EX 10.33
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT is entered into as of the 11th day of
October, 1996, by and between Work Recovery, Inc., a Colorado corporation
("WRI"), and Xxxxxx Inc., an Illinois corporation ("Xxxxxx").
STATEMENT OF BACKGROUND INFORMATION
WRI has previously filed for relief pursuant to Chapter 11 of Title 11
of the United States Code (the "Reorganization"). In connection with the
reorganization, WRI has filed an Amended Plan of Reorganization dated October
4, 1996 (the "Plan of Reorganization") which contemplates infusion of
additional working capital. WRI is currently seeking confirmation of the Plan
of Reorganization by the Bankruptcy Court, and in connection therewith has
submitted an Amended Disclosure Statement on October 4, 1996 (the "Disclosure
Statement"). In addition, WRI is in need of additional working capital of
$500,000 prior to confirmation of the Plan of Reorganization.
WRI has previously entered into a Loan Agreement dated as of May
17, 1996 (the "Loan Agreement") with Recovery Lender, L.L.C. ("Recovery
Lender"), pursuant to which Recovery Lender has agreed to loan WRI up to an
aggregate principal amount of $5,000,000. The Loan Agreement provides for,
among other things, the right for Recovery Lender to convert into common stock
of WRI, as reorganized, on the basis of one percent (1%) of the Reorganized
WRI's issued and outstanding stock (on a fully diluted basis, giving effect
to all stock issuances, but excluding warrants, pursuant to the Reorganization
Plan) for each $100,000 of indebtedness under the Loan Agreement. In addition,
WRI previously entered into a Loan Agreement dated February 26, 1996 with
Xxxxxx (the "Initial Xxxxxx Loan Agreement"), pursuant to which Xxxxxx
loaned WRI $500,000 (the "Initial Xxxxxx Loan").
AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
1. Investment by Xxxxxx. Xxxxxx hereby agrees to invest the
aggregate sum of $1,500,000 in WRI pursuant to the terms and conditions of
this Agreement (the "Investment"). The Investment shall consist of a
$500,000 loan, upon the terms and conditions specified in Section 2 below, and
a $1,000,000 acquisition of common stock in WRI in accordance with the
provisions of Section 3 set forth below.
2. The New Xxxxxx Loan.
2.1 Loan of $500,000. Xxxxxx agrees to loan WRI the sum of
$500,000 (the "New Xxxxxx Loan").
2.2 Terms of New Xxxxxx Loan. Subject to Section 2.3 below,
the New Xxxxxx Loan shall be made generally on the same terms and conditions
as set forth in Sections 2 and 3 of the Loan Agreement, including, without
limitation, conversion rights similar to those set forth in Section 2.8
thereof, and the covenants set forth in Section 6 of the Loan Agreement and
the default provisions of Section 7 shall be applicable.
2.3 Modifications to Terms of Loan Agreement. The following
provisions apply, notwithstanding any provision to the contrary in the Loan
Agreement or related documentation:
2.3.1 Security Interest in Intellectual Property. Any
limitations on the security interest in WRI's intellectual property granted
to Recovery Lender pursuant to the Loan Agreement or any related documents,
shall be eliminated. Pursuant to the terms of the Intercreditor Agreement,
Xxxxxx, to the extent of the New Xxxxxx Loan, and Recovery Lender shall each
have liens of equal priority, on WRI's intellectual property and all other
collateral granted to Recovery Lender pursuant to the terms of the Loan
Agreement (collectively, the "Collateral"). As will be provided in the
Intercreditor Agreement, any amounts realized from the foreclosure of Allsup's
and Recovery Lender's respective security interests in the Collateral shall be
apportioned between Xxxxxx and Recovery Lender pro rata based upon the
outstanding principal balances of their respective loans, excluding the
Initial Xxxxxx Loan.
2.3.2 Future Borrowings. Prior to the Effective Date of
the Plan of Reorganization, WRI agrees not to borrow any additional monies
without first complying with the Right of First Refusal provisions in Section
4.5 below.
2.4 Conditions Precedent to Closing of New Xxxxxx Loan.
Allsup's obligation to make the New Xxxxxx Loan shall be conditioned upon
satisfaction of the following contingencies:
2.4.1 Execution of Intercreditor Agreement. Execution of
an Intercreditor Agreement by and among Xxxxxx, WRI and Recovery Lender (the
"Intercreditor Agreement"), in form satisfactory to Xxxxxx, the terms of which
effectuate the provisions of Section 2.3.1 above.
2.4.2 Bankruptcy Court Approval. Approval of the terms of
the New Xxxxxx Loan by the Bankruptcy Court.
2.5 Closing. The closing on the New Xxxxxx Loan (the "Initial
Closing") will be held on or before two (2) days after approval of this
Agreement by the Bankruptcy Court, or soon thereafter as practicable after
the satisfaction of the various conditions precedent to such loan as set forth
herein (the "Initial Closing Date"). At the Initial Closing, the parties of
this Agreement will exchange certificates and other instruments and documents
in order to determine whether the conditions precedent to Initial Closing
have been satisfied. Upon such determination, Xxxxxx shall disburse the
proceeds from the New Xxxxxx Loan to WRI.
