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) July 25, 1997
WORK RECOVERY, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 01-18695 86-0848910
(State or Other Juris- (Commission File Number) (IRS Employer
diction of Incorporation) 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)
ITEM 5 OTHER ITEMS DEEMED OF IMPORTANCE TO SHAREHOLDERS
See press release dated July 31, 1997; Exhibit-99.1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WORK RECOVERY, INC.
(Registrant)
By /s/ Dorcas R. Hardy
Dorcas R. Hardy
President and Chief Executive Officer
Date August 4, 1997
Exhibit 10.35
SOLE SALE CONTRACT
The undersigned:
WORK RECOVERY INC., a Delaware corporation ("WRI"), established at 2341 S.
Friebus, Suite 14, Tucson, Arizona 85713, represented hereunder pursuant to
its Bylaws by its Chief Executive Officer Dorcas Hardy who has been authorized
to conclude this agreement pursuant to WRI's Bylaws and necessary actions of
the Board of Directors: and
WORK RECOVERY EUROPA BV, a Dutch corporation ("WRE"), established at 139
Pastoriestraat, 5162 EK Eindhoven, the Netherlands, represented hereunder
pursuant to its articles of association by its directors Rinus Persons and
Koos Loose who have been authorized to conclude this contract pursuant to
WRE's articles of association and necessary actions by its Board of
Supervisory Directors.
considering:
Whereas, WRI manufactures and sells functional capacity evaluation testing
equipment (collectively, the "ERGOS(r) System Hardware") and licenses
proprietary software (the "ERGOS(r) System Software") which is used with the
ERGOS(r) System Hardware ( together the "ERGOS(r) System") and owns the rights,
title and interest in and to that certain product (including the U.S. trademark
rights), more completely described in Exhibit A, attached hereto as part of this
Agreement;
Whereas, WRE has developed a marketing and sales strategy for selling the
ERGOS(r) System in Europe and has the financial means to exploit these
activities; and
Whereas, the parties agree that WRE will act as WRI's exclusive distributor/
dealer of the ERGOS(r) System in Europe. WRE shall carry on such activities
for its own account and risk.
NOW, THEREFORE, the parties hereby agree as follows effective as of July 18,
1997 (the "Effective Date"):
Article 1. Exclusive Right to Sell an Sublicense; Territory; Term.
1.1 Exclusive Right to Sell. WRI hereby grants WRE the exclusive right to sell
the ERGOS(r) products in the Territory (as defined below) from the Effective
Date until the expiration or termination of the term of this Agreement.
1.2 Exclusive License Rights.
a. Subject to the definitions, terms and conditions set forth in this
Agreement, WRI hereby grants to WRE:
(i) a nontransferable, exclusive (within the Territory), terminable license
to sublicense and distribute the most recent version of the ERGOS(r) System
Software then available (including Maintenance Releases and Upgrades of the
ERGOS(r) System Software) within the Territory in conjunction with the sales
and service of the most recent version of the ERGOS(r) System Hardware then
available, and
(ii) a nontransferable, terminable license to copy the ERGOS(r) System
Software (including Maintenance Release and Upgrades of the ERGOS(r) System
Software) onto ERGOS(r) System Hardware only to the extent necessary to
distribute same as permitted by Section 1.2(i) above.
WRI shall deliver only the most recent version of the machine executable copy of
the object code of the ERGOS(r) System Software on all ERGOS(r) System Hardware
units sold by WRI to WRE under this Agreement. Promptly after execution of this
Agreement WRI shall deliver the most recent version of the Documentation to WRE.
License hereby accepts the grant of the license set forth in this Section 1.2
and the delivery of the Documentation.
1.4 Right to Appoint Sub-Dealers; WRI Right to Terminate. WRI hereby grants
WRE the right to appoint one or more commercial agents and/or sub-dealers to
act in the Territory and empower such commercial agents/sub-dealers to act on
WRE's behalf in performing its obligations hereunder; provided that in each
agreement appointing a person or entity a commercial agent/subdealer, WRE
shall provide WRI with the right to cancel such commercial agent/sub-dealer
agreement upon two (2) months notice if it appears to WRI that such commercial
agent or sub-dealer fails to meet its obligations towards WRI or the ERGOS(r)
products.
1.5 License Fees. All license fees for the rights granted in Section 1.2 are
included in the price of the ERGOS(r) System, more completely described
hereinafter under clause 4.1.
1.6 Trademark Applications. WRI shall, with WRE's cooperation and assistance,
file all necessary trademark applications during the term hereof. All filings
shall be for WRI's benefit.
1.7 No Grant of Rights to Third Parties. Except as specified herein, WRI shall
not:
a. grant third parties a license for the use of the trademark "ERGOS(r) "
in connection with the sale, distribution, sublicense or other use of the
ERGOS(r) System in the Territory during the term of the Agreement;
b. assign or transfer its rights to the present trade mark to a third party;
provided that WRI may sell, assign or transfer such rights in connection with
the sale of all or substantially all of its assets or the sale of the rights
to the ERGOS(r) System;
c. grant comparable rights to sell or license the ERGOS(r) System to third
parties in the Territory during the course of this Agreement; nor
d. import, manufacture, use or distribute the "ERGOS(r) " System Software in
the Territory.
Notwithstanding the foregoing, WRI may prepare to undertake such acts as are
prohibited under this clause 1.7 if WRI intends to exercise its buyout rights
under clause 1.10 but may not actually consummate such acts until it pays the
required amounts under clause 1.10.
1.8 Restrictions on WRE's Rights. Except as specifically set forth herein,
WRE shall not:
a. license, sell, transfer, assign, lease or otherwise provide the ERGOS(r)
System or any component or derivative thereof outside of the Territory;
b. use, manufacture, modify, reverse engineer, decompile or disassemble the
ERGOS(r) System or any component or derivative thereof (including without
limitation the ERGOS(r) System Software);
c. make, or assist others to make, any "derivative works" (as such term is
defined in the 1976 Copyright Act of the United States) of the ERGOS(r)
System or any component thereof, or any copies of the ERGOS(r) System
Software except for one (1) copy for backup and archival purposes at the
WRE's principal place of business (or such other site in the Territory to
which WRE may relocate its chief executive offices). Such copy shall
include all copyright and proprietary rights notices reasonably requested by
WRI; nor
d. import, manufacture, use, distribute, license or develop any system or
product which competes with the ERGOS(r) System or any component thereof.
