WORK RECOVERY INC, 8-K, 1996-02-05

WORK RECOVERY INC
8-K, 1996-02-05
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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<PAGE> 1
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 18, 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) (I.R.S. 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)

(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
INFORMATION TO BE INCLUDED IN THE REPORT

ITEM 1. CHANGES IN CONTROL OF REGISTRANT.

As a result of a meeting of the Board of Directors of Work Recovery,
Inc. (the "Company") convened on January 18, 1996 and continued on January 22,
1996, changes in control of the Board of Directors of the Company and certain
changes in the management of the Company have been effected.

On January 18, 1996, Patricia D. Golde, Christopher H. Bingham and
Robert E. Robbins resigned, effective immediately, from all officer and director
positions with the Company and its affiliates (except that Mr. Bingham remains a
director of Work Recovery Europe Limited). Dorcas R. Hardy, Julian W. De La
Rosa, Renato DiPentima and Edward M. Young were then appointed to the Board of
Directors. Charles J. Rastatter, Ed.D and Robert B. Bunker then resigned from
all officer and director positions with the Company and its affiliates. Via
letter dated January 18, 1996, Thomas L. Brandon resigned from the Company. The
Board accepted Mr. Brandon's resignation on January 22, 1996. On January 22,
1996, the Board filled two Board vacancies (i.e., the vacancies other than the
vacancy created by Mr. Brandon's resignation) by appointing William R. Sauey and
Richard A. Lewis to the Board. On that date, the Board also appointed John E.
Affeldt, M.D. to fill the vacancy caused by the resignation of Mr. Brandon. Mr.
Brandon has disputed whether he has resigned from the Board of Directors, and
has taken the position that his resignation was only as an officer.

On January 18, 1996, the Board of Directors appointed Dorcas R. Hardy
as Acting Chair of the Board, Acting President, Acting Chief Executive Officer
and Acting Chief Financial Officer. The Board also approved the retention of
the Team for New Management, L.L.C. (the "Team") to provide certain management
services to the Company pursuant to the terms of an Interim Management Services
Agreement. (See Item 5 below.) Ms. Hardy is a member of the Team. The various
persons added to the Board of Directors as described above were proposed by the
Team.

On January 22, 1996, the Board of Directors created an Executive
Committee consisting of Ms. Hardy, Mr. DiPentima and Mr. Young, along with an
Audit and Finance Committee consisting of Messrs. Young, De La Rosa and Sauey.

The new members of the Board of Directors (other than Ms. Hardy)
collectively hold approximately .04% of the Company's voting securities. Ms.
Hardy holds approximately .01% of the Company's voting securities. The Team
currently holds no voting securities in the Company. Members of the Team (other
than Ms. Hardy) collectively hold approximately .28% of the Company's voting
securities.

2
<PAGE> 3
The change in control described was effected through a voluntary,
negotiated change in the composition of the Board of Directors and management
of the Company. Accordingly, such change in control did not occur as a result
of an acquisition of voting securities of the Company.

The above described change in control resulted from a Letter of Intent
dated January 3, 1996 (previously filed as part of the Company's Form 8-K filed
on January 6, 1996), an interim letter agreement dated January 16, 1996, and an
Agreement between the Company and the Team dated January 18, 1996.

On January 16, 1996, the Company provided a letter to the Team
regarding an interim agreement with respect to a contemplated change in control
of the Company (the "Interim Agreement"). The Interim Agreement provided,
among other things, that: (1) subject to certain exceptions, the Team will
receive advance written notice of, and the right to register with the Board of
Directors its approval or disapproval of, any cash expenditure or deposit by
the Company or any entity controlled by the Company; (2) the Company would
suspend or terminate any and all payments to former employees of the Company or
of any entity controlled by the Company; and (3) the Company would permit the
Team to place a representative at the Company's executive offices and would
permit such representative to attend all Company, management and Board of
Directors meetings other than the portion of Board meetings involving
discussions of the proposed arrangements between the Company and the Team.

On January 18, 1996, the Company and the Team entered into an
Agreement (the "Agreement") regarding the change in control. In addition to
setting forth certain resolutions and actions to be taken by the incumbent
Board of Directors to effectuate the Board and management changes described
above, the Agreement provided that, subject to certain conditions, the Team and
the Company would execute and deliver an Interim Management Services Agreement
(the "IMSA") (see Item 5 below) and the Team would dismiss the lawsuit it filed
in Colorado to compel the holding of a shareholders' meeting. In addition, the
Agreement contemplated that the Board of Directors would take the following
additional actions prior to the change of control, each of which was approved
by the Board of Directors on January 18, 1996:

(1) approval of the Agreement and the IMSA with the Team;

(2) approval for each person not serving on the incumbent Board
who becomes a director of the Company within the next year to
receive:

(a) an indemnification agreement substantially in the
form previously granted to the incumbent directors
and senior officers of the Company;

3
<PAGE> 4
(b) if not an officer of the Company, $1,500 per Board or
committee meeting plus expenses for meeting
attendance;

(d) if not an officer of the Company, 100,000 warrants
for serving as a director, 25,000 warrants for each
committee membership, and 25,000 warrants for each
committee chair, with the exercise price of the
warrants to be equal to the average closing bid price
of the Company's stock for a twenty day trading
period centered around the date on which such person
is announced or elected as a director;

(3) approval of such persons as may be designated by the Team
serving as directors and constituting a majority of the Board
of Directors of the Company;

(4) authorizing severance agreements with Robert Bunker and Linda
Duncan (see Item 5 below);

(5) authorizing, subject to shareholder approval and negotiation
with the Team of a definitive Management Services Agreement,
the following warrant package for the Team:

(a) warrants, exercisable for five years, to purchase
3,000,000 shares of Common Stock at an exercise price
of $1.25 per share;

(b) warrants, exercisable for five years, to purchase
3,000,000 shares of Common Stock at a price equal to
the average closing bid price of the Common Stock for
the twenty trading day period beginning January 8,
1996;

(c) warrants, exercisable for five years, to purchase
2,000,000 shares of Common Stock at an exercise price
of $3 per share;

(d) warrants, exercisable for five years, to purchase
2,000,000 shares of Common Stock at an exercise price
of $5 per share;

(e) unlimited piggyback registration rights, two demand
registration rights at the expense of the Company,
and the right to participate pari passu with demand
rights of other holders of shares of Common Stock;
and

4
<PAGE> 5
(f) warrant or stock option incentives for Dorcas R.
Hardy as an officer and director of the Company,
along with similar stock incentives that the Company
intends to offer for a new Chief Operating Officer
and Chief Financial Officer, will cause a deduction
from the above described warrant package;

(6) authorizing, subject to negotiation with the Team of a
definitive Management Services Agreement to replace the IMSA,
reimbursement of the Team's out-of-pocket expenses incurred
through January 2, 1996 in connection with or related to the
Team's attempts to obtain a change in control of the Company;
and

(7) increasing the size of the Board of Directors from six to
seven members.

