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 30, 1997
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 Changes Since Last Report)
*(NOTE: As part of the bankruptcy reorganization plan
discussed in Item 3 below, the Registrant's corporate
domicile will move from Colorado to Delaware)
<PAGE> 2
ITEM 3 BANKRUPTCY OR RECEIVERSHIP
On December 4, 1996 the United States Bankruptcy Court for the District of
Arizona (the "Bankruptcy Court") entered its confirmation order confirming
and approving Debtors' Restated Amended Joint Plan of Reorganization dated
October 4, 1996 and the modification of Plan dated November 25, 1996 (the
"Amended Plan") of Work Recovery, Inc., a Colorado corporation and its
subsidiary ("Old WRI"). The Amended Plan will become effective on February 1,
1997 (the "Effective Date"). On the Effective Date, all of the assets of Old
WRI will be transferred to Work Recovery, Inc., a Delaware corporation ("New
WRI") and New WRI will assume all liabilities of Old WRI as such liabilities
are modified pursuant to the terms of the Amended Plan.
The material features of the Amended Plan and information concerning the
capitalization, assets and liabilities of New WRI are summarized below and
contained in the Amended Plan, New WRI `s Certificate of Incorporation, as
amended, and Bylaws and certain Agreements governing the rights of security
holders of New WRI, which are filed as exhibits hereto and are incorporated
herein by reference.
On the Effective Date, the capital structure of New WRI will consist of
50,000,000 shares of $.01 par value capital stock which include 48,000,000
shares of common stock ("New Common Stock") and 2,000,000 shares of preferred
stock. The Company estimates that, on the Effective Date, there will be
approximately 17,675,234 shares of New Common Stock issued or reserved for
issuance pursuant to the Amended Plan. The distribution of such shares is
described below.
The Amended Plan provides for the continuation of Old WRI's business as New
WRI. Funds required to make initial distributions to creditors and for
continued operations will be supplied from the proceeds of certain additional
financings expected to be available at the Effective Date, from funds generated
through operations and the sale of assets. Additional funds may be generated
through the exercise of the warrants to purchase Common Stock that will be
issued to the holders of common stock of Old WRI ("Old Common Stock") which
are described below.
In summary, the Amended Plan provides for the following treatment of
administrative, secured and unsecured obligations of and other claims against
and interests in Old WRI and the holders of preferred stock of Old WRI, and
Old Common Stock and options and warrants to purchase Old Common Stock.
Treatment of Creditors and Other Claimants
Administrative Claims and Expenses. The Amended Plan provides for the payment
in full of all administrative claims and expenses on the Effective Date or when
the claim is allowed. Administrative claims and expenses consist of the
reasonable and necessary costs of preserving the bankruptcy estate, including
general operating expenses, claims under assumed executory
<PAGE> 2
contracts and fees and expenses of professional to the extent authorized
by order of the Bankruptcy court. The company estimates that general
operating expenses as of the Effective Date, will aggregate $125,000,
obligations under assumed executory contracts will aggregate $60,000, and fees
and expenses of professionals will aggregate $900,000.
Priority Claims. The holders of Priority Claims will be paid the full amount
of their respective claims on or after the Effective Date. Priority Claims
include wage claims and tax claims against the Company to the extent entitled
to priority.
Certain Secured Claims. All existing defaults on the claims secured by
(i) the Company's Tucson real estate and (ii) an automobile owned by the
Company will be cured as of the Effective Date and the company will resume
monthly payments on such obligations. The company estimates that cure payment
will aggregate $125,000.
Converted Secured Claims. The claims of Allsup, Inc. ("Allsup") Doug Engmann
("Engmann"), and Recovery Lenders L.L.C. ("Recovery Lenders"), arising from
secured loans made prior to the bankruptcy proceedings and from advances made
during the bankruptcy proceeding will be converted to New Common Stock pursuant
to the provisions of the Amended Plan. Pursuant to the Amended Plan, Allsup
will be issued a total of 2,573,517 shares, the successors of Recovery Lenders
will be issued a total of 1,323,523 shares and Engmann will be issued a total
of 51,470 shares in exchange for secured claims totaling $2,035,000 plus accrued
interest plus an additional cash contribution by Allsup of $1,000.000.
Unsecured Claims Claims that are not Priority Claims or Secured Claims are
referred to as "Unsecured Claims". The Unsecured Claims include the following:
Small Claims. Holders of Small Claims against the Company ($500 or less) will
receive payment of cash in the amount of 90% of their respective claims within
thirty days of the Effective Date. The aggregate amount payable to the holders
of Small Claims is approximately $66,000.
Unresolved Claims. The Company identified 11 claims as "Unresolved Claims"
under the Amended Plan. Under the terms of the Amended Plan, the holders of
such claim are to receive full payment of their allowed claims in New Common
Stock at the rate of $2.50 per share. All such claims have been liquidated
by settlement agreements or by orders disallowing the claims. Pursuant to
the settlement agreements, the holders of such claims will receive a total of
1,000,000 shares of New Common Stock. Certain of such holders will also receive
additional consideration for the assumption or rejection of executory contracts,
for the sale of personal property, and/or for consulting services. Pursuant to
the terms of the Amended Plan, and since 500,000 shares allocated to such class
will not be issued pursuant to such settlement agreements, 250,000 of such
shares shall be canceled and 250,000 shares will be transferred to the Claims
Trust described below.
Securities Class Action Claimants. Holders of claims against the Old WRI
arising from the purchase or sale of securities in the Old WRI purchased from
September 1993 through April
<PAGE 4
1996 will receive a pro rata distribution of 1,500,000 shares of New Common
Stock. The holders of such claims may receive additional distributions from
the Claims Trust described below. Such holders include the members of class
action cases currently pending against the company, the Old WRI; it is
anticipated that the procedures for identifying and quantifying such claims
will be determined in accordance with the terms of a tentative settlement
agreement with the class representatives which will be presented to the
Bankruptcy Court and the United States District Court in which actions are
pending.
Claims Trust. On or after the Effective Date, the company will transfer to
a Claims Trust to be established all claims of the company against Thomas
Brandon, affiliates of Thomas Brandon and person acting in concert with him
in certain suspect transactions. The Company will also transfer $50,000 on the
Effective Date and an additional $250,000 within 180 days after the Effective
Date to the Claims Trust. One-half of the unallocated shares not distributed
to Unresolved Claims, which are estimated to be 250,000 shares, will be
transferred to the Claims Trust. The trustee of the Claims Trust shall be
appointed by the Bankruptcy Court upon recommendation by the Creditors
committee. Distributions for the Claims Trust are to be made first to
general unsecured creditors until total distributions equal twenty percent of
their allowed claims. Thereafter, distributions shall be made to holders of
Securities Fraud claims and holders of Old Common Stock, in accordance with
the terms of the Amended Plan.
General Unsecured Claims. The holders of claims against Old WRI not otherwise
classified under the Amended Plan will receive cash in the amount of eighty
percent (80%) of the amount of their claim as allowed by the Bankruptcy
Court. Such holders may receive additional distributions from the Claims
Trust as otherwise described herein and in the Amended Plan. It is anticipated
that such claims will aggregate $2,100,000. The Amended Plan provides that
payment on account of such claims shall be made in two installments, within
thirty and 180 days after the Effective Date. However, no distributions will
be made on account of such claims until allowed.
Treatment of Security Holders.
Under the Amended Plan, the holders of Old Common Stock, certain warrants to
purchase Old Common Stock ("Old Warrants") and holders of certain classes of
Preferred Stock of Old WRI ("Preferred Stock") are entitled to receive the
following:
Old Common Stock. The holders of Old Common Stock are entitled to receive
New Common Stock on the basis of one share of New Common Stock for each ten
shares of Old Common Stock; provided that the certificates for Old Common
Stock are submitted to the transfer agent for the New Common Stock on or
before February 1, 1998. Shares of Old Common Stock outstanding after that
date will be canceled and no longer exchangeable into New Common Stock.
There are currently 45,918,623 shares of Old Common Stock outstanding meaning
that, if all Old Common Stock is submitted for exchange into New Common Stock,
4,591,862 shares of New Common Stock will be issued to the holders of Old Common
Stock.
Each holder of Old Common Stock will also receive a Warrant ("New Warrant") to
purchase one share of New Common Stock for each share of New Common Stock
received in
<PAGE> 5
exchange for Old Common Stock; except that, the maximum number of shares of
New Common Stock that may be issued on the exercise of New Warrants shall be
2,700,000. The exercise price of each New Warrant is $2.50 subject to
adjustment in accordance with the Warrant Agreement for the New Warrants.
New Warrants will be exercisable on a first come first served basis until
2,700,000 Warrants have been exercised at which time all remaining Warrants
expire. If at least 2, 700,000 Warrants have not been exercised, the New
Warrants will expire on August 1, 1997. The "Expiration Date" is the earlier
to occur of (i) August 1, 1997 or (ii) the exercise of 2,700,000 warrants.
A "Conditional Warrant" representing the difference between 2,700,000 Warrants
and the number of Warrants that have been exercised as of the Expiration Date,
may be issued by New WRI to a third party during the 20 day period following
the Expiration Date. Such Conditional Warrant must be exercised within ten
days of its issuance to such third party. The exercise price of the Conditional
Warrant shall be $2.50 per share.
Preferred Stock Holders. The holders of Series B and C of the Old Preferred
Stock shall receive twenty percent (20%) of accrued dividends in cash and one
share of New Common Stock for each ten shares of Old Common Stock into which
their Old Preferred Stock was convertible. It is estimated that cash
distributions on account of such interests will aggregate $134,000 and that
97,999 shares of New Common Stock will be issued.
Old Warrants. The holders of Old Warrants will receive an aggregate of
500,000 shares of New Common Stock in exchange for and cancellation of their
Old Warrants.
Employees and Directors.
The Amended Plan provides for the issuance of an aggregate of 2,500,000
shares of New Common Stock to employees of Old WRI who will also be employees
of New WRI (500,000 shares, in the aggregate), directors of Old WRI who are
also directors of New WRI (200,000 shares, in the aggregate) and members of
Team for New Management, which has furnished senior management (chief executive
officer, chief financial officer, etc.) and other services to Old WRI during the
bankruptcy period (1,800,000 shares, in the aggregate).
Employee Stock Option Plan. Old WRI has a qualified employee Stock Option Plan
that will be assumed by New WRI. On the Effective Date, the 2,118,050 shares
of Old Common Stock reserved for issuance pursuant to the employee plan
("Employee Plan") will be reduced to 211,805 shares. On the Effective Date,
options to purchase a total of 136,326 shares of New Common Stock will be
granted pursuant to the Employee Plan to employees of the Company. The
remaining shares will be available for the grant of Options to employees in
the future pursuant to the Employee Plan.
<PAGE> 6
Shares of New Common Stock to be Issued or Reserved for Issuance
Class Description Number of Shares
1. Secured Claims 3,948,568
2. Unresolved Claims 1,000,000
3. Securities Fraud Claims 1,500,000
4. Claims Trust 250,000
5. Old Common Stock 4,591,862
6. Old WRI Warrants 500,000
7. Old Preferred Stock 97,999
8. Warrants and Options
a. New Warrants 2,700,000
b. Holder of Secured Claim 300,000
c. Unresolved Claims 75,000
d. Employee Stock Options 211,805
9. Employees and Directors 2,500,000
a. Team for New Management 1,800,000
b. Other 700,000
----------
17,675,234
==========
<PAGE> 7
Item 7. Financial Statements and Exhibits
Exhibit No. Description
1.1 Debtors' Restated Amended Joint Plan of Reorganization dated
October 4, 1996, modified as of November 25, 1996.
3.1 Certificate of Incorporation of Work Recovery, Inc., as amended.
4.1 Warrant Agreement dated as of February 1, 1997 between Work
Recovery, Inc., and Harris Trust and Bank.
4.2 Form of Warrant.
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORK RECOVERY, INC.
(Registrant)
By /s/ Dorcas R. Hardy
Dorcas R. Hardy
President and Chief Executive
Officer, Acting
Exhibit 3.1
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
WORK RECOVERY, INC.
(Pursuant to Section 241 of the
General Corporation Law of Delaware)
Work Recovery, Inc., a Delaware corporation (the "Corporation"),
does hereby certify:
1. The Corporation has amended its Certificate of Incorporation
as follows (the "Amendment"):
"Article FOURTH (a) of the Certificate of Incorporation
of Work Recovery, Inc. (the "Corporation") is hereby
amended by changing the total number of authorized stock
of the Corporation to 50,000,000 shares, and changing the
total number of authorized Common Stock of the Corporation
to 48,000,000 shares."
2. The Corporation certifies that it has not received any
payment for any of its stock and the Amendment was duly adopted by the sole
director in accordance with the provisions of Section 241 of the General
Corporation Law of the State of Delaware (the "General Corporation Law"). The
approval of the Amendment by the Corporation's sole director described above was
pursuant to written consent of the sole director in lieu of a special meeting in
accordance with the provisions of Section 141 of the General Corporation Law.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment
this __ day of January, 1997.
WORK RECOVERY, INC.
By:/s/ Dorcas R. Hardy. President
ATTEST:
By: Secretary
CERTIFICATE OF INCORPORATION
OF
WORK RECOVERY, INC.
FIRST: NAME. The name of the corporation is Work Recovery, Inc., (the
"Corporation").
SECOND: REGISTERED OFFICE/AGENT. The address of the Corporation's
registered office in the State of Delaware is 1209 Orange Street, City of
Wilmington, County of New Castle, 19801. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
THIRD: PURPOSE. The purposes of the Corporation are to develop,
manufacture, sell and distribute equipment and supplies to the rehabilitation
health care industry and to assist rehabilitation facilities, physician groups
and hospitals in establishing functional capacity evaluations and work therapy
programs.
FOURTH: CAPITAL STOCK. (a) The total number of shares of stock
which the Corporation shall have authority to issue is 30,000,000 shares,
consisting of 28,000,000 shares of Common Stock, par value $.01 per share
("Common Stock") and 2,000,000 shares of Preferred Stock, par value $.01 per
share ("Preferred Stock").
(b)Shares of Preferred Stock may be issued from time to time in
one or more series as may from time to time be determined by the Board of
Directors, each of said series to be distinctly designated. The voting powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions thereof, if any, of each such
series may differ from those of any and all other series of Preferred Stock at
any time outstanding, and the Board of Directors is hereby expressly granted
authority to fix, by resolution or resolutions, the designation, number, voting
powers, preferences and relative, participating, option and other special
rights, and the qualifications, limitations and restrictions thereof, of each
such series, including but without limiting the generality of the foregoing,
the following:
1. The distinctive designation of, and the number of
shares of Preferred Stock that shall constitute such series; which number
(except where otherwise provided by the Board of Directors in the resolution
establishing such series) may be increased or decreased (but not below the
number of shares of such series then outstanding) from time to time by like
action of the Board of Directors;
2. The rights in respect of dividends, if any, of such series
of Preferred Stock, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes or any other
series of the same or other class or classes of capital stock of the Corporation
and whether such dividends shall be cumulative or noncumulative;
3. The right, if any, of the holders of such series of Preferred
Stock to convert the same into, or exchange the same for, shares of any other
class or classes or of any other series of the same or any other class or
classes of capital stock of the Corporation, and the terms and conditions of
such conversion or exchange;
4. Whether or not shares of such series of Preferred Stock
shall be subject to redemption, and the redemption price or prices and the
time or times at which, and the terms and conditions on which, shares of such
series of Preferred Stock may be redeemed;
5. The rights, if any, of the holders of such series of
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation or in the event of any merger or consolidation of
or sale of assets by the Corporation;
6. The terms of any sinking fund or redemption or repurchase or
purchase account, if any, to be provided for shares of such series of Preferred
Stock;
7. The voting powers, if any, of the holders of any series of
Preferred Stock generally or with respect to any particular matter, which may
be less than, equal to or greater than one vote per share; and
8. Such other powers, preferences and relative, participating,
option and other special rights, and the qualifications, limitations and
restrictions thereof, as the Board of Directors shall determine.
(c) Except as may otherwise be required by law, and subject to
the voting rights, if any, of the holders as any one or more series of
Preferred Stock issued in accordance with paragraph (b) of this Article
FOURTH, each holder of Common Stock shall have one vote in respect of each
share of Common Stock held on all matters voted upon by the stockholders.
(d) Except as may otherwise be provided in the terms of any one
or more series of Preferred Stock issued in accordance with paragraph (b)
of this Article FOURTH, the authorized amount of shares of Common Stock, and
of Preferred Stock may, without a class vote of either thereof, be increased or
decreased from time to time by the affirmative vote of the holders of a majority
of the combined voting power of the then outstanding shares of all classes and
series of stock of the Corporation entitled to vote generally in the election of
directors ("Voting Stock").
FIFTH: BOARD OF DIRECTORS/CLASSIFICATION AND TERMS.
(a) The business and affairs of the Corporation shall be
conducted and managed by, or under the direction of, the Board of Directors.
Subject to the right, if any, of the holders of any one or more series of
Preferred Stock issued in accordance with paragraph (b) of Article FOURTH of
this Certificate of Incorporation separately to elect additional directors,
the total number of directors constituting the entire Board of Directors shall
be not less than three (3) nor more than nine (9), with the then-authorized
number of directors being fixed from time to time by or pursuant to a
resolution passed by the Board of Directors.
