frey also spent thirteen years with General Mills, Inc. in senior financial positions in various consumer products divisions both in England and the United States. He is a Chartered Accountant.

William B. Patterson, MD, MPH, FACOEM was appointed Chief Medical Officer in January 2003. He has also served as Chair of the Company’s Medical Policy Board since September 1998. He served as Medical Director of the Company’s Massachusetts operations from August 1997 when New England Health Center, a company of which he was the founder and president was acquired by the Company, until June, 2000. Dr. Patterson is board certified in both internal medicine and occupational/environmental medicine. He has served as President of the New England College of Occupational and Environmental Medicine and is on its Board of Directors. Dr. Patterson also serves as an assistant professor at the Boston University School of Public Health and has been a consultant to many large corporations and government agencies in occupational and environmental medicine.

Edward L. Cahill has served as a director of the Company since November 1996. Mr. Cahill is a General Partner of HLM Management, an asset management firm established to invest in venture capital and small capitalization growth companies. He was a founding partner of Cahill, Warnock & Company, LLC (“Cahill, Warnock”), a private equity firm. Prior to founding Cahill, Warnock in July 1995, Mr. Cahill had been a Managing Director at Alex. Brown & Sons Incorporated where, from 1986 through 1995, he headed the firm’s Health Care Investment Banking Group. Mr. Cahill is also a director of Centene Corp. (Nasdaq: CNTE), Johns Hopkins Medicine and several private companies.

Kevin J. Dougherty served as a director of OH+R from July 1993 and has been a director of the Company since the Merger. Mr. Dougherty is currently a General Partner of The Venture Capital Fund of New England, a venture capital firm he joined in April 1986. Previously, he participated in the venture capital industry as Vice President of 3i Capital Corporation from 1985 to 1986, and as Vice President of Massachusetts Capital Resource Company from 1981 to 1985. Prior to that, Mr. Dougherty served as a commercial banker at Bankers Trust Company and the First National Bank of Boston.

Angus M. Duthie served as a director of OH+R from June 1992 and has been a director of the Company since the Merger. Mr. Duthie is currently a General Partner of Prince Ventures, L.P., a venture capital firm he co-founded in 1978. Mr. Duthie has over 29 years of experience involving portfolio management.

Donald W. Hughes has served as a director of the Company since December 1997 and is a General Partner and Chief Financial Officer of Cahill, Warnock. Prior to joining Cahill, Warnock in February 1997, Mr. Hughes had served as Vice President, Chief Financial Officer and Secretary of Capstone Pharmacy Services, Inc. (Nasdaq: DOSE) from December 1995, and as Executive Vice President and Chief Financial Officer of Broventure Company Inc., a closely-held investment management company from July 1984 to November 1995. Mr. Hughes is also a director of Touchstone Applied Science Associates, Inc. (OTCBB: TASA) and several private companies.

Frank H. Leone has served as a director of the Company since July 1998. In 1985, Mr. Leone founded and has since served as President/Chief Executive Officer of RYAN Associates, and he is the founder and Executive Director of the National Association of Occupational Health Professionals (N.A.O.H.P.). Mr. Leone is also the executive editor of four leading occupational health periodicals: “VISIONS,” “Partners,” the “Workers’ Compensation Managed Care Bulletin,” and the “Clinical Care Update.”

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Steven W. Garfinkle has served as a director of the Company since July 1998. Since January 2002, Mr. Garfinkle has served as Chairman and Chief Executive Officer of Advanced Care Solutions, Inc., a start-up medical staffing company. From November 1999 to December 2001, he served as President and Chief Executive Officer of Maestro Learning, Inc. From September 1998 to November 1999, he was a principal in NorthStar Health Advisors LLC, a private healthcare consultancy group. Mr. Garfinkle served as Chairman and Chief Executive Officer of Prism Health Group Inc. (“Prism”) from 1992 until Prism was sold to Mariner Health, Inc. in 1997 and from 1991 to 1992 was President of New England Health Strategies. From 1982 to 1991, Mr. Garfinkle served as Chief Operating Officer and in several other senior management positions for the Mediplex Group, Inc.

The directors are elected to three-year terms or until their successors have been duly elected and qualified. The terms of Edward L. Cahill and Donald W. Hughes expire at the 2003 Annual Meeting of Stockholders. The terms of Kevin J. Dougherty and Frank H. Leone expire in 2004. Angus M. Duthie, John C. Garbarino and Steven W. Garfinkle were elected in 1999 for three-year terms expiring in 2002. Since their successors have not been duly elected and qualified, they continue to serve as directors of the Company.

Pursuant to the terms of a Stockholders’ Agreement (the “Stockholders’ Agreement”) dated as of November 6, 1996, by and among the Company and certain of the Company’s stockholders, Angus M. Duthie was elected a director in 1999 as the designee of the Telor Principal Stockholders, as defined in the Stockholders’ Agreement. The Stockholders’ Agreement was amended on May 24, 2001 in connection with the distribution by Prince Venture Partners III, L.P. to its partners of the shares of Common Stock held by it, for the purpose of terminating the right of the Telor Principal Stockholders to designate a director, and releasing them from their obligations under the Stockholders’ Agreement arising from their status as Telor Principal Stockholders. Under the Stockholders’ Agreement as further amended on March 24, 2003 in connection with the Company’s repurchase of its Preferred Stock, certain of the Company’s stockholders have agreed to vote all of their shares of Common Stock to elect certain nominees to the Company’s Board of Directors. The Stockholders’ Agreement provides that such nominees are to be determined as follows: (a) the Chief Executive Officer of the Company (presently, John C. Garbarino); (b) a person designated by the OH+R Principal Stockholders, as defined in the Stockholders’ Agreement (presently, Kevin J. Dougherty); (c) two persons designated by Cahill, Warnock Strategic Partners Fund, L.P. (presently, Edward L. Cahill and Donald W. Hughes); (d) a person designated by the Chief Executive Officer (presently, Angus M. Duthie) and (e) two persons unaffiliated with the management of the Company, (the “Independent Directors”) and mutually agreeable to all of the other directors (presently, Frank H. Leone and Steven W. Garfinkle).

Executive officers serve at the discretion of the Company’s Board of Directors. There are no family relationships among the executive officers and directors nor are there any arrangements or understandings between any executive officer and any other person pursuant to which the executive officer was selected.

Other Key Officers

As of January 1, 2003, other key contributing officers of the Company were:

Name	Age	Position with the Company
Mark S. Flieger	46	Senior Vice President, Information Services
Janice M. Goguen	39	Vice President, Finance and Controller
Patti E. Walkover	48	Vice President, Reimbursement and Contracting
Mary E. Kenney	53	Vice President, Northeast Operations
Thomas J. Ward	47	Vice President, Operations

Mark S. Flieger joined the Company as Vice President, Information Services in July 2000 and in December 2001 was appointed Senior Vice President, Information Services. From 1995 to 2000, he held leadership positions with Harvard Pilgrim Health Care, including Senior Director, Information Technology Project Office, Y2K Program Manager, and Manager, IT Services for a five center primary care practice in Rhode Island. From

31

1992 to 1995, Mr. Flieger served as Director of Information Systems and Claims for Health Advantage of Rhode Island, Inc., a Preferred Provider Organization of 2,000 providers and 13 hospitals serving over 60,000 members in Southern New England. Other prior positions include Programmer Analyst and then Manager of Computer Training and Support at Health Systems, Inc. from 1987 to 1992. From 1983 to 1987 he served as a Systems Analyst for the Center for Health Promotion and Environmental Disease Prevention within the Massachusetts Department of Public Health.

Janice M. Goguen has served Vice President, Finance and Controller since May 2000. Previously, she had served as Corporate Controller since joining the Company in October 1997. From November 1992 through October 1997, Ms. Goguen was Corporate Controller for AdvantageHEALTH Corporation, which merged with HEALTHSOUTH Corporation. From August 1985 to November 1992, Ms. Goguen was employed by Ernst & Young, LLP where she planned, managed and executed audits of publicly held, privately owned, and non-profit companies. Ms. Goguen is a Certified Public Accountant.

Patti E. Walkover was appointed Vice President, Reimbursement and Contracting in January 2003. She joined the Company in March 1999 as Vice President, Network Operations. From April 1996 to February 1999, Ms. Walkover served as Vice President, New Markets and Vice President of Operations, respectively, for Healthcare First, a regionally based workers’ compensation managed care company, where she was responsible for network development and operations in New England and New York. Healthcare First was acquired by Gates McDonald in October 1998. Ms. Walkover was Director of Occupational Health and Workers’ Compensation Managed Care at VHA East in Philadelphia from February 1993 to March 1996 where she developed the TeamWorks occupational health plan. Her prior positions include Program Director for the Occupational Health Center at Chester County Hospital (January 1992 to January 1993), and Administrative Director at the Crozier Center for Occupational Health (November 1989 to December 1991), a multi-site occupational health program in greater Philadelphia.

Mary E. Kenney has served as Vice President, Northeast Operations since October 2001. She joined the Company in January 1995 as Manager of Clinical Services, Maine, and served as Regional Operations Director, Maine from May 1998 through September 2001. From May 1990 through December 1994, Ms. Kenney served as Executive Director for the Center for Health Promotion, a division of Maine Medical Center, the largest single provider of occupational medical services in the state of Maine. Other leadership positions included Program Director for Health Promotion and Cardiac Rehabilitation for Geisinger Medical Center in Pennsylvania. In these positions Ms. Kenney was responsible for the start-up and development of the programs, as well as financial and operational oversight.

Thomas J. Ward joined the Company as Vice President, Operations in April 2002. Prior to joining the Company, Mr. Ward served ten years with Concentra, Inc., the nation’s largest company focusing on occupational health services, most recently as Vice President of Business Development. From March 1992 through April 2001, he served as Vice President of Operations with responsibility for a $75 million business unit. From 1987 until February 1992, Mr. Ward served as Director of Operations of The Holly Clinic in Denver, CO where he successfully developed a start-up occupational medicine business into five large, profitable centers. From 1982 through 1987, he served as Director of Operations for Medical Centers of Colorado in Denver, CO, a multi-site urgent care/occupational medicine group. From 1980 to 1982 Mr. Ward served as Assistant Administrator, Ambulatory Services for The Children’s Hospital in Denver, CO.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Act”), requires the Company’s executive officers, as defined for the purposes of Section 16(a) of the Act, and directors and persons who beneficially own more than ten percent of the Company’s Common Stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely on reports and other information submitted by the executive officers, directors and such beneficial owners, the Company believes that during the fiscal year ended December 31, 2002, all such reports were timely filed.

32

ITEM 11.    EXECUTIVE COMPENSATION

Summary Compensation

The following table sets forth certain information regarding the compensation paid by the Company to the Company’s Chief Executive Officer, and the other executive officers whose salary and bonus exceeded $100,000 in 2002 (together the “Named Executive Officers”) for services rendered in all capacities to the Company and its subsidiaries for the fiscal years ended December 31, 2002, 2001 and 2000.

SUMMARY COMPENSATION TABLE

						Long Term Compensation Awards
		Annual Compensation				Securities Underlying Options (#)	All Other Compensation (1)
Name and Principal Position	Year	Salary		Bonus
John C. Garbarino     President and Chief Executive Officer	2002 2001 2000	$	230,000 215,000 200,000	$	10,000 10,500 40,000	100,000 25,000 110,000	$	13,037 12,684 4,686
Lynne M. Rosen     Chief Operating Officer (2)	2002 2001 2000		185,000 165,000 150,000		10,000 10,000 25,000	39,500 20,000 50,000		3,786 2,290 3,456
William B. Patterson, MD, MPH (3)(4)     Chief Medical Officer,         Chair-Medical Policy Board	2002 2001		185,000 146,250		10,000 7,500	10,000 16,500		8,515 2,553
H. Nicholas Kirby     Senior Vice President,         Corporate Development	2002 2001 2000		160,000 150,000 150,000		10,000 5,000 10,000	10,000 3,000 14,000		4,473 4,154 3,658
Keith G. Frey (5)     Chief Financial Officer and Secretary	2002 2001 2000		160,000 140,000 28,090		10,000 10,000 3,000	20,000 20,000 40,000		9,741 9,758 194

(1) Consists of the Company’s matching contributions under its 401(k) plan, car allowances, and group life and disability insurance premiums.

(2) Chief Operating Officer since October 1, 2001; Senior Vice President, Operations from March 1999.

(3) Dr. Patterson was appointed an executive officer of the Company in December 2001.

(4) During 2001, the Company also paid Dr. Patterson $178,520 as final payments due him in connection with the sale of his business to the Company in 1997. This amount was comprised of an additional purchase price payment of $111,645 based on the performance of his former business during the twelve months ended July 31, 2001, a principal payment of $62,500 under a subordinated note, and accrued interest thereon of $4,375.

(5) Mr. Frey joined the Company in September 2000. Compensation in 2000 excludes $28,130 in consulting fees paid to Mr. Frey prior to his joining the Company.

Option Grants

The following table sets forth information with respect to stock options granted to the Named Executive Officers during the fiscal year ended December 31, 2002.

33

OPTION GRANTS IN LAST FISCAL YEAR

Individual Grants

	Number of Securities Underlying Options Granted (#) (1)	% of Total Options Granted to Employees in 2002		Exercise Price Per Share		Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation For Option Term (2)
Name							5%		10%
John C. Garbarino	100,000	34.4	%	$	1.20	12/18/12	$	75,467	$	191,249
Lynne M. Rosen	39,500	13.6			1.20	12/18/12		29,810		75,543
William B. Patterson, MD, MPH	10,000	3.4			1.20	12/18/12		7,547		19,125
H. Nicholas Kirby	10,000	3.4			1.20	12/18/12		7,547		19,125
Keith G. Frey	20,000	6.9			1.20	12/18/12		15,093		38,250

(1) Options granted vest ratably over 4 years on each of the first four anniversary dates of the grant date.

(2) The dollar amounts under these columns are the result of calculations assuming 5% and 10% growth rates as set by the Securities and Exchange Commission and, therefore, are not intended to forecast future price appreciation, if any, of the Company’s Common Stock.

Option Exercises and Year-End Values

The following table sets forth information concerning option holdings as of December 31, 2002 with respect to the Named Executive Officers.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR

AND FISCAL YEAR-END OPTION VALUES

	Shares Acquired On Exercise (#)	Value Realized		Number of Securities Underlying Unexercised Options at FY-End (#)		Value of Unexercised In-The-Money Options at FY-End (1)
Name				Exercisable	Unexercisable	Exercisable		Unexercisable
John C. Garbarino	—	$	—	215,790	173,750	$	—	$	10,000
Lynne M. Rosen	—		—	66,537	79,500		—		3,950
William B. Patterson, MD, MPH.	—		—	29,375	33,125		—		1,000
H. Nicholas Kirby	—		—	50,870	21,750		—		1,000
Keith G. Frey	—		—	25,000	45,000		—		1,000

(1) Based on the fair market value of the Company’s Common Stock as of December 31, 2002 ($1.30) minus the exercise price of options.

Employment Agreements

John C. Garbarino has an employment agreement with the Company dated June 6, 1996. The term of the agreement is two years from such date and renews automatically for successive one-year periods until terminated. The agreement provides for an annual salary of $180,000, subject to increase on an annual basis in the discretion of the board of directors, and bonus as may be determined by the Compensation Committee of the board of directors. Mr. Garbarino is subject to a covenant not to compete with the Company for six months after the termination of his employment. If the Company terminates the agreement without “cause” (as defined in the agreement), or if Mr. Garbarino becomes incapacitated, or if Mr. Garbarino resigns from the Company for “just cause” (as defined in the agreement), then the Company is obligated to pay to Mr. Garbarino six months’ base salary in consideration of his covenant not to compete.

34

Director Compensation

Except for the Independent Directors, the Company’s directors do not receive any cash compensation for service on the Company’s board of directors or any committee thereof, but all directors are reimbursed for expenses actually incurred in connection with attending meetings of the Company’s board of directors and any committee thereof. In 2002, each of the Independent Directors received $1,200 for each meeting of the Company’s board of directors he attended. Beginning in 2003, each Independent Director will receive $2,000 for each meeting of the Company’s board of directors he attends.

Upon election to the Company’s board of directors, each Independent Director was granted a non-qualified stock option to purchase 20,000 shares of the Company’s Common Stock. In December 2002, each Independent Director was granted a non-qualified stock option to purchase 5,000 shares of the Company’s Common Stock as compensation for services rendered in 2002. Except for the Independent Directors, the Company granted in December 2002 to each director who was not an employee a non-qualified stock option to purchase 2,000 shares of the Company’s Common Stock as compensation for services rendered in 2002. The exercise price of all such option grants was the fair market value of the Company’s Common Stock on the date of grant. All such options vest ratably over four years on each of the first four anniversary dates of the dates of grant and are exercisable for a period of ten years.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding beneficial ownership of the Company’s Common Stock as of March 24, 2003 by (i) each person known by the Company to own beneficially more than five percent of the Common Stock of the Company, (ii) each director and nominee for director of the Company, (iii) each Executive Officer of the Company named in the Summary Compensation Table and (iv) all directors and executive officers of the Company as a group. Except as otherwise indicated, all shares are owned directly. Except as indicated by footnote, and subject to community property laws where applicable, the Company believes that the persons named in the table have sole voting and investment power with respect to all shares of Common Stock indicated.

Name and Address of Beneficial Owner	Shares Beneficially Owned	Percent of Total Voting Power
Cahill, Warnock Strategic Partners Fund, L.P. (1) (2) One South Street, Suite 2150 Baltimore, MD 21202	770,871	25.0	%
Venrock Entities (1) (3) 30 Rockefeller Plaza, Room 5508 New York, NY 10112	269,123	8.7	%
FleetBoston Financial Corporation (1) (4) 175 Federal Street, 10th Floor Boston, MA 02110	229,159	7.4	%
The Venture Capital Fund of New England III, L.P. (1) (5) 30 Washington Street Wellesley Hills, MA 02481	191,319	6.2	%
Asset Management Associates 1989, L.P. (1) (6) 480 Cowper Street, 2nd Floor Palo Alto, CA 94301	184,954	6.0	%

35

Name and Address of Beneficial Owner	Shares Beneficially Owned	Percent of Total Voting Power
Pantheon Global PCC Limited (7) Transamerica Center 600 Montgomery Street, 23rd Floor San Francisco, CA 94111	196,775	6.4	%
John C. Garbarino (1) (8)	307,859	9.1	%
Lynne M. Rosen (1) (9)	95,568	3.0	%
H. Nicholas Kirby (10)	62,870	2.0	%
Keith G. Frey (11)	25,000	*
William B. Patterson, MD, MPH (12)	40,175	1.3	%
Edward L. Cahill (13)	18,500	*
Kevin J. Dougherty (14)	18,500	*
Angus M. Duthie (15)	39,180	1.3	%
Donald W. Hughes (16)	17,700	*
Steven W. Garfinkle (17)	27,500	*
Frank H. Leone (18)	27,500	*
All directors and executive officers as a group (11 persons) (19)	680,352	18.1	%

 * Less than 1%

(1) Each of the stockholders who is a party to a certain Amended and Restated Stockholders’ Agreement dated as of March 24, 2003, by and among the Company and certain of its stockholders (the “Stockholders’ Agreement”) may be deemed to share voting power with respect to, and therefore may be deemed to beneficially own, all of the shares of the Common Stock subject to the Stockholders’ Agreement. Such stockholders disclaim such beneficial ownership.

(2) Edward L. Cahill and Donald W. Hughes, directors of the Company, are General Partners of Cahill, Warnock Strategic Partners, L.P., the General Partner of Cahill, Warnock Strategic Partners Fund, L.P. David L. Warnock is also a General Partner of Cahill, Warnock Strategic Partners, L.P. The General Partners of Cahill, Warnock Strategic Partners, L.P. share voting and investment power with respect to the shares held by Cahill, Warnock Strategic Partners Fund, L.P. and may be deemed to be the beneficial owners of such shares. Each of the General Partners of Cahill, Warnock Strategic Partners, L.P. disclaims beneficial ownership of the shares held by Cahill, Warnock Strategic Partners Fund, L.P.

(3) Consists of 130,861 shares of Common Stock held by Venrock Associates and 138,262 shares of Common Stock held by Venrock Associates II, L.P. Michael C. Brooks, Joseph E. Casey, Eric S. Copeland, Anthony B. Evnin, Thomas R. Frederick, Terrence J. Garnett, David R. Hathaway, Bryan E. Roberts, Ray A. Rothrock, Anthony Sun, and Michael F. Tyrell are General Partners of Venrock Associates and of Venrock Associates II, L.P. The General Partners of Venrock Associates and of Venrock Associates II, L.P. share voting and investment power with respect to the shares held by Venrock Associates and by Venrock Associates II, L.P. and may be deemed to be the beneficial owners of such shares. Each of the General Partners of Venrock Associates and Venrock Associates II, L.P. disclaims beneficial ownership of the shares held by Venrock Associates and Venrock Associates II, L.P.

(4) Consists 115,636 shares of Common Stock reported as beneficially owned in Schedule 13G/A dated February 14, 2003 as filed with the Securities and Exchange Commission (the “SEC”) by FleetBoston Financial Corporation as a holding company on behalf of its subsidiary, BancBoston Ventures Inc., and 113,523 shares of Common Stock held in the name of BancBoston Ventures Inc.

(5) Kevin J. Dougherty, a director of the Company, is a General Partner of FH&Co. III, L.P., the General Partner of The Venture Capital Fund of New England III, L.P. Richard A. Farrell, Harry J. Healer, Jr. and William C. Mills III are also General Partners of FH&Co. III, L.P. The General Partners of FH&Co. III, L.P. share voting and investment power with respect to the shares held by The Venture Capital Fund of New England III, L.P. and may be deemed to be the beneficial owners of such shares. Each of the General Partners of FH&Co. III, L.P. disclaims beneficial ownership of the shares held by The Venture Capital Fund of New England III, L.P.

36

(6) Craig C. Taylor, Franklin P. Johnson Jr., John F. Shoch and W. Ferrell Sanders are General Partners of AMC Partners 89, L.P., the General Partner of Asset Management Associates 1989, L.P. The General Partners of AMC Partners 89, L.P. share voting and investment power with respect to the shares held by Asset Management Associates 1989, L.P. and may be deemed to be the beneficial owners of such shares. Each of the General Partners of AMC Partners 89, L.P. disclaims beneficial ownership of the shares held by Asset Management Associates 1989, L.P.

(7) Reported as beneficially owned in Schedule 13G dated July 10, 2000 as filed with the SEC to report shares held by Pantheon Global PCC Limited for its own account for the benefit of its shareholders, Pantheon Global Secondary Fund, L.P., Pantheon Global Secondary Fund, Ltd. and Pantheon International Participations, PLC.

(8) Includes 235,790 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003.

(9) Includes 72,787 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003.

(10) Includes 55,870 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003.

(11) Consists entirely of shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003.

(12) Includes 31,875 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003.

(13) Consists entirely of shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003. Does not include 770,871 shares of Common Stock held by Cahill, Warnock Strategic Partners Fund, L.P. (see Note 2) and 42,713 shares of Common Stock held by Strategic Associates, L.P. Mr. Cahill is a General Partner of Cahill, Warnock Strategic Partners, L.P., the General Partner of each of Cahill, Warnock Strategic Partners Fund, L.P. and of Strategic Associates, L.P. Mr. Cahill disclaims any beneficial ownership of the shares held by Cahill, Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P.

(14) Consists entirely of shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003. Mr. Dougherty disclaims any beneficial ownership in the shares held by The Venture Capital Fund of New England III, L.P. See Note 5.

(15) Includes 18,500 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003.

(16) Consists entirely of shares of Common stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003. Does not include 770,871 shares of Common Stock held by Cahill, Warnock Strategic Partners Fund, L.P. (see Note 2) and 42,713 shares of Common Stock held by Strategic Associates, L.P. Mr. Hughes is a General Partner of Cahill, Warnock Strategic Partners, L.P., the General Partner of each of Cahill, Warnock Strategic Partners Fund, L.P. and of Strategic Associates, L.P. Mr. Hughes disclaims any beneficial ownership of the shares held by Cahill, Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P.

(17) Consists entirely of shares of Common stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003.

(18) Consists entirely of shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003.

(19) Includes an aggregate of 549,522 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2003. Does not include an aggregate of 1,039,994 shares of Common Stock with respect to which certain directors disclaim beneficial ownership. See Notes 2, 5, 13, 14 and 16.

37

EQUITY COMPENSATION PLAN INFORMATION

Plan Category	Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders (1)	1,301,631	$	2.54	73,734
Equity compensation plans not approved by security holders	—		—	—
Total	1,301,631	$	2.54	73,734

(1) Includes the Company’s 1993, 1996, and 1998 Stock Plans. The 1998 Stock Plan, as approved by the Company’s stockholders, reserved 150,000 shares of the Company’s Common Stock for the granting of non-qualified stock options, incentive stock options, and stock appreciation rights. The Company’s board of directors has subsequently approved, without stockholder approval, the reservation of an additional of 720,000 shares of the Company’s Common Stock under the 1998 Stock Plan for the granting of non-qualified stock options and stock appreciation rights.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

No relationships or related transactions exist that require reporting by the Company for the year ended December 31, 2002.

ITEM 14.    CONTROLS AND PROCEDURES

Within 90 days of the filing of this report, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was conducted under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were adequate and designed to ensure that information required to be disclosed by the Company in this report is recorded, processed, summarized and reported in a timely manner, including that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses in internal controls, subsequent to the evaluation described above.

Reference is made to the Certifications of the Chief Executive Officer and Chief Financial Officer about these and other matters following the signature page of this report.

38

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) and (2) Financial Statements and Schedules

The auditors’ report, consolidated financial statements and financial statement schedules listed in the Index to Consolidated Financial Statements and Financial Statement Schedules on page 41 hereof are filed as part of this report, commencing on page 42 hereof.

Schedules Supporting the Financial Statements

Schedule II Valuation and Qualifying Accounts++

(a)(3) Exhibits

3.01(a)		Restated Certificate of Incorporation (Filed as Exhibit 4.1 to Form 8-K/A dated June 6, 1996, File No. 0-21428, and incorporated by reference herein).
(b)		Certificate of Designations (Filed as Exhibit 4.1 to Form 8-K dated November 6, 1996, File No. 0-21428, and incorporated by reference herein).
(c	)	Certificate of Retirement and Prohibition of Reissuance of Shares.++
3.02		Restated Bylaws, as amended.*
4.01		Form of Common Stock Certificate (Filed as Exhibit 4.01 to Form 10-Q for the quarterly period ended June 30, 1996, File No. 0-21428, and incorporated by reference herein).
4.02		Form of Series A Convertible Preferred Stock Certificate (Filed as Exhibit 4.2 to Form 8-K dated November 6, 1996, File No. 0-21428, and incorporated by reference herein).
4.03(a)		Loan and Security Agreement dated and effective as of December 15, 2000 by and between the Company and DVI Business Credit Corporation (“DVI”) (“Loan Agreement”) (Filed as Exhibit 4.03(a) to Form 10-K for the fiscal year ended December 31 2000, File No. 0-21428, and incorporated by reference herein).
(b)		Secured Promissory Note dated March 21, 2003 payable to DVI.++
(c)		Amendment No. 1 dated July 19, 2002 to Loan Agreement.++
(d)		Amendment No. 2 dated March 18, 2003 to Loan Agreement.++
10.01		Employment Agreement by and between the Company and John C. Garbarino dated as of June 6, 1996 (Filed as Exhibit 10.02 to Form 10-Q for the quarterly period ended June 30, 1996, File No. 0-21428, and incorporated by reference herein).
10.02(a)		Series A Convertible Preferred Stock Repurchase Agreement among the Company and certain security holders dated as of March 24, 2003.++
(b)		Amended and Restated Stockholders’ Agreement among the Company and certain security holders dated as of March 24, 2003.++
(c)		Amended and Restated Registration Rights Agreement among the Company and certain security holders dated as of March 24, 2003.++
(d)		Promissory Notes dated March 24, 2003 payable to certain security holders.++
(e	)	Subordination Agreement dated March 24, 2003 by and among the Company, certain security holders, and DVI and DVI Financial Services Inc.++

39

10.03(a)	Lease Agreement dated August 30, 2002 by and between the Company and Somerset Capital Group, Ltd. (“Somerset”) (Filed as Exhibit 10.07(a) to Form 10-Q for the quarterly period ended September 30 2002, File No. 0-21428, and incorporated by reference herein).
(b)	Letter dated August 29, 2002 to the Company from Somerset (Filed as Exhibit 10.07(a) to Form 10-Q for the quarterly period ended September 30 2002, File No. 0-12428, and incorporated by reference herein).
10.04	1998 Stock Plan (as fully amended).++
21.01	Subsidiaries of the Company.++
23.01	Consent of PricewaterhouseCoopers LLP.++
99.01	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.++

* Previously filed as the exhibit stated in Form 10-K for the fiscal year ended December 31, 1996, File No. 0-21428, and incorporated by reference herein.

++ Filed herewith.

The Company agrees to furnish to the Commission a copy of any instrument evidencing long-term debt, which is not otherwise required to be filed.

(b) Reports on Form 8-K

No reports on Form 8-K were filed for events occurring during the last quarter of the fiscal year ended December 31, 2002.

40

OCCUPATIONAL HEALTH + REHABILITATION INC

CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002 and 2001

CONTENTS

Report of Independent Accountants	42
Consolidated Financial Statements
Consolidated Balance Sheets	43
Consolidated Statements of Operations	44
Consolidated Statements of Stockholders’ Equity (Deficit) and Redeemable Stock	45
Consolidated Statements of Cash Flows	46
Notes to Consolidated Financial Statements	47

41

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Shareholders

Occupational Health + Rehabilitation Inc:

In our opinion, the consolidated financial statements listed in the index appearing on page 41 present fairly, in all material respects, the financial position of Occupational Health + Rehabilitation Inc at December 31, 2002 and 2001, and the results of its operations, its changes in stockholders’ equity (deficit) and redeemable stock, and its cash flows for each of the three years ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

March 7, 2003, except for Notes 4 and 10

as to which the date is March 24, 2003

42

OCCUPATIONAL HEALTH + REHABILITATION INC

CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2001

(dollar amounts in thousands)

	2002			2001
ASSETS
Current assets:
Cash and cash equivalents	$	1,674		$	1,607
Accounts receivable, less allowance for doubtful accounts of $969 and $1,169 in 2002 and 2001, respectively		9,736			11,211
Deferred tax assets		654			898
Prepaid expenses and other assets		899			572
Total current assets		12,963			14,288
Property and equipment, net		3,169			2,533
Goodwill, less accumulated amortization of $1,288 in 2002 and 2001		6,174			5,258
Other intangible assets, net		92			160
Deferred tax assets		1,908			1,870
Other assets		91			89
Total assets	$	24,397		$	24,198
LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	755		$	388
Accrued expenses		3,172			3,906
Accrued payroll		2,053			2,491
Current portion of long-term debt		2,332			2,781
Current portion of obligations under capital leases		580			221
Restructuring liability		22			48
Total current liabilities		8,914			9,835
Long-term debt, less current maturities		942			938
Obligations under capital leases		1,040			291
Deferred credit		530			562
Restructuring liability		—			24
Total liabilities		11,426			11,650
Commitments and contingencies
Minority interests		1,422			1,142
Redeemable, Series A convertible preferred stock, $.001 par value, 1,666,667 shares authorized; 1,416,667 shares issued and outstanding		10,653			9,973
Stockholders’ equity:
Preferred stock, $.001 par value, 3,333,333 shares authorized; none issued and outstanding		—			—
Common stock, $.001 par value, 10,000,000 shares authorized; 1,580,366 shares issued in 2002 and 2001; and 1,479,864 shares outstanding in 2002 and 2001		1			1
Additional paid-in capital		8,390			9,070
Accumulated deficit		(6,995	)		(7,138	)
Less treasury stock, at cost, 100,502 shares		(500	)		(500	)
Total stockholders’ equity		896			1,433
Total liabilities, redeemable stock and stockholders’ equity	$	24,397		$	24,198

The accompanying notes are an integral part of these consolidated financial statements.

43

OCCUPATIONAL HEALTH + REHABILITATION INC

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2002, 2001 and 2000

(dollar amounts in thousands)

	2002			2001			2000
Revenue	$	56,949		$	57,017		$	43,683
Expenses:
Operating		49,803			48,476			36,376
General and administrative		4,883			5,096			4,824
Depreciation and amortization		1,012			1,265			1,134
		55,698			54,837			42,334
Gain from operations		1,251			2,180			1,349
Nonoperating gains (losses):
Interest income		26			45			36
Interest expense		(423	)		(507	)		(535	)
Minority interest and contractual settlements, net		(496	)		(329	)		105
Recovery of note receivable		—			—			248
Income before income taxes		358			1,389			1,203
Tax provision (benefit)		215			(2,695	)		34
Net income	$	143		$	4,084		$	1,169
Net (loss) income per common share—basic	$	(0.36	)	$	2.29		$	0.32
Net (loss) income per common share—assuming dilution	$	(0.36	)	$	1.08		$	0.17

The accompanying notes are an integral part of these consolidated financial statements.