There are no arrangements, known to the Company, the operation of
which may at a subsequent date result in a change in control of the Company.

ITEM 5. OTHER EVENTS.

In connection with the change in control described in Item 1 above,
the Company on January 18, 1996 entered into the IMSA with the Team and entered
into a Severance Agreement and Release ("Severance Agreement") with each of
Robert B. Bunker, the Company's former Senior Vice President and Chief
Financial Officer, and Linda J. Duncan, the Company's former Secretary and
Chief Operating Officer.

The IMSA expires April 17, 1996, unless terminated earlier pursuant to
its terms. During the term of the IMSA, the Team will provide to the Company
the executive management services that generally are performed by a
corporation's President, Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer (or Comptroller). In particular, the Team will employ
Dorcas R. Hardy and make her services available to the Company as Acting
President and Chief Executive Officer. In addition, the Team will provide to
the Company such consulting services as may be agreed from time to time by the
Team and the Company.

Under the IMSA, the Company will pay the Team $25,000 per week,
payable in advance, and will advance or reimburse the Team's out-of-pocket
expenses associated with services provided under the IMSA. In addition, the
Company will reimburse the Team for its out-of-pocket expenses incurred from
and after January 3, 1996 (including from and after the date of the IMSA) in
connection with or otherwise related to the negotiation and execution of the
IMSA and the Team's attempts to obtain a change in control of the Company. The
Company's payment obligations described in this paragraph survive any
termination of the IMSA. Further, the

5
<PAGE> 6
Company will enter into an indemnification agreement with the Team
substantially in the form executed with directors and senior executive officers
of the Company.

Under the Severance Agreement with Robert B. Bunker, the Company will
pay Mr. Bunker severance equal to one year's salary paid out over a period of
thirty months, payable monthly in arrears, at the per annum rate of $120,000,
with any unpaid amounts payable in full if and when the Company reimburses the
Team for its expenses through January 2, 1996. During a twelve month period,
the Company will provide Mr. Bunker with the health care and other benefits
provided to the Company's senior executives; provided, however, that the
aggregate amount of such other benefits (excluding health care benefits) shall
not exceed 5% of the per annum severance pay. In addition, the Company, through
its Compensation Committee and subject to the discretion of the Compensation
Committee, will reprice and extend the exercise period in respect of the stock
options granted by the Company to Mr. Bunker such that Mr. Bunker will have
options to purchase 170,000 shares of the Company's Common Stock at an exercise
price of $1.50 per share for a period expiring on the date two years following
the date on which Mr. Bunker is notified by the President of the Company that
his full time employment is no longer required (with such notification date
being referred to hereinafter as the "Effective Date"). Such 170,000 options
shall replace all existing options held by Mr. Bunker (i.e., options to purchase
400,000 shares). The Company will use its best efforts to register the shares
underlying the repriced options with the Commission no later than any
registration of warrants issued by the Company to the Team.

In exchange for the consideration described above, Mr. Bunker will,
upon reasonable notice and at such reasonable times as the Company may request,
assist in the orderly transition of management control and make himself
available to provide all requested information about the Company. Mr. Bunker,
however, is not obligated to provide any particular number of hours of
assistance and is entitled to seek and accept other employment. Mr. Bunker also
has agreed not to solicit any customer or licensee of the Company or its related
entities for purposes the effect of which would be to adversely impact the
volume of business of such customer or licensee with the Company or its related
entities. In addition, Mr. Bunker has agreed not to compete with the Business
(as defined) of the Company and certain related entities in the Geographic Area
(as defined) until January 18, 1999. Further, Mr. Bunker has released the
Company and its related entities and certain other parties from claims and
causes of action existing as of January 18, 1996. Likewise, the Company has
agreed not to assert against Mr. Bunker any claim existing as of January 18,
1996, subject to certain exceptions. Finally, Mr. Bunker has agreed to the
establishment of a voting trust into which all of his capital stock in the
Company, whether now owned or hereafter

6
<PAGE> 7
acquired, will be placed and has agreed that the voting trustee shall be the
President of the Company.

The Severance Agreement with Linda J. Duncan is substantially similar
to the Severance Agreement with Mr. Bunker except that Ms. Duncan's severance
pay is payable at the per annum rate of $96,000.

EXHIBITS

<TABLE>
<S> <C>
99.1 - Press Release dated January 3, 1996

99.2 - January 16, 1996 letter from the Company to the Team regarding Interim Agreement

99.3 - Agreement between the Company and the Team dated January 18, 1996

99.4 - Interim Management Services Agreement between the Company and the Team dated January 18, 1996

99.5 - Severance Agreement and Release between Robert B. Bunker and the Company dated January 18, 1996

99.6 - Severance Agreement and Release between Linda J. Duncan and the Company dated January 18, 1996
</TABLE>

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: February 2, 1996.

WORK RECOVERY, INC.

By: /s/ Dorcas R. Hardy
-----------------------
Dorcas R. Hardy, President
and Chief Executive Officer

<PAGE> 1
Exhibit 99.1

<TABLE>
=================================================================================
<S> <C> <C> <C>
FROM: WORK RECOVERY, INC. CONTACT: Nancy Preble, Investor
2341 South Friebus Avenue Relations
Tucson, AZ 85713 TEL.: (520) 322-6634
TRADING SYMBOL: WORKE

TEAM FOR NEW MANAGEMENT, L.L.C. CONTACT: Eileen Bradley
601 Madison Street, Suite 200 TEL.: (703) 683-1280
Alexandria, VA 22314
=================================================================================
</TABLE>

For Immediate Release

Work Recovery Announces Letter of Intent
Regarding Possible Change in Control

Tucson, AZ, January 3, 1996 -- The Board of Directors of Work Recovery, Inc.
and the Team for New Management, L.L.C. jointly announced that they have
entered into a letter of intent that contemplates a change in control of the
Board of Directors and management of Work Recovery.