(b) The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The terms of the initial Class I
directors shall terminate on the date of the 1997 annual meeting of
stockholders; the term of the initial Class II directors shall terminate on
the date of the 1998 annual meeting of stockholders; and the term of the
initial Class III directors shall terminate on the date of the 1999 annual
meeting of stockholders. At each annual meeting of stockholders beginning
in 1997, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly
equal as possible, and any additional directors of any class elected to fill
a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining terms of that class, but in no
case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting
for the year in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the
Board of Directors, howsoever resulting (including, without limitation,
newly created directorships), may be filled by a majority of the directors
then in office, even if less than a quorum, or by a sole remaining director.
Any director elected to fill a vacancy shall hold office for a term that
shall coincide with the term of the class to which such director shall have
been elected.
Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of this Certificate of Incorporation or the resolution or
resolutions adopted by the Board of Directors pursuant to Article FOURTH
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to this Article FIFTH unless expressly provided by such terms.
(c) Subject to the right, if any, of the holders of any one
or more series of Preferred Stock issued in accordance with paragraph (b) of
Article FOURTH of this Certificate of Incorporation separately to elect
additional directors and to fill any vacancies therein, and subject to the
provisions hereof, newly created directorships resulting from any increase in
the authorized number of directors, and any vacancies on the Board of Directors
resulting from death, resignation, disqualification or removal, may be filled by
the affirmative vote of a majority of (i) the remaining directors then in
office, even though less than a quorum of the Board of Directors, or (ii) the
combined voting power of the then-outstanding shares of Voting Stock. Any
director elected in accordance with the preceding sentence shall hold office
until the expiration of the term of office of the director whom he has
replaced or until his successor is elected and qualified, subject to his
earlier death, disqualification, resignation or removal. No decrease in the
number of directors constituting the entire Board of Directors shall shorten
the term of any incumbent director.
(d) During any period when the holders of any one or more
series of Preferred Stock issued in accordance with paragraph (b) of Article
FOURTH of this Certificate of Incorporation have the right separately to
elect additional directors, then upon commencement and for the duration of
the period during which such right continues (i) the then otherwise total
authorized number of directors of the Corporation shall automatically be
increased by such specified number of directors, and the holders of such
one or more series of Preferred Stock shall be entitled to elect the additional
directors so provided for, and (ii) each such additional director shall serve
until such director's successor shall have been duly elected and qualified, or
until such director's right to hold such office terminates pursuant to said
provisions, whichever occurs earlier, subject to his or her earlier death,
disqualification, resignation or removal. Except as otherwise provided by
the Board of Directors in the resolution or resolutions establishing such
series of Preferred Stock, whenever the holders of any one or more series of
Preferred Stock having such right to elect additional directors are divested of
such right pursuant to the provisions of such stock, the terms of office of all
such additional directors elected by the holders of such stock, or elected to
fill any vacancies resulting from the death, resignation, disqualification or
removal of such additional directors, shall forthwith terminate and the total
authorized number of directors of the Corporation shall be reduced accordingly.
(e) Unless and except to the extent that the Bylaws of the
Corporation shall so require, the election of directors of the Corporation
need not be by written ballot.
SIXTH: INDEMNIFICATION. To the fullest extent permitted by
applicable law as it presently exists or may hereafter be amended, the
Corporation shall indemnify any person who was or is made or is threatened
to be made a party or is otherwise involved in any action, suit, or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he, or a person for whom he is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust, enterprise or
non-profit entity, including service with respect to employee benefit plans,
against all expenses, liability, and loss reasonably incurred or suffered by
such person, and the Corporation shall advance expenses (including attorneys'
fees) to such person. Notwithstanding the foregoing, the Corporation shall
be required to indemnify a person and advance expenses to such person in
connection with a proceeding (or part thereof) commenced by such person only
if the commencement of such proceeding (or part thereof) was authorized by
the Board of Directors. The rights conferred on any person by this Article
SIXTH shall not be exclusive of any rights which such person may have or
hereafter acquire under any statute, provision of this Certificate of
Incorporation, the Bylaws, agreement, vote of stockholders or disinterested
directors, by law or otherwise.
SEVENTH: LIMITATION OF LIABILITY. A director of the Corporation
shall not be liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent such
exemption from liability or limitation thereof is not permitted under the
General Corporation Law of Delaware ("GCL") as the same exists or may
hereafter by amended. Any repeal or modification of the first sentence of
this Article SEVENTH shall not adversely affect any right or protection of a
director of the Corporation existing hereunder with respect to any act or
omission occurring prior to such repeal or modification.
EIGHTH: STOCKHOLDER MEETINGS. Meetings of stockholders of the
Corporation may be held within or without the State of Delaware, as the
Bylaws of the Corporation may provide. Subject to the rights, if any, of the
holders of any one or more series of Preferred Stock issued in accordance with
paragraph (b) of Article FOURTH of this Certificate of Incorporation to call a
special meeting thereof, special meetings of stockholders of the Corporation
may be called only by the Chairman of the Board, the President or the Board
of Directors, and special meetings of stockholders may not be called by any
other person or persons or in any other manner. The business to be
transacted at any special meeting of stockholders of the Corporation shall be
limited to the purpose or purposes stated in the notice of such meeting.
NINTH: SPECIAL VOTING REQUIREMENTS.
(a) Except as set forth in Section (b) of this Article NINTH, the
affirmative vote of the holders of 66 2/3% of the Voting Stock shall be required
for:
1. any merger or consolidation to which the Corporation, or
any of its subsidiaries, and an Interested Person (as hereinafter defined) are
parties;
2. any sale or other disposition by the Corporation, or any
of its subsidiaries, of all or substantially all of its assets to an Interested
Person;
3. any purchase or other acquisition by the Corporation, or
any of its subsidiaries, of all or substantially all of the assets or stock of
an Interested Person; and
4. any other transaction with an Interested Person which
requires the approval of the stockholders of the Corporation under the GCL, as
in effect from time to time.
(b) The provisions of Section (a) of this Article NINTH shall
not be applicable to any transaction described therein if such transaction is
approved by resolution of the Corporation's Board of Directors, provided that
a majority of the members of the Board of Directors voting for the approval of
such transaction are Continuing Directors. The term "Continuing Director" shall
mean any member of the Board of Directors of the Corporation who is not a
representative or nominee of the Interested Person or of such an affiliate or
associate, that is involved in the relevant transaction, and (i) was a member of
the Board of Directors on January 31,1997, or (ii) was a member of the Board of
Directors prior to the date that the person, firm or corporation, or any group
thereof, with whom such transaction is proposed, became an Interested Person, or
(iii) whose initial election as a director of the Corporation succeeds a
Continuing Director or is a newly created directorship, and in either case was
recommended by a majority vote of the Continuing Directors then in office.
(c) AS used in this Article NINTH, the term "Interested Person"
shall mean any person, firm or corporation, or any group thereof, acting or
intending to act in concert, including any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such person, firm or corporation or group, which owns of record or beneficially,
directly or indirectly, five percent (5%) or more of any class of voting
securities of the Corporation.
TENTH: BYLAWS. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized by
majority vote of the whole Board of Directors to adopt, repeal, alter,
amend or rescind the Bylaws of the Corporation. In addition, the Bylaws of
the Corporation may be adopted, repealed, altered, amended or rescinded by
the affirmative vote of 66 2/3% of the Voting Stock; provided, if the
Continuing Directors, as defined in Article NINTH shall by a two-thirds
favorable vote of such Continuing Directors have adopted a resolution
approving the amendment or repeal proposal and have determined to recommend
it for approval by the holders of stock entitled to vote thereon, then the
vote required shall be the affirmative vote of the holders of a least a
majority of the Voting Stock.
ELEVENTH: CERTIFICATE. The Corporation specifically elects not to
be governed by Section 203 of the GCL. The Corporation reserves the right
to amend, alter, change or repeal any provisions contained in this
Certificate of Incorporation in the manner now or hereafter prescribed by
statute and the Certificate of Incorporation, and all rights conferred on
stockholders herein are granted subject to the reservations in this Article
ELEVENTH; provided, however, the affirmative vote of the holders of at least
66 2/3% of the Voting Stock shall be required to alter, amend or adopt any
provision inconsistent with or repeal Articles FIFTH, SIXTH, SEVENTH, NINTH
and TENTH and this Article ELEVENTH; provided, if the Continuing Directors,
as defined in Article NINTH shall by a two-thirds favorable vote of such
Continuing Directors have adopted a resolution approving the amendment or
repeal proposal and have determined to recommend it for approval by the
holders of Voting Stock, then the vote required shall be the affirmative
vote of the holders of at least a majority of the outstanding shares of Voting
Stock.
TWELFTH: The name and mailing address of the Incorporator of
the Corporation is Dorcas Hardy, 2341 S. Friebus, Suite 14, Tucson, Arizona
85713.
THIRTEENTH: The powers of the Incorporator shall terminate upon
the filing of this Certificate of Incorporation. The name and mailing
address of the person who is to serve as the sole director of the Corporation
until the organizational meeting of the stockholders of the Corporation, or
until her successor is elected and qualifies, is Dorcas Hardy, 2341 S. Friebus,
Suite 14, Tucson, Arizona 85713.
IN WITNESS WHEREOF, I, the undersigned, being the sole Incorporator
hereinabove named, hereby acknowledge that the foregoing Certificate of
Incorporation is my act and deed and further certify that the facts hereinabove
stated are truly set forth, and accordingly I have hereunto set my hand this
20th day of December, 1996.
/s/ Dorcas R. Hardy
Incorporator
Exhibit 1.1
C. Taylor Ashworth, No. 010143
OSBORN MALEDON, P.A.
2929 North Central Avenue
Suite 2100
Phoenix, Arizona 95012-2798
(602) 207-1288,Gary A. Gotto, No. 007401
DALTON GOTTO SAMSON & KILGARD
3101 North Central Avenue
Suite 900
Phoenix, Arizona 95012
(602) 248-0088
Attorneys for Debtor
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ARIZONA
In re:
WORK RECOVERY, INC., a Colorado corporation,
Debtor
Case No. B-96-01640-TUC-JMM
Chapter 11
In re:
WORK RECOVERY CENTERS, INC., an Arizona corporation.
Debtor
Case No. B-96-01641-TUC-JMM
Chapter 11
DEBTORS' RESTATED AMENDED JOINT PLAN OF REORGANIZATION
DATED OCTOBER 4, 1996
MODIFIED AS OF NOVEMBER 25, 1996
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . 1
1.1 General Definitions . . . . . . . . . . . . . . 1
1.1.1 Administrative Claim . . . . . . . . . . 1
1.1.2 Allowed Claim. . . . . . . . . . . . . . 2
1.1.3 Allowed Secured Claim. . . . . . . . . . 2
1.1.4 Bankruptcy Code. . . . . . . . . . . . . 2
1.1.5 Bankruptcy Court . . . . . . . . . . . . 2
1.1.6 Bankruptcy Rules . . . . . . . . . . . . 2
1.1.7 Bar Date . . . . . . . . . . . . . . . . 2
1.1.8 Claim. . . . . . . . . . . . . . . . . . 2
1.1.9 Class. . . . . . . . . . . . . . . . . . 2
1.1.10 Confirmation . . . . . . . . . . . . . . 2
1.1.11 Confirmation Date. . . . . . . . . . . . 2
1.1.12 Confirmation Hearing . . . . . . . . . . 2
1.1.13 Confirmation Order . . . . . . . . . . . 2
1.1.14 Creditors' Committee . . . . . . . . . . 2
1.1.15 Debtors. . . . . . . . . . . . . . . . . 3
1.1.16 Disclosure Statement . . . . . . . . . . 3
1.1.17 Discount Factor. . . . . . . . . . . . . 3
1.1.18 Disputed Claim . . . . . . . . . . . . . 3
1.1.19 Effective Date . . . . . . . . . . . . . 3
1.1.20 Equity Conversion Rate . . . . . . . . . 3
1.1.21 Estates. . . . . . . . . . . . . . . . . 3
1.1.22 Estimated Claim. . . . . . . . . . . . . 3
1.1.23 Final Order. . . . . . . . . . . . . . . 3
1.1.24 Interest or Interests. . . . . . . . . . 3
1.1.25 MetLife. . . . . . . . . . . . . . . . . 3
1.1.26 MetLife Louisiana Rate . . . . . . . . . 3
1.1.27 New Common Stock . . . . . . . . . . . . 4
1.1.28 New Warrant. . . . . . . . . . . . . . . 4
1.1.29 New WRI. . . . . . . . . . . . . . . . . 4
1.1.30 Old Common Stock . . . . . . . . . . . . 4
1.1.31 Petition Date. . . . . . . . . . . . . . 4
1.1.32 Plan . . . . . . . . . . . . . . . . . . 4
1.1.33 Plan Shares. . . . . . . . . . . . . . . 4
1.1.34 Priority Claims. . . . . . . . . . . . . 4
1.1.35 Recovery Conversion Rate . . . . . . . . 4
1.1.36 Pro Rata . . . . . . . . . . . . . . . . 4
1.1.37 Recovery Lender. . . . . . . . . . . . . 4
1.1.38 Recovery Lender Financing Agreement. . . 4
1.1.39 Reorganization Cases . . . . . . . . . . 4
1.1.40 Reorganized Debtor . . . . . . . . . . . 4
1.1.41 Securities Fraud Claim . . . . . . . . . 5
1.1.42 Securities Fraud Claim Bar Date. . . . . 5
1.1.43 Share Rate . . . . . . . . . . . . . . . 5
1.1.44 Tax Claim. . . . . . . . . . . . . . . . 5
1.1.45 TEAM . . . . . . . . . . . . . . . . . . 5
1.1.46 Unresolved Claim . . . . . . . . . . . . 5
1.1.47 Wage Claim. . . . . . . . . . . . . 5
1.1.48 WRI. . . . . . . . . . . . . . . . . . . 5
1.1.49 WRC. . . . . . . . . . . . . . . . . . . 5
1.2 Property Descriptions . . . . . . . . . . . . . 5
1.2.1 The Louisiana Property . . . . . . . . . 5
1.2.2 The Tucson Property. . . . . . . . . . . 5
1.2.3 The Engmann Collateral . . . . . . . . . 6
1.2.4 The Recovery Lender Collateral . . . . . 6
1.2.5 The Allsup Collateral. . . . . . . . . . 6
1.3 Terms Defined in Bankruptcy Code. . . . . . . . 6
ARTICLE 2 CLASSIFICATION OF CLAIMS AND INTERESTS. . . . . . 6
2.1 Priority Claims . . . . . . . . . . . . . . . . 6
2.1.1 Class 1A. Allowed Administrative Claims WRI.6
2.1.2 Class 1B. Allowed Administrative Claims WRC.6
2.1.3 Class 1C. Allowed Wage Claims WRI. . . . . . . . . 6
2.1.4 Class 1D. Allowed Tax Claims WRI.. . . . 6
2.1.5 Class 1E. Allowed Tax Claims WRC . . . . 6
2.2 Secured Claims. . . . . . . . . . . . . . . . . 6
2.2.1 Class 2A. Louisiana Property Secured Claim WRI6
2.2.2 Class 2B. Tucson Property Secured Claim WRI7
2.2.3 Class 2C. Engmann Secured Claim WRI. . . 7
2.2.4 Class 2D. Recovery Lender Secured Claim WRI.7
2.2.5 Class 2E. Allsup Secured Claim WRI.. . . 7
2.2.6 Class 2F. Ford Motor Secured Claim WRI.. 7
2.3 Unsecured Claims. . . . . . . . . . . . . . . . 7
2.3.1 Class 3A. Small Claims WRI . . . . . . . 7
2.3.2 Class 3B. Small Claims WRC . . . . . . . 7
2.3.3 Class 3C. Unresolved Claims WRI. . . . . 7
2.3.4 INTENTIONALLY OMITTED. . . . . . . . . . 7
2.3.5 Class 3E. Securities Fraud Claims WRI. . 7
2.3.6 Class 3F. B Warrants Claims WRI. . . . . 8
2.3.7 Class 3G. Dealer Warrants Claims WRI . . 8
2.3.8 Class 3H. General Unsecured Claims WRI . 8