44

OCCUPATIONAL HEALTH + REHABILITATION INC

CONSOLIDATED STATEMENTS OF

STOCKHOLDERS’ EQUITY (DEFICIT) AND REDEEMABLE STOCK

For the Years Ended December 31, 2002, 2001 and 2000

(dollar amounts in thousands)

			Common Stock									Treasury Stock
	Redeemable Convertible Preferred Stock Series A		Shares	Amount		Additional paid-in capital			Accumulated deficit			Shares	Amount			Total stockholders’ equity (deficit)
Balance at December 31, 1999	$	8,583	1,479,510	$	1	$	10,460		$	(12,391	)	100,502	$	(500	)	$	(2,430	)
Accretion of preferred stock issuance costs		16					(16	)									(16	)
Accrual of preferred stock dividends		680					(680	)									(680	)
Net income										1,169							1,169
Balance at December 31, 2000		9,279	1,479,510		1		9,764			(11,222	)	100,502		(500	)		(1,957	)
Accretion of preferred stock issuance costs		14					(14	)									(14	)
Exercise of stock options			354				—										—
Accrual of preferred stock dividends		680					(680	)									(680	)
Net income										4,084							4,084
Balance at December 31, 2001		9,973	1,479,864		1		9,070			(7,138	)	100,502		(500	)		1,433
Accrual of preferred stock dividends		680					(680	)									(680	)
Net income										143							143
Balance at December 31, 2002	$	10,653	1,479,864	$	1	$	8,390		$	(6,995	)	100,502	$	(500	)	$	896

The accompanying notes are an integral part of these consolidated financial statements.

45

OCCUPATIONAL HEALTH + REHABILITATION INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2002, 2001 and 2000

(dollar amounts in thousands)

	2002			2001			2000
Operating activities:
Net income	$	143		$	4,084		$	1,169
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation		961			911			782
Amortization		51			354			352
Minority interest		891			699			510
Imputed interest on non-interest bearing promissory note payable		112			112			28
Loss on disposal of fixed assets		13			19			—
Deferred tax expense (benefit)		206			(2,768	)		—
Changes in operating assets and liabilities:
Accounts receivable		1,475			(196	)		(3,910	)
Prepaid expenses and other assets		(390	)		535			(737	)
Restructuring liability		(50	)		(145	)		(677	)
Accounts payable and accrued expenses		(806	)		352			1,341
Net cash provided (used) by operating activities		2,606			3,957			(1,142	)
Investing activities:
Property and equipment additions		(891	)		(993	)		(687	)
Distributions to joint venture partnerships		(886	)		(773	)		(610	)
Cash paid for acquisitions and other intangibles, net of cash acquired		(115	)		584			1,005
Cash received on note receivable		—			248			—
Net cash (used) in investing activities		(1,892	)		(934	)		(292	)
Financing activities:
(Repayment) proceeds from lines of credit and loans payable		(198	)		(2,153	)		2,245
Proceeds from lease lines		766			398			—
Payments of long-term debt and capital lease obligations		(1,205	)		(1,072	)		(766	)
Payments made for debt issuance costs		(10	)		(32	)		(139	)
Cash received from joint ventures and partnerships		—			—			25
Net cash (used) provided by financing activities		(647	)		(2,859	)		1,365
Net increase (decrease) in cash and cash equivalents		67			164			(69	)
Cash and cash equivalents at beginning of year		1,607			1,443			1,512
Cash and cash equivalents at end of year	$	1,674		$	1,607		$	1,443
Noncash items:
Accrual of dividends payable	$	680		$	680		$	680
Notes payable issued as partial consideration for acquisitions		—			—			1,569
Capital leases, excluding proceeds received from lease lines		648			—			94

The accompanying notes are an integral part of these consolidated financial statements.

46

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollar amounts in thousands)

1.    Summary of Significant Accounting Policies

Occupational Health + Rehabilitation Inc (the Company), a leading national occupational healthcare provider, specializes in the prevention, treatment and management of work related injuries and illnesses as well as regulatory compliance services. The Company develops and operates occupational health centers and contracts with other healthcare providers to develop integrated occupational healthcare delivery systems. The Company typically operates the centers under management and submanagement agreements with professional corporations (Physician Practices) that practice exclusively through such centers. Additionally, the Company has entered into joint ventures and management agreements with health systems to provide management and related services to the centers and networks of providers established by the joint ventures or health systems.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its joint ventures and partnerships. All of the outstanding voting equity instruments of the Physician Practices are owned by shareholders nominated by the Company. Through options or employee agreements, the Company restricts transfer of Physician Practice ownership without its consent and can, at any time, require the nominated shareholder to transfer ownership to a Company designee. It is through this structure and through long-term management agreements entered into with the Physician Practices that the Company has an other than temporary controlling financial interest in the Physician Practices.

Most states in which the Company operates have laws and regulations that are often vague limiting the corporate practice of medicine and the sharing of fees between physicians and non-physicians. The Company believes it has structured all of its operations so that they comply with such laws and regulations; however, there can be no assurance that an enforcement agency could not find to the contrary or that future interpretations of such laws and regulations will not require structural and organizational modifications of the Company’s business.

All significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less. Cash and cash equivalents include cash balances of majority-owned joint ventures of $1,398 and $1,261 at December 31, 2002 and 2001, respectively. These funds are utilized only for joint venture purposes unless paid as dividends to the joint venture participants.

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed by the straight-line method over the useful lives of the respective assets. Medical equipment is depreciated over 10 years and furniture and office equipment is depreciated over 5 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset. Depreciation of assets under capital leases is included with depreciation.

Goodwill and Other Intangible Assets

The Company has adopted the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standard (SFAS) 142, Goodwill and Other Intangible Assets, which was effective January 1, 2002.

47

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

SFAS 142 requires, among other things, the discontinuance of goodwill amortization. The carrying value of goodwill is reviewed if the facts and circumstances suggest that it may be impaired. If this review indicates that goodwill will not be recoverable, as determined based on the projected undiscounted cash flows of the entity acquired, over the remaining amortization period, the Company’s carrying value of the goodwill will be reduced by the estimated shortfall of cash flows. No such impairment existed at December 31, 2002 or 2001. Other intangible assets include noncompete agreements and deferred financing costs which are being amortized using the straight-line method over periods of three to five years.

Joint Ventures

The Company has entered into joint ventures with health systems for which the Company owns varying percentages but at least a majority. Accordingly, these joint ventures are consolidated for financial reporting purposes. The minority equity holders’ portions of the equity in the joint ventures are disclosed as an obligation on the balance sheets. The minority equity holders’ portions of the operating results are disclosed in the statements of operations as a nonoperating gain or loss. In connection with certain joint venture agreements, the minority equity holder has agreed to the funding of defined initial operating losses. These amounts are recorded as nonoperating gains in the period losses are incurred.

Contractual Settlements

The Company has entered into management contracts to manage the day-to-day operations of certain clinics. Generally, these contracts require a payment by the Company at the inception of the agreement, which is recorded as an intangible asset and amortized over the initial term of the contract. The contracts generally require the sharing of profits and losses at varying percentages throughout the contract term. The funding/payment of these contractual settlement amounts are recorded as nonoperating gains or losses.

The Company recorded $395 and $370 of funded operating losses and contractual settlements for the years ended December 31, 2002 and 2001, respectively, as nonoperating gains.

Revenue Recognition

Revenue is recorded at estimated net amounts to be received from employers, third-party payers and others for services rendered. The Company operates in certain states that regulate the amounts which the Company can charge for its services associated with work-related injuries and illnesses.

Professional Liability Coverage

The Company maintains entity professional liability insurance coverage on a claims-made basis in all states in which it has centers operating. The Company also maintains shared professional liability insurance coverage in the name of its employed physicians on a claims-made basis in all states except Massachusetts, which is principally on an occurrence basis. The Company has recorded liabilities for deductibles and for claims which may arise after expiration of the existing policies. The Company intends to renew its existing policies and is not aware of any reason it will not be able to do so. Nor is it aware of any claims that may result in a loss in excess of amounts covered by its existing insurance.

Stock Compensation Arrangements

The Company accounts for its stock compensation arrangements under the provisions of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and accordingly recognizes no compensation expense for the issue thereof.

48

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

The Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation, and will continue to account for its stock option plans in accordance with the provisions of APB Opinion No. 25.

Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and long-term debt. The Company believes that the carrying value of its financial instruments approximates fair value.

Segment Reporting

The Company follows SFAS 131, Disclosures about Segments of an Enterprise and Related Information, which establishes standards for related disclosures about products and services, geographic areas, and major customers. All of the Company’s efforts are devoted to occupational healthcare that are managed and reported in one segment. The Company derives all of its revenues from services provided in the United States.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation. These changes included the reclassification of a credit balance arising in connection with a long-term contract entered into by the Company in 2000 with a hospital system to manage its ambulatory care centers. The credit balance represents the net difference between payments made by the hospital system for working capital deficiencies during the first twelve months of operations and the discounted value of a non-interest bearing loan payable to the hospital system by the Company. The balance has been recorded as a deferred credit and is being amortized over the 20-year initial term of the contract.

Recent Accounting Standards

In July 2001, the FASB issued SFAS 142, Goodwill and Other Intangible Assets, which was effective January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill, and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. Adoption of SFAS 142 by the Company on January 1, 2002 resulted in an increase in net income of approximately $186 for the year ended December 31, 2002 compared to the year ended December 2001.

In July 2001, the FASB issued SFAS 143, Accounting for Asset Retirement Obligations. Companies are required to adopt SFAS 143 in their fiscal year beginning after June 15, 2002. SFAS 143 requires that obligations

49

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

associated with the retirement of a tangible long-lived asset be recorded as a liability when these obligations are incurred, with the amount of the liability initially measured at fair value. Upon recognizing a liability, an entity must capitalize the cost by recognizing an increase in the carrying amount of the related long-lived asset, accrete the liability over time to its present value each period, and depreciate the capitalized cost over the useful life of the related asset. Upon settlement of the liability, the obligation is either settled for its recorded amount or a gain or loss is recognized. The Company does not believe adoption of SFAS 143 will have a significant impact on its financial statements.

In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company adopted SFAS 144 for its fiscal year 2002. SFAS 144 changes the criteria that would have to be met to classify an asset as held-for-sale, revises the rules regarding reporting the effects of a disposal of a segment of a business, and requires expected future operating losses from discontinued operations to be displayed in discontinued operations in the periods in which the losses were incurred. The Company does not believe adoption of SFAS 144 will have a material impact on its financial statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. Companies are required to adopt SFAS 145 in their fiscal year beginning after May 15, 2002. On matters with possible application to the Company, SFAS 145 rescinds, SFAS No. 4, Reporting Gains and Losses from Extinguishments of Debt, and SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. SFAS 145 amends SFAS No. 13, Accounting for Leases, to eliminate certain inconsistencies. It also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed circumstances. The Company does not believe adoption of SFAS 145 will have a material impact on its financial statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, rather than recognizing a liability when an entity commits to an exit plan. The statement also establishes that fair value is the objective for initial measurement of the liability. The provisions of SFAS 146 will be effective for exit or disposal activities initiated after December 31, 2002. The Company does not believe adoption of SFAS 146 will have a material impact on its financial statements.

Income Taxes

The Company accounts for income taxes under a liability approach. Under this approach, deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and tax basis of assets and liabilities, as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense or benefit is the result of changes between deferred tax assets and liabilities. A valuation allowance is established when, based on an evaluation of objective verifiable evidence, there is a likelihood that some portion or all of the deferred tax assets will not be realized.

2.    Joint Ventures, Acquisitions and Contractual Settlements

In January 2002, the Company entered into an affiliation with a hospital system in New Jersey to operate its employee health and occupational health programs. In February 2002, the Company purchased two occupational health clinics located in New Jersey and transferred the hospital system’s occupational health programs to these centers. The combined purchase price of these entities was $610, of which $70 was in cash and the balance in the

50

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

form of a subordinated note payable in varying installments through February 2005. The Company recognized goodwill of $621 on these transactions. Effective July 1, 2002, the Company assumed the 40% ownership interest of its joint venture partner in its Rochester, NY center and recognized $193 in goodwill on the transaction. Effective August 1, 2002, the Company increased its ownership in its joint venture in the St. Louis, MO market to 96% from 80%, and recognized $90 in goodwill on the transaction.

In 2001, the Company purchased an occupational medicine business in St. Louis, MO for $77 and recognized goodwill of $57. The acquired revenue stream was incorporated into the Company’s existing Missouri centers.

In 2000, the Company entered into a long-term contract with a hospital system to manage its ambulatory care centers. The initial contract term is 20 years with automatic renewals for successive five year terms. In connection with the execution of the contract, the hospital system agreed to provide the working capital necessary to fund any working capital deficiencies (as defined) during the first twelve months of operations and the Company committed to pay the hospital system $2,000 in equal annual installments over a five year period. The note payable is noninterest-bearing and was initially recorded net of a discount of $558. At December 31, 2002 and 2001, the net amount payable was $893 (note payable of $1,200 less a discount of $307) and $1,181 (note payable of $1,600 less a discount of $419), respectively. At December 31, 2002 and 2001, the net credit balance of the intangible asset was $561 and $592, respectively, representing the net difference between payments made by the hospital system for working capital deficiencies and the discounted value of the non-interest bearing loan payable to the hospital system. The Company is amortizing this net intangible balance over the 20-year initial term of the contract

All acquisitions have been accounted for using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the dates of acquisition. The results of operations of the acquired practices are included in the consolidated financial statements from the respective dates of acquisition.

In connection with certain acquisitions, the Company has entered into contractual arrangements whereby the selling parties are entitled to receive contingent cash consideration based upon the achievement of certain minimum operating results. Obligations related to these contingencies are reflected as additional goodwill in the period they become known.

The pro forma results of operations as if the 2002 and 2001 acquisitions and management contracts had occurred at the beginning of the preceding fiscal year are as follows (unaudited):

	2002			2001
Total revenue	$	57,062		$	59,428
Net income		139			4,112
Net income per common share		(0.37	)		2.31

The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effective on the assumed dates or of the future results of operations of the combined entities. These results highlight the financial condition of the operations prior to the Company’s influence on the acquired businesses.

51

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

3.    Property and Equipment

Property and equipment, inclusive of assets under capital leases, consist of the following at December 31, 2002 and 2001:

	2002			2001
Medical equipment	$	1,520		$	1,357
Furniture and office equipment		4,212			3,118
Leasehold improvements		757			633
Vehicles		13			13
		6,502			5,121
Less accumulated depreciation		(3,333	)		(2,588	)
	$	3,169		$	2,533

Depreciation expense was $961, $911, and $782 for the years ended December 31, 2002, 2001, and 2000, respectively.

Property and equipment under capital leases consist of the following at December 31, 2002 and 2001:

	2002			2001
Medical equipment	$	118		$	67
Furniture and office equipment		1,586			1,025
Leasehold improvements		202			—
		1,906			1,092
Less accumulated depreciation		(218	)		(366	)
	$	1,688		$	726

The Company entered into capital lease obligations of $1,413 and $398 in 2002 and 2001, respectively.

4.    Long-Term Debt, Other Credit Arrangements and Liquidity

Long-term debt consists of the following at December 31, 2002 and 2001:

	2002		2001
Promissory notes bearing interest at rates ranging from 0% to 12.0%,
due in periodic installments through September 2005	$	1,378	$	1,625
Credit line collateralized by certain accounts receivable		1,896		2,094
		3,274		3,719
Less current portion		2,332		2,781
	$	942	$	938

The non-interest bearing note payable over five years to a hospital system has been discounted at 12.0%.

52

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

On December 15, 2000, the Company entered into an agreement with an asset-based lender for a revolving line of credit (the “Credit Line”) of up to $7,250. In March 2003, the asset-based lender extended the term of the Credit Line to March 31, 2004. The Credit Line is collateralized by present and future assets of certain operations of the Company. The borrowing base consists of a certain percentage of eligible accounts receivable (as defined in the agreement). Under the terms of the Credit Line, the Company pays a commitment fee of 0.5% of the unused portion of the Credit Line and certain additional fees. The interest rate under the Credit Line is prime plus 1% (5.25% and 5.75% as of December 31, 2002 and 2001, respectively). At December 31, 2002, the maximum amount available under the lender’s borrowing base formula was $6,882, of which $1,896 was outstanding.

The Credit Line’s covenants include a quarterly tangible net worth requirement of $3,000 (defined as shareholders’ equity plus the Redeemable Series A Convertible Preferred Stock, subordinated debt, and minority interests less intangible assets, goodwill, deferred tax assets, leasehold improvements, deposits and certain prepayments), a leverage coverage ratio not greater than 5.0 to 1.0, and a fixed charge ratio not less than 1.25 to 1.0 as well as certain restrictions relating to the acquisition of new businesses without the prior approval of the asset-based lender. The Company did not meet its fixed charge covenant as of June 30, 2002 and was granted a waiver by the asset-based lender. The Company has been in compliance with all covenants since the third quarter of 2002. As of and for the year ended December 31, 2002, the Company’s tangible net worth, leverage coverage ratio, and fixed charge ratio were $5,096, 1.86, and 1.69, respectively, which were calculated under the terms of the agreement.

As discussed in Note 10, on March 24, 2003, the Company repurchased all of its outstanding Series A Convertible Preferred Stock in exchange for (i) $2,700 in cash at closing, (ii) subordinated debt in the principal amount of $2,700, and (iii) 1,608,247 shares of the Company’s Common Stock. The Company expects that this transaction will cause a debt covenant violation with respect to the tangible net worth requirement during 2003. Accordingly, on March 18, 2003, the asset-based lender reduced the tangible net worth requirement from $3,000 to $2,500.

In February 2002, the Company purchased two occupational health clinics located in New Jersey. The purchase price of these clinics was $610, of which $70 was paid in cash and the balance in the form of a subordinated note payable in varying installments through February 2005. At December 31, 2002, the amount payable was $440.

Aggregate maturities of obligations under long-term debt agreements are as follows:

2003	$	2,332
2004		510
2005		432
	$	3,274

Interest paid in 2002, 2001, and 2000 was $440, $509, and $509, respectively.

Liquidity

The Company expects that its principal use of funds in the foreseeable future, after the cash payment on March 24, 2003 of $2,700 to the holders of Preferred Stock, will be for the repayment of the Notes, and for acquisitions and the formation of joint ventures, working capital requirements, other debt repayments, and purchases of property and equipment. The Company believes that the funds available to it under the Credit Line and other lease lines, together with cash generated from operations, and other sources of funds it anticipates will be available to it will be adequate to meet these projected needs.

53

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

5.    Leases

The Company maintains operating leases for commercial property and office equipment. The commercial leases contain renewal options and require the Company to pay certain utilities and taxes over established base amounts. Operating lease expenses were $3,748, $3,511, and $2,702 for the years ended December 31, 2002, 2001, and 2000, respectively.

In March 2001, the Company entered into an agreement for an Equipment Facility (the “Lease Line”) of $750 to provide secured financing. Borrowings under the facility are repayable over 42 months. The interest rate is based upon the 31 month Treasury Note (“T-Note”) plus a spread and fluctuates with any change in the T-Note rate up until the time of payment commencement for each draw down. At December 31, 2002, the Company had utilized $678 of its Lease Line. Interest rates range from 9.9% to 11.0%.

In August 2002, the Company entered into an agreement for secured equipment lease financing in the approximate amount of $1,600 (the “Secured Line”). Borrowings under the facility are repayable over 36 months. The lease-rate factors are based upon the 36-month Treasury Note yield ten days prior to payment commencement for each drawdown. At the end of the lease term, the Company may either purchase the equipment for its fair market value, renew the lease on a year-to-year basis at its then fair market value, or return the equipment with no further obligation. The Company intends to utilize this lease line primarily to fund its equipment needs relating to the upgrade of its practice management system. At December 31, 2002, the Company had utilized $1,098 of the Secured Line. Interest rates range from 3.2% to 9.6%.

The Company has also entered into other equipment lease arrangements with various lenders. Interest rates on these leases range from 11.3% to 18.3%.

Future minimum lease payments under capital leases and noncancelable operating leases are as follows:

	Capital Leases		Operating Leases
2003	$	673	$	2,326
2004		635		1,710
2005		478		1,031
2006		9		811
2007 and thereafter		5		389
Total minimum lease payments		1,800	$	6,267
Less: amounts representing interest		180
Present value of net minimum lease payments	$	1,620

In connection with the 1999 restructuring plan (Note 9), minimum operating lease payments of $19, payable in 2003, have been recorded as a restructuring liability on the Company’s balance sheet at December 31, 2002. Accordingly, they are not included above.

54

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

6.    Income Taxes

For the years ended December 31, 2002 and 2001, the provision for income taxes consist of the following:

	2002			2001
Current:
Federal	$	(18	)	$	25
State		27			48
Total current		9		$	73
Deferred:
Federal		164			(2,441	)
State		42			(327	)
Total deferred		206			(2,768	)
Total	$	215		$	(2,695	)

In 2002, the Company’s effective tax rate of 60.1% differed from the federal statutory tax rate primarily due to state income taxes and the disproportionately greater impact that certain permanent adjustments had on the relatively low level of earnings. In 2001, the Company reported a negative effective tax rate as a result of changes in the valuation allowance against the Company’s net deferred tax assets.

At December 31, 2002 and 2001, the components of the Company’s deferred tax assets and liabilities were:

	2002			2001
Deferred tax assets:
Net operating loss carryforwards	$	2,157		$	1,953
Other		654			906
Total deferred tax assets		2,811			2,859
Deferred tax liabilities:
Depreciation and amortization		(249	)		(91	)
Deferred tax assets, net	$	2,562		$	2,768

At December 31, 2001, the Company, having determined that its recent operating results and forecasted future income supported an assertion that ultimate realization of its net deferred tax assets was more likely than not, fully released the valuation allowance which had in prior years offset such deferred tax assets, and recorded a deferred tax benefit of $2,768.

At December 31, 2002, the Company had federal net operating loss carryforwards of $5,947 which begin to expire in 2009. Of this amount, $2,625 is subject to an annual limitation on usage under the change in stock ownership rules of the Internal Revenue Code.

7.    Stockholders’ Equity and Redeemable Preferred Stock

Net Income (Loss) Per Common Share

The Company calculates earnings per share in accordance with SFAS 128, Earnings Per Share, which requires disclosure of basic and diluted earnings per share. Basic earnings per share excludes any dilutive effects of options and convertible securities while diluted earnings per share includes such amounts. For purposes of the net income (loss) per share calculation, the income (loss) available to common shareholders has been adjusted for accrued but unpaid dividends on the preferred stock ($680 in 2002, 2001, and 2000) and for preferred stock accretion of issuance costs ($0, $14, and $16 in 2002, 2001, and 2000, respectively). For 2002, the effect of options, convertible preferred stock and a convertible note payable is not considered since it would be antidilutive.

55

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

	2002			2001			2000
Basic Earnings per Share:
Net income	$	143		$	4,084		$	1,169
Accretion on preferred stock redemption value and dividends accrued		(680	)		(694	)		(696	)
Net (loss) income available to common shareholders	$	(537	)	$	3,390		$	473
Total weighted average shares outstanding—basic		1,480			1,480			1,480
Net (loss) income per common share—basic	$	(0.36	)	$	2.29		$	0.32
	2002			2001			2000
Diluted Earnings per Share:
Net income	$	143		$	4,084		$	1,169
Accretion on preferred stock redemption value and dividends accrued		(680	)		(694	)		(696	)
Interest expense on convertible subordinated debt		—			12			12
Net (loss) income available to common shareholders	$	(537	)	$	3,402		$	485
Share data (000)
Total weighted average shares outstanding		1,480			1,480			1,480
Incremental shares from assumed conversion of Series A preferred stock		—			1,417			1,417
Options		—			239			14
Convertible subordinated debt		—			25			25
Total weighted average shares outstanding—assuming dilution		1,480			3,161			2,936
Net (loss) income available per common share—assuming dilution	$	(0.36	)	$	1.08		$	0.17
For the year ended December 31, 2002, $(0.36) is both the basic and diluted net loss per common share. The weighted average shares outstanding for the following potentially dilutive securities were excluded from the computation of diluted loss per common share because the effect would have been antidilutive.
Share data (000)	2002			2001			2000
Incremental shares from assumed conversion of Series A preferred stock		1,417			—			—
Stock options		1,301			856			961
		2,718			856			961

Preferred Stock

At December 31, 2002, 5,000,000 shares of preferred stock, $.001 par value, were authorized, with 1,666,667 of such shares designated as Series A Convertible Preferred Stock. On November 6, 1996, the Company issued 1,416,667 shares of redeemable Series A Convertible Preferred Stock (Series A) in a private placement at a purchase price of $6.00 per share. Each share of Series A was convertible, at the option of the holder, into one share of Common Stock, subject to certain adjustments.

On March 24, 2003, the Company repurchased all of its outstanding Series A shares for (i) $2,700 in cash at closing, (ii) subordinated promissory notes (the “Notes”) in the principal amount of $2,700, and (iii) 1,608,247 shares of the Company’s Common Stock. The Notes will bear interest at 8% and will be payable in three equal

56

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

principal installments, together with interest accrued thereon, 12, 15 and 18 months after the date of issuance. In the event of a default, the interest rate will increase to 15% until the default is cured.

Commencing November 6, 1999, dividends became payable on the shares of Series A when and if declared by the Company’s board of directors and thereafter accrued at an annual cumulative rate of $.48 per share, subject to certain adjustments. At December 31, 2002 and 2001, $2,153 and $1,473, respectively, of dividends were accrued and included in the carrying value of the preferred stock.

Shares Reserved for Future Issuance

At December 31, 2002, the Company has reserved shares of common stock for future issuance for the following purposes:

Conversion of Series A preferred stock	1,416,667
Stock Plans	1,375,365
	2,792,032

8.    Benefit Plans

Stock Plans

1998 Stock Plan: In January 1998, the Company’s board of directors adopted the 1998 Stock Plan,which provided for the granting of up to 150,000 non-qualified stock options, incentive stock options, and stock appreciation rights to employees, directors, and consultants of the Company. In 2000, 2001, and 2002, the Company’s board of directors increased the number of shares of common stock issuable under the plan by 379,000, 141,000, and 200,000, respectively. At December 31, 2002, 870,000 shares were issuable under the 1998 Stock Plan.

1996 Stock Plan: In October 1996, the Company’s board of directors adopted the 1996 Stock Plan, which provides for the granting of up to 265,000 nonqualified stock options and stock appreciation rights to employees, directors and consultants of the Company.

Non-qualified options granted under both the 1998 and 1996 Stock Plans may not be priced at less than 50% of the fair market value of the common stock on the date of grant.

1993 Stock Plan: The Company’s 1993 Stock Plan provides for the granting of options to purchase up to 245,000 shares of the Company’s Common Stock.

The options in all of the above plans generally become exercisable over a four-year period and generally expire in ten years.

A summary of the activity under the stock plans follows:

	2002		Weighted- average exercise price		2001		Weighted- average Exercise Price		2000		Weighted- average exercise price
Outstanding, at beginning of year	1,095,117		$	2.93	975,020		$	3.15	509,370		$	4.73
Granted	308,500			1.29	147,000			2.04	558,150			1.92
Exercised	—			—	(354	)		1.77	—			—
Canceled	(101,986	)		2.91	(26,549	)		2.75	(92,500	)		4.40
Outstanding, at end of year	1,301,631		$	2.54	1,095,117		$	2.93	975,000		$	3.15

57

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

Related information for options outstanding and exercisable as of December 31, 2002 under the stock plans is as follows:

Range of exercise prices	Options Outstanding	Options Exercisable	Weighted- average Remaining Life (years)
$1.20—1.77	478,098	113,098	6.56
2.00—2.98	482,150	200,815	7.78
3.00—3.75	128,424	116,674	4.90
4.50—6.00	212,959	212,959	4.55
	1,301,631	643,546

Pro Forma Information for Stock-Based Compensation

Pro forma information regarding net income and earnings per share, as if the Company had used the fair value method of SFAS 123 to account for stock options issued under its Plans, is presented below. The fair value of stock activity under these plans was estimated at the date of grant using the minimum value method for options granted prior to 1996, the date of the Company’s merger, and the Black-Scholes option pricing model for options granted in and subsequent to 1996. The following weighted-average assumptions were used to determine the fair value for 2002, 2001, and 2000, respectively: a risk-free interest rate of 3.4% in 2002, 4.6% in 2001, and 6.2% in 2000; an expected dividend yield of 0% each year; an average volatility factor of the expected market price of the Company’s common stock over the expected life of the options of 1.219 in 2002, 0.938 in 2001, and 2.460 in 2000; and a weighted-average expected life of the options of five to six years.

For purposes of pro forma disclosures, the estimated fair value of options is amortized to expense over the related vesting period. Pro forma information is as follows:

	2002			2001		2000
Pro forma net (loss) income	$	(809	)	$	2,844	$	237
Pro forma net (loss) income per share—basic		(0.55	)		1.92		0.16

Retirement Plan

The Company has a qualified 401(k) plan for all employees meeting certain eligibility requirements. The Company contributes a stipulated percentage based on employee contributions. Company contributions to the 401(k) plan were $294, $278, and $228 during 2002, 2001, and 2000, respectively.

9.    Restructuring Charges

During the fourth quarter of 1999, the Company began to implement a restructuring plan to close certain centers that were either outside of the Company’s core occupational health focus or were deemed not capable of achieving significant profitability due to specific market factors. As a result of the restructuring plan and other actions, the Company recorded restructuring and other charges of $2,262 during the fourth quarter of 1999. The restructuring plan also included the streamlining of certain other remaining operations and the elimination or combining of various other positions within the Company.

58

OCCUPATIONAL HEALTH + REHABILITATION INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar amounts in thousands)

The total number of employees terminated in conjunction with the restructuring plan was 64, all of whom terminated employment with the Company by the end of the first quarter of 2000. The employees affected by the restructuring plan included medical, physical therapy and administrative staff at the closed centers.

The restructuring charges primarily included severance and other expenses related to the terminations, fixed asset disposals and goodwill impairments for centers that were closed, contractual expenses including lease abandonment costs, receivable write-downs related to accounts receivable at centers that were deemed to be uncollectible, and miscellaneous related charges. The lease abandonment charge included an estimate of sublet income.

During 2001 and 2000, the Company negotiated buyout terms for some or all of the space at certain of the closed centers. At December 31, 2002, the Company’s obligation for future lease payments and other charges relating to the closed centers was $22.

The initial charge recognized at December 31, 1999 and the status of the related accrued liabilities at December 31, 2002 and 2001 are as follows:

			December 31, 2001				December 31, 2002
Description	Initial Charge		Payments		Accruals		Payments		Accruals
Accrued liabilities:
Severance costs	$	151	$	—	$	—	$	—	$	—
Lease abandonment costs		683		145		72		50		22
Miscellaneous		68		—		—		—		—
		902	$	145	$	72	$	50	$	22
Assets impairments
Fixed asset writedowns and disposals		319
Goodwill impairment		340
Receivable writedown		690
Miscellaneous		11
	$	2,262

For the year ended December 31, 1999, the revenues at the closed centers were $3,492 and the net operating losses were $565.

10.    Subsequent Events

Effective January 31, 2003, the Company terminated a long-term management contract in exchange for transfer of title to the Company of four occupational health centers which the Company had previously managed. The Company agreed to pay $25 for its share of the centers’ assets. There will be a final settlement between the parties as of June 30, 2003 after the Company has collected all amounts owed to, and paid all amounts owed by, the network as of the termination date.

On March 24, 2003, the Company repurchased all of its outstanding Series A Convertible Preferred Stock, namely 1,416,667 shares, for (i) $2,700 in cash at closing, (ii) subordinated promissory notes (the “Notes”) in the principal amount of $2,700, and (iii) 1,608,247 shares of the Company’s Common Stock. The Notes will bear interest at 8% and will be payable in three equal principal installments, together with interest accrued thereon, 12, 15 and 18 months after the date of issuance. In the event of a default, the interest rate will increase to 15% until the default is cured.

59

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

Occupational Health + Rehabilitation Inc

December 31, 2002

	Allowance for Doubtful Accounts December 31,
	2002			2001			2000
Beginning balance	$	1,168,800		$	1,255,200		$	744,100
Charged to revenue		1,069,300			714,900			738,800
Deductions (1)		(1,268,800	)		(801,300	)		(227,700	)
Ending balance	$	969,300		$	1,168,800		$	1,255,200

(1) Uncollectible accounts written off, net of recoveries.