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 SEC a preliminary proxy statement describing its qualifications,
plans and proposed compensation and warrant package. Work Recovery 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 Work
Recovery. In that regard, Work Recovery has agreed to permit the Team
confidential access to its records and personnel.

Work Recovery also announced that its current Board of Directors is
negotiating severance arrangements with three of its senior personnel,
including Mr. Thomas Brandon. The letter of intent with the Team anticipates
that the Team would support such severance arrangements if they do not exceed
certain
<PAGE> 2
guidelines. The guidelines reflect not more than one year's severance pay or
other equivalent compensation, possible repricing of a portion of existing
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 Work Recovery 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.

Work Recovery, Inc. is a Tucson-based provider of proprietary advanced
rehabilitation technology with a national and international network of testing
clinics.

The Team for New Management, L.L.C. was formed to seek a change in
control of Work Recovery.

******

<PAGE> 1
Exhibit 99.2

January 16, 1996

The Team for New Management, L.L.C.
c/o Ms. Dorcas Hardy
11407 Stonewall Jackson Drive
Spotsylvania, VA 22553

Re: Interim Agreement

Ladies and Gentlemen:

For good and valuable consideration, the receipt of which is
hereby acknowledged, and with the intent that you will rely hereon, we hereby
agree as follows:

1. We ratify and reiterate the provisions contained in
Paragraph 8 of that certain Letter of Intent between us dated January 3, 1996.
The provisions of such Paragraph 8 will apply to us, as well as each entity
directly or indirectly controlled by us (the "WRI Affiliates").

2. You will receive advance written notice of, and the
right to register your approval or disapproval of, any cash expenditure or
deposit by us or any WRI Affiliate other than (i) to meet current payroll at
historical rates of pay (i.e. not in excess of $300,000 funded on the 1st and
15th of each month); and (ii) payments, each of which is less than $500, and
the aggregate of which in any given week is not more than $5,000. In the event
that you disapprove by the close of the next business day after you receive
actual notice of the proposed payment of any particular expenditure or deposit,
we will not make such expenditure unless and until the expenditure has been
approved by our Board of Directors at a meeting duly noticed in accordance with
our Bylaws and applicable law at which you are given the opportunity to present
your objection to payment of the proposed expenditure.

3. Attached hereto as Attachment A is a true and correct
list of each bank account and investment account of WRI and each WRI Affiliate,
including the bank account number and the authorized signatories on each
account. We represent and warrant that as of the date hereof, no person other
than Robert Bunker and/or Linda Duncan is an authorized signatory on any such
account, except for depository accounts at the WRI Affiliates, and we covenant
that no persons will be added as signatories
<PAGE> 2
without your approval. We hereby authorize the release to you of all records
in connection with each such account. Attached hereto as Attachment B is a
letter that you may present to each bank and financial institution related to
such accounts authorizing the release of such information.

4. We hereby represent and warrant that we have
canceled, effective immediately, all credit cards as to which WRI or WRI
Affiliates are liable for payment. We agree to make available to you all
records related to any such credit cards.

5. You will receive immediate notification by facsimile
of all actions taken and approvals given by our Board of Directors or executive
committee, and any Board of Directors, executive committee or equivalent of any
WRI Affiliate. Such notice will be sent to the attention of Dorcas Hardy at
703-972-1728, with a copy to Doug Engmann at 415-781-4641.

6. Effective immediately, we will suspend or terminate
any and all payments to our former employees and former employees of any WRI
Affiliate.

7. We will permit you to place a representative at our
Tucson executive offices. Such person or persons will be afforded the right to
attend all company, management and Board meetings, other than that portion of
Board meetings that involve the discussion of arrangements between us.

8. We understand you are expending significant resources
in reliance on the agreements set forth in this letter, and we intend that you
so rely.

Very truly yours,

WORK RECOVERY, INC.

By:/Robert B. Bunker

Its: Senior Vice President and
Chief Financial Officer

<PAGE> 1
Exhibit 99.3

AGREEMENT

This Agreement (the "Agreement") is made as of January 18,
1996 by and among Work Recovery, Inc., a Colorado corporation ("WRI") and The
Team for New Management, L.L.C., A Delaware limited liability company (the
"Team").

RECITALS

A. WRI and the Team are parties to a letter of intent dated January 3, 1996
(the "LOI").

B. WRI has issued to the Team a letter dated January 16, 1996 (the "Interim
Agreement").

NOW THEREFORE, the parties agree as follows:

1. Board Meeting. It is anticipated that the Board of Directors of WRI, as
constituted as of the date hereof (the "Current Board"), and certain of its
individual members, will take the following actions at a meeting (the "Board
Meeting") held on January 17, 1996, including such later dates as to which the
Board Meeting was continued, such actions to be taken in the following order:

a. The Current Board will pass a resolution authorizing and
directing the officers of WRI to enter into this Agreement and authorizing and
directing the officers of WRI to enter into the Interim Management Services
Agreement (the "Interim Management Services Agreement") with the Team in the
form set forth as Exhibit A hereto.

b. The Current Board will elect the following officers of
WRI, to replace all persons currently holding such officer positions with WRI:

Acting Chair of the Board (subject to appointment to
the Board), President and CEO: Dorcas Hardy

Chief Operating Officer: to be held vacant at this time
<PAGE> 2
Acting Chief Financial Officer: Dorcas Hardy

c. The Current Board will adopt a resolution approving and
authorizing each person not serving on the Current Board who becomes a director
of WRI within the next year to receive the following:

i. Indemnification Agreements substantially in the
form previously granted to current directors and senior officers of WRI;

ii. if not an officer of WRI, $1,500 per Board or
Board committee meeting, plus expenses for meeting attendance;

iii. coverage under a directors' and officers'
insurance policy with maximum limits of not less than $5,000,000; and

iv. if not an officer of WRI, warrants on WRI common
stock exercisable for five years as follows:

100,000 warrants for serving as a director;
25,000 for each Committee membership; and
25,000 for each Committee Chair.