3. Acquisition of Shares of WRI.
3.1 Acquisition of Shares. Subject to satisfaction of the conditions
precedent set forth below, Xxxxxx agrees to acquire the "Target Number of
Shares" from WRI or the Reorganized Debtor under the Debtor's Approved Plan
(the "Subject Shares") for the purchase price of $1,000,000 (the "Purchase
Price"). For purposes of this Agreement, the "Target Number of Shares" shall
be the number of shares of WRI's common stock that, when combined with the
number of shares of WRI's common stock to be issued to Xxxxxx in connection
with (a) the Initial Xxxxxx Loan and (b) the New Xxxxxx Loan, will provide
Xxxxxx with ownership of 17.5% of the outstanding common stock of WRI
immediately after the Effective Date of the Plan of Reorganization or to be
distributed under the Plan of Reorganization after the Effective Date. In
addition, on the Effective Date of the Plan of Reorganization, Xxxxxx will be
issued warrants to purchase up to 300,000 shares of the common stock of WRI
(the "Xxxxxx Warrants") upon the terms and conditions set forth in Section 5.3
of the Plan of Reorganization.
3.2 Conditions Precedent to Acquisition of Stock. Allsup's
agreement to acquire the Subject Shares shall be conditioned upon satisfaction
of the following conditions:
3.2.1 Confirmation of Plan of Reorganization. Entry of an
order in the Reorganization confirming the Plan of Reorganization, with such
modifications thereto as Xxxxxx approves in the exercise of its reasonable
discretion, on or before March 1, 1997, which order shall be final and not
appealable.
3.2.2 No Material Changes. There shall not have occurred
any material adverse change in WRI's financial condition, business or assets,
or material failure to meet the Company's projected cash flows, as set forth
in the Disclosure Statement.
In the event that the foregoing conditions precedent are not
satisfied on or before March 1, 1997, Allsup's obligation to acquire the
Subject Shares shall terminate.
3.3 Payment of Purchase Price. The Purchase Price will be
paid to WRI in cash in full at Closing.
3.4 Closing.
3.4.1 Time, Place and Manner of Closing. Unless this
Agreement has otherwise been terminated, the closing (the "Purchase Closing")
will be held on the Effective Date of the Plan of Reorganization, but in no
event earlier than January 3, 1997, or such earlier date as agreed to by
Xxxxxx. At the Purchase Closing, the parties to this Agreement will exchange
certificates and other instruments and documents in order to determine whether
the terms and conditions of this Agreement have been satisfied. Upon such
determination, and upon payment of the Purchase Price, WRI shall issue to
Xxxxxx the certificate(s) evidencing the Subject Shares.
3.4.2 Standby Letter of Credit. Within ten (10) days
after execution of this Agreement by the parties, Xxxxxx shall deliver to WRI
a standby letter of credit from a bank and in a form reasonably acceptable to
WRI (the "Letter of Credit") pursuant to which WRI shall have the unconditional
right to require payment of the Purchase Price in the event that Xxxxxx fails
pay the Purchase Price to WRI at the Purchase Closing as required pursuant
to this Section 3. WRI shall pay for the cost of obtaining the Letter of Credit
in an amount not in excess of 1.5% per annum based upon the face amount of
the Letter of Credit and the number of days for which the Letter of Credit is
issued, plus customary costs of issuance. In the event that Allsup's
obligation to purchase the Subject Shares is terminated as provided in Section
3.2 above, the Letter of Credit shall be released to Xxxxxx.
3.5 Piggyback Registration.
3.5.1 Allsup's Right to Require Registration. At such time
that WRI proposes to register any of its securities under the Securities Act
(other than a registration effected solely to implement an employee benefit
plan, a transaction to which Rule 145 of the Commission is applicable or
any other form or type of registration in which shares of WRI held by Xxxxxx
("Registrable Securities") cannot be included pursuant to Commission rule of
practice), WRI will give written notice to Xxxxxx of such intention to
register any of the securities of the WRI. If such registration is proposed
to be on a form which permits inclusion of the Registrable Securities, upon
the written request (stating the intended method of disposition of such
securities) of Xxxxxx, WRI will, subject to the limits contained in this
Section 3.5.1, use its best efforts to cause all such Registrable Securities
of Xxxxxx to be registered under the Securities Act and qualified for sale
under certain state blue sky laws, all to the extent requisite to permit such
sale or other disposition by Xxxxxx of the Registrable Securities so registered.
Notwithstanding the above, however, if the underwriter managing such
registration notifies Xxxxxx in writing that market or economic conditions
limit the amount of securities which may reasonably be expected to be sold,
Xxxxxx will be allowed to register its Registrable Securities pro rata based
on the aggregate number of shares of securities being registered in the
applicable registration.
