FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
For the quarter ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _________
Commission file number 01-18695
WORK RECOVERY, INC
(Exact name of registrant as specified in its charter)
Delaware * 86-0848910 *
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of
1934during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
* Note: As part of the bankruptcy reorganization plan, the Registrant's
corporate domicile was moved on February 1, 1997 from Colorado to Delaware.
The IRS Employer Identification Number of the Colorado corporation is
68-0165800.
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No___.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Registrant has only one class of common stock outstanding. The Company estimates
that, on February 1, 1997, the Effective Date of the Plan of Reorganization,
there are approximately 17,675,234 shares of New Common Stock issued or reserved
for issuance pursuant to the Amended Plan.
Before the Effective Date of the Plan of Reorganization, the Registrant had
only one class of common stock outstanding of which approximately 45,918,623
shares were outstanding as of January 31, 1997.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) 1.11 Order Confirming Plan of Reorganization
10.34 Loan Agreement dated January 30, 1997 between the Company, Allsup,
Inc. and Quest Trading, Inc.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
<PAGE>
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 thereunto duly authorized.
WORK RECOVERY, INC.
(Registrant)
/s/ Dorcas R. Hardy
Dorcas R. Hardy, Chief Executive Officer (Principal Executive Officer)
Date: March 14, 1997
/s/ Jerald L. Fenstermaker
Jerald L. Fenstermaker, Acting Chief Financial Officer (Principal Financial and
Accounting Officer)
Date: March 13, 1997
Exhibit 1.11
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ARIZONA
In Re:
WORK RECOVERY, INC., a Colorado corporation, ) Case No. 96-01640-TUC-JMM
) Case No. 96-01641-TUC-JMM
Debtor. ) (Jointly Administered)
)
) Chapter 11
_____________________________________________)
)
)
In Re: ) ORDER CONFIRMING PLAN OF
) REORGANIZATION
WORK RECOVERY CENTERS, INC., an )
Arizona corporation, )
)
Debtor. )
_____________________________________________)
On the 25th day of November, 1996, came on for consideration the confirmation
of Debtors' Joint Amended Plan of Reorganization; and the Court having
considered the Plan of Reorganization, dated October 4,1996, and the
Modification of Plan, dated November 22, 1996, the oral modifications
announced in open court, and the Restated Amended Joint Plan of Reorganization,
dated November 26, 1996 (which restated plan is attached hereto as Exhibit 1
and hereinafter referred to as the "Restated Joint Plan"); and, having
considered the objections to the Restated Joint Plan, and having allowed the
withdrawal of the objections of Al Sabah Trading and Development Company PLC and
of Ladislav Beca, and having considered the argument of counsel and the evidence
presented,
THE COURT FINDS:
1. The Restated Joint Plan complies with the applicable provisions of the
Bankruptcy Code;
2. The proponents of the Restated Joint Plan have complied with the applicable
provision of the Bankruptcy Code.
3. The Restated Joint Plan has been proposed in good faith and not by any means
forbidden by law.
4. Any payment made to to be made by the Debtors for services or for costs and
expenses in or in connection with these cases, or in connection with the
Restated Joint Plan and incident to the cases, has been approved by, or is
subject to the approval of the Court as reasonable. The Court specifically
finds that the New Common Stock to be issued to the Team for New Management
LLC pursuant to the terms of the Restated Joint Plan represents reasonable
compensation for services rendered in connection with these cases.
5. Debtors have disclosed the identity and affiliations of any individual
proposed to be serve, after confirmation of the plan, as a director or
officer of the Debtors and the successor the Debtors under the Plan, and
their appointment and continuance in such offices are consistent with the
interests of creditors and equity security holders and with public policy.
Debtors have disclosed the identity of insiders who will be employed by the
Reorganized Debtors and the nature of their compensation.
6. The rates charged by Debtors are not subject to an governmental regulatory
commission.
7. Each holder of a claim or interest has accepted the Plan or will receive
or retain under the Plan property of a value, as of the Effective Date of the
Plan, that is not less than the amount that such holder would receive or retain
if the Debtor were liquidated under chapter 7 of the Code on such date.
8. Each class of claims or interests has either accepted the Restated Joint
Plan or is not impaired under the Restated Joint Plan, except for Class 2A.
