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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported)
JANUARY 3, 1996
WORK RECOVERY, INC.
(Exact Name of Registrant as Specified in its Charter)
Colorado
(State or Other Jurisdiction of Incorporation)
0-18695 68-0165800
Commission File Number) (IRS Employer Identification No.)
2341 South Friebus Avenue, Suite 14, Tucson, Arizona 85713
(Address of Principal Executive Offices) (Zip Code)
(520) 322-6634
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
On January 3, 1996, Work Recovery, Inc. (the "Company") and the Team for
New Management, L.L.C. (the "Team") entered into a letter of intent that
contemplates a change in control of the Board of Directors and management of
the Company.
Under the letter of intent, the parties intend to work together to
structure the proposed change of control, including appointment or election of
certain Team nominees to replace the existing Board, appointment of Ms. Dorcas
Hardy (a member of the Team)as President and Chief Executive Officer, and
retention of the Team to provide certain management services. The Team has
filed with the U.S. Securities and Exchange Commission (the "SEC") a
preliminary proxy statement describing its qualifications, plans and proposed
compensation and warrant package. The Company would endorse the Team's
proposals as part of revised proxy materials to be drafted cooperatively by the
parties.
As a condition to the contemplated change in control, the Team has
undertaken a review (which must be to its satisfaction) of the business of the
Company. In that regard, the Company has agreed to permit the Team
confidential access to its records and personnel.
The Company's current Board of Directors is negotiating severance
agreements with three of its senior personnel, including Mr. Thomas L. Brandon.
The letter of intent with the Team anticipates that the Team would support such
severance arrangements if they do not exceed certain guidelines. The guidelines
reflect not more than one year's severance pay or other equivalent compensation,
possible repricing of a portion ofexisting options to not less than $1.50,
extending the term for exercise to up to two years from severance date, and
cancellation of not less than 57.5% of the options currently held by each person
(92% in the case of Mr. Brandon). If the change in control occurs, it is also
contemplated that the Team would use its best efforts to cause the Company not
to pursue actions against current officers and directors other than in certain
limited circumstances such as related to criminal misconduct, bad faith acts or
breach of certain agreements.
EXHIBITS
Letter of Intent Between Work Recovery, Inc. and Team for New Management,
L.L.C., dated January 3, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 3, 1996
WORK RECOVERY, INC.
by: Robert B. Bunker
------------------------------
Robert B. Bunker, Senior Vice
President of Finance and Chief
Financial Officer
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EXHIBIT 99
LETTER OF INTENT
(NON-BINDING IN PART; ENFORCEABLE IN PART)
Work Recovery, Inc., a Colorado Corporation (the "Company") and the
TEAM for New Management, L.L.C. (the "Team") are executing this letter of
intent this 3rd day of January, 1996. Certain sections of this letter of
intent contain legally binding and enforceable obligations and are so
identified; otherwise, this letter of intent is intended to state certain
proposed terms for purposes of continuing discussions and is not intended to be
or to evidence any legally binding obligations or commitments.
1. This paragraph number 1 is intended to be legally binding. The
Company will cooperate, beginning with the execution hereof, to provide access
to the Team to the Company's books and records, personnel, accountants, counsel
and other advisors and consultants for the purposes of performing due diligence
in connection with the Team and its Board nominees assuming control of the
Company. As part of the Team's due diligence, the Company shall make available
to the Team's representatives its counsel, Fennemore Craig, and its auditors,
LaVoie, Clark, and request that such professionals furnish to the Team's
representatives all information at their disposal concerning the Company, its
management, business and financial condition and to disclose to the Team all
pending or threatened claims against or which might involve the Company or any
of its officers or directors of which they are aware. If the anticipated
change of control does not occur, the Team shall maintain the confidentiality
of all information derived from its due diligence; provided, however, that such
obligations will not apply to the extent such information is or becomes
publicly disclosed by the Company or under authority of the Company or as
otherwise required by applicable law.
2. The parties intend to work together cooperatively to structure the
proposed change in control. Such change of control would include retention by
the Company of the Team to provide management services to the Company
(including the issuance of warrants to the Team, and the payment of
compensation to the Team, as described in the Team's preliminary proxy
statement), the appointment of Ms. Dorcas Hardy as President and Chief
Executive Officer of the Company, the appointment and/or election of the Team's
Board nominees to the Board of Directors of the Company and the execution of
indemnification agreements with the new Directors and Officers. The parties
intend to discuss further the extent to which Team nominees would be placed on
the Board prior to any general shareholder election of Directors.
3. The Company and the Team intend to cooperate to prepare and file
with the Securities and Exchange Commission (the "SEC") a positive proxy
statement which shall be endorsed by the Company and the Team. Such proxy
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materials would notice a meeting of the shareholders of the Company to be held
as soon as possible. To the extent any proxy statement is not jointly filed,
each party intends to provide the other the opportunity to review and provide
input concerning such proxy statement. In the proxy materials, at that meeting
and at all other relevant times, the Company (and current directors and
officers) would endorse the proposals of the Team as set forth in the Team's
preliminary proxy materials. The meeting would be held at a time and place
mutually designated by the Company and the Team.
4. This paragraph number 4 is intended to be legally binding: The
Team shall prepare and submit to the Company on or before 5:00 p.m. Mountain
Standard Time on January 4, 1996 a proposed press release announcing the change
of control contemplated by this letter of intent and a draft report to the SEC
on Form 8-K regarding this letter of intent in respect of the proposed change
of control for the Company's review and approval on or before 5:00 p.m. on
January 4, 1996. If the parties agree to the terms of the press release (it
being acknowledged that the Company will review any proposed changes with the
Team prior to release), it will be made mutually on or before January 5, 1996
and the Company will comply with its obligations concerning the Form 8-K. The
Company promptly will furnish the Team with a copy of any press release that it
makes and the 8-K report as transmitted to the SEC for filing.