The exercise price of the warrants will be equal to the average closing bid
price of WRI's stock for the 20 trading day period commencing with the date
that is ten days prior to the earlier of: the date of the public announcement
of such person becoming a director, or the date of the first meeting of the
Board of Directors after the appointment or election of such director.

d. The Current Board will adopt a resolution approving such
persons as may be designated by the Team (the "Team Nominees"), which persons
may include some or all of Dorcas R. Hardy, John E. Affeldt, M.D., Julian W. De
La Rosa, Renato DiPentima, Richard A. Lewis, William R. Sauey, and Edward M.
Young, serving as directors of WRI and constituting a majority of the Board of
Directors of WRI.

e. The Current Board will adopt a resolution authorizing the
officers of WRI to enter into severance arrangements with Mr. Robert Bunker and
Ms. Linda Duncan containing the terms set forth in the LOI with the following
change: severance will be one year's base salary paid out over 30 months, with
any unpaid amount

2.
<PAGE> 3
payable in full if and when WRI reimburses the Team for its expenses through
January 2, 1996. Except for such agreements with Mr. Bunker and Ms. Duncan,
the Current Board also will adopt a resolution directing the officers of WRI to
cease payment of all amounts to former employees of WRI and its affiliates.

f. The Current Board will adopt a resolution authorizing,
subject to approval of the shareholders of WRI and negotiation with the Team of
a definitive Management Services Agreement to replace the Interim Management
Services Agreement, the following warrant package:

i. warrants, exercisable for five years, to
purchase three million shares of Common Stock of WRI at an exercise price of
$1.25 per share;

ii. warrants, exercisable for five years, to
purchase three million shares of the Common Stock of WRI at a price equal to
the average closing bid price of the Common Stock for the 20 trading day period
beginning ten days prior to the date hereof;

iii. warrants, exercisable for five years, to
purchase two million shares of Common Stock of WRI at an exercise price of $3
per share; and

iv. warrants, exercisable for five years, to
purchase two million shares of Common Stock of WRI at an exercise price of $5
per share.

The warrants would include the following provisions applicable to the
underlying shares of Common Stock:

(aa) the warrants will be issued as restricted
securities and initially will not be freely tradeable;

(bb) the warrants will carry unlimited piggyback
rights on all underwritten public offerings or registrations of outstanding
shares by the Company, subject to reasonable cutback pro rata with other
secondary sellers, as may be requested by the managing underwriters;

(cc) holders of the warrants will have the right to
participate pari passu with demand rights of other holders of shares of Common
Stock, including shares underlying any outstanding options or warrants; and

3.
<PAGE> 4
(dd) the warrants will carry two demand registration
rights for which WRI will bear all expenses.

The warrant or stock option incentives (but excluding cash bonuses paid based on
stock price appreciation) for Ms. Dorcas Hardy as an officer and director of
WRI, along with similar stock incentives that WRI is anticipated to offer for a
new Chief Operating Officer and a Chief Financial Officer to be hired in the
next year will also come from, or cause a deduction from, this warrant package.

g. The Current Board will adopt a resolution authorizing,
subject negotiation with the Team of a definitive Management Services Agreement
to replace the Interim Management Services Agreement, reimbursement of the
Team's out-of-pocket expenses, incurred prior through and including January 2,
1996, in connection with or otherwise related to the Team's attempts to obtain
a change in control of WRI, including, without limitation, in connection with
preparing to mount a proxy solicitation to replace the Current Board, drafting
and filing preliminary proxy and solicitation materials with the Securities and
Exchange Commission, meeting with shareholders of WRI and brokers, performing
preliminary due diligence on WRI and its affiliates, obtaining WRI shareholder
lists and commencing litigation to compel the holding of a WRI shareholders'
meeting.

h. The Current Board will adopt a resolution establishing the
authorized size of WRI's Board of Directors at seven members.

i. The following members of the Current Board will submit
their resignations, effective immediately, resigning from all officer and
director positions with WRI and any and all entities affiliated with WRI
(except for Work Recovery Europe Limited): Christopher H. Bingham; Patricia
D. Golde and Robert E. Robbins.

j. The remaining members of the Current Board present at the
Board Meeting (including Robert B. Bunker and Charles J. Rastatter) will
appoint the following persons to fill vacancies on the Board of Directors:

Dorcas R. Hardy, Julian W. De La Rosa, Renato
DiPentima and Edward M. Young

k. Continuation of the Board Meeting to January 22, 1996 at 2
p.m. at the offices of WRI.

4.
<PAGE> 5
l. Robert B. Bunker and Charles J. Rastatter will submit
their resignations, effective immediately, resigning from all officer and
director positions with WRI and any and all entities affiliated with WRI.

Each of the foregoing actions may be made conditioned on the satisfaction of
the condition set forth in paragraph 2(c), below.

2. Subsequent Actions. The Team will execute and deliver the Interim
Management Services Agreement and the lawsuit filed in Colorado against WRI to
compel the holding of a shareholders' meeting will be dismissed, subject to
satisfaction of the following conditions:

a. Approval and adoption by the Current Board and its
relevant members of each of the resolutions and actions set forth in paragraph
1 on or before January 19, 1996, such resolutions to be in form and substance
acceptable to the Team.

b. No material adverse change in the business, financial
condition or prospects of WRI and its affiliates that becomes known to the Team
from and after January 4, 1996 through the date of execution of the Interim
Management Services Agreement.

c. The Company obtaining for the benefit of the Team Nominees
officer and director liability insurance with coverage of not less than
$5,000,000 in aggregate.

3. Miscellaneous.

a. All portions of the LOI and the Interim Agreement
constituting legally enforceable agreements will continue in full force and
effect. Except as set forth therein or herein, this Agreement constitutes the
entire agreement of the parties, superseding all prior agreements,
understandings and representations concerning the subject matter hereof.

b. This Agreement may be executed in counterparts. The
validity and enforceability of any provision hereof will be affected by a
finding that any particular provision is invalid or unenforceable.

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

5.
<PAGE> 6
WORK RECOVERY, INC.

BY: /s/ Robert B. Bunker
--------------------

ITS: Senior Vice President

TEAM FOR NEW MANAGEMENT, L.L.C.