9. The Restated Joint Plan provides for payment in full, on the Effective Date,
of all administrative and priority claims and expenses.
10. At least one class of claims impaired under the Restated Joint Plan has
accepted the Restated Joint Plan, without consideration of acceptances by
insiders.
11. Confirmation of the Restated Joint Plan is not likely to be followed by
liquidation, or the need for further financial reorganization, of the Debtors.
12. All fees required to be paid pursuant to Section 1930 of title 28 have been
paid or shall be paid as of the Effective Date.
13. Debtors are not obligated under an retiree benefit plans.
14. With respect to Class 2A, the holder of such claim shall receive, on or
before the Effective Date, cash in the full amount of its claim together with
any and all interest, fees and expenses allowable under section 506(b) of the
Bankruptcy Code, which payment constitutes the indubitable equivalent of such
claim.
15. A discount rate of forty percent (40%) is a reasonable discount rate to
apply to the value of New Common Stock distributable on account of the Class
2E Claims owned by Allsup and to be exchanged for Allsup's post-petition loan
because such stock will be restricted.
16. The likely fair market value of a share of New Common Stock after the
Effective Date is $2.50.
17. Thomas Brandon, and his affiliates and insiders holding common Stock in
Debtors, have been guilty of inequitable conduct and have obtained their shares
in Debtors through inequitable conduct.
18. The Restated Plan provides for the issuance of warrants to certain
interest holders, and such issuance is in exchange for an interest in Debtors.
19. The treatment of each class of claims and interests is summarized in
Exhibit 2, attached hereto. Such exhibit is merely a summary and, in the
event of a conflict between the terms of such exhibit and the terms of the
Joint Restated Plan, the terms of the Plan shall control.
IT IS HEREBY ORDERED
1. That the Restated Joint Plan of Reorganization is confirmed.
2. The objection filed by Robert Manard et al is overruled.
3 The Discount Factor, as defined in the Restated Joint Plan, shall be forty
percent (40%).
4. The Share Rate, as defined in the Restated Joint Plan, shall be $2.50.
5. The interests of Thomas Brandon, his affiliates and insiders, are
appropriately subordinated and separately classified in Class 4H.
6. The Reorganized Debtor, as defined in the Restated Joint Plan, shall act as
Disbursing Agent.
7. After the Effective Date of the Plan, Debtors and the Reorganized Debtor are
free to employ professionals and deal with their property without further
approval of the Court, except as provided in the Order or in the Plan.
8. The Court, following Confirmation of the Plan, shall retain jurisdiction
over the Plan and over Debtors' cases and proceedings or other matters arising
in or relating to Debtors' cases as provided in the Plan.
9. As of the Effective Date defined in the Plan, the Debtors are discharged
and released of any and all debts and Claims of any nature against Debtors
that arose at any time before the entry of this Order, including, but not
limited to, all principal and any and all interest accrued on such Claims,
except as provided in the Plan pursuant to section 1141(d)(1) of the Code. The
discharge of Debtors shall be effective, on the Effective Date, as to each
Claim, regardless of whether a proof of Claim therefor was filed, whether the
Claim is an Allowed Claim, or whether the holder thereof votes to accept the
Plan.
10. Except as provided for in the Plan, on the Effective Date, the Reorganized
Debtor shall be vested with all assets free and clear of all Claims, liens,
charges and other interests of creditors arising prior to the Petition Date.
11. The Debtors' assignment, conveyance and transfer of certain causes of action
set for in the Plan to the Claims Trust created by the Plan is expressly
approved and authorized, and the Trustee is vested with all the right, power
and authority to prosecute and settle these actions on behalf of the Debtors
and their estates.
12. Section 5 of the Securities Act of 1933 and any State or local law requiring
registration ofor offer or sale of securities or registration or licensing of
an issuer of, underwriter of, or broker or dealer in, securities, are not
applicable to the offer or distribution of warrants provided for in the
Restated Plan, by virtue of section 1145 of the Bankruptcy Code, or to the
offer of New Common Stock through such warrants pursuant to section 1145(a)(2)
of the Bankruptcy Code.