3.5.2 Registration Procedures. If and
whenever WRI is required by the provisions of this Section 3.5 to
use its best efforts to effect the registration of any of its
securities under the Securities Act, WRI will, as expeditiously as
possible:
(a) prepare and file with the Commission
a registration statement with respect to such securities and use
its best efforts to cause such registration statement to become and
remain effective for the period of at least ninety (90) days;
(b) prepare and file with the Commission
such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such registration
statement whenever the seller or sellers of such securities shall
desire to sell or otherwise dispose of the same, but only to the
extent provided in this Section 3.5;
(c) furnish to each seller such number of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such
other documents, as such seller may reasonably request in order to
facilitate the public sale or other disposition of the securities
owned by such seller;
(d) use every reasonable effort to
register or qualify the securities covered by such registration
statement under such other securities or state blue sky laws of
such jurisdictions as WRI's Board of Directors may reasonably
determine, and do any and all other acts and things which may be
necessary under such securities or blue sky laws to enable such
seller to consummate the public sale or other disposition in such
jurisdictions of the securities owned by such seller, provided,
however, that in no event shall WRI be obligated to qualify to do
business in any jurisdiction where it is not at the time so
qualified or to take any action that would subject it to the
service of process of suits other than those arising out of the
offer or sale of the Registrable Securities covered by such
registration statement in any jurisdiction where it is not at the
time so subject;
(e) before filing the registration
statement or prospectus or amendments or supplements thereto,
furnish to one counsel selected by the holders of Registrable
Securities copies of such documents proposed to be filed which
shall be subject to the reasonable approval of such counsel; and
(f) furnish to each prospective seller a
signed counterpart, addressed to the prospective seller, of (i) an
opinion of counsel for WRI, dated the effective date of the
registration statement, and (ii) a "comfort" letter signed by the
independent public accountants who have certified WRI's financial
statements included in the registration statement, covering
substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of
the accountants' letter) with respect to events subsequent to the
date of financial statements, as are customarily covered (at the
time of such registration) in opinions of issuer's counsel and in
accountants' letter delivered to the underwriters in underwritten
public offerings of securities. Provided, however, notwithstanding
any other provisions of this Agreement, WRI shall not in any event
be required to use its best efforts to maintain the effectiveness
of any such registration statement for a period in excess of ninety
(90) days (or at the request of the selling holders, an additional
90 days).
3.5.3 Expenses. WRI shall pay for the
following listed expenses incurred in effecting the registration
provided for in this Section 3.5, namely expenses for: (a)
registration and filing fees, (b) printing expenses, (c)
underwriting expenses other than fees, commissions or discounts,
(d) expenses of any audits incident to or required by any such
registration and expenses of complying with the securities or blue
sky laws of any jurisdictions pursuant to Section 3.5.2(d) hereof,
(e) WRI's legal fees, and (f) legal fees of Xxxxxx; all of which
expenses (which specifically exclude Allsup's broker's fees) are
hereinafter referred to as "Registration Expenses". Xxxxxx shall
pay the fees and expenses of its own legal counsel, brokerage
commissions and other expenses which are not specifically included
in the definition of Registration Expenses.
3.5.6 Indemnification
(a) Indemnification by WRI. In the event
of any registration of any of WRI's securities under the Securities
Act pursuant to this Article II, WRI shall indemnify and hold
harmless (i) Xxxxxx, (ii) the officers, directors, trustees and
partners of Xxxxxx, (iii) each underwriter (as defined in the
Securities Act), (iv) each other Person who participates in the
offering of such securities, and (v) each other Person, if any, who
controls (within the meaning of the Securities Act) Xxxxxx,
underwriter or participating Person (individually and collectively
the "Indemnified Person") against any losses, claims, damages or
liabilities (collectively the "liability"), joint or several, to
which such Indemnified Person may become subject under the
Securities Act or any other statute or at common law, insofar as
such liability (or action in respect thereof) arises out of or is
based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration
statement under which such securities are registered under the
Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or (ii)
any alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading. Except as otherwise provided in paragraph (c) of this
Section 3.5.6, WRI shall reimburse each such indemnified Person in
connection with investigating or defending any such liability;
provided, however, that WRI shall not be liable to any indemnified
Person in any such case to the extent that any such liability
arises out of or is based upon any alleged untrue statements or
alleged omissions made in such registration statement, preliminary
or final prospectus, or amendment or supplement thereto in reliance
upon and in conformity with information furnished in writing to WRI
by such Person specifically for use therein; and provided further,
that WRI shall not be required to indemnify any Person against any
liability arising from any untrue or misleading statement or
omission contained in any preliminary prospectus if such deficiency
is corrected in the final prospectus that is circulated prior to
acceptance of offers to purchase, or for any liability which arises
out of the failure of any Person to deliver a prospectus as
required by the Act, regardless of any investigation made by or on
behalf of such Indemnified Person and shall survive transfer of
such securities by Xxxxxx.
(b) Indemnification by Xxxxxx. Xxxxxx
shall, by acceptance thereof, indemnify and hold harmless WRI, the
directors, officers, trustees and partners of WRI, each underwriter
and each other Person, if any, who controls WRI or such underwriter
(individually and collectively also the "Indemnified Person"),
against any liability, joint or several, to which any such
Indemnified Person may become subject under the Securities Act or
any other state or at common law, in so far as such liability (or
actions in respect thereof) arises out of or is based upon (i) the
disposition by Xxxxxx of such Registrable Securities in violation
of the provisions of this Section 3.5, or (ii) any alleged untrue
statement of any material fact contained, on the effective date
thereof, in any registration statement under which securities were
registered under the Securities Act at the request of such holder,
any preliminary prospectus or final prospectus contained therein,
or any amendment or supplement thereto, or (iii) any alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement therein not misleading,
in the case of (ii) and (iii) to the extent, but only to the
extent, that such alleged untrue statement or alleged omission was
made in such registration statement, preliminary or final
prospectus, amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to WRI by Xxxxxx
specifically for use therein. Xxxxxx shall reimburse any
Indemnified Person for any legal fees incurred in investigating or
defending any such liability; provided, however, that Xxxxxx shall
not be required to indemnify any Person against any liability
arising from any untrue or misleading statement or omission
contained in any preliminary prospectus if such deficiency is
corrected in the final prospectus that is circulated prior to
acceptance of offers to purchase or for any liability which arises
out of the failure of any Person to deliver a prospectus as
required by the Securities Act.
