AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WARNER INSURANCE SERVICES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 18-01 Pollitt Drive 13-2698053
(State or other Fair Lawn, New Jersey 07410 (I.R.S. Employer
jurisdiction of (201) 794-4800 Identification
incorporation or (Address, including zip code, and No.)
organization) telephone number,
including area code, of Registrant's
principal executive offices)
-----------------
Alfred J. Moccia
President and
Chief Executive Officer
Warner Insurance Services, Inc.
Fair Lawn, New Jersey 07410
(201) 794-4800
(Name, address, including zip code, and telephone number,
including area code, of Registrant's agent for service)
------------------
Copies of all communications, including communications sent to agent for
service, should be sent to:
Leonard Gubar, Esq.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
(212) 603-2288
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement as
determined by market conditions and other factors.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
==========================================================================
TITLE PROPOSED PROPOSED
OF EACH MAXIMUM MAXIMUM
CLASS OF AMOUNT OFFERING AGGREGATE
SECURITIES TO BE PRICE OFFERING AMOUNT OF
TO BE REGISTERED PER SHARE PRICE REGISTRATION
REGISTERED (1) (2)(3) (2)(3) FEE
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Common Stock,
$0.01 par
value . . . 6,591,528 $5.5625 $36,665,374 $12,643.24
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(1) Pursuant to Rule 416, this Registration Statement also covers
such indeterminable additional shares of Common Stock as may
become issuable as a result of anti-dilution adjustments in
accordance with the terms of certain Selling Securityholder
Warrants and certain Additional Warrants under which an aggregate
of 862,847 and 196,875, respectively, of the shares of Common
Stock registered hereby may be issued.
(2) Estimated solely for the purpose of calculating the registration
fee.
(3) Calculated pursuant to Rule 457(c), based upon the average of the
high and low prices of the Common Stock on June 11, 1996, as
reported by the Nasdaq SmallCap Market SM Symbol.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF
1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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<PAGE>
WARNER INSURANCE SERVICES, INC.
CROSS-REFERENCE SHEET
FORM S-3 ITEM NUMBER AND HEADING HEADING OR LOCATION IN PROSPECTUS
-------------------------------- ---------------------------------
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus . . . . Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus . . . Inside Front and Outside Back
Cover Pages of Prospectus;
Available Information; Additional
Information
3. Summary Information, Risk
Factors and Ration of
Earnings to Fixed Charges . . . Prospectus Summary; Risk Factors
4. Use of Proceeds . . . . . . . . Use of Proceeds
5. Determination of Offering
Price . . . . . . . . . . . . . Outside Front Cover Page of
Prospectus; Plan of
Distribution
6. Dilution . . . . . . . . . . . Not Applicable
7. Selling Securityholders . . . . Selling Securityholders
8. Plan of Distribution . . . . . Plan of Distribution
9. Description of Securities to
be Registered . . . . . . . . . Description of Securities--
Common Stock
10. Interests of Named Experts
and Counsel . . . . . . . . . Legal Matters; Experts
11. Material Changes . . . . . . . Prospectus Summary; Price Range
of Common Stock
12. Incorporation of Certain
Information by Reference . . . Incorporation of Certain
Documents by Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities . . . . . . . . . Not Applicable
<PAGE>
Subject to Completion Dated June 17, 1996
PROSPECTUS
6,591,528 SHARES OF COMMON STOCK
WARNER INSURANCE SERVICES, INC.
This Prospectus relates to an aggregate of 6,591,528 shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"),
of Warner Insurance Services, Inc. (the "Company") held by four holders
(the "Selling Securityholders"). Of the aggregate number of Shares offered
hereby, 5,531,806 are shares of Common Stock held by the Selling
Securityholders, 862,847 are shares of Common Stock issuable upon exercise
of certain warrants (the "Selling Securityholder Warrants") held by certain
of the Selling Securityholders and 196,875 are shares of Common Stock
issuable upon exercise of certain additional warrants (the "Additional
Warrants") held by one of the Selling Securityholders. The Selling
Securityholder Warrants are exercisable by the holders thereof, at an
exercise price of $1.80 per share of Common Stock (subject to adjustment
pursuant to the anti-dilution provisions of the Selling Securityholder
Warrants), at any time until February 28, 2001. The Additional Warrants
are exercisable by the holder thereof, at an exercise price of $2.00 per
share of Common Stock (subject to adjustment pursuant to the anti-dilution
provisions of the Additional Warrants), at any time until March 30, 2001.
See "Prospectus Summary--Recent Developments," "Description of Securities"
and "Selling Securityholders."
The Shares offered by the Selling Securityholders by this Prospectus
may be sold from time to time by the Selling Securityholders or by their
transferees. The distribution of the Shares offered hereby may be effected
in one or more transactions that may take place in the over-the-counter
market, including ordinary brokers' transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders. Sales of the
Shares may be made pursuant to this Prospectus or pursuant to Rule 144
under the Securities Act of 1933, as amended. See "Plan of Distribution."
The Common Stock is listed on the Nasdaq SmallCap Market SM Symbol under
the symbol "WISI." On June 11, 1996, the closing sale price of the Common
Stock was $5 7/16, according to the Nasdaq SmallCap Market SM Symbol. See
"Price Range of Common Stock."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Securityholders.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 12.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________________________________
THE DATE OF THIS PROSPECTUS IS , 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
<PAGE>
AVAILABLE INFORMATION
Warner Insurance Services, Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files periodic
reports, proxy statements and other information with the Commission. The
reports, proxy statements and other information filed by the Company with
the Securities and Exchange Commission (the "Commission") can be inspected
and copied at the public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material also can be obtained by mail
from the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. See "Incorporation of
Certain Documents by Reference."