1.9 Term and Termination.
a. The term of this Agreement shall commence on the date hereof and terminate
ten (10) years from the date hereof unless terminated earlier pursuant to the
terms of this Agreement.
b. This Agreement may be terminated as follows:
(i) WRE's Right to Terminate. WRE may terminate this Agreement upon five
(5) days written notice to WRI if:
(1) The "ERGOS(r)" trademark is declared void or annulled for the products
then marketed as the "ERGOS(r) System by a court of competent jurisdiction;
(2) WRI declares, or is forced by its creditors into, bankruptcy under
Chapter 7 of the United States Code; or
(3) WRI materially breaches any of its representations, warranties, covenants
or agreements hereunder and fails to cure such breach within thirty (30) days
after receipt of a request to cure such breach from WRE.
(ii) WRI's Right to Terminate. WRI may terminate this Agreement upon five
(5) days written notice to WRE if:
(1) In the event of bankruptcy of WRE or in case of an official moratorium,
liquidation, composition with creditors of WRE;
(2) WRE materially breaches any of its representations, warranties, covenants
or agreements hereunder and fails to cure such breach within thirty (30) days
after receipt of a request to cure such breach from WRI; or
(3) WRI exercises its buyout rights under clause 1.10.
(iii) Either party may terminate this Agreement upon the third (3rd)
anniversary of this contract in the event that WRE fails to purchase ten (10)
ERGOS(r) Systems in the first three (3) years of this Agreement, and upon
the sixth anniversary of this Agreement in the event that WRE fails to purchase
twenty (20) ERGOS(r) Systems by such date, provided that prior to such
termination either party shall provide to the other party at least sixty (60)
days' written notice of such termination. If the Agreement is canceled
pursuant to this clause 1.9(b)(iii) then no termination payments under
clause 1.10 will be due.
The parties obligations upon termination are set forth in article 14 of this
Agreement.
1.10 Buyout Rights.
a. At any time prior to the third (3rd) anniversary of this Agreement, WRI
may, in its sole discretion, terminate the Agreement for the entire Territory
(and only the entire Territory) by providing WRE written notice of termination
and paying WRE the amount indicated below.
Date of Termination Notice Termination Payment
Effective Date - July 31, 1998 US$375,000
August 1, 1998 - July 31, 1999 US$625,000
August 1, 1999 - July 31, 2000 US$875,000
Subject to the right to terminate set forth in clause 1.9, if WRI does not
exercise its buyout rights by the third anniversary, WRE shall remain WRI's
exclusive dealer/licensor until the expiration of this Agreement.
b. Notwithstanding the buyout rights in clause 1.10(a), WRI agrees to
include WRE in the process of discussions with any third party that WRI may
consider to act as its licensor in Europe to determine whether there is a
mutually agreeable role for WRE in any new venture. WRE would be bought out
under clause 1.10 if it was not included in any new venture that arose with
a third party during the first three years of this Agreement.
1.11 Registration. Promptly following the Effective Date, WRE shall register
the license granted hereunder under its own name to the extent necessary to
preserve its rights under this Agreement under the national law of the counties
of the Territory. WRE shall promptly notify WRI of all such registrations. If
any governmental agency (each an "Agency") raises issues regarding this
Agreement or any action to be taken in connection herewith, WRE will use its
best efforts to satisfy such Agency's concerns without any change to this
Agreement. If such Agency makes recommendations to modify or delete any
provision of this Agreement, WRI will work with WRE reasonably and in good
faith to attempt to achieve a mutually acceptable resolution that does not
materially compromise either party's rights hereunder.
1.12 License Extending to New Products and Upgrades. The rights granted to
WRE under this Agreement include the most recent version of the ERGOS(r)
System and any directly related products of WRI, including but not limited
to New Releases produced by WRI and/or made available by WRI based on
modification of the ERGOS(r) System required for use in the Territory,
upgrades and maintenance releases, the same in the widest sense of the word,
including all parts of this (these) product(s), also when coming from
subsidiaries or ancillary industries of WRI. WRE acknowledges that any
ERGOS(r) System Software upgrade implemented hereunder shall replace the
prior release of the ERGOS(r) System Software then being used by WRE and/or
its sublicensees, as applicable, and all rights (i) to operate the ERGOS(r)
System Hardware with such prior release and (ii) to distribute, promote and
enter into new sublicense arrangements with respect to such prior version
shall immediately cease. WRI acknowledges that neither Licensee nor any
sublicensee is obligated to implement any ERGOS(r) System Software Upgrade.
1.13 Territory. The territory shall include the following regions/countries
in Europe: Benelux, Austria, Switzerland, Scandinavia, Germany, France,
United Kingdom (including England and Ireland), Italy, Spain and Portugal,
(hereinafter referred to as the "Territory"). The exclusive rights of WRE
under this Agreement extends to all buyers whose primary business is established
within the Territory, but not to buyers who only maintain branches in the
Territory and whose primary business is established outside the Territory.
1.14 Assignability. This Agreement is personal in nature to WRI and WRE and
is not assignable without the mutual agreement of the parties. Any attempt
to assign, transfer or subcontract in whole or in part any right, duty or
obligation from this Agreement by one party will give the other party the
right to terminate the Agreement pursuant to clause 1.8. Notwithstanding
the foregoing, WRI may assign this Agreement in connection with the sale of
all or substantially all of its assets or stock.
1.15 Source Code Escrow Agreement. The parties shall enter into and implement
a Source Code Escrow Agreement in the form attached hereto as Exhibit B which
contains terms relating to WRE's right to access the Source Code for the
ERGOS(r) System and the schematics to the ERGOS(r) System Hardware, if and
only if, WRI enters bankruptcy under Chapter 7 of the US Bankruptcy Code.
1.16 Localization. WRE is responsible for the content of the translation of
the ERGOS(r) System audio features in order to serve the different European
countries. WRI is responsible for the hard and software related facilities
as language sensitive components.
Both parties are jointly responsible for the most economic way of performing
this transition process.
Article 2. Orders.