(c) Procedure for Indemnification. In
the event WRI, Xxxxxx or other person receives a complaint, claim
or other notice of any liability or action, giving rise to a claim
for indemnification under paragraphs (a) or (b) of this Section
3.5.6, the Person claiming indemnification under such paragraphs
shall promptly notify the Person against whom indemnification is
sought of such complaint, notice, claim or action, and such
indemnifying Person shall have the right to investigate and defend
any such loss, claim, damage, liability or action. The Person
claiming indemnification shall have the right to employ separate
counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall not be at
the expense of the Person against whom indemnification is sought
(unless the indemnifying party fails to promptly defend, in which
case the fees and expenses of such separate counsel shall be borne
by the Person against whom indemnification is sought). In no event
shall a Person against whom indemnification is sought be obligated
to indemnify any Person for any settlement of any claim or action
effected without the indemnifying Persons' prior written consent.
3.5.7 Termination of Registration.
Notwithstanding the foregoing provisions of this Section 3.5, the
rights to registration and the designation of Allsup's Common Stock
as Registrable Securities shall terminate as to any particular
securities when such securities shall have been lawfully sold by
Xxxxxx pursuant to a registration statement or Rule 144.
3.5.8 Consent to Be Bound. Each subsequent
holder of Registrable Securities must consent in writing to be
bound by the terms and conditions of this Section 3.5 in order to
acquire the rights granted pursuant to Section 3.5.
3.5.8 Amendments. The provisions of this
Section 3.5 may be amended, and WRI may take any action herein
prohibited or omit to perform any act herein required to be
performed by it, only if WRI has obtained the written consent of
Xxxxxx.
3.5.9 Assignability of Registration Rights.
Subject to Section 3.5.7 hereof, the registration rights set forth
in this Section 3.5 are assignable to each assignee as to each
share of Registrable Securities conveyed in accordance herewith who
agrees in writing to be bound by the terms and conditions of this
Agreement and who (a) after such transfer owns at least 100,000
shares of Registrable Securities (as adjusted to reflect stock
splits, stock dividends, or other recapitalizations), or (b) is a
shareholder of Xxxxxx.
3.5.10 Designation of Underwriter. In the
case of any registration effected pursuant to this Section 3.5, WRI
shall have the right to designate the managing underwriter, subject
to the approval of Xxxxxx, which approval will not be unreasonably
withheld.
3.5.11 Lock-Up Provision. Upon receipt of
a written request by WRI or by its underwriters, Xxxxxx will not
sell, sell short, grant an option to buy, or otherwise dispose of
Registrable Securities or other securities of WRI (except for any
such shares included in the registration) for a period of one
hundred twenty (120) days after WRI has completed the sale of stock
pursuant to the registration in question. WRI may impose
stop-transfer instructions with respect to the shares (or
securities) subject to the foregoing restriction until the end of
said 150- day period.
4. Additional Covenants. The parties hereby covenant
and agree as follows:
4.1 Appointment of Xxxxx Xxxxxxxxxxxx as a Director
of WRI. WRI agrees to take, on or before the date of the Purchase
Closing, such actions as may be necessary to appoint Xx. Xxxxx
Xxxxxxxxxxxx to the Board of Directors of WRI and the Audit
Committee of WRI's Board of Directors, with such appointment to be
effective as of the date of the Purchase Closing. Allsup's
obligations under this Agreement are expressly conditioned upon the
foregoing appointments.
4.2 Appointment of Xxxxxx X. Xxxxxx, Xx. as Chief
Financial Officer. WRI agrees that Xxxxxx X. Xxxxxx, Xx.,
currently the acting Chief Financial Officer of WRI, will be
retained as Chief Financial Officer of WRI; pursuant to an
employment agreement between Xx. Xxxxxx and WRI which would be
subject to review and approval by the Compensation Committee of
WRI's Board of Directors.
4.3 Further Effort into Joint Marketing Agreement.
WRI and Xxxxxx agree to explore ways in which the goals of the
Joint Marketing Program dated April 8, 1996 between Xxxxxx and WRI
will be realized, including, without limitation, putting additional
effort and concentration into each party's obligations thereunder.
4.4 Support for WRI's Efforts. Xxxxxx agrees to
take, or refrain from taking, the following actions:
4.4.1 Support for Plan of Reorganization.
Provided that the Bankruptcy Court approves the Disclosure
Statement, Xxxxxx shall endorse, approve and actively support
confirmation of the Plan of Reorganization. Notwithstanding the
above, Xxxxxx shall not be required to support any amendment to the
Plan of Reorganization that it has not previously approved.