DATED: ______________________
________________________________________
United States Bankruptcy Judge
Exhibit 10.34
LOAN AGREEMENT
This Loan Agreement (this "Agreement"), is dated as of January 30, 1997,
between WORK RECOVERY, INC., a Delaware corporation ("Borrower"), and ALLSUP
INC., an Illinois corporation ("Allsup"), and QUEST TRADING, INC., a California
corporation ("Quest") ("Lenders").
Background Information
Work Recovery, Inc., a Colorado corporation ("WRIC") filed for relief
pursuant to Chapter 11 of Title 11 of the United States Code, Case No.
96-1640 TUC-LO, in the United States Bankruptcy Court for the District of
Arizona (the "Case").
WRIC confirmed a Restated Amended Joint Plan of Reorganization dated November
26, 1996 (the "Plan") pursuant to the bankruptcy court's order filed December
4, 1996. The "Effective Date" of the Plan, as defined therein, is scheduled to
be February 1, 1997. Borrower is the "Reorganized Debtor" under the Plan.
Borrower is in immediate need of a loan for working capital purposes, and will
require financing in order to make the payments required under the Plan.
Lenders have agreed to provide financing in an amount not to exceed $2,000,000
on the terms and conditions hereinafter set forth.
Agreements
NOW, THEREFORE, in consideration of the premises, the mutual covenants of the
parties hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. LOAN; BORROWING PROCEDURES.
1.1 Loan. Subject to the terms and conditions of this Agreement, Lenders
agree to make such advances to the Borrower as the Borrower may from time to
time request up to, but not including, December 31, 1997 (the "Maturity Date"),
in a total amount not to exceed $2,000,000 (the "Loan"). Lenders shall make the
initial advance on the first business day after the conditions specified in
Section 4.1 have been satisfied, and subsequent advances on the conditions
set forth in Section 4.2. Advances shall be in the minimum amount of $100,000.
1.2 Maximum Amount of Loan. The aggregate principal amount of the Loan shall
not exceed $2,000,000.
1.3 Loan Borrowing Procedures. Borrower shall give Lenders irrevocable
telephone notice of each borrowing of each requested advance no later than
11:00 a.m., Arizona time, on the same business day as the proposed date of
borrowing. Each such notice shall be effective upon receipt by Lenders and
shall specify the date and the amount of the borrowing, and, subject to the
terms and conditions hereof, Lenders shall make an advance to the Borrower in
such amount on the date specified in such notice. Borrower agrees that Lenders
may rely on any notice referred to in this Section that Lenders reasonably
believes to be made by a person authorized to request an advance, without
the necessity of independent investigation. Borrower shall confirm in writing
by facsimile the same business day any telephonic notice of borrowing. Each
request for an advance shall automatically constitute a representation and
warranty by the Borrower that, as of the date of such requested advance, all
conditions precedent to the making of such advance set forth herein shall be
satisfied. Each advance shall be funded on a business day. Communications
with Lenders with respect to matters described in this Section 1.3 shall be
made to:
Quest Trading, Inc.
Attention: Douglas Engmann
c/o Sage Clearing, L.P.
220 Bush Street, Suite 660
San Francisco, CA 94104
Telephone: (415) 781-7430
Facsimile: (415) 78104641
Allsup, Inc.
Attention: Mr. Jerry Fenstermaker
Chief Operating Officer
300 Allsup Place
Belleville, IL 62223-8626
Telephone: 618/236-5798
Facsimile: 618/236-5778
1.4 Pro-Rata Advances. Each Lender's portion of each advance shall be pro-rata
as determined by their Intercreditor Agreement.
2. NOTE; INTEREST; PAYMENTS.
2.1 Note; Loan Balances. The Loan shall be evidenced by one Promissory Note
in the form attached hereto as Exhibit "A" (the "Note"). The date and amount of
each individual advance hereunder and of each repayment of principal shall be
recorded by Lenders in their records. The outstanding principal balance of the
Loan reflected in Lenders' records from time to time shall be rebuttable
presumptive evidence of such outstanding principal balances as of such time.
The failure so to record such amount or any error in so recording any such
amount shall not limit or otherwise affect Borrower's obligations hereunder
or under the Note to repay the principal amount of the Loan, together with
all interest accruing thereon.