60

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 28, 2003

OCCUPATIONAL HEALTH + REHABILITATION INC.
By:	/s/    JOHN C. GARBARINO
	John C. Garbarino President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    JOHN C. GARBARINO         John C. Garbarino	President and Chief Executive Officer (principal executive officer)	March 28, 2003
/s/    KEITH G. FREY         Keith G. Frey	Chief Financial Officer and Secretary (principal financial officer)	March 28, 2003
/s/    JANICE M. GOGUEN         Janice M. Goguen	Vice President, Finance and Controller (principal accounting officer)	March 28, 2003
/s/    EDWARD L. CAHILL         Edward L. Cahill	Director	March 28, 2003
/s/    KEVIN J. DOUGHERTY         Kevin J. Dougherty	Director	March 28, 2003
/s/    ANGUS M. DUTHIE         Angus M. Duthie	Director	March 28, 2003
/s/    DONALD W. HUGHES         Donald W. Hughes	Director	March 28, 2003
/s/    FRANK H. LEONE         Frank H. Leone	Director	March 28, 2003
/s/    STEVEN W. GARFINKLE         Steven W. Garfinkle	Director	March 28, 2003

61

CERTIFICATIONS

I, John C. Garbarino, certify that:

1.    I have reviewed this annual report on Form 10-K of Occupational Health + Rehabilitation Inc;

2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)    presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.    The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003

/s/    John C. Garbarino

John C. Garbarino

President and Chief Executive Officer

62

I, Keith G. Frey, certify that:

1.    I have reviewed this annual report on Form 10-K of Occupational Health + Rehabilitation Inc;

2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)    presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.    The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003

/s/    Keith G. Frey

Keith G. Frey

Chief Financial Officer

63

EXHIBIT INDEX

Exhibit No.	Description
3.01 (c)	Certificate of Retirement and Prohibition of Reissuance of Shares
4.03 (b)	Secured Promissory Note dated March 21, 2003 payable to DVI Business Credit Corporation (“DVI”)
(c)	Amendment No. 1 dated July 19, 2002 to Loan Agreement
(d)	Amendment No. 2 dated March 18, 2003 to Loan Agreement
10.02 (a)	Series A Convertible Preferred Stock Repurchase Agreement among the Company and certain security holders dated as of March 24, 2003
(b)	Amended and Restated Stockholders’ Agreement among the Company and certain security holders dated as of March 24, 2003
(c)	Amended and Restated Registration Rights Agreement among the Company and certain security holders dated as of March 24, 2003
(d)	Promissory Notes dated March 24, 2003 payable to certain security holders
(e)	Subordination Agreement dated March 24, 2003 by and among the Company, certain security holders, and DVI and DVI Financial Services Inc.
10.04	1998 Stock Plan (as fully amended)
21.01	Subsidiaries of the Company
23.01	Consent of PricewaterhouseCoopers LLP
99.01	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

64

EX-3.01(C)

                                                                 Exhibit 3.01(c)


        CERTIFICATE OF RETIREMENT AND PROHIBITION OF REISSUANCE OF SHARES
                                       OF
                    OCCUPATIONAL HEALTH + REHABILITATION INC

                         (Pursuant to Section 243 of the
               General Corporation Law of the State of Delaware)


         OCCUPATIONAL HEALTH + REHABILITATION INC, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware does hereby certify as follows:

1. The name of the corporation is Occupational Health + Rehabilitation Inc (the
"Corporation").

2. The Corporation has repurchased all of its outstanding shares of Series A
Convertible Preferred Stock ("Series A Preferred Stock"), namely 1,416,667
shares.

3. The Certificate of Designations filed November 6, 1996 authorizing the
designation of 1,666,667 shares of the Corporation's Preferred Stock as Series A
Preferred Stock and specifying its terms prohibits the reissuance of any shares
of Series A Preferred Stock that are redeemed or repurchased.

4. The Corporation has, by resolution of its board of directors, retired
1,416,667 shares of Series A Preferred Stock and shall not reissue such shares
as shares of Series A Preferred Stock. Such 1,416,667 shares shall resume the
status of Preferred Stock of the Corporation, undesignated as to relative
rights, designations, preferences, special rights and restrictions until further
action of the Corporation.

         IN WITNESS WHEREOF, Occupational Health + Rehabilitation Inc has caused
this certificate to be signed by John C. Garbarino, its President, this 25th day
of March, 2003.


                                 OCCUPATIONAL HEALTH + REHABILITATION INC


                                 By: /s/ John C. Garbarino
                                     --------------------------------------
                                     John C. Garbarino, President

EX-4.03(B)

                                                                 Exhibit 4.03(b)

                  AMENDED AND RESTATED SECURED PROMISSORY NOTE

$7,250,000.00                                             Dated:  March 18, 2003


     FOR VALUE RECEIVED, the undersigned (collectively and individually
"Borrower") hereby promises to pay to DVI Business Credit Corporation or its
assignee (the "Holder") or order, the principal sum of Seven Million Two Hundred
Fifty Thousand Dollars ($7,250,000.00) or such amount thereof as may be from
time to time advanced hereunder and pursuant to the terms of that certain Loan
and Security Agreement dated as of December 15, 2000 between Holder as Lender,
and Borrower as Borrower (as amended by that certain Amendment No. 1 dated July
19, 2002, Amendment No. 2 dated of even date herewith and as may be hereafter
amended from time to time, the "Agreement"), with interest on the unpaid
principal balance from time to time outstanding until paid at the fluctuating
rate of interest provided in the Agreement; computed on the basis of a 360-day
year and actual days elapsed, until paid. Interest shall be payable on the first
of each month this Note is outstanding in accordance with the terms of the
Agreement, with all unpaid principal and interest due and payable in full on the
expiration of the term of the Agreement. Capitalized terms used but not defined
herein shall have the meanings given them in the Agreement.

     If any part of the interest due on this Note is not paid when due, it shall
be added to the principal amount of this Note and thereafter bear interest at
the rate provided in the Agreement. If the specified interest rate shall at any
time exceed the maximum allowed by law, then the applicable interest rate shall
be reduced to the maximum allowed by law.

     1. Borrower may only have the right to prepay or terminate this Note if and
when such right is expressly provided for in the Agreement.

     2. Principal and interest shall be payable to Holder at 2500 York Road,
Jamison, PA 18929, or such other place as the Holder may, from time to time in
writing, appoint.

     3. This Note is made pursuant to, and secured by, the Collateral and the
Agreement. This Note is also secured by all of the other Loan Documents. The
Agreement and the other Loan Documents create a lien on and security interest in
the Collateral. The Agreement and the other Loan Documents are hereby
incorporated by reference in and made a part of this Note.

     4. The occurrence of any Event of Default shall, at the election of the
Holder, make the entire unpaid balance of the principal amount of this Note and
accrued interest immediately due and payable without notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor,
or other notices or demands of any kind or character.

     5. Failure of the Holder to exercise the acceleration option of paragraph 4
of this Note on the occurrence of any of the events enumerated therein shall not
constitute waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.

     6. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. Borrower waives presentment, demand
for payment, notice of nonpayment, protest and notice of protest, and all other
notices and demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note. Borrower consents to any and all
assignments of this Note, extensions of time, renewals and waivers that may be
made or granted by the Holder. Borrower expressly agrees that such assignments,
extensions of time, renewals or waivers shall not affect Borrower's liability.
Borrower agrees that Holder may, without notice to Borrower and without
affecting the liability of Borrower, accept additional or substitute security
for this Note, release any security or any




party liable for this Note or extend or renew this Note. Borrower may not assign
any of its rights or delegate any of its obligations under this Note. Any such
assignment or delegation by Borrower shall be void.

     7. Upon or after and during the continuance of any Event of Default, in
addition to any and all other remedies available to Holder, the outstanding
principal balance of this Note shall bear interest at a variable rate per annum
equal to the Default Interest Rate until the principal balance of this Note is
paid in full.

     8. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan Documents, Borrower
promises to pay the Holder all costs of collection and enforcement including,
without limitation, reasonable attorneys' fees.

     9. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.

     10. This Note shall inure to the benefit of the Holder's successors and
assigns. References to the "Holder" shall be deemed to refer to the holder(s) of
this Note at the time such reference becomes relevant.

     11. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greater extent
permitted by law and shall in no other way be affected, impaired or invalidated.

     12. Nothing contained herein or in any Loan Document shall be deemed to
prevent recourse to and the enforcement against Borrower and the Collateral of
all liabilities, obligations and undertakings contained herein and in the Loan
Documents.

     13. This Note amends and restates in its entirety that certain Secured
Promissory Note, dated December 15, 2000 made by Borrower in favor of Holder, as
may have been amended from time to time; and the undersigned each confirm that
all of the Collateral pledged to Holder as security for the obligations of
Borrower thereunder continues to be and shall be Collateral for the obligations
of Borrower, hereunder.

     14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF CALIFORNIA AND BORROWER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF CALIFORNIA.





     IN WITNESS WHEREOF, Borrower has executed this Note by their duly
authorized officers in favor of Lender intending to be legally bound effective
as of the date first above written.

BORROWER:                              BORROWER:
OCCUPATIONAL HEALTH +                  OCCUPATIONAL HEALTH PHYSICIANS OF
REHABILITATION INC,                    NEW JERSEY, P.A., A NEW JERSEY
A DELAWARE CORPORATION                 PROFESSIONAL SERVICE CORPORATION

By:  /s/ Keith G. Frey                 By: /s/ Keith G. Frey
     ------------------------------    -----------------------------------
Print Name: Keith G. Frey              Print Name: Keith G. Frey
Title: CFO                             Title: Vice President


BORROWER:                              BORROWER:
CM OCCUPATIONAL HEALTH, LIMITED        OHR-SSM, LLC, A MISSOURI LIMITED
LIABILITY COMPANY, A MAINE LIMITED     LIABILITY COMPANY
LIABILITY COMPANY
                                       By: Occupational Health +
By: Occupational Health +                  Rehabilitation Inc, A Delaware
Rehabilitation Inc, A Delaware             Corporation, its Member and Manager
Corporation, Its Member and Manager
                                       By: /s/ Keith G. Frey
By: /s/ Keith G. Frey                  -----------------------------------
    -------------------------------    Print Name: Keith G. Frey
Print Name: Keith G. Frey              Title: CFO
Title: CFO





GUARANTOR ACKNOWLEDGEMENT:

The undersigned acknowledges that Lender has no obligation to provide it with
notice of, or to obtain its consent to, the terms of the foregoing Amended and
Restated Secured Promissory Note. The undersigned nevertheless acknowledges as
of March 18, 2003 and agrees to the terms and conditions of this Note and
acknowledges that its Guaranty remains fully valid, binding and enforceable
against it in accordance with its terms.

GUARANTOR:                             GUARANTOR:
SPORTS MEDICINE SYSTEMS PHYSICAL       OCCUPATIONAL HEALTH PHYSICIAN OF
THERAPY, INC.                          NEW YORK, P.C.

By: /s/ Matthew D. Flynn               By: /s/ William B. Patterson
    -------------------------------    -----------------------------------
Print Name: Matthew D. Flynn           Print Name: William B. Patterson, MD
Title: President                       Title: President

GUARANTOR:                             GUARANTOR:
OCUPATIONAL HEALTH PHYSICIANS, INC.    OHP-VT, INC.

By:  /s/ Dana Sparhawk                 By: /s/ William Mercia
     ------------------------------        -------------------------------
Print Name: Dana Sparhawk              Print Name: William Mercia, MD
Title: President                       Title: Secretary

EX-4.03(C)

                                                                Exhibit 4.03 (c)

                                 AMENDMENT NO. 1
                                       TO
                           LOAN AND SECURITY AGREEMENT
                             DATED DECEMBER 15, 2000
                                      AMONG
                    OCCUPATIONAL HEALTH + REHABILITATION INC
                CM OCCUPATIONAL HEALTH, LIMITED LIABILITY COMPANY
                                  0HR-SSM, LLC
                       OCCUPATIONAL HEALTH CONNECTION LLC
               OCCUPATIONAL HEALTH PHYSICIANS OF NEW JERSEY, P.A.
                                       AND
                         DVI BUSINESS CREDIT CORPORATION

     This Amendment No. 1 ("Amendment") to the Loan and Security Agreement is
made and entered into as of July 19, 2002, by and between Occupational Health +
Rehabilitation Inc ("OHR"), a Delaware corporation; CM Occupational Health,
Limited Liability Company ("CM"), a Maine limited liability company; OHR-SSM,
LLC ("OHR-SSM"), a Missouri limited liability company; Occupational Health
Connection LLC ("OHC"), a New York limited liability company and Occupational
Health Physicians of New Jersey, P.A. ("OHP"), a New Jersey professional service
corporation (collectively and individually referred to as "Borrowers") and DVI
Business Credit Corporation ("Lender").

                                    RECITALS

          A.   Borrowers and Lender entered into a Loan and Security Agreement
               dated December 15, 2000 and other related documents, instruments
               and agreements (collectively referred to as the "Agreement").

          B.   Borrowers and Lender desire to amend certain terms of the
               Agreement on and subject to the terms of this Amendment.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are being acknowledged and affirmed, the parties hereto
agree as follows:

     1.   Occupational Health Connection, LLC is hereby deleted as a Borrower to
the Agreement, each and every reference to "Borrower" in each Loan Document
shall be deemed to exclude Occupational Health Connection LLC as a Borrower, on
and after the date of this Amendment.

     2.   Occupational Health Physicians of New Jersey, P.A., is hereby added to
the Agreement as a Borrower. Occupational Health Physicians of New Jersey, P.A.
hereby: (a) becomes a Borrower under, in accordance with and subject to the
terms and conditions of the Agreement, the Note and the other Loan Documents;
(b) joins in and agrees to be bound by and perform in accordance with the terms
of the Agreement, the Note and the other Loan Documents; and (c) subject to the
provisions of Section 2.15 of the Agreement, confirms that it shall be jointly
and severally liable to Lender for all of the Obligations. Occupational Health
Physicians of New Jersey, P.A. hereby makes in favor of Lender all of the
representations, warranties, covenants and agreements set forth in the Agreement
and the other Loan Documents. Each and every reference to "Borrower" in each
Loan Document shall be deemed to include Occupational Health Physicians of New
Jersey, P.A. along with the existing Borrowers, on and after the date of this
Amendment.

                                        1



     3.   The exact name of OHP is Occupational Health Physicians of New Jersey,
P.A. organized under the laws of the State of New Jersey. The following are all
previous legal names of OHP: None

OHP uses the following trade names: None

     4.   The chief executive office of OHP is located at: 4 Glenn Road, Bound
Brook, NJ 088805 OHP maintains all of its records with respect to Accounts at
the following address: c/o Occupational Health + Rehabilitation Inc, 175 Derby
Street, Suite 36, Hingham, MA 02043

     5.   Section 1.1 "Account Debtors" definition shall be amended in its
entirety to read as follows:

           ""Account Debtors" shall have the meaning given the term "account
debtor" in the UCC."

     6.   Section 1.1 "Accounts" definition shall be amended in its entirety to
read as follows:

           ""Accounts" means all accounts, accounts receivable, monies and debt
obligations in any form owing to any Borrower (whether arising in connection
with contracts, contract rights, instruments, general intangibles or chattel
paper) arising out of the rendition of services by such Borrower whether or not
earned by performance and includes, without limitation, health-care-insurance
receivables, all amounts due under any contract listed on Schedule 6.1, and any
other property and rights set forth in the definition of "account" in the UCC."

     7.   The following definitions shall be added to Section 1.1:

           "OHP" shall mean Occupational Health Physicians of New Jersey, P.A.

           "OHP Borrowing Base" shall mean on the date of determination thereof,
an amount equal to the lesser of (i) the sum of eighty-five percent (85%) of the
Net Collectible Value of OHP's Eligible Accounts, or (ii) the aggregate total of
the monthly Accounts collections for OHP over the immediately preceding three
(3) month period.

     8.   Section 2.4 "The Borrowing Base" shall be amended in its entirety to
read as follows:

           "Section 2.4 The Borrowing Base. Two times a month, the Borrowing
Base will be recalculated by adding new billings to the prior Borrowing Base's
Eligible Accounts and subtracting deposits and adjustments, and then multiplying
this amount by the Net Collectible Percentage. The Borrowing Base shall be
calculated on the basis of the reports delivered to Lender pursuant to Section
5.4. To the extent that any Borrower fails to deliver the Borrowing Base report
to Lender, the Borrowing Base shall be reduced by the full amount of all lock
box collections related to that Borrower."

     9.   Section 3.1 "Grant of Security Interest" shall be amended in its
entirety to read as follows:

           "Section 3.1 Grant of Security Interest. In order to secure prompt
payment and performance of all Obligations, each Borrower hereby grants to
Lender a continuing first-priority pledge and security interest in all of each
Borrower's: (i) present and future Accounts including without limitation
health-care-insurance receivables, chattel paper, instruments, investment
property, documents, and general intangibles including without limitation
payment intangibles; (ii) deposit accounts, lockbox accounts, credit insurance,
guaranties, and letter-of-credit rights; (iii) deposits, reserves, Medicare or
Medicaid pools, cost report settlements, prospective payments, adjustments and
incentive payments of any kind; (iv) inventory, equipment, goods and fixtures;
(v) attachments, accessories, accessions, returns, repossessions, exchanges,
substitutions and replacements thereto; (vi) Borrower's Books related to the
foregoing; and (vii) all income, proceeds and products and any and all security
for any of the foregoing; all whether now owned or existing or hereafter
acquired or arising and regardless of where located (collectively, the
"Collateral"). This security interest in the Collateral shall attach to all
Collateral without further action on the part of Lender or Borrower.

          The Collateral, as defined in the DVIFS Documents also secures all
Obligations of Borrower under this Agreement. The Collateral as defined in this
Section 3 also secures all obligations due DVIFS under the DVIFS

                                        2



Documents."

     10.  Section 5.4 "The Borrowing Base and Other Reports" letter (a) shall be
amended in its entirety to read as follows:

            Section 5.4 Borrowing Base and Other Reports

          "(a) Reports. OHR, on behalf of each Borrower, shall deliver to Lender
on the third Friday of each month by Internet E-Mail or in a computer disc or
tape format acceptable to Lender, in form and content satisfactory to Lender (i)
a Borrowing Base report updated to reflect billings, adjustments and
collections; and (ii) a summary system generated accounts receivable aging
report by Financial Class."

     Borrower hereby agrees to execute and deliver such other and further
documents and instruments as Lender may request to implement the provisions of
this Amendment and the Agreement and to perfect and protect the Liens and
security interests created by the Loan Documents.

     Lender is entering into this Amendment without any forbearance, and without
waiver or prejudice of defaults, events of default, and any rights or remedies
Lender has or may have under the Agreement and applicable law. Except as
otherwise agreed to in writing, Lender hereby expressly reserves the right to
declare a default in accordance with the Agreement and exercise all of Lender's
rights and remedies thereunder.

     All capitalized terms used herein and not otherwise defined herein shall
have the same meaning as in the Agreement. Any provision in the Amendment hereof
that may be contrary to any provision of the Agreement shall prevail and
override the Agreement. Except as expressly set forth herein, all other
provisions of the Agreement shall remain in full force and effect. Borrower and
Lender warrant to each other that this Amendment has been authorized and duly
executed and is binding on all parties hereto.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.

                                                     
BORROWER:                                               LENDER:
OCCUPATIONAL HEALTH + REHABILITATION INC                DVI BUSINESS CREDIT CORPORATION

By: /s/ Keith G. Frey                                   By: /s/ Gerald A. Hayes, Jr.
   -------------------------------------------             -------------------------------------
Print Name: Keith G. Frey                               Print Name: Gerald A. Hayes, Jr.
            ----------------------------------                      ----------------------------
Title: Chief Financial Officer                          Title: Executive Vice President & Chief Operating Officer
       ---------------------------------------                 --------------------------------------------------

BORROWER:                                               BORROWER:
CM OCCUPATIONAL HEALTH,                                 OHR-SSM, LLC
LIMITED LIABILITY COMPANY

By: /s/ Keith G. Frey                                   By: /s/ Keith G. Frey
   -------------------------------------------             -------------------------------------
Print Name: Keith G. Frey                               Print Name: Keith G. Frey
            ----------------------------------                      ----------------------------
Title: Chief Financial Officer                          Title: Chief Financial Officer
       ---------------------------------------                 ---------------------------------
Occupational Health + Rehabilitation Inc                Occupational Health + Rehabilitation Inc
Its Member and Manager                                  Its Member and Manager

BORROWER:                                               BORROWER:
OCCUPATIONAL HEALTH PHYSICIANS                          OCCUPATIONAL HEALTH CONNECTION LLC
OF NEW JERSEY, P.A.
By: /s/ Keith G. Frey                                   By: /s/ Keith G. Frey
   -------------------------------------------             -------------------------------------
Print Name: Keith G. Frey                               Print Name: Keith G. Frey
            ----------------------------------                      ----------------------------
Title: Vice President                                   Title: Chief Financial Officer
       ---------------------------------------                 ---------------------------------
                                                        Occupational Health + Rehabilitation Inc
                                                        Its Member and Manager



                                        3

EX-4.03(D)

                                                                 Exhibit 4.03(d)

                                 AMENDMENT NO. 2
                                       TO
                           LOAN AND SECURITY AGREEMENT
                       DATED DECEMBER 15, 2000, AS AMENDED
                                      AMONG
                    OCCUPATIONAL HEALTH + REHABILITATION INC
                CM OCCUPATIONAL HEALTH, LIMITED LIABILITY COMPANY
                                  OHR-SSM, LLC
               OCCUPATIONAL HEALTH PHYSICIANS OF NEW JERSEY, P.A.
                                       AND
                         DVI BUSINESS CREDIT CORPORATION

     This Amendment No. 2 ("Amendment") to the Loan and Security Agreement is
made and entered into effective as of March 18, 2003, by and among Occupational
Health + Rehabilitation Inc, a Delaware corporation; CM Occupational Health,
Limited Liability Company, a Maine limited liability company; OHR-SSM, LLC, a
Missouri limited liability company; and Occupational Health Physicians of New
Jersey, P.A., a New Jersey professional service corporation (collectively
referred to as "Borrowers" and individually as "Borrower") and DVI Business
Credit Corporation ("Lender").

                                    RECITALS

          A.   Borrowers and Lender entered into that certain Loan and Security
               Agreement dated December 15, 2000, and all amendments thereto
               (collectively referred to as the "Agreement") pursuant to which
               Borrowers obtained a revolving credit line facility from Lender.

          B.   Borrowers and Lender desire to amend certain terms of the
               Agreement on and subject to the terms of this Amendment.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are being acknowledged and affirmed, the parties hereto
agree as follows:

          1. Amendments.

               (a) The first sentence in Section 2.8 of the Agreement is hereby
          amended in its entirety to read as follows: "The term of this
          Agreement is for the period from the Effective Date through March 31,
          2004 ("Initial Term") and is non-cancelable."

               b) Section 9.20 Financial Covenants (a) shall be amended in its
          entirety to read as follows: "(a) OHR, on a consolidated basis, shall
          maintain the following financial covenants, measured in accordance
          with GAAP: (i) minimum Tangible Net Worth of no less than: (A)
          $2,500,000 at March 31, 2003 and at the end of each calendar quarter
          through March 31, 2004; (B) in the event the Loan is renewed in
          accordance with the terms set forth in the Agreement, $2,500,000 at
          June 30, 2004 and at the end of each calendar quarter through
          September 30, 2004, and $3,000,000 at December 31, 2004 and at the end
          of each calendar quarter through the remainder of the term, (ii)
          Maximum Leverage Coverage Ratio of 5.0 to 1.0, and (iii) Fixed Charge
          Coverage of not less than 1.25 to 1.0."

          2. Conditions to Closing. As of the execution date of this Amendment,
     Borrower will have delivered to Lender the following, in form and content
     satisfactory to Lender:



               (a) Amended and Restated Secured Promissory Note;

               (b) Secretary Certificates for all Borrowers;

               (c)  Such other and further documents and instruments as Lender
                    may request to implement the provisions of this Amendment
                    and the Agreement and to perfect and protect the Liens and
                    security interests created by the Loan Documents.

          3. No Waiver or Delay. Lender is entering into this Amendment without
     any forbearance, and without waiver or prejudice of defaults, events of
     default, and any rights or remedies Lender has or may have under the
     Agreement and applicable law. Accept as otherwise agreed to in writing,
     Lender hereby expressly reserves the right to declare a default in
     accordance with the Agreement and exercise all of Lender's rights and
     remedies thereunder.

          4. Miscellaneous. All capitalized terms used herein and not otherwise
     defined herein shall have the same meaning as in the Agreement. Any
     provision in this Amendment that may be contrary to any provision of the
     Agreement shall prevail and override the Agreement. Except as expressly set
     forth herein, all other provisions of the Agreement shall remain in full
     force and effect. Each Borrower and Lender warrant to each other that this
     Amendment has been authorized and duly executed and is binding on all
     parties hereto as of the date first above written.

     IN WITNESS WHEREOF, Borrowers and Lender have executed this Amendment by
their duly authorized officers intending to be legally bound effective as of the
date first above written.

                                           LENDER:
                                           DVI BUSINESS CREDIT CORPORATION


                                           By:  /s/ Gerald A. Hayes, Jr.
                                              ----------------------------------
                                           Print Name: Gerald A. Hayes, Jr.
                                           Title: Executive Vice President &
                                                  Chief Operating Officer

BORROWER:                                  BORROWER:
OCCUPATIONAL HEALTH + REHABILITATION INC,  OCCUPATIONAL HEALTH PHYSICIANS OF
A DELAWARE CORPORATION                     NEW JERSEY, P.A., A NEW JERSEY
                                           PROFESSIONAL SERVICE CORPORATION

By: /s/ Keith G. Frey                      By: /s/ Keith G. Frey
    -----------------------------------        ---------------------------------
Print Name: Keith G. Frey                  Print Name: Keith G. Frey
Title: CFO                                 Title: Vice President


BORROWER:                                  BORROWER:
CM OCCUPATIONAL HEALTH, LIMITED            OHR-SSM, LLC, A MISSOURI LIMITED
LIABILITY COMPANY, A MAINE LIMITED         LIABILITY COMPANY
LIABILITY COMPANY

By: Occupational Health +                  By: Occupational Health +
Rehabilitation Inc,                        Rehabilitation Inc,
A Delaware Corporation,                    A Delaware Corporation,
Its Member and Manager                     its Member and Manager

By: /s/ Keith G. Frey                      By: /s/ Keith G. Frey
    --------------------------------       ------------------------------------
Print Name: Keith G. Frey                  Print Name: Keith G. Frey
Title: CFO                                 Title: CFO



GUARANTOR ACKNOWLEDGEMENT:

The undersigned acknowledges that Lender has no obligation to provide it with
notice of, or to obtain its consent to, the terms of the foregoing Amendment to
the Agreement. The undersigned nevertheless acknowledges and agrees to the
terms and conditions of this Amendment and acknowledges as of March 18, 2003
that its Guaranty remains fully valid, binding and enforceable against it in
accordance with its terms.

GUARANTOR:                                 GUARANTOR:
SPORTS MEDICINE SYSTEMS PHYSICAL           OCCUPATIONAL HEALTH PHYSICIAN OF
THERAPY, INC.                              NEW YORK, P.C.

By: /s/ Matthew D. Flynn                   By: /s/ William B. Patterson
    -------------------------------        -----------------------------------
Print Name: Matthew D. Flynn               Print Name: William B. Patterson, MD
Title: President                           Title: President

GUARANTOR:                                 GUARANTOR:
OCUPATIONAL HEALTH PHYSICIANS, INC.        OHP-VT, INC.

By:  /s/ Dana Sparhawk                     By: /s/ William Mercia
     ------------------------------            ---------------------------------
Print Name: Dana Sparhawk                  Print Name: William Mercia, MD
Title: President                           Title: Secretary

EX-10.02(A)

                                                                Exhibit 10.02(a)



                      SERIES A CONVERTIBLE PREFERRED STOCK
                              REPURCHASE AGREEMENT


                                     Between


                    OCCUPATIONAL HEALTH + REHABILITATION INC


                                       and


                 THE SERIES A CONVERTIBLE PREFERRED STOCKHOLDERS
                               NAMED ON SCHEDULE I


                           Dated as of March 24, 2003




                                TABLE OF CONTENTS

1.   Authorization; Purchase of Series A Preferred ..........................  1
  1.1  Authorization ........................................................  1
  1.2  Repurchase of Series A Preferred at the Closing ......................  1
2.   Closing; Delivery ......................................................  1
  2.1  The Closing ..........................................................  1
  2.2  Delivery .............................................................  2
3.   Representations and Warranties of the Company ..........................  2
  3.1  Organization and Corporate Power; No Violations ......................  2
  3.2  Authorization ........................................................  3
  3.3  Capitalization .......................................................  4
  3.4  Contracts and Commitments ............................................  5
  3.5  Financial Statements .................................................  5
  3.6  Events Subsequent to the Date of the Balance Sheet ...................  6
  3.7  Litigation; Compliance with Law ......................................  6
  3.8  Loans and Advances ...................................................  7
  3.9  Assumptions, Guaranties, Etc. of Indebtedness of Other Persons .......  7
  3.10 Significant Customers and Suppliers ..................................  7
  3.11 Governmental Approvals ...............................................  7
  3.12 Certain Agreements of Officers .......................................  8
  3.13 No Insolvency ........................................................  8
  3.14 ERISA ................................................................  8
  3.15 Transactions with Affiliates .........................................  9
  3.16 Securities Act of 1933 ...............................................  9
  3.17 Registration Rights ..................................................  9
  3.18 Insurance ............................................................  9
  3.19 Books and Records ....................................................  9
  3.20 Title to Assets ......................................................  9
  3.21 Burdensome Restrictions ..............................................  9
  3.22 Computer Programs .................................................... 10
  3.23 Intellectual Property Rights ......................................... 11
  3.24 Taxes ................................................................ 11
  3.25 Disclosure ........................................................... 11
  3.26 Additional Information ............................................... 11
4.   Covenants ..............................................................  2
5.   Representations and Warranties of the Sellers .......................... 13
6.   Conditions to the Obligations of the Sellers ........................... 14
  6.1  Accuracy of Representations and Warranties ........................... 14
  6.2  Performance .......................................................... 14
  6.3  Documents; Corporate Approvals ....................................... 15
  6.4  Payment of Costs ..................................................... 16
  6.5  Board of Directors ................................................... 16
  6.6  Sellers' Participation ............................................... 16
  6.7  Consents, Waivers, Etc. .............................................. 16




7.   Conditions to the Obligations of the Company ........................... 16
  7.1  Accuracy of Representations and Warranties ........................... 16
  7.2  Performance .......................................................... 16
  7.3  Approvals ............................................................ 17
  7.4  Stockholders' Agreement, Registration Rights Agreement and
       Subordination Agreement .............................................. 17
  7.5  Sellers' Participation ............................................... 17
8.   Successors and Assigns ................................................. 17
9.   Survival of Representations and Warranties ............................. 17
10.  Costs, Expenses and Taxes .............................................. 17
11.  Notices ................................................................ 17
12.  Brokers ................................................................ 18
13.  Entire Agreement ....................................................... 18
14.  Amendments and Waivers ................................................. 18
15.  Counterparts ........................................................... 19
16.  Captions ............................................................... 19
17.  Severability ........................................................... 19
18.  Waiver of Preemptive Rights ............................................ 19
19.  Governing Law .......................................................... 19

SCHEDULES:

Schedule I   Schedule of Sellers

EXHIBITS:

Exhibit A    Form of Promissory Note
Exhibit B    Disclosure Schedule
Exhibit C    Opinion of Shipman & Goodwin LLP
Exhibit D    Amended and Restated Stockholders' Agreement
Exhibit E    Amended and Restated Registration Rights Agreement
Exhibit F    Subordination Agreement


[The Company agrees to furnish supplementally a copy of any omitted schedule to
the Commission upon request.]






                         SERIES A CONVERTIBLE PREFERRED
                           STOCK REPURCHASE AGREEMENT

     This Series A Convertible Preferred Stock Repurchase Agreement (the
"Agreement") dated as of March 24, 2003 is between Occupational Health +
Rehabilitation Inc, a Delaware corporation (the "Company"), and the several
holders of Series A Convertible Preferred Stock, par value $.001 per share (the
"Series A Preferred") named in the attached Schedule I (each individually, a
"Seller" and collectively, the "Sellers").