2.1 Ordering. WRE shall send its orders to WRI on or before the fifteenth
(15th) of every month. All orders shall be on forms supplied by WRI.. WRE
should state in such forms the requested time of delivery, quality and any
other features which are readily available from WRI and whether or not the
ERGOS(r) System ordered is for a particular sub-dealer or enduser.
2.2 Order Execution. WRI shall use its reasonable efforts to execute WRE's
purchase orders; provided that if the orders are relative to products belonging
to the normal assortment of WRI, WRI shall accept and execute such orders in the
ordinary course of business; and provided further that WRI shall not be bound
to the times of delivery stated by WRE, insofar as they differ from the times
of delivery stated by WRI to the dealers at regular times by means of circular
letters. Unless agreed otherwise, WRI shall deliver ERGOS(r) System Hardware
units to a common carrier at WRI's warehouse in Tucson, Arizona six (6) weeks
after WRI receives the relevant order. WRI shall be empowered to suspend the
execution of the orders on the ground of delay in manufacture or forwarding or
on the ground of any other circumstances hampering the delivery temporarily,
without being obliged to pay any indemnification in consequence thereof.
Article 3. Individual Purchase and Sale Agreement.
WRI and WRE will enter into a Purchase and Sale Agreement for each ordered
ERGOS(r) System, in which, in addition to this Agreement, the following
issues are to be covered: (i) Source Code services; (ii) maintenance
releases; (iii) manuals, training materials, guides; and (iv) liabilities.
Unless the parties agree otherwise, the Purchase and Sale Agreement shall be
in the form of WRI's Standard Terms of Sale. WRE will use the terms in the
individual Purchase and Sale Agreement as the terms of its standard Terms of
Sale.
Article 4. Wholesale prices and delivery.
4.1 Price.
a. WRE will buy and WRI will sell the most recent version of the ERGOS(r)
System as described in the foregoing at a purchase price equal to (i) the
manufacturing price plus bonus (and extra bonus, as applicable),each as
described in Exhibit C, attached hereto and deemed to form an integral part
of this Agreement plus (ii) all shipping, taxes and insurance (unless paid
directly by WRE to the appropriate party or authority). WRE will buy and
WRI will sell and make available all products directly related to the ERGOS(r)
System at a purchase price equal to the manufacturing cost plus a bonus as
determined by the parties. WRI will also provide, at no additional cost to
WRE, all promotional literature used by WRI and relating to ERGOS(r) System;
provided that WRI shall only be obligated to provide English language versions
of such literature.
b. For software upgrades provided to the end users at no charge within the
first year following such end user's purchase of the ERGOS(r) System, WRE
shall pay WRI fifty percent (50%) of the cost of such upgrade. WRE shall
pay WRI one hundred percent (100%) of the cost of all other software upgrades.
4.2 Delivery; Passage of Title.
a. WRI shall deliver ERGOS Systems and components (collectively, "Products")
to WRE F.O.B. WRI's warehouse in Tucson, Arizona. Any delivery date quoted or
otherwise given is only an estimate and WRI shall not be liable for any delivery
later than the estimated day of delivery; provided that WRI must ship the
products ordered within six (6) weeks of the date of WRE's purchase order.
Unless WRE notifies WRI in writing that it will arrange for such matters,
WRI shall (i) arrange for shipment of Products and insurance (for the full
replacement value) of Products during shipment, and (ii) prepay and bill Buyer
for such insurance and shipment of Products. All insurance obtained shall name
WRI and Buyer as named insureds, each in their respective interests.
Notwithstanding to the contrary in the foregoing, Buyer shall be solely
responsible for all shipping, insurance and taxes.
b. If WRE arranges shipping or so long as WRI arranges for shipment of the
Products by a reputable international shipping firm and obtains insurance for
the products during transit, delivery of Products to such common carrier
shall be deemed a satisfactory delivery to Buyer and title and risk of loss
and damage shall pass to Buyer upon delivery to the carrier or to Buyer,
whichever occurs first.
4.3 Payment. WRE shall pay for Products purchased hereunder as follows: 50% of
the price of Products [(including applicable bonuses)] shall be paid at ordering
and 50% of the price shall be paid upon the acceptance date (the "Acceptance
Date"), which shall be within three (3) days after the products are delivered
to WRE's office in Eindhoven.
4.4 Distribution of Scarce Products. When introducing new Products (including
upgrades) or in the event of a temporary shortage of existing Products, WRI
shall use reasonable efforts to distribute such scarce Products reasonably
and fairly to licensors.
Article 5. WRE's Pricing.
5.1 Sales Price. WRE is entitled to offer and sell the ERGOS(r) System and
related Products for prices determined by WRE in its sole discretion and is
not bound to WRI's list prices.
5.2 Royalty and License Fees to Third Parties. WRE may determine the
royalties/license fees payable by the sub-dealers and/or buyers, if any, in
its reasonable discretion, provided that WRE is bound to exercise its rights
in this respect with due diligence.
Article 6. Sales promotion.
6.1 Regular Promotion. WRE will regularly conduct advertising campaigns by
the effective means of its choice. Subject to clause 6.2, the extent to which
and the way in which such advertising campaigns shall be conducted and
continued shall be at WRE' reasonable discretion.
6.2 Promotional Materials. WRE shall prepare, fabricate and use such
promotional materials as are appropriate to promote, market, sell and
sublicense (as applicable) the ERGOS(r) System in the Territory provided
that such materials (i) are materially consistent with the promotional
materials used by WRI, (ii) comply with all applicable laws and regulations,
and (iii) will not injure, impair or diminish the value of WRI or the ERGOS(r)
tradename, trade mark or reputation. WRE shall provide WRI copies of all
such promotional materials. WRI may request changes provided that WRE may
elect not to make such revisions in its reasonable discretion. To assist WRE
in its promotional efforts, WRI shall provide WRE copies of WRI's English
language promotional materials free of cost.
6.3 Limit on Authority. WRE has no authority to make and shall not make any
statements or representations concerning ERGOS(r) System that exceed or are
inconsistent with the specifications provided by WRI. In business dealings
with other dealers of WRI and when selling the products of WRI to the public,
WRE shall refrain from any such practices as are detrimental to the reputation
and the good-will of WRI.
Article 7. Maintenance and repairs.