BY: /s/ Dorcas R. Hardy
-------------------

ITS: Member

<PAGE> 1
Exhibit 99.4

INTERIM MANAGEMENT SERVICES AGREEMENT

THIS INTERIM MANAGEMENT SERVICES AGREEMENT is entered into
effective as of January 18, 1996 (the "Effective Date") by and between Work
Recovery, Inc., a Colorado corporation (the "Company"), and The Team for New
Management, L.L.C., a Delaware limited liability company (the "Team").

R E C I T A L S

A. The Company is engaged in the business of providing proprietary
advanced rehabilitation technology and operating related testing clinics.

B. The Company desires to engage the Team to provide it with certain
executive management and consulting services, as provided in this Agreement.

NOW, THEREFORE, the parties agree as follows:

1. Executive Management Services. During the term hereof, the Company
hereby retains the Team to provide the executive management services that are
generally performed by a corporation's President, Chief Executive Officer,
Chief Operating Officer and Chief Financial Officer (or Comptroller), as the
responsibilities of such officers are more fully described in the Company's
Bylaws, as defined by the reasonable instructions of the Company's Board of
Directors (the "Board") and as subject to the oversight and reasonable
direction of the Board. In particular, the Team will employ Ms. Dorcas Hardy,
and make her services available to the Company as the Acting President and
Chief Executive Officer of the Company.

2. Consulting Services. During the term hereof, the Company hereby
retains the Team to provide, either directly or through persons or entities
engaged by the Team (including, in particular, persons or entities who are
members of the Team, or affiliated with members of the Team), such consulting
services as may be agreed from time to time by the Team and the Company (acting
through its Board of Directors, or such authority as the Board of Directors may
delegate to one or more officers of the Company).

3. Company Duties. In addition to providing the Team with the
compensation set forth in paragraph 4, below, the Company will have the
following obligations to the Team:

(a) The Company will invest the Team with all rights, authorities
and powers of whatsoever nature as the Team may require to enable it to
properly and efficiently perform the services described in paragraph 1 above.

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(b) The Company will, if called on to do so, ratify and confirm
any act or thing lawfully done or caused to be done by the Team in the proper
performance of its duties hereunder.

(c) The Company will enter into an Indemnification Agreement with
the Team substantially in the form executed with directors and
senior officers of the Company.

(d) The Company will name the Team as an additional insured under
any and all insurance policies covering any officer or
director.

(e) The Company will provide representatives of the Team with all
necessary secretarial facilities and office accommodations, and
other equipment to enable the Team to carry out its services
hereunder while working at the Company's offices.

4. Compensation. The Company will compensate the Team for its services
in the following manner:

(a) The Company will pay to the Team $25,000 per week, with payment
in advance, for its services referred to in paragraph 1.

(b) The Company will pay in advance (as requested by the Team), or
reimburse the Team for, all of the Team's out-of-pocket
expenses (including, without limitation, travel and lodging
expenses) associated with the services provided hereunder.
Amounts will be invoiced monthly, with payment due within 15
days.

(c) Any amounts unpaid when due hereunder will bear interest until
paid at a rate equal to the lesser of (i) three percent (3%)
above the reference rate announced from time to time by Bank of
America, NT&SA, San Francisco, California, or (ii) the maximum
interest rate permissible under applicable law.

5. Certain Reimbursements. Within seven days of the date hereof, the
Company will reimburse the Team for its out-of-pocket expenses, incurred from
and after January 3, 1996 (including from and after the date of this
Agreement), in connection with or otherwise related to the negotiation and
execution of this Agreement and the Team's attempts to obtain a change in
control of the Company, including, without limitation, performing due diligence
on the Company and its affiliates.

6. Term. This Agreement will have a term (the "Term") that will commence
with the Effective Date and will terminate on the earliest to occur of:

(a) ninety days from the Effective Date;

(b) termination noticed in writing by the Team upon not less than two
weeks notice;

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<PAGE> 3
(c) termination seven days after written notice by one party to
the other party upon breach hereof by such other party, which breach is
not cured by the end of such seven day period.

Upon termination hereof, the following provisions will survive: paragraph 4
(as to amounts owed and expenses incurred prior to termination), 5 and 7.

7. Warranties. The Team agrees to provide its services hereunder in a
professional manner. Except as otherwise expressly provided herein, the Team
makes no representations or warranties concerning the services to be provided
hereunder and no warranties or guarantees concerning the future performance of
the Company. In no event will the liability of the Team to the Company exceed
the cumulative amount of cash compensation actually paid hereunder to the Team.
Further, in no event will the Team be liable to the Company for lost profits or
special or consequential damages.

8. Disclosures of Interest. It is understood by the Company that:

(a) directors, officers, agents and shareholders of the Company are or
may be interested in the Team as members, managers or otherwise; and

(b) members, equity owners and agents of the Team are or may be
interested in the Company as directors, officers, shareholders or otherwise.

9. General.

(a) Not a Partnership. Nothing in this Agreement will be deemed to
constitute a partnership between the Company and the Team.

(b) Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties concerning the subject matter hereof. It
supersedes any prior agreement or understanding between them concerning the
subject matter hereof, and it may not be modified or amended in any manner
other than by a writing signed by duly authorized representatives of the
parties.

(c) Governing Law. This Agreement and the rights of the parties
hereunder will be governed by and interpreted in accordance with the laws of
the State of Arizona.

(d) Notices. Any notice required to be given by either party to the
other will be deemed given (i) immediately upon delivery by the party giving
notice or by a messenger directly to the notified party at the address set
forth for the notified party on the signature page below, (ii) five (5)
business days after being deposited in the postal system in certified form with
return receipt requested, postage paid, addressed to the notified party at the
address for the notified party set forth on the signature page below, but

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<PAGE> 4
only if the party giving notice receives a return receipt within ten (10)
business days after the notice is mailed, (iii) on the next business day if
dispatched to the notified party at the address set forth for the notified
party on the signature page below via a courier service that guarantees next
business day delivery, but only if the records of such courier service confirm
that such delivery was in fact made the next business day, or (iv) immediately
upon dispatch if dispatched by facsimile transmission to the notified party at
the facsimile telephone number for the notified party set forth on the
signature page below, but only if the dispatching party receives an electronic
confirmation of receipt, and the dispatching party also promptly gives notice
as provided in clause (ii) or (iii) of this paragraph. Either party may change
the address and facsimile telephone number to which notice should be sent by
written notice to the other party.