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), with the
Commission in Washington, D.C. with respect to the securities offered by
this Prospectus. This Prospectus does not contain all the information set
forth in or annexed as exhibits and schedules to the Registration
Statement. For further information with respect to the Company and the
securities offered by this Prospectus, reference is made to the
Registration Statement and to the financial statements, schedules and
exhibits filed as part hereof or incorporated by reference herein. Copies
of the Registration Statement, together with such financial statements,
schedules and exhibits, may be obtained from the public reference
facilities of the Commission at the addresses listed above, upon payment of
the charges prescribed therefor by the Commission. Statements contained in
this Prospectus as to the contents of any contract or other document
referred to are not necessarily complete and, in each instance, reference
is made to the copy of such contract or other documents, each such
statement being qualified in its entirety by such reference. Copies of
such contracts or other documents, to the extent that they are exhibits to
the Registration Statement, may be obtained from the public reference
facilities of the Commission, upon the payment of the charges prescribed
therefor by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following information, filed by the Company with the Commission
pursuant to the Exchange Act, is incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996; and
3. The Company's Proxy Statement dated May 6, 1996.
4. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on May 22, 1996 under the Exchange
Act, including any amendment or report filed for the purpose of updating
such description.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the
date of this Prospectus and prior to the termination of this offering,
shall be deemed to be incorporated by reference into this Prospectus and to
be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, including any beneficial owner, upon the written
or oral request of such person, a copy of any or all of the foregoing
documents incorporated herein by reference (other than the exhibits to such
documents). Requests should be directed to the Company, 18-01 Pollitt
Drive, Fair Lawn, New Jersey, Attention: Raul F. Calvo--Vice President,
telephone number (201) 794-4800.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and
financial statements (including the notes thereto) appearing elsewhere in
this Prospectus and in the documents incorporated herein by reference.
THE COMPANY
GENERAL
Warner Insurance Services, Inc. (the "Company" or "Warner"), a Delaware
corporation formed in 1971, is a provider of software products for the
property/casualty and health care insurance industries through its wholly-
owned subsidiary, COVER-ALL Systems, Inc. ("COVER-ALL").
Historically, the Company also provided services to the automobile
insurance industry, including underwriting, policy maintenance and claims
adjustment, which was carried out by its Insurance Services Division
("ISD"). However, in March 1996, the ISD business was transferred to a
subsidiary of The Robert Plan Corporation in connection with the settlement
of two lawsuits between the Company and The Robert Plan Corporation and the
release of Warner from its obligations under long-term processing contracts
with the customers of ISD. See "Recent Developments."
OVERVIEW
COVER-ALL offers standard as well as customized software application
products, together with implementation support services, to the
property/casualty and health care insurance industries.
In December 1989, the Company purchased, through its wholly-owned
subsidiary, the assets related to the exclusive proprietary rights to a PC-
based software application for policy-rating and issuance for
property/casualty insurance companies. This acquired software has been
enhanced and is the Company's "Classic" product line, which is one of the
Company's two current product lines.
The Classic product line is a self-contained rating, issuance and
transaction management application system utilized in the property/casualty
insurance industry. This software was developed using the Microfocus COBOL
language, and the Company is currently upgrading this product line to be
used in the Windows operating system. The Company believes that this
software product provides cost-effectiveness and flexibility for self-
contained Local Area Network ("LAN") systems. The Classic product is in
use in over 40 property/casualty insurance companies.
Since 1993, COVER-ALL has been developing its second product line
entitled the Total Administrative Solution ("TAS 2000"). TAS 2000 is a
suite of computer applications for property/casualty and health care
insurers designed to enable a client-driven re-engineering of the insurer's
business processes. TAS 2000 applications run on commodity priced open
computer systems and use state-of-the-art client/server software
technology provided by Oracle Corporation ("Oracle").
PRODUCT DESCRIPTION
CLASSIC PRODUCT LINE
The Classic product line is a set of LAN-based PC software packages
designed to automate the rating and issuance tasks in the property and
casualty insurance industry. Functionality includes rating and issuance
for quoting new business, mid-term changes, cancellations, reinstatements
and renewals. Multiple recipient copies of all relevant documentation for
each of these transactions, including quote summaries, declaration pages
and mandatory and optional manuscript forms, are printed by the system's
print engine. This functionality is supported for property and casualty
lines of business in a user friendly system.
The Company believes that the Classic product line brings to the
customer certain useful functions, features and capabilities. Some are
line of business specific and some are line of business independent. These
include:
. Clear and comprehensive data collection
. Various on-line help screens
. On-line ISO Commercial Lines Manual Tables and Footnotes
. Easy and direct system navigation
. Standard Bureau coverages and rates support
. Company customized coverages and rates support
. Fully automated recipient driven issuance of declaration
pages, worksheets, ID card, etc.
. Help Desk assistance
. Remote diagnostic and fix capabilities
The Classic products were originally brought to the marketplace in the
mid 1980's and subsequently have been enhanced to provide greater
functionality and to better utilize newer technology. The cost
effectiveness of the system rests on an inherent flexibility which can
accommodate specific customer requirements while retaining a single source
integrated core system. The Classic product line is based upon several
specific proprietary design features. COVER-ALL is currently working to
upgrade the Classic product line for use in the Windows operating system.
This will make it a Graphical User Interface ("GUI") application and is
expected to be completed by year-end 1996. This enhancement will increase
user friendliness and provide the customers with an easier integration of
peripheral support applications (e.g., imaging, work flow management,
etc.).
TAS 2000 PRODUCT LINE
The TAS 2000 product line was developed to be used as client/server
applications in the property/casualty and health care insurance industries.
COVER-ALL created the TAS 2000 product line to better position itself to
penetrate the larger customer market segment. The client/server
architectural concept allows companies to take advantage of the power of
distributed processing. The TAS 2000 product line includes the following
application modules:
. Client Management
. End User Tools
. Agency Profile Management
. Policy Administration
. Billing Management
. Claims Administration
. Statistical System
The TAS 2000 has Windows compliant GUI to enhance its user friendliness.
The TAS 2000 can be used on many different client/server hardware platforms
and offers capability to process the voluminous transactions that are
common to large scale insurance operations. The TAS 2000 is an
architecture of open LAN - and Wide Area Network ("WAN") - based modules
possessing varying elements of interdependence.