7.1 Maintenance. During the term of this Agreement, WRE shall perform the
maintenance and service activities on every ERGOS(r) System in the Territory
during the term hereof. WRE may charge such rates at is deems appropriate in
connection with performing such services.
7.2 Availability of WRI. WRI shall provide technical service and maintenance
and warranty support telephonically (including through modem transmissions)
and shall make technical services representatives available to WRE
telephonically at mutually agreeable times. Such services shall be rendered
free of charge, unless otherwise agreed to by the parties or the contrary
should emanate from the nature of the service rendered.
Article 8. Warranty.
8.1 Product Warranties; WRI's and WRE's Obligations.
a. Defects. WRI hereby warrants that each properly installed, unmodified
ERGOS(r) System in the Territory shall be free of defects attributable to
WRI which adversely affect ERGOS(r) System performance (the "Warranty") for
a period of thirteen (13) months from the date of shipment from WRI's Tucson,
Arizona warehouse. If WRI replaces an entire ERGOS(r) System pursuant to
Section 8.1(a), the Warranty period shall run for one (1) year from the
Acceptance Date of the replacement system. WRI does not warrant that the
operation of any ERGOS(r) System or component thereof will be uninterrupted
or that any ERGOS(r) System will be error free.
b. Notification and Demonstration of Non-Conformance. To make a warranty
claim, WRE must notify WRI in writing within thirty (30) days after
discovering or being informed of the alleged defect. WRE acknowledges and
agrees that no warranty claim may be made with respect to any given ERGOS(r)
System more than thirteen (13) months after the shipment date from WRI's
warehouse. In addition to the claim requirements set forth above, for WRI
to honor a warranty claim, WRE or a sublicensee must demonstrate the alleged
defect or nonconformance to WRI's reasonable satisfaction.
c. Providing Warranty Service. WRE shall provide all Warranty service
(with WRI's support pursuant to clause 7.2) that is required during the term
hereof; provided that WRI shall reimburse WRE for WRE's actual cost of
providing such service (including the actual cost of any necessary
replacement parts).
8.2 Extended Warranty Agreements. WRI and WRE may enter into a separate
extended maintenance and warranty agreement. WRI agrees, that if such an
agreement is entered into, the services to be rendered under such maintenance/
extended warranty agreement shall not exceed the lowest rate charged to any
third party for similar contracts.
Article 9. Product Changes.
WRE shall have no right to independently change or modify any ERGOS(r) System
model; provided WRE may require WRI to modify the ERGOS(r) System to the
extent required to make such products comply with governmental standards
within the Territory.
WRI shall bear the cost of such modifications if such costs are equal to two
percent (2%) or less of the manufacturing cost (agreed to be US$50,000) and
WRE shall bear the modification costs if such modification costs exceed two
percent (2%) of the manufacturing cost.
Article 10. Carrying on business.
10.1 WRE Representations. WRE represents and warrants that it will (i)
properly install all ERGOS(r) Systems in the Territory, (ii) properly train
representatives of all ERGOS(r) System purchasers (and other users) (iii)
perform all service and maintenance obligations to third parties that it has
and will subsequently acquire, and (iv) supervise all commercial agents and
sub-dealers and use its best efforts to ensure that such parties comply with
all terms of their agreements with WRE and to perform all obligations they
have to WRE and/or WRI. WRE shall further use its best efforts to ensure
that (i) no party other than WRE installs, services or performs maintenance
on any ERGOS(r) System in the Territory, (ii) all ERGOS(r) Systems and the
environment in which they are operated are properly maintained, (iii) all
evaluations performed on the ERGOS(r) Systems installed in the Territory
are conducted by evaluators certified by WRE in accordance with WRI's
standards for such certification, and (iv) the ERGOS(r) System Software is
not combined with any other software.
10.2 Independent Risk. Except as specifically set forth herein, WRE shall
carry on business fully at its own risk. Any operating costs and/or expenses
shall be payable by WRE without an obligation for WRI to reimburse the same;
any operating profits shall be in its favor.
10.3 Safeguarding Interests. Each party shall safeguard the goodwill and
reputation of the other party with appropriate diligence and in good faith.
10.4 No Authority. Neither party shall be a representative of the other
party in whatever respect. Each party shall therefore have no power
whatsoever to enter into any commitment on behalf of the other party;
each party should refrain from any act from which third parties might infer
such power.
Article 11. Trademarks and Use.
11.1 Use of Trademark. WRE may and shall use in the Territory and in
connection with the ERGOS(r) System those WRI trade names, trademarks and
logos used by WRI (including the "ERGOS" trademark ). WRE not imply that it
is WRI or is a part of WRI nor use any WRI trade name or trademark as part
of WRE's business name. WRE acknowledges and agrees that "ERGOS(r) " is
proprietary to WRI and embodies valuable trademarks, copyrights and trade
secrets of WRI. WRE warrants that its standard Terms of Sale and sublicense
shall prohibit endusers and sublicensees from using WRI's names and trademarks
expect as allowed pursuant hereto.
11.2 Protection from Copying. In addition to any other obligations it has
hereunder, WRE shall use all due care to protect the ERGOS(r) System and the
components thereof from unauthorized copying, dissemination, disclosure or
decompilation or other unauthorized use. The title and full ownership rights
to the name ERGOS(r) and any other trade name or trademark of WRI used by WRE
shall remain with WRI.
11.3 Card-Index System. WRE shall be obliged to keep a card-index system with
the names and addresses of all relations, buyers and intending buyers of the
products of WRI within the Territory of WRE. WRI shall be obliged to
forward and make available to WRE updates regarding the ERGOS(r) System,
such as but not limited to manuals and training modifications.
11.4 Information to WRI. WRE shall be obliged to supply WRI forthwith and
completely with any information desired by the latter relative to the dealership
and to promote in general the interests of WRI in accordance with the
instructions of WRI on the understanding that the goodwill shall be part of
the business of WRE at all times, the latter therefore not being obliged to
allow WRI to inspect the card-index system referred to in clause 11.3 during
the first three (3) years of the term of this Agreement; provided that (i)
immediately following any buyout of this Agreement pursuant to Section 1.10
and (ii) during the period after July 31, 2000, WRE shall allow WRI at
reasonable times and upon reasonable notice to inspect and copy all of such
card-index system.