(e) Binding Effect. Except as herein otherwise specifically
provided, this Agreement will be binding upon and inure to the benefit of the
parties and their successors and assigns.

(f) Waivers. The failure of any party to seek redress for violation
of or to insist on the strict performance of any covenant or condition of this
Agreement will not prevent a subsequent act, which could have originally
constituted a violation, from having the effect of an original violation.

(g) Rights and Remedies Cumulative. The rights and remedies provided
by this Agreement are cumulative and the use of any one right or remedy by any
party will not preclude or waive the right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.

(h) Captions. Captions contained in this Agreement are inserted only
as matter of convenience and in no way define, limit, or extend the scope or
intent of this Agreement or any provision hereof.

(i) Severability. In the event of the invalidity of any provision of
this Agreement, such provision will be deemed deleted and the Agreement as so
amended will remain in full force and effect, unless the result would be unjust
to either party.

(j) Assignment. This Agreement may not be assigned by either party
without the express written consent of the other party.

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<PAGE> 5
(k) Counterparts. This Agreement may be executed in several
counterparts and all so executed will constitute one agreement which will be
binding on all the parties hereto, notwithstanding that all of the parties are
not signatory to the original or the same counterpart.

IN WITNESS WHEREOF, the undersigned have executed this Agreement,
effective as of the date first hereinabove written.

The TEAM for New Management, L.L.C.

By: /s/ Dorcas R. Hardy
-------------------
Its: Member
Address for Notices:

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

Fax Phone Number:
------------------

Work Recovery, Inc.

By: /s/ Robert B. Bunker
--------------------
Its: Senior Vice President

Address for Notices:

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

Fax Phone Number:
------------------

<PAGE> 1
Exhibit 99.5

SEVERANCE AGREEMENT AND RELEASE

This Severance Agreement and Release (the "Agreement") is entered into
effective as of the 18th day of January, 1996, between Robert B. Bunker (the
"Employee") and Work Recovery, Inc., a Colorado corporation (the "Company").

WHEREAS, the parties have agreed that it is in their respective best
interests to terminate their employment relationship amicably and resolve all
issues to their mutual satisfaction.

NOW, THEREFORE, for and in consideration of the mutual promises and
release and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:

1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:

a. "Related Company Entities" shall mean the Company,
all entities controlled by the Company, directly or indirectly, including
without limitation Work Recovery Centers, Inc., Work Recovery Europe, Work
Recovery Far East, New Concepts Corporation and all entities as to which any
Related Company Entity or Entities owns not less than a 10% voting interest
(including without limitation Work Recovery Pty., approximately 30 entities
owned not less than 20% by Work Recovery Centers, Inc. and Tradesman
Industries).

b. "Effective Date" shall mean the date when full time
employment is concluded and Employee is notified by the President of the
Company that Employee's full time employment is no longer required.

2. Compensation.

a. Severance Pay and Benefits. From and after the
Effective Date, Employee will receive severance which will be one year's salary
paid out over a period of thirty months, payable monthly in arrears on the last
day of each month during such period, at the per annum rate of $120,000, with
any unpaid amount payable in full if and when WRI reimburses the Team for its
expenses through January 2, 1996. During the first twelve month period, the
Company also shall provide the Employee with the health care and other benefits
provided to the Company's senior executives; provided, however, that the
aggregate amount of such other benefits (excluding health care benefits) shall
not exceed 5% of the per annum severance pay specified above. The Company
shall withhold from the Employee's

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severance pay all appropriate payroll taxes, customary withholdings, and such
other amounts as are required by law.

b. Options. The Company, through its Compensation
Committee and subject to the discretion of the Compensation Committee, shall
reprice and extend the exercise period in respect of the stock options granted
by the Company to the Employee such that the Employee shall have options to
purchase 170,000 shares of the Company's Common Stock at an exercise price of
$1.50 per share for a period expiring on the date two years following the
Effective Date. The Employee acknowledges and agrees that such options shall
replace all existing stock options held by the Employee (i.e., options to
purchase 400,000 shares) and that the Employee shall have no rights pursuant to
such existing options. Upon such repricing and extension of the exercise
period, the Employee shall surrender to the Company all existing options and
the Company shall issue to the Employee replacement options that are
substantially the same as the options surrendered except that such replacement
options shall evidence the new number of shares into which the options may be
exercised, the new exercise price and the new exercise period. The Company
agrees to use its best efforts to register the shares underlying such repriced
options with the Securities and Exchange Commission no later than any such
registration of warrants issued by the Company to the TEAM for New Management,
L.L.C.

3. Transition Services. From the Effective Date through the date
that is one year after the effective date of this Agreement, the Employee will,
upon reasonable notice and at such reasonable times as the Company may request,
(a) assist in the orderly transition of management control arising in
connection with the Employee's separation from the Company and (b) make himself
available to provide all requested information about the Related Company
Entities and the Business. Notwithstanding the immediately preceding sentence,
however, the Employee (i) shall not be obligated to provide any particular
number of hours of assistance and (ii) shall be entitled to seek and accept
other employment that is not in violation of Section 5 of this Agreement
("Acceptable Alternative Employment"). If the Employee accepts any Acceptable
Alternative Employment, this will have no effect on the Employee's right to
compensation pursuant to Section 2 of this Agreement.

4. Resignation. The Employee hereby resigns, effective as of the
date hereof, from all offices and director positions with the Related Company
Entities. The Employee covenants not to interfere in the businesses of any of
the Related Company Entities, not to represent himself as an officer, director,
employee, agent, consultant or otherwise of any Related Company Entity, and not
to solicit any customer or licensee of the Related Company Entities for
purposes the effect of which would be to adversely impact the volume of
business of such customer or licensee with the Related Company Entities.

