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Exhibit 99.5
SEVERANCE AGREEMENT AND RELEASE
This Severance Agreement and Release (the "Agreement") is entered into
effective as of the 18th day of January, 1996, between Xxxxxx X. Xxxxxx (the
"Employee") and Work Recovery, Inc., a Colorado corporation (the "Company").
WHEREAS, the parties have agreed that it is in their respective best
interests to terminate their employment relationship amicably and resolve all
issues to their mutual satisfaction.
NOW, THEREFORE, for and in consideration of the mutual promises and
release and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:
a. "Related Company Entities" shall mean the Company,
all entities controlled by the Company, directly or indirectly, including
without limitation Work Recovery Centers, Inc., Work Recovery Europe, Work
Recovery Far East, New Concepts Corporation and all entities as to which any
Related Company Entity or Entities owns not less than a 10% voting interest
(including without limitation Work Recovery Pty., approximately 30 entities
owned not less than 20% by Work Recovery Centers, Inc. and Tradesman
Industries).
b. "Effective Date" shall mean the date when full time
employment is concluded and Employee is notified by the President of the
Company that Employee's full time employment is no longer required.
2. Compensation.
x. Xxxxxxxxx Pay and Benefits. From and after the
Effective Date, Employee will receive severance which will be one year's salary
paid out over a period of thirty months, payable monthly in arrears on the last
day of each month during such period, at the per annum rate of $120,000, with
any unpaid amount payable in full if and when WRI reimburses the Team for its
expenses through January 2, 1996. During the first twelve month period, the
Company also shall provide the Employee with the health care and other benefits
provided to the Company's senior executives; provided, however, that the
aggregate amount of such other benefits (excluding health care benefits) shall
not exceed 5% of the per annum severance pay specified above. The Company
shall withhold from the Employee's
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severance pay all appropriate payroll taxes, customary withholdings, and such
other amounts as are required by law.
b. Options. The Company, through its Compensation
Committee and subject to the discretion of the Compensation Committee, shall
reprice and extend the exercise period in respect of the stock options granted
by the Company to the Employee such that the Employee shall have options to
purchase 170,000 shares of the Company's Common Stock at an exercise price of
$1.50 per share for a period expiring on the date two years following the
Effective Date. The Employee acknowledges and agrees that such options shall
replace all existing stock options held by the Employee (i.e., options to
purchase 400,000 shares) and that the Employee shall have no rights pursuant to
such existing options. Upon such repricing and extension of the exercise
period, the Employee shall surrender to the Company all existing options and
the Company shall issue to the Employee replacement options that are
substantially the same as the options surrendered except that such replacement
options shall evidence the new number of shares into which the options may be
exercised, the new exercise price and the new exercise period. The Company
agrees to use its best efforts to register the shares underlying such repriced
options with the Securities and Exchange Commission no later than any such
registration of warrants issued by the Company to the TEAM for New Management,
L.L.C.
3. Transition Services. From the Effective Date through the date
that is one year after the effective date of this Agreement, the Employee will,
upon reasonable notice and at such reasonable times as the Company may request,
(a) assist in the orderly transition of management control arising in
connection with the Employee's separation from the Company and (b) make himself
available to provide all requested information about the Related Company
Entities and the Business. Notwithstanding the immediately preceding sentence,
however, the Employee (i) shall not be obligated to provide any particular
number of hours of assistance and (ii) shall be entitled to seek and accept
other employment that is not in violation of Section 5 of this Agreement
("Acceptable Alternative Employment"). If the Employee accepts any Acceptable
Alternative Employment, this will have no effect on the Employee's right to
compensation pursuant to Section 2 of this Agreement.
4. Resignation. The Employee hereby resigns, effective as of the
date hereof, from all offices and director positions with the Related Company
Entities. The Employee covenants not to interfere in the businesses of any of
the Related Company Entities, not to represent himself as an officer, director,
employee, agent, consultant or otherwise of any Related Company Entity, and not
to solicit any customer or licensee of the Related Company Entities for
purposes the effect of which would be to adversely impact the volume of
business of such customer or licensee with the Related Company Entities.