Article 12. WRI Representations.
12.1 Representations and Warranties as of the Effective Date. WRI represents
and warrants to WRE that as of the Effective Date:
a. The ERGOS(r) System does not infringe upon or violate any United States or
European copyright, trade secret or other intellectual property right;
b. It has the full right, power and authority to grant the rights to the
ERGOS(r) System granted hereunder and to enter into and perform its
obligations under this Agreement;
c. Except as disclosed to WRE, (A) WRI owns, licenses or otherwise has the
rights to the software modules which in the aggregate comprise the ERGOS(r)
System Software, (B) the intellectual property comprising a portion of the
ERGOS(r) System is free and clear of all liens, charges, and encumbrances,
and (C) no party or entity has any claim of ownership to the portions of the
ERGOS(r) System Software embodying the ERGOS(r) expression of WRI's Physical
Capacities Evaluation model;
d. WRI has not granted to any third party any license or rights to the
ERGOS(r) System or any component thereof directly in respect of any country
comprising a portion of the Territory; and
e. To WRI's actual knowledge, there is no pending litigation or claim by a
third party pursuant to which such third party claims that the ERGOS(r)
System infringes any intellectual property right of such third party or that
such party is being deprived of a lawful right to manufacture, distribute,
license, sell or lease the ERGOS(r) System.
WRI makes no claim of ownership or other representation with respect to
generic modules utilized for access to DOS(r) operating systems and ERGOS(r)
System Hardware.
12.2 Other Representations. WRI further represents and warrants to keep WRE
informed as to any problems encountered with the ERGOS(r) System and its
components and any proposed resolutions for those problems, and to
communicate promptly to WRE any and all modifications, design changes or
improvements of the ERGOS(r) System and its components suggested by any
customer, employee or agent. WRI further agrees to cooperate with WRE to
determine who owns any such suggested modifications, design changes or
improvements of the ERGOS(r) System and its components.
Article 13. Indemnification and waiver.
13.1 Indemnification. Each party shall indemnify and hold the other harmless
from all costs, damages, liabilities and reasonable attorneys' fees resulting
from third-party claims in contract, tort or otherwise relating to or arising
from the other party's breach of its representations, warranties or covenants
contained herein.
13.2 Waiver. Any failure on the part of any party hereunder to comply with
any of their obligations, agreements or conditions hereunder may be waived in
writing by the other party to whom such compliance is owed; however, such
waiver does not operate to effectuate a waiver on any other occasion.
Article 14. Obligations Upon Termination of Agreement.
14.1 Existing and In Process Orders. After termination of this Agreement,
WRE shall remain empowered to complete all orders pending at the date of
termination and shall have sixty (60) days to conclude any order which is in
the course of negotiation. WRI shall be obliged to cooperate in making such
deliveries.
14.2 Service Agreements. At termination, WRI shall have the right (but not
the obligation) to assume all outstanding service and warranty agreements of
WRE; provided that if WRI does not assume such obligations WRE may perform
all the maintenance and repairs regarding the ERGOS(r) Systems in the
Territory and WRI shall cooperate in enabling WRE to do so. If WRI takes over
WRE's maintenance and repair obligations, (i) WRE shall provide WRI all
information necessary for WRI to perform such obligations and (ii) WRI shall
indemnify WRE for all and any claims arising out of the same which claims
arise from events occurring after the termination date. WRE hereby
indemnifies WRI for all events arising in connection with such maintenance
and repair relationships prior to the termination date.
14.3 Cease Sales. Except as provided in clause 14.1, immediately following
termination, WRE immediately cease marketing the ERGOS(r) System, selling
the ERGOS(r) System Hardware and using, distributing and sublicensing the
ERGOS(r) System Software.
14.4 Return of Materials. Immediately following termination, WRE must at its
own cost and expense, return to WRI the original and all copies of the ERGOS(r)
System Software and any software Upgrades, the Documentation, promotional
materials and such other materials delivered free of charge after the
Effective Date. WRE hereby authorizes WRI to have such objects removed at
WRE's expense, regardless of where such objects are to be found.
14.5 Removal of Names. Immediately after termination of this Agreement, WRE
shall remove all names and inscriptions indicating a relationship with WRI
no matter how affixed, and to stop every publicity in regard to the products
of WRI.
14.6 No Deemed Renewal. Acts performed by parties after termination of this
Agreement shall not be interpreted as a renewal of the dealership or this
Agreement.
14.7 No Other Termination Payments. WRE acknowledges and agrees that
WRI shall not be obligated to pay any payment or fee in connection with any
termination of this Agreement by WRI other than as required in Section 1.10(a).
Article 15. Notices.
All notices and other communications hereunder shall be in writing and shall
be deemed to have been given if delivered in person or sent by pre-paid,
first class, registered or certified mail return receipt requested or by
international courier as follows: to WRI at 2341 S. Friebus, Suite 14,
Tucson, Arizona 85713, and to WRE at 139 Pastoriestraat, 5612 EK Eindhoven,
the Netherlands. Either party may change their notice address by written
notice to the other party as provided in this article.
Article 16. Complaints.
Complaints regarding errors in invoicing or the forwarding of products are
to be notified to WRI by WRE within five (5) days after receipt of the invoice.
Article 17. Reports.
WRE shall be obliged to keep books and records properly.
Article 18. Choice of jurisdiction and choice of law.
18.1 Jurisdiction. Any disputes between parties emanating from this
contract or being connected therewith, direct or indirect, shall be judged
by the competent judge in the Netherlands.
18.2 Choice of Law. Only the Netherlands law shall be applicable to this
Agreement. The Purchase and Sales Agreement will be governed by and based
on the basis of Arizona law.
Article 19. Amendments
This Agreement may solely be amended in writing and only after the mutual
agreement of the parties affected thereby.
Article 20. Survival of Representations and Warranties; Pre-Existing ERGOS(r)
Systems.
20.1 Representations and Warranties. The representations, warranties,
covenants and agreements contained herein shall survive the execution and
delivery of this agreement during the term hereof, except for the
indemnification obligations which shall survive for a period of three (3)
years following termination or expiration of the Agreement.