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with the relevant portion of the Business of the Related Company Entities. For
the purposes of this Agreement, the relevant portions of the Business and the
relevant Geographic Areas are as follows:

a. ERGOS Business: Developing, manufacturing,
licensing, selling and supporting machines, software and/or simulators that (i)
provide work simulation for use in physical and functional capacities analysis,
rehabilitation, work performance testing, job analysis, evaluation in
connection with work conditioning and treatment programs, and/or ADA compliance
(including, without limitation, all businesses in which the Related Company
Entities' ERGOS Work Simulator competes (including areas in which products
currently being developed by the Company will compete); and/or (ii) provide
vocational interest assessment, vocational performance assessment and/or career
exploration (including, without limitation, all business in which New Concepts
Corp. competes (including areas in which products currently being developed by
New Concepts Corp. will compete)).

ERGOS Geographic Area: It is acknowledged that this
portion of the Business is being conducted on a nationwide and worldwide basis;
accordingly, the relevant Geographic Area is nationwide and worldwide.

b. Testing Clinic Business: Owning and operating
testing clinics that utilize machines, software and/or simulators described in
(a), above, whether same are provided by the Company Related Entities, the
Employee or third parties.

Testing Clinic Geographic Area: Within 250 miles of
each testing clinic of a Related Company Entity currently in operation or
currently identified by a Related Company Entity as targeted for operation, it
being acknowledged that testing clinics draw from a wide geographic area.

c. Vehicle Business: Development, manufacture and sale
of easy-loading vans, trucks and trailers.

Vehicle Geographic Area: It is acknowledged that
this portion of the Business is being conducted on a nationwide and worldwide
basis; accordingly, the relevant Geographic Area is nationwide and worldwide.

6. Enforceability of Certain Covenants. The Employee represents
and warrants to and covenants with the Company as follows:

a. The covenants set forth in Sections 4 and 5 of this
Agreement are reasonably necessary for the protection of the interest of the
Company, are reasonable as to duration, scope and territory, and are not
unreasonably restrictive of the Employee.

b. The Company's remedy at law for breach of any of the
covenants set forth in Sections 4 and 5 of this Agreement will be inadequate.
In addition to any other

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rights or remedies that the Company may have, the Company shall be entitled to
injunctive relief.

c. Notwithstanding subsection 6(a), should any court
determine that any covenants set forth in Section 4 or 5 of this Agreement are
unreasonable as to duration, scope, or territory, the covenants shall be
enforceable as provided herein with respect to such duration, scope and
territory as the court determines to be reasonable.

7. Trade Secret Agreement. The Employee acknowledges that he is
a party to a Trade Secret Agreement dated February 8, 1994 (the "TSA") and
represents, warrants, and covenants to the Company that the Employee is in full
compliance with the terms of the TSA and that the Employee will continue to
honor the terms of the TSA. The Employee further represents, warrants and
covenants to the Company that the Employee does not own any proprietary rights
or licenses, directly or indirectly, in any proprietary rights necessary or
desirable for operation of the Businesses by the Related Company Entities,
assigning to the Company (as if Inventions under the TSA) any and all rights
whether or not such rights were developed before, during or after the
employment of the Employee by the Company.

8. General Release by the Employee; Knowing and Voluntary Release.

a. In consideration of the promises and benefits
provided under this Agreement, which the Employee acknowledges are sufficient
consideration, the Employee (for himself, his agents, heirs, executors,
administrators, and assigns) hereby knowingly and voluntarily releases, holds
harmless and discharges the Related Company Entities and their respective
shareholders, directors, officers, employees and agents, and all of their
respective attorneys, accountants, insurers, agents, heirs, administrators,
executors, successors and assigns (collectively, the "Released Parties") from
any and all agreements, debts, claims, and causes of every kind or nature,
known or unknown, that exist as of the date of this Agreement; provided,
however, that the obligation of the Company to indemnify the Employee under the
terms of the Company's Articles of Incorporation and Bylaws and the
Indemnification Agreement between the Company and the Employee dated July 10,
1995 shall not be affected by this Agreement.

b. Without limiting the generality of the foregoing, the
Employee knowingly and voluntarily releases all statutory, common law or
equitable claims arising out of or related in any way to his employment with
any Related Company Entity or the termination thereof. The Employee
acknowledges that (i) he has read this Agreement and fully understands it to be
binding and enforceable and a full and complete compromise, settlement and
release of any claims referred to in Section 8(a) of this Agreement; (ii) he
has entered into this Agreement on advice of legal counsel and of his own free
will and accord without reliance on any representation, warranty or assurance
of any kind or character; (iii) no oral understandings, statements, promises or
inducements contrary to the terms of this Agreement exist; (iv) he does not
consider himself to be in a disparate bargaining position relative to the
Company with respect to the matters covered by this Agreement; (v) his

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decision to terminate his employment with the Company and the Related Company
Entities was voluntary and not in any way coerced or the result of a forced
resignation or constructive discharge; (vi) the Company has no obligations to
the Employee with respect to compensation, bonuses, severance payments,
allowances, pension or retirement benefits, vacation or sick leaven benefits or
other employment benefits of whatever nature except as set forth in this
Agreement; and (vii) the execution, delivery and performance of this Agreement
by the Company shall not be construed as an admission of liability of any kind
on the part of the Company.

9. Agreement by Company Not to Assert Claims. The Company agrees
not to assert against the Employee any claim existing as of the Effective Date
except for (i) any claim alleging criminal misconduct or actions taken in bad
faith to the material detriment of the Company or any Related Company Entity,
(ii) any claim alleging breach of this Agreement, or (iii) an answer or
counterclaim to any claim by the Employee against the Company or any Related
Company Entities or any of their respective directors, officers, employees,
agents or affiliates.

10. Representation and Warranty of the Employee. The Employee
represents and warrants to the Company that he has no equity or debt interest
in, and no contract with, any Related Company Entity other than his shares in
the Company and his options as indicated in Section 2(b) of this Agreement.

11. Voting Trust. The parties hereby agree to the establishment
of a voting trust into which all of the Employee's capital stock in the
Company, whether now owned or hereafter acquired, will be placed. The voting
trustee shall be the President of the Company. The voting trustee will be
required to vote the shares held in the voting trust in the same manner as all
other shareholders vote their shares (excluding abstentions). Shares may be
released from the voting trust only in the case of bona fide sales incident to
broker's transactions. The parties agree to execute a voting trust agreement
that incorporates the provisions of this Section 11. The voting trust
agreement shall be in form reasonably satisfactory to the Company.