TAS 2000's product design is distinguished from competitive offerings by
the integrated use of Oracle's relational database and the Designer 2000
and Developer 2000 tool sets. The underlying database and language used
for the TAS 2000 products are the Oracle Relational Database Management
System and the Oracle Cooperative Development Environment products. These
products provide an integrated application environment. Through Oracle's
tools, these new products take advantage of the power of Oracle Version 7
on over 90 different server platforms. This software allows processing to
be centralized, dedicated to specific server(s) or clients or distributed
across the network.
The changing of the century is an issue which has never been faced in
the computer industry and poses a massive problem for automation systems
previously designed and currently being used. Companies must modify their
systems to accommodate a four-digit year in order to properly affect the
calculations and sorting routines which provide the core of their data
processing accuracy. Although seemingly minor, this change requires
finding, analyzing, implementing and testing tens of thousands of isolated
incidents within millions of lines of source code. The cost for the
industry can reach into the millions of dollars to affect proper change.
Both COVER-ALL product lines already accommodate the advent of the new
century.
The TAS 2000 product line was developed with an emphasis on quality from
the conceptual design stage using Oracle CASE tools through to the physical
coding and testing phases. COVER-ALL intends to continue to enhance both
of its product lines based on customer needs and changes in technology.
COVER-ALL is also committed to maintaining a quality support service
program for its customers.
COMPETITIVE PRODUCTS
COVER-ALL's competitors for both of its product lines are in most
instances larger and financially stronger than the Company. The Classic
product line competes primarily with three competitors who hold leadership
positions for LAN-based policy rating and issuance software used by
property/casualty insurance companies. The TAS 2000 primary competitors
are also larger and financially stronger than the Company. The Company
believes, however, that its products offer customers certain advantages not
available from COVER-ALL's competitors as to functionality and hardware
requirements.
MARKETING
The Company maintains a sales staff at its principal executive offices
in Fair Lawn, New Jersey. The Company also participates in and displays
its software products at trade shows organized by industry trade groups.
RESEARCH AND DEVELOPMENT
COVER-ALL's business is characterized by rapid technological change.
The Company's success will depend, in part, on its ability to keep its
products current based on new technologies. Accordingly, the Company must
maintain ongoing research and development programs to continually add value
to its suite of products, as well as any possible expansion of its suite of
products. The Company believes that research and development expenditures
will continue to constitute a significant percentage of revenues.
COVER-ALL has expensed for research and development $957,564,
$1,023,920, $1,932,920, $2,499,436, $533,260 and $805,563 for the three
months ended March 31, 1996 and 1995, the years ended December 31, 1995 and
1994, the two months ended December 31, 1993 and the year ended October 31,
1993, respectively.
BACKLOG
Backlog is not applicable to the business of the Company.
MAJOR CUSTOMERS
The Classic product line is in use in over forty property/casualty
insurance companies while the TAS 2000 product line is currently in use in
two property/casualty insurance companies. TAS 2000 was licensed to the
first health care insurer in 1996. The Company's revenues from major
customers (more than 10 percent of total revenues) for the years ended
December 31, 1995 and 1994 as a percentage of total revenue were as
follows:
YEAR ENDED YEAR ENDED
CUSTOMER DECEMBER 31, 1995 DECEMBER 31, 1994
-------- ----------------- -----------------
New Jersey State
Medical Underwriters . . . . 18% --
Sun Alliance Management
Services . . . . . . . . . . 16% --
Secura, Inc. . . . . . . . . 11% --
Empire Insurance Company . . -- 17%
Millers Insurance Group . . -- 13%
No customer represented more than 10 percent of total revenues prior to
1994. In 1995, export sales were made to a U.K. customer of approximately
$640,000.
EMPLOYEES
The Company had 80 employees at June 1, 1996. None of the Company's
employees are represented by a labor union, and the Company has not
experienced any work stoppages. The Company believes that relations with
its employees are good.
RECENT DEVELOPMENTS
INSURANCE SERVICES DIVISION
In March 1996, the Company entered into a series of agreements (the "ISD
Agreements") which provided for the transfer and discontinuance of its
Insurance Services Division ("ISD") operations. Pursuant to the ISD
Agreements (i) the Company issued an aggregate of 2,476,547 and 137,586
shares of its common stock, par value $0.01 per share (the "Common Stock"),
respectively, and 1,181,250 and 65,625 warrants (the "Selling
Securityholder Warrants"), respectively, to Atlantic Employers Insurance
Company ("Atlantic") and Electric Insurance Company ("Electric") (each of
which is a Selling Securityholder) in exchange for the release of Warner
from its obligations to provide insurance services to such companies, and
(ii) the Company issued to The Robert Plan Corporation ("RPC") (which is a
Selling Securityholder) an aggregate of 642,068 shares of Common Stock and
306,250 Selling Securityholder Warrants in exchange for the settlement and
dismissal of lawsuits with The Robert Plan Corporation. Effective March 1,
1996, the Company has discontinued providing insurance processing services
to the automobile insurance industry. The 3,256,201 shares of Common Stock
issued as provided in (i) and (ii) above are referred to as the "Settlement
Shares."
As a part of the restructuring transactions, the Company transferred
certain assets, employees, contracts and leased premises relating to its
ISD business to a subsidiary of The Robert Plan Corporation, which replaced
the Company as the provider of insurance services to the ISD customers.
Under the ISD Agreements, the Company also paid an aggregate of $887,500 to
Atlantic, Electric and RPC and an aggregate of $1.6 million to another of
the Company's former ISD customers to settle certain claims. Under the ISD
Agreements, the Company was granted the option (the "Repurchase Option"),
exercisable for a period of six months, to (i) purchase 50 percent of the
Settlement Shares at a cash price equal to the greater of $3.00 or 50
percent of the then-market price of a share of Warner Common Stock, and
(ii) acquire 50 percent of the Selling Securityholder Warrants at a cash
price equal to $1.00 per Selling Securityholder Warrant.