5. Noncompetition. For a period of three years from the date
hereof, the Employee agrees not to engage, assist or participate in, directly
or indirectly, whether as an employee, independent contractor, director,
officer, employee, equity participant, debt holder or otherwise, any business
or enterprise that is competitive in the relevant Geographic Area
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with the relevant portion of the Business of the Related Company Entities. For
the purposes of this Agreement, the relevant portions of the Business and the
relevant Geographic Areas are as follows:
a. ERGOS Business: Developing, manufacturing,
licensing, selling and supporting machines, software and/or simulators that (i)
provide work simulation for use in physical and functional capacities analysis,
rehabilitation, work performance testing, job analysis, evaluation in
connection with work conditioning and treatment programs, and/or ADA compliance
(including, without limitation, all businesses in which the Related Company
Entities' ERGOS Work Simulator competes (including areas in which products
currently being developed by the Company will compete); and/or (ii) provide
vocational interest assessment, vocational performance assessment and/or career
exploration (including, without limitation, all business in which New Concepts
Corp. competes (including areas in which products currently being developed by
New Concepts Corp. will compete)).
ERGOS Geographic Area: It is acknowledged that this
portion of the Business is being conducted on a nationwide and worldwide basis;
accordingly, the relevant Geographic Area is nationwide and worldwide.
b. Testing Clinic Business: Owning and operating
testing clinics that utilize machines, software and/or simulators described in
(a), above, whether same are provided by the Company Related Entities, the
Employee or third parties.
Testing Clinic Geographic Area: Within 250 miles of
each testing clinic of a Related Company Entity currently in operation or
currently identified by a Related Company Entity as targeted for operation, it
being acknowledged that testing clinics draw from a wide geographic area.
c. Vehicle Business: Development, manufacture and sale
of easy-loading vans, trucks and trailers.
Vehicle Geographic Area: It is acknowledged that
this portion of the Business is being conducted on a nationwide and worldwide
basis; accordingly, the relevant Geographic Area is nationwide and worldwide.
6. Enforceability of Certain Covenants. The Employee represents
and warrants to and covenants with the Company as follows:
a. The covenants set forth in Sections 4 and 5 of this
Agreement are reasonably necessary for the protection of the interest of the
Company, are reasonable as to duration, scope and territory, and are not
unreasonably restrictive of the Employee.
b. The Company's remedy at law for breach of any of the
covenants set forth in Sections 4 and 5 of this Agreement will be inadequate.
In addition to any other
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rights or remedies that the Company may have, the Company shall be entitled to
injunctive relief.
c. Notwithstanding subsection 6(a), should any court
determine that any covenants set forth in Section 4 or 5 of this Agreement are
unreasonable as to duration, scope, or territory, the covenants shall be
enforceable as provided herein with respect to such duration, scope and
territory as the court determines to be reasonable.
7. Trade Secret Agreement. The Employee acknowledges that he is
a party to a Trade Secret Agreement dated February 8, 1994 (the "TSA") and
represents, warrants, and covenants to the Company that the Employee is in full
compliance with the terms of the TSA and that the Employee will continue to
honor the terms of the TSA. The Employee further represents, warrants and
covenants to the Company that the Employee does not own any proprietary rights
or licenses, directly or indirectly, in any proprietary rights necessary or
desirable for operation of the Businesses by the Related Company Entities,
assigning to the Company (as if Inventions under the TSA) any and all rights
whether or not such rights were developed before, during or after the
employment of the Employee by the Company.
8. General Release by the Employee; Knowing and Voluntary Release.
a. In consideration of the promises and benefits
provided under this Agreement, which the Employee acknowledges are sufficient
consideration, the Employee (for himself, his agents, heirs, executors,
administrators, and assigns) hereby knowingly and voluntarily releases, holds
harmless and discharges the Related Company Entities and their respective
shareholders, directors, officers, employees and agents, and all of their
respective attorneys, accountants, insurers, agents, heirs, administrators,
executors, successors and assigns (collectively, the "Released Parties") from
any and all agreements, debts, claims, and causes of every kind or nature,
known or unknown, that exist as of the date of this Agreement; provided,
however, that the obligation of the Company to indemnify the Employee under the
terms of the Company's Articles of Incorporation and Bylaws and the
Indemnification Agreement between the Company and the Employee dated July 10,
1995 shall not be affected by this Agreement.