2.2 Interest Rate on Loan. Interest shall accrue at a rate equal to ten
percent (10%) per annum on the principal amount of the Loan outstanding from
time to time pursuant hereto from the date of advance until repaid or converted
(pursuant to Section 2.9 below).
2.3 Computation of Interest. Interest on the Loan shall be computed for the
actual number of days elapsed on the basis of a 365 or 366-day year, as the
case may be.
2.4 Maturity. The Loan, together with all accrued interest thereon, unless
converted pursuant to Section 2.9 below, shall be due and payable in full on
the Maturity Date, or upon notice from Lenders upon an Event of Default.
2.5 Prepayments. Borrower may from time to time prepay the Loan in whole or in
part without notice and without penalty.
2.6 Warrants Proceeds. Borrower shall use 50% of the proceeds of the sale
of Borrower's warrants pursuant to the Plan to pay the Loan. Borrower shall,
not later than the last business day of each month, apply 50% of all proceeds
received during that month from warrant sales with the exception of those
exercised by the Lenders, to the outstanding Note balance. Payment
application shall be as set forth in Section 2.8 below.
2.7 Interest on Principal Prepaid. Any prepayment of the Loan shall include
accrued and unpaid interest to the date of prepayment on the principal amount
being prepaid.
2.8 Making of Payments. All payments of principal or interest on the Note
shall be made to Lenders at the addresses set forth in Section 1.2 above or
such other address as Lenders shall designate in writing. Any payments, fees,
warrants or other distributions to Lenders shall be made pro-rata as provided
in the Intercreditor Agreement.
2.9 Conversion Option. The indebtedness evidenced by the Note (outstanding
principal and interest) shall, at each Lender's option, within 30 days after
the Maturity Date, be convertible into common stock of Borrower in an amount
equal to the outstanding Note balance plus unpaid interest and attorneys' fees
incurred in connection with the Loan described in this Agreement using as the
conversion rate the lesser of:
(a) the average of the daily closing prices of Borrower's common stock for
the 5 business days prior to each advance on the Loan; or
(b) the average of the daily closing prices of Borrower's common stock for the
5 business days after the Maturity Date.
3. COMMITMENT FEES. Borrower shall pay the following commitment fees:
3.1 Initial Options. Upon execution of the documentation for the Loan,
Borrower shall issue to Lenders options to purchase, in the aggregate,
100,000 shares of Borrower common stock at a price equal to 60% of the
average daily closing prices for Borrower's shares for the first 5 business
days beginning February 3, 1997.
3.2 Additional Options. Lenders shall be issued options to acquire 75,000
shares of Borrower's common stock the first time that the average outstanding
principal balance of the Loan equals or exceeds $500,000;$1,000,000;$1,500,000
and $2,000,000 during any calendar month (as a result, the maximum number of
shares of Borrower's common stock subject to such options is 300,000). The
exercise price for the options granted pursuant to this Section 3.2 shall be
equal to 60% of the closing price on the last trading day of the calendar
month in which the average outstanding principal balance of the Loan equals
or exceeds $500,000, $1,000,000, $1,500,000 or $2,000,000, as the case may be.
3.3 Term of Options. Each option issued pursuant to this paragraph 3, if not
exercised, shall expire 12 months from the date such option is delivered to
Lenders.
4. CONDITIONS PRECEDENT TO LOAN.
Each and every advance hereunder shall be subject to Lenders' agreement, in
the exercise of their reasonable discretion, in good faith, to make such
advance. For this purpose, "good faith" means honesty in fact.
4.1 Initial Advance. Lenders' obligation to make the initial advance of the
Loan shall be subject to the satisfaction or waiver by Lenders of the following
conditions precedent:
(a) The Note. Lenders shall have received the Note, executed and delivered by
Borrower.
(b) The Security Agreement. Lenders shall have received the Security
Agreement in the form attached hereto as Exhibit "B" (the "Security Agreement"),
executed and delivered by Borrower, granting Lenders a senior security interest
in all assets of Borrower to secure repayment of the Loan at any time that the
balance of the Note exceeds $500,000.