On March 31, 1996, the Company entered into a series of agreements (the
"SIL/Care Agreements") with Software Investments Limited ("SIL"), which is
a Selling Securityholder, and Care Corporation Limited ("Care") whereby the
Company:
(A) sold to SIL for total proceeds of $3,022,391: (i) 1,412,758
shares of Common Stock (the "SIL Shares") for $2.00 per share, and (ii)
the Additional Warrants, (together with the SIL Shares, the "SIL
Securities") to purchase during a five-year period an aggregate of
196,875 shares of Common Stock exercisable at $2.00 per share, for $1.00
per SIL Warrant; and
(B) assigned to SIL the Repurchase Option.
In addition, under the SIL/Care Agreements, the Company was granted by
Care the exclusive license for the Care software systems for use in the
workers' compensation and group health claims administration markets in
Canada, Mexico and Central and South America. In exchange for this
license, Warner issued to Care 2,500,000 shares of Common Stock (the "Care
Shares"). Pursuant to the SIL/Care Agreements, if during the three years
after closing, this license results in $5,000,000 or more in revenues by
Warner, then the Care Shares will be fully earned; otherwise, depending
upon the level of revenue reached, Warner will have the right to repurchase
portions of the Care Shares at $.01 per share based upon the level of
revenues actually achieved. Under certain circumstances, based upon
aggregate net sales in excess of $10,000,000 from a maximum of two separate
sales during such three-year period, Warner may be required to grant to
Care five-year Warrants to buy an additional 1,000,000 shares of Common
Stock at $2.00 per share. Accordingly, the Company recorded a $5,000,000
software license on the Consolidated Balance Sheet as of March 31, 1996.
Pursuant to the terms of the SIL/Care Agreements, on May 1, 1996, SIL
exercised the Repurchase Option pursuant to which it (i) acquired 1,628,101
of the Settlement Shares at $3.00 per share, and (ii) at $1.00 per Warrant,
776,562 Selling Securityholder Warrants to acquire 776,562 shares of Common
Stock at $2.00 per share. SIL exercised these Selling Securityholder
Warrants on May 6, 1996, resulting in the Company receiving $1,553,124 in
additional equity.
As a result of the issuance of the SIL Securities and the Care Shares,
the anti-dilution provisions of the Selling Securityholder Warrants
required that certain adjustments be made to the exercise price thereunder
and the aggregate number of shares of Common Stock issuable. Pursuant to
such provisions, the exercise price of the Selling Securityholder Warrants
was reduced to $1.80 from $2.00 per share and the aggregate number of
shares of Common Stock issuable was increased to 1,725,694 from 1,553,125.
Of such increased number of shares of Common Stock, 86,285 were issued to
SIL in respect of its May 6, 1996 exercise of Selling Securityholder
Warrants referred to above.
ALERION INSURANCE COMPANY OF NEW JERSEY ("ALERION")
In late 1993, the Company established Alerion, a wholly-owned
property/casualty insurance subsidiary. In this connection, the Company
also changed to a calendar year for financial and tax reporting purposes to
bring the Company into line with the calendar year reporting requirements
of the insurance industry.
By early 1994, Warner had funded Alerion with approximately $10 million
of cash and securities and Alerion entered into a reinsurance agreement to
reinsure a portion of the risk on certain insurance policies written by a
primary insurer. In late 1994, the Company decided that risk taking, even
as a reinsurer, was not an attractive business strategy. The Company and
the primary insurer agreed to end the reinsurance arrangement in the fourth
quarter of 1994 and "commute" all reinsurance interests and liabilities
back to the inception of the agreement, thus eliminating all reinsurance
activity of Alerion. Therefore, Alerion's operations for all periods
consisted of immaterial investment activity.
Alerion sold its securities and returned all of its remaining cash in
1996, having surrendered its Certificate of Authority to transact insurance
business in New Jersey.
PROPERTIES
The Company's principal headquarters are located in Fair Lawn, New
Jersey where it occupies approximately 36,000 square feet under a lease
which expires in 2000 at a current annual rental expense of approximately
$400,000.
In addition, the Company also leases a facility with approximately
22,000 square feet in Somerset, New Jersey. This lease expires in 2002
with an annual rental expense of approximately $270,000. This facility
was previously used by ISD, and the Company is currently exploring
opportunities to either continue utilizing this facility or transfer or
sell this lease to a third-party.
In connection with the ISD Agreements, the Company's lease for its
former principal headquarters has been transferred to The Robert Plan
Corporation.
The Company believes that these facilities are well maintained and
adequate to meet its needs in the foreseeable future.
LEGAL PROCEEDINGS
In March 1994, Material Damage Adjustment Corporation ("MDA"), a
subsidiary of The Robert Plan Corporation and a subcontractor for the
Company performing claims processing work, instituted an action in the
Superior Court of New Jersey seeking injunctive relief requiring that the
Company turn over to MDA in excess of $1 million that the Company had
withheld from certain claims fees allegedly owed to MDA. This action arose
out of the Company's servicing contract with the Market Transition Facility
of New Jersey ("MTF"). The Company had withheld the funds as a set off to
cover unpaid invoices for data processing services rendered by the Company
for MDA. MDA also added a claim for approximately $2.5 million of
surcharge fees paid to the Company by the MTF. The MTF was brought into
the case to resolve disputes between MTF and MDA over refunds of claims
fees paid on claims later closed without payment. The Company vigorously
contested MDA's claims and asserted counterclaims against MDA to establish
the Company's entitlement to the disputed sums.
In May 1994, the Company filed an action in the Superior Court of New
Jersey against Lion Insurance Company, National Consumer Insurance
Corporation and The Robert Plan Corporation seeking payment of unsatisfied
invoices under an April 1991 agreement totalling approximately $2.7
million. Under the agreement, the Company agreed to provide data
processing services for a three-year term in support of Lion Insurance
Company's "depopulation pool" automobile insurance business in New Jersey.