     In consideration of the mutual promises and covenants contained in this
Agreement, and intending to be legally bound by the terms and conditions of this
Agreement, the parties hereto hereby agree as follows:

     1.   Authorization; Purchase of Series A Preferred.

          1.1  Authorization.

               (a) Common Stock. The Company has duly authorized the issuance of
          up to 1,608,247 shares of its previously authorized but unissued
          shares of Common Stock, par value $.001 per share (the "Repurchase
          Stock") to the Sellers.

               (b) The Notes. The Company has duly authorized the issuance of
          the Company's Promissory Notes in the original aggregate principal
          amount of up to $2,699,740.35 (collectively, the "Notes" and
          individually, a "Note") to the Sellers. Each Note will be
          substantially in the form set forth in Exhibit A hereto.

          1.2 Repurchase of Series A Preferred at the Closing. Upon the terms
     and subject to the conditions hereof, at the Closing each Seller agrees,
     severally but not jointly, to sell to the Company all of its shares of
     Series A Preferred as set forth opposite such Seller's name on the attached
     Schedule I under the heading "Series A Preferred Shares", and the Company
     agrees to repurchase all such shares of Series A Preferred. The aggregate
     purchase price of the Series A Preferred being repurchased by the Company
     from each Seller at the Closing is set forth opposite such Seller's name on
     the attached Schedule I and includes: (i) that number of shares of
     Repurchase Stock set forth opposite such Seller's name on the attached
     Schedule I under the heading "Shares of Repurchase Stock"; (ii) a Note in
     the principal amount set forth opposite such Seller's name on the attached
     Schedule I under the heading "Notes"; and (iii) the dollar amount set forth
     opposite such Seller's name on the attached Schedule I under the heading
     "Cash".

     2. Closing; Delivery.

          2.1 The Closing. The closing of the repurchase of the Series A
     Preferred pursuant to this Agreement shall take place by mail and/or
     facsimile at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High
     Street, Boston, Massachusetts 02110 on March 24, 2003,




     or at such other time, date, and place as are mutually agreeable to the
     Company and the Sellers (the "Closing"). The date of the Closing is
     hereinafter referred to as the "Closing Date."

          2.2 Delivery. At the Closing, upon the terms and subject to the
     conditions hereof, each Seller shall deliver to the Company the
     certificates evidencing the shares of Series A Preferred to be sold by each
     Seller at the Closing accompanied by executed stock powers and, in payment
     therefor, the Company shall deliver to each Seller the certificates
     evidencing the number of shares of Repurchase Stock to be issued to such
     Seller at the Closing or issue on the Closing Date irrevocable instructions
     to the Company's transfer agent to deliver such stock certificates as soon
     as practicable after the Closing, a Note evidencing the aggregate principal
     amount set forth opposite the Seller's name on Schedule I under the heading
     "Notes," and the dollar amounts to be paid to such Seller at the Closing.
     The Company shall make payment of all dollar amounts to be paid at the
     Closing to each Seller by wire transfer in immediately available funds.

     3. Representations and Warranties of the Company. For purposes of this
Section 3, unless otherwise specified, the term Company shall include the
Company and each of its Subsidiaries. Except as disclosed in the Disclosure
Schedule attached hereto as Exhibit B (the "Disclosure Schedule"), the Company
hereby represents and warrants to the Sellers as follows:

          3.1 Organization and Corporate Power; No Violations.

               (a) The Company is a corporation duly organized, validly existing
          and in corporate good standing under the laws of the State of Delaware
          and is qualified to do business as a foreign corporation in each
          jurisdiction in which such qualification is required, except where the
          failure to be so qualified would not have either individually or in
          the aggregate, a material adverse effect on the business, operations,
          affairs or condition (financial or otherwise), assets, liabilities or
          contractual rights of the Company (a "Material Adverse Effect"). The
          Company has all required corporate power and authority to own its
          property, to carry on its business as presently conducted or
          contemplated, to enter into and perform this Agreement, the Amended
          and Restated Stockholders' Agreement (the "Stockholders' Agreement"),
          the Amended and Restated Registration Rights Agreement (the
          "Registration Rights Agreement"), the Subordination Agreement (the
          "Subordination Agreement"), the Notes and the other agreements,
          documents and instruments contemplated hereby or executed in
          connection herewith (collectively with this Agreement, the
          "Transaction Documents"), and generally to carry out the transactions
          contemplated hereby or executed in connection herewith. The copies of
          the Restated Certificate of Incorporation and Certificate of
          Designations (collectively, the "Restated Charter") and By-laws of the
          Company, as amended to date, which have been furnished to the Sellers
          by the Company, are correct and complete at the date hereof.

               (b) The Company is in compliance with the terms and provisions of
          this Agreement and of its Restated Charter and Bylaws, and with all
          mortgages, indentures, leases, agreements and other instruments, if
          any, by which it is bound or to which it or any of its respective
          properties or assets are subject. The Company is in





          compliance with all judgments, decrees, governmental orders, statutes,
          rules or regulations by which it is bound or to which any of its
          properties or assets are subject. Neither the execution and delivery
          of this Agreement or the other Transaction Documents, or the issuance
          of the Repurchase Stock or Notes, nor the consummation of any
          transaction contemplated by this Agreement or the Transaction
          Documents, has constituted or resulted in or will constitute or result
          in a default or violation of any term or provision of any of the
          foregoing documents, instruments, judgments, agreements, decrees,
          orders, statutes, rules and regulations.

               (c) Section 3.1(c) of the Disclosure Schedule contains a list of
          all subsidiaries of the Company and its equity interest therein.
          Except for such subsidiaries, the Company does not (i) own of record
          or beneficially, directly or indirectly, (A) any shares of capital
          stock or securities convertible into capital stock of any other
          corporation or (B) any participating interest in any partnership,
          joint venture or other non-corporate business enterprise or (C) any
          assets comprising the business or obligations of any other
          corporation, partnership, joint venture or other non-corporate
          business enterprise, or (ii) control, directly or indirectly, any
          other entity. Each of the Company's corporate subsidiaries and limited
          liability company subsidiaries is a corporation or limited liability
          company duly incorporated or organized, as the case may be, validly
          existing and in good standing under the laws of its respective
          jurisdiction of incorporation or organization, as the case may be, and
          is duly licensed or qualified to transact business as a foreign
          corporation or limited liability company, as the case may be, and is
          in good standing in each jurisdiction in which the nature of the
          business transacted by it or the character of the properties owned or
          leased by it requires such licensing or qualification, except where
          the failure to be so qualified would not have a Material Adverse
          Effect. Each of the subsidiaries referenced above has the corporate
          power or entity power, as the case may be, and authority to own and
          hold its properties and to carry on its business as now conducted and
          as proposed to be conducted. All of the outstanding shares of capital
          stock or equity interests, as the case may be, of each of the
          subsidiaries are owned beneficially and of record by the Company, one
          of its other wholly-owned subsidiaries, or any combination of the
          Company and/or one or more of its other wholly-owned subsidiaries, in
          each case free and clear of any liens, charges, restrictions, claims
          or encumbrances of any nature whatsoever; and there are no outstanding
          subscriptions, warrants, options, convertible securities, or other
          rights (contingent or other) pursuant to which any of the subsidiaries
          is or may become obligated to issue any shares of its capital stock or
          equity interests, as the case may be, to any person other than the
          Company or one of the other subsidiaries.

          3.2 Authorization. The Transaction Documents are valid and binding
     obligations of the Company, enforceable in accordance with their respective
     terms. The execution, delivery and performance of the Transaction Documents
     have been duly authorized by all necessary corporate or other action of the
     Company. The issuance and delivery of the Repurchase Stock, the Notes and
     the cash in accordance with this Agreement has been duly authorized and
     reserved for issuance, as the case may be, by all necessary corporate
     action on the part of the Company. The Repurchase Stock, when issued and
     delivered against the shares of




     Series A Preferred therefor in accordance with the provisions of this
     Agreement, will be duly authorized and validly issued, fully paid and
     non-assessable, is not subject to preemptive rights or other preferential
     rights in any present or future stockholders of the Company, will not be
     subject to any lien, and will not conflict with any provision of any
     agreement or instrument to which the Company is a party or by which it or
     its property is bound. The Notes, when issued and delivered against the
     shares of Series A Preferred therefor in accordance with the provisions of
     this Agreement, will be duly authorized and validly issued, and will not
     conflict with any provision of any agreement or instrument to which the
     Company is a party or by which it or its property is bound. No consent,
     approval or authorization of, or designation, declaration or filing with,
     any governmental authority or any other person or entity is required in
     connection with the execution, delivery and performance of the Transaction
     Documents, or the issuance and delivery of the Repurchase Stock and Notes
     in accordance with the terms of this Agreement or the consummation of any
     other transaction contemplated hereby or by the other Transaction Documents
     other than (i) filings pursuant to federal and state securities laws (all
     of which filings have been made by the Company, other than those which are
     required to be made after the Closing and which will be duly made on a
     timely basis) in connection with the issuance of the Repurchase Stock and
     (ii) with respect to the Registration Rights Agreement, the registration of
     the shares covered thereby with the Commission and filings pursuant to
     state securities laws.

          3.3 Capitalization. The authorized capital stock of the Company
     consists of (i) 5,000,000 shares of Preferred Stock, par value $.001 per
     share (the "Preferred Stock"), of which 1,666,667 shares have been
     designated Series A Preferred, and (ii) 10,000,000 shares of Common Stock.
     Immediately prior to the Closing, 1,479,864 shares of Common Stock will be
     validly issued and outstanding, fully paid and nonassessable with no
     personal liability attaching to the ownership thereof and 1,416,667 shares
     of Series A Preferred will be validly issued and outstanding, fully paid
     and nonassessable with no personal liability attaching to the ownership
     thereof. All the outstanding shares of capital stock of the Company have
     been duly authorized, and are validly issued, fully paid and
     non-assessable. The designations, powers, preferences, rights,
     qualifications, limitations and restrictions in respect of each class and
     series of authorized capital stock of the Company are as set forth in the
     Restated Charter and all such designations, powers, preferences, rights,
     qualifications, limitations and restrictions are valid, binding and
     enforceable and in accordance with all applicable laws. Except as set forth
     in the attached Disclosure Schedule, (i) no subscription, warrant, option,
     convertible security, or other right (contingent or other) to purchase or
     otherwise acquire equity securities of the Company is authorized or
     outstanding and (ii) there is no commitment by the Company to issue shares,
     subscriptions, warrants, options, convertible securities, or other such
     rights or to distribute to holders of any of its equity securities any
     evidence of indebtedness or asset. Except as provided for in the Restated
     Charter or as set forth in the attached Disclosure Schedule, the Company
     has no obligation (contingent or other) to purchase, redeem or otherwise
     acquire any of its equity securities or any interest therein or to pay any
     dividend or make any other distribution in respect thereof. Except for the
     Stockholders' Agreement, there are no voting trusts or agreements,
     stockholders' agreements, pledge agreements, buy-sell agreements, rights of
     first refusal, preemptive rights or proxies relating to any securities of
     the Company or any of its subsidiaries (whether or not the Company or any
     of its subsidiaries is a party thereto). All of the outstanding





     securities of the Company were issued in compliance with all applicable
     federal and state securities laws and no stockholder has a right of
     rescission with respect thereto.

          3.4 Contracts and Commitments. Except as set forth on the Disclosure
     Schedule or as filed as an exhibit to the Company's periodic reports filed
     pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
     Act"), the Company (i) is not a party to any oral or written contract,
     obligation, instrument, corporate restriction or commitment which involves
     a potential commitment in excess of $150,000 or which is otherwise material
     and not entered into in the ordinary course of business, and (ii) does not
     have any oral or written employment or consulting contracts; stock
     redemption or purchase agreements; registration rights agreements;
     non-competition agreements; financing agreements; licenses; contracts
     regarding intellectual property; agreements with officers, directors,
     employees or shareholders of the Company or persons or organizations
     related to or affiliated with any such persons (except for agreements
     between the Company and the Series A Preferred); leases; or agreements
     relating to product development.

          The Company and, to the Company's knowledge, each other party thereto
     have in all material respects performed all the actions required to be
     performed by them to date, have received no notice of default and are not
     in default under any lease, agreement or contract now in effect to which
     the Company is a party or by which it or its property may be bound. The
     Company has no present expectation or intention of not fully performing all
     its respective material obligations under each such lease, contract or
     other agreement, and the Company has no knowledge of any material breach or
     anticipated breach by the other party to any contract or commitment to
     which the Company is a party.

          3.5 Financial Statements. The Company has furnished to the Sellers the
     unaudited consolidated balance sheet of the Company and its subsidiaries as
     of September 30, 2002 (the "Balance Sheet") and the related unaudited
     consolidated statements of income, stockholders' equity and cash flows of
     the Company and its subsidiaries for the nine-months ended September 30,
     2002, All such financial statements have been prepared in accordance with
     United States generally accepted accounting principles consistently applied
     (except that such unaudited financial statements do not contain all of the
     required footnotes and interim statements do not contain year-end
     adjustments), or where different from generally accepted accounting
     principles, SEC requirements, and fairly present the consolidated financial
     position of the Company and its subsidiaries as of September 30, 2002 and
     December 31, 2001, respectively, and the consolidated results of
     operations, cash flows and stockholders' equity of the Company and its
     subsidiaries for the nine months ended September 30, 2002 and the year
     ended December 31, 2001, respectively. Since the date of the Balance Sheet,
     (i) there has been no change in the business, assets, liabilities or
     condition (financial or otherwise) of the Company and its subsidiaries (on
     a consolidated basis) from that reflected in the Balance Sheet except for
     changes in the ordinary course of business which in the aggregate have not
     been materially adverse and (ii) none of the business, prospects, financial
     condition, operations, property or affairs of the Company and its
     subsidiaries (on a consolidated basis) has been materially adversely
     affected by any occurrence or development, individually or in the
     aggregate, whether or not insured against.




     The Company does not have any material liability, contingent or otherwise,
     not adequately reflected in or reserved against in the aforesaid financial
     statements or in the notes thereto.

          3.6 Events Subsequent to the Date of the Balance Sheet. Since the date
     of the Balance Sheet, the Company has not (i) issued any stock, bond or
     other corporate security, (ii) borrowed any amount or incurred or become
     subject to any liability (absolute, accrued or contingent), except current
     liabilities incurred and liabilities under contracts entered into in the
     ordinary course of business, (iii) discharged or satisfied any lien or
     encumbrance or incurred or paid any obligation or liability (absolute,
     accrued or contingent) other than current liabilitiesshown on the Balance
     Sheet and current liabilities incurred since the date of the Balance Sheet
     in the ordinary course of business, (iv) declared or made any payment or
     distribution to stockholders or purchased or redeemed any share of its
     capital stock or other security, (v) mortgaged, pledged, encumbered or
     subjected to lien any of its assets, tangible or intangible, other than
     liens of current real property taxes not yet due and payable, (vi) sold,
     assigned or transferred any of its tangible assets except in the ordinary
     course of business, or cancelled any debt or claim, (vii) sold, assigned,
     transferred or granted any exclusive license with respect to any patent,
     trademark, trade name, service mark, copyright, trade secret or other
     intangible asset, (viii) suffered any loss of property or waived any right
     of substantial value whether or not in the ordinary course of business,
     (ix) made any change in officer compensation except in the ordinary course
     of business and consistent with past practice, (x) made any material change
     in the manner of business or operations of the Company, (xi) entered into
     any transaction except in the ordinary course of business or as otherwise
     contemplated hereby or (xii) entered into any commitment (contingent or
     otherwise) to do any of the foregoing.

          3.7 Litigation; Compliance with Law. There is no (i) action, suit,
     claim, proceeding or investigation pending or, to the best of the Company's
     knowledge, threatened against or affecting the Company, any of its
     respective properties or assets, or against an officer, employee or holder
     of more than 5% of the capital stock of the Company relating to the
     business of the Company, at law or in equity, or before or by any federal,
     state, municipal or other governmental department, commission, board,
     bureau, agency or instrumentality, domestic or foreign (including, without
     limitation, an action which directly or indirectly challenges the validity
     of this Agreement, or any action taken or to be taken pursuant hereto or
     pursuant to any Transaction Document), (ii) arbitration proceeding relating
     to the Company pending under collective bargaining agreements or otherwise
     or (iii) governmental inquiry pending or, to the best of the Company's
     knowledge, threatened against or affecting the Company (including without
     limitation any inquiry as to the qualification of the Company to hold or
     receive any license or permit), in each case, which would be required to be
     disclosed in the Company's periodic reports under the Exchange Act and, to
     the best of the Company's knowledge, there is no basis for any of the
     foregoing. The Company has not received any opinion or memorandum or legal
     advice from legal counsel to the effect that it is exposed, from a legal
     standpoint, to any liability or disadvantage which may be material to its
     business, prospects, financial condition, operations, property or affairs.
     The Company is not in default with respect to any order, writ, injunction
     or decree of any court or of any federal, state, municipal or other
     governmental department, commission, board, bureau, agency or
     instrumentality, domestic or foreign. There is no action or suit by the
     Company pending, or threatened or contemplated against others. The




     Company has complied in all material respects with all laws, rules,
     regulations and orders applicable to its business, operations, properties,
     assets, products and services, the Company has all necessary permits,
     licenses and other authorizations required to conduct its business as
     conducted and as proposed to be conducted, and the Company has been
     operating its business pursuant to and in compliance with the terms of all
     such permits, licenses and other authorizations. There is no existing law,
     rule, regulation or order, and the Company after due inquiry is not aware
     of any proposed law, rule, regulation or order, whether federal, state,
     county or local, which would prohibit or restrict the Company from, or
     otherwise materially adversely affect the Company in, conducting its
     business in any jurisdiction in which it is now conducting business or in
     which it proposes to conduct business. The foregoing includes, without
     limitation, actions pending or, to the knowledge of the Company, threatened
     (or any basis therefor) involving the prior employment of any of the
     Company's officers or employees or their use in connection with the
     Company's business of any information or techniques allegedly proprietary
     to any of their former employers.

          3.8 Loans and Advances. The Company does not have any outstanding
     loans or advances to any person and is not obligated to make any such loans
     or advances, except, in each case, for advances to employees of the Company
     in respect of reimbursable business expenses anticipated to be incurred by
     them in connection with their performance of services for the Company.

          3.9 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
     The Company has not assumed, guaranteed, endorsed or otherwise become
     directly or contingently liable on any indebtedness of any other person
     (including, without limitation, liability by way of agreement, contingent
     or otherwise, to purchase, to provide funds for payment, to supply funds to
     or otherwise invest in the debtor, or otherwise to assure the creditor
     against loss), except for guaranties by endorsement of negotiable
     instruments for deposit or collection in the ordinary course of business.

          3.10 Significant Customers and Suppliers. No customer or supplier
     which was significant to the Company during the period covered by the
     financial statements referred to in Section 3.5 or which has been
     significant to the Company thereafter, has terminated, materially reduced
     or threatened to terminate or materially reduce its purchases from or
     provision of products or services to the Company, as the case may be.

          3.11 Governmental Approvals. Subject to the accuracy of the
     representations and warranties of the Sellers set forth in Section 4, no
     registration or filing with, or consent or approval of or other action by,
     any federal, state or other governmental agency or instrumentality is or
     will be necessary for the valid execution, delivery and performance by the
     Company of this Agreement and the other Transaction Documents, the issuance
     and delivery of the Repurchase Stock, the issuance and delivery of the
     Notes, or for the performance by the Company of its obligations hereunder
     and under the other Transaction Documents other than (i) filings pursuant
     to federal and state securities laws (all of which filings have been made
     by the Company, other than those which are required to be made after the
     Closing and which will be duly made on a timely basis) in connection with
     the issuance of the Repurchase Stock and (ii) with respect to the




     Registration Rights Agreement, the registration of the shares covered
     thereby with the Commission and filings pursuant to state securities laws.

          3.12 Certain Agreements of Officers.

               (a) The Company is not a party to or obligated in connection with
          its business with respect to (i) any contracts with officers, agents,
          consultants or advisers or (ii) collective bargaining agreements or
          contracts with any labor union or other representative of employees or
          any employee benefits provided for by any such agreement.

               (b) To the knowledge of the Company, no officer of the Company is
          in violation of any term of any employment contract, patent disclosure
          agreement, proprietary information agreement, noncompetition
          agreement, or any other contract or agreement or any restrictive
          covenant relating to the right of any such officer to be employed by
          the Company because of the nature of the business conducted or to be
          conducted by the Company or relating to the use of trade secrets or
          proprietary information of others, and the continued employment of the
          Company's officers does not subject the Company or any Seller to any
          liability to third parties.

               (c) To the knowledge of the Company, no officer of the Company
         has expressed any present intention of terminating his employment with
         the Company.

          3.13 No Insolvency. No insolvency proceeding of any character,
     including, without limitation, bankruptcy, receivership, reorganization,
     composition or arrangement with creditors, voluntary or involuntary,
     affecting the Company or any of its assets or properties, is pending or, to
     the knowledge of the Company, threatened. The Company has not taken any
     action in contemplation of, or that would constitute the basis for, the
     institution of any such insolvency proceedings.

          3.14 ERISA. Each "Employee Benefit Plan" (within the meaning of
     Section 3(3) of the Employee Retirement Income Security Act of 1974, as
     amended ("ERISA")) and each benefit arrangement including any plan,
     contract, arrangement or policy providing for severance benefits, insurance
     coverage, workers' compensation, disability benefits, vacation benefits,
     retirement benefits or for deferred compensation, profit-sharing, bonuses,
     stock options, stock appreciation rights or other forms of incentive
     compensation or post-retirement insurance, compensation or benefits has
     been maintained in substantial compliance with its terms and with the
     applicable requirements prescribed by any and all statutes, orders, rules
     and regulations, including but not limited to ERISA and the Code. Each
     Employee Benefit Plan which is intended to be qualified under Section
     401(a) of the Code is so qualified and has been so qualified during the
     period from its adoption to date. Neither the Company nor any entity that
     would be considered to be under common control with the Company under
     Section 414 of the Code maintains or has ever maintained or contributed to
     any "multiemployer plan" as defined in Section 3(37) of ERISA or any
     Employee Benefit Plan subject to Title IV of ERISA.





          3.15 Transactions with Affiliates. Except as contemplated hereby,
     there are no loans, leases, royalty agreements or other continuing
     transactions between the Company and (a) any officer, employee or director
     of the Company, or (b) any Person owning 5% or more of any class of capital
     stock of the Company, or (c) any member of the immediate family of such
     officer, employee, director or stockholder, or (d) any corporation or other
     entity controlled by such officer, employee, director or stockholder or a
     member of the immediate family of such officer, employee, director or
     stockholder.

          3.16 Securities Act of 1933. The Company has complied and will comply
     with all applicable federal and state securities laws in connection with
     the offer, issuance and delivery of the Repurchase Stock and Notes. Neither
     the Company nor anyone acting on its behalf has or will sell, offer to
     sell, solicit offers to buy, issue or deliver the Repurchase Stock or
     Notes, or solicit offers with respect thereto from, or enter into any
     preliminary conversations or negotiations relating thereto with, any
     Person, so as to bring the issuance and delivery of Repurchase Stock or
     Notes under the registration provisions of the Securities Act and
     applicable state securities laws.

          3.17 Registration Rights. Except for the rights granted to the Sellers
     pursuant to the Registration Rights Agreement, no Person has demand or
     other rights to cause the Company to file any registration statement under
     the Securities Act relating to any securities of the Company or any right
     to participate in any such registration statement.

          3.18 Insurance. The Company has in full force and effect fire, general
     casualty, and liability insurance covering its properties and business, in
     such amounts, and against such losses and risks, as are generally
     maintained for comparable businesses and properties.

          3.19 Books and Records. The books of account, ledgers, order books,
     records and documents of the Company accurately and completely reflect all
     material information relating to the business of the Company, the location
     and collection of its assets, and the nature of all transactions giving
     rise to the obligations or accounts receivable of the Company.

          3.20 Title to Assets. The Company has good and marketable title in fee
     to such of its fixed assets, if any, as are real property, and good and
     marketable title to all of its other assets and properties, free of any
     mortgages, pledges, charges, liens, security interests or other
     encumbrances of any kind. The Company enjoys peaceful and undisturbed
     possession under all leases under which it is operating, and all said
     leases are valid and subsisting and in full force and effect.

          3.21 Burdensome Restrictions. The Company is not obligated under any
     contract or agreement or subject to any charter or other corporate
     restriction which materially and adversely affects or in the future may
     reasonably be expected to materially adversely affect its financial
     condition, results of operations, assets, liabilities or business.




          3.22 Computer Programs.

               (a) Set forth in the Disclosure Schedule is a list and brief
          description of the computer programs (other than off-the-shelf
          computer programs) owned, licensed or otherwise used by the Company
          that are material in the continued operation of its business as
          currently conducted or proposed to be conducted (such computer
          programs being referred to herein as the "Company Software"),
          identifying with respect to each such Computer Program whether it is
          owned, licensed or otherwise used by the Company. The Disclosure
          Schedule identifies all material agreements relating to the Company
          Software (the "Software Contracts") and further classifies each such
          Software Contract under one of the following categories: (A) license
          to use third party software; (B) development contract, work-for-hire
          agreement, or consulting agreement; (C) distributor, dealer or value
          added reseller agreement; (D) license or sublicense to a third party
          (including agreements with end-users); (E) maintenance, support or
          enhancement agreement; or (F) other.

               (b) The computer programs included in the Company Software are
          (i) owned by the Company, (ii) currently in the public domain or
          otherwise available to the Company without the approval or consent of
          any third party, or (iii) licensed or otherwise used by the Company
          pursuant to the terms of valid, binding written agreements.

               (c) The Company Software owned, designed or developed by the
          Company or any of its employees, consultants or agents conforms in all
          material respects to the technical specifications for the design,
          performance, operation, test, support and maintenance of the Software,
          and all other documentation relating to such technical specifications.
          No portion of the Company Software sold or licensed by the Company
          directly or indirectly to end users contained, on the date of shipment
          by the Company, no portion of the Company Software currently for sale
          or license directly or indirectly to end users contains, and, to the
          knowledge of the Company, no portion of any other Company Software
          contains any software routines or hardware components designed to
          permit unauthorized access; to disable or erase software, hardware or
          data; or to perform any other such actions.

               (d) All personnel, including employees, agents, consultants, and
          contractors, who have contributed to or participated in the conception
          and development of any of the Company Software either (i) have been
          party to a "work-for-hire" arrangement or agreement with the Company,
          whether in accordance with applicable federal and state law, domestic
          or foreign, or otherwise, that has accorded the Company full,
          effective, exclusive and original ownership of all tangible and
          intangible property thereby arising, or (ii) have executed appropriate
          instruments of assignment in favor of the Company as assignee that
          have conveyed to the Company full, effective and exclusive ownership
          of all tangible and intangible property thereby arising.




          3.23 Intellectual Property Rights. The Company owns or possesses or
     otherwise has the legally enforceable perpetual right to use, and has the
     right to bring actions for infringement of, all intellectual property
     rights necessary or required for the conduct of its business as currently
     conducted or proposed to be conducted, including all intellectual property
     rights pertaining to the Company Software.

          3.24 Taxes. The Company has filed all tax returns, federal, state,
     county and local, domestic and foreign, required to be filed by it, and the
     Company has paid all taxes shown to be due by such returns as well as all
     other taxes, assessments and governmental charges which have become due or
     payable, including without limitation all taxes which the Company is
     obligated to withhold from amounts owing to employees, creditors and third
     parties. The Company has established adequate reserves for all taxes
     accrued but not yet payable to the extent required by generally accepted
     accounting principles. All material tax elections of any type which the
     Company has made as of the date hereof are set forth in the audited
     financial statements referred to in Section 3.5. No deficiency assessment
     with respect to the Company's federal, state, county or local taxes,
     domestic and foreign, is pending or, to the knowledge of the Company,
     threatened. No proposed adjustment of the Company's federal, state, county,
     local taxes, domestic and foreign, is pending or, to the knowledge of the
     Company, threatened. There is no tax lien (other than for current taxes not
     yet due and payable), whether imposed by any federal, state, county or
     local taxing authority, domestic or foreign, outstanding against the
     assets, properties or business of the Company. Neither the Company nor any
     of its present or former stockholders has ever filed an election pursuant
     to Section 1362 of the Internal Revenue Code of 1986 (the "Code"), that the
     Company be taxed as an S corporation.

          3.25 Disclosure. Neither this Agreement (including any Schedule or
     Exhibit to this Agreement) nor the Transaction Documents or any other
     agreement, statement, document, certificate or other items prepared or
     supplied by the Company with respect to the transactions contemplated
     hereby or thereby contains an untrue statement of a material fact or omits
     a material fact necessary to make the statements contained herein or
     therein not misleading. There is no fact which the Company has not
     disclosed to the Sellers and their counsel in writing and of which the
     Company is aware which could have a Material Adverse Effect.

          3.26 Additional Information. The Company has filed in a timely manner
     all documents that the Company was required to file under the Exchange Act
     during the 12 months preceding the date of this Agreement. The following
     documents complied in all material respects with the requirements of the
     Exchange Act as of their respective filing dates, and the information
     contained therein was true and correct in all material respects as of the
     date of such documents, and each of the following documents as of the date
     thereof did not contain an untrue statement of a material fact or omit to
     state a material fact required to be stated therein or necessary to make
     the statements therein, in light of the circumstances under which they were
     made, not misleading:

               (a) The Company's Annual Report on Form 10-K for the year ended
          December 31, 2001;





               (b) The Company's Quarterly Reports on Form 10-Q for the quarters
          ended March 31, 2002, June 30, 2002 and September 30, 2002; and

               (c) all other documents, if any, filed by the Company with the
          Securities and Exchange Commission (the "Commission") since the filing
          of the Quarterly Report on Form 10-Q for the fiscal quarter ended
          September 30, 2002 pursuant to the reporting requirements of the
          Exchange Act.

     4. Covenants. The Company, together with its subsidiaries, covenants and
agrees with each of the Sellers that:

               (a) The affirmative vote of both of the directors designated by
          Cahill, Warnock Strategic Partners Fund, L.P. and Strategic Associates
          L.P. pursuant to the terms of the Stockholders' Agreement shall be
          required to (i) amend or modify the terms of the Restated Charter; and
          (ii) issue any series of preferred stock, or other securities of the
          Company, which has preference or priority over the Common Stock as to
          the right to receive either dividends or amounts distributable upon
          liquidation, dissolution, or winding up of the Company.

               (b) The membership of each committee of the Company's Board of
          Directors shall include one of the directors designated by Cahill,
          Warnock Strategic Partners Fund, L.P. and Strategic Associates L.P.

               (c) The next annual meeting of the stockholders of the Company
          shall include a vote to approve an amendment to the Restated Charter
          to eliminate the terms of the Series A Preferred.

               (d) The Company shall maintain and cause each of its subsidiaries
          (if any) to maintain, their respective corporate or legal existence,
          rights and franchises in full force and effect.

               (e) The Company shall maintain and cause each of its subsidiaries
          (if any) to maintain as to their respective properties and business,
          with financially sound and reputable insurers, insurance against such
          casualties and contingencies and of such types and in such amounts as
          is customary for companies similarly situated, which insurance shall
          be deemed by the Company to be sufficient.

               (f) Neither the Company nor any of its subsidiaries shall become
          a party to any agreement which by its terms restricts the Company's
          performance of this Agreement, the other Transaction Documents or the
          Restated Charter.

               (g) Except for transactions contemplated by this Agreement or as
          otherwise approved by the Board of Directors, neither the Company nor
          any of its subsidiaries shall enter into any transaction with any
          director, officer, employee or holder of more than 5% of the
          outstanding capital stock of any class or series of capital stock of
          the Company or any of its subsidiaries, member of the family of any
          such person, or any corporation, partnership, trust or




          other entity in which any such person, or member of the family of any
          such person, is a director, officer, trustee, partner or holder of
          more than 5% of the outstanding capital stock thereof, except for
          transactions on customary terms related to such person's employment.

               (h) The Company shall promptly reimburse in full all directors of
          the Company who are not employees of the Company for all of his or her
          reasonable out-of-pocket expenses incurred in attending each meeting
          of the Board of Directors of the Company or any Committee thereof.

               (i) The Company shall use its best efforts to ensure that
          meetings of its Board of Directors are held at least four times each
          year and at least once each quarter.

               (j) The Company shall comply, and cause each subsidiary to
          comply, with all applicable laws, rules, regulations and orders,
          noncompliance with which could materially adversely affect its
          business or condition, financial or otherwise.

               (k) The Company shall keep, and cause each subsidiary to keep,
          adequate records and books of account, in which complete entries will
          be made in accordance with generally accepted accounting principles
          consistently applied, reflecting all financial transactions of the
          Company and such subsidiary, and in which, for each fiscal year, all
          proper reserves for depreciation, depletion, obsolescence,
          amortization, taxes, bad debts and other purposes in connection with
          its business shall be made.