2.3.9 Class 3I. General Unsecured Claims WRC . 8
2.4 Interests . . . . . . . . . . . . . . . . . . . 8
2.4.1 Class 4A. Series A Preferred Stock WRI . 8
2.4.2 Class 4B. Series B Preferred Stock WRI . 8
2.4.3 Class 4C. Series C Preferred Stock WRI . 8
2.4.4 Class 4D. Common Stock WRI . . . . . . . 8
2.4.5 INTENTIONALLY OMITTED. . . . . . . . . . 8
2.4.6 Class 4F. Common Stock WRC . . . . . . . 8
2.4.7 Class 4G. Employee Stock Option Plan WRI 8
2.4.8 Class 4H. Brandon Interests WRI. . . . . 9
ARTICLE 3 TREATMENT OF CLASSES OF CLAIMS AND INTERESTS. . . 9
3.1 Priority Claims . . . . . . . . . . . . . . . . 9
3.1.1 Class 1A. Allowed Administrative Claims WRI.9
3.1.2 Class 1B. Allowed Administrative Claims WRC.9
3.1.3 Class 1C. Allowed Wage Claims WRI. . . . 9
3.1.4 Class 1D. Allowed Tax Claims WRI . . . .10
3.1.5 Class 1E. Allowed Tax Claims WRC . . . .10
3.2 Secured Claims. . . . . . . . . . . . . . . . .10
3.2.1 Class 2A. Louisiana Property Secured Claim WRI10
3.2.2 Class 2B. Tucson Property Secured Claim WRI10
3.2.3 Class 2C. Engmann Secured Claim WRI. . .11
3.2.4 Class 2D. Recovery Lender Secured Claim WRI.11
3.2.5 Class 2E. Allsup Secured Claim WRI.. . .11
3.2.6 Class 2F. Ford Motor Secured Claim WRI .11
3.3 Unsecured Claims Without Priority . . . . . . .11
3.3.1 Class 3A. Small Claims WRI . . . . . . .11
3.3.2 Class 3B. Small Claims WRC . . . . . . .11
3.3.3 Class 3C. Unresolved Claims WRI. . . . .12
3.3.4 INTENTIONALLY OMITTED. . . . . . . . . .12
3.3.5 Class 3E. Securities Fraud Claims WRI. .12
3.3.6 Class 3F. B Warrants Claims WRI. . . . .12
3.3.7 Class 3G. Dealer Warrants Claims WRI . .12
3.3.8 Class 3H. General Unsecured Claims WRI .12
3.3.9 Class 3I. General Unsecured Claims WRC .13
3.4 Interests . . . . . . . . . . . . . . . . . . .13
3.4.1 Class 4A. Series A Preferred Stock WRI .13
3.4.2 Class 4B. Series B Preferred Stock WRI .13
3.4.3 Class 4C. Series C Preferred Stock WRI .13
3.4.4 Class 4D. Common Stock WRI . . . . . . .13
3.4.5 INTENTIONALLY OMITTED. . . . . . . . . .13
3.4.6 Class 4F. Common Stock WRC . . . . . . .14
3.4.7 Class 4G. Employee Stock Option Plan WRI14
3.4.8 Class 4H. Brandon Interests WRI. . . . .14
ARTICLE 4 ELECTIONS BY CLAIMANTS. . . . . . . . . . . . . .14
4.1 Small Creditor Elections14
4.2 New Common Stock Elections. . . . . . . . . . .14
ARTICLE 5 ISSUANCE OF NEW COMMON STOCK AND WARRANTS . . . .14
5.1 Issuance of New Common Stock. . . . . . . . . .14
5.2 Issuance of New Warrants. . . . . . . . . . . .15
5.3 Issuance of Allsup Warrants . . . . . . . . . .15
5.4 Issuance of Conditional Warrants. . . . . . . .16
ARTICLE 6 DISTRIBUTIONS ON ACCOUNT OF UNRESOLVED CLAIMS . .16
6.1 Identification of Claims. . . . . . . . . . . .16
6.2 Resolution of Claims. . . . . . . . . . . . . .16
6.3 Initial Distribution. . . . . . . . . . . . . .16
6.4 Final Distribution. . . . . . . . . . . . . . .16
ARTICLE 7 SECURITIES FRAUD CLAIMS . . . . . . . . . . . . .17
7.1 Identification of Claims. . . . . . . . . . . .17
7.2 Distribution on Account of Claims . . . . . . .17
ARTICLE 8 THE CLAIMS TRUST. . . . . . . . . . . . . . . . .17
8.1 Establishment of Trust. . . . . . . . . . . . .17
8.2 Appointment and Responsibilities of Trustee . .17
8.3 Excess Shares of New Common Stock . . . . . . .17
8.4 Beneficiaries and Distributions . . . . . . . .18
ARTICLE 9 IMPLEMENTATION PROVISIONS--CERTAIN ENABLING AGREEMENTS18
9.1 Stock Acceptance by Recovery Lender . . . . . .18
9.2 Agreement with Team.. . . . . . . . . . . . . .18
9.3 Agreement with Allsup, Inc. . . . . . . . . . .18
ARTICLE 10 IMPLEMENTATION PROVISIONS-- NEW CORPORATION. . .19
10.1 Formation of New Work Recovery, Inc.. . . . . .19
10.2 Transfer of Assets and Liabilities. . . . . . .19
10.3 Dissolution of WRI and WRC. . . . . . . . . . .19
ARTICLE 11 THE DISBURSING AGENT . . . . . . . . . . . . . .19
11.1 Appointment . . . . . . . . . . . . . . . . . .19
11.2 Compensation of the Disbursing Agent. . . . . .19
11.3 New WRI as Disbursing Agent . . . . . . . . . .19
11.4 Debtors' Obligations on Effective Date. . . . .20
11.4.1 Delivery of Funds to Disbursing Agent. .20
11.4.2 Delivery of Stock and Warrants to Agent20
11.5 Disbursement of Funds, Stock and Warrants . . .20
11.5.1 Disbursement of Funds. . . . . . . . . .20
11.5.2 Disbursement of Stock. . . . . . . . . .20
11.5.3 Disbursement of New Warrants . . . . . .20
ARTICLE 12 CONDITIONS PRECEDENT TO PLAN . . . . . . . . . .20
12.1 Execution of Documents. . . . . . . . . . . . .21
12.2 Corporate Action. . . . . . . . . . . . . . . .21
12.3 Recovery Lender Conversion. . . . . . . . . . .21
12.4 Allsup agreement. . . . . . . . . . . . . . . .21
ARTICLE 13 CONDITIONS PRECEDENT TO DISTRIBUTIONS. . . . . .21
13.1 Documents of Exchange and Surrender . . . . . .21
13.2 Fractional Shares . . . . . . . . . . . . . . .21
13.3 Unclaimed Funds and Interests . . . . . . . . .21
ARTICLE 14 OBJECTIONS TO AND ESTIMATIONS OF CLAIMS. . . . .22
14.1 Objections and Bar Date for Filing Objections .22
14.2 Settlement of Claims. . . . . . . . . . . . . .22
14.3 Estimation of Claims. . . . . . . . . . . . . .22
14.4 Claims Against Both Debtors . . . . . . . . . .22
ARTICLE 15 NONALLOWANCE OF PENALTIES AND FINES. . . . . . .22
ARTICLE 16 EFFECT OF PLAN ON CLAIMS AND INTERESTS AND ASSETS 23
16.1 Discharge of Claims . . . . . . . . . . . . . .23
16.2 Injunction. . . . . . . . . . . . . . . . . . .23
16.3 Cancellation of Interests . . . . . . . . . . .23
16.4 Vesting of Assets . . . . . . . . . . . . . . .23
16.5 Assumption of Liabilities . . . . . . . . . . .23
ARTICLE 17 LEASES AND EXECUTORY CONTRACTS . . . . . . . . .23
17.1 Leases Rejected Unless Assumed. . . . . . . . .23
ARTICLE 18 RETENTION OF JURISDICTION. . . . . . . . . . . .24
18.1 Claims. . . . . . . . . . . . . . . . . . . . .24
18.2 Title and Disputes. . . . . . . . . . . . . . .24
18.3 Executory Contracts . . . . . . . . . . . . . .24
18.4 Estimation. . . . . . . . . . . . . . . . . . .24
18.5 Plan Corrections. . . . . . . . . . . . . . . .24
18.6 Plan Modifications. . . . . . . . . . . . . . .24
18.7 Administrative Claims . . . . . . . . . . . . .25
18.8 Interpretation. . . . . . . . . . . . . . . . .25
18.9 Extensions of Time. . . . . . . . . . . . . . .25
18.10 Enforcement . . . . . . . . . . . . . . . . . .25
18.11 Termination . . . . . . . . . . . . . . . . . .25
18.12 Other Matters . . . . . . . . . . . . . . . . .25
ARTICLE 19 MODIFICATION OF THE PLAN . . . . . . . . . . . .25
ARTICLE 20 MISCELLANEOUS. . . . . . . . . . . . . . . . . .25
20.1 Notices . . . . . . . . . . . . . . . . . . . .25
20.2 Headings. . . . . . . . . . . . . . . . . . . .26
20.3 Time of the Essence . . . . . . . . . . . . . .26
20.4 Confirmation Without Acceptance of All Classes.26
SCHEDULES
1 Description of Louisiana Property
2 Description of Tucson Property
3 Description of Engmann Collateral
4 Description of Recovery Lender Collateral
5 Description of Allsup Collateral
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ARIZONA
In re:
WORK RECOVERY, INC., a Colorado corporation,
Debtor
Case No. B-96-01640-TUC-JMM
Chapter 11
In re:
WORK RECOVERY CENTERS, INC., an Arizona corporation,
Debtor
Case No. B-96-01641-TUC-JMM
Chapter 11
DEBTORS' RESTATED AMENDED JOINT PLAN OF REORGANIZATION
DATED OCTOBER 4, 1996, MODIFIED AS OF NOVEMBER 25, 1996
WORK RECOVERY, INC., a Colorado corporation, and WORK RECOVERY CENTERS,
INC., an Arizona corporation, Debtors and Debtors In Possession in the above
captioned jointly administered cases, propose the following Chapter 11 Plan
of Reorganization pursuant to Chapter 11 of Title 11 of the United States Code.
ARTICLE 1
DEFINITIONS
The following terms, when used in the Plan, shall, unless the context
otherwise requires, have the meanings set forth in this Article.
1.1 General Definitions
1.1.1 Administrative Claim shall mean a claim or portion of a
claim which is a cost or expense of the administration of Debtors' Estates
allowed under Section 503(b) of the Code that is entitled to priority under
Section 507(a)(1) of the Code, including but not limited to any actual and
necessary costand expense of preserving the Estates, or operating the business
of Debtors, and all fees and expenses of professionals entitled to compensation
pursuant to Sections 328, 330 and 503(b) of the Code.
1.1.2 Allowed Claim means a claim to the extent that:
(a) a proof of such claim was filed with the Court within
the applicable time period fixed by the Court, or deemed filed pursuant to
Section 1111(a) of the Bankruptcy Code, or was not required to be filed pursuant
to a Final Order; and
(b) to which no objection has been made, or which is
allowed (and only to the extent allowed) by a Final Order. Multiple proofs of
claim within the same Class filed by one claimant shall be aggregated and shall
constitute a single Allowed Claim.
1.1.3 Allowed Secured Claim shall mean an Allowed Claim as
defined herein and further defined as secured under Section 506(a) of the
Bankruptcy Code.
1.1.4 Bankruptcy Code means the Bankruptcy Code, as set forth
in Title 11 of the United States Code, 11 U.S.C. Sections 101 et seq., as
amended.
1.1.5 Bankruptcy Court means the United States Bankruptcy Court
for the District of Arizona (or such other court as may have jurisdiction over
this Chapter 11 case) and, with respect to any particular proceeding arising
under Title 11 of the United States Code, or arising in or related to this
Chapter 11 case, any other court which has jurisdiction over such proceeding.
1.1.6 Bankruptcy Rules means the Rules of Bankruptcy Procedure
and the Local Rules of Bankruptcy Procedure for the District of Arizona.
1.1.7 Bar Date means October 1, 1996, the date established by
order of the Court by which any holder of a Claim or Interest must file a
proof of claim or interest in order for such claim or interest to be considered
for allowance.
1.1.8 Claim means a claim against Debtors within the meaning of
Section 101(5) of the Bankruptcy Code that arose prior to the Confirmation Date.
1.1.9 Class means a category or group of holders of Claims or
Interests as designated pursuant to this Plan.
1.1.10 Confirmation means entry of the Confirmation Order.
1.1.11 Confirmation Date means the date on which the Confirmation
Order is entered on the docket by the Clerk of the Bankruptcy Court.
1.1.12 Confirmation Hearing means the hearing conducted by the
Bankruptcy Court to consider confirmation of the Plan, as such hearing may be
continued from time to time.
1.1.13 Confirmation Order means the order of the Bankruptcy Court
confirming this Plan pursuant to Section 1129 of the Bankruptcy Code.
1.1.14 Creditors' Committee means the Official Unsecured Creditors'
Committee appointed in the WRI Reorganization Case, as constituted from time to
time.
1.1.15 Debtors means Work Recovery, Inc., a Colorado corporation,
and Work Recovery Centers, Inc., an Arizona corporation, each a Debtor and
Debtor-in-Possession in these proceedings.
1.1.16 Disclosure Statement means the written disclosure
statement concerning the Plan approved by the Court pursuant to Section 1125(b)
of the Bankruptcy Code, including any amendments thereto which have been
approved by the Court.
1.1.17 Discount Factor means a factor to be applied to the Share
Rate to account for the diminution in value of New Common Stock distributable
on account of Class 2E Claims because such stock will be restricted. At the
Confirmation Hearing, Debtors will request the Court to determine the Discount
Factor to be forty percent (40%).
1.1.18 Disputed Claim means any claim as to which any party in
interest has filed an objection, which objection has not been withdrawn or
resolved by a Final Order.
1.1.19 Effective Date means the first business day after the
tenth (10th) day after the Confirmation Date on which the Confirmation Order
is not stayed, or such later date as Debtors shall select, not later than ninety
(90) days after the Confirmation Date.
1.1.20 Equity Conversion Rate means a ratio of an Allowed Interest
to the number of shares of New Common Stock into which such claim may be
converted pursuant to the terms of this Plan, which rate shall be one (1)
share of New Common Stock for each ten (10) shares of Old Common Stock.
1.1.21 Estates means the estates created in the Reorganization
Cases under the Bankruptcy Code.
1.1.22 Estimated Claim means a Disputed Claim which has been
esti- mated for distribution purposes pursuant to Section 14.3 hereof.
1.1.23 Final Order means an order, judgment or other decree of
the Court, including, without limitation, a stipulation or other agreement
entered into which is "so ordered" by the Court, the operation or effect of
which has not been reversed or stayed and as to which order, judgment or
other decree (or any revision, modification or amendment thereof) the time to
appeal or seek review has expired, and as to which no appeal or petition for
review or certiorari has been taken or is pending (or if such appeal or
petition has been taken or granted, it has been finally decided).
1.1.24 Interest or Interests means the rights of any holder of
shares of stock in a Debtor or of any holder of warrants or rights to acquire
stock in a Debtor.
1.1.25 MetLife means Metlife Capital Financial Corporation, the
holder of the Class 2A and Class 2B Claims.
1.1.26 MetLife Louisiana Rate means a rate of interest to be
paid on the principal amount of the Class 2A Claim, such rate to be determined
by the Bankruptcy Court at the Confirmation Hearing as sufficient to meet the
requirements of Sections 506(b) and 1129(b)(2)(A)(i)(II) of the Bankruptcy Code.
At the hearing, Debtors shall request the Court to find that the MetLife
Louisiana Rate should be two percent (2%) above the yield rate then prevailing
for three-year Treasury obligations as reported in the Wall Street Journal.
1.1.27 New Common Stock means stock in New WRI issued pursuant
to this Plan. Pursuant to the terms of this Plan, approximately 15,000,000
shares of New Common Stock may be issued, in addition to New Common Stock that
may be issued pursuant to the exercise of New Warrants, as provided for herein.
1.1.28 New Warrant means a warrant permitting the purchase of New
Common Stock issued pursuant to Section 5.2 hereof at page 15.
1.1.29 New WRI means the corporation, organized under the laws of
the State of Delaware, to be formed pursuant to the provisions of Article 10 to
be the successor to the Debtors.
1.1.30 Old Common Stock means the common stock of WRI issued and
outstanding immediately prior to the Effective Date.
1.1.31 Petition Date means May 29, 1996, the date upon which the
Reorganization Cases commenced.
1.1.32 Plan means this plan of reorganization, including any
amendment or modification made in accordance with the terms of the Plan or
the applicable provisions of the Bankruptcy Code.
1.1.33 Plan Shares means shares of New Common Stock to be issued
pursuant to the terms of this Plan; PROVIDED, Plan Shares do not include the
shares provided for herein to be issued to the Employee Stock Option Plan and
do not include any shares issued pursuant to New Warrants.
1.1.34 Priority Claims means those Allowed Claims which are
entitled to priority under Section 507(a)(1) through (a)(7) of the Bankruptcy
Code.
1.1.35 Recovery Conversion Rate means a ratio of certain Allowed
Claims or administrative expenses to the number of shares of New Common Stock
into which such claims or expenses may be converted pursuant to the terms of
this Plan, which rate shall be fixed so that the claimant receives one percent
(1%) of the Plan Shares for each $100,000 of Allowed Claim or expense.
1.1.36 Pro Rata means the ratio of an Allowed Claim or Interest
in a particular Class to the aggregate amount of all Allowed Claims or Interests
in that Class.
1.1.37 Recovery Lender means Recovery Lender, L.L.C., an Arizona
limited liability company, the lender under the Recovery Lender Financing
Agreement.
1.1.38 Recovery Lender Financing Agreement means the Financing
Agreement between WRI and Recovery Lender providing for certain pre-petition
and post-petition loans to WRI, as such agreement has been or may be modified
from time to time.
1.1.39 Reorganization Cases means In re Work Recovery, Inc., Case
No. 96-01640-TUC-JMM and In re Work Recovery Centers, Inc., Case No.
96-01641-TUC-JMM.
1.1.40 Reorganized Debtor means New WRI, as successor to Work
Recovery, Inc. and Work Recovery Centers, Inc. after the Effective Date of
the Plan.
1.1.41 Securities Fraud Claim means a claim arising from
rescission of a purchase or sale of a security of WRI, for damages arising
from the purchase or sale of such a security, or for reimbursement or
contribution on account of such claim, within the meaning of Section 510(b) of
the Bankruptcy Code, to the extent such claim arises in connection with
securities purchased after September 30, 1993, and before April 30, 1996.