20.2 Pre-Existing ERGOS(r) Systems. Notwithstanding anything to the contrary
in this Agreement, the terms hereof in no way affect, limit or add to the
parties rights and obligations in connection with the Pre-Existing ERGOS
Systems. For [purposes of this Agreement, "Pre-Existing ERGOS(r) Systems
"means those ERGOS(r) Systems and the components thereof that are located in
the Territory on the Effective Date.
Article 21. Proprietary Rights; Confidentiality.
21.1 Protected Works. WRE acknowledges that (i) the ERGOS(r) System Software
including its associated report formats, screen displays and menu features
constitute copyrighted works protected by federal and international copyright
laws, including without limitation the Copyright Act and (ii) the ERGOS(r)
System Software and the Documentation contain proprietary legends and
restrictive notices to such effect. WRE shall not take any action or permit
any of its personnel or agents to take any action that would infringe upon
WRI's proprietary rights, including copying the ERGOS(r) System Software or
the Documentation (except as expressly authorized herein) or removing or
modifying any such proprietary legends or restrictive notices contained or
included in the ERGOS(r) System or the Documentation.
21.2 No Transfer. No title to or ownership of the ERGOS(r) System Software
or Documentation or rights in patents, copyrights, trade secrets or other
intellectual properties in the ERGOS(r) System or Documentation or in any
trade or service mark, trade name, logo or other proprietary right of WRI is
transferred to WRE by virtue of this Agreement. All copies of the ERGOS(r)
System Software and Documentation WRI provides are and shall remain WRI's
property and are subject to the terms and conditions of this Agreement.
21.3 Confidential Treatment. WRE acknowledges that (i) the ERGOS(r) System
Software (a) contains valuable trade secrets, and (b) is made available only
in object code format and only on the condition that it will not be transformed
into any other form, reverse compiled, reverse assembled, used or distributed
by WRE other than as provided herein, and (ii) the ERGOS(r) System Hardware
contains valuable trade secrets and is made available only on the condition
that WRE will not disassemble or otherwise re-engineer such hardware and
equipment and shall not manufacture, assemble or otherwise create hardware
or equipment which may be used for any purpose for which the ERGOS(r) System
Hardware may be used. WRE shall (x) treat as strictly confidential the trade
secrets in the ERGOS(r) System, the components thereof (including without
limitation the ERGOS(r) System Software and the Documentation and all
information relating thereto and all fees, discounts and other terms of this
Agreement), and (y) with respect to WRE's employees, consultants, agents and
other third parties, satisfy its obligations under this Section 21.3 to the
same extent WRE protects its own confidential and proprietary information,
but in no event using less than proper care and reasonable safeguards.
21.4 Cooperation Regarding Research. WRI pledges to fully cooperate with
WRE in connection with educational, governmental and insurance industry
studies and investigations to establish the reliability and predictability of
the ERGOS(r) System; provided that all educational, governmental and
industrial entities allowed to do research must agree to keep WRI's
proprietary information strictly confidential.
Article 22. Warranty Disclaimer.
The warranties set forth in clause 8.1 are the only warranties made by WRI.
WRI makes no other warranties, express or implied.
Article 23. No Consequential Damages.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES OF THAT PARTY WHETHER OR NOT SUCH PARTY HAS
BEEN APPRISED OF THE POSSIBILITY OF SUCH DAMAGES EXCEPT FOR CONSEQUENTIAL
DAMAGES WHICH A PARTY BECOMES OBLIGATED TO PAY TO A THIRD PARTY PURCHASER OR
THE SUBJECT OF AN ERGOS(r) EVALUATION WHICH DAMAGES RESULT DIRECTLY FROM THE
ACTIONS OR INACTIONS OF THE OTHER PARTY.
Article 24. Miscellaneous.
24.1 Additional Representations of WRE. WRE hereby represents, warrants and
agrees:
a. To keep WRI informed as to any problems encountered with the ERGOS(r)
System and its components and any proposed resolutions for those problems,
and to communicate promptly to WRI any and all modifications, design changes
or improvements of the ERGOS(r) System and its components suggested by any
customer, employee or agent. WRE further agrees to cooperate with WRI to
determine who owns any such suggested modifications, design changes or
improvements of the ERGOS(r) System and its components.
b. That, to the best of its knowledge after due inquiry, neither this
Agreement (or any term hereof) nor the performance of or exercise of rights
under this Agreement, is restricted by, contrary to, in conflict with,
ineffective under, requires registration or approval under, or affects
WRI's proprietary rights (or the duration thereof) under, or will require
any termination payment or compulsory licensing under, any law or regulation
of any organization, country, group of countries or political or governmental
entity located within the Territory.
c. To comply with the U.S. Foreign Corrupt Practices Act (regarding, among
other things, payments to government officials) and all export laws and
restrictions and regulations of the Department of Commerce or other United
States or Foreign agency or authority, and not to export, directly or
indirectly, or allow the export or reexport of the ERGOS(r) System or
component thereof without first complying with such laws.
d. Not to use (i) any unauthorized promotional materials, (ii) any materials
which do not comply with all applicable law, or (iii) any materials which may
injure, impair or diminish the value of the "ERGOS(r)" trademark or any other
WRI trademark, trade name or reputation without WRI's prior written consent,
advertise, promote or take other action or use any medium of advertising or
promotion with respect to the ERGOS(r) System or any other product which may
be sold or licensed in connection therewith.
24.2 Attorneys' Fees. If any party commences an action or arbitration against
another party to enforce or interpret any of the terms hereof, the losing or
defaulting party shall pay to the prevailing party as determined by the
court or arbitration panel all costs and expenses, including reasonable
attorneys' fees, incurred in connection with the prosecution or defense of
such action or arbitration.
24.3 Force Majeure. If either party is prevented from performing any
obligation under this Agreement by reason of fire, explosion, casualty,
accident, flood, hurricane, war, civil commotion, labor dispute, acts of
God, law, order or decree of any governmental entity, then such party shall
be excused from performance under this Agreement to the extent and for the
duration of such prevention, provided it notifies the other party in writing
of such prevention. Except as expressly set forth in this Section 24.3,
nothing in this Section 24.3 shall relieve either party of its rights or
obligations under the other terms and conditions of this Agreement.
24.4 Release. WRI hereby abandons and releases all claims it has against
WRE for events occurring prior to the Effective Date and WRE hereby abandons
and releases all claims it has against WRI for events occurring prior to the
Effective Date.