12. Disparaging Remarks. Except in connection with the defense of
any litigation initiated by the Company or a Related Company Entity against the
Employee, the Employee agrees not to, either personally or through any agent,
make any defamatory or disparaging remarks or statements to any third party
about the Company or any Related Company Entity or any of their respective
shareholders, directors, officers, employees or agents. Except in connection
with the defense of any litigation initiated by the Employee, the Company
agrees not to, either personally or through any agent, make any defamatory or
disparaging remarks or statements to any third party about the Employee.

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provided, however, that this Agreement shall not supersede the Indemnification
Agreement between the Company and the Employee dated July 10, 1995.

14. Modification and Waiver. No modification or amendment to this
Agreement shall be effective unless in writing and signed by all parties to
this Agreement. No waiver shall be effective unless in writing and executed by
the party against whom enforcement of the waiver is sought.

15. Attorneys' Fees and Costs. The parties agree that the
prevailing party in any dispute or litigation arising under this Agreement
shall be entitled to recover its reasonable attorneys' fees and costs from the
non-prevailing party.

16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona without giving
effect to the conflict of law provisions thereof.

17. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.

18. Binding Effect. This Agreement shall be binding upon, inure
to the benefit of and enforceable against the parties and their respective
successors, assigns, heirs and personal representatives. The Company's rights
under this Agreement are hereby made expressly assignable by the Company.

19. Interpretation. No provision of this Agreement shall be
construed in favor of or against either party solely because that party (or its
legal representative) drafted such provision.

Dated: January 18, 1996

/s/Robert B. Bunker
-------------------
Robert B. Bunker

WORK RECOVERY, INC., a
Colorado corporation

By:/s/ Linda J. Duncan
-------------------
Its: Senior Vice President

<PAGE> 1
Exhibit 99.6

SEVERANCE AGREEMENT AND RELEASE

This Severance Agreement and Release (the "Agreement") is entered into
effective as of the 18th day of January, 1996, between Linda J. Duncan (the
"Employee") and Work Recovery, Inc., a Colorado corporation (the "Company").

WHEREAS, the parties have agreed that it is in their respective best
interests to terminate their employment relationship amicably and resolve all
issues to their mutual satisfaction.

1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:

b. "Effective Date" shall mean the date when full time
employment is concluded and Employee is notified by the President of the
Company that Employee's full time employment is no longer required.

2. Compensation.

a. Severance Pay and Benefits. From and after the
Effective Date, Employee will receive severance which will be one year's salary
paid out over a period of thirty months payable monthly in arrears on the last
day of each month during such period, at the per annum rate of $96,000, with
any unpaid amount payable in full if and when WRI reimburses the Team for its
expenses through January 2, 1996. During the first twelve month period, the
Company also shall provide the Employee with the health care and other benefits
provided to the Company's senior executives; provided, however, that the
aggregate amount of such other benefits (excluding health care benefits) shall
not exceed 5% of the per annum severance pay specified above. The Company
shall withhold from the Employee's severance pay all appropriate payroll taxes,
customary withholdings, and such other amounts as are required by law.

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<PAGE> 2

5. Noncompetition. For a period of three years from the date
hereof, the Employee agrees not to engage, assist or participate in, directly
or indirectly, whether as an employee, independent contractor, director,
officer, employee, equity participant, debt holder or otherwise, any business
or enterprise that is competitive in the relevant Geographic Area with the
relevant portion of the Business of the Related Company Entities. For the
purposes of this Agreement, the relevant portions of the Business and the
relevant Geographic Areas are as follows:

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<PAGE> 3

c. Vehicle Business: Development, manufacture and sale
of easy-loading vans, trucks and trailers.

6. Enforceability of Certain Covenants. The Employee represents
and warrants to and covenants with the Company as follows:

b. The Company's remedy at law for breach of any of the
covenants set forth in Sections 4 and 5 of this Agreement will be inadequate.
In addition to any other rights or remedies that the Company may have, the
Company shall be entitled to injunctive relief.

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c. Notwithstanding subsection 6(a), should any court
determine that any covenants set forth in Section 4 or 5 of this Agreement are
unreasonable as to duration, scope, or territory, the covenants shall be
enforceable as provided herein with respect to such duration, scope and
territory as the court determines to be reasonable.

7. Trade Secret Agreement. The Employee acknowledges that he is
a party to a Trade Secret Agreement dated September 15, 1993 (the "TSA") and
represents, warrants, and covenants to the Company that the Employee is in full
compliance with the terms of the TSA and that the Employee will continue to
honor the terms of the TSA. The Employee further represents, warrants and
covenants to the Company that the Employee does not own any proprietary rights
or licenses, directly or indirectly, in any proprietary rights necessary or
desirable for operation of the Businesses by the Related Company Entities,
assigning to the Company (as if Inventions under the TSA) any and all rights
whether or not such rights were developed before, during or after the
employment of the Employee by the Company.

8. General Release by the Employee; Knowing and Voluntary Release.

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compensation, bonuses, severance payments, allowances, pension or retirement
benefits, vacation or sick leaven benefits or other employment benefits of
whatever nature except as set forth in this Agreement; and (vii) the execution,
delivery and performance of this Agreement by the Company shall not be
construed as an admission of liability of any kind on the part of the Company.

13. Entire Agreement. This Agreement is the entire, integrated
agreement of the parties and supersedes any and all prior and contemporaneous
agreements, promises, representations, negotiations, and understandings of the
parties, whether written or oral; provided, however, that this Agreement shall
not supersede the Indemnification Agreement between the Company and the
Employee dated July 10, 1995.

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14. Modification and Waiver. No modification or amendment to this
Agreement shall be effective unless in writing and signed by all parties to
this Agreement. No waiver shall be effective unless in writing and executed by
the party against whom enforcement of the waiver is sought.

16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona without giving
effect to the conflict of law provisions thereof.

19. Interpretation. No provision of this Agreement shall be
construed in favor of or against either party solely because that party (or its
legal representative) drafted such provision.

Dated: January 18, 1996

/s/ Linda J. Duncan
-------------------
Linda J. Duncan

WORK RECOVERY, INC., a
Colorado corporation

By: Robert B. Bunker
----------------
Its:Senior Vice President and
Chief Financial Officer