4.4.2 No Disparagement. Neither Xxxxxx nor
its officers, directors or employees shall not make any disparaging
comments, verbally or in writing, with respect to WRI or its
current officers, directors or management team prior to the date of
confirmation of the Plan of Reorganization.
4.4.3 No Takeover Attempt. For a period of
four (4) years commencing with the date of this Investment
Agreement, Xxxxxx shall not, directly or indirectly through any
third party or parties, attempt or assist any third party or
parties in their attempt of, any takeover of WRI, whether through
acquisition of WRI shares or through a proxy solicitation, without
the prior written consent of WRI. Allsup's agreement hereunder
shall be reflected in any Form 13D filed by Xxxxxx in connection
with its acquisition of shares in WRI, including, without
limitation, the Subject Shares or any shares acquired through
conversion of the Initial Xxxxxx Loan or the New Xxxxxx Loan.
4.4.4 Replacement of Current Management of
WRI. Xxxxxx shall not, for a period of four (4) years commencing
with this Investment Agreement, seek the removal, or assist any
third party or parties in seeking the removal, by proxy
solicitation or otherwise, or any current officer or director of
WRI or any other member of WRI's management team.
4.4.5 Exercise of Business Judgment.
Notwithstanding the provisions of Sections 4.4.3 or 4.4.4 above,
Xxxxxx, as a shareholder of WRI, and Xxxxx Xxxxxxxxxxxx, as a
director of WRI, shall be entitled to take such actions as deemed
necessary in the exercise of their business judgment or in the
fulfillment of any fiduciary duty that may exist, with respect to
the operations of WRI.
4.5 Right of First Refusal to Provide Additional
Financing. In the event that, prior to confirmation of the Plan of
Reorganization, WRI seeks to borrow any monies in addition to the
New Xxxxxx Loan, Xxxxxx and Recovery Lender shall have a right of
first refusal, on a pro rata basis, based upon the respective
principal balances due Recovery Lender under the Loan Agreement and
Xxxxxx pursuant to the Initial Xxxxxx Loan and the New Xxxxxx Loan,
to provide such financing. WRI will not secure any such additional
financing without first providing Xxxxxx and Recovery Lender with
written notice of WRI's intention to obtain such additional
financing, and the terms applicable to such financing. Xxxxxx and
Recovery Lender shall have ten (10) days after receipt of such
written notice from WRI to commit to providing the requested
financing upon the same terms and conditions as specified in the
written notice. In the event that either Xxxxxx or Recovery
Lender, but not both, elect to provide such financing, the party
electing to provide such financing shall have the right to provide
all of the requested financing. In the event that Xxxxxx and
Recovery Lender collectively fail to notify WRI within said ten
(10) day period of its election to provide the full amount of such
financing, then WRI is automatically permitted to pursue said
financing from third parties upon the terms and conditions
specified in WRI's notice to Xxxxxx and Recovery Lender. The
provisions of this Section 4.5 will be incorporated into the
Intercreditor Agreement.
4.6 Prohibition Against Grant of Security Interest.
WRI shall not grant, prior to the date of confirmation of the Plan
of Reorganization, any security interest in WRI's assets to any
third party, other than in connection with a financing permitted by
Section 4.5 above.
4.7 Approval of Plan of Reorganization. WRI agrees
to seek confirmation of the Plan of Reorganization as expeditiously
as reasonably practicable, after taking into account all required
notices.
5. WRI's Representations and Warranties. As a material
inducement to Recovery Lender and Xxxxxx to enter into this
Agreement, WRI represents and warrants that:
5.1 Organization and Corporate Power. WRI is a
corporation duly incorporated and validly existing under the laws
of Colorado and it is qualified to do business in every
jurisdiction in which its ownership of property or conduct of
business requires it to qualify. WRI has all requisite corporate
power and authority and all material licenses, permits, and
authorizations necessary to own and operate its properties and to
carry on its business as now conducted. The copies of the WRI's
Articles of Incorporation and other organizational documents have
been furnished to Xxxxxx reflect all amendments made thereto at any
time prior to the date of this Agreement and are correct and
complete.
5.2 Authorization. The making and performance by
WRI of this Agreement and the transactions described herein have
been duly authorized by all necessary corporate action; provided,
however, that approval of this Agreement by the Bankruptcy Court
shall be required.
5.3 Enforceability. This Agreement constitutes the
legal and binding obligation of WRI, enforceable against WRI in
accordance with its terms.
6. Representations of Xxxxxx. Xxxxxx represents and
warrants as follow:
6.1 Adequate Disclosure; Access to Information. As
a result of its independent due diligence investigation, it is
familiar with and fully aware of WRI's business operations and
financial condition.
6.2 Speculative Investment; Ability to Assume
Financial Risk. It is aware of and understands that the Investment
is a speculative investment which involves a high degree of risk of
loss by it of its entire investment. It is able to assume the
economic risks of the Investment and could absorb a complete loss
on such investment without significantly affecting its financial
condition.
6.3 No Representations. It is not relying on
representations concerning WRI, express or implied, other than
those set forth herein and in the Plan of Reorganization and the
Disclosure Statement.