Lion Insurance Company is a subsidiary of The Robert Plan Corporation whose
affiliate, National Consumer Insurance Corporation, has taken over the
"depopulation pool" business. The Robert Plan Corporation guaranteed Lion's
performance and payment.
On March 1, 1996, in connection with the ISD Agreements, the two
lawsuits described above were settled as part of the overall settlement
with certain of the Company's insurance services customers.
On February 2, 1995, Sol M. Seltzer commenced an action in the Supreme
Court of New York against Mr. Krieger, a director and former President of
the Company, and each of the other members of the then Board of Directors
of the Company. The plaintiff, Sol M. Seltzer, who purports to sue
derivatively on behalf of the Company and COVER-ALL, was a vice president
of the Company and a director of COVER-ALL until he resigned from such
positions in late 1994. The plaintiff alleges, among other things, breach
of fiduciary duty, waste and mismanagement, as well as other alleged
wrongful acts by the Board and the former President, including among other
things, self-dealing and misuse of corporate funds by the former President.
The plaintiff seeks, among other things, compensatory damages in an amount
to be determined at trial and punitive damages in an aggregate amount of
$12 million.
The Company, and the other defendants, are vigorously contesting
Mr. Seltzer's claims. The Company believes that this lawsuit lacks
substantial merit. A motion to dismiss the complaint has been filed and is
pending.
On February 6, 1995, the Company commenced an action in the Superior
Court of New Jersey against Sol M. Seltzer, a former vice president of the
Company and a director of COVER-ALL, alleging fraud, mismanagement,
negligent misrepresentation and breach of fiduciary duty with respect to
the development and implementation of COVER-ALL's TAS 2000 software
product. The Company seeks compensatory and punitive damages in an amount
to be determined at trial. Discovery has not been completed in this case.
The Company's principal executive offices are located at 18-01 Pollitt
Drive, Fair Lawn, New Jersey 07410, and its telephone number is (201)
794-4800.
THE OFFERING
Securities offered
hereby.................... 6,591,528 shares of Common Stock (the
"Shares")(1)
Shares of Common Stock
outstanding after this
Offering.................. 17,708,069 shares(2)
Nasdaq SmallCap Market SM
symbol.................... WISI
Use of proceeds........... The Company will not receive any proceeds from
the sale of the Shares by the holders thereof
(the "Selling Securityholders"). The Company,
however, will receive aggregate proceeds of
approximately $1,947,000 upon the exercise of
the Selling Securityholder Warrants and the
Additional Warrants, although there is no
assurance that any of such Selling
Securityholder Warrants or Additional Warrants
will be so exercised.
Risk factors.............. The securities offered hereby involve a high
degree of risk. See "Risk Factors."
-----------------------
(1) Of the aggregate number of Shares offered hereby, 5,531,806 are shares
of Common Stock held by the Selling Securityholders, 862,847 are
shares of Common Stock issuable upon exercise of the Selling
Securityholder Warrants held by certain of the Selling Securityholders
and 196,875 are shares of Common Stock issuable upon exercise of the
Additional Warrants held by one of the Selling Securityholders. See
"Selling Securityholders."
(2) Includes an aggregate of 1,059,722 shares of Common Stock issuable
upon the exercise of currently outstanding Warrants, but does not
include an aggregate of 683,716 shares of Common Stock issuable upon
exercise of currently outstanding options under the Company's option
plans (collectively, the "Plans") and an aggregate of 954,113
additional shares of Common Stock reserved for issuance upon the
exercise of options which may be granted under the Plans.
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED YEAR ENDED DECEMBER
MARCH 31, 31,
---------------------- ------------------
(UNAUDITED)
1996 1995 1995 1994
---- ---- ---- ----
STATEMENT OF
OPERATIONS DATA:
Software
licensing,
maintenance and
professional
services
revenues . . . $1,120 $1,054 $4,119 $1,927
Loss from
continuing
operations(1) . (798) (2,158) (3,544) (7,466)
Income (loss)
from
discontinued
operations less
applicable
income taxes/
(benefit)(2) . -- (1,330) (7,108) (6,754)
Loss on disposal
of discontinued
operations
including
$1,000 for
anticipated
losses in 1996
prior to sale,
no tax benefit
provided . . . -- -- (750) --
Net income
(loss) . . . . (798) (3,488) (11,402) (14,220)
Loss per share
from continuing
operations . . (.07) (.25) (.41) (.84)
Net income
(loss) per
share(3) . . . (.07) (.41) (1.33) (1.60)
Cash dividends
per share . . . -- -- -- $ .02
BALANCE SHEET
DATA:
Working capital
(deficiency) . $ 209 $ 162 $(8,717) $ 3,110
Total assets . . 14,331 15,279 8,369 18,795
Short-term
debt . . . . . -- -- -- 2,000
Stockholders'
equity
(deficit) . . . 8,266 1,901 (6,013) 5,376
TWO MONTHS
ENDED
DECEMBER
31, YEARS ENDED OCTOBER 31,
---------- -----------------------
1993 1993 1992 1991
---- ---- ---- ----
STATEMENT OF
OPERATIONS DATA:
Software
licensing,
maintenance and
professional
services
revenues . . . $ 224 $1,740 $1,802 $1,317
Loss from
continuing
operations(1) . (781) (1,943) (850) (384)
Income (loss)
from
discontinued
operations less
applicable
income taxes/
(benefit)(2) . 1,158 5,653 4,116 2,034
Loss on disposal
of discontinued
operations
including
$1,000 for
anticipated
losses in 1996
prior to sale,
no tax benefit
provided . . . -- -- -- --
Net income
(loss) . . . . 377 3,710 3,266 1,650
Loss per share
continuing
operations. . . (.09) (.21) (.09) (.04)
Net income
(loss) per
share(3). . . . .04 .40 .36 .19
Cash dividends
per share . . . $ .01 $ .03 -- --
BALANCE SHEET
DATA:
Working capital
(deficiency) . $12,475 $12,843 $17,102 $12,386
Total assets . . 22,748 22,443 18,544 14,451
Short-term
debt. . . . . . -- -- -- --
Stockholders'
equity
(deficit) . . . 20,574 20,541 17,637 13,302
----------------------
(1) Includes a $1,165 ($.14 per share) special charge in the three months
ended 1995 and the year ended December 31, 1995 and $3,373 ($.25 per
share net of tax) special charge in the year ended December 31, 1994.