(c) Perfection of Security Interests. Lenders shall have received originals,
each duly executed by Borrower, of all financing statements under the Uniform
Commercial Code reasonably required by Lenders to be filed in connection with
the Security Agreement.
(d) Fees. Borrower shall have paid the Commitment Fees provided in Section 3.
(e) Board Approval. Borrower's Board of Directors shall have authorized the
execution, delivery and performance of this Agreement, the Note and the Security
Agreement.
(f) The Effective Date. The conditions precedent to the consummation of
WRIC's Plan and the Effective Date shall have occurred.
(g) Opinions. Borrower shall have delivered to Lenders such opinions of
counsel as Lenders may reasonably require assuring Lenders that Borrower is a
valid entity, that its actions hereunder are valid, binding and enforceable
according to their terms, and that approval of the Bankruptcy Court in WRIC's
bankruptcy case is not required.
(h) Intercreditor Agreement. Lenders shall have executed an Intercreditor
Agreement in form acceptable to Allsup and Quest.
4.2 Conditions Precedent to Subsequent Advances. The obligations of Lenders
to make any advance of the Loan is subject to the satisfaction of the following
additional conditions at the time of making such advance:
(a) All representations and warranties of Borrower contained in this Agreement
shall be true and correct as of the date of the advance;
(b) Borrower shall not be in default under the terms of this Agreement; and
(c) Borrower shall have complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the date of
such advance.
4.3 Excess Advances. Lenders shall have no obligation to fund advances in
excess of $2,000,000, however, disbursement of such additional advances shall
be subject to such additional conditions precedent as Lenders in their sole and
absolute discretion shall require.
5. STOCK RESTRICTION. All stock issued to Lenders pursuant to this Agreement
shall be held for 2 years before any resale,to the extent required by applicable
securities laws. The stock certificates issued to Lenders shall contain a
legend evidencing such restriction.
6. REPRESENTATIONS AND WARRANTIES OF BORROWER.
As a material inducement to Lenders to enter into this Agreement, Borrower
hereby represents and warrants that as of the date of this Agreement:
6.1 Organization, Corporate Powers, Etc. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, is duly qualified to transact business in all places where such
qualification is necessary (excluding places where the failure to so qualify
would not materially adversely affect the business of Borrower) and has all
requisite authority and legal right to incur the obligations provided for
under, to execute and deliver, and to perform and observe and provisions of,
this Agreement and the Note.
6.2 Authorization. The making and performance by Borrower of this Agreement,
the Note and the Security Agreement have been duly authorized by all necessary
corporate action.
6.3 Enforceability. This Agreement, the Note and the Security Agreement shall
constitute legal and binding obligations of Borrower, enforceable against
Borrower in accordance with their terms.
6.4 Subsidiaries. None of Borrower's subsidiaries own property of any
significant value; provided, that if it is determined that a subsidiary of
Borrower does own property of significant value, the foregoing representation
and warranty shall not give rise to an Event of Default hereunder if Borrower
shall cause such subsidiary to grant Lenders a first lien security interest in
any such property of significant value to further secure the Note.
7. COVENANTS.
So long as all or any portion of the Note remains outstanding, Borrower hereby
agrees as follows:
7.1 Compliance with Laws. Borrower shall comply in all material respects
with all applicable laws, rules, regulations and orders of, and restrictions
imposed by, governmental authorities, the violation of which could reasonably
by expected to materially adversely effect the financial condition, results,
assets or operations of Borrower.
7.2 Inspection. Borrower shall allow representatives of Lenders, upon
reasonable prior notice to Borrower, to inspect, copy and make extracts of all
applicable records, and all properties, of Borrower at any reasonable time for
any reasonable purpose.
7.3 Litigation. Borrower shall promptly notify Lenders of any litigation
instituted, or to Borrower's knowledge, threatened against Borrower, that is
instituted or threatened after the date of this Agreement.
7.4 Further Borrowing. In the event that, prior to the Maturity Date, Borrower
seeks to borrow any monies other than under this Agreement, Borrower shall offer
Lenders a right of first refusal, on a pro rata basis, to provide such
financing. Borrower shall not borrow any sums before expiration of a 10 day
notice of such right of first refusal.