6.4 Legends. It is aware and agrees that all
certificates for the Subject Shares shall bear a legend describing
transfer restrictions requiring compliance with state and federal
securities laws. Xxxxxx agrees that it will not dispose of any of
the Subject Shares unless it has delivered to WRI an opinion of
counsel in form acceptable to the WRI that the proposed disposition
does not violate applicable federal or state blue sky securities
laws.
6.5 Accredited Investor. It is an accredited
investor as defined in Regulation D, Rule 501(a) (17
C.F.R.230.501(a)).
6.6 Additional Information. It has had the
opportunity, at minimal inconvenience, to ask questions of and
obtain from WRI any additional information, to the extent possessed
or obtainable without unreasonable effort or expense, necessary to
evaluate the merits and risks of the Investment. There is no
additional information that it wishes to obtain from WRI or from
any other source with respect to the Investment.
6.7 Sole Party in Interest. Except as otherwise
indicated, it is the sole party in interest in making the
Investment, and is making the New Allsup Loan and acquiring the
Subject Shares solely for investment for its own account or as
indicated and have no present agreement, understanding or
arrangement to subdivide, sell, assign, or transfer any part or all
of the New Allsup Loan, the Subject Shares or the Allsup Warrants
to any other person.
7. Miscellaneous Provisions.
7.1 Severability. Should any one or more of the
provisions hereunder be determined to be illegal or unenforceable,
all other provisions hereof shall be given effect separately
therefrom and shall not be affected thereby.
7.2 Notices and Bank Accounts. Any notice or other
communications required or permitted hereunder shall be in writing
and shall be deemed to have been given upon deliver if personally
delivered or when sent if sent by facsimile or two days after
mailing by certified mail, postage prepaid, and addressed as
follows, and any disbursements or payment in connection with the
Investment shall be deemed delivered upon deposit of immediately
available funds to the accounts indicated below:
If to Allsup: Allsup Inc.
000 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Acct:
If to WRI: Work Recovery, Inc.
0000 X. Xxxxxxx, Xxxxx 00
Xxxxxx, XX 00000
Fax: (000) 000-0000
Acct:
Each of the above addressees may change its address or
bank account information for purposes of this paragraph by
providing notice of the new address or bank account in the manner
herein provided.
7.3 Choice of Law. It is the intention of the
parties that the internal laws of the State of Arizona (and not the
laws of conflict) shall govern the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and
duties of the parties.
7.4 Counterparts. This Agreement may be signed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same document.
7.5 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.
7.6 Definitions. All terms not otherwise defined
herein shall have the meanings assigned to such terms by the Plan
of Reorganization.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
WORK RECOVERY, INC.
By: XXXXXX X. XXXXX
Its: PRESIDENT AND CEO,
ACTING
ALLSUP INC.
By: XXXX X. FINSTERMAKER
Its: COO
Loan Agreement
This Loan Agreement (this "Agreement"), is dated as of
November 7, 1996, between Work Recovery, Inc., a Colorado
corporation ("Debtor"), and Allsup Inc., an Illinois corporation
("Lender").
Whereas, Debtor 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");
Whereas, Debtor is in immediate need of a loan for working
capital purposes, and will require financing during the Chapter 11
Case for working capital purposes; and
Whereas, Lender has agreed to provide financing in an amount
not to exceed $500,000 on the terms and conditions hereinafter set
forth.
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:
I.. Loan; Borrowing Procedures.
Subject to the terms and conditions of this Agreement, Lender
agrees to loan Debtor $500,000 to be repaid on the earlier of (i)
December 31, 1996, or (ii) 30 days after entry of an order in
Debtor's Chapter 11 Case confirming a plan of reorganization, which
order shall be final and nonappealable (the "Maturity Date").
Lender shall advance the loan on the first business day after the
conditions specified in Section 3 have been satisfied.
II.. Note; Interest; Payments.
A. Note; Loan Balances. The loan pursuant to this Agreement
shall be evidenced by one Promissory Note in the form attached
hereto as Exhibit "A" (the "Note").
B. Interest Rate on Loan. Interest shall accrue at a rate
equal to twelve percent (12%) 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 2.8
below).
C. 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.
D. Maturity. The loan, together with all accrued interest
thereon, unless converted pursuant to Section 2.8 below, shall be
due and payable in full on the Maturity Date, or upon the filing of
a competing Plan in the Case upon the expiration of the exclusivity
periods established by Section 1121 of the Bankruptcy Code.
E. Prepayments. Debtor may from time to time prepay the
loan in whole or in part without notice and without penalty;
however, Lender shall have the ability to retain its Conversion
Option (Section 2.8) by retendering to Debtor the repaid principal
not later than 30 days after Confirmation.
F. 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.
G. Making of Payments. All payments of principal or
interest on the Note shall be made to Lender at the address set
forth in Section 1.2 above or such other address as Lender shall
designate in writing.
H. Conversion Option. The indebtedness evidenced by the
Note (outstanding principal and interest) shall, at Lender's
option, be convertible into common stock of the reorganized Debtor
(the "Reorganized Debtor") in an amount equal to $500,000 plus
unpaid interest and attorneys fees incurred in connection with the
loan described in this Agreement using the Share Rate and the
Discount Rate as provided in Debtor's Amended Joint Plan of
Reorganization Dated October 4, 1996 or such other plan approved by
Allsup ("Debtor's Approved Plan") confirmed in the Chapter 11 Case.