(2) Revenues of the discontinued operations (ISD) were none, $6,868,
$20,228, $32,893, $8,589, $68,515, $88,858 and $53,541, respectively,
for each of the periods above.
(3) All per share amounts are based on the increased number of shares
giving retroactive effect to the impact of the five-for-four stock
split by way of a twenty-five percent (25%) stock dividend declared on
March 18, 1993 and the five percent (5%) stock dividend declared on
December 19, 1991.
RISK FACTORS
THE SECURITIES BEING OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
PRIOR TO ACQUIRING ANY OF THE SECURITIES OFFERED HEREBY, PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, AS WELL AS
OTHER INFORMATION DESCRIBED ELSEWHERE IN THIS PROSPECTUS.
RECENT LOSSES; HISTORICAL LOSSES FOR COVER-ALL. The Company has
experienced losses from continuing operations of $798,000, $3,544,000,
$7,466,000, $781,000 and $1,943,000 for the three months ended March 31,
1996, the years ended December 31, 1995 and 1994, the two months ended
December 31, 1993 and the year ended October 31, 1993. There can be no
assurance that the Company will ever operate profitably.
NEED FOR ADDITIONAL FINANCING. The Company will need significant
additional financing in order to continue to fund the research and
development of its software products and to generally expand and grow the
COVER-ALL business. At December 31, 1995, the Company had a stockholders'
deficit of $6,013,000 and a working capital deficiency of approximately
$8,717,000. As a result of the cumulative benefit to the equity of the
Company by virtue of the transactions described under the caption
"Prospectus Summary--Recent Developments," the Company had stockholders'
equity of $8,266,000 and working capital of $209,000 at March 31, 1996. To
the extent that the Company continues to be required to fund operating
losses, the Company's financial position would deteriorate. There can be
no assurance that the Company will be able to find significant additional
financing at all or on terms favorable to the Company.
DEPENDENCE ON PRODUCT DEVELOPMENT. The Company is currently investing
significant resources in product development and expects to continue to do
so in the future. The Company's future success will depend on its ability
to continue to enhance its current product line and to continue to develop
and introduce new products that keep pace with competitive product
introductions and technological developments, satisfy diverse and evolving
insurance industry requirements and otherwise achieve market acceptance.
There can be no assurance that the Company will be successful in continuing
to develop and market on a timely and cost-effective basis product
enhancements or new products that respond to technological advances by
others, or that these products will achieve market acceptance. In
addition, the Company has in the past experienced delays in the
development, introduction and marketing of new and enhanced products, and
there can be no assurance that the Company will not experience similar
delays in the future. Any failure by the Company to anticipate or respond
adequately to changes in technology and insurance industry preferences, or
any significant delays in product development or introduction, would have a
material adverse effect on the Company's business, operating results and
financial condition.
NO ASSURANCE OF MARKET ACCEPTANCE OF COMPANY PRODUCTS. The future
success of the Company will be dependent upon the Company's ability to
increase significantly the number of insurance companies that purchase the
Company's software products. As a result of the intense competition in the
Company's industry and the rapid technological changes which characterize
it, there is no assurance that the Company's products will achieve
significant market acceptance. Further, insurance companies are typically
characterized by slow decision-making and numerous bureaucratic and
institutional obstacles which will make the Company's efforts to
significantly expand its customer base difficult.
RAPID TECHNOLOGICAL CHANGE. The demand for the Company's products is
impacted by rapid technological advances, evolving industry standards in
computer hardware and software technology, changing insurance industry
requirements and frequent new product introductions and enhancements that
address the evolving needs of the insurance industry. The process of
developing software products such as those offered by the Company is
extremely complex and is expected to become increasingly complex and
expensive in the future with the introduction of new platforms and
technologies. The introduction of products embodying new technologies and
the emergence of new industry standards and practices can render existing
products obsolete and unmarketable. The Company's future success depends
upon its ability to anticipate or respond to technological advances,
emerging industry standards and practices in a timely, cost-effective
manner. There can be no assurance that the Company will be successful in
developing and marketing new products or enhancements to existing products
that respond to technological changes or evolving industry standards. The
failure to successfully respond to such changes and evolving standards on a
timely basis, or at all, could have a material adverse effect upon the
Company's business, operating results and financial condition.
COMPETITION. Both the computer software and the insurance software
systems industries are highly competitive. There are a number of larger
companies, including computer manufacturers, computer service and software
companies and insurance companies, that have greater financial resources
than the Company that currently offer and have the technological ability to
develop software products similar to those offered by the Company. Very
large insurers, which internally develop systems similar to those of the
Company, may or may not become major customers of the Company for software.
These companies present a significant competitive challenge to the
Company's business. The Company competes on the basis of its service,
price, system functionality and performance and technological advances.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a
significant extent upon a limited number of members of senior management
and other key employees, including Peter C. Lynch, the President and Chief
Operating Officer of COVER-ALL. The Company does not maintain key man life
insurance on any such persons. The loss of the service of one or more key
managers or other employees could have a material adverse effect upon the
Company's business, operating results or financial condition. In addition,
the Company believes that its future success will depend in large part upon
its ability to attract and retain additional highly skilled technical,
management, sales and marketing personnel. Competition for such personnel
in the computer software industry is intense. There can be no assurance
the Company will be successful in attracting and retaining such personnel,
and, the failure to do so, could have a material adverse effect on the
Company's business, operating results or financial condition.