               (l) The transactions contemplated by this Agreement are intended
          to qualify as a reorganization within the meaning of Section 368(a) of
          the Code, and the Company shall not take any action inconsistent with
          such treatment.

     5. Representations and Warranties of the Sellers. Each Seller, severally
and not jointly, represents and warrants to the Company as follows:

               (a) Each Seller has good title to such Seller's shares of Series
          A Preferred, free and clear of all liens, security interests and
          adverse interests in favor of any person or entity.

               (b) (i) It will acquire the Repurchase Stock and the Note to be
          acquired by it for its own account and that the Repurchase Stock and
          the Note are being and will be acquired by it for the purpose of
          investment and not with a view to distribution or resale thereof; (ii)
          it is an "accredited investor" within the meaning of Rule 501 of
          Regulation D promulgated under the Securities Act and was not
          organized for the specific purpose of acquiring the Repurchase Stock
          or Note; (iii) it has taken no action which would give rise to any
          claim by any other person for any brokerage commissions, finders' fees
          or the like relating to this Agreement or the transactions
          contemplated hereby; (iv) it has sufficient knowledge and experience
          in investing in companies similar to the Company in terms of the
          Company's stage of development so as to be able to evaluate the risks
          and merits of its investment in the Company and it is able financially
          to bear the risks thereof; (v) without limiting the representations or
          warranties of the Company in Section 3 hereof, it has had an
          opportunity to discuss the Company's business, management and




          financial affairs with the Company's management, and it has been
          furnished with copies of documents which it has requested, and (vi) it
          is making the decision to acquire the Repurchase Stock and the Note in
          the jurisdiction set forth in its address on Schedule I.

               (c) (i) It has full right, power, authority and capacity to enter
          into the Agreement and the other Transaction Documents and to
          consummate the transactions contemplated hereby and thereby and has
          taken all necessary action to authorize the execution, delivery and
          performance of the Agreement and the other Transaction Documents, and
          (ii) upon the execution and delivery of the Agreement and the other
          Transaction Documents, the Agreement and the other Transaction
          Documents to which it is a party shall constitute a valid and binding
          obligation of the Seller enforceable in accordance with their
          respective terms, except as enforceability may be limited by
          applicable bankruptcy, insolvency, reorganization, moratorium or
          similar laws affecting creditors' and contracting parties' rights
          generally and except as enforceability may be subject to general
          principles of equity (regardless of whether such enforceability is
          considered in a proceeding in equity or at law) and except as the
          indemnification agreements of the Seller herein may be legally
          unenforceable.

               (d) It understands and agrees that, until registered under the
          Securities Act or transferred pursuant to the provisions of Rule 144
          as promulgated by the SEC, all certificates evidencing any of the
          Repurchase Stock, whether upon initial issuance or upon any transfer
          thereof, shall bear a legend, prominently stamped or printed thereon,
          reading substantially as follows, together with any legends that may
          be required under applicable state securities laws:

                    "The securities represented by this certificate have not
               been registered under the Securities Act of 1933 or applicable
               state securities laws. These securities have been acquired for
               investment and not with a view to distribution or resale, and may
               not be sold, mortgaged, pledged, hypothecated or otherwise
               transferred [for non U.S. persons add: in the United States or to
               U.S. persons] without an effective registration statement for
               such securities under the Securities Act of 1933 and applicable
               state securities laws, or the availability of an exemption from
               the registration provisions of the Securities Act of 1933 and
               applicable state securities laws."

     6. Conditions to the Obligations of the Sellers. The obligation of each
Seller under this Agreement is subject to the fulfillment to the Seller's
satisfaction, or the waiver by such Seller, of each of the conditions set forth
in this Section 6 on or before the Closing Date.

          6.1 Accuracy of Representations and Warranties. Each of the
     representations and warranties of the Company set forth in Section 3 hereof
     shall be true and correct on the date of the Closing.

          6.2 Performance. All covenants, agreements and conditions contained in
     this Agreement to be performed or complied with by the Company at or prior
     to the Closing shall have been performed or complied with by the Company.




          6.3 Documents; Corporate Approvals. The Sellers shall have received
     prior to or at the Closing all of the following documents or instruments,
     or evidence of completion thereof, each in form and substance satisfactory
     to the Sellers and their counsel:

               (a) A copy of the Restated Charter, certified by the Secretary of
          State of the State of Delaware together with a certified copy of the
          Certificate of Designations, a copy of the resolutions of the Board of
          Directors evidencing the approval of this Agreement and the other
          Transaction Documents, the issuance of the Repurchase Stock and Notes
          and the other matters contemplated hereby and thereby, and a copy of
          the By-laws of the Company, all of which shall have been certified by
          the Secretary of the Company to be true, complete and correct in every
          particular, and certified copies of all documents evidencing other
          necessary corporate or other action and governmental approvals, if
          any, with respect to this Agreement, the Repurchase Stock and the
          Notes.

               (b) An opinion of Shipman & Goodwin LLP, counsel to the Company,
          in the form set forth in Exhibit C.

               (c) A certificate of the Secretary or an Assistant Secretary of
          the Company which shall certify the names of the officers of the
          Company authorized to sign the Transaction Documents, the certificates
          for the Repurchase Stock, the Notes and the other documents,
          instruments or certificates to be delivered pursuant to this Agreement
          by the Company or any of its officers, together with the true
          signatures of such officers. The Sellers may conclusively rely on such
          certificate until they shall receive a further certificate of the
          Secretary or an Assistant Secretary of the Company canceling or
          amending the prior certificate and submitting the signatures of the
          officers named in such further certificate.

               (d) A certificate of the President of the Company stating that
          the representations and warranties of the Company contained in Section
          3 hereof and otherwise made by the Company in writing in connection
          with the transactions contemplated hereby are true and correct and
          that all conditions required to be performed prior to or at the
          Closing have been performed as of the Closing.

               (e) The Stockholders' Agreement in the form set forth in Exhibit
          D shall have been duly executed and delivered by the parties named
          therein.

               (f) The Registration Rights Agreement in the form set forth in
          Exhibit E shall have been duly executed and delivered by the parties
          named therein.

               (g) Certificates of Good Standing for the Company from the
          Secretaries of State of Delaware, Massachusetts, Rhode Island,
          Vermont, Maine, New Jersey, New York, Pennsylvania and all other
          jurisdictions in which the Company is qualified to do business as a
          foreign corporation.




               (h) The Sellers, the Company and DVI Business Credit Corporation
          shall have duly executed and delivered a Subordination Agreement in
          the form set forth in Exhibit F.

               (i) The Company shall have duly executed and delivered a Note to
          each Seller in the form set forth in Exhibit A.

          6.4 Payment of Costs. The Company shall have paid for the costs,
     expenses, taxes and filing fees as required in Section 10.

          6.5 Board of Directors. The Board of Directors of the Company
     following the Closing shall consist of seven (7) members, of which the
     members shall be: John C. Garbarino, Angus M. Duthie, Kevin J. Dougherty,
     Steven W. Garfinkle, Frank H. Leone, Donald W. Hughes and Edward L. Cahill.
     Each committee of the Board of Directors shall include either Donald W.
     Hughes or Edward L. Cahill as one of its members.

          6.6 Sellers' Participation. All Sellers specified on Schedule I hereto
     shall participate in the transactions contemplated hereby.

          6.7 Consents, Waivers, Etc. Prior to the Closing, the Company shall
     have obtained all consents or waivers, if any, necessary to execute and
     deliver this Agreement, issue the Repurchase Stock and the Notes and to
     carry out the transactions contemplated hereby and thereby, and all such
     consents and waivers shall be in full force and effect. All corporate and
     other action and governmental filings necessary to effectuate the terms of
     this Agreement, the Repurchase Stock and the Notes and other agreements and
     instruments executed and delivered by the Company in connection herewith
     shall have been made or taken, except for any post-sale filing that may be
     required under federal or state securities laws. In addition to the
     documents set forth above, the Company shall have provided to the Sellers
     any other information or copies of documents that they may reasonably
     request.

     7. Conditions to the Obligations of the Company. The obligation of the
Company under this Agreement is subject to the fulfillment to the Company's
satisfaction, or the waiver in writing by the Company, of each of the conditions
set forth in this Section 7 on or before each Closing Date.

          7.1 Accuracy of Representations and Warranties. Each of the
     representations and warranties of the Sellers set forth in Section 4 hereof
     shall be true and correct on the date of the Closing.

          7.2 Performance. All covenants, agreements and conditions contained in
     this Agreement to be performed or complied with by the Sellers at or prior
     to the Closing shall have been performed or complied with by the Sellers.





          7.3 Approvals. The Company shall have received prior to or at Closing
     from each Seller a certificate of an authorized person of such Seller
     stating that the representations and warranties of such Seller contained in
     Section 4 hereof and otherwise made by such Seller in writing in connection
     with the transactions contemplated hereby are true and correct and that all
     conditions required to be performed prior to or at the Closing have been
     performed as of the Closing.

          7.4 Stockholders' Agreement, Registration Rights Agreement and
     Subordination Agreement. The Stockholders' Agreement, Registration Rights
     Agreement and Subordination Agreement shall have been duly executed and
     delivered by the Sellers.

          7.5 Sellers' Participation. All Sellers specified on Schedule I hereto
     shall participate in the transactions contemplated hereby.

     8. Successors and Assigns. The provisions of this Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of the
parties hereto.

     9. Survival of Representations and Warranties. All representations and
warranties shall survive and remain in full force and effect after the Closing
with respect to the Company.

     10. Costs, Expenses and Taxes. The Company agrees to pay in connection with
the preparation, execution and delivery of this Agreement and the other
Transaction Documents and the issuance of the Repurchase Stock and the Notes,
the reasonable fees and out-of-pocket expenses collectively of Testa, Hurwitz &
Thibeault, LLP, special counsel for the Sellers. In addition, the Company shall
pay any and all stamp and similar transfer taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement and the
Transaction Documents, the issuance of the Repurchase Stock and the Notes and
the other instruments and documents to be delivered hereunder or thereunder, and
agrees to save the Sellers harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes.

     11. Notices. All notices, requests, consents and other communications under
this Agreement shall be in writing (including facsimile communication) and shall
be delivered by hand, by telecopier, by express overnight courier service or
mailed by first class mail, postage prepaid, and shall be given,

          if to Company, to:

               175 Derby Street, Suite 36
               Hingham, MA  02043
               Attention: President             Fax: (781) 741-5499





          with a copy to:

               Donna L. Brooks, Esq.
               Shipman & Goodwin LLP
               One American Row
               Hartford, CT  06103              Fax: (860) 251-5999

          if to any Seller, to:

               To the applicable address and fax number set forth in
               Schedule I.

          with a copy to:

               Barbara M. Johnson, Esq.
               Testa, Hurwitz & Thibeault, LLP
               125 High Street
               Boston, MA  02110                Fax: (617) 790-0144

or at such other address as to which such party may inform the other parties in
writing in compliance with the terms of this Section.

     Notices provided in accordance with this Section 11 shall be deemed
delivered upon personal delivery, receipt by telecopy, or overnight mail, or 48
hours after deposit in the mail in accordance with the above.

     12. Brokers. The Company and the Sellers (i) represent and warrant to the
other that they have retained no finder or broker in connection with the
transactions contemplated by this Agreement, and (ii) shall indemnify and hold
harmless the other from and against any and all claims, liabilities, or
obligations with respect to brokerage or finders' fees or commissions or
consulting fees in connection with the transactions contemplated by this
Agreement, asserted by any person on the basis of any statement or
representation alleged to have been made by such indemnifying party.

     13. Entire Agreement. This Agreement, together with the instruments and
other documents hereby contemplated to be executed and delivered in connection
herewith, contains the entire agreement and understanding of the parties hereto,
and supersedes any prior agreements or understandings between or among them,
with respect to the subject matter hereof, including the Series A Convertible
Preferred Stock Purchase Agreement dated November 6, 1996, which will be of no
further force or effect.

     14. Amendments and Waivers. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and holders of at least a majority of the




outstanding Repurchase Stock. No waivers of or exceptions to any term, condition
or provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.

     15. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. A facsimile signature shall constitute
an original signature hereto.

     16. Captions. The captions of the sections, subsections and paragraphs of
this Agreement have been added for convenience only and shall not be deemed to
be a part of this Agreement.

     17. Severability. Each provision of this Agreement shall be interpreted in
such manner as to validate and give effect thereto to the fullest lawful extent,
but if any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable under applicable law, such provision
shall be ineffective only to the extent so determined and such invalidity or
unenforceability shall not affect the remainder of such provision or the
remaining provisions of this Agreement.

     18. Waiver of Preemptive Rights. The Sellers representing the holders of at
least a majority in interest of the Series A Preferred hereby by waive any
rights of first refusal pursuant to Article VI of the Series A Convertible
Preferred Stock Purchase Agreement dated as of November 6, 1996, including any
notice requirements related thereto, with respect to the issuance and sale of
the Repurchase Stock.

     19. Governing Law. This Agreement shall be governed by and interpreted and
construed in accordance with the laws of the State of Delaware. Each of the
parties hereby irrevocably submits to the jurisdiction of any United States
federal court sitting in the State of Delaware (or, if such court shall not
accept such jurisdiction, any state court sitting in Delaware) in any action,
suit or proceeding brought against it by the other party under this Agreement.

                  [Remainder of page intentionally left blank]



     IN WITNESS WHEREOF, the Company and the Sellers have executed this
Agreement as of the day and year first above written.

                           OCCUPATIONAL HEALTH + REHABILITATION INC


                           By:  /s/ Keith G. Frey
                                ------------------------------------------------
                           Name:  Keith G. Frey
                                  ----------------------------------------------
                           Title:  Chief Financial Officer
                                   ---------------------------------------------


                           SELLERS:

                           CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.

                           By:  Cahill, Warnock Strategic Partners, L.P.

                           By: /s/ Donald W. Hughes
                               -------------------------------------------------
                           Title:  General Partner
                                 -----------------------------------------------


                           STRATEGIC ASSOCIATES, L.P.

                           By:  Cahill, Warnock Strategic Partners, L.P.

                           By: /s/ Donald W. Hughes
                               -------------------------------------------------
                           Title:  General Partner
                                 -----------------------------------------------


                           AXA U.S. GROWTH FUND LLC

                           By: /s/ Thomas G. McKinley
                               -------------------------------------------------
                           Title: Managing Member
                                  ----------------------------------------------


                           PANTHEON GLOBAL PCC LIMITED

                           By: /s/ Sarita Keen
                               -------------------------------------------------
                           Title: Alternate Director
                                  ----------------------------------------------



                           DOUBLE BLACK DIAMOND II, LLC

                           By:  /s/Thomas G. McKinley
                                ------------------------------------------------
                           Title:  Managing Member
                                 -----------------------------------------------


                           /s/ Thomas G. McKinley
                           -----------------------------------------------------
                           Vincent Worms, signed by Thomas G. McKinley
                           pursuant to a power of attorney


                           THE VENTURE CAPITAL FUND OF NEW ENGLAND III, L.P.

                           By:  FH & Co. III, L.P., its General Partner

                           By: /s/ Kevin J. Dougherty
                               -------------------------------------------------
                           Title: General Partner
                                  ----------------------------------------------


                           BANCBOSTON VENTURES, INC.

                           By: /s/John B. McCormick
                               -------------------------------------------------
                           Title: Vice President
                                  ----------------------------------------------


                           VENROCK ASSOCIATES
                           VENROCK ASSOCIATES II, L.P.

                           By: /s/Anthony B. Evnin
                               -------------------------------------------------
                           Title:  General Partner
                                   ---------------------------------------------


                           ASSET MANAGEMENT ASSOCIATES, 1989, L.P.

                           By:  AMC Partners 89, L.P., General Partner

                           By: /s/ Craig C. Taylor
                               -------------------------------------------------
                           Title: General Partner
                                  ----------------------------------------------



                                                                      SCHEDULE I


                                  Series A                                       Shares of
Name and                         Preferred                                      Repurchase
Address of Sellers                 Shares        Cash            Notes             Stock
- ------------------               ---------       ----            -----             -----
                                                                      
Cahill, Warnock Strategic        679,042     $1,294,049.41   $1,294,049.41       770,871
Partners Fund, L.P.
One South Street
Suite 2150
Baltimore, Maryland 21202
Attn:  Mr. Donald W. Hughes

     with copy to:
     ------------
     Edward L. Cahill
     HLM Management
     222 Berkley Street
     Boston, MA  02116

Strategic Associates, L.P.        37,625          71,701.91      $71,701.91        42,713
One South Street
Suite 2150
Baltimore, Maryland 21202
Attn: Mr. Donald W. Hughes

     with copy to:
     ------------
     Edward L. Cahill
     HLM Management
     222 Berkley Street
     Boston, MA  02116

AXA U.S. Growth Fund LLC          86,667         165,161.18     $165,161.18        98,387
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn:  Mr. Thomas G. McKinley

Pantheon Global PCC Limited      173,334         330,322.37     $330,322.37       196,775
Pantheon Ventures, Inc.
Transamerica Center
600 Montgomery Street
23rd Floor
San Francisco, CA  94111
Attn: Jay Pierrepont

Double Black Diamond II, LLC      16,667         $31,762.28      $31,762.28        18,921
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn:  Mr. Thomas G. McKinley






                                  Series A                                       Shares of
Name and                         Preferred                                      Repurchase
Address of Sellers                 Shares        Cash            Notes             Stock
- ------------------               ---------       ----            -----             -----
                                                                      
Vincent Worms                      6,665         $12,701.48      $12,701.48         7,566
50 California Street
Suite 3200
San Francisco, CA 94111

Asset Management Associates,      83,333        $158,807.58     $158,807.58        94,602
1989, L.P.
Alloy Ventures
480 Cowper Street, 2nd Floor
Palo Alto, CA  94301
Attn:  Mr. Craig C. Taylor

Venrock Associates                66,667        $127,047.21     $127,047.21        75,683
Room 5508
30 Rockefeller Plaza
New York, New York 10112
Attn:  Mr. Anthony Evnin

Venrock Associates II, L.P.      100,000        $190,569.86     $190,569.86       113,523
Room 5508
30 Rockefeller Plaza
New York, New York 10112
Attn:  Mr. Anthony Evnin

The Venture Capital Fund of       66,667        $127,047.21     $127,047.21        75,683
New England, III, L.P.
30 Washington Street
Wellesley Hills, MA  02481-1905
Attn:  Mr. Kevin J. Dougherty

BancBoston Ventures, Inc.        100,000        $190,569.86     $190,569.86       113,523
BancBoston Capital
Mail Stop:  MA DE  10210A
175 Federal Street,
Apt. 10th Floor
Boston, MA  02110
Attn:  Mr. John B. McCormick

         TOTAL                 1,416,667      $2,699,740.35   $2,699,740.35     1,608,247





                                                                       EXHIBIT A

                             FORM OF PROMISSORY NOTE



                                                                       EXHIBIT B

                               DISCLOSURE SCHEDULE



                                                                       EXHIBIT C

                        OPINION OF SHIPMAN & GOODWIN LLP



                                                                       EXHIBIT D

                   AMENDED AND RESTATED STOCKHOLDERS AGREEMENT



                                                                       EXHIBIT E

               AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



                             SUBORDINATION AGREEMENT

EX-10.02(B)

                                                                Exhibit 10.02(b)

                  AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT

     AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (this "Agreement") made this
24th day of March, 2003, by and among (i) Occupational Health + Rehabilitation
Inc, a Delaware corporation (the "Company"), (ii) the individuals and entities
listed under the heading "Holders" on Schedule I attached hereto, and (iii)
those persons whose names are set forth under the heading "Investors" on
Schedule I hereto (the "Investors").

     WHEREAS, the Investors acquired an aggregate of 1,416,667 shares of Series
A Convertible Preferred Stock, par value $.001 per share, of the Company (the
"Series A Preferred Stock") pursuant to a certain Series A Convertible Preferred
Stock Purchase Agreement dated as of November 6, 1996, by and among the
Investors and the Company (the "Purchase Agreement");

     WHEREAS, in connection with the sale of the Series A Preferred Stock, the
Company entered into a Stockholders' Agreement dated as of November 6, 1996 with
the Holders and the Investors (the "Prior Agreement");

     WHEREAS, the Investors and the Company are, on the date hereof, entering
into a Series A Convertible Stock Repurchase Agreement (the "Repurchase
Agreement") pursuant to which the Company shall repurchase the Series A
Preferred Stock held by the Investors in exchange for consideration that
includes shares of the Company's Common Stock, par value $.001 per share;

     WHEREAS, the Investors, the Holders and the Company have agreed that it is
in the best interest of the Company to amend and restate the Prior Agreement to
grant certain rights to the Investors with respect to the composition of the
Board of Directors; and

     WHEREAS, pursuant to Section 7 of the Prior Agreement, amendments to the
Prior Agreement may be made with the written consent of the Company, Investors
holding a majority of the Series A Preferred Stock and Holders holding a
majority of the Common Stock subject to the Prior Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company, the Holders and the Investors agree as
follows:

     1. Board of Directors.

          (a) Election of Directors. Each of the parties hereto agrees to vote
     all of the Stock (as hereinafter defined) of the Company now owned or
     hereafter acquired by such party (and attend, in person or by proxy, all
     meetings of stockholders called for the purpose of electing directors), and
     the Company agrees to take all actions (including, but not limited to the
     nomination of specified persons) to cause and maintain the election to the
     Board of Directors of the Company,



to the extent permitted pursuant to the Company's Restated Certificate of
Incorporation, as amended, as set forth below:

               (i) the Chief Executive Officer of the Company, who initially is
          John C. Garbarino;

               (ii) a person designated by the Chief Executive Officer of the
          Company, who shall initially be Angus M. Duthie;

               (iii) a person designated by those persons designated as OH+R
          Principal Stockholders on Schedule II hereto by a majority in interest
          of Stock held by them, who shall initially be Kevin J. Dougherty;

               (iv) two persons designated by Cahill, Warnock Strategic Partners
          Fund, L.P. and Strategic Associates, L.P., one of whom shall initially
          be Edward L. Cahill and the other of whom shall initially be Donald W.
          Hughes (the "Cahill Directors"), and

               (v) two persons who shall be unaffiliated with the management of
          the Company and mutually agreeable to all of the other directors, one
          of whom shall initially be Frank H. Leone and the other of whom shall
          initially be Steven W. Garfinkle.

     Each of the parties further covenants and agrees to vote, to the extent
possible, all shares of Stock of the Company now owned or hereafter acquired by
such party so that the Company's Board of Directors shall consist of no more
than seven (7) members. For the purposes of this Agreement, "Stock" shall mean
and include all shares of Common Stock, and all other securities of the Company
which may be exchangeable for or issued in exchange for or in respect of shares
of Common Stock (whether by way of stock split, stock dividend, combination,
reclassification, reorganization or any other means).

     In the absence of any designation from the persons or groups so designating
directors as specified above, the director previously designated by them and
then serving shall be reelected if still eligible to serve as provided herein.

     No party hereto shall vote to remove any member of the Board of Directors
designated in accordance with the aforesaid procedure unless the persons or
groups so designating directors as specified above so vote, and, if such persons
or groups so vote then the non-designating party or parties shall likewise so
vote.

     Any vacancy on the Board of Directors created by the resignation, removal,
incapacity or death of any person designated under this Section 1 shall be
filled by another person designated in a manner so as to preserve the
constituency of the Board as provided above.

     If any party to this Agreement shall fail to vote such party's Stock as
provided in this Agreement, without further action by such party, the President
of the Company shall be, and hereby is, irrevocably constituted the
attorney-in-fact and proxy of such party for the purpose of



voting the shares of such Stock and shall vote the same in accordance with the
terms of this Agreement and is hereby authorized to revoke any proxy providing
for any other vote of such shares with respect to the election of directors.

          (b) Committees of the Board of Directors. The membership of each
     committee of the Board of Directors shall at all times include one of the
     Cahill Directors.

     2. Termination. This Agreement, and the respective rights and obligations
of the parties hereto, shall terminate upon the earliest to occur of the
following: (i) the date on which the Investors no longer hold either the
Promissory Notes issued to the Investors pursuant to the Repurchase Agreement or
at least fifty percent (50%) of the shares of Common Stock issued to the
Investors pursuant to the Repurchase Agreement; (ii) a firm commitment
underwritten public offering of shares of Common Stock; (iii) the sale of the
Company, whether by merger, sale, or transfer of more than eighty percent (80%)
of its capital stock, or sale of substantially all of its assets; or (iv) the
date on which the Company's Common Stock is listed on a securities exchange or
the Nasdaq Stock Market if termination of this Agreement is required to be so
listed.

     3. Notices. All notices, requests, demands and other communications
provided for hereunder shall be in writing (including electronic communication)
and delivered personally, or by overnight courier, or by facsimile or other
electronic means or sent by certified or registered United States mail, postage
prepaid, return receipt requested and addressed as follows:

     If to any Investor: at such Investor's address for notice as set forth in
the register maintained by the Company, or, as to each of the foregoing, at the
addresses set forth on Schedule I hereto or at such other address as shall be
designated by such Person in a written notice to the other parties complying as
to delivery with the terms of this Section, with a copy to Barbara M. Johnson,
Esq., Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street,
Boston, Massachusetts 02110.

     If to the Company: at 175 Derby Street, Suite 36, Hingham, Massachusetts
02043, or at such other address as shall be designated by the Company in a
written notice to the other parties complying as to delivery with the terms of
this Section, with a copy to Donna L. Brooks, Esq., Shipman & Goodwin LLP, One
American Row, Hartford, CT 06103.

     All such notices, requests, demands and other communications shall be
effective three days after deposited in the mails or upon receipt when delivered
electronically, by facsimile, by hand or by overnight courier, respectively,
addressed as aforesaid, unless otherwise provided herein.

     4. Specific Performance. The rights of the parties under this Agreement are
unique and, accordingly, the parties shall, in addition to such other remedies
as may be available to any of them at law or in equity, have the right to
enforce their rights hereunder by actions for specific performance to the extent
permitted by law.





     5. Entire Agreement. This Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them or any of them as to such subject
matter, including, without limitation, the Prior Agreement.

     6. Waivers and Further Agreements. Any of the provisions of this Agreement
may be waived with the consent of the Investors holding a majority in interest
of the issued and outstanding shares of Common Stock issued to the Investors
pursuant to the Repurchase Agreement by an instrument in writing. Any waiver by
any party of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach of that provision or of any other
provision hereof. Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action as any other party
may reasonably require in order to effectuate the terms and purposes of this
Agreement. Notwithstanding the foregoing, no waiver approved in accordance
herewith shall be effective if and to the extent that such waiver grants to any
one or more Investors any rights more favorable than any rights granted to all
other Investors or otherwise treats any one or more Investors differently than
all other Investors.

     7. Amendments. Except as otherwise expressly provided herein, this
Agreement may not be amended except by an instrument in writing executed by (i)
the Company, (ii) Investors holding a majority in interest of the issued and
outstanding shares of Common Stock issued to the Investors pursuant to the
Repurchase Agreement, and (iii) Holders holding a majority of the shares of
Common Stock subject to this Agreement. Notwithstanding the foregoing, no such
amendment shall be effective if and to the extent that such amendment creates
any additional affirmative obligations to be complied with by any or all of the
Investors.

     8. Assignment; Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and permitted transferees.

     9. Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, and such invalid,
illegal and unenforceable provision shall be reformed and construed so that it
will be valid, legal, and enforceable to the maximum extent permitted by law.

     10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     11. Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

     12. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the General Corporation Law of the State of
Delaware as to matters within




the scope thereof, and as to all other matters shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts.

     13. Legend. The certificates representing the shares of Common Stock issued
to the Investors pursuant to the Repurchase Agreement shall bear a legend
substantially in the following form:

     "The shares represented by this certificate are subject to the terms and
conditions of an Amended and Restated Stockholders' Agreement dated as of March
24, 2003, a copy of which will be furnished to any interested party upon written
request without charge."

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




     IN WITNESS WHEREOF, the parties hereto have executed this Stockholders'
Agreement as a sealed instrument as of the day and date first above written.

INVESTORS:                            THE COMPANY:

CAHILL, WARNOCK STRATEGIC             OCCUPATIONAL HEALTH + REHABILITATION INC
PARTNERS FUND, L.P.

By:  Cahill, Warnock Strategic        By: /s/ Keith G. Frey
     Partners, L.P.                       --------------------------------------
                                          Title: Chief Financial Officer
     By: /s/ Donald W. Hughes
         ----------------------       HOLDERS:
         Title: General Partner
                                      STRATEGIC ASSOCIATES, L.P.
AXA U.S. GROWTH FUND LLC
                                      By: Cahill, Warnock Strategic
By: /s/ Thomas G. McKinley                Partners, L.P
    --------------------------
    Title: Managing Member            By: /s/ Donald W. Hughes
                                          --------------------------------------
PANTHEON GLOBAL PCC LIMITED               Title: General Partner

By: /s/ Sarita Keen                   *THE VENTURE CAPITAL FUND
    --------------------------         OF NEW ENGLAND III, L.P.
    Title: Alternate Director
                                      By: FH & Co. III, L.P.,
DOUBLE BLACK DIAMOND II LLC               Its General Partner

By: /s/ Thomas G. McKinley            By: /s/ Kevin J. Dougherty
    --------------------------            --------------------------------------
    Title: Managing Member                Title: General Partner

    /s/ Thomas G. McKinley            *BANCBOSTON VENTURES, INC.
    --------------------------
    Vincent Worms, signed by          By: /s/ John B. McCormick
    Thomas G. McKinley pursuant           --------------------------------------
    to a power of attorney                Title: Vice President

                                      /s/ John C. Garbarino
                                      ------------------------------------------
                                      John C. Garbarino

                                      /s/ Lynne M. Rosen
                                      ------------------------------------------
                                      Lynne M. Rosen




                                      *VENROCK ASSOCIATES

                                      *VENROCK ASSOCIATES II, L.P.

                                      By: /s/ Anthony B. Evnin
                                          --------------------------------------
                                      Title: General Partner

                                      *ASSET MANAGEMENT ASSOCIATES, 1989, L.P.

                                      By:  AMC Partners 89, L.P.,
                                           General Partner

                                      By: /s/ Craig C. Taylor
                                          --------------------------------------
                                      Title: General Partner

                                      *In their capacities as Holders and
                                      Investors hereunder



                                                                      SCHEDULE I

                    OCCUPATIONAL HEALTH + REHABILITATION INC

                                     HOLDERS

The Venture Capital Fund of New England III, L.P.
BancBoston Ventures, Inc.
John C. Garbarino
Lynne M. Rosen
Venrock Associates
Venrock Associates II, L.P.
Asset Management Associates, 1989, L.P.

                                    INVESTORS

Cahill, Warnock Strategic Partners Fund, L.P.
One South Street
Suite 2150
Baltimore, Maryland 21202
Attn:  Mr. Donald W. Hughes

with copy to:
- ------------
Edward L. Cahill
HLM Management
222 Berkley Street
Boston, MA 02116

Strategic Associates, L.P.
One South Street
Suite 2150
Baltimore, Maryland 21202
Attn:  Mr. Donald W. Hughes

with copy to:
- ------------
Edward L. Cahill
HLM Management
222 Berkley Street
Boston, MA 02116




AXA U.S. Growth Fund LLC
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn:  Mr. Thomas G. McKinley

Pantheon Global PCC Limited
Pantheon Ventures, Inc.
Transamerica Center
600 Montgomery Street
23rd Floor
San Francisco, CA 94111
Attn:  Jay Pierrepont

Double Black Diamond II, LLC
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn:  Mr. Thomas G. McKinley

Vincent Worms
50 California Street
Suite 3200
San Francisco, CA 94111

Asset Management Associates, 1989, L.P.
Alloy Ventures
480 Cowper Street, 2nd Floor
Palo Alto, CA  94301
Attn:  Mr. Craig C. Taylor

Venrock Associates
Room 5508
30 Rockefeller Plaza
New York, New York 10112
Attn:  Mr. Anthony Evnin

Venrock Associates II, L.P.
Room 5508
30 Rockefeller Plaza
New York, New York 10112
Attn:  Mr. Anthony Evnin



The Venture Capital Fund of New England, III, L.P.
30 Washington Street
Wellesley Hills, MA 02481-2175
Attn:  Mr. Kevin J. Dougherty

BancBoston Ventures, Inc.
BancBoston Capital
Mail Stop:  MA DE 10210A
175 Federal Street, 10th Floor
Boston, MA  02110
Attn:  Mr. John B. McCormick





                                                                     SCHEDULE II

                    OCCUPATIONAL HEALTH + REHABILITATION INC

                           OH+R Principal Stockholders

The Venture Capital Fund of New England III, L.P.
BancBoston Ventures, Inc.