Agreed upon and drawn up in two copies and signed on July 18, 1997 at the
respective offices of the parties as indicated above.
WORK RECOVERY EUROPA BV, WORK RECOVERY, INC.
a Dutch corporation a Delaware corporation
By: ____________________ By: _________________
Rinus Persons, Director Dorcas Hardy
Chief Executive Officer
By: ____________________
Koos Loose, Director
Exhibit 10.36
July 16, 1997
Mr. Michael S. Hovsepian, President
Functional Capacity Evaluation Technologies, Inc.
75 Milford Road
Hudson, Ohio 44236
Dear Mr. Hovsepian:
Work Recovery, Inc. (WRI) wishes to engage Functional Capacity Evaluation
Technologies, Inc. (FCE Technologies) to actively participate in the sales
and marketing of WRI's ERGOS(r) system over the ninety (90) day period
beginning July 21, 1997 ("the Initial Engagement").
The purpose of the Initial Engagement is (1) to have FCE Technologies assist
WRI in obtaining orders and (2) to allow FCE Technologies to gain first hand
market place experience which may prove useful to WRI in discussions with
potential new investors. If the results of the Initial Engagement are
considered positive by the parties and sufficient capital is raised to fund
WRI's forward activities, then the parties will, in good faith, attempt to
negotiate a long term contract. If such a contract is not reached for any
reason, then the parties mutually agree that they will have no continuing
obligations to each other except with respect to the provisions of Section 7.
The balance of this letter summarizes the terms and conditions of the Initial
Engagement.
1. FCE Technologies will report to Edward M. Young, WRI's Chief Operating
Officer (COO).
2. FCE Technologies will have responsibility for managing WRI's sales and
marketing activities. WRI's current sales personnel, Eric Nauhaus, Herb
Schultz, and Robert Helmer, will report to FCE Technologies. These persons
will remain WRI personnel, and WRI will bear all costs and will retain all
responsibilities associated with their employment and activities on behalf
of WRI and FCE Technologies. Prior to the engagement, WRI will secure a
general release from these employees in the form as attached Exhibit A.
During the engagement period, all interactions with potential customers by
WRI personnel, both managed by FCE Technologies and not managed by FCE
Technologies, will be the responsibility of, and will be conducted
exclusively through FCE Technologies.
3. WRI will, at its expense, make additional personnel and material available
to FCE Technologies to support the sales and marketing effort. WRI will inform
these people that it is contemplating a long-term relationship with FCE
Technologies.
4. It is understood by the parties that FCE Technologies will not have any
decision making authority with regards to the operation of WRI and that all
matters pertaining to the operation of WRI are the responsibility of the
officers and directors of the Company, including, but not limited to, all
financing decisions, product pricing decisions, hiring and firing of all
employees and entrance into and termination of material contracts.
5. FCE Technologies agrees to provide additional consultation and advice with
respect to WRI's operations, including technical support, manufacturing and
research and development.
6. During the engagement, FCE Technologies will submit written reports, not
less than bi-weekly, on the status of its activities, including but not limited
to information on sales and sales prospects, pricing or other market concerns
and competitive activities. These reports will be submitted to WRI and to its
principal lenders, Allsup, Inc. and Quest Trading, Inc.
7. During the term of this Initial Engagement, FCE Technologies may have
access to non-public proprietary and/or confidential information with respect
to WRI's products, promotional materials, current and prospective clients, and
business and financial strategies. WRI will identify to FCE Technologies in
writing any such material that it considers of a confidential or proprietary
nature including WRI's patents, copyrights and other rights and information
relating to the ERGOS(r) technology ("ERGOS(r) Technology") ("Proprietary
Information"). FCE Technologies agrees that, during the term of this Initial
Engagement, such information is proprietary and confidential and further
agrees not to use such information for any purposes other than promoting the
sales of WRI products. Upon termination of the engagement, FCE Technologies
will return to WRI any unused materials that it receives in connection with
carrying out its activities and all copies of any Proprietary Information.
At all times during and for two years following the termination of the
Initial Engagement, FCE Technologies covenants and agrees to hold in
strictest confidence, not disclose to any third party or use any Proprietary
Information without the express written consent of WRI or the lawful owner of
the ERGOS(r) Technology.
This covenant and agreement shall survive the Initial Engagement and continue
to be binding upon FCE Technologies after the expiration or termination hereof,
whether by passage of time or otherwise so long as the Proprietary Information
shall remain Proprietary Information. Notwithstanding the foregoing, the
foregoing covenant and agreement shall run with the ERGOS(r) Technology and
any person who becomes the lawful owner of the ERGOS(r) Technology shall have
the right to waive all or any portion of FCE Technologies' obligations
hereunder.
The receiving party shall have no obligations or restrictions with respect to
any Proprietary Information which FCE Technologies can prove:
a) has come into the public domain prior to, or after the disclosure thereof
and in such case through no wrongful act of the receiving party; or
b) has been lawfully received from a third party without restrictions or
breach of this Agreement; or
c) is independently developed in good faith by employees of FCE Technologies
who did not have access to the Proprietary Information; or
d) is approved for release or use by written authorization of WRI; or
e) is not properly designated or confirmed in writing as proprietary.
8. Any claims against FCE Technologies by WRI must be based on proof of gross
negligence by FCE Technologies. FCE Technologies will make its reasonable best
efforts to represent WRI and its products in an accurate manner.
9. When asked, FCE Technologies will present itself to the marketplace as a
consultant to WRI and will answer questions from the customer in an honest
and direct manner consistent with its knowledge of the facts.
10. WRI will retain full responsibility for ensuring that any products sold
are delivered in a timely manner, free of defect, and for providing
installation, training, technical support and service to purchasers.
11. WRI agrees to hold FCE Technologies, its employees officers, directors
and investors harmless for any loss or damage attributable to WRI or its
products and will indemnify same for any claims made by WRI's customers,
stockholders, officers, directors or creditors unless such claims are proven
to be solely the result of gross negligence on the part of FCE Technologies.