DEPENDENCE UPON PROPRIETARY TECHNOLOGY; RISK OF THIRD PARTY CLAIMS OF
INFRINGEMENT. The Company's success and ability to compete is dependent in
part upon its proprietary software technology. The Company also relies on
certain software that it licenses from others. The Company relies on a
combination of trade secret, copyright and trademark laws, nondisclosure
and other contractual agreements and technical measures to protect its
proprietary rights. The Company currently has no patents or patent
applications pending. Despite the Company's efforts to protect is
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's products or to obtain and use information that the Company
regards as proprietary. There can be no assurance that the steps taken by
the Company to protect its proprietary technology will prevent
misappropriation of such technology, and such protection may not preclude
competitors from developing products with functionality or features similar
to the Company's products. While the Company believes that its products
and trademarks do not infringe upon the proprietary rights of third
parties, there can be no assurance that the Company will not receive future
communications from third parties asserting that the Company's products
infringe, or may infringe, the proprietary rights of third parties. Any
such claims, with or without merit, could be time-consuming, result in
costly litigation and diversion of technical and management personnel,
cause product shipment delays or require the Company to develop non-
infringing technology or enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may not be available on terms
acceptable to the Company or at all. In the event of a successful claim of
product infringement against the Company and failure or inability of the
Company to develop non-infringing technology or license the infringed or
similar technology, the Company's business, operating results and financial
condition could be materially adversely affected.
DEPENDENCE ON MAJOR CUSTOMERS. In 1994 and 1995, the Company's software
products operations were dependent on certain major customers, two of which
accounted for approximately 30% of total revenues in 1994 and three of
which accounted for approximately 45% of total revenues in 1995. The
Company anticipates that its operations will continue to be characterized
by dependence on the continuing business of major customers. As a result,
the loss of any such major customer or the Company's inability to continue
to attract new major customers could have a material adverse effect upon
the Company's business, operating results and financial condition.
SHARES ELIGIBLE FOR RESALE. This Prospectus covers the sale by the
Selling Securityholders of an aggregate of 6,591,528 shares of Common
Stock. Although the Selling Securityholders may sell the Shares from time
to time under this Prospectus, to the extent that a significant number of
the Shares are sold during a short period of time, the market price of the
Common Stock could be adversely impacted. Further, the prospect of the
Shares being sold into the market (the so-called "over-hang") may in and of
itself create continuing pressures on the price of the Common Stock. In
addition, there are an aggregate of 1,621,875 shares of Common Stock
issuable under the Plans which are registered for resale under Form S-8
under the Securities Act.
NO ASSURANCE OF CONTINUED QUOTATION ON THE NASDAQ SMALLCAP MARKET SM
Symbol. The Company's Common Stock is listed on the Nasdaq SmallCap Market
SM Symbol. However, no assurance can be given that the Company will be
able to satisfy the criteria for continued listing on the Nasdaq SmallCap
Market SM Symbol. For continued listing on the Nasdaq SmallCap Market SM
Symbol, a company must, among other things, have $2,000,000 in total
assets, $1,000,000 in total capital and surplus, $1,000,000 in market value
of public float and a minimum bid price of $1.00 per share. If the Company
is unable to satisfy the requirements for continued listing on the Nasdaq
SmallCap Market SM Symbol, trading, if any, in the Common Stock would be
conducted in the over-the-counter market in what are commonly referred to
as the "pink sheets" or on the NASD OTC Electronic Bulletin Board. In such
an event, an investor may find it more difficult to dispose of, or to
obtain accurate price quotations as to the market value of, the securities
offered hereby.
"PENNY STOCK" REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON
MARKETABILITY OF SECURITIES. The Securities and Exchange Commission (the
"Commission") has adopted regulations which generally define "penny stock"
to be an equity security that has a market price (as defined) of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject
to certain exceptions. Because the Common Stock is currently listed on the
Nasdaq SmallCap Market SM Symbol, such securities are exempt from the
definition of "penny stock." However, if the Common Stock is removed from
listing by the Nasdaq SmallCap Market SM Symbol at any time, the Common
Stock may become subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons other
than established customers and accredited investors (generally those with
assets in excess of $1,000,000 or annual incomes exceeding $200,000 or
$300,000 together with their spouse). For transactions covered by these
rules, the broker-dealer must make a special suitability determination for
the purchase of such securities and have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction (other than exempt transactions) involving a penny stock, the
rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the Commission relating to the penny stock market.
The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-
dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, monthly statements must be sent disclosing
recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the
"penny stock" rules may restrict the ability of broker-dealers to sell the
Company's securities and may affect the ability of investors to sell the
Company's securities in the secondary market. Furthermore, if the
securities offered hereby are removed from listing by the Nasdaq SmallCap
Market SM Symbol, trading, if any, in the Common Stock would be conducted
in the over-the-counter market in what are commonly referred to as the
"pink sheets" or on the NASD OTC Electronic Bulletin Board. In such an
event, an investor may find it more difficult to dispose of, or to obtain
accurate price quotations as to the market value of, the securities offered
hereby.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
securities offered by this Prospectus. The Company, however, will receive
aggregate proceeds of approximately $1,947,000 upon the exercise of the
Selling Securityholder Warrants and Additional Warrants, although there is
no assurance that any of such Selling Securityholder Warrants or Additional
Warrants will be so exercised.
DIVIDEND POLICY
The Company does not anticipate paying cash dividends in the foreseeable
future. The Company currently intends to retain all earnings, if any, for
use in the expansion of the Company's business. The declaration and
payment of future dividends, if any, will be at the sole discretion of the
Board of Directors and will depend upon the Company's profitability,
financial condition, cash requirements, future prospects and other factors
deemed relevant by the Board of Directors. The Company paid quarterly cash
dividends of $0.01 per share from the first quarter of 1993 through the
second quarter of 1994 but discontinued this policy in the third quarter of
1994.