1.1.42 Securities Fraud Claim Bar Date means the date set by the
Court for the filing of proofs of claim for Securities Fraud Claims. Currently,
the Court has set October 1, 1996 as the date for filing all claims; Debtors
have filed a motion to extend such date as it applies to Securities Fraud
Claims.
1.1.43 Share Rate means an amount of money equal to the likely
fair market value of a share of New Common Stock after the Effective Date, as
determined by the Bankruptcy Court at the Confirmation Hearing. The Share
Rate is applicable in determining the exercise price for New Warrants as
provided for in this Plan. The Share Rate is also applicable in determining
the amount of shares issuable under the Plan on account of Allowed Claims in
Class 3C (Unresolved Claims WRI). Debtors currently anticipate that they will
request the Court to find such value to be $2.50, but reserve the right to
propose a different value based upon the facts and circumstances as of the
Confirmation Hearing.
1.1.44 Tax Claim means a claim for taxes of the kind specified
in Section 507(a)(7) of the Bankruptcy Code.
1.1.45 TEAM means the Team for New Management, L.L.C., the
limited liability company which currently manages the Debtors pursuant to an
agreement with Debtors, as approved by the Bankruptcy Court.
1.1.46 Unresolved Claim means a Disputed Claim included in a
list of such claims to be filed by Debtors and the Creditors' Committee on or
before November 1, 1996. PROVIDED, Unresolved Claims shall not include
Securities Fraud Claims.
1.1.47 Wage Claim means a claim for wages, salaries,
commissions, including vacation pay, severance and sick leave pay, of the kind
and in the amount specified in Section 507(a)(3) of the Bankruptcy Code.
1.1.48 WRI means Work Recovery, Inc., a Colorado corporation.
1.1.49 WRC means Work Recovery Centers, Inc., an Arizona
corporation.
1.2 Property Descriptions
Certain properties of WRI are referred to herein and described with
particularity in the Schedules hereto:
1.2.1 The Louisiana Property means that certain real property
located in Metairie, Louisiana as more particularly described in Schedule 1,
consisting of all property interests which are covered by the security interest
of MetLife securing the Class 2A Claim.
1.2.2 The Tucson Property means that certain real property
located in Tucson, Arizona as more particularly described in Schedule 2,
consisting of all property interests which are covered by the security
interest of MetLife securing the Class 2B Claim.
1.2.3 The Engmann Collateral means that certain personal
property more particularly described in Schedule 3, consisting of all
property interests which are covered by the security interest securing the
Class 2C Claim.
1.2.4 The Recovery Lender Collateral means that certain
personal property more particularly described in Schedule 4, consisting of
all property interests which are covered by the security interest securing
the Class 2D Claim.
1.2.5 The Allsup Collateral means that certain personal property
more particularly described in Schedule 5, consisting of all property interests
which are covered by the security interest securing the Class 2E Claim.
1.3 Terms Defined in Bankruptcy Code
A term not defined in the Plan but defined in the Bankruptcy Code shall
have the meaning given in the Bankruptcy Code.
ARTICLE 2
CLASSIFICATION OF CLAIMS
AND INTERESTS
For the purposes of the Plan, Claims against and Interests in the
Debtors, of whatever nature, whether or not scheduled, liquidated or
unliquidated, absolute or contingent, direct or indirect, including all
Claims arising from the rejection of executory contracts, and all Claims or
Interests arising from the ownership of equity securities of Debtor, shall
be bound by the provisions of this Plan and are classified as follows:
2.1 Priority Claims
2.1.1 Class 1A. Allowed Administrative Claims WRI.
Class 1A shall consist of all Allowed Administrative Claims against
the Estate of Work Recovery, Inc.
2.1.2 Class 1B. Allowed Administrative Claims WRC.
Class 1B shall consist of all Allowed Administrative Claims against the
Estate of Work Recovery Centers, Inc.
2.1.3 Class 1C. Allowed Wage Claims WRI.
Class 1C shall consist of all Allowed Wage Claims.
2.1.4 Class 1D. Allowed Tax Claims WRI.
Class 1D shall consist of all Allowed Tax Claims against the Estate of
WRI.
2.1.5 Class 1E. Allowed Tax Claims WRC.
Class 1E shall consist of all Allowed Tax Claims against the Estate of
WRC.
2.2 Secured Claims
2.2.1 Class 2A. Louisiana Property Secured Claim WRI.
Class 2A shall consist of the Allowed Secured Claim of MetLife Finance
Corporation secured by the Louisiana Property.
2.2.2 Class 2B. Tucson Property Secured Claim WRI.
Class 2B shall consist of the Allowed Secured Claim of MetLife Finance
Corporation secured by the Tucson Property.
2.2.3 Class 2C. Engmann Secured Claim WRI.
Class 2C shall consist of the Allowed Secured Claim of Doug Engmann
secured by the Engmann Collateral.
2.2.4 Class 2D. Recovery Lender Secured Claim WRI.
Class 2D shall consist of the Allowed Secured Claim of Recovery Lender,
L.L.C., secured by the Recovery Lender Collateral.
2.2.5 Class 2E. Allsup Secured Claim WRI.
Class 2E shall consist of the Allowed Secured Claim of Allsup, Inc.
secured by the Allsup Collateral.
2.2.6 Class 2F. Ford Motor Secured Claim WRI.
Class 2E shall consist of the Allowed Secured Claim of Ford Motor
Credit Company, secured by an automobile.
2.3 Unsecured Claims
2.3.1 Class 3A. Small Claims WRI.
Class 3A shall consist of all Allowed Claims against the Estate of WRI,
not entitled to priority, which are either (a) $500 or less, or (b) greater
than $500, but the holders of which voluntarily elect to reduce their claims
to $500 in order to be treated as Class 3A Claims pursuant to Article 4 hereof.
2.3.2 Class 3B. Small Claims WRC.
Class 3B shall consist of all Allowed Claims against the Estate of WRC,
not entitled to priority, which are either (a) $500 or less, or (b) greater than
$500, but the holders of which voluntarily elect to reduce their claims to $500
in order to be treated as Class 3B Claims pursuant to Article 4 hereof.
2.3.3 Class 3C. Unresolved Claims WRI.
Class 3C Claims shall consist of all Allowed Unresolved Claims against
WRI. The Class 3C Claims shall include certain claims which are disputed,
unliquidated, or contingent claims, including without limitation, any claims
for damages resulting from the rejection of leases or executory contracts,
and claims subject to set off by the Debtor. The Claims to be included in
such Class shall be identified in accordance with the provisions of Article
6 of this Plan at page 16 hereof.
2.3.4 INTENTIONALLY OMITTED.
2.3.5 Class 3E. Securities Fraud Claims WRI.
Class 3E Claims shall consist of all Allowed Securities Fraud Claims.
Such claims arise from rescission of a purchase or sale of a security of WRI,
or are for damages arising from the purchase or sale of such security, or are
for reimbursement or contribution on account of such a claim, within the meaning
of Section 510(b) of the Bankruptcy Code, and include only those claims with
respect to securities of WRI purchased by the claimant after September 30,
1993 and before April 30, 1996. Notwithstanding the foregoing, Class 3E
Claims shall not include claims included within Class 3F or Class 3G.
2.3.6 Class 3F. B Warrants Claims WRI.
Class 3F Claims shall consist of all Allowed Claims against the Estate
of WRI arising from or relating to the issuance of B Warrants, including any
claims based upon the exercise of such warrants.
2.3.7 Class 3G. Dealer Warrants Claims WRI.
Class 3G Claims shall consist of all Allowed Claims against the Estate
of WRI arising from or relating to the issuance of Dealer Warrants, including
any claims based upon the exercise of such warrants.
2.3.8 Class 3H. General Unsecured Claims WRI.
Class 3H Claims shall consist of all Allowed Claims against the Estate
of WRI not otherwise classified herein.
2.3.9 Class 3I. General Unsecured Claims WRC.
Class 3I Claims shall consist of all Allowed Claims against the Estate
of WRC not otherwise classified herein.
2.4 Interests
2.4.1 Class 4A. Series A Preferred Stock WRI.
Class 4A shall consist of all Allowed Interests of the holders of Series
A Preferred Stock in WRI, except those classified in Class 4H.
2.4.2 Class 4B. Series B Preferred Stock WRI.
Class 4B shall consist of all Allowed Interests of the holders of Series
B Preferred Stock in WRI, except those classified in Class 4H.
2.4.3 Class 4C. Series C Preferred Stock WRI.
Class 4C shall consist of all Allowed Interests of the holders of Series
C Preferred Stock in WRI, except those classified in Class 4H.
2.4.4 Class 4D. Common Stock WRI.
Class 4D shall consist of all Allowed Interests of the holders of WRI
Common Stock, except those classified in Class 4H.
2.4.5 INTENTIONALLY OMITTED.
2.4.6 Class 4F. Common Stock WRC.
Class 4F shall consist of all Allowed Interests of WRI, as the holder
of Common Stock in WRC.
2.4.7 Class 4G. Employee Stock Option Plan WRI.
Class 4G shall consist of all Allowed Interests of the beneficiaries of
WRI's Employee Stock Option Plan.
2.4.8 Class 4H. Brandon Interests WRI.
Class 4H shall consist of all Allowed Interests of Thomas Brandon, and
his affiliates and insiders, to the extent that the Bankruptcy Court determines
that such Interests should be subordinated to the Interests of other Interest
holders. Debtors will request the Court to make such determination at the
Confirmation Hearing.
ARTICLE 3
TREATMENT OF CLASSES OF
CLAIMS AND INTERESTS
3.1 Priority Claims
3.1.1 Class 1A. Allowed Administrative Claims WRI.
Each holder of an Allowed Class 1A Claim shall receive, on account of
such Claim, cash in the full amount of such Claim on the later of (i) the
Effective Date, (ii) the date on which the Claim is allowed, or (iii) the
date upon which such obligation becomes due in accordance with its terms.
Professionals and entities who may be entitled to allowance of fees and
expenses from the estate pursuant to Section 503(b)(2) through (6) of the
Bankruptcy Code will receive cash in the amount awarded to such professionals or
entities at such times and in accordance with Final Orders entered pursuant to
Sections 330 or 503(b)(2) through (6) of the Bankruptcy Code.
Any holder of a Class 1A Claim may agree to deferred payment or a
different treatment, provided such treatment is no more favorable than provided
for herein.
Class 1A Claims are not impaired.
3.1.2 Class 1B. Allowed Administrative Claims WRC.
Each holder of an Allowed Class 1B Claim shall receive, on account of
such Claim, cash in the full amount of such Claim on the later of (i) the
Effective Date, (ii) the date on which the Claim is allowed, or (iii) the date
upon which such obligation becomes due in accordance with its terms.
Professionals and entities who may be entitled to allowance of fees and
expenses from the estate pursuant to Sections 503(b)(2) through (6) of the
Bankruptcy Code will receive cash in the amount awarded to such professionals
or entities at such times and in accordance with Final Orders entered pursuant
to Sections 330 or 503(b)(2) through (6) of the Bankruptcy Code.
Any holder of a Class 1B Claim may agree to deferred payment or a
different treatment, provided such treatment is no more favorable than provided
for herein.
Class 1B Claims are not impaired.
3.1.3 Class 1C. Allowed Wage Claims WRI.
Each holder of an Allowed Class 1C Claim shall receive, on account of
such claim, pay- ment in full, in cash, on the later of (i) the Effective
Date, (ii) the date on which the Claim becomes an Allowed Claim, or (iii) the
date upon which such obligation becomes due in accordance with its terms.
Any holder of a Class 1C Claim may agree to deferred payment or a
different treatment, provided such treatment is no more favorable than provided
for herein.
Class 1C Claims are not impaired.
3.1.4 Class 1D. Allowed Tax Claims WRI.
Each holder of an Allowed Class 1D Claim shall receive, on account of
such claim, cash in the full amount of such claim, on the later of the
Effective Date or the date upon which such Claim becomes an Allowed Claim.
Class 1D Claims are not impaired.
3.1.5 Class 1E. Allowed Tax Claims WRC.
Each holder of an Allowed Class 1E Claim shall receive, on account of
such claim, cash in the full amount of such claim, on the later of the
Effective Date or the date upon which such Claim becomes an Allowed Claim.
Class 1E Claims are not impaired.
3.2 Secured Claims
3.2.1 Class 2A. Louisiana Property Secured Claim WRI.
To the extent that such claim has not been paid as of the Effective Date,
the holder of the Class 2A Claim shall, on account of such claim, receive cash
in the full amount of the Allowed Class 2A Claim, together with any accrued and
unpaid interest on the principal amount of such claim at the MetLife Louisiana
Rate from the Petition Date until the Effective Date as and to the extent such
interest may be authorized by Final Order of the Bankruptcy Court in accordance
with Sections 506(b) of the Bankruptcy Code. The payment shall be made from
the proceeds of the sale of the Louisiana Property and as part of the closing of
such sale.
Until the closing of the sale of the Louisiana Property, the holder of
the Class 2A Claim shall (i) retain its lien on the Louisiana Property to
secure payment of the amounts specified herein, and (ii) receive monthly
payments of interest on the principal amount of such claim, commencing on the
first day of the calendar month which is at least thirty (30) days after the
Effective Date, and continuing until the closing of the Louisiana Property sale.
The Class 2A Claim is impaired.
3.2.2 Class 2B. Tucson Property Secured Claim WRI.
The holder of the Class 2B Claim shall retain its lien on the Tucson
Property to secure payment of the deferred payments provided for in this
Section.
The holder of the Class 2B Claim shall receive, on account of such
claim, (i) on the Effective Date, an amount equal to any payments required to
cure any existing defaults that occurred before or after the Petition Date,
other than a default of a kind specified in Sections 365(b)(2) of the Bankruptcy
Code, and (ii) thereafter, monthly payments as provided for in the existing
agreement with the holder of the Class 2B Claim. Upon the payment on the
Effective Date provided for herein, the maturity date for the obligation
shall be reinstated as it existed prior to any defaults, as provided for in
Section 1124(2)(B) of the Bankruptcy Code.
The Class 2B Claim is not impaired.
3.2.3 Class 2C. Engmann Secured Claim WRI.
The holder of the Class 2C Claim shall, on account of such claim,
receive, at the election of the holder, either (i) payment in the full amount
of the Allowed Claim in six (6) equal monthly installments commencing on the
thirtieth (30th) day after the Effective Date with interest at eight percent
(8%) per annum, or (ii) New Common Stock in an amount based upon the Recovery
Conversion Rate.
The Class 2C Claim is impaired.
3.2.4 Class 2D. Recovery Lender Secured Claim WRI.
The holder of the Class 2D Claim shall, on account of such claim,
receive New Common Stock in an amount based upon the Recovery Conversion Rate.
The Class 2D Claim is impaired.
3.2.5 Class 2E. Allsup Secured Claim WRI.
The holder of the Class 2E Claim shall, on account of such claim,
receive, at the election of the holder, either (i) payment in the full amount
of the Allowed Class 2E Claim in thirty-six (36) equal monthly installments
commencing on the thirtieth (30th) day after the Effective Date with interest
at ten percent (10%) per annum, or (ii) New Common Stock equal in value to the
amount of the Allowed Claim with allowed interest, based upon the Share Rate and
the Discount Factor.
The Class 2E Claim is impaired.
3.2.6 Class 2F. Ford Motor Secured Claim WRI.
The holder of the Class 2F Claim shall retain its lien on the
automobile to secure payment of the deferred payments provided for in this
Section.
The holder of the Class 2F Claim shall receive, on account of such
claim, (i) on the Effective Date, an amount equal to any payments required to
cure any existing defaults that occurred before or after the Petition Date,
other than a default of a kind specified in Section 365(b)(2) of the Bankruptcy
Code, and (ii) thereafter, monthly payments as provided for in the existing
agreement with the holder of the Class 2F Claim. Upon the payment on the
Effective Date provided for herein, the maturity date for the obligation
shall be reinstated as it existed prior to any defaults, as provided for in
Section 1124(2)(B) of the Bankruptcy Code.
The Class 2F Claim is not impaired.
3.3 Unsecured Claims Without Priority
3.3.1 Class 3A. Small Claims WRI.
Each holder of an Allowed Class 3A Claim shall receive, on account of
such claim, cash in the amount of ninety percent (90%) of its Allowed Claim,
within thirty (30) days of the Effective Date.
Class 3A Claims are impaired.
3.3.2 Class 3B. Small Claims WRC.
Each holder of an Allowed Class 3B Claim shall receive, on account of
such claim, cash in the amount of ninety percent (90%) of its Allowed Claim,
within thirty (30) days of the Effective Date.
Class 3B Claims are impaired.
3.3.3 Class 3C. Unresolved Claims WRI.
Each holder of an Allowed Class 3C Claim shall, on account of such Claim,
receive shares of New Common Stock, of a value as of the Effective Date equal
to the Allowed Amount of such claim, provided, that the total amount of shares
distributable on account of Claims in Class 3C shall not exceed 1,500,000
shares. The value of the New Common Stock shall be based upon the Share Rate.
Shares shall be issuable in accordance with the provisions of Article 6 hereof.
The Class 3C Claims are impaired.
3.3.4 INTENTIONALLY OMITTED.
3.3.5 Class 3E. Securities Fraud Claims WRI.
Each holder of an Allowed Class 3E Claim shall, on account of such
Claim, receive its pro rata share of 1,500,000 shares of New Common Stock in
accordance with the provisions of Article 7 of this Plan at page 17, and also
a pro rata interest in the Claims Trust, in accordance with the provisions of
Article 8 of this Plan at page 17.