EX-10.02(C)

                                                                Exhibit 10.02(c)

               AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

     This Amended and Restated Registration Rights Agreement (the "Agreement"),
dated as of March 24, 2003 is by and among Occupational Health + Rehabilitation
Inc (the "Company"), and the parties listed under the heading of Investors on
Schedule A attached hereto (the "Investors").

     WHEREAS, the Investors and the Company entered into a Series A
Convertible Preferred Stock Purchase Agreement dated as of November 6, 1996 (the
"Series A Purchase Agreement") pursuant to which the Company issued to the
Investors 1,416,667 shares of Series A Convertible Preferred Stock, par value
$.001 per share, of the Company (the "Series A Preferred Shares"); and

     WHEREAS, the Company agreed to grant to the Investors, as an inducement to
enter into the Series A Purchase Agreement, certain rights with respect to the
Series A Preferred Shares as set forth in a Registration Rights Agreement dated
as of November 6, 1996 (the "Prior Agreement");

     WHEREAS, the Investors and the Company are, on the date hereof, entering
into a Series A Convertible Stock Repurchase Agreement (the "Repurchase
Agreement") pursuant to which the Company shall repurchase the Series A
Preferred Shares held by the Investors in exchange for consideration that
includes shares of the Company's Common Stock, par value $.001 per share;

     WHEREAS, the Investors and the Company have agreed that it is in the best
interest of the Company to amend and restate the Prior Agreement to provide for
certain rights with respect to the shares of Common Stock issued pursuant to the
Repurchase Agreement; and

     WHEREAS, pursuant to Section 13(d) of the Prior Agreement, amendments to
the Prior Agreement may be made with the written consent of the Company and the
holders of a majority of the aggregate number of outstanding shares of
Restricted Stock (as defined therein) held of record by the Holders (as defined
therein) or their permitted successors and assigns.

     NOW, THEREFORE, in consideration of the premises set forth herein, the
parties hereto hereby agree as follows:

     1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:

     "Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.



     "Common Stock" shall mean the Common Stock, $.001 par value, of the
Company, as constituted as of the date of this Agreement.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

     "Holder" shall mean the person who is the then record owner of Restricted
Stock.

     "Registrable Shares" shall mean the shares of Restricted Stock.

     "Registration Expenses" shall mean the expenses so described in Section 8.

     "Restricted Stock" shall mean the shares of Common Stock issued to the
Investors pursuant to the Repurchase Agreement, and any shares of capital stock
received in respect thereof, excluding shares which have been (a) registered
under the Securities Act pursuant to an effective registration statement filed
thereunder and disposed of in accordance with the registration statement
covering them or (b) publicly sold pursuant to Rule 144 under the Securities
Act.

     "Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

     2. Restrictive Legend.

     Each certificate representing the Restricted Stock shall bear a legend
stating in substance:

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE
     SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
     DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED,
     HYPOTHECATED OR OTHERWISE TRANSFERRED [FOR NON U.S. PERSONS ADD: IN THE
     UNITED STATES OR TO U.S. PERSONS] WITHOUT AN EFFECTIVE REGISTRATION
     STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 AND
     APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM
     THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933 AND APPLICABLE
     STATE SECURITIES LAWS.

     A certificate shall not be required to bear such legend if, in the opinion
of counsel satisfactory to the Company, the securities represented thereby may
be publicly sold without registration under the Securities Act.




     3. Notice of Proposed Transfer.

     Prior to any proposed transfer of any Restricted Stock (other than under
the circumstances described in Section 4, 5 or 6), the Holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and, if requested
by the Company, shall be accompanied by an opinion of counsel satisfactory to
the Company to the effect that the proposed transfer may be effected without
registration under the Securities Act, whereupon the Holder of such stock shall
be entitled to transfer such stock in accordance with the terms of its notice;
provided, however, that no such opinion of counsel shall be required for a
distribution by a partnership to its partners or a limited liability company to
its members of such stock in respect of such interest. Each certificate for
shares of Restricted Stock transferred as above provided shall bear the legend
set forth in Section 2, except that such certificate shall not bear such legend
if (i) such transfer is in accordance with the provisions of Rule 144 (or any
other rule permitting public sale without registration under the Securities Act)
or (ii) the opinion of counsel referred to above is to the further effect that
the transferee and any subsequent transferee (other than an affiliate of the
Company) would be entitled to transfer such securities in a public sale without
registration under the Securities Act. The restrictions provided for in this
Section 3 shall not apply to securities which are not required to bear the
legend prescribed by Section 2 in accordance with the provisions of that
Section.

     4. Required Registration.

          (a) The Holders of Registrable Shares constituting at least 51% of the
     total shares of Registrable Shares then outstanding may request the Company
     to register under the Securities Act all or any portion of the Registrable
     Shares held by such requesting Holder or Holders for sale in the manner
     specified in such notice, provided that the Registrable Shares for which
     registration has been requested shall constitute at least 25% of the total
     Registrable Shares originally issued pursuant to the Repurchase Agreement
     if such Holder or Holders shall request the registration of less than all
     Registrable Shares then held by such Holder or Holders. Notwithstanding
     anything to the contrary contained herein, no request may be made under
     this Section 4 within 180 days after the effective date of a registration
     statement filed by the Company covering a firm commitment underwritten
     public offering in which the Holders of Registrable Shares shall have been
     entitled to join pursuant to Section 5 or 6 and in which there shall have
     been effectively registered all Registrable Shares to which registration
     shall have been requested.

          (b) Following receipt of any notice under this Section 4, the Company
     shall immediately notify all Holders of Registrable Shares from whom notice
     has not been received and shall use its reasonable best efforts to register
     under the Securities Act, for public sale in accordance with the method of
     disposition specified in such notice from requesting Holders, the number of
     Registrable Shares specified in such notice (and in all notices received by
     the Company from other Holders within 30 days after the giving of such
     notice by the Company). If such method of disposition shall be an
     underwritten public offering, the Holders of a majority of the Registrable
     Shares to be sold in such offering may designate the managing underwriter
     of



     such offering, subject to the approval of the Company, which approval shall
     not be unreasonably withheld or delayed. The Company shall be obligated to
     register Registrable Shares pursuant to this Section 4 on two occasions
     only, provided, however, that such obligation shall be deemed satisfied
     only when a registration statement, which covers all Registrable Shares
     specified in notices received as aforesaid and with respect to which the
     request for registration has not been withdrawn and provides for sale of
     such shares in accordance with the method of disposition specified by the
     requesting Holders, shall have become effective and, if such method of
     disposition is a firm commitment underwritten public offering, all such
     shares shall have been sold pursuant thereto.

          (c) The Company shall be entitled to include in any registration
     statement referred to in this Section 4, for sale in accordance with the
     method of disposition specified by the requesting Holders, shares of Common
     Stock to be sold by the Company for its own account, except as and to the
     extent that, in the opinion of the managing underwriter (if such method of
     disposition shall be an underwritten public offering), such inclusion would
     adversely affect the marketing of the Registrable Shares to be sold. Except
     for registration statements on Form S-4, S-8 or any successor thereto, the
     Company will not file with the Commission any other registration statement
     with respect to its Common Stock, whether for its own account or that of
     other stockholders, from the date of receipt of a notice from requesting
     Holders pursuant to this Section 4 (the "Demand Holders") until the first
     to occur of (i) withdrawal of such registration statement or (ii) the
     effectiveness of such registration statement unless such registration
     statement relates to a firm commitment underwritten public offering, then
     the completion of the period of distribution of the registration
     contemplated thereby; provided, however, that following receipt of any
     notice under this Section 4, the Company shall immediately notify all
     holders of the Company's Common Stock who have contractual rights to demand
     registrations pursuant to the terms of any other registration rights
     agreement to which the Company is a party. Upon the written request of such
     demand rights holders constituting the requisite percentages of shares to
     initiate a demand under such other registration rights agreement specifying
     the number of shares to be registered, which request shall be deemed to be
     an exercise of a demand right under the terms of the registration rights
     agreement to which they are parties, such demand rights holders shall be
     deemed to be Demand Holders and the shares requested to be registered by
     such Demand Holders shall be deemed to be Registrable Shares, in each case,
     for purposes of Section 4(d), provided that such written request is
     received by the Company within 30 days of the giving of notice by the
     Company.

          (d) If, in the opinion of the managing underwriter, the inclusion in a
     registration statement to be filed under this Section of any shares other
     than the Registrable Shares requested to be registered under this Section
     by Demand Holders would adversely affect the marketing of such shares,
     then, in such event (a) such other shares may be included in such
     registration only if all of the Registrable Shares requested to be
     registered by Demand Holders hereunder are included, and (b) such other
     shares shall be subject to the provisions of Section 5 and the first
     sentence of Section 4(c) as to priority of inclusion. If, in the opinion of
     the managing underwriter, the inclusion of the Registrable Shares requested
     to be registered under this Section by Demand Holders would adversely
     affect the marketing of such Registrable Shares, Registrable Shares to be
     sold by the Demand Holders shall be excluded in such manner


- - 5 -

     that the Registrable Shares to be excluded shall first be the Registrable
     Shares of Demand Holders who are not affiliates (as defined in Rule 144 of
     the Securities Act) of the Company (the "Affiliate Holders") and whose
     Registrable Shares are then saleable under Rule 144(e) or Rule 144(k) under
     the Securities Act and then pro rata among them, and if further reduction
     is necessary, shall next be pro rata among the remaining Registrable Shares
     of the Demand Holders who are Affiliate Holders or whose Registrable Shares
     are not then saleable under Rule 144(e) or Rule 144(k), provided, however,
     that, notwithstanding anything in this Agreement to the contrary, in
     respect of the first underwritten public offering following the date of
     this Agreement, no reduction shall reduce the number of shares which may be
     sold by requesting Holders to less than 25% of the shares to be sold in
     such offering.

     5. Incidental Registration.

     If the Company at any time (other than pursuant to Section 4 or Section 6)
proposes to register any of its securities under the Securities Act for sale to
the public, whether for its own account or for the account of other
securityholders or both (except with respect to registration statements on Forms
S-4, S-8 or another form not available for registering the Restricted Stock for
sale to the public), each such time the Company will give written notice to all
Holders of outstanding Restricted Stock of its intention to do so. Upon the
written request of any such Holder received by the Company within 30 days of the
giving of any such notice by the Company to register any of such Holder's
Restricted Stock (which request shall state the intended method of disposition
thereof), the Company will use its reasonable best efforts to cause the
Restricted Stock as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale or
other disposition by the Holder (in accordance with such Holder's written
request) of such Restricted Stock so registered. In the event that any
registration pursuant to this Section 5 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of shares of Restricted
Stock to be included in such an underwriting may be reduced if and to the extent
that the managing underwriter shall be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company or
the requesting party therein or that such reduction is otherwise advisable,
provided, however, that after any shares to be sold by holders that do not have
contractual rights to have shares included in such registration have been
excluded, shares to be sold by the Holders shall be excluded in such manner that
the shares to be excluded shall first be the shares of selling Holders and other
requesting holders who, in each case, are not Affiliate Holders and whose shares
are then saleable under Rule 144(e) or Rule 144(k) under the Securities Act and
then pro rata among them, and if further reduction is necessary, shall next be
pro rata among the remaining shares of the selling Holders and other requesting
holders who are Affiliate Holders or whose shares are not then saleable under
Rule 144(e) or Rule 144(k), unless such registration is pursuant to the exercise
of a demand right of another securityholder, in which event such securityholder
shall be entitled to include all shares it desires to have so included before
any shares of Restricted Stock or shares of any other holder are included
therein and provided, however, that, notwithstanding anything in this Agreement
to the contrary, in respect of the first underwritten public offering following
the date of this Agreement, no reduction shall reduce the



number of shares which may be sold by requesting Holders to less than 25% of the
shares to be sold in such offering.

     6. Registration on Form S-3.

     If (i) a Holder or Holders of Registrable Shares request that the Company
file a registration statement on Form S-3 or any successor thereto for a public
offering of all or any portion of the Registrable Shares held by such requesting
Holder or Holders, the reasonably anticipated aggregate price to the public of
at least $500,000, and (ii) the Company is a registrant entitled to use Form S-3
or any successor thereto to register such shares, then the Company shall use its
reasonable best efforts to register under the Securities Act on Form S-3 or any
successor thereto, for public sale in accordance with the method of disposition
specified in such notice, the number of Registrable Shares specified in such
notice. Whenever the Company is required by this Section 6 to use its reasonable
best efforts to effect the registration of Registrable Shares, each of the
procedures and requirements of Section 4 (including but not limited to the
requirement that the Company notify all Holders of Registrable Shares from whom
notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration, provided,
however, that there shall be up to five (5) registrations on Form S-3 which may
be requested and obtained under this Section 6, and the Company shall not be
obligated to register Registrable Shares pursuant to this Section 6 on more than
one occasion per twelve (12) month period, and provided, further, however, that
the requirements contained in the first sentence of Section 4(a) shall not apply
to any registration on Form S-3 which may be requested and obtained under this
Section 6.

     7. Registration Procedures.

     If and whenever the Company is required by the provisions of Section 4, 5
or 6 to use its reasonable best efforts to effect the registration of any shares
of Restricted Stock under the Securities Act, the Company will, as expeditiously
as possible:

          (a) prepare and file with the Commission a registration statement
     (which, in the case of an underwritten public offering pursuant to Section
     4, shall be on Form S-1 or other form of general applicability satisfactory
     to the managing underwriter selected as therein provided) with respect to
     such securities and use its reasonable best efforts to cause such
     registration statement to become and remain effective for the period of the
     distribution contemplated thereby (determined as hereinafter provided);

          (b) prepare and file with the Commission such amendments and
     supplements to such registration statement and the prospectus used in
     connection therewith as may be necessary to keep such registration
     statement effective for the period specified in paragraph (a) above and
     comply with the provisions of the Securities Act with respect to the
     disposition of all Restricted Stock covered by such registration statement
     in accordance with the sellers' intended method of disposition set forth in
     such registration statement for such period;




          (c) furnish to each seller of Restricted Stock and to each underwriter
     such number of copies of the registration statement and the prospectus
     included therein (including each preliminary prospectus) as such persons
     reasonably may request in order to facilitate the public sale or other
     disposition of the Restricted Stock covered by such registration statement;

          (d) use its reasonable best efforts to register or qualify the
     Restricted Stock covered by such registration statement under the
     securities or "blue sky" laws of such jurisdictions as the sellers of
     Restricted Stock or, in the case of an underwritten public offering, the
     managing underwriter reasonably shall request, provided, however, that the
     Company shall not for any such purpose be required to qualify generally to
     transact business as a foreign corporation in any jurisdiction where it is
     not so qualified or to consent to general service of process in any such
     jurisdiction;

          (e) use its reasonable best efforts to list the Restricted Stock
     covered by such registration statement with any securities exchange on
     which the Common Stock is then listed;

          (f) immediately notify each seller of Restricted Stock and each
     underwriter under such registration statement, at any time when a
     prospectus relating thereto is required to be delivered under the
     Securities Act, of the happening of any event of which the Company has
     knowledge as a result of which the prospectus contained in such
     registration statement, as then in effect, includes an untrue statement of
     a material fact or omits to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading in light
     of the circumstances then existing, and promptly prepare and furnish to
     such seller a reasonable number of copies of a prospectus supplemented or
     amended so that, as thereafter delivered to the purchasers of such
     Restricted Stock, such prospectus shall not include an untrue statement of
     a material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading in light
     of the circumstances then existing;

          (g) if the offering is underwritten and at the request of any seller
     of Restricted Stock as provided herein, use its reasonable best efforts to
     furnish on the date that Restricted Stock is delivered to the underwriters
     for sale pursuant to such registration: (i) an opinion dated such date of
     counsel representing the Company for the purposes of such registration,
     addressed to the underwriters and to such seller, stating that such
     registration statement has become effective under the Securities Act and
     that (A) to the knowledge of such counsel, no stop order suspending the
     effectiveness thereof has been issued and no proceedings for that purpose
     have been instituted or are pending or threatened under the Securities Act,
     (B) the registration statement, the related prospectus and each amendment
     or supplement thereof comply as to form in all material respects with the
     requirements of the Securities Act (except that such counsel need not
     express any opinion as to financial statements, schedules and other
     financial or statistical information contained therein) and (C) to such
     other effects as reasonably may be requested by counsel for the
     underwriters or by such seller or its counsel; and (ii) a letter dated such
     date from the independent public accountants retained by the Company,
     addressed to the underwriters and to such seller, stating that they are
     independent public accountants within the meaning of the Securities Act and
     that, in the opinion of such accountants, the financial statements of the
     Company included in the registration statement or the prospectus, or any
     amendment or



     supplement thereof, comply as to form in all material respects with the
     applicable accounting requirements of the Securities Act, and such letter
     shall additionally cover such other financial matters (including
     information as to the period ending no more than five business days prior
     to the date of such letter) with respect to such registration as such
     underwriters reasonably may request;

          (h) make available for inspection by each seller of Restricted Stock,
     any underwriter participating in any distribution pursuant to such
     registration statement, and any attorney, accountant or other agent
     retained by such seller or underwriter, all financial and other records,
     pertinent corporate documents and properties of the Company, and cause the
     Company's officers, directors and employees to supply all information
     reasonably requested by any such seller, underwriter, attorney, accountant
     or agent in connection with such registration statement;

          (i) cooperate with the selling holders of Restricted Stock and the
     managing underwriters, if any, to facilitate the timely preparation and
     delivery of certificates representing Restricted Stock to be sold, such
     certificates to be in such denominations and registered in such names as
     such holders or the managing underwriters may request at least two business
     days prior to any sale of Restricted Stock; and

          (j) permit any holder of Restricted Stock which holder, in the sole
     and exclusive judgment, exercised in good faith, of such holder, might be
     deemed to be a controlling person of the Company, to participate in good
     faith in the preparation of such registration or comparable statement and
     to require the insertion therein of material, furnished to the Company in
     writing, which in the reasonable judgment of such holder and its counsel
     should be included.

     For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of
distribution of Restricted Stock included therein shall be deemed to extend
until the first to occur of (i) each underwriter's completion of the
distribution of all securities purchased by it, and (ii) either (A) two years,
if the Company is qualified to file a registration statement on Form S-3 or any
successor thereto, or (B) 120 days if the Company is not qualified to file a
registration statement on Form S-3 or any successor thereto.

     In connection with each registration hereunder, the sellers of Restricted
Stock will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.

     In connection with each registration pursuant to Section 4, 5 or 6 covering
an underwritten public offering, the Company and each seller agree to enter into
a written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.

     No Holder of shares of Restricted Stock included in a registration
statement shall (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company




to suspend sales to permit the Company to correct or update a registration
statement or prospectus; but the obligations of the Company with respect to
maintaining any registration statement current and effective shall be extended
by a period of days equal to the period such suspension is in effect unless (i)
such extension would result in the Company's inability to use the financial
statements in the registration statement as initially filed and (ii) such
correction or update did not result from the Company's acts or failures to act.

     At the end of the period during which the Company is obligated to keep the
registration statement current and effective as described above (and any
extensions thereof required by the preceding sentence), the Holders of shares of
Restricted Stock included in the registration statement shall discontinue sales
of shares pursuant to such registration statement upon receipt of notice from
the Company of its intention to remove from registration the shares covered by
such registration statement which remain unsold, and such Holders shall notify
the Company of the number of shares registered which remain unsold immediately
upon receipt of such notice from the Company.

     8. Expenses.

     All expenses incurred by the Company in complying with Sections 4, 5 and 6,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance, and fees and disbursements
of one counsel for the sellers of Restricted Stock, but excluding any Selling
Expenses, are called "Registration Expenses." All underwriting discounts and
selling commissions applicable to the sale of Restricted Stock are called
"Selling Expenses."

     The Company will pay all Registration Expenses in connection with each
registration statement under Sections 4, 5 or 6. All Selling Expenses in
connection with each registration statement under Sections 4, 5 or 6 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.

     9. Indemnification and Contribution.

          (a) In the event of a registration of any of the Restricted Stock
     under the Securities Act pursuant to Sections 4, 5 or 6, the Company will
     indemnify and hold harmless each seller of such Restricted Stock
     thereunder, its officers and directors, each underwriter of such Restricted
     Stock thereunder and each other person, if any, who controls such seller or
     underwriter within the meaning of the Securities Act, against any losses,
     claims, damages or liabilities, joint or several, to which such seller,
     officer, director, underwriter or controlling person may become subject
     under the Securities Act or otherwise, insofar as such losses, claims,
     damages or liabilities (or actions in respect thereof) arise out of or are
     based upon (i) any untrue statement or alleged untrue statement of any
     material fact contained in any registration statement




     under which such Restricted Stock was registered under the Securities Act
     pursuant to Sections 4, 5 or 6, any preliminary prospectus or final
     prospectus contained therein, or any amendment or supplement thereof, (ii)
     any blue sky application or other document executed by the Company
     specifically for that purpose or based upon written information furnished
     by the Company filed in any state or other jurisdiction in order to qualify
     any or all of the Restricted Stock under the securities laws thereof (any
     such application, document or information herein called a "Blue Sky
     Application"), (iii) the omission or alleged omission to state therein a
     material fact required to be stated therein or necessary to make the
     statements therein not misleading, (iv) any violation by the Company or its
     agents of any rule or regulation promulgated under the Securities Act
     applicable to the Company or its agents and relating to action or inaction
     required of the Company in connection with such registration, or (v) any
     failure to register or qualify the Restricted Stock in any state where the
     Company or its agents has affirmatively undertaken or agreed in writing
     that the Company (the undertaking of any underwriter chosen by the Company
     being attributed to the Company) will undertake such registration or
     qualification on the seller's behalf (provided that in such instance the
     Company shall not be so liable if it has undertaken its best efforts to so
     register or qualify the Restricted Stock) and will reimburse each such
     seller, and such officer and director, each such underwriter and each such
     controlling person for any legal or other expenses reasonably incurred by
     them in connection with investigating or defending any such loss, claim,
     damage, liability or action, provided, however, that the Company will not
     be liable in any such case if and to the extent that any such loss, claim,
     damage or liability arises out of or is based upon an untrue statement or
     alleged untrue statement or omission or alleged omission so made in
     conformity with information furnished by any such seller, any such
     underwriter or any such controlling person in writing specifically for use
     in such registration statement or prospectus, and except that the foregoing
     indemnity agreement is subject to the condition that, insofar as it relates
     to any such untrue statement or alleged untrue statement or omission or
     alleged omission made in the preliminary prospectus but eliminated or
     remedied in the amended prospectus on file with the Commission at the time
     the registration statement becomes effective or in the amended prospectus
     filed with the Commission pursuant to Rule 424(b) or in the prospectus
     subject to completion and term sheet under Rule 434 of the Securities Act,
     which together meet the requirements of Section 10(a) of the Securities Act
     (the "Final Prospectus"), such indemnity agreement shall not inure to the
     benefit of any such seller, any such underwriter or any such controlling
     person, if such seller, underwriter or controlling person was obligated
     under law to provide a copy of the Final Prospectus to the person or entity
     asserting the loss, liability, claim or damage and failed to do so after
     sufficient copies of the Final Prospectus were delivered by the Company to
     such seller, underwriter or controlling person in sufficient time to
     deliver the Final Prospectus within the period required by the Securities
     Act; provided, further, that this indemnity shall not be deemed to relieve
     any underwriter of any of its due diligence obligations.

          (b) To the extent permitted by law, in the event of a registration of
     any of the Restricted Stock under the Securities Act pursuant to Section 4,
     5 or 6, each seller of such Restricted Stock thereunder, severally and not
     jointly, will indemnify and hold harmless the Company, each person, if any,
     who controls the Company within the meaning of the Securities Act, each
     officer of the Company who signs the registration statement, each director
     of the Company, each underwriter and each person who controls any
     underwriter within the meaning of



     the Securities Act, against all losses, claims, damages or liabilities,
     joint or several, to which the Company or such officer, director,
     underwriter or controlling person may become subject under the Securities
     Act or otherwise, insofar as such losses, claims, damages or liabilities
     (or actions in respect thereof) arise out of or are based upon any untrue
     statement or alleged untrue statement of any material fact contained in any
     registration statement under which such Restricted Stock was registered
     under the Securities Act pursuant to Section 4, 5 or 6, any preliminary
     prospectus or final prospectus contained therein, or any amendment or
     supplement thereof, or arise out of or are based upon the omission or
     alleged omission to state therein a material fact required to be stated
     therein or necessary to make the statements therein not misleading in the
     light of the circumstances in which they were made, and will reimburse the
     Company and each such officer, director, underwriter or controlling person
     for any legal or other expenses reasonably incurred by them in connection
     with investigating or defending any such loss, claim, damage, liability or
     action, provided, however, that such seller will be liable hereunder in any
     such case if and only to the extent that any such loss, claim, damage or
     liability arises out of or is based upon an untrue statement or alleged
     untrue statement or omission or alleged omission so made in reliance upon
     and in conformity with information pertaining to such seller furnished in
     writing to the Company by such seller specifically for use in such
     registration statement or prospectus, and provided, further, that the
     foregoing indemnity agreement is subject to the condition that, insofar as
     it relates to any such untrue statement or alleged untrue statement or
     omission or alleged omission made in the preliminary prospectus but
     eliminated or remedied in the amended prospectus on file with the
     Commission at the time the registration statement becomes effective or in
     the Final Prospectus, such indemnity agreement shall not inure to the
     benefit of the Company, any controlling person or any underwriter, if the
     Company, underwriter or controlling person was obligated under law to
     provide a copy of the Final Prospectus to the person or entity asserting
     the loss, liability, claim or damage and failed to do so within the period
     required by the Securities Act; provided, further, that this indemnity
     shall not be deemed to relieve any underwriter of any of its due diligence
     obligations; and provided, further, that in no event shall any indemnity by
     a seller under this Section 9(b) exceed the gross proceeds from the
     offering received by such seller.

          (c) Promptly after receipt by an indemnified party hereunder of notice
     of the commencement of any action, such indemnified party shall, if a claim
     in respect thereof is to be made against the indemnifying party hereunder,
     notify the indemnifying party in writing thereof, but the omission so to
     notify the indemnifying party shall not relieve it from any liability which
     it may have to such indemnified party other than under this Section 9 and
     shall only relieve it from any liability which it may have to such
     indemnified party under this Section 9 if and to the extent the
     indemnifying party is prejudiced by such omission. In case any such action
     shall be brought against any indemnified party and it shall notify the
     indemnifying party of the commencement thereof, the indemnifying party
     shall be entitled to participate in and, to the extent it shall wish, to
     assume and undertake the defense thereof with counsel satisfactory to such
     indemnified party, and, after notice from the indemnifying party to such
     indemnified party of its election so to assume and undertake the defense
     thereof, the indemnifying party shall not be liable to such indemnified
     party under this Section 9 for any legal expenses subsequently incurred by
     such indemnified party in connection with the defense thereof other than
     reasonable costs of investigation and of liaison with counsel so selected,
     provided, however, that, if the defendants in any such action include both
     the indemnified party and the indemnifying party and




     counsel to the indemnified party shall have reasonably concluded that there
     are reasonable defenses available to the indemnified party which are
     different from or additional to those available to the indemnifying party
     or if the interests of the indemnified party reasonably may be deemed to
     conflict with the interests of the indemnifying party, the indemnified
     party shall have the right to select a separate counsel and to assume such
     legal defenses and otherwise to participate in the defense of such action,
     with the expenses and fees of such separate counsel and other expenses
     related to such participation to be reimbursed by the indemnifying party as
     incurred. No indemnifying party, in the defense of any such claim or
     litigation, shall, except with the consent of each indemnified party,
     consent to entry of any judgment or enter into any settlement which does
     not include as an unconditional term thereof the giving by the claimant or
     plaintiff to such indemnified party of a release from all liability in
     respect to such claim or litigation.

          (d) In order to provide for just and equitable contribution to joint
     liability under the Securities Act in any case in which either (i) any
     Holder of Restricted Stock exercising rights under this Agreement, or any
     controlling person of any such Holder, makes a claim for Indemnification
     pursuant to this Section 9 but it is judicially determined (by the entry of
     a final judgment or decree by a court of competent jurisdiction and the
     expiration of time to appeal or the denial of the last right of appeal)
     that such indemnification may not be enforced in such case notwithstanding
     the fact that this Section 9 provides for indemnification in such case, or
     (ii) contribution under the Securities Act may be required on the part of
     any such selling Holder or any such controlling person in circumstances for
     which indemnification is provided under this Section 9; then, and in each
     such case, the Company and such Holder will contribute to the aggregate
     losses, claims, damages or liabilities to which they may be subject (after
     contribution from others) in such proportion so that such Holder is
     responsible for the portion represented by the percentage that the public
     offering price of its Restricted Stock offered by the registration
     statement bears to the public offering price of all securities offered by
     such registration statement, and the Company is responsible for the
     remaining portion; provided, however, that, in any such case, (A) no such
     Holder will be required to contribute any amount in excess of the public
     offering price of all such Restricted Stock offered by it pursuant to such
     registration statement; and (B) no person or entity guilty of fraudulent
     misrepresentation (within the meaning of Section 11(f) of the Securities
     Act) will be entitled to contribution from any person or entity who was not
     guilty of such fraudulent misrepresentation.

     10. Changes in Common Stock. If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.

     11. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, the Company
agrees to:




          (a) make and keep public information available, as those terms are
     understood and defined in Rule 144 under the Securities Act;

          (b) use its reasonable best efforts to file with the Commission in a
     timely manner all reports and other documents required of the Company under
     the Securities Act and the Exchange Act; and

          (c) furnish to each Holder of Restricted Stock forthwith upon request
     a written statement by the Company as to its compliance with the reporting
     requirements of such Rule 144 and of the Securities Act and the Exchange
     Act, a copy of the most recent annual or quarterly report of the Company,
     and such other reports and documents so filed by the Company as such Holder
     may reasonably request in availing itself of any rule or regulation of the
     Commission allowing such Holder to sell any Restricted Stock without
     registration.

     The Company shall not be required to effect a registration pursuant to
Section 4, 5 or 6 hereof for any Holder desiring to participate in such
registration who (a) may then dispose of all of its shares of Restricted Stock
pursuant to Rule 144 within the three-month period following such proposed
registration; and (b) holds less than 1% of the outstanding capital stock of the
Company (on a common stock-equivalent basis) at the time of such registration.

     12. Representations and Warranties of the Company. The Company represents
and warrants to the Investors as follows:

          (a) The execution, delivery and performance of this Agreement by the
     Company have been duly authorized by all requisite corporate action and
     will not violate any provision of law, any order of any court or other
     agency of government, the Charter or By-laws of the Company or any
     provision of any indenture, agreement or other instrument to which it or
     any or its properties or assets is bound, conflict with, result in a breach
     of or constitute (with due notice or lapse of time or both) a default under
     any such indenture, agreement or other instrument or result in the creation
     or imposition of any lien, charge or encumbrance of any nature whatsoever
     upon any of the properties or assets of the Company.

          (b) This Agreement has been duly executed and delivered by the Company
     and constitutes the legal, valid and binding obligation of the Company,
     enforceable in accordance with its terms (subject, as to enforcement of
     remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
     and similar laws affecting the rights of creditors generally), except to
     the extent the indemnification provisions herein may be deemed not
     enforceable.

          (c) The Company has not granted any registration rights, and no such
     registration rights exist, that conflict with the registrations rights set
     forth herein or contemplated hereby. All registration rights agreements
     relating to the capital stock of the Company permit, or have been amended
     to permit, the transactions and rights set forth herein and contemplated
     hereby.




     13. Miscellaneous.

          (a) All covenants and agreements contained in this Agreement by or on
     behalf of any of the parties hereto shall bind and inure to the benefit of
     the respective successors and assigns of the parties hereto (including
     without limitation transferees of any of the shares of Restricted Stock),
     whether so expressed or not, provided, however, that registration rights
     conferred herein on the Holders of shares of Restricted Stock shall only
     inure to the benefit of a transferee of shares of Restricted Stock if such
     transferee, in the Company's reasonable judgment, is not a competitor of
     the Company, and (i) there is transferred to such transferee at least 20%
     of the total shares of Restricted Stock originally issued to the direct or
     indirect transferor of such transferee by the Company or (ii) such transfer
     is made in connection with the distribution by a Holder to such Holders
     beneficial owners (including, without limitation, to partners of a general
     or limited partnership, shareholders of a corporation, members of a limited
     liability company, and beneficiaries of a trust) of securities of the
     Holder or to the partners or employees of the Holder, provided that at the
     Company's request, one person shall be designated by such transferees as
     their agent for purposes of their rights hereunder and the provision of a
     notice by the Company to such agent in accordance with the provisions
     hereof shall be deemed compliance with such provisions for all such
     beneficial owners, partners and employees, and following such request by
     the Company, the Company shall have no obligation under said provisions
     with respect to such transferees until it shall have been notified of the
     name and address of such agent.