8. EVENTS OF DEFAULT; REMEDIES.
8.1 Event of Default. An Event of Default shall be deemed to have occurred
upon the occurrence and during the continuance of any of the following events:
(a) Payment. Any amount payable on the Loan shall not be paid when due;
(b) Covenants. A breach or failure of performance by Borrower of any
covenant, condition or agreement on its part to be observed or performed
pursuant to this Agreement, the Note or the Security Agreement which shall
not have been cured within 30 days after receipt by Borrower of notice thereof
given on behalf of Lenders or of any other agreement between Borrower and
Lenders, whether jointly or severally;
(c) Management. Dorcas Hardy resigns and no longer has a management role with
Borrower;
(d) Hiring of Key Personnel. Failure of Borrower to hire key personnel
acceptable to Lenders, including a Chief Operating Officer/ Chief Financial
Officer and Sales Manager;
(e) Misrepresentation. Any material representation or warranty made by
Borrower herein or in the Security Agreement shall provide to have been false
or in breach in any material respect on and as of the date on which made; or
(f) Bankruptcy. Borrower shall file a voluntary bankruptcy petition or shall
be subject to an order for relief in an involuntary bankruptcy case or in an
equivalent state case or proceeding, or a trustee or receiver shall be
appointed for Borrower's business.
8.2 Consequences of an Event of Default.
(a) Acceleration. If an Event of Default shall have occurred and be
continuing, Lenders may (by written notice delivered to Borrower) declare all
or any portion of the Loan immediately due and payable.
(b) Other Rights and Remedies. Upon the occurrence and during the continuance
of an Event of Default:
(i) Lenders' commitment to make further advances shall, at Lenders' option,
terminate, and Lenders shall have no further obligation to make advances
hereunder;
(ii) Lenders shall also be entitled to exercise all their rights and remedies
as may exist at law or as set forth in the Security Agreement or the Note.
9. MISCELLANEOUS.
9.1 Successors and Assigns. All covenants and agreements in this Agreement
by or on behalf of either party shall bind and inure to the benefit of their
respective successors and assigns, including any subsequent holder of the Note.
9.2 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under applicable law, then such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement.
9.3 No Waiver. No delay, extension of time, renewal, compromise or other
indulgence which may occur or be granted by a party shall impair that party's
rights or powers hereunder. No party shall be deemed to have waived any of its
rights hereunder, unless the party or its authorized agent shall have signed
such waiver in writing. No such waiver, unless expressly as stated therein,
shall be effective as to any transaction which occurs after the date of such
waiver, nor as to any continuance of a breach after such waiver.
9.4 Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original hereof, and all of which taken
together shall constitute one and the same agreement.
9.5 Descriptive Headings; Interpretation. Descriptive headings in this
Agreement are inserted for convenience of reference only and are not intended
to be part of or affect the meaning or interpretation of this Agreement.
9.6 Governing Law. THIS AGREEMENT SHALL BE ENFORCED IN ACCORDANCE WITH, AND
ALL QUESTIONS REGARDING THE CONSTRUCTION, VALIDITY, INTERPRETATION AND PURPOSE
OF THIS AGREEMENT SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF
ARIZONA, WITHOUT GIVING EFFECT TO PROVISIONS THEREOF REGARDING CONFLICT OF LAWS.
9.7 Notices. Any notice provided or in this Agreement must be in writing and
must be either (a) hand delivered, (b) mailed by registered or certified first
class mail, postage prepaid with return receipt requested, (c) sent by reputable
overnight courier serve for next business morning delivery, or (d) sent by
facsimile to the recipient at the address/telecopy number below indicated:
If to Lenders:
Allsup, Inc.
Attention: Mr. Jerry Fenstermaker
Chief Operating Officer
300 Allsup Place
Belleville, Illinois 62223-8626
Telephone: 618/236-5798
Facsimile: 618/236-5778
Rob Charles
Lewis and Roca LLP
One South Church Ave., Suite 700
Tucson, Arizona 85701-1620
Telephone: (520) 622-2090
Facsimile: (520) 622-5311
Quest Trading, Inc.
Attention: Douglas Engmann
c/o Sage Clearing, L.P.
220 Bush Street, Suite 660
San Francisco, California 94104
Telephone: (415) 781-7430
Facsimile: (415) 78104641
Lowell E. Rothschild, Esq.