b. Without limiting the generality of the foregoing, the
Employee knowingly and voluntarily releases all statutory, common law or
equitable claims arising out of or related in any way to his employment with
any Related Company Entity or the termination thereof. The Employee
acknowledges that (i) he has read this Agreement and fully understands it to be
binding and enforceable and a full and complete compromise, settlement and
release of any claims referred to in Section 8(a) of this Agreement; (ii) he
has entered into this Agreement on advice of legal counsel and of his own free
will and accord without reliance on any representation, warranty or assurance
of any kind or character; (iii) no oral understandings, statements, promises or
inducements contrary to the terms of this Agreement exist; (iv) he does not
consider himself to be in a disparate bargaining position relative to the
Company with respect to the matters covered by this Agreement; (v) his
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decision to terminate his employment with the Company and the Related Company
Entities was voluntary and not in any way coerced or the result of a forced
resignation or constructive discharge; (vi) the Company has no obligations to
the Employee with respect to compensation, bonuses, severance payments,
allowances, pension or retirement benefits, vacation or sick leaven benefits or
other employment benefits of whatever nature except as set forth in this
Agreement; and (vii) the execution, delivery and performance of this Agreement
by the Company shall not be construed as an admission of liability of any kind
on the part of the Company.
9. Agreement by Company Not to Assert Claims. The Company agrees
not to assert against the Employee any claim existing as of the Effective Date
except for (i) any claim alleging criminal misconduct or actions taken in bad
faith to the material detriment of the Company or any Related Company Entity,
(ii) any claim alleging breach of this Agreement, or (iii) an answer or
counterclaim to any claim by the Employee against the Company or any Related
Company Entities or any of their respective directors, officers, employees,
agents or affiliates.
10. Representation and Warranty of the Employee. The Employee
represents and warrants to the Company that he has no equity or debt interest
in, and no contract with, any Related Company Entity other than his shares in
the Company and his options as indicated in Section 2(b) of this Agreement.
11. Voting Trust. The parties hereby agree to the establishment
of a voting trust into which all of the Employee's capital stock in the
Company, whether now owned or hereafter acquired, will be placed. The voting
trustee shall be the President of the Company. The voting trustee will be
required to vote the shares held in the voting trust in the same manner as all
other shareholders vote their shares (excluding abstentions). Shares may be
released from the voting trust only in the case of bona fide sales incident to
broker's transactions. The parties agree to execute a voting trust agreement
that incorporates the provisions of this Section 11. The voting trust
agreement shall be in form reasonably satisfactory to the Company.
12. Disparaging Remarks. Except in connection with the defense of
any litigation initiated by the Company or a Related Company Entity against the
Employee, the Employee agrees not to, either personally or through any agent,
make any defamatory or disparaging remarks or statements to any third party
about the Company or any Related Company Entity or any of their respective
shareholders, directors, officers, employees or agents. Except in connection
with the defense of any litigation initiated by the Employee, the Company
agrees not to, either personally or through any agent, make any defamatory or
disparaging remarks or statements to any third party about the Employee.
13. Entire Agreement. This Agreement is the entire, integrated
agreement of the parties and supersedes any and all prior and contemporaneous
agreements, promises, representations, negotiations, and understandings of the
parties, whether written or oral;
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provided, however, that this Agreement shall not supersede the Indemnification
Agreement between the Company and the Employee dated July 10, 1995.
14. Modification and Waiver. No modification or amendment to this
Agreement shall be effective unless in writing and signed by all parties to
this Agreement. No waiver shall be effective unless in writing and executed by
the party against whom enforcement of the waiver is sought.
15. Attorneys' Fees and Costs. The parties agree that the
prevailing party in any dispute or litigation arising under this Agreement
shall be entitled to recover its reasonable attorneys' fees and costs from the
non-prevailing party.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona without giving
effect to the conflict of law provisions thereof.
17. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
18. Binding Effect. This Agreement shall be binding upon, inure
to the benefit of and enforceable against the parties and their respective
successors, assigns, heirs and personal representatives. The Company's rights
under this Agreement are hereby made expressly assignable by the Company.
19. Interpretation. No provision of this Agreement shall be
construed in favor of or against either party solely because that party (or its
legal representative) drafted such provision.
Dated: January 18, 1996
/s/Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
WORK RECOVERY, INC., a
Colorado corporation
By:/s/ Xxxxx X. Xxxxxx
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Its: Senior Vice President
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