          (b) Each Holder agrees that it will provide notice to the Company of
     any transfer or assignment of its rights or interests hereunder. Any
     failure by the Company to fulfill a covenant or obligation hereunder which
     is the direct result of a failure by a Holder to provide such notice shall
     not be deemed to be a breach of any covenant or obligation hereunder.

     Nothing in this Agreement shall be construed to create any rights or
obligations except among the parties hereto and their respective and permitted
successors and assigns, and no person or entity shall be regarded as a
third-party beneficiary of this Agreement.

     Except as provided in Section 13(a) above, all notices, requests, consents
and other communications hereunder shall be in writing, shall be addressed to
the receiving party's address set forth below or to such other address as a
party may designate by notice hereunder, and shall be either (i) delivered by
hand, (ii) sent by overnight courier, with a receipt obtained or (iii) sent by
registered or certified mail, return receipt requested, postage prepaid.

         If to the Company:  Occupational Health + Rehabilitation Inc
                             175 Derby Street, Suite 36
                             Hingham, MA 02043-5048
                             Attn: Chief Executive Officer

         If to an Investor:  To such Investor at the address of such Investor
                             set forth in Schedule A attached hereto




     All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if sent
by overnight courier, on the next business day following the day such notice is
delivered to the courier service, or (iii) if sent by registered or certified
mail, on the 5th business day following the day such mailing is made.

          (c) This Agreement shall be governed and construed in accordance with
     the law of the Commonwealth of Massachusetts, without giving effect to the
     conflict of laws principles thereof.

          (d) This Agreement may be amended or modified, and any provision
     hereof may be waived in whole or in part, but only by the written consent
     of the Company and the holders of a majority of the aggregate number of
     outstanding shares of Restricted Stock held of record by the Holders or
     their permitted successors and assigns. This Agreement may be terminated by
     written agreement of the Company and the holders of at least a majority of
     the aggregate number of outstanding shares of Restricted Stock held of
     record by the Holders or their permitted successors and assigns.

          (e) This Agreement may be executed in two or more counterparts, each
     of which shall be deemed an original, but all of which together shall
     constitute one and the same instrument.

          (f) Except as otherwise expressly provided herein, the obligations of
     the Company to register shares of Restricted Stock under Section 4, 5 or 6
     as provided herein shall terminate on March 24, 2007.

          (g) If requested by the underwriter or underwriters for an
     underwritten public offering of securities of the Company which offering is
     by the Company, each Holder of Restricted Stock who is a party to this
     Agreement (including, without limitation, a successor or permitted assignee
     of a party) shall agree not to sell, make any short sale of, loan, grant
     any option for the purchase of, or otherwise dispose of any shares of
     Restricted Stock or any other shares of Common Stock (other than shares
     being registered in such offering), without the consent of such underwriter
     or underwriters, for a period of not more than 90 days following the
     effective date of the registration statement relating to such offering
     (unless in any event such underwriter or underwriters shall, based on then
     current market conditions, agree to a shorter period), provided, with
     respect to each such offering, that all persons entitled to registration
     rights in such offering who are not parties to this Agreement, all other
     persons selling shares of Common Stock in such offering and all executive
     officers of the Company shall also have agreed to be bound by provisions
     pertaining to the sale of their shares of Common Stock following such
     offering which provisions are substantially similar to the provisions
     binding upon the Holders of Restricted Stock obligated under this Agreement
     with respect to the sale of their shares following such offering.

          (h) The Company shall be permitted to require any Holders requesting
     registration under Section 4, 5 or 6 to delay any request for registration
     or to cease sales under



     any effective registration statement if the Company is then contemplating a
     transaction that could reasonably be expected to be adversely affected or
     the Company would be required to make public disclosure of information, the
     disclosure of which at such time could reasonably be expected to cause a
     material adverse effect upon the Company's business.

     In addition, if at the time of any request to register Registrable Shares
pursuant to Section 4 or Section 6 hereof, the Company is engaged or has fixed
plans to engage within ninety (90) days of the time of the request in a
registered public offering as to which such Holders may nclude Registrable
Shares pursuant to Section 5 hereof, then the Company may at its option direct
that such request be delayed.

          (i) If any provision of this Agreement shall be held to be illegal,
     invalid or unenforceable, such illegality, invalidity or unenforceability
     shall attach only to such provision and shall not in any manner affect or
     render illegal, invalid or unenforceable any other provision of this
     Agreement, and this Agreement shall be carried out as if any such illegal,
     invalid or unenforceable provision were not contained herein.

     In the event that any court of competent jurisdiction shall determine that
any provision, or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any respect, then such provision shall be
deemed limited to the extent that such court deems it reasonable and
enforceable, and as so limited shall remain in full force and effect.

          (j) The headings and captions of the various subdivisions of this
     Agreement are for convenience of reference only and shall in no way modify,
     or affect the meaning or construction of any of the terms or provisions
     hereof.

     14. Entire Agreement.

     This Agreement embodies the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings related to the subject
matter hereof, including without limitation the Prior Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




     IN WITNESS WHEREOF, the undersigned have executed this Amended and Restated
Registration Rights Agreement as a sealed instrument as of the day and year
first written above.

THE COMPANY:                           INVESTORS:

OCCUPATIONAL HEALTH +                  CAHILL, WARNOCK STRATEGIC
 REHABILITATION INC                     PARTNERS FUND, L.P.

By: /s/ Keith G. Frey                  By:  Cahill, Warnock Strategic
    -------------------------------         Partners, L.P.
Title: Chief Financial Officer
       ----------------------------    By: /s/ Donald W. Hughes
                                         ---------------------------------------
                                       Title: General Partner


                                       STRATEGIC ASSOCIATES, L.P.

                                       By: Cahill, Warnock Strategic
                                           Partners, L.P.

                                       By: /s/ Donald W. Hughes
                                           -------------------------------------
                                       Title: General Partner


                                       AXA U.S. GROWTH FUND LLC

                                       By: /s/ Thomas G. McKinley
                                           -------------------------------------
                                       Title: Managing Member


                                       PANTHEON GLOBAL PCC LIMITED

                                       By: /s/ Sarita Keen
                                           -------------------------------------
                                       Title: Alternate Director


                                       DOUBLE BLACK DIAMOND II, LLC

                                       By: /s/ Thomas G. McKinley
                                           -------------------------------------
                                       Title:   Managing Member




                                       /s/ Thomas G. McKinley
                                       -----------------------------------------
                                       Vincent Worms, signed by Thomas G.
                                       McKinley pursuant to a power of attorney


                                       THE VENTURE CAPITAL FUND OF
                                       NEW ENGLAND III, L.P.

                                       By:  FH & Co. III, L.P.,
                                            Its General Partner

                                       By: /s/ Kevin J. Dougherty
                                           -------------------------------------
                                       Title: General Partner


                                       BANCBOSTON VENTURES, INC.

                                       By: /s/John B. McCormick
                                           -------------------------------------
                                       Title: Vice President


                                       VENROCK ASSOCIATES

                                       VENROCK ASSOCIATES II, L.P.

                                       By: /s/Anthony B. Evnin
                                           -------------------------------------
                                       Title:   General Partner


                                       ASSET MANAGEMENT ASSOCIATES,
                                       1989, L.P.

                                       By:  AMC Partners 89, L.P.,
                                            General Partner

                                       By: /s/ Craig C. Taylor
                                           -------------------------------------
                                       Title: General Partner



                                                                      SCHEDULE A

                                    INVESTORS

Cahill, Warnock Strategic Partners Fund, L.P.
One South Street
Suite 2150
Baltimore, Maryland 21202
Attn: Mr. Donald W. Hughes

     with copy to:
     Edward L. Cahill
     HLM Management
     222 Berkley Street
     Boston, MA  02116

Strategic Associates, L.P.
One South Street
Suite 2150
Baltimore, Maryland 21202
Attn: Mr. Donald W. Hughes

     with copy to:
     Edward L. Cahill
     HLM Management
     222 Berkley Street
     Boston, MA  02116

AXA U.S. Growth Fund LLC
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn: Mr. Thomas G. McKinley

Pantheon Global PCC Limited
Pantheon Ventures, Inc.
Transamerica Center
600 Montgomery Street
23rd Floor
San Francisco, CA  94111
Attn: Jay Pierrepont



Double Black Diamond II, LLC
c/o Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
Attn:  Mr. Thomas G. McKinley

Vincent Worms
50 California Street
Suite 3200
San Francisco, CA 94111

Asset Management Associates, 1989, L.P.
Alloy Ventures
480 Cowper Street, 2nd Floor
Palo Alto, CA  94301
Attn:  Mr. Craig C. Taylor

Venrock Associates
Room 5508, 30 Rockefeller Plaza
New York, NY  10112
Attn:  Mr. Anthony Evnin

Venrock Associates II, L.P.
Room 5508, 30 Rockefeller Plaza
New York, NY  10112
Attn:  Mr. Anthony Evnin

The Venture Capital Fund of New England, III, L.P.
30 Washington Street
Wellesley Hills, MA  02481-1905
Attn:  Mr. Kevin J. Dougherty

BancBoston Ventures, Inc.
BancBoston Capital
Mail Stop:  MA DE 10210A
175 Federal Street, 10th Floor
Boston, MA  02110
Attn:  Mr. John B. McCormick

EX-10.02(D)

                                                                Exhibit 10.02(d)


THIS NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED MARCH 24,
2003 IN FAVOR OF DVI BUSINESS CREDIT CORPORATION AND DVI FINANCIAL SERVICES
INC., A COPY OF WHICH MAY BE OBTAINED FROM OBLIGOR. NOTWITHSTANDING ANY CONTRARY
STATEMENT CONTAINED IN THIS NOTE, NO PAYMENT ON ACCOUNT OF THE PRINCIPAL OR
INTEREST THEREON WILL BECOME DUE OR BE PAID EXCEPT IN ACCORDANCE WITH THE TERMS
OF SUCH SUBORDINATION AGREEMENT.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE OBLIGOR THAT SUCH
REGISTRATION IS NOT REQUIRED.

                                 PROMISSORY NOTE

$_____________                                                   March 24, 2003

      For value received, the undersigned, Occupational Health + Rehabilitation
Inc, a Delaware corporation ("Obligor"), hereby promises to pay to the order of
_________________________ ("Lender"), at Lender's principal office at
_____________________or at such other place as may be designated from time to
time in writing by Lender, the principal sum of $_____________ together with
interest in arrears from and including the date hereof on the unpaid principal
balance hereunder, at the rate of eight percent (8%) per annum, payable as set
forth below. To the extent permitted by applicable law, if an Event of Default
(as defined below) has occurred and is continuing, the rate of interest on any
unpaid principal or interest hereunder shall be seven percent (7%) per annum
above the rate of interest set forth in the immediately preceding sentence until
such time as the Company cures such Event of Default, whereupon the rate of
interest shall again be eight percent (8%) per annum. Interest shall be
calculated on the basis of actual number of days elapsed and a year of 360 days.
Notwithstanding any other provision of this Promissory Note, Lender does not
intend to charge and Obligor shall not be required to pay any interest or other
fees or charges in excess of the maximum permitted by applicable law; any
payments in excess of such maximum shall be credited to reduce principal
hereunder. All payments received by Lender hereunder will be applied first to
costs of collection, if any, then to interest and the balance to principal.
Principal and interest shall be payable in lawful money of the United States.

      Principal and interest accrued to the date thereof shall be paid in three
(3) equal installments of principal of $__________ each, on March 24, 2004, June
24, 2004, in each case together with the accrued interest thereon and with a
final payment of all unpaid principal and accrued interest thereon on September
24, 2004.



                                     - 2 -

      If any day on which a payment is due pursuant to the terms of this
Promissory Note is not a day on which banks in the Commonwealth of Massachusetts
are generally open (a "Business Day"), such payment shall be due on the next
Business Day following. Obligor shall make all payments on a pro rata basis on
all Promissory Notes issued pursuant to the Repurchase Agreement (as defined
below).

      This Promissory Note may be prepaid at any time, without premium or
penalty, in whole or in part. Any prepayment of principal shall be accompanied
by a payment of accrued interest in respect of the principal being prepaid.

      This Promissory Note shall, at the option of the holder hereof, become due
and payable without notice or demand, upon the happening of any one of the
following specified events (an "Event of Default") by or with respect to
Obligor: (1) failure to pay any amount as herein set forth; (2) default in the
performance by Obligor of any other obligation to Lender, which default is not
cured within thirty (30) days; (3) insolvency (however evidenced) or the
commission of any act of insolvency; (4) the making of a general assignment for
the benefit of creditors; (5) the filing of any petition or the commencement of
any proceeding for any relief under any bankruptcy or insolvency laws, or any
laws relating to the relief of debtors; (6) suspension of all or substantially
all of the business of the Company; (7) a default under any arrangement or
agreement with a third party for debt or a credit facility to which this note is
subordinated or is otherwise junior to in priority; or (8) any breach or
violation of the terms of the Transaction Documents (as such term is defined in
the Series A Convertible Preferred Stock Repurchase Agreement (the "Repurchase
Agreement") by and among the Obligor and the parties named therein), after
Obligor has received notice of such breach or violation and such breach or
violation remains uncured after 10 days.

      Any deposits or other sums at any time credited by or due from Lender to
or for Obligor and any securities or other property of Obligor in the possession
of Lender shall at all times be held and treated as collateral security for the
payment of this Promissory Note and any other liability now existing or
hereafter arising of Obligor to Lender and Lender may apply or set off any such
deposits and sums against said liabilities.

      If this Promissory Note is not paid in accordance with its terms, Obligor
shall pay to Lender, in addition to principal and accrued interest thereon, all
costs of collection of the principal and accrued interest, including, but not
limited to, reasonable attorneys' fees, court costs and other costs for the
enforcement of payment of this Promissory Note.

      No waiver of any obligation of Obligor under this Promissory Note shall be
effective unless it is in a writing signed by Lender. A waiver by Lender of any
right or remedy under this Promissory Note on any occasion shall not be a bar to
exercise of the same right or remedy on any subsequent occasion or of any other
right or remedy at any time.

      This Promissory Note is delivered in and shall be enforceable in
accordance with the internal domestic laws of the State of Delaware (without
regard to the conflicts of law provisions



                                     - 3 -


thereof), and shall be construed in accordance therewith, and shall have the
effect of a sealed instrument.

      This Promissory Note is one of a series of Promissory Notes of like tenor
issued by Obligor pursuant to a certain Series A Convertible Preferred Stock
Repurchase Agreement among the Obligor and the Sellers listed on Schedule I
thereto (the "Repurchase Agreement"). The Promissory Notes issued pursuant to
the Repurchase Agreement may be amended as to all Lenders with the written
consent of holders of the Promissory Notes whose aggregate face value equals or
exceeds 66-2/3% of the aggregate face value of all the Promissory Notes issued
under the Repurchase Agreement.

      Obligor hereby expressly waives presentment, demand, and protest, notice
of demand, dishonor and nonpayment of this Promissory Note, and all other
notices or demands of any kind in connection with the delivery, acceptance,
performance, default or enforcement hereof, and hereby consents to any delays,
extensions of time, renewals, waivers or modifications that may be granted or
consented to by the holder hereof with respect to the time of payment or any
other provision hereof.

                           OCCUPATIONAL HEALTH + REHABILITATION INC:

                           By: /s/ Keith G. Frey
                               ----------------------------------------
                           Name:    Keith G. Frey
                                ---------------------------------------
                           Title:   Chief Financial Officer
                                 --------------------------------------




                                     - 4 -

List of Subordinated Creditors and Amount of Each Note



Name of Subordinated Creditor                       Principal amounts of Notes
- -----------------------------                       --------------------------

Cahill, Warnock Strategic Partners Fund, L.P.            $   1,294,049.41

Strategic Associates, L.P.                               $      71,701.91

Venrock Associates                                       $     127,047.21

Venrock Associates II, L.P.                              $     190,569.86

The Venture Capital Fund of New England III, L.P.        $     127,047.21

Asset Management Associates, 1989, L.P.                  $     158,807.58

Pantheon Global PCC Limited                              $     330,322.37

AXA U.S. Growth Fund LLC                                 $     165,161.18

Double Black Diamond II LLC                              $      31,762.28

Vincent Worms                                            $      12,701.48

BancBoston Ventures, Inc.                                $     190,569.86
                                                         ----------------
                                       Totals            $   2,699,740.35
                                                         ================

EX-10.02(E)

                                                                Exhibit 10.02(e)

                             SUBORDINATION AGREEMENT

     THIS SUBORDINATION AGREEMENT (the "Agreement") is dated as of March 24,
2003, by and among Occupational Health + Rehabilitation Inc, a Delaware
corporation (the "Company"), the holders of Promissory Notes (the "Notes")
listed in Schedule I attached hereto (the "Subordinated Creditors"), and DVI
Business Credit Corporation ("DVIBC") and DVI Financial Services Inc. ("DVIFS"
and together with DVIBC, the "Senior Creditors").

                              W I T N E S S E T H:

     WHEREAS, the Subordinated Creditors will on the date hereof acquire certain
Promissory Notes of the Company in the original aggregate principal amount of
$2,699,740.35 (the obligations of the Company to the Subordinated Creditors
under the Notes are hereinafter called the "Subordinated Debt");

     WHEREAS, the Company pursuant to a Loan and Security Agreement dated as of
December 15, 2000 between the Company and DVIBC and a Master Loan Agreement
dated March 1, 2001 between the Company and DVIFS (collectively, as amended or
restated from time to time, the "Credit Agreements"), has borrowed and will from
time to time borrow and re-borrow money from the Senior Creditors (all
obligations of the Company to the Senior Creditors, whether now existing or
hereafter arising, including all principal, interest, costs, fees, expenses and
other amounts owed by the Company to the Senior Creditors pursuant to the Credit
Agreements and all other amounts which are included in the Obligations (as that
term is defined in either of the Credit Agreements) are herein called the
"Senior Debt");

     WHEREAS, the Senior Debt is secured pursuant to the terms of the Credit
Agreements; and

     WHEREAS, each Subordinated Creditor, as an inducement to each Senior
Creditor to continue present credit extensions to the Company and from time to
time make further loans and credit available to the Company, desires to
subordinate, in the manner and to the extent herein set forth, the payment of
the Subordinated Debt to the due and punctual payment of the Senior Debt.

      NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby agree as follows:

     1. Subordination. Each Subordinated Creditor, for itself, its successors
and assigns, covenants and agrees that the payment of the principal of and
interest on all Subordinated Debt now or hereafter outstanding is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
to the payment of the Senior Debt. This



Agreement shall constitute a continuing agreement of subordination and shall
continue in effect until written notice from the Subordinated Creditors
representing at least 662/3% of the then outstanding aggregate principal amount
of the Promissory Notes to the Senior Creditors. No such notice or revocation
shall affect the rights of the parties with respect to any Senior Debt
outstanding or committed for on the date of revocation, as to which this
Agreement shall continue in force and effect until such Senior Debt shall be
paid in full.

     2. No Payment Upon Default. In the event of a default by the Company under
the terms of each Credit Agreement due to the Company's failure to make payments
thereunder or satisfy the financial covenants thereunder, and during the
continuance of such default for a period up to one hundred eighty (180) days and
thereafter if (a) the maturity of any Senior Debt has been accelerated by the
Senior Creditors, (b) judicial proceedings shall have been instituted with
respect to such default, or (c) (if a shorter period) until such default has
been cured or waived in writing by a Senior Creditor, then and during the
continuance of such period, no payment of principal of, interest on, or fees,
costs, expenses or other amounts with respect to, any Subordinated Debt shall be
made by the Company or accepted any each Subordinated Creditor.

     3. Payments Held in Trust. Each Subordinated Creditor agrees that, if any
payment of principal of, interest on, or fees, costs, expenses or other amounts
with respect to, any Subordinated Debt is received by it before all Senior Debt
shall have been paid in full, despite or in violation or contravention of the
terms of this Agreement, such Subordinated Creditor will hold the same in trust
for the Senior Creditor and forthwith pay the same to the Senior Creditors, to
be held by the Senior Creditors as additional security for the Senior Debt or
applied by the Senior Creditors to payment of the Senior Debt in such manner as
the Senior Creditors may choose in their sole discretion.

     4. Bankruptcy. In the event of any receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization (whether or not pursuant
to bankruptcy laws), sale of all or substantially all of the assets,
dissolution, liquidation, winding up of the business or affairs of the Company
or any other marshalling of the assets and liabilities of the Company:

          (a) Each Subordinated Creditor will prove, enforce and endeavor to
     obtain payment of the principal of, interest on and all other amounts
     payable with respect to all Subordinated Debt and will pay over, but only
     out of and to the extent of any proceeds realized therefor, to the Senior
     Creditors amounts thereof sufficient, after application of all other
     amounts then or theretofore realized for payment of principal of and
     interest on, or other payments with respect to, the Senior Debt, to pay in
     full the Senior Debt, as provided in Section 2 hereof. Each Subordinated
     Creditor may file claims in any such proceeding on its own behalf;
     provided, however, in the event that a Subordinated Creditor fails to make
     such filings by the tenth day prior to the due date of such filings then
     during the ten day period prior to the due date of such filings (a
     "Forfeited Filing Period"), the Senior Creditors may file claims in any
     such proceeding on such



     Subordinated Creditor's behalf during such Forfeited Filing Period and in
     no event shall any Subordinated Creditor on whose behalf a Senior Creditor
     has made a filing waive, forgive or cancel any claim it may now or
     hereafter have against the Company with respect to such filing. For
     purposes of the foregoing, each Senior Creditor is hereby irrevocably
     constituted and appointed by each Subordinated Creditor failing to file a
     claim prior to a Forfeited Filing Period as its attorney-in-fact to file
     any and all proofs of claim and any other documents and to take all other
     actions during such Forfeited Filing Period, either in such Senior
     Creditor's name or in the name of a Subordinated Creditor, that in such
     Senior Creditor's opinion is reasonably necessary to enable such Senior
     Creditor to obtain such payments.

          (b) The Senior Creditors may, at their option, claim directly from the
     trustee or representative of the Company's estate in such proceeding. In
     the event that a Senior Creditor does so elect to claim directly against
     the trustee or representative of the Company's estate, each Subordinated
     Creditor hereby grants to such Senior Creditor an irrevocable proxy to vote
     its claims in any such proceeding or at any meeting of creditors, and
     agrees to execute all further documents requested by each Senior Creditor
     to facilitate exercise of this proxy. Each Subordinated Creditor and the
     Company agree to furnish all assignments, powers or other documents
     requested by each Senior Creditor to facilitate such direct collection by
     such Senior Creditor or the perfection of any interest of such Senior
     Creditor hereunder.

     5. Certain Prohibited Actions. Until the payment in full of the Senior
Debt, without the prior written consent of the Senior Creditors:

          (a) No Subordinated Creditor shall request, demand or seek to obtain
     from the Company, and the Company shall not grant or deliver to any
     Subordinated Creditor, any collateral or other security for the
     Subordinated Debt;

          (b) No Subordinated Creditor shall (i) accelerate the maturity of any
     Subordinated Debt or (ii) exercise any right or remedy, or take any action,
     against the Company or any of the assets or property of the Company to
     enforce his rights with respect to any Subordinated Debt; provided,
     however, the foregoing restrictions on the Subordinated Creditors shall
     only apply if there is a default under the Credit Agreement with respect to
     the Company's failure to make payments thereunder or satisfy the financial
     covenants; and

          (c) No Subordinated Creditor shall sell, assign or otherwise transfer
     or further encumber any Subordinated Debt or interest therein without first
     procuring and delivering to the Senior Creditors evidence in writing of the
     consent and agreement of the purchaser, pledgee, assignee or transferee of
     such Subordinated Debt or interest therein to comply with all terms,
     conditions and provisions of this Agreement. The rights of the Senior
     Creditors under this Section 5 shall inure to the benefit of its successors
     and assigns.




     6. Consents and Waivers. Each Subordinated Creditor hereby irrevocably
consents to (a) any amendment or waiver of the terms of the Senior Debt, (b) any
renewal, extension or postponement of the time of payment of the Senior Debt or
any other indulgence with respect to the Senior Debt, (c) any substitution,
exchange or release of collateral for the Senior Debt and (d) the addition or
release of any person primarily or secondarily liable on the Senior Debt, made
or effected by a Senior Creditor. Each Senior Creditor may exercise, fail to
exercise, waive or amend any of its rights under any instrument evidencing or
securing or under any agreement delivered in connection with any Senior Debt,
and in reference thereto may make and enter into such agreements as to it may
seem proper or desirable, all without notice to or further assent from any
Subordinated Creditor, and any such action shall not in any manner impair or
affect this Agreement or any of such Senior Creditor's rights hereunder. Each
Subordinated Creditor hereby irrevocably waives (i) presentment, notice and
protest in connection with all negotiable instruments evidencing Senior Debt or
Subordinated Debt, (ii) notice of the acceptance of this Agreement by a Senior
Creditor, (iii) notice of any extensions of credit made, extensions granted or
other action taken in reliance hereon, and (iv) all demands and notices of every
kind in connection with this Agreement. Each Subordinated Creditor hereby waives
and agrees not to assert against a Senior Creditor any rights which a guarantor
or surety with respect to any indebtedness of the Company could exercise; but
nothing in this Agreement shall constitute any Subordinated Creditor a guarantor
or surety.

     7. Further Assurances. Each Subordinated Creditor and the Company shall
execute and deliver to each Senior Creditor such further instruments and
documents and shall take such further action as each Senior Creditor may at any
time or times reasonably request in order to carry out the provisions and intent
of this Agreement.

     8. No Obligations of Senior Creditor. The rights granted to each Senior
Creditor hereunder are solely for its protection and nothing herein contained
shall impose on a Senior Creditor any duties with respect to the Subordinated
Debt or any property of any Subordinated Creditor or the Company received
hereunder beyond reasonable care while in any Senior Creditor's custody and
redelivery upon expiration of this Agreement.

     9. Specific Performance. Each Senior Creditor is hereby authorized to
demand specific performance of this Agreement, whether or not the Company shall
have complied with the provisions hereof applicable to it, at any time when any
Subordinated Creditor shall have failed to comply with any provision hereof.

     10. Amendment; Waiver. This Agreement may not be amended or waived except
by a writing signed by each Senior Creditor, the Company and the Subordinated
Creditors representing at least a majority of the then outstanding aggregate
principal amount of the Promissory Notes. No delay on the part of a Senior
Creditor in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any partial exercise or waiver of any privilege or
right hereunder preclude any further exercise of such privilege or right or the
exercise of any other right, power or privilege. The rights


- -


and remedies expressed in this Agreement are cumulative and not exclusive of any
right or remedy which each Senior Creditor may otherwise have.

     11. Notices. Any notices or other communications to be given to the Senior
Creditors under this Agreement shall be in writing and shall be deemed given
when mailed to the Senior Creditors by overnight courier or by registered mail
addressed to DVI Business Credit Corporation, 2500 York Road, Jamison, PA 18929,
Attention: Gerald A. Hayes, Jr., Chief Operating Officer, or to such other
address or addresses as the Senior Creditors may from time to time designate for
that purpose.

     12. Governing Law. This Subordination Agreement shall be deemed to be a
contract made under and shall be construed in accordance with, and this
Subordination Agreement and any claim arising out of the relationship of the
parties hereto, whether arising under this Subordination Agreement or otherwise,
shall be governed by the laws of the State of Delaware. This Agreement shall be
deemed to be an instrument under seal.

     13. Counterparts. This Agreement may be signed in any number of
counterparts, which together will be one and the same instrument. This Agreement
shall become effective whenever each party shall have signed at least one such
counterpart. This Agreement shall be binding upon each Subordinated Creditor and
its executors, administrators, personal representatives, heirs, devisees,
legatees, successors and assigns, and shall inure to the benefit of each Senior
Creditor and its successors and assigns.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




      IN WITNESS WHEREOF, each party hereto has cause this Subordination
Agreement to be executed by its duly authorized officer as of the date first
above written.

                                  Subordinated Creditors:

                                  CAHILL, WARNOCK STRATEGIC
                                  PARTNERS FUND, L.P.

                                  By:  Cahill, Warnock Strategic Partners, L.P.
                                  By: /s/ Donald W. Hughes
                                      ------------------------------------------
                                  Title:  General Partner


                                  STRATEGIC ASSOCIATES, L.P.

                                  By:  Cahill, Warnock Strategic Partners, L.P.
                                  By: /s/ Donald W. Hughes
                                      ------------------------------------------
                                  Title: General Partner


                                  AXA U.S. GROWTH FUND LLC

                                  By: /s/ Thomas G. McKinley
                                      ------------------------------------------
                                  Title: Managing Member


                                  PANTHEON GLOBAL PCC LIMITED

                                  By: /s/ Sarita Keen
                                      ------------------------------------------
                                  Title: Alternate Director


                                  DOUBLE BLACK DIAMOND II LLC

                                  By: /s/ Thomas G. McKinley
                                      ------------------------------------------
                                  Title: Managing Member


                                  /s/ Thomas G. McKinley
                                  ----------------------------------------------
                                  Vincent Worms, signed by
                                  Thomas McKinley pursuant to a power of
                                  attorney



                                  THE VENTURE CAPITAL FUND OF
                                    NEW ENGLAND III, L.P.

                                  By:  FH & Co. III, L.P., Its General Partner

                                  By: /s/ Kevin J. Dougherty
                                      ------------------------------------------
                                  Title: General Partner


                                  BANCBOSTON VENTURES, INC.

                                  By: /s/ John B. McCormick
                                      ------------------------------------------
                                  Title: Vice President


                                  VENROCK ASSOCIATES

                                  VENROCK ASSOCIATES II, L.P.

                                  By: /s/ Anthony B. Evnin
                                      ------------------------------------------
                                  Title:  General Partner


                                  ASSET MANAGEMENT ASSOCIATES,
                                    1989, L.P.

                                  By:  AMC Partners 89, L.P., General Partner

                                  By: /s/ Craig C. Taylor
                                      ------------------------------------------
                                  Title: General Partner

                                  Senior Creditor:
                                  DVI BUSINESS CREDIT CORPORATION

                                  By: /s/ Gerald A. Hayes, Jr.
                                      ------------------------------------------
                                  Name: Gerald A. Hayes, Jr.
                                  Title: Executive Vice President and
                                         Chief Operating Officer

                                  DVI FINANCIAL SERVICES INC.

                                  By: /s/ Gerald A. Hayes, Jr.
                                      ------------------------------------------
                                  Name: Gerald A. Hayes, Jr.
                                  Title: Senior Vice President




                                  Company:
                                  OCCUPATIONAL HEALTH + REHABILITATION INC

                                  By: /s/ Keith G. Frey
                                      ----------------------------
                                  Name: Keith G. Frey
                                  Title: Chief Financial Officer




                                                                      SCHEDULE I

  Name of
Subordinated                                                  Principal amounts
 Creditor                                                          of Notes
- ------------                                                  -----------------
Cahill, Warnock Strategic Partners Fund, L.P.                  $ 1,294,049.41

Strategic Associates, L.P.                                     $    71,701.91

Venrock Associates                                             $   127,047.21

Venrock Associates II, L.P.                                    $   190,569.86

The Venture Capital Fund of New England III, L.P.              $   127,047.21

Asset Management Associates, 1989, L.P.                        $   158,807.58

Pantheon Global PCC Limited                                    $   330,322.37

AXA U.S. Growth Fund LLC                                       $   165,161.18

Double Black Diamond II LLC                                    $    31,762.28

Vincent Worms                                                  $    12,701.48

BancBoston Ventures, Inc.                                      $   190,569.86
                                                             ----------------
                                                   Totals      $ 2,699,740.35
                                                             ================

EX-10.04

                                                                   Exhibit 10.04

                    OCCUPATIONAL HEALTH + REHABILITATION INC

                                 1998 STOCK PLAN
                         (as amended December 18, 2002)

SECTION 1. Purpose

     The purpose of the 1998 Stock Plan (the "Plan") is to secure for
Occupational Health + Rehabilitation Inc (the "Company"), its parent (if any)
and any subsidiaries of the Company (collectively the "Related Companies") the
benefits arising from capital stock ownership by those employees, directors,
officers and consultants of the Company and any Related Companies who will be
responsible for the Company's future growth and continued success.