WRI will maintain sufficient general and product liability insurance, will
name FCE Technologies a named insured and will deliver to FCE Technologies
evidence of coverage. In addition, WRI will take such actions as necessary
to name FCE Technologies, its directors, officers and employees, as named
insured parties under WRI's directors and officers insurance policy and will
delivery to FCE Technologies evidence of coverage.
12. As a condition precedent for FCE Technologies to enter into this Initial
Agreement, WRI shall cause Allsup, Inc. and Quest Trading, Inc. to enter into
a form of waiver attached as Exhibit B.
13. During the term of this Initial Engagement, WRI will pay FCE Technologies
a monthly retainer, in advance, according to the following schedule: $60,000
upon commencement and $30,000 each 30 days thereafter. In addition, FCE
Technologies will bill WRI weekly for reasonable travel and other expenses
incurred by FCE Technologies sales personnel, including any pre-approved
consulting expenses to third parties and customer travel to demonstration
sites. WRI will reimburse FCE Technologies within five (5) days of
submission of invoices. FCE Technologies will also receive a commission in
the amount of two-and-a-half percent (2.5%) of the sales price for any
ERGOS(r) system sold to an existing prospect, as defined in Exhibit C (to be
provided upon execution of this agreement), and five percent (5%) of the
sales price for any system sold to a lead generated by FCE Technologies.
Any commission earned will be paid within five (5) days of receipt of funds
from the customer.
14. Either party may terminate this agreement within ten (10) days written
notice, or immediately by WRI should the company seek protection under the
Bankruptcy Code. Upon such termination and payment of all amounts owed by
WRI to FCE Technologies, all obligations between the parties shall end,
except for the covenants and agreements of FCE Technologies contained in
Paragraph 7.
15. FCE Technologies understands that WRI is attempting to raise additional
investment capital from one or more sources, and FCE Technologies agrees to
reasonably assist WRI by providing information generated from sales
activities for the purpose of developing marketing and/or business plans,
allowing WRI to discuss the role of FCE Technologies in the management of
WRI (subject to the prior approval of FCE Technologies) and, if necessary,
meeting with prospective investors. However, FCE Technologies shall not be
obligated to be a solicitor of funds from any source. WRI agrees to hold
FCE Technologies harmless from any claims arising from such financing
activities.
16. FCE Technologies agrees to devote reasonable time and effort to the tasks
identified in the initial paragraph of this letter, and further agrees that the
level of effort during this Initial Engagement will be not less than four full
time equivalents (FTEs). It is understood by WRI that employees of FCE
Technologies who will be engaged in the execution of this Initial Engagement
have other responsibilities outside of FCE Technologies for which they are
responsible.
17. It is specifically understood by the parties that all decisions regarding
the future employment of WRI employees will be the sole responsibility of WRI,
and FCE Technologies makes no demands as a condition of this Initial Engagement
with regard to any WRI employees.
18. As a condition to enter into this Initial Engagement, FCE Technologies
will require the unanimous consent of the Board of Directors of WRI
authorizing entry into it and a form of waiver from the CEO and COO, as
attached in Exhibit D.
This letter of engagement represents the full understanding between the
Parties, and may only be amended or modified by the written consent of the
Parties.
Agreed to this 16 day of July, 1997, by
WORK RECOVERY, INC. FCE TECHNOLOGIES, INC.
/s/Dorcas R. Hardy /s/ Donald Broomfield
Name Name
Title Chief Executive Officer Title Treasurer
The Board of Directors of Work Recovery, Inc. hereby approves the Initial
Agreement with FCE Technologies, Inc. as attached hereto:
/s/ Dorcas R. Hardy July 16, 1997
Dorcas R. Hardy Date
/s/ John E. Affeldt July 17, 1997
John E. Affeldt, M.D. Date
/s/ Julian De La Rosa July 19, 1997
Julian De La Rosa Date
/s/ Renato DiPentima July 17, 1997
Renato DiPentima Date
/s/ William R. Sauey July 18, 1997
William R. Sauey Date
/s/ Edward M. Young July 16, 1997
Edward M. Young Date
Exhibit 99.1
Work Recovery, Inc.
"The Solution Company"
Press Release
Contact: Jodi Stefaniak
Phone: 520-322-6634
Symbol: WRKE
WORK RECOVERY RESTRUCTURES OPERATIONS
Tucson, AZ, July 31, 1997 -- Work Recovery, Inc. (WRI) announced a restructuring
of its operations to better focus upon sales and marketing of its unique
ERGOS(r) functional capacity evaluation technology which evaluates an
individual's capacity to perform work. A key element is the short-term
engagement of Functional Capacities Evaluation Technologies, Inc. (FCE
Technologies), to assist in the marketing and sales of the ERGOS(r) system.
FCE Technologies is a management and consulting firm which provides services
to businesses in the field of technology-based products. Principals of FCE
Technologies specialize in the development of new health care product businesses
and improvement of existing medical equipment businesses, and have recently
expanded into the functional capacity assessment field. It is hoped that
the contract with FCE Technologies will enhance Work Recovery's sales and
marketing efforts. Work Recovery believes that the skills and expertise of
FCE Technologies in the health care technology arena are particularly suited
to the ERGOS(r) and Work Recovery.
Work Recovery also announced the revitalization of its sales and marketing
efforts in Europe. A new definitive agreement was signed with Work Recovery
Europa BV, a Netherlands corporation, to exclusively sublicense and
distribute the ERGOS(r) system within Europe. "With the emphasis of European
countries upon streamlining disability and workers' compensation costs, I
believe ERGOS(r) will be a valuable tool for benefit determination and
adjudication. Our new agreement provides another opportunity for ERGOS(r) to
become the international standard of functional capacity testing," stated WRI
President and Chief Executive Officer Dorcas R Hardy.
This press release contains the opinions of management regarding the future
prospects of Work Recovery. There can be no assurance that Work Recovery will
be successful in accomplishing the objectives or goals outlined herein. This
press release contains forward-looking statements as contemplated by the
Securities Litigation Reform Act of 1995 and actual results may differ
materially from the opinions and other forward looking statements contained
herein. The company faces risks, uncertainties and other factors which are
discussed in greater detail in the Management's Discussion and Analysis section
of Company's Form 10-K for the year ended June 30, 1996.
2341 S. Friebus Ave., Suite 14 Tucson, AZ 85713 Telephone 520-322-6634