The Class 3E Claims are impaired.
3.3.6 Class 3F. B Warrants Claims WRI.
Each holder of an Allowed Class 3F Claim shall, on account of such
Claim, receive its pro rata share of 150,000 shares of New Common Stock.
The Class 3F Claims are impaired.
3.3.7 Class 3G. Dealer Warrants Claims WRI.
Each holder of an Allowed Class 3F Claim shall, on account of such
Claim, receive its pro rata share of 350,000 shares of New Common Stock.
The Class 3G Claims are impaired.
3.3.8 Class 3H. General Unsecured Claims WRI.
Each holder of an Allowed Class 3H Claim shall, on account of such
Claim, receive cash equal to eighty percent (80%) of its Allowed Claim, in two
(2) equal installments, the first such installment being payable within thirty
(30) days of the Effective Date, and the final installment being payable within
one hundred eighty (180) days of the Effective Date. Such holders shall also
receive additional distributions from the Claims Trust in accordance with the
provisions of Article 8 hereof.
The Class 3H Claims are impaired.
3.3.9 Class 3I. General Unsecured Claims WRC.
Each holder of an Allowed Class 3I Claim shall, on account of such
Claim, receive cash equal to eighty percent (80%) of the Allowed Claim, in two
(2) equal installments, the first such installment being payable within thirty
(30) days of the Effective Date, and the final installment being payable within
one hundred eighty (180) days of the Effective Date. Such holders shall also
receive additional distributions from the Claims Trust in accordance with the
provisions of Article 8 hereof.
The Class 3I Claims are impaired.
3.4 Interests
3.4.1 Class 4A. Series A Preferred Stock WRI.
Prior to the Effective Date of the Plan, the Series A Preferred Stock
shall be redeemed in accordance with its terms. The funds required to redeem
the stock, approximately $1800, shall be contributed to Debtor by Doug Engmann,
as additional capital and without compensation, exchange or reimbursement.
The Class 4A Interest is unimpaired.
3.4.2 Class 4B. Series B Preferred Stock WRI.
Each holder of a Class 4B Interest shall, on account of such Interest,
receive (i) cash in an amount equal to twenty percent (20%) of all accrued
and unpaid dividends, as of the Petition Date, attributable to such Interest,
and (ii) New Common Stock in an amount determined based upon the Equity
Conversion Rate and the number of shares of Old Common Stock into which the
Class 4B Interest is convertible.
The Class 4B Interests are impaired.
3.4.3 Class 4C. Series C Preferred Stock WRI.
Each holder of a Class 4C Interest shall, on account of such Interest,
receive (i) cash in an amount equal to twenty percent (20%) of all accrued and
unpaid dividends, as of the Petition Date, attributable to such Interest, and
(ii) New Common Stock in an amount determined based upon the Equity Conversion
Rate and the number of shares of Old Common Stock into which the Class 4C
Interest is convertible.
The Class 4C Interests are impaired.
3.4.4 Class 4D. Common Stock WRI.
Each holder of a Class 4D Interest shall, on account of such interest,
receive (i) shares of New Common Stock based upon the Equity Conversion Rate,
and, (ii) subject to the conditions specified in section 5.2.6 hereof at page
15, New Warrants to purchase a like amount of additional New Common Stock, in
accordance with the provisions of Article 5 of this Plan at page 14 hereof, and
(iii) a pro rata interest in the Claims Trust in accordance with the provisions
of Article 8 of this Plan at page 17 hereof.
The Class 4D Interests are impaired.
3.4.5 INTENTIONALLY OMITTED.
3.4.6 Class 4F. Common Stock WRC.
The holder of the Class 4F Interest shall retain its interest in WRC.
The Class 4F Interests are impaired.
3.4.7 Class 4G. Employee Stock Option Plan WRI.
The holders of the Class 4G Interest shall receive a Pro Rata portion
of options to purchase 211,805 shares of New Common Stock. Each beneficiary
of the Employee Stock Option Plan who has unexpired, unexercised options will
receive a replacement option to acquire one (1) share of New Common Stock for
each ten (10) shares of Old Common Stock for which such employee has such
options, such option exercisable at the average market price for New Common
Stock from February 1, 1997 through February 28, 1997. The Stock Option Plan
will receive the balance of the options and will be authorized to award such
options in accordance with the terms of the existing Employee Stock Option
Plan.
The Class 4G Interests are impaired.
3.4.8 Class 4H. Brandon Interests WRI.
The holders of Class 4H Interests will receive nothing on account of
their Interests.
Class 4H Interests are impaired.
ARTICLE 4
ELECTIONS BY CLAIMANTS
4.1 Small Creditor Elections
Simultaneously with the distribution of ballots on the Plan, each
holder of a Claim in excess of $500 shall be requested to elect whether to
reduce its Claim to $500 and thereby choose the Class in which its Claim
shall be classified and treated. Each Claim holder having an election shall
make its election by filing its ballot with the Bankruptcy Court within the
time specified by the Bankruptcy Court for the filing of ballots on the Plan.
Unless a holder of an Allowed Claim in excess of $500 elects to reduce its
claim to $500, it shall not be treated as a member of Class 3A or Class 3B.
4.2 New Common Stock Elections
Simultaneously with the distribution of ballots on the Plan, each
holder of a Class 2C or 2E Claim shall be requested to elect whether to
accept New Common Stock in exchange for its Claim. Each such Claim holder
shall make its election by filing its ballot with the Bankruptcy Court within
the time specified by the Bankruptcy Court for the filing of ballots on the
Plan. Unless a holder of a Class 2C or 2E Claim elects to accept New Common
Stock, it shall be deemed to have elected the alternative treatment provided
for herein.
ARTICLE 5
ISSUANCE OF NEW COMMON STOCK AND WARRANTS
5.1 Issuance of New Common Stock
On the Effective Date, New WRI shall issue to the Disbursing Agent
sufficient shares of New Common Stock to satisfy the distribution requirements
of this Plan.
5.2 Issuance of New Warrants
On the Effective Date, and subject to the condition specified in section
5.2.6 hereof, New WRI shall issue to the Disbursing Agent, for distribution to
holders of Allowed Class 4D Interests as provided in this Plan, New Warrants for
the purchase of New Common Stock. The New Warrants shall be freely transferable
and shall give the holders the following rights:
5.2.1 The right to purchase, at the Share Rate, a number of
shares of New Common Stock in the Reorganized Debtor equal to one (1) share
for every ten (10) shares of Old Common Stock held by the Class 4D Interest
holder.
5.2.2 The exercise of a New Warrant shall be irrevocable.
5.2.3 Each New Warrant shall expire and be of no further effect
on the earlier of (i) 180 days after the Effective Date, or (ii) the date upon
which 2,700,000 shares of New Common Stock have been purchased pursuant to the
exercise of New Warrants.
5.2.4 Notwithstanding the foregoing, the New Warrants shall be
limited so that no more than 2,700,000 shares of New Common Stock may be issued
in the aggregate pursuant to such warrants.
5.2.5 New Warrants for all or any portion of the indicated
number of shares may be exercised by surrendering the New Warrant and delivering
the exercise price to WRI.
5.2.6 The issuance of Warrants under the Plan is expressly
conditioned on the entry by the Bankruptcy Court of a Final Order concluding
that Section 5 of the Securities Act of 1933 and any State or local law
requiring registration for offer or sale of security or registration or
licensing of an issuer of, underwriter of, or broker or dealer in, a security
are not applicable to the offer or distribution of such warrants by virtue of
Section 1145 of the Bankruptcy Code.
5.3 Issuance of Allsup Warrants
On the Effective Date,New WRI shall issue, to Allsup, Inc., warrants
(the "Allsup Warrants") to purchase additional shares of New Common Stock.
The Allsup Warrants will be non-transferable and shall give the holder the
following rights:
5.3.1 The right to purchase, at the Share Rate, up to 300,000
shares of New Common Stock.
5.3.2 Unless exercised previously, the Allsup Warrants shall
expire and be of no further effect 200 days after the Effective Date.
5.3.3 The Allsup Warrants shall be exercisable, in whole or in
part, by surrendering the Allsup Warrants and delivering the exercise price to
WRI.
5.4 Issuance of Conditional Warrants
On the Effective Date, New WRI shall issue to the Disbursing Agent,
for the benefit of all recipients of Plan Shares, a Conditional Warrant.
Rights in the Conditional Warrant shall be non-transferable and shall bestow
the following rights:
5.4.1 To purchase, at the Share Rate, a number of shares of New
Common Stock in an amount equal to the difference, if any, between 2,700,000
and the number of shares issued pursuant to the exercise of New Warrants.
5.4.2 Rights under the Conditional Warrant shall be exercisable
from 180 days after the Effective Date and until 200 days after the Effective
Date.
5.4.3 Rights under the Conditional Warrant shall be exercisable
only in response to a specific written proposal from New WRI to a beneficiary
of the Conditional Warrant, such proposal to require payment of the purchase
price within ten (10) days of receipt of the proposal.
5.4.4 New WRI shall make such written proposals to the recipients
of Plan Shares based upon the order in which Debtors and/or New WRI receive
written expressions of interest in exercising the rights granted under the
Conditional Warrant.
ARTICLE 6
DISTRIBUTIONS ON ACCOUNT OF
UNRESOLVED CLAIMS
6.1 Identification of Claims
On or before November 1, 1996, Debtors shall prepare and file a list
of Disputed Claims that the Debtors and the Creditors' Committee determine
are substantial Disputed Claims arising from improvident or suspect
transactions. Such Claims shall be referred to herein as "Unresolved Claims."
Debtors shall notify the holder of each such Claim of the filing of such list.
6.2 Resolution of Claims
The Bankruptcy Court shall resolve all Unresolved Claims.
6.3 Initial Distribution
On the thirtieth (30th) day after the Effective Date, holders of Allowed
and Estimated Class 3C Claims shall receive a distribution of New Common Stock,
which distribution shall be prorated only among such Claims which have been
Allowed or Estimated. The distribution to all holders of Allowed and Estimated
Claims in such Class shall total the lesser of (i) 500,000 shares of New Common
Stock, or (ii) a number of shares determined by dividing the Allowed and
Estimated Amount of such claims by the Share Rate.
6.4 Final Distribution
On the first anniversary of the Effective Date, holders of Allowed and
Estimated Class 3C Claims shall receive a final distribution of New Common
Stock, which distribution shall be distributed only among such Claims which
have been Allowed or Estimated. The distribution to all holders of Allowed
and Estimated Claims in such Class shall be total the lesser of (i)
1,500,000 shares of New Common Stock less those shares issued in the
Initial Distribution, or (ii) a number of shares determined by dividing the
Allowed and Estimated Amount of such claims by the Share Rate, less those shares
issued in the Initial Distribution. The final distribution shall be made,
first, on account of such Claims that were Allowed or Estimated after the
Initial Distribution, and then, pro rata, among all such Allowed and
Estimated Claims.
ARTICLE 7
SECURITIES FRAUD CLAIMS
7.1 Identification of Claims
Debtors anticipate that the method of identifying Securities Fraud
Claims and making distributions on account of such Claims shall be determined
in accordance with a settlement agreement to be approved by the United States
District Court for the District of Arizona and the Bankruptcy Court. If a
settlement agreement is not reached or not approved, Debtors shall prepare
and file with the Bankruptcy Court a list of all claims filed in these
proceedings that constitute Securities Fraud Claims within sixty (60) days
after the Securities Fraud Bar Date.
7.2 Distribution on Account of Claims
As soon as practicable after the identification of all such claims,
the Disbursing Agent shall disburse 1,500,000 shares of New Common Stock Pro
Rata to the holders of Allowed Securities Fraud Claims.
ARTICLE 8
THE CLAIMS TRUST
8.1 Establishment of Trust
On the Effective Date, Debtors shall cause to be created a Trust (the
"Claims Trust") and shall transfer and assign to the Claims Trust all claims
and causes of action Debtors may have against Thomas Brandon, relatives and
affiliates of Tom Brandon, and all other persons and entities who acted in
concert with Tom Brandon in the suspect transactions described in WRI's
financial statements for the period ending June 30, 1995. Within thirty (30)
days after the Effective Date, New WRI will transfer $50,000 in cash to the
Claims Trust. On or before the first anniversary of the Effective Date, New
WRI will transfer an additional $250,000 to the Claims Trust.
8.2 Appointment and Responsibilities of Trustee
After the confirmation hearing, the Creditors Committee will request
the Bankruptcy Court to designate a person or entity to serve as trustee of
the Claims Trust, who will manage and conduct the affairs of the Claims Trust.
The Trustee shall be responsible for prosecuting the claims transferred to the
Trust, and shall be primarily responsible for pursuing objections to Unresolved
Claims.
8.3 Excess Shares of New Common Stock
If some portion of the 1,500,000 shares of New Common Stock allocated
under this Plan on account of Class 3C Claims are not required under the terms
of this Plan to be distributed to the holders of such Claims, one half of the
excess shares will be canceled and one half of the excess shares will be
transferred to the Claims Trust.
8.4 Beneficiaries and Distributions
The beneficiaries of the Claims Trust shall be (i) the holders of
Allowed Claims in Classes 3H, 3I and 3E, and (ii) the holders of Class 4D
Interests. Until the holders of Class 3H and 3I Claims have received
distributions from the Claims Trust equal to twenty percent (20%) of the
Allowed Amount of their claims, the Trustee shall distribute the net funds
available in the Claims Trust (after allowance for expenses of the Claims
Trust) pro rata among the holders of Class 3H and 3! Claims. After the
holders of Class 3H and 3I Claims have received such amount, The Trustee
shall distribute all net funds thereafter among the holders of Class 3E
Claims and Class 4D Interests, prorated based upon the ratio between the
number of shares of New Common Stock issuable to such holder under this Plan
and the number of all such shares issuable on account of claims in Class 3E
and Interests in Class 4D. Distributions shall be made in accordance with
the terms of a Trust Agreement to be approved by the Court at the Confirmation
Hearing.
ARTICLE 9
IMPLEMENTATION PROVISIONS--
CERTAIN ENABLING AGREEMENTS
Consummation of the Plan is contingent upon the completion, on or prior
to the Effective Date, of certain agreements. These agreements are described
in the following sections.
9.1 Stock Acceptance by Recovery Lender
Consummation of the Plan is contingent upon the election by Recovery
Lender to convert its administrative claim and its Class 2D Claim to New Common
Stock in accordance with the conversion privilege afforded in the Recovery
Lender Financing Agreement. Such agreement provides that, upon conversion,
Recovery Lender shall receive one percent (1%) of the New Shares issued
pursuant to the Plan for every $100,000 in advances made pursuant to the
Recovery Lender Financing Agreement.
9.2 Agreement with Team.
Consummation of the Plan is also contingent upon the execution of an
agreement between WRI and the TEAM providing for continued management of the
Debtor after the Effective Date. To obtain such agreement, New WRI will
agree to issue an aggregate of 2,500,000 shares of New Common Stock to the
TEAM, to key employees, and to existing members of the board of directors
in full satisfaction of their existing claims for warrants and in partial
payment for services rendered during the administration of these proceedings.
Dorcas R. Hardy and Robert D. Judson, Jr. will agree to enter into employment
agreements, providing for their full time services. Ms. Hardy will agree to
hold stock issued to her through the TEAM for a period of at least six (6)
months after the Effective Date.
9.3 Agreement with Allsup, Inc.
Consummation of the Plan is also contingent upon the approval by the
Bankruptcy Court and the performance by the parties of an agreement between
WRI and Allsup, Inc., providing for a post-petition loan to Debtor in the
amount of $500,000, and the purchase of stock in New WRI, on the Effective
Date for an additional $1,000,000. Under the terms of this agreement, New
WRI will be required to secure the services of Ms. Hardy and Mr. Judson to
provide full time services to New WRI after the Effective Date.
ARTICLE 10
IMPLEMENTATION PROVISIONS-- NEW CORPORATION
10.1 Formation of New Work Recovery, Inc.
Prior to the Effective Date, WRI will cause to be formed a corporation
("New WRI"), organized under the laws of the State of Delaware, with the name
"Work Recovery, Inc.," or a similar name, and will issue one share of WRI
common stock to New WRI. Until the Effective Date, WRI will be the sole
shareholder of New WRI.
10.2 Transfer of Assets and Liabilities
On the Effective Date, WRI and WRC will transfer all of their assets
to New WRI, except as otherwise provided in this Plan. New WRI will assume
all liabilities of WRI and WRC as such liabilities are modified pursuant to
the terms of this Plan.
10.3 Dissolution of WRI and WRC
After the Effective Date, WRI and WRC will continue in existence as
wholly owned subsidiaries of New WRI until the completion of the distribution
of New Common Stock pursuant to the terms of this Plan. Thereafter, WRI and
WRC will be dissolved.
ARTICLE 11
THE DISBURSING AGENT
11.1 Appointment
A Disbursing Agent shall be appointed pursuant to the Confirmation
Order. The Disbursing Agent shall, among other things, act instead of and as
the nominee of the holders of Claims and Interests, receive payments from New
WRI and its Estate, and make all payments and distributions contemplated by the
Plan.
11.2 Compensation of the Disbursing Agent
The Disbursing Agent shall be entitled to no compensation for services
rendered. If any reimbursement of expenses is sought by the Disbursing Agent,
the same shall be subject to the approval of the Bankruptcy Court and shall be
payable from cash on hand after the entry of such an order by the Bankruptcy
Court.