This Conversion Option shall expire on the Effective Date of
Debtor's Approved Plan.
III.. Conditions Precedent to Loan.
The disbursement of the loan hereunder shall be subject to the
satisfaction or waiver by Lender of the following conditions
precedent:
A. The Note. Lender shall have received the Note, executed
and delivered by Debtor.
B. The Security Agreement. Lender shall have received the
Security Agreement in the form attached hereto as Exhibit "B" (the
"Security Agreement"), executed and delivered by Debtor.
C. Perfection of Security Interests. Lender shall have
received originals, each duly executed by Debtor, of all financing
statements under the Uniform Commercial Code reasonably required by
Lender to be filed in connection with the Security Agreement.
D. Board Approval. Debtor's Board of Directors shall have
authorized the execution, delivery and performance of this
Agreement, the Note and the Security Agreement.
E. Bankruptcy Court Approval. Debtor shall have obtained a
final Bankruptcy Court order entered in compliance with the
Bankruptcy Code and Rules approving (i) the loan hereunder, (ii)
the granting to Lender of a continuing security interest in all of
the "Collateral" (as defined in the Security Agreement) to secure
all amounts outstanding under the Note senior to all liens (except
as permitted by the Security Agreement), pursuant to Section 364(d)
of the Bankruptcy Code, and (iii) the granting of a priority to the
loan pursuant to Section 364(c)(1) of the Bankruptcy Code; except
that repayment of the loan and the priority of the security
interests shall be on a parity with Recovery Lender, L.L.C.,
pursuant to the Intercreditor Agreement described below, and such
approval shall not be subject to any automatic or discretionary
stay (except as may be otherwise agreed in writing by Lender).
F. Intercreditor Agreement. Recovery Lender, L.L.C. shall
have executed an Intercreditor Agreement with Allsup in form
acceptable to Allsup.
G. Plan Modification. Debtor shall have filed a
modification to Debtor's Amended Joint Plan of Reorganization Dated
October 4, 1996 incorporating the Investment Agreement between
Lender and Debtor dated October 11, 1996 (the "Investment
Agreement") as the document governing treatment of Allsup's claims
in the Case.
IV.. Representations and Warranties of Debtor.
As a material inducement to Lender to enter into this
Agreement, Debtor hereby represents and warrants that as of the
date of this Agreement:
A. Organization, Corporate Powers, Etc. Debtor is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado, 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 Debtor) 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.
B. Authorization. The making and performance by Debtor of
this Agreement, the Note and the Security Agreement have been duly
authorized by all necessary corporate action.
C. Enforceability. Upon Bankruptcy Court approval of this
Agreement, this Agreement, the Note and the Security Agreement
shall constitute legal and binding obligations of Debtor,
enforceable against Debtor in accordance with their terms.
D. Subsidiaries. None of Debtor's subsidiaries own property
of any significant value; provided, that if it is determined that
a subsidiary of Debtor does own property of significant value, the
foregoing representation and warranty shall not give rise to an
Event of Default hereunder if Debtor shall cause such subsidiary to
grant Lender a first lien security interest in any such property of
significant value to further secure the Note.
V.. Covenants.
So long as all or any portion of the Note remains outstanding,
Debtor hereby agrees as follows:
A. Compliance with Laws. Debtor 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 Debtor.
B. Inspection. Debtor shall allow representatives of
Lender, upon reasonable prior notice to Debtor, to inspect, copy
and make extracts of all applicable records, and all properties, of
Debtor at any reasonable time for any reasonable purpose.
C. Litigation. Debtor shall promptly notify Lender of any
litigation instituted, or to Debtor's knowledge, threatened against
Debtor, that is instituted or threatened after the date of this
Agreement.
D. Further Borrowing. In the event that, prior to
confirmation of Debtor's Approved Plan or the Maturity Date, Debtor
seeks to borrow any monies other than under this Agreement, Debtor
shall offer Lender and Recovery Lender, L.L.C. a right of first
refusal, on a pro rata basis, upon the respective principal
balances due Recovery Lender, L.L.C. and Lender, to provide such
financing. Debtor shall not borrow any sums before expiration of
a 10 day notice of such right of first refusal. Other terms of
this right are set forth in the Investment Agreement.
VI.. Events of Default; Remedies.
A. 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 any loan shall not
be paid when due;
(b) Covenants. A breach or failure of performance by
Debtor of any covenant, condition or agreement on its part to be
observed or performed contained in this Agreement, the Note or the
Security Agreement which shall not have been cured within 30 days
after receipt by Debtor of notice thereof given by Lender;
(c) Misrepresentation. Any material representation or
warranty made by Debtor herein or in the Security Agreement shall
provide to have been false or breach in any material respect on and
as of the date on which made;
(d) Conversion, Appointment of Trustee, Dismissal.
Debtor's bankruptcy Case shall be converted to a case under Chapter
7 of the Bankruptcy Code, a trustee shall be appointed in Debtor's
bankruptcy Case, or Debtor's bankruptcy Case shall be dismissed; or
(e) Default to Recovery Lender, L.L.C. An Event of
Default shall have occurred under any of Debtor's agreements with
Recovery Lender, L.L.C.