     The Plan will provide a means whereby (a) employees of the Company and any
Related Companies may purchase stock in the Company pursuant to options which
qualify as "incentive stock options" ("Incentive Stock Options") under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), (b)
directors, employees and consultants of the Company and any Related Companies
may purchase stock in the Company pursuant to options granted hereunder which do
not qualify as Incentive Stock Options ("Non-Qualified Option" or "Non-Qualified
Options"); (c) directors, employees and consultants of the Company and any
Related Companies may be awarded stock in the Company ("Awards"); and (d)
directors, employees and consultants of the Company and any Related Companies
may receive stock appreciation rights ("SARs"). Both Incentive Stock Options and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." As used herein, the terms "parent" and "subsidiary"
mean "parent corporation" and "subsidiary corporation" as those terms are
defined in Section 424 of the Code. Options, Awards and SARs are referred to
hereafter individually as a "Plan Benefit" and collectively as "Plan Benefits."
Directors, employees and consultants of the Company and any Related Companies
are referred to herein as "Participants."

SECTION 2. Administration

     2.1 Board of Directors and the Committee. The Plan will be administered by
the Board of Directors of the Company whose construction and interpretation of
the terms and provisions hereof shall be final and conclusive. Any director to
whom a Plan Benefit is awarded shall be ineligible to vote upon his or her Plan
Benefit, but Plan Benefits may be granted to any such director by a vote of the
remainder of the directors, except as limited below. The Board of Directors may
in its sole discretion grant Options, issue shares upon exercise of such
Options, grant Awards and grant SARs all as provided in the Plan. The Board of
Directors shall have authority, subject to the express provisions of the Plan,
to construe the Plan and its related agreements, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Option, Award and SAR agreements, which



need not be identical, and to make all other determinations in the judgment of
the Board of Directors necessary or desirable for the administration of the
Plan. The Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into effect,
and it shall be the sole and final judge of such expediency. No director shall
be liable for any action or determination made in good faith. The Board of
Directors may delegate any or all of its powers under the Plan to a Compensation
Committee or other Committee (the "Committee") appointed by the Board of
Directors consisting of at least two members of the Board of Directors. If Plan
Benefits are to be approved solely by a Committee, the members of the Committee
shall at all times be: (i) "outside directors" as that term is defined in Treas.
Reg. ss.1.162-27(e)(3) (or any successor regulation); and (ii) "non-employee
directors" within the meaning of Rule 16b-3 (or any successor rule) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such terms
are interpreted from time to time. If the Committee is so appointed, all
references to the Board of Directors herein shall mean and relate to such
Committee, unless the context otherwise requires.

     2.2 Compliance with Section 162(m) of the Code. Section 162(m) of the Code
generally limits the tax deductibility to publicly held companies of
compensation in excess of $1,000,000 paid to certain "covered employees"
("Covered Employees"). It is the Company's intention to preserve the
deductibility of such compensation to the extent it is reasonably practicable
and to the extent it is consistent with the Company's compensation objectives.
For purposes of this Plan, Covered Employees of the Company shall be those
employees of the Company described in Section 162(m)(3) of the Code.

SECTION 3. Eligibility

     3.1 Incentive Stock Options. Participants who are employees shall be
eligible to receive Incentive Stock Options pursuant to the Plan; provided that
no person shall be granted any Incentive Stock Option under the Plan who, at the
time such Option is granted, owns, directly or indirectly, Common Stock of the
Company possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its Related Companies, unless the
requirements of Section 6.6(b) hereof are satisfied. In determining whether this
10% threshold has been reached, the stock attribution rules of Section 424(d) of
the Code shall apply. Directors who are not regular employees are not eligible
to receive Incentive Stock Options.

     3.2 Non-Qualified Options, Awards and SARs. Non-Qualified Options, Awards
and SARs may be granted to any Participant.

     3.3 Generally. The Board of Directors may take into consideration a
Participant's individual circumstances in determining whether to grant an
Incentive Stock Option, a Non-Qualified Option, an Award or an SAR. Granting of
any Option, Award or SAR for any individual shall neither entitle that
individual to, nor disqualify that individual from, participation in any other
grant of Plan Benefits.

                                       2



SECTION 4. Stock Subject to Plan

     Subject to adjustment as provided in Sections 10 and 11 hereof, the stock
to be offered under the Plan shall consist of shares of the Company's Common
Stock, $.001 par value, and the maximum number of shares which will be reserved
for issuance, and in respect of which Plan Benefits may be granted pursuant to
the provisions of the Plan, shall not exceed in the aggregate 870,000 shares.
Such shares may be authorized and unissued shares, treasury shares or shares
purchased on the open market. If an Option or SAR granted hereunder shall expire
or terminate for any reason without having been exercised in full, or if the
Company shall reacquire any unvested shares issued pursuant to Awards, the
unpurchased shares subject thereto and any unvested shares so reacquired shall
again be available for subsequent grants of Plan Benefits under the Plan. Stock
issued pursuant to the Plan may be subject to such restrictions on transfer,
repurchase rights or other restrictions as shall be determined by the Board of
Directors.

SECTION 5. Granting of Options, SARs and Awards

     Plan Benefits may be granted under the Plan at any time after January 16,
1998 (the date of approval of the Plan by the Board of Directors), subject to
approval of the Plan by the stockholders of the Company, and prior to January
16, 2008; provided, however, that nothing in the Plan shall be construed to
obligate the Company to grant Plan Benefits to a Participant or anyone claiming
under or through a Participant. The date of grant of Plan Benefits under the
Plan will be the date specified by the Board of Directors at the time the Board
of Directors grants such Plan Benefits; provided, however, that such date shall
not be prior to the date on which the Board of Directors takes such action. The
Board of Directors shall have the right, with the consent of a Participant, to
convert an Incentive Stock Option granted under the Plan to a Non-Qualified
Option pursuant to Section 6.7. Plan Benefits may be granted alone or in
addition to other grants under the Plan.

SECTION 6. Special Provisions Applicable to Options and SARs

     6.1   Purchase Price and Shares Subject to Options and SARs.

           (a) The purchase price per share of Common Stock deliverable upon the
     exercise of an Option shall be determined by the Board of Directors;
     provided, however, that (i) in the case of an Incentive Stock Option, the
     exercise price shall not be less than 100% of the fair market value of such
     Common Stock on the day the Option is granted (except as modified in
     Section 6.6(b) hereof), and (ii) in the case of a Non-Qualified Option, the
     exercise price shall not be less than 50% of the fair market value on the
     day such Option is granted.

           (b) Options granted under the Plan may provide for the payment of the
     exercise price by delivery of (i) cash or a check payable to the order of
     the Company in an amount equal to the exercise price of such Options, (ii)
     shares of Common Stock of

                                        4



     the Company owned by the Participant having a fair market value equal in
     amount to the exercise price of the Options being exercised, or (iii) any
     combination of (i) and (ii). The fair market value of any shares of the
     Company's Common Stock which may be delivered upon exercise of an Option
     shall be determined by the Board of Directors. The Board of Directors may
     also permit Participants, either on a selective or aggregate basis, to
     simultaneously exercise Options and sell the shares of Common Stock thereby
     acquired, pursuant to a brokerage or similar arrangement, approved in
     advance by the Board of Directors, and to use the proceeds from such sale
     as payment of the purchase price of such shares.

          (c) If, at the time an Option is granted under the Plan, the Company's
     Common Stock is publicly traded, "fair market value" shall be determined as
     of the last business day for which the prices or quotes discussed in this
     sentence are available prior to the date such Option is granted (the
     "Determination Date") and shall mean (i) the average (on the Determination
     Date) of the high and low prices of the Common Stock on the principal
     national securities exchange on which the Common Stock is traded, if such
     Common Stock is then traded on a national securities exchange; (ii) the
     last reported sale price (on the Determination Date) of the Common Stock on
     The Nasdaq Stock Market if the Common Stock is not then traded on a
     national securities exchange; or (iii) the closing bid price (or average of
     bid prices) last quoted (on the Determination Date) by an established
     quotation service for over-the-counter securities, if the Common Stock is
     not reported on The Nasdaq Stock Market. However, if the Common Stock is
     not publicly traded at the time an Option is granted under the Plan, "fair
     market value" shall be deemed to be the fair value of the Common Stock as
     determined by the Board of Directors after taking into consideration all
     factors which it deems appropriate, including, without limitation, recent
     sale and offer prices of the Common Stock in private transactions
     negotiated at arm's length.

          (d) The maximum number of shares with respect to which Options or SARs
     may be granted to any employee, including any transactions contemplated by
     Treas. Reg. (S)1.162-27(e)(2)(vi), shall be limited to 100,000 shares in
     any calendar year.

     6.2  Duration of Options and SARs. Subject to Section 6.6(b) hereof, each
Option and SAR and all rights thereunder shall be expressed to expire on such
date as the Board of Directors may determine, but in no event later than ten
years from the day on which the Option or SAR is granted and shall be subject to
earlier termination as provided herein.

     6.3  Exercise of Options and SARs.

          (a) Subject to Section 6.6(b) hereof, each Option and SAR granted
     under the Plan shall be exercisable at such time or times and during such
     period as shall be set forth in the instrument evidencing such Option or
     SAR, with vesting to occur in equal annual installations over a four-year
     period unless otherwise approved by the Board of Directors. To the extent
     that an Option or SAR is not exercised by a Participant when it becomes
     initially exercisable, it shall not expire but shall be carried forward and
     shall be

                                       5



     exercisable, on a cumulative basis, until the expiration of the exercise
     period. No partial exercise may be for less than ten (10) full shares of
     Common Stock (or its equivalent).

          (b) The Board of Directors shall have the right to accelerate the date
     of exercise of any installments of any Option or SAR; provided that the
     Board of Directors shall not accelerate the exercise date of any
     installment of any Option granted to a Participant as an Incentive Stock
     Option (and not previously converted into a Non-Qualified Option pursuant
     to Section 6.7) if such acceleration would violate the annual vesting
     limitation contained in Section 422(d)(1) of the Code, which provides
     generally that the aggregate fair market value (determined at the time the
     Option is granted) of the stock with respect to which Incentive Stock
     Options granted to any Participant are exercisable for the first time by
     such Participant during any calendar year (under all plans of the Company
     and any Related Companies) shall not exceed $100,000.

     6.4  Nontransferability of Options and SARs. No Option or SAR granted under
the Plan shall be assignable or transferable by the Participant, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution or, with respect to Non-Qualified Options and SARs, pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act ("ERISA") or the rules promulgated
thereunder or unless the Participant's non-qualified stock option agreement
granting such options (the "Non-Qualified Stock Option Agreement") or the
Participant's SAR agreement granting such SARs (the "SAR Agreement") provides
otherwise. Unless otherwise provided by the Non-Qualified Stock Option Agreement
or the SAR Agreement, as applicable, during the life of the Participant, the
Option or SAR shall be exercisable only by him or her. If any Participant should
attempt to dispose of or encumber his or her Options or SARs, other than in
accordance with the applicable terms of a Non-Qualified Stock Option Agreement
or SAR Agreement, his or her interest in such Options or SARs shall terminate.

     6.5  Effect of Termination of Employment or Death on Options and SARs.

          (a) If a Participant ceases to be employed by the Company or a Related
     Company for any reason, including retirement but other than death, any
     Option or SAR granted to such Participant under the Plan shall immediately
     terminate; provided, however, that any portion of such Option or SAR which
     was otherwise exercisable on the date of termination of the Participant's
     employment may be exercised within the three-month period following the
     date on which the Participant ceased to be so employed, but in no event
     after the expiration of the exercise period. Any such exercise may be made
     only to the extent of the number of shares subject to the Option or SAR
     which were purchasable or exercisable on the date of such termination of
     employment. If the Participant dies during such three-month period, the
     Option or SAR shall be exercisable by the Participant's personal
     representatives, heirs or legatees to the same extent and during the same
     period that the Participant could have exercised the Option or SAR on the
     date of his or her death.

                                       6



          (b) If the Participant dies while an employee of the Company or any
     Related Company, any Option or SAR granted to such Participant under the
     Plan shall be exercisable by the Participant's personal representatives,
     heirs or legatees, for the purchase of or exercise relative to that number
     of shares and to the same extent that the Participant could have exercised
     the Option or SAR on the date of his or her death. The Option or SAR or any
     unexercised portion thereof shall terminate unless so exercised prior to
     the earlier of the expiration of six months from the date of such death or
     the expiration of the exercise period.

     6.6  Designation of Incentive Stock Options; Limitations. Options granted
under the Plan which are intended to be Incentive Stock Options qualifying under
Section 422 of the Code shall be designated as Incentive Stock Options and shall
be subject to the following additional terms and conditions:

          (a) Dollar Limitation. The aggregate fair market value (determined at
     the time the option is granted) of the Common Stock for which Incentive
     Stock Options are exercisable for the first time during any calendar year
     by any person under the Plan (and all other incentive stock option plans of
     the Company and any Related Companies) shall not exceed $100,000. In the
     event that Section 422(d)(1) of the Code is amended to alter the limitation
     set forth therein so that following such amendment such limitation shall
     differ from the limitation set forth in this Section 6.6(a), the limitation
     of this Section 6.6(a) shall be automatically adjusted accordingly.

          (b) 10% Stockholder. If any Participant to whom an Incentive Stock
     Option is to be granted pursuant to the provisions of the Plan is on the
     date of grant the owner of stock possessing more than 10% of the total
     combined voting power of all classes of stock of the Company or any Related
     Companies, then the following special provisions shall be applicable to the
     Incentive Stock Option granted to such individual:

              (i)  The option price per share of the Common Stock subject to
          such Incentive Stock Option shall not be less than 110% of the fair
          market value of one share of Common Stock on the date of grant; and

              (ii) The option exercise period shall not exceed five years from
          the date of grant.

     In determining whether the 10% threshold has been reached, the stock
     attribution rules of Section 424(d) of the Code shall apply.

          (c) Except as modified by the preceding provisions of this Section
     6.6, all of the provisions of the Plan shall be applicable to Incentive
     Stock Options granted hereunder.

                                       7



     6.7 Conversion of Incentive Stock Options into Non-Qualified Options;
Termination of Incentive Stock Options. The Board of Directors, at the written
request of any Participant, may in its discretion take such actions as may be
necessary to convert such Participant's Incentive Stock Options (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such Incentive Stock Options, regardless of whether the
Participant is an employee of the Company or a Related Company at the time of
such conversion. Such actions may include, but not be limited to, extending the
exercise period or reducing the exercise price of the appropriate installments
of such Options. At the time of such conversion, the Board of Directors (with
the consent of the Participant) may impose such conditions on the exercise of
the resulting Non-Qualified Options as the Board of Directors in its discretion
may determine, provided that such conditions shall not be inconsistent with the
Plan. Nothing in the Plan shall be deemed to give any Participant the right to
have such Participant's Incentive Stock Options converted into Non-Qualified
Options, and no such conversion shall occur until and unless the Board of
Directors takes appropriate action. The Board of Directors, with the consent of
the Participant, may also terminate any portion of any Incentive Stock Option
that has not been exercised at the time of such termination.

     6.8 Stock Appreciation Rights. An SAR is the right to receive, without
payment, an amount equal to the excess, if any, of the fair market value of a
share of Common Stock on the date of exercise over the grant price, which amount
will be multiplied by the number of shares with respect to which the SARs shall
have been exercised. The grant of SARs under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the express terms of the Plan, as the Board of
Directors shall deem desirable:

     (a) Grant. SARs may be granted in tandem with, in addition to or completely
independent of any Plan Benefit.

     (b) Grant Price. The grant price of an SAR may be the fair market value of
a share of Common Stock on the date of grant or such other price as the Board of
Directors may determine.

     (c) Exercise. An SAR may be exercised by a Participant in accordance with
procedures established by the Board of Directors or as otherwise provided in any
agreement evidencing any SARs. The Board of Directors may provide that an SAR
shall be automatically exercised on one or more specified dates.

     (d) Form of Payment. Payment upon exercise of an SAR may be made in cash,
in shares of Common Stock or any combination thereof, as the Board of Directors
shall determine, provided, however, that any SAR exercised upon or subsequent to
the occurrence of a Change in Control (as defined in Section 11(a) hereof) shall
be paid in cash.

     (e) Fair Market Value. Fair market value shall be determined in accordance
with Section 6.1(c) with the "Determination Date" being determined by reference
to the date of grant or the date of exercise of an SAR, as applicable.

                                        8



     6.9   Rights as a Stockholder. The holder of an Option or SAR shall have no
rights as a stockholder with respect to any shares covered by the Option or SAR
until the date of issue of a stock certificate to him or her for such shares.
Except as otherwise expressly provided in the Plan, no adjustment shall be made
for dividends or other rights for which the record date is prior to the date
such stock certificate is issued.

     6.10  Special Provisions Applicable to Non-Qualified Options and SARs
Granted to Covered Employees. In order for the full value of Non-Qualified
Options or SARs granted to Covered Employees other than Non-Qualified Options or
SARs granted pursuant to Section 8 hereof, to be deductible by the Company for
federal income tax purposes, the Company may intend for such Non-Qualified
Options or SARs to be treated as "qualified performance-based compensation" as
described in Treas. Reg. ss.1.162-27(e) (or any successor regulation). In such
case, Non-Qualified Options or SARs granted to Covered Employees shall be
subject to the following additional requirements:

           (a) such options and rights shall be granted only by the Committee;
     and

           (b) the exercise price of such Options and the grant price of such
     SARs granted shall in no event be less than the fair market value of the
     Common Stock as of the date of grant of such Options or SARs.

SECTION 7. Special Provisions Applicable to Awards

     7.1   Grants of Awards. The Board of Directors may grant a Participant an
Award subject to such terms and conditions as the Board of Directors deems
appropriate, including, without limitation, restrictions on the pledging, sale,
assignment, transfer or other disposition of such shares and the requirement
that the Participant forfeit all or a portion of such shares back to the Company
upon termination of employment.

     7.2   Conditions. Approvals of Awards may be subject to the following
conditions:


           (a) Each Participant receiving an Award shall enter into an agreement
     (a "Stock Restriction Agreement") with the Company, if required by the
     Board of Directors, in a form specified by the Board of Directors agreeing
     to such terms and conditions of the Award as the Board of Directors deems
     appropriate.

           (b) Shares issued and transferred to a Participant pursuant to an
     Award may, if required by the Board of Directors, be deposited with the
     Treasurer or other officer of the Company designated by the Board of
     Directors to be held until the lapse of the restrictions upon such shares,
     and each Participant shall execute and deliver to the Company stock powers
     enabling the Company to exercise its rights hereunder.

                                        9



           (c) Certificates for shares issued pursuant to an Award shall, if the
     Company shall deem it advisable, bear a legend to the effect that they are
     issued subject to specified restrictions.

           (d) Certificates representing the shares issued pursuant to an Award
     shall be registered in the name of the Participant and shall be owned by
     such Participant. Such Participant shall be the holder of record of such
     shares for all purposes, including voting and receipt of dividends paid
     with respect to such shares.

           (e) If required by the Board of Directors, no Participant receiving
     an Award shall make, in connection with such Award, the election permitted
     under Section 83(b) of the Code.

     7.3   Nontransferability. Shares issued pursuant to an Award may not be
sold, assigned, transferred, alienated, commuted, anticipated, or otherwise
disposed of (except, subject to the provisions of such Participant's Stock
Restriction Agreement, by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of ERISA or the rules promulgated thereunder), or pledged or hypothecated as
collateral for a loan or as security for the performance of any obligation, or
be otherwise encumbered, and are not subject to attachment, garnishment,
execution or other legal or equitable process, prior to the lapse of
restrictions on such shares, and any attempt at action in contravention of this
Section shall be null and void. If any Participant should attempt to dispose of
or encumber his or her shares issued pursuant to an Award prior to the lapse of
the restrictions imposed on such shares, his or her interest in such shares
shall terminate.

     7.4   Effect of Termination of Employment or Death on Awards. If, prior to
the lapse of restrictions applicable to Awards, the Participant ceases to be an
employee of the Company or the Related Companies for any reason, Awards to such
Participant, as to which restrictions have not lapsed, shall be forfeited to the
Company, effective on the date of the Participant's termination of employment.
The Board of Directors shall have the sole power to decide in each case to what
extent leaves of absence shall be deemed a termination of employment.

SECTION 8. Performance Objectives

     The Committee may, in its discretion, designate any Plan Benefit that is
subject to the achievement of performance conditions as a performance-based Plan
Benefit subject to this Section 8, in order to qualify such Plan Benefit as
"qualified performance-based compensation" as described in Treas. Reg.
(S)1.162-27(e) (or any successor regulation). The performance objectives for a
Plan Benefit subject to this Section 8 shall consist of one or more business
criteria and a targeted level or levels of performance with respect to such
criteria, as specified by the Committee but subject to this Section 8. Such
performance objectives shall be objective and shall otherwise meet the
requirements of Section 162(m)(4)(C) of the Code and regulations

                                       10



thereunder. Business criteria used by the Committee in establishing such
performance objectives shall be selected exclusively from among the following:

     (1)  Pre-tax income;

     (2)  Operating profit;

     (3)  Return to stockholders;

     (4)  Return on equity;

     (5)  Earnings per share;

     (6)  Revenues and revenue growth;

     (7)  Cash flow

     (8)  Company-created income (for example, income due to Company-initiated
          cost reductions or productivity improvements)

     (9)  Stock price; and/or

     (10) Strategic business criteria, consisting of one or more objectives
          based on region or center performance compared to budget, meeting
          specified revenue, market penetration, business expansion goals, cost
          targets, and goals relating to affiliations, joint ventures,
          acquisitions and divestitures.

     The levels of performance required with respect to such business criteria
may be expressed in absolute or relative levels. Achievement of performance
objectives with respect to such Plan Benefits shall be measured over such
periods as the Committee may specify. Performance objectives may differ for such
Plan Benefits to different Participants. The Committee shall specify the
weighing to be given to each performance objective for purposes of determining
the final amount payable with respect to any such Plan Benefit. The Committee
may, in its discretion, reduce the amount of a payout otherwise to be made in
connection with a Plan Benefit subject to this Section 8, but may not exercise
discretion to increase such amount, and the Committee may consider other
performance criteria in exercising such discretion. All determinations by the
Committee as to the achievement of performance objectives shall be in writing.
Any Plan Benefit designated as performance-based pursuant to this Section 8
shall be granted only by the Committee, and the Committee may not delegate any
responsibility with respect to a Plan Benefit subject to this Section 8.

SECTION 9. Requirements of Law

     9.1 Violations of Law. No shares shall be issued and delivered upon
exercise of any Option or the making of any Award or the payment of any SAR
unless and until, in the opinion of counsel for the Company, any applicable
registration requirements of the Securities Act of 1933, any applicable listing
requirements of any national securities exchange on which stock of the same
class is then listed, and any other requirements of law or of any regulatory
bodies having jurisdiction over such issuance and delivery, shall have been
fully complied with. Each Participant may, by accepting Plan Benefits, be
required to represent and agree in writing, for himself or herself and for his
or her transferees by will or the laws of descent and distribution, that the
stock acquired by him, her or them is being acquired for investment. The
requirement for any such representation may be waived at any time by the Board
of Directors.

                                       11



     9.2 Compliance with Rule 16b-3. The intent of this Plan is to qualify for
the exemption provided by Rule 16b-3 under the Exchange Act. To the extent any
provision of the Plan does not comply with the requirements of Rule 16b-3, it
shall be deemed inoperative to the extent permitted by law and deemed advisable
by the Board of Directors and shall not affect the validity of the Plan. In the
event Rule 16b-3 is revised or replaced, the Board of Directors may exercise
discretion to modify this Plan in any respect necessary to satisfy the
requirements of the revised exemption or its replacement.

SECTION 10. Recapitalization

     In the event that dividends are payable in Common Stock of the Company or
in the event there are splits, sub-divisions or combinations of shares of Common
Stock of the Company, the number of shares available under the Plan shall be
increased or decreased proportionately, as the case may be, and the number of
shares deliverable upon the exercise thereafter of any Option previously granted
shall be increased or decreased proportionately, as the case may be, without
change in the aggregate purchase price, and the number of shares to which
granted SARs relate shall be increased or decreased proportionately, as the case
may be, and the grant price of such SARs shall be decreased or increased
proportionately, as the case may be.

SECTION 11. Change in Control and Reorganization

          (a) For purposes of this Plan, a "Change in Control" shall mean (i)
     the acquisition by a third person, including a "person" as defined in
     Section 13(d)(3) of the Exchange Act, of beneficial ownership (as defined
     in Rule 13d-3 under the Exchange Act) directly or indirectly, of securities
     of the Company representing twenty-five percent (25%) or more of the total
     number of votes that may be cast for the election of the directors of the
     Company; or (ii) as the result of, or in connection with, any tender or
     exchange offer, merger, consolidation or other business combination, sale
     of assets or one or more contested elections, or any combination of the
     foregoing transactions, the persons who were directors of the Company shall
     cease to constitute a majority of the Board of the Company. In the event of
     a Change in Control of the Company, except as the Board of Directors may
     expressly provide otherwise at the time of the Change in Control or in a
     Participant's agreement governing an Option, Award or SAR, (i) vesting of
     Options and SARs shall accelerate such that (1) upon the Change in Control,
     the Participant would be entitled to exercise his or her Options and/or
     SARs to the extent of 50% of the number of shares not otherwise exercisable
     at the time of the Change in Control, (2) beginning six months after the
     Change in Control, the Participant would be entitled to exercise his or her
     Options and/or SARs to the extent of an additional 25% of the number of
     shares not otherwise exercisable at the time of the Change in Control, and
     (3) beginning eighteen months after the Change in Control, the Participant
     would be entitled to exercise his or her Options and/or SARs to the extent
     of an additional 25% of the number of shares not otherwise exercisable at
     the time of the Change in Control; in each case, unless such

                                       12



     Options and/or SARs would vest sooner pursuant to the terms of their
     original grant, in which case they shall vest at such earlier date, but in
     no event will Options or SARs vest prior to six months from the date of
     grant; and (ii) a Participant who is an officer of the Company (including
     the controller) who is terminated other than for cause or who resigns
     because of a significant diminution of his or her duties and
     responsibilities, in either case within 180 days before a Change in Control
     or within eighteen months after a Change in Control and in conjunction with
     such Change in Control, shall be entitled to exercise his or her Options
     and/or SARs to the extent of 100% of the number of shares covered thereby.
     For purposes of this Plan, "cause" shall mean (x) conviction of a felony,
     (y) commission of an act of fraud or embezzlement against the Company or
     the commission of any other action with the intent to injure the Company,
     and (z) material misconduct in the performance of the Participant's duties
     or any material neglect of his or her duties to the Company.

          (b) In the case of any tender or exchange offer, merger, consolidation
     or other business combination or sale of all or substantially all of the
     assets of the Company, which does not constitute a Change in Control, or in
     the case of a reorganization or liquidation of the Company, the Board of
     Directors of the Company, or the board of directors of any corporation
     assuming the obligations of the Company hereunder, shall, as to outstanding
     Plan Benefits, (i) make appropriate provision for the protection of any
     such outstanding Plan Benefits by the substitution on an equitable basis of
     appropriate stock of the Company or of the merged, consolidated or
     otherwise reorganized corporation which will be issuable in respect of the
     shares of Common Stock of the Company; provided only that the excess of the
     aggregate fair market value of the shares subject to the Plan Benefits
     immediately after such substitution over the purchase price thereof is not
     more than the excess of the aggregate fair market value of the shares
     subject to such Plan Benefits immediately before such substitution over the
     purchase price thereof, (ii) upon written notice to the Participants,
     provide that all unexercised Plan Benefits must be exercised within a
     specified number of days of the date of such notice or such Plan Benefits
     will be terminated, or (iii) upon written notice to the Participants,
     provide that the Company or the merged, consolidated or otherwise
     reorganized corporation shall have the right, upon the effective date of
     any such merger, consolidation, sale of assets or reorganization, to
     purchase all Plan Benefits held by each Participant and unexercised as of
     that date at an amount equal to the aggregate fair market value on such
     date of the shares subject to the Plan Benefits held by such Participant
     over the aggregate purchase or grant price therefor, such amount to be paid
     in cash or, if stock of the merged, consolidated or otherwise reorganized
     corporation is issuable in respect of the shares of the Common Stock of the
     Company, then, in the discretion of the Board of Directors, in stock of
     such merged, consolidated or otherwise reorganized corporation equal in
     fair market value to the aforesaid amount. In any such case the Board of
     Directors shall, in good faith, determine fair market value and may, in its
     discretion, advance the lapse of any waiting or installment periods and
     exercise dates.

                                       13



SECTION 12. No Special Employment Rights

     Nothing contained in the Plan or in any Plan Benefit documentation shall
confer upon any Participant receiving a grant of any Plan Benefit any right with
respect to the continuation of his or her employment by the Company (or any
Related Company) or interfere in any way with the right of the Company (or any
Related Company), subject to the terms of any separate employment agreement to
the contrary, at any time to terminate such employment or to increase or
decrease the compensation of the Participant from the rate in existence at the
time of the grant of any Plan Benefit. Whether an authorized leave of absence or
absence in military or government service shall constitute termination of
employment shall be determined by the Board of Directors, in accordance with any
applicable laws.

SECTION 13. Amendment of the Plan

     The Board of Directors may at any time and from time to time suspend or
terminate all or any portion of the Plan or modify or amend the Plan in any
respect. The termination or any modification or amendment of the Plan shall not,
without the consent of a recipient of any Plan Benefit, affect his or her rights
under any Plan Benefit previously granted. With the consent of the affected
Participant, the Board of Directors may amend outstanding agreements relating to
any Plan Benefit in a manner not inconsistent with the Plan. The Board of
Directors hereby reserves the right to amend or modify the terms and provisions
of the Plan and of any outstanding Options to the extent necessary to qualify
any or all Options under the Plan for such favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, provided, however, that
the consent of a Participant is required if such amendment or modification would
cause unfavorable income tax treatment for such Participant.

SECTION 14. Withholding

     The Company's obligation to deliver shares of stock upon the exercise of
any Option or SAR or the granting of an Award and to make payment upon exercise
of any SAR shall be subject to the satisfaction by the Participant of all
applicable federal, state and local income and employment tax withholding
requirements.

SECTION 15. Effective Date and Duration of the Plan

     15.1 Effective Date. The Plan shall become effective as of January 16, 1998
(the date of approval of the Plan by the Board of Directors), subject to
approval of the Plan by the stockholders of the Company.

     15.2 Duration. Unless sooner terminated in accordance with Section 13
hereof, the Plan shall terminate upon the earlier of (i) the tenth anniversary
of the effective date or (ii) the

                                       14



date on which all shares available for issuance under the Plan shall have been
issued pursuant to any Awards or the exercise or cancellation of Options and
SARs granted hereunder. If the date of termination is determined under (i)
above, then Plan Benefits outstanding on such date shall continue to have force
and effect in accordance with the provisions of the instruments evidencing such
Plan Benefits.

SECTION 16. Governing Law

     The Plan and all actions taken thereunder shall be governed by the laws of
the State of Delaware.

                                       15

EX-21.01

                                                                   Exhibit 21.01

                                 SUBSIDIARIES OF
                    OCCUPATIONAL HEALTH + REHABILITATION INC

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

CM Occupational Health, Limited Liability Company,
A Maine limited liability company
(also doing business as The Health Center)

OHR/MMC, Limited Liability Company,
A Maine limited liability company
(also doing business as Occupational Health + Rehabilitation,
An affiliate of Maine Health)

Kent/OH+R, LLC,
A Rhode Island limited liability company

OHR/Baystate, LLC,
A Massachusetts limited liability company
(also doing business as Occupational Health + Rehabilitation)

OHR/SSM, LLC,
A Missouri limited liability company
(also doing business as SSM Corporate Health Services)

Occupational Health Connection LLC,
A New York limited liability company
(dormant)

OH+R/Boston, LLC,
A Massachusetts limited liability company
(dormant)

EX-23.01

                                                               Exhibit No. 23.01

                       CONSENT OF INDEPENDENT ACCOUNTANTS

     We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (Nos. 33-71462, 333-05253, 333-15191, 333-61997,
333-33948, 333-59578, and 333-86588) of Occupational Health + Rehabilitation Inc
of our report dated March 7, 2003, except for Notes 4 and 10 as to which the
date is March 24, 2003, relating to the consolidated financial statements, which
appears in this Annual Report on Form 10-K. We also consent to the incorporation
by reference of our report dated March 7, 2003 relating to the financial
statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
March 28, 2003

EX-99.01

                                                                   Exhibit 99.01

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Occupational Health + Rehabilitation Inc
(the "Company") on Form 10-K for the year ending December 31, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
John C. Garbarino, Chief Executive Officer of the Company, and I, Keith G. Frey,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
(ss.)1350, as adopted pursuant to (ss.)906 of the Sarbanes-Oxley Act of 2002,
that to the best of our knowledge:

     (1) The Report fully complies with the requirements of Section 13(a) or
     15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all
     material respects, the financial condition and result of operations of the
     Company.

/s/ John C. Garbarino                                  /s/ Keith G. Frey
John C. Garbarino                                      Keith G. Frey
Chief Executive Officer                                Chief Financial Officer

March 28, 2003                                         March 28, 2003