11.3 New WRI as Disbursing Agent
New WRI may be appointed as Disbursing Agent pursuant to the
Confirmation Order to act in all such things as are required of the Disbursing
Agent.
11.4 Debtors' Obligations on Effective Date
11.4.1 Delivery of Funds to Disbursing Agent.
On or before the Effective Date, New WRI shall deliver to the Disbursing
Agent sufficient funds to pay in full all Allowed Class 1A, 1B, 1C, 1D and 1E
Claims to the extent such Claims are to be paid on the Effective Date.
Thereafter, New WRI shall deliver to the Disbursing Agent, from time to time as
required, sufficient funds to make all subsequent payments required to be made
on account of Claims in Classes 1A, 1B, 1C, 1D, 1E, 3A, 3B, 3H, and 3I, and
Interests in Classes 4B and 4C.
11.4.2 Delivery of Stock and Warrants to Agent.
On or before the Effective Date, New WRI shall deliver to the
Disbursing Agent an aggregate of 15,000,000 shares of New Common Stock
(or such lesser number as may be required to make the distributions provided
for in the Plan) and Warrants to purchase an additional 5,000,000 shares of
New Common Stock.
11.5 Disbursement of Funds, Stock and Warrants
11.5.1 Disbursement of Funds.
The Disbursing Agent shall deposit all funds received from New WRI in
a separate, interest bearing account (the "Disbursement Account"). From the
Disbursement Account, the Disbursing Agent shall, on the Effective Date and
thereafter, disburse the amounts owed on such date to the holders of Allowed
Claims in Classes 1A, 1B, 1C, 1D, 1E, 3A, 3B, 3H, and 3I and Allowed Interests
in Classes 4B and 4C.
11.5.2 Disbursement of Stock.
The Disbursing Agent shall own and retain all New Common Stock issued
to it pursuant to this plan until disbursement of such stock is required
pursuant to this section.
On the Effective Date, the Disbursing Agent shall deliver shares of
New Common Stock to, or at the direction of, Recovery Lender, Allsup, Inc.,
the Team, and the holder of the Class 2C Claim.
On or prior to the Effective Date, the Disbursing Agent shall request
the holders of Class 4B, 4C, and 4D Interests to surrender their existing
shares of stock in WRI in exchange for shares of New Common Stock. Thereafter,
at least quarterly, the Disbursing Agent shall distribute New Common Stock to
such Interest holders upon delivery of the certificates for existing stock in
WRI.
11.5.3 Disbursement of New Warrants.
The Disbursing Agent shall own and retain all New Warrants issued to
it pursuant to this plan until disbursement of such New Warrants is required
pursuant to this section.
As shares of New Common Stock are distributed to Class 4D Interest
holders, the Disbursing Agent shall also deliver New Warrants to such
Interest holders in amounts determined in accordance with this Plan.
ARTICLE 12
CONDITIONS PRECEDENT TO PLAN
The following are conditions precedent to the Plan:
12.1 Execution of Documents
All documents necessary and appropriate to effectuate Debtor's Plan
shall have been executed and delivered by all parties.
12.2 Corporate Action
All corporate actions of Debtors shall be properly completed by the
Effective Date. The directors and officers of the Reorganized Debtor will
take such actions as may be necessary to the end that, among other things,
the articles and bylaws of the Reorganized Debtor contain provisions which
are consistent with the interests of creditors and equity security holders
and with public policy with respect to the manner of selection of any officer
or director and any successor to such officer or director.
12.3 Recovery Lender Conversion
The Plan is contingent upon Recovery Lender electing to convert its
claims and administrative expenses to New Common Stock.
12.4 Allsup agreement
The Plan is contingent upon the Bankruptcy Court approval of and the
performance by the parties of the Allsup Agreement.
ARTICLE 13
CONDITIONS PRECEDENT TO DISTRIBUTIONS
13.1 Documents of Exchange and Surrender
The Disbursing Agent may, as a condition to receipt of distributions
of funds or stock herein, require a holder of a Claim or Interest to return
and cancel instruments respecting such Claim or Interest, or to execute
separate releases provided for under this Plan.
13.2 Fractional Shares
Fractional shares of New Common Stock shall not be issued. For purposes
of distributing New Common Stock, a Creditor otherwise entitled to 0.5 or more
of one (1) share shall receive one share therefor, and a Creditor entitled to
less than 0.5 of one (1) share shall not receive a share therefor.
13.3 Unclaimed Funds and Interests
For a period of one (1) year from the Effective Date, the Disbursing
Agent shall retain any New Common Stock, Warrant, or distribution otherwise
distributable hereunder which remains unclaimed or as to which the Disbursing
Agent has not received documents required under Section 13.1 hereof.
Thereafter, the unclaimed New Common Stock and Warrants shall be canceled, and
any unclaimed funds will be returned to the Reorganized Debtor.
ARTICLE 14
OBJECTIONS TO AND
ESTIMATIONS OF CLAIMS
14.1 Objections and Bar Date for Filing Objections
As soon as practicable, but in no event later than ninety (90) days
after the Confirmation Date, objections to claims shall be filed with the
Bankruptcy Court and served upon the holders of each of the claims to which
objections are made pursuant to the Bankruptcy Code and Bankruptcy Rules.
Objections filed after such date will be barred. The primary responsibility
for objecting to claims shall be with Debtors. Debtors shall have full right,
power and authority to investigate and, if necessary, object to claims within
the time stipulated.
14.2 Settlement of Claims
Settlement of any objection to a claim not exceeding $5,000 shall be
permitted on the eleventh (11th) day after notice of the settlement has been
provided to Debtor, the settling party, and other persons specifically
requesting such notice, and if on such date there is no written objection
filed, such settlement shall be deemed approved. In the event of a written
objection to the settlement, the settlement must be approved by the Bankruptcy
Court on notice to the objecting party.
14.3 Estimation of Claims
Any holder of a Disputed Claim may request the Bankruptcy Court to
conduct a hearing to estimate its Claim at any time prior to its allowance or
disallowance. A Claim which has been estimated shall not be re-classified,
but shall be entitled to distributions on the basis of such estimate until
such Claim is allowed, disallowed or allowed in a different amount.
14.4 Claims Against Both Debtors
For the purposes of voting and distribution under the Plan, (a) any
obligation of either of the Debtors and all guaranties thereof executed by
the other Debtor will be treated as though they were one obligation, (b) any
Claim or Claims filed against either of the Debtors in connection with any
such obligation and any such guaranties will be treated as though they were
one Claim; and (c) the intercompany claim arising therefrom shall be canceled
and extinguished. Any Claim for which both Debtors are alleged to be liable
shall be treated as a single Claim.
ARTICLE 15
NONALLOWANCE OF
PENALTIES AND FINES
No distribution shall be made under this Plan on account of, and no
Allowed Claim, whether secured, unsecured or priority, and no Allowed
Administrative Claim shall include any fine, penalty, exemplary or punitive
damages, late charges or other monetary charge relating to or arising from
any default or breach by Debtors, and any claim on account thereof shall be
deemed disallowed whether or not an objection is filed to it.
ARTICLE 16
EFFECT OF PLAN ON CLAIMS AND INTERESTS AND ASSETS
16.1 Discharge of Claims
Except for the obligations imposed under this Plan, the consideration
distributed under the Plan to any holder of a Claim shall be in exchange for
and in complete discharge and release of all claims of any nature whatsoever
against Debtors and the Estates, and in any of the assets or properties of
Debtors or the Estates. The Confirmation Order shall constitute a judicial
determination of the discharge, as of the Effective Date, of all liabilities
of Debtors and the Estates.
16.2 Injunction
In accordance with Section 524 of the Bankruptcy Code, the discharge
provided for in this Article 16 and Section 1141 of the Bankruptcy Code, among
other things, acts as a permanent injunction against the commencement or
continuation of any action, employment or process or act to collect, offset
or recover the Claims discharged hereby.
16.3 Cancellation of Interests
The consideration distributed under the Plan to any holder of an
Interest shall be in exchange for and in complete discharge and release of all
claims of any nature whatsoever against Debtors and the Estate, and in any of
the assets or properties of Debtor or the Estate, arising out of such Interests.
Except as otherwise provided herein, all shares, warrants, options, and
subscription rights in Debtors shall be canceled and void as of the Effective
Date, except for the one (1) share in WRI to be issued to New WRI in accordance
with Article 10 hereof.
16.4 Vesting of Assets
On the Effective Date, all assets of Debtors shall vest in New WRI,
except as otherwise provided in Article 8 hereof, free and clear of all liens,
claims and encumbrances, except as otherwise provided herein.
16.5 Assumption of Liabilities
On the Effective Date, New WRI will assume only those obligations
imposed under this Plan and shall assume no other liabilities of Debtors.
ARTICLE 17
LEASES AND EXECUTORY CONTRACTS
17.1 Leases Rejected Unless Assumed
All leases and executory contracts not assumed on or prior to the
Effective Date shall be rejected as of the Effective Date, unless specific
written notice of intent to assume is mailed or delivered to the lessor or
other contracting party before Confirmation. In the event of assumption,
all pre-petition defaults will be cured on the Effective Date, or as soon
thereafter as practicable.
ARTICLE 18
RETENTION OF JURISDICTION
Until the case is closed, the Court will retain jurisdiction to
insure that the purposes and intent of the Plan are carried out. Without
limiting the generality of the foregoing, the Court will retain jurisdiction,
until the Plan is fully consummated, for the following purposes:
18.1 Claims
The classification, allowance, subordination and liquidation of the
claim of any creditor (including Administrative Claims) and the reexamination
of Allowed Claims for purposes of determining acceptances at the time of
Confirmation, and the determination of such objections as may be filed.
The failure by Debtors to object to or to examine any claim for the purpose
of determining Plan acceptance, shall not be deemed to be a waiver of any
right to object to or reexamine any claim in whole or in part.
18.2 Title and Disputes
The determination of all questions and disputes regarding title to the
assets of the Estate, and determination of all causes of action, controversies,
disputes, or conflicts, known or unknown, whether or not subject to action
pending as of the Confirmation Date, between Debtors or either of them and any
other party, including but not limited to, Debtor's right to recover assets,
avoid transfers, recover fraudulent transfers, offset claims, recover money
or property from any party or return assets which were or are the property of
the Estate pursuant to the provisions of the Bankruptcy Code.
18.3 Executory Contracts
The determination of all matters relating to the assumption, assignment,
or rejection of executory contracts and unexpired leases, including claims for
damages from the rejection of any executory contract or unexpired lease within
such time as the Bankruptcy Court may direct.
18.4 Estimation
The liquidation or estimation of damages or the determination of the
manner and time for such liquidation or estimation in connection with any
contingent, disputed, or unliquidated Claims.
18.5 Plan Corrections
The correction of any defect, the curing of any omission, or the
reconciliation of any inconsistency in the Plan, the Confirmation Order, or
any and all documents executed or to be executed in connection therewith, as
may be necessary to carry out the purposes and the intent of the Plan, on
such notice as the Bankruptcy Court shall determine to be appropriate.
18.6 Plan Modifications
The modification of the Plan after Confirmation pursuant to the
Bankruptcy Rules and the Bankruptcy Code.
18.7 Administrative Claims
The adjudication of all claims, controversies, contested matters or
adversary proceed- ings arising out of any purchases, sales, agreements or
obligations made or undertaken by and between Debtors and any third party
during the pendency of Debtors' reorganization case.
18.8 Interpretation
The enforcement and interpretation of the terms and conditions of the
Plan and the determination of all controversies and disputes that may arise
in connection with the enforce- ment, interpretation or consummation of the
Plan.
18.9 Extensions of Time
The shortening or extending, for cause, of the time fixed for doing
any act or thing under the Plan, on such notice as the Bankruptcy Court shall
determine to be appropriate.
18.10 Enforcement
The entry of any order, including injunctions, necessary to enforce the
title, rights, and powers of Debtors, and to impose such limitations,
restrictions, terms and conditions on such title, rights, and powers as the
Bankruptcy Court may deem appropriate.
18.11 Termination
The entry of an order concluding and terminating this Reorganization
Case.
18.12 Other Matters
The determination of such other matters as may be provided in the
Confirmation Order or as may be authorized under the Bankruptcy Code.
ARTICLE 19
MODIFICATION OF THE PLAN
In addition to the modification rights under Section 1127 of the
Bankruptcy Code, Debtors may propose amendments to or modifications of this
Plan at any time prior to entry of the Confirmation Order, with leave of the
Bankruptcy Court, upon such notice as may be prescribed by the Court. After
entry of the Confirmation Order, the Debtors may, with the approval of the
Court, and so long as it does not materially or adversely affect the interest
of creditors, cure any omission, correct any defect, or reconcile any
inconsistencies in the Plan, the Confirmation Order, or any and all documents
executed or to be executed in accordance therewith, in such manner as may be
necessary to carry out the purposes and intent of this Plan.
ARTICLE 20
MISCELLANEOUS
20.1 Notices
All notices, requests, or demands for payment provided for in the Plan
shall be in writing and shall be deemed to have been given when personally
delivered by hand, or deposited in any general or branch post office of the
United States Postal Service, or received by telecopy. Notices, requests and
demands for payment shall be addressed and sent postage prepaid or delivered to:
Work Recovery, Inc.
Attn.: Dorcas R. Hardy
2341 S. Friebus, Suite 14
Tucson, Arizona 85713
With copies to:
Osborn Maledon
Attn: C. Taylor Ashworth
2929 N. Central Avenue, Suite 2100
Phoenix, Arizona 85012-2794
20.2 Headings
The headings used in the Plan are inserted for convenience only and
neither constitute a portion of the Plan nor in any manner affect the
provisions or interpretation of the Plan.
20.3 Time of the Essence
Time is of the essence in the interpretation and enforcement of this
Plan. Without limiting the generality of such statement, the rights provided
hereunder are intended to expire immediately upon the expiration of the period
provided for herein, and are intended not to be extended under Section 362 or
Section 105 ofthe Bankruptcy Code for any reason.
20.4 Confirmation Without Acceptance of All Classes
Debtors will request the Bankruptcy Court to confirm the Plan
notwithstanding the rejection of the Plan by an impaired Class, pursuant to
the provisions of Section 1129(b) of the Bankruptcy Code.
DATED the 25th day of November, 1996.
WORK RECOVERY, INC.,
a Colorado corporation
By /s/ Robert D. Judson, Jr.
Robert D. Judson, Jr., Chief Financial Officer
WORK RECOVERY CENTERS, INC.,
an Arizona corporation
By /s/ Robert D. Judson, Jr.
Robert D. Judson, Jr., Chief Financial Officer
OSBORN & MALEDON, P.A.
By /s/ C. Taylor Ashworth
C. Taylor Ashworth
2929 N. Central Avenue, Suite 2100
Phoenix, Arizona 85012-2798
Attorneys for Debtors
Exhibit 4.2
[FORM OF FACE OF WARRANT CERTIFICATE]
No. AW __________Warrants
VOID AFTER TERMINATION DATE
(As Defined in the Warrant Agreement)
WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
WORK RECOVERY, INC.
This certifies that FOR VALUE RECEIVED __________________ or Registered
assigns (the "Registered Holder") is the owner of the number of Warrants
("Warrants") specified above. Each Warrant represented hereby initially
entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Warrant Certificate and the Warrant Agreement
(as hereinafter defined), one fully paid and non assessable share of Common
Stock, $0.01 par value (" Common Stock"), of Work Recovery, Inc., a Delaware
corporation (the "Company"), at any time between February 1, 1997, and the
Expiration Date (as hereinafter defined), upon the presentation and surrender
of this Warrant Certificate with the Subscription Form on the reverse hereof
duly executed, at the corporate office of Harris Trust and Savings Bank, as
Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment
of $2.50 for each Warrant exercised (the "Purchase Price") in lawful money of
the United States of America in cash or by official bank or certified check
made payable to Work Recovery, Inc.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to and governed by the terms and
conditions set forth in the Warrant Agreement effective as of February 1, 1997
(the "Warrant Agreement"), by and between the Company and the Warrant Agent.
A copy of the Warrant Agreement may be obtained upon request from the Company
at 2341 S. Friebus, Suite 14, Tucson, Arizona 85713 (520) 322-6634 attn:
Investor Relations.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Warrants represented hereby,
the Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
As provided in the Warrant Agreement, no more than 2,700,000 Warrants
("Maximum Allowable Amount") may be exercised into Common Stock. This Warrant
Certificate may be exercised only for so many Warrants as do not exceed the
Maximum Allowable Amounts determined in accordance with the provisions of the
Warrant Agreement.
The term "Expiration Date" shall mean the first to occur of : (A) the receipt
by the Warrant Agent of: (i) duly executed Subscription Forms exercising
Warrants into 2,700,000 shares of Common Stock, in the aggregate, ("Warrants
Being Exercised") determined in the manner provided in the Warrant Agreement
and (ii) the payment in cash, or by official bank or certified check in an
aggregate amount equal to the full purchase price of the Warrants Being
Exercised or (B) 5:00 P.M. (New York time) on July 31, 1997. If such date
shall be a federal holiday or a day on which banks are authorized to close,
then the Expiration Date shall mean 5:00 P.M. (New York time) the next
following day which is not a federal holiday or a day on which banks are
authorized to close.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants
will be issued to the transferee in exchange therefor, subject to the
limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Prior to due presentment for registration of transfer hereof, the Company and
the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Illinois.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile, by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Work Recovery, Inc.