B. Consequences of an Event of Default.
(a) Acceleration. If an Event of Default shall have
occurred and be continuing, Lender may (by written notice delivered
to Debtor) 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 Lender shall also be
entitled to exercise all its rights and remedies as may exist at
law or as set forth in the Security Agreement or the Note.
VII.. Miscellaneous.
A. 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.
B. 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.
C. 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.
D. 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.
E. 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.
F. 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 telecopy
to the recipient at the address/telecopy number below indicated:
If to Lender:
Allsup, Inc.
Attention: Xx. Xxxxx Xxxxxxxxxxxx
Chief Operating Officer
000 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Telephone: 618/000-0000
Facsimile: 618/236-5778
Rob Xxxxxxx
Xxxxx and Xxxx LLP
Xxx Xxxxx Xxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Debtor:
Work Recovery, Inc.
Attention: Xx. Xxxxxx Xxxxxx
Chief Financial Officer, Acting
0000 X. Xxxxxxx, Xxxxx 00
Xxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
X. Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxx, P.A.
0000 X. Xxxxxxx Xxx., Xxxxx 0000
X.X. Xxx 00000
Xxxxxxx, Xxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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.
G. 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.
H. Attorneys' Fees. In the event Lender is required to
employ counsel to enforce Lender's rights under this Agreement, the
Note or the Loan Agreement, including any proceeding in the
Bankruptcy Court, Debtor shall pay Lender's actual attorneys' fees
and expenses incurred therein.
In Witness Whereof, the parties have executed this Agreement
as of the date first above written.
Work Recovery, Inc., a Colorado
corporation
By:
Its:
Allsup Inc., an Illinois corporation
By:
Its:
Convertible Promissory Note
November 7, 1996 $500,000.00
For Value Received, Work Recovery, Inc., a Colorado
corporation ("Borrower"), hereby promises to pay to the order of
Allsup Inc., an Illinois corporation ("Lender") the principal sum
of Five Hundred Thousand and 00/00 Dollars ($500,000.00) or so much
thereof as may be outstanding hereunder on the Maturity Date (as
defined in the Loan Agreement hereinafter referred to). All
capitalized terms used but not otherwise defined herein shall have
the meaning ascribed thereto in the Loan Agreement.
This Note was issued pursuant to the Loan Agreement of
even date herewith (as amended, supplemented or otherwise modified
from time to time the "Loan Agreement"), between Borrower and
Lender and this Note is the note referred to in the Loan Agreement.
All provisions of the Loan Agreement are hereby incorporated by
reference in this Note.
Borrower also promises to pay interest on the outstanding
unpaid principal amount of the loans from time to time outstanding
from the date of such advance until the same shall have been paid
in full, at the rate and at the time specified in the Loan
Agreement. Reference is hereby made to the Loan Agreement for a
more complete statement of the terms and conditions under which the
loans evidenced hereby are made and are to be repaid.
Lender is authorized to endorse, and prior to any
transfer of this Note Lender shall endorse, the date and amount of
each payment or prepayment of principal of this Note on the
schedule annexed hereto and made a part hereof, or a continuation
thereof which shall be attached hereto and made a part thereof,
which endorsement shall constitute prima facie evidence of the
accuracy of the information so endorsed, provided that failure by
Lender to make such endorsement shall not affect the obligations of
Borrower under this Note. In lieu of endorsing such schedule as
hereinabove provided Lender is authorized to record, at its option,
such payment or prepayment in its books and records, such books and
records constituting prima facie evidence of the accuracy of the
information contained therein.
All payments of principal and interest in respect of this
Note shall be made to Lender in lawful money of the United States
of America in immediately available funds to Lender at such place
as shall be designated in writing by Lender for such purpose in
accordance with the terms of the Loan Agreement.
The indebtedness evidenced by this Note is convertible
into common stock upon the terms and conditions specified in the
Loan Agreement.
Upon the occurrence and continuation of any one or more
Events of Default, the unpaid balance of the principal amount of
this Note may be declared to be due and payable in the manner, upon
the conditions and with the effect provided in the Loan Agreement.
The terms of this Note are subject to amendment only in
the manner provided in the Loan Agreement.
Except only upon conversion into common stock as
aforesaid, no reference herein to the Loan Agreement and no
provision of this Note, the Loan Agreement or any documents
executed in connection therewith shall alter or impair the
obligation of Borrower, which is absolute and unconditional, to pay
the unpaid principal of and interest on this Note at the place, at
the time and in the currency herein prescribed.
Borrower and endorsers of this Note hereby consent to
renewals and extension of time at or after the maturity hereof,
without notice, and hereby waive diligence, presentment, protest,
demand and notice of every kind (other than notices required by the
Loan Agreement) and, to the full extent permitted by law, the right
to plead any statute of limitations as a defense to any demands
thereafter.
This Note is secured pursuant to the terms of the
Security Agreement. Reference is made to such agreement for the
terms and conditions governing the collateral security for the
obligations of Borrower hereunder.
This Note has been delivered and accepted in Tucson,
Arizona and shall be construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation
and performance of this Note and the Loan Agreement shall be
governed by, the internal laws of the State of Arizona, without
giving effect to provisions thereof regarding conflict of laws.
In Witness Whereof, Borrower has executed and delivered
this Note as of the date first written above.
Work Recovery, Inc., a Colorado
corporation
By
Its