5. It is acknowledged that the Company is negotiating certain severance
agreements and that the intent of the parties is that the Team would endorse
such severance agreements. The Team would support the following actions
taken by the Company upon approval by the existing Board of Directors:
a) Provide severance packages for Tom Brandon, Robert Bunker and Linda
Duncan of up to one year (paid over the one year period) at current salary
levels, and during such one year period benefits consistent with current health
care benefits for management and other current benefits not to exceed 5% of
base salary in aggregate; provided, however, that salary shall not exceed the
following for the listed individuals:
Tom Brandon $192,000
Robert Bunker $120,000
Linda Duncan $ 96,000
The severance agreements would contain appropriate terms related to
cooperation with transition, non-competes, representations and warranties,
assignment of proprietary rights, releases by the departing employees and
voting trust arrangements for their shares, pursuant to such terms as are
acceptable to the Team.
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b) Provide that current employees, consisting of the employees based
in Tucson, released by the Company from employment other than for good cause
during the three month period after the proposed change in control, would
receive two weeks severance plus one week of salary for each full year of
employment. The Company may also provide for similar severance packages for
employees outside of Tucson.
c) The Team acknowledges that there are existing indemnification
agreements that will continue in full force and effect.
d) Provide through the Compensation Committee, repricing and extension
of the exercise period in respect of certain employee stock options, at the
discretion of the Compensation Committee, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME: OPTIONS: PRICE: DATE OF EXERCISE:
Tom Brandon 500,000 $1.50 Up to 2 years from
severance date
Robert Bunker 170,000 $1.50 Up to 2 years from
severance date
Linda Duncan 170,000 $1.50 Up to 2 years from
severance date
Christopher Bingham 170,000 $1.50 Up to 2 years from
severance date
</TABLE>
Such grants would replace all existing employee stock options held by
such persons (totaling 6,200,000 in the case of Mr. Brandon and 400,000 in the
case of each of Mr. Bunker, Ms. Duncan and Mr. Bingham). The Team will use its
best efforts to cause the Company to register such repriced options with the
SEC no later than any such registration of the warrants contemplated to be
issued to the Team.
Nothing in this paragraph 5 affects otherwise valid and existing
options held by persons other than those listed in paragraph 5, above.
6. If the Company decides to seek shareholder approval for any action
referred to in Paragraph 5, the Team would announce its support for such
approval and shall cause its members to vote their shares in favor of such
action.
7. The Team would agree that after the change of control the Team would
use its best efforts to cause the Company:
a) not to assert any claim existing as of the change in control against
any existing director or officer of the Company except (i) any claim associates
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with criminal misconduct or actions taken in bad faith to the material
detriment of the Company, (ii) any claim related to breach of a severance
agreement referred to above, or (iii) to the extent that the person shall have
filed a claim against the Company, its officers, directors, employees or
affiliates; and
b) respect and abide by the provisions of the indemnification agreements,
severance packages and employee stock options referred to above; it being
acknowledged that no waiver of offset rights against same is intended.
8. This Paragraph 8 is intended to be legally enforceable: Pending
the earlier of the change in control contemplated hereby or 45 days from the
date hereof, the Company will not take any of the following actions: any
action that would prevent the contemplated change in control, any increase in
base compensation for any officer or former officer of the Company, payment of
any employee bonuses, payment of any dividend, execution of any exclusive
license or distribution agreement related to any asset, product or technology
of the Company, sale of any material asset of the Company, other than in the
ordinary course of business, execution of any further indemnification
agreements, execution of any agreements or the establishment of any
arrangements with any person or entity affiliated with or related to any
current or former officer of the Company, or any other action not in the
ordinary course of business. The Company further represents that, except as
disclosed during the due diligence period, none of same has taken place since
November 3, 1995.
9. This Paragraph 9 is intended to be legally enforceable:
a) This letter of intent may be executed in counterparts.
b) Any notice which may or shall be given shall be sent by facsimile
transmission, confirmed in writing by United States mail as follows:
If to Team:
TEAM for New Management L.L.C.
601 Madison Street, Suite 200
Alexandria, VA 22314
Fax: 703-683-2779
with a copy to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation.
3 Embarcadero Center, #700
San Francisco, CA 94111
Att: Ronald H. Star, Esq.
Fax: 415-399-3041
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If to the Company:
Work Recovery, Inc.
2341 S. Friebus
Tucson, AZ 85713
Att: Robert B. Bunker
Fax: 520-325-5277
with a copy to:
Fennemore Craig
Suite 2200, Two North Central Avenue
Phoenix, AZ 85004-2390
Att: John Everroad and Bob Hackett
Fax: 602-257-8527
c) To the extent that portions of this letter of intent expressly
constitute legally binding agreements, they shall be governed by and construed
in accordance with Arizona law, and shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns; provided,
however, that neither party may assign any of its rights hereunder without the
prior written consent of the other party.
d) The Team represents that its Board of Directors has approved this
letter of intent on behalf of the Team.
e) The Company represents that its Board of Directors has approved this
letter of intent on behalf of the Company.
f) The validity and enforceability of any enforceable section hereof
shall not be affected by a finding that any particular provision is invalid or
enforceable.
g) The Company acknowledges that the Team, in reliance on the enforceable
provisions of this letter of intent, will be expending considerable effort and
resources to the benefit of the Company, and that the Team is
entitled to so rely.
WORK RECOVERY, INC.
a Colorado Corporation
By: Robert B. Bunker
Its: Sr. Vice President & CFO
TEAM FOR NEW MANAGEMENT, L.L.C.
By: Eileen Bradley
Its: Authorized Agent