Dated:_______________ By:_______________________________
By:_______________________________
Countersigned:
HARRIS TRUST AND SAVINGS BANK
as Warrant Agent
By:_____________________________
Authorized Officer
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $_______ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_______Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of :
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
and be delivered to
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to, the Registered
Holder at the address stated below.
Dated: _______________ _________________________________
_________________________________
_________________________________
Address
----------------------------------------
Taxpayer Identification Number
----------------------------------------
Signature Guaranteed
----------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO
THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND
MUST BE GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF TRANSFEREE
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
[please print or type name and address]
_________________ of the Warrants represented by this Warrant Certificate, and
hereby irrevocably constitutes and appoints ____________________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated: __________________ ________________________________
Signature Guaranteed
Exhibit 4.1
WARRANT AGREEMENT
AGREEMENT, dated as of this ____ day of January, 1997, by and between
WORK RECOVERY, INC., a Delaware corporation ("Company") and HARRIS TRUST AND
SAVINGS BANK, an Illinois corporation, as Warrant Agent (the "Warrant Agent").
STATEMENT OF BACKGROUND INFORMATION
On December 4, 1996, the United States Bankruptcy Court for the District
of Arizona (the "Bankruptcy Court") entered its Confirmation Order in Case No.
B-96-01640-TUC-JMM ("Confirmation Order") confirming and approving the Debtors'
Amended Joint Plan of Reorganization Dated October 4, 1996 and the Modification
of Plan dated November 25, 1996 (the "Plan") of Work Recovery, Inc., a Colorado
corporation ("Old WRI") and its wholly owned subsidiary Work Recovery Centers,
Inc., an Arizona corporation ("WRC").
The Company was formed pursuant to the Plan and is and until the
Effective Date will continue to be wholly owned by Old WRI. On the Effective
Date, the assets of Old WRI and WRC will be transferred to the Company (except
as otherwise provided in the Plan). On the Effective Date, the Company will
assume all liabilities of Old WRI and WRC as such liabilities are modified
pursuant to the terms of the Plan. The Effective Date is February 1, 1997.
Holders of Class D Interests consist of certain holders of Old Common
Stock. On or prior to the Effective Date, the Disbursing Agent under the
Plan shall request the holders of Class 4D Interests to surrender their existing
shares of common stock in Old WRI ("Old Common Stock") in exchange for shares of
the Common Stock, $0.01 par value of the Company ("Common Stock"). The Company
was appointed as the Disbursing Agent in the Confirmation Order.
The Plan authorizes the issuance of 15,000,000 shares of Common Stock
and Warrants to purchase 4,650,000 shares of Common Stock ("Warrants"). On
the Effective Date, Common Stock is issuable to the holders of Class 4D, among
other holders of Interests.
The holders of Class 4D Interests are entitled to receive, in the
aggregate, 4,650,000 Warrants; except that no more than 2,700,000 Warrants, in
the aggregate, may be exercised. Each holder of a Class 4D Interest will be
entitled to receive one (1) Warrant for each ten (10) shares of Old Common
Stock held by such holder.
Each Warrant initially entitles the Registered Holder thereof to purchase
one (1) share of Common Stock. Warrants are exercisable on a "first-come,
first-served" basis and once 2,700,000 Warrants, in the aggregate, have been
exercised, all remaining, unexercised Warrants immediately expire and may not
be exercised.
The Company desires the Warrant Agent to assist the Company in performing
its duties as Disbursing Agent and to act on behalf of the Company, and the
Warrant Agent is willing to so act, in connection with the issuance,
registration, transfer and exchange of the Warrants, the issuance of
certificates representing the Warrants, the exercise of the Warrants, and the
rights of the Registered Holders thereof.
NOW THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise provided herein, capitalized
words or expressions used herein shall have the same meaning as set forth in the
Plan. As used herein, the following terms shall have the following meanings,
unless the context shall otherwise require:
(a) "Aggregate Purchase Price" shall mean the Purchase Price per share
multiplied by the number of shares of Common Stock purchasable upon the
exercise (or partial exercise) of a Warrant.
(b) "Calculation Date" shall have the meaning set forth in Section 8
hereof.
(c) "Common Stock" shall mean the common stock of the Company which at
the date hereof consists of 48,000,000 shares of Common Stock, $0.01 par value.
(d) "Completed Exercise" shall mean, as to any Warrant, the receipt by
the Warrant Agent of (i) the Warrant Certificate representing such Warrant,
with the subscription form thereon duly executed by the Registered Holder
thereof or his attorney duly authorized in writing, and (ii) payment in cash,
or by official bank or certified check make payable to the Company, or otherwise
as provided in Section 4 (b), in an amount in lawful money of the United States
of America equal to the applicable Purchase Price.
(e) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall
be administered, which office is located at the date hereof at 311 W. Monroe,
14th Floor, Chicago, Illinois, 60690, Attention: Tod Shafer.
(f) "Exercise Date" shall mean, as to any Warrant, the date on which the
Warrant Agent shall have received those items necessary to constitute a
Completed Exercise.
(g) "Exercised Warrant" shall mean any Warrant submitted to the Warrant
Agent together with the items necessary in order to constitute a Completed
Exercise.
(h) "Market Price" shall mean shall mean (i) the average closing bid price
of the Common Stock, for thirty (30) consecutive business days ending on the
Calculation Date, as reported by Nasdaq, if the Common Stock is traded on
the Nasdaq Small Cap Market, or (ii) the average last reported sale price of
the Common Stock, for thirty (30) consecutive business days ending on the
Calculation as reported by the primary exchange on which the Common Stock is
traded, if the Common Stock is traded on a national securities exchange, or
by Nasdaq, if the Common Stock is traded on the Nasdaq National Market.
(i) "Maximum Exercisable Amount" shall mean and refer to 2,700,000
Warrants which is the maximum number of Warrants that may be exercised and the
maximum number of shares of Common Stock that may be issued pursuant to the
exercise of Warrants (subject to adjustment in accordance with Section 8).
(j) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Warrant in accordance with the terms hereof, which price
shall be $2.50, subject to adjustment from time to time pursuant to the
provisions of Section 8 hereof.
(k) "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the
Warrant Agent pursuant to Section 6.
(l) "Transfer Agent" shall mean Harris Trust and Savings Bank, as the
Company's transfer agent, or its authorized successor, as such.
(m) "Warrant Expiration Date" shall mean the earlier of: (i) 5:00 P.M.
(New York time) on July 31, 1997 or (ii) the date on which Completed Exercises
have occurred for an aggregate of 2,700,000 Warrants provided that if such date
shall be a federal holiday or a day on which banks are authorized or required
to close, then 5:00 P.M. (New York time) on the next following day which is not
a federal or a day on which banks are authorized or required to close.
(n) "Warrants" shall mean the warrants to purchase shares of Common Stock
pursuant to and in accordance with the Plan and this Agreement.
SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) A Warrant initially shall entitle the Registered Holder of
the certificate representing such Warrant (the "Warrant Certificate") to
purchase one share of Common Stock upon the exercise thereof, in accordance
with the terms hereof, subject to modification and adjustment as provided in
Section 8.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants issuable hereunder shall be executed by
the Company and delivered to the Warrant Agent. Upon written order of the
Company signed by its President or Chairman or a Vice President and by its
Secretary or an Assistant Secretary, the Warrant Certificates shall be
countersigned, issued and delivered by the Warrant Agent.
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 2,700,000 shares
of Common Stock, subject to adjustment as described herein, upon the exercise
of Warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent upon written order of the Company as set forth in Section 2(b)
shall countersign and deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any transfer
or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially issued hereunder,
(ii) those issued on or after the date hereof, upon the exercise of fewer
than all Warrants represented by any Warrant Certificate, to evidence any
unexercised Warrants held by the exercising Registered Holder, (iii) those
issued upon any transfer or exchange pursuant to Section 6, (iv) those issued
in replacement of lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to Section 7 and (v) at the option of the Company, in such form as
may be approved by its Board of Directors, to reflect any adjustment or change
in the Purchase Price or the number of shares of Common Stock purchasable upon
exercise of the Warrants made pursuant to Section 8 hereof.
SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification
or designation and such legends, summaries or endorsements printed, lithographed
or engraved thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant exchange on
which the Warrants may be listed, or to conform to usage or to the requirements
of Section 2(d). The Warrant Certificates shall be dated the date of issuance
thereof (whether upon initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen, or destroyed Warrant Certificates) and issued in
registered form. Warrant Certificates shall be numbered serially with the
letters AW.
(b) Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of
the Company's seal. Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be an officer of the Company or to
hold the particular office referenced in the Warrant Certificate before the
date of issuance of the Warrant Certificates or before countersignature by
the Warrant Agent and issue and delivery thereof, such Warrant Certificates
may nevertheless be countersigned by the Warrant Agent, issued and delivered
with the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be an officer of the Company or to hold such
office. After countersignature by the Warrant Agent, Warrant Certificates
shall be delivered by the Warrant Agent to the Registered Holder without
further action by the Company, except as otherwise provided by Section 4 hereof.
SECTION 4. EXERCISE.
(a) (i) Each Warrant may be exercised by the Registered Holder thereof
at any time on or after the Effective Date but not after the Warrant Expiration
Date, upon the terms and subject to the conditions set forth herein and in the
applicable Warrant Certificate. The Company shall notify Warrant Agent in
writing, by facsimile or overnight mail of the Effective Date. Except as
provided in paragraph (ii) below for Warrants exercised on the Cut-off Date,
a Warrant shall be deemed to have been exercised immediately prior to the
Exercise Date and the person entitled to receive the securities deliverable
upon such exercise shall be treated for all purposes as the holder of those
securities upon the exercise of the Warrant as of the close of business on
the Exercise Date. Notwithstanding the foregoing, Exercised Warrants received
prior to the Effective Date shall be deemed to have been exercised on the
Effective Date.
(ii) Exercised Warrants submitted by Registered Holders (for
purposes of this Sub-Section 4(a)(ii), "Exercising Holders") on the Cut-off
Date (as defined below) shall be pro-rated among and accepted for exercise
only to the extent that the Maximum Exercisable Amount is not exceeded on the
Cut-off Date. The "Cut-off Date" is the day on which the number of Exercised
Warrants submitted to the Warrant Agent for exercise would cause the Maximum
Exercisable Amount to be exceeded. The number of Exercised Warrants that may
be exercised on the Cut-off Date without exceeding the Maximum Exercisable
Amount is the "Permissible Exercisable Amount". The Permissible Exercisable
Amount shall be pro-rated among all Exercising Holders in the ratio that the
number of Exercised Warrants which an Exercising Holder seeks to exercise
bears to the total number of Exercised Warrants all Exercising Holders seek
to exercise received on the Cut-off Date. The operation of such pro-ration
is illustrated as follows:
1. On the Cut-off Date, all Exercising Holders desire to
exercise a total of 10,000 Exercised Warrants.
2. The Maximum Exercisable Amount is 5,000 Warrants.
3. Exercising Holder "X" desires to exercise 1,000 Exercised
Warrants.
4. X will be permitted to exercise 500 of his Exercised
Warrants.
The Warrant Agent shall return to the Exercising Holders the portion of
the Aggregate Purchase Price representing the Warrants not exercisable as a
result of the operation of this Sub-Section. The provisions of this Sub-
Section shall apply only to Warrants received by the Warrant Agent on the
Cut-off Date. The provisions of this Sub-Section 4(a)(ii) shall apply only
to Exercised Warrants submitted on the Cut-off Date and to no other Warrants.
(b) As soon as practicable on or after the Exercise Date, the Warrant
Agent shall deposit the proceeds received from the exercise of a Warrant and
shall notify the Company in writing of the exercise of the Warrants. Promptly
following, and in any event within five business days after the date of such
notice from the Warrant Agent, the Warrant Agent, on behalf of the Company,
shall cause to be issued and delivered by the Transfer Agent, to the person
or persons entitled to receive the same, a certificate or certificates for
the securities deliverable upon such exercise (plus a Warrant Certificate
for any remaining unexercised Warrants of the Registered Holder), unless
prior to the date of issuance of such certificates the Company shall
instruct the Warrant Agent to refrain from causing such issuance of
certificates pending clearance of checks received in payment of the Purchase
Price pursuant to such Warrants. Notwithstanding the foregoing, in the case
of payment made in the form of a check drawn on an account of the Underwriter
or such other investment banks and brokerage houses as the Company shall
approve in writing to the Warrant Agent, certificates shall immediately be
issued without prior notice to the Company or any delay. Upon the exercise of
any Warrant and clearance of the funds received, the Warrant Agent shall
promptly remit the payment received for the Warrant (the "Warrant Proceeds")
to the Company or as the Company may direct in writing
SECTION 5. RESERVATION OF SHARES; PAYMENT OF TAXES; ETC.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock
as shall then be issuable upon the exercise of the Maximum Exercisable Amount
of Warrants. The Company covenants that all shares of Common Stock which shall
be issuable upon exercise of the Warrants shall, at the time of delivery, be
duly and validly issued, fully paid, nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, (other than those which
the Company shall promptly pay or discharge or liens imposed solely as a result
of actions or agreements of the Warrantholder).
(b) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance
of Warrants, or the issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock, as the case
may be, are to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Warrant being exercised,
then no such delivery shall be made unless the person requesting the same has
paid to the Warrant Agent the amount of transfer taxes or charges incident
thereto, if any.
(c) The Warrant Agent is hereby irrevocably authorized to requisition the
Company's Transfer Agent from time to time for certificates representing shares
of Common Stock issuable upon exercise of the Warrants, and the Company will
authorize the Transfer Agent to comply with all such proper requisitions. The
Company will file with the Warrant Agent a statement setting forth the name and
address of the Transfer Agent of the Company for shares of Common Stock issuable
upon exercise of the Warrants.
SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office,
and upon satisfaction of the terms and provisions hereof, the Company shall
execute and the Warrant Agent shall countersign, issue and deliver in exchange
therefor the Warrant Certificate(s) which the Registered Holder making the
exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject
to such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate
at such office, the Company shall execute and upon the written order of the
Company pursuant to Section 2(b), the Warrant Agent shall countersign, issue
and deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form
on the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory
to the Company and the Warrant Agent, duly executed by the Registered Holder
or his attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any exchange
or registration of transfer of Warrant Certificates. In addition, the Company
may require payment by such holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly canceled
by the Warrant Agent and thereafter sent to Company by the Warrant Agent until
termination of this Agreement or resignation as Warrant Agent, or, with the
prior written consent of the Underwriter (not to be unreasonably withheld),
disposed of or destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary.
SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the
case of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall ( in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a
bonafide purchaser) countersign and deliver to the Registered Holder in lieu
there of a new Warrant Certificate of like tenor representing an equal
aggregate number of Warrants. Applicants for a substitute Warrant
Certificate shall comply with such other reasonable regulations and pay such
other reasonable charges as the Warrant Agent may prescribe.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF COMMON
STOCK OR WARRANTS.
(a) Subject to the exceptions referred to in Section 8(g) below, in
the event the Company shall, at any time or from time to time after the date
hereof, sell any shares of Common Stock for a consideration per share less
than the Purchase Price (as defined in Section 1, except that for all purposes
of this Section 8, the time periods set forth in Section 1(h)(i) and (ii) shall
be ten (10) consecutive business days) on the date of the sale or issue any
shares of Common Stock as a stock dividend to the holders of Common Stock, or
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares (any such sale, issuance, subdivision or combination
being herein called a "Change of Shares"), then, and thereafter upon each
further Change of Shares, the Purchase Price in effect immediately prior to
such Change of Shares shall be changed to a price (including any applicable
fraction of a cent) determined by multiplying the Purchase Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the
sum of (i) the number of shares of Common Stock outstanding immediately prior
to the issuance of such additional shares and (ii) the number of shares of
Common Stock which the aggregate consideration received (determined as provided
in subsection 8(f)(F) below) for the issuance of such additional shares would
purchase at the Market Price and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively whenever
such an issuance is made. For purposes of this Section 8, the Transaction Date
shall mean the date of the sale, issuance, modification or other transaction
referred to in this Section 8.