Michael McGrath, Esq.
Mesch, Clark & Rothschild, P.C.
259 N. Meyer Ave.
Tucson, Arizona 85701
Telephone: (520) 624-8886
Facsimile: (520) 798-1037
If to Borrower:
Work Recovery, Inc.
Attention: Mr. Robert Judson
Chief Financial Officer, Acting
2341 S. Friebus, Suite 14
Tucson, Arizona 85713
Telephone: (520) 322-6634
Facsimile: (520) 321-9481
C. Taylor Ashworth
Osborn Maledon, P.A.
2929 N. Central Ave., Suite 2100
P.O. Box 36379
Phoenix, Arizona 85067-6379
Telephone: (602) 207-1288
Facsimile: (602) 235-9444
or such other address/telecopy number or to the attention of such other person
as the recipient party shall have specified by prior written notice to the
sending party. Any notice under this Agreement shall be deemed to have been
given (i) on the date such notice is hand delivered, (ii) 3 days after the
date of mailing if mailed by certified or registered mail, (iii) on the
business day next following the day notice is sent via overnight courier
service, or (iv) as of the beginning of the next day if such notice is sent
by telecopy.
9.8 Entire Agreement. This Agreement, the Note and the Security Agreement
embody the complete agreement and understanding among the parties with
respect to the subject matter hereof and thereof and supersede and preempt
any prior understandings, agreements and/or representations by or among the
parties, written or oral, related to the subject matter hereof in any way.
9.9 Attorneys' Fees. In the event Lenders are required to employ counsel to
enforce Lenders' rights under this Agreement, the Note or the Loan Agreement,
including any proceeding in the Bankruptcy Court, Borrower shall pay Lenders'
actual attorneys' fees and expenses incurred therein.
9.10 Dispute Resolution. Any dispute arising out of or relating to this
Agreement shall be resolved through arbitration in Tucson, Arizona, which
shall be the exclusive means of resolving such disputes except as provided
below. The parties waive any right to a jury trial, to a trial by the court,
or to appeal the arbitrator's decision of any dispute. Arbitration will be
governed by the provisions of the Arizona Arbitration Act, A.R.S. Section
12-1501, et seq. (the "Act").
Arbitration may be initiated by either party by making a written demand for
arbitration on the other party. The demand shall contain a statement setting
forth the nature of the dispute, the amount of damages involved, if any, and
the remedy sought. Within ten business days of receipt of that demand, the
parties shall select one arbitrator, having at least 10 years experience in
commercial arbitration. If for any reason the parties are unable to agree
upon the selection of an arbitrator within 10 calendar days after a demand
for arbitration (or any extension of time agreed upon by the parties), then
they will request a list of six names of experienced commercial arbitrators
from the American Arbitration Association (the "AAA"), and each party may
strike up to two names from the list. The AAA will choose the arbitrator
from the remaining names. If for any reason this process does not result in
selection of a qualified arbitrator, the arbitrator shall be selected in the
manner provided for by the Act.
The arbitrator shall schedule a hearing promptly. The arbitrator shall
render a decision no more than sixty days after such arbitrator's selection.
Subject to the terms of the Act, any decision and award of the arbitrator
shall be final, binding and conclusive upon the parties. Costs of the
arbitration and the prevailing party's attorneys' fees and expenses shall be
assessed against the non-prevailing party by the arbitrator. All other
aspects of this binding arbitration shall be governed by the Act and, to the
extent consistent with such Act, the Commercial Rules of the AAA unless the
parties agree otherwise at the time.
Except as otherwise provided in this Agreement, if a party wishes to seek
interim relief, whether affirmative or prohibitive, in the form of a temporary
restraining order or a preliminary injunction or other interim equitable relief
concerning the dispute either before beginning or at any point in the
arbitration proceedings concerning such dispute, such party may initiate the
appropriate litigation to obtain such relief, which shall be subject to and
controlled by the ultimate decision in the arbitration proceedings.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ALLSUP INC., an Illinois corporation
By
Its
WORK RECOVERY, INC., a
Delaware corporation
By
Its
QUEST TRADING, INC., a
California corporation
By
Its
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