Upon each adjustment of the Purchase Price pursuant to this Section 8,
the total number of shares of Common Stock purchasable upon the exercise of
each Warrant shall (subject to the provisions contained in Section (b) hereof)
be such number of shares (calculated to the nearest one-hundredth; PROVIDED,
HOWEVER, that in no event shall the Purchase Price increase as a result of
such rounding calculation) purchasable at the Purchase Price in effect
immediately prior to such adjustment multiplied by a fraction, the numerator
of which shall be the Purchase Price in effect immediately prior to such
adjustment and the denominator of which shall be the Purchase Price in effect
immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase
one share of Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one
by a fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be
the Purchase Price in effect immediately after such adjustment. Upon each
adjustment of the number of Warrants pursuant to this Section 8, the
Company shall, as promptly as practicable, cause to be distributed to each
Registered Holder of Warrant Certificates on the date of such adjustment
Warrant Certificates evidencing, subject to Section 8 hereof, the number of
additional Warrants to which such Holder shall be entitled as a result of
such adjustment or, at the option of the Company, cause to be distributed to
such Holder in substitution and replacement for the Warrant Certificates held
by him prior to the date of adjustment (and upon surrender thereof, if
required by the Company) new Warrant Certificates evidencing the number of
Warrants to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation
or merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation
and which does not result in any reclassification, capital reorganization or
other change of outstanding shares of Common Stock), or in case of any sale
or conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage or
other financing transaction), the Company shall cause effective provision to
be made so that each holder of a Warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable
upon such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock that might have been purchased upon exercise of such Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 8. The Company
shall not effect any such consolidation, merger or sale of all or substantially
all of the assets or stock of the Company unless prior to or simultaneously
with the consummation thereof the successor (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing all
or substantially all of the assets or stock or other appropriate corporation
or entity shall assume, by written instrument executed and delivered to the
Warrant Agent, the obligation to deliver to the holder of each Warrant such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and the other obligations
of the Company under this Agreement. The foregoing provisions shall similarly
apply to successive reclassifications, capital reorganizations and other
changes of outstanding shares of Common Stock and to successive consolidations,
mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(d) hereof, continue to express the Purchase Price per
share, the number of shares purchasable thereunder and the number of shares
purchasable and the Redemption Price therefor was expressed in the Warrant
Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 8, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the Registered Holder of each Warrant shall then be entitled,
and the adjustment in Redemption Price resulting therefrom, and (iii) a
statement showing in detail the method of calculation and the facts upon
which such adjustment or readjustment is based, including a statement of
(a) the consideration received or to be received by the Company for any
securities issued or sold or deemed to have been issued, (b) the number of
shares of Common Stock outstanding or deemed to be outstanding, and (c) the
Purchase Price in effect immediately prior to such issue or sale and as
adjusted and readjusted on account thereof. The Company will promptly file
such certificate with the Warrant Agent and furnish a copy thereof to be sent
by ordinary first class mail to the each Registered Holder of Warrants at his
last address as it shall appear on the registry books of the Warrant Agent.
No failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity thereof except as to the holder to whom the
Company failed to mail such notice, or except as to the holder whose notice was
defective. The affidavit of an officer of the Warrant Agent or the Secretary of
the Company that such notice has been mailed shall, in the absence of fraud or
negligence, be prima facie evidence of the facts stated therein.
Notwithstanding the foregoing, the Warrant Agent shall not be deemed to have
knowledge of any adjustment made pursuant to Section 8 until actual receipt
of the certificate described in this Section 8(e).
(f) For purposes of Section 8(a) and 8(b) hereof, the following provisions
(A) to (G) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any given
time shall include shares of Common Stock owned or held by or for the account of
the Company and the sale or issuance of such treasury shares or the distribution
of any such treasury shares shall not be considered a Change of Shares for
purposes of said sections.
(B) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least $.10 in the
Purchase Price; provided that any adjustments which by reason of this clause
(B) are not required to be made shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment which, together
with any adjustment(s) so carried forward, shall require an increase or
decrease of at least $.10 in the Purchase Price then in effect hereunder.
(C) In case of (1) the sale by the Company after the Effective
Date for cash (or as a component of a unit being sold for cash) of any rights
or warrants to subscribe for or purchase, or any options for the purchase of,
Common Stock or any securities convertible into or exchangeable for Common
Stock without the payment of any further consideration other than cash, if
any (such securities convertible, exercisable or exchangeable into Common
Stock being herein called "Convertible Securities"), or (2) the issuance
by the Company after the Effective Date, without the receipt by the Company of
any consideration therefor, of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, in each case, if (and only if) the consideration payable to the
Company upon the exercise of such rights, warrants or options shall consist
of cash, whether or not such rights, warrants or options, or the right to
convert or exchange such Convertible Securities, are immediately exercisable,
and the price per share for which Common Stock is issuable upon the exercise of
such rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum aggregate
consideration payable to the Company upon the exercise of such rights,
warrants or options, plus the consideration, if any, received by the
Company for the issuance or sale of such rights, warrants or options, plus,
in the case of such Convertible Securities, the minimum aggregate amount of
additional consideration, other than such Convertible Securities, payable
upon the conversion or exchange thereof, by (y) the total maximum number of
shares of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less than
the Purchase Price, then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities (as of the date of the
issuance or sale of such rights, warrants or options) shall be deemed to be
outstanding shares of Common Stock for purposes of Sections 8(a) and 8(b)
hereof and shall be deemed to have been sold for cash in an amount equal to
such price per share.
(D) In case of the sale by the Company after the Effective Date
for cash of any Convertible Securities, whether or not the right of conversion
or exchange thereunder is immediately exercisable, and the price per share for
which Common Stock is issuable upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the total amount of
consideration received by the Company for the sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, other than such Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible Securities) is
less than the Purchase Price, then the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of such Convertible
Securities (as of the date of the sale of such Convertible Securities) shall
be deemed to be outstanding shares of Common Stock for purposes of Sections 8
(a) and 8(b) hereof and shall be deemed to have been sold for cash in an
amount equal to such price per share.
(E) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (C) or (D) above
or any other securities of the Company convertible, exchangeable or exercisable
for shares of Common Stock, for any reason other than an event that would
require adjustment to prevent dilution, so that the consideration per share
received by the Company after such modification is less than the Purchase
Price to be in effect after such modification shall be determined by multiplying
the Purchase Price in effect immediately prior to such event by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding
on the date prior to the modification plus the number of shares of Common Stock
which the aggregate consideration receivable by the Company for the securities
affected by the modification would purchase at the Market Price and of which the
denominator shall be the number of shares of Common Stock outstanding on such
date plus the number of shares of Common Stock to be issued upon conversion,
exchange or exercise of the modified securities at the modified rate. Such
adjustment shall become effective as of the date upon which such modification
shall take effect. On the expiration of any such right, warrant or option or
the termination of any such right to convert or exchange any such Convertible
Securities referred to in Paragraph (C) or (D) above, the Purchase Price then
in effect hereunder shall forthwith be readjusted to such Purchase Price as
would have obtained (a) had the adjustments made upon the issuance or sale of
such rights, warrants, options or Convertible Securities been made upon the
basis of the issuance of only the number of shares of Common Stock theretofore
actually delivered (and the total consideration received therefor) upon the
exercise of such rights, warrants or options or upon the conversion or exchange
of such Convertible Securities and (b) had adjustments been made on the basis
of the Purchase Price as adjusted under clause (a) for all transactions (which
would have affected such adjusted Purchase Price) made after the issuance or
sale of such rights, warrants, options or Convertible Securities.
(F) In case of the sale for cash of any shares of Common Stock,
any Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall be
deemed to be the gross sales price therefor without deducting therefrom any
expense paid or incurred by the Company or any underwriting discounts or
commissions or concessions paid or allowed by the Company in connection
therewith.
(G) In case any event shall occur as to which the provisions of
Section 8 are not strictly applicable but the failure to make any adjustment
would not fairly protect the purchase rights represented by the Warrants in
accordance with the essential intent and principles of Section 8, then, in
each such case, the Board of Directors of the Company shall in good faith by
resolution provide for the adjustment, if any, on a basis consistent with the
essential intent and principles established in Section 8, necessary to
preserve, without dilution, the purchase rights represented by the Warrants.
The Company will promptly make the adjustments described therein.
(g) No adjustment to the Purchase Price of the Warrants or to the number
of shares of Common Stock purchasable upon the exercise of each Warrant will be
made, however,
(i) upon the exercise of any of the options presently outstanding
under the Company's 1993 Stock Option Plan (the "Plan") for officers, directors
and certain other key personnel of the Company; or
(ii) upon the issuance or exercise of any securities which may
hereafter be granted or exercised under the Plan or under any other employee
benefit or non-employee director plan of the Company approved by the Company's
stockholders; or
(iii) upon the sale of any shares of Common Stock and/or
Convertible Securities in a firm commitment underwritten public offering,
including, without limitation, shares sold upon the exercise of any
overallotment option granted to the underwriters in connection with such
offering; or
(iv) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, whether or not such rights, warrants or options were outstanding
on the date of the original sale of the Warrants or were thereafter issued
or sold;
(v) upon the issuance of any Common Stock or warrants (or
Common Stock issuable upon the exercise of any such warrants) pursuant to the
provisions of the Plan.
(h) As used in this Section 8, the term "Common Stock" shall
mean and include the Company's Common Stock authorized on the date of the
Effective Date and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company. The shares issuable upon exercise
of the Warrants shall include only shares of such class designated in the
Company's Certificate of Incorporation as Common Stock on the Effective
Date or (i) in the case of any reclassification, change, consolidation,
merger, sale or conveyance of the character referred to in Section 8(c)
hereof, the stock, securities or property provided for in such section, or
(ii) in the case of any reclassification or change in the outstanding shares
of Common Stock issuable upon exercise of the Warrants as a result of a
subdivision or combination or consisting of a change in par value, or from
par value to no par value, or from no par value to par value, such shares of
Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 8, or as to the
amount of any such adjustment, if required, shall be binding upon the holders
of the Warrants and the Company if made in good faith by the Board of Directors
of the Company.
(j) If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered
Holder as of the record date for such transaction of the Warrants then
outstanding, the rights, warrants or options to which each Registered Holder
would have been entitled if, on the record date used to determine the
stockholders entitled to the rights, warrants or options being granted by
the Company, the Registered Holder were the holder of record of the number of
whole shares of Common Stock then issuable upon exercise of his Warrants.
Such grant by the Company to the holders of the Warrants shall be in lieu of
any adjustment which otherwise might be called for pursuant to this Section 8.
SECTION 9. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 8 hereof, the
Company nevertheless shall not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share called
for upon the exercise of any Warrant, the Company shall pay to the Holder an
amount in cash equal to such fraction multiplied by the current market value
of such fractional share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange
or is traded on the Nasdaq National Market, the current market value
shall be the last reported sale price of the Common Stock on such
exchange or market on the last business day prior to the date of
exercise of this Warrant or, if no such sale is made on such day
or no closing sale price is quoted, the average of the closing bid
and asked prices for such day on such exchange or market; or
(2) If the Common Stock is not listed or admitted to unlisted
trading privileges on a national securities exchange or is not
traded on the Nasdaq National Market, the current market value shall
be the mean of the last reported bid and asked prices reported by the
Nasdaq SmallCap Market or, if not traded thereon, by the Nasdaq
Bulletin Board on the last business day prior to the date of the
exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported,
the current market value shall be an amount determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company.
SECTION 10. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Warrants, as such,
any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock,
change of par value or change of stock to no par value, consolidation, merger
or conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights, until such holder shall have exercised such
Warrants and been issued shares of Common Stock in accordance with the
provisions hereof.
SECTION 11. RIGHTS OF ACTION. All rights of action with respect
to this Agreement are vested in the respective Registered Holders of the
Warrants, and any Registered Holder of a Warrant, without consent of the
Warrant Agent or of the holder of any other Warrant, may, in his own behalf
and for his own benefit, enforce against the Company his right to exercise
his Warrants for the purchase of shares of Common Stock in the manner provided
in the Warrant Certificate and this Agreement.
SECTION 12. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant,
by his acceptance thereof, consents and agrees with the Company, the Warrant
Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of
the Warrant Agent by the Registered Holder thereof in person or by his
attorney duly authorized in writing and only if the Warrant Certificates
representing such Warrants are surrendered at the office of the Warrant
Agent, duly endorsed or accompanied by a proper instrument of transfer
satisfactory to the Warrant Agent and the Company in their sole discretion,
together with payment of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice or knowledge to the contrary, except as otherwise expressly provided
in Section 7 hereof.
SECTION 13. CANCELLATION OF WARRANT CERTIFICATES. If the Company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be delivered to the
Warrant Agent and canceled by it and retired. The Warrant Agent shall also
cancel the Warrant Certificate or Warrant Certificates following exercise of
any or all of the Warrants represented thereby or delivered to it for transfer
or exchange.
SECTION 14. CONCERNING THE WARRANT AGENT. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby
or of any securities or other property delivered upon exercise of any Warrant
or whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable. The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay the Company, as provided
in Section 4, all moneys received by the Warrant Agent upon the exercise of
such Warrants. The Warrant Agent shall, upon request of the Company from
time to time, deliver to the Company such complete reports of registered
ownership of the Warrants and such complete records of transactions with
respect to the Warrants and the shares of Common Stock as the Company may
request. The Warrant Agent shall also make available to the Company and the
Underwriter for inspection by their agents or employees, from time to time as
either of them may request, such original books of accounts and record
(including original Warrant Certificates surrendered to the Warrant Agent
upon exercise of Warrants) as may be maintained by the Warrant Agent in
connection with the issuance and exercise of Warrants hereunder, such
inspections to occur at the Warrant Agent's Corporate Office, during normal
business hours.
The Warrant Agent shall not at any time be under any duty or responsibility
to any holder of Warrant Certificates to make or cause to be made any
adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustments or prevent
such adjustment from being made, or with respect to the nature or extent of
any such adjustment, when made, or with respect to the method employed in
making the same. It shall not (i) be liable for any recital or statement of
facts contained herein or for any action taken, suffered or omitted by it in
reliance on any Warrant Certificate or other document or instrument believed
by it in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained in
this Agreement or in any Warrant Certificate, or (iii) be liable for any act
or omission in connection with this Agreement except for its own negligence
or wilful misconduct.
Before the Warrant Agent acts or refrains from acting, may at any
time consult with counsel satisfactory to it (who may be counsel for the
Company) and shall incur no liability or responsibility for any action taken,
suffered or omitted by it in good faith in accordance with the opinion or
advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed
by the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent may conclusively rely upon and
shall not be liable for any action taken, suffered or omitted by it in
accordance with such notice, statement, instruction, request, direction,
order or demand believed by it to be genuine. No implied duties or
obligations shall be read into this Agreement against the Warrant Agent.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder, it further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and reasonable counsel fees, for anything done or omitted
by the Warrant Agent in the execution of its duties and powers hereunder
except losses, expenses and liabilities arising as a result of the Warrant
Agent's negligence or wilful misconduct. The indemnification provided for
hereunder shall survive the termination of this Agreement. The costs and
expenses incurred in enforcing the right of indemnification shall be paid by
the Company.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or wilful misconduct), after
giving 30 days' prior written notice to the Company. At least 15 days prior
to the date such resignation is to become effective, the Warrant Agent shall
cause a copy of such notice of resignation to be mailed to the Registered
Holder of each Warrant Certificate at the Company's expense. Upon such
resignation, or any inability of the Warrant Agent to act as such hereunder,
the Company shall appoint a new warrant agent in writing. If the Company
shall fail to make such appointment within a period of 15 days after it has
been notified in writing of such resignation by the resigning Warrant Agent,
then the Registered Holder of any Warrant Certificate may apply to any court
of competent jurisdiction for the appointment of a new warrant agent. Any
new warrant agent, whether appointed by the Company or by such a court, shall
be a bank or trust company having a capital and surplus, as shown by its last
published report to its stockholders, of not less than $10,000,000 or a stock
transfer company that is a registered transfer agent under the Securities
Exchange Act of 1934. After acceptance in writing of such appointment by the
new warrant agent is received by the Company, such new warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed and delivered by the
resigning Warrant Agent. Not later than the effective date of any such
appointment the Company shall file notice thereof with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent
to be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
Whenever in the performance of its duties under this Agreement, the
Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter may be deemed conclusively proved or
established by a certificate signed by the Chairman of the Board, President,
any Vice President, Secretary or Assistant Secretary and received by the
Warrant Agent.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effects as though it were not
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting
in any other capacity for the Company or for any other legal entity.
SECTION 15. MODIFICATION OF AGREEMENT. Subject to the provisions
of Section 4(b), the parties hereto and the Company may by supplemental
agreement make any changes or corrections in this Agreement (i) that they
shall deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or manifest mistake or error herein contained; or (ii)
that they may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Warrant Certificates; PROVIDED, HOWEVER, that
this Agreement shall not otherwise be modified, supplemented or altered in any
respect except with the consent in writing of the Registered Holders of Warrant
Certificates representing not less than 50% of the Warrants then outstanding;
and PROVIDED, FURTHER, that no change in the number or nature of the securities
purchasable upon the exercise of any Warrant, or the Purchase Price therefor, or
the acceleration of the Warrant Expiration Date, shall be made without the
consent in writing of the Registered Holder of the Warrant Certificate
representing such Warrant, other than such changes as are specifically
prescribed by this Agreement as originally executed or are made in
compliance with applicable law.
SECTION 16. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at
the address of such holder as shown on the registry books maintained by the
Warrant Agent; if to the Company, at____________________________, attention:
President, or at such other address as may have been furnished to the Warrant
Agent in writing by the Company; if to the Warrant Agent, at its Corporate
Office. Notwithstanding the foregoing, all notices to the Warrant Agent
shall be deemed given only upon actual receipt thereof.
SECTION 17. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois, without
reference to principles of conflict of laws.
SECTION 18. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Company and the Warrant Agent and their
respective successors and assigns, and the holders from time to time of
Warrant Certificates . Nothing in this Agreement is intended or shall be
construed to confer upon any other person any right, remedy or claim, in
equity or at law, or to impose upon any other person any duty, liability or
obligation.
SECTION 19. TERMINATION. This Agreement shall terminate at the
close of business on the earlier of the Warrant Expiration Date or the date
upon which all Warrants have been exercised, except that the Warrant Agent
shall account to the Company for cash held by it and the provisions of
Section 14 hereof shall survive such termination.
SECTION 20. COUNTERPARTS. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
WORK RECOVERY, INC.
By:_________________________________
HARRIS TRUST AND SAVINGS BANK
By:_________________________________