PRICE RANGE OF COMMON STOCK
Prior to March 4, 1996, the Common Stock was traded on the New York
Stock Exchange (the "NYSE"). Upon the Common Stock's delisting from the
NYSE, commencing March 8, 1996, the Common Stock was traded in the over-
the-counter market and, as of March 15, 1996, the Common Stock was quoted
on the NASD OTC Bulletin Board. On May 23, 1996, the Common Stock was
listed on the Nasdaq SmallCap Market SM Symbol under the symbol "WISI."
The following chart sets forth (i) the high and low sales prices of the
Common Stock on the NYSE in 1994 and 1995 and in the first quarter of 1996
through March 4, 1996, (ii) the high and low last sales prices of the
Common Stock on the NASD OTC Bulletin Board from March 15, 1996 through
May 22, 1996 as reported by the National Quotation Bureau, Inc., and
(iii) the high and low last sale prices of the Common Stock on the Nasdaq
SmallCap Market SM Symbol as reported by the Nasdaq SmallCap Market SM
Symbol from May 23, 1996 through May 31, 1996.
HIGH LOW
---- ---
1994
----
1st Quarter . . . . $5.25 $4.125
2nd Quarter . . . . 4.25 2.375
3rd Quarter . . . . 4.25 2.25
4th Quarter . . . . 4.125 2.125
1995
----
1st Quarter . . . . $3.00 $1.50
2nd Quarter . . . . 1.75 0.875
3rd Quarter . . . . 2.25 1.25
4th Quarter . . . . 1.625 1.00
1996
----
January 1 to March 4 $3.50 $1.625
March 15 to May 22(1) 7.375 2.75
May 23 to May 31 . . 6.875 4.75
----------------
(1) These last sales quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions, and may not necessarily
represent actual transactions.
As of May 31, 1996, there were approximately 829 holders of record of
the Common Stock. This number does not include beneficial owners who may
hold their shares in street name.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, par value $0.01 per share. As of May 31, 1996,
there were 16,648,347 shares of Common Stock outstanding.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote per share
on all matters to be voted on by stockholders. The holders of shares of
Common Stock are not entitled to cumulate their votes in elections for
directors, which means that holders of more than half the outstanding
shares of Common Stock can elect all of the directors of the Company
standing for election.
The holders of shares of Common Stock are entitled to receive such
dividends as may be declared from time to time by the Board of Directors in
its discretion from any assets legally available therefor. In the event of
the dissolution of the Company, whether voluntary or involuntary, the
holders of Common Stock are entitled to share ratably in the assets of the
Company legally available for distribution to its stockholders. The
holders of Common Stock have no preemptive, subscription, conversion or
redemption rights and are not subject to further calls or assessments or
rights of redemption by the Company.
WARRANTS
SELLING SECURITYHOLDER WARRANTS. As of the date hereof, an aggregate of
862,847 Selling Securityholder Warrants to purchase an aggregate of 862,847
shares of Common Stock at $1.80 per share are issued and are outstanding.
The exercise price of the Selling Securityholder Warrants was originally
$2.00 per share, but has been reduced to $1.80 as a result of the anti-
dilution provisions of the Selling Securityholder Warrants which required
such adjustment upon the issuance of the SIL Securities and the Care
Shares. Holders of unexercised Selling Securityholder Warrants are not
entitled to receive dividends or other distributions, receive notice of any
meeting of stockholders, the right to vote or to consent to any action of
the stockholders, or to any other rights of stockholders. The exercise
price and number of shares of Common Stock issuable upon exercise of the
Selling Securityholder Warrants will be adjusted in the event that the
Company (i) issues or sells any (A) shares of Common Stock, or (B) rights
to subscribe for, options to purchase, or any securities convertible into
or exchangeable for, shares of Common Stock, in either case for a
consideration less than 95% of the "Market Price" (as defined), (ii) pays a
dividend or makes any other distribution with respect to the Common Stock
in shares of any class or series of its capital stock, (iii) subdivides its
outstanding Common Stock, (iv) combines its outstanding Common Stock into a
smaller number of shares, (v) effects a reclassification of the Common
Stock, or (vi) merges, consolidates or sells all or substantially all of
its properties and assets to a buyer under specified circumstances. The
Selling Securityholder Warrants expire on February 28, 2001.
ADDITIONAL WARRANTS. As of the date hereof, an aggregate of 196,875
Additional Warrants to purchase an aggregate of 196,875 shares of Common
Stock at $2.00 per share are issued and outstanding. All of the Additional
Warrants are currently owned by SIL. The terms of the Additional Warrants
are substantially identical to those of the Selling Securityholder
Warrants, except for the $2.00 exercise price and that the Additional
Warrants expire on March 30, 2001.
CLASSIFICATIONS OF THE BOARD OF DIRECTORS
The Certificate of Incorporation also provides that the members of the
Board of Directors of the Company will be classified into three classes,
with the term of each class to run for three years and expire at successive
annual meetings of stockholders. Thus, it would take a minimum of two
annual meetings of stockholders to change the majority of the Board of
Directors. Vacancies on the Board of Directors that may occur between
annual meetings may be filled only by the Board of Directors. In addition,
this provision specifies that any director elected to fill a vacancy on the
Board will serve for the balance of the term of the replaced director.
STOCKHOLDER RIGHTS PLAN
On November 17, 1989, the Company adopted a Stockholder Rights Plan and
declared a dividend distribution of one Right for each outstanding share of
Common Stock. Under certain conditions, each Right shall initially
entitle the registered holder thereof to purchase one-fifth of one share of
Common Stock at a purchase price of $10.00, subject to adjustment. The
Rights will be exercisable only if (i) a person or group has acquired, or
obtained the right to acquire, 15% or more of the outstanding shares of
Common Stock (other than a person that acquires the stock directly from the
Company in a transaction that the Company's independent Directors determine
to be in the best interests of the Company and its stockholders) or (ii)
following the commencement of a tender offer or exchange offer for 15% or
more of the then outstanding shares of Common Stock. Each Right will
entitle its holder to receive, upon exercise, Common Stock (or, in certain
circumstances, cash, property, or other securities of the Company) having a
value equal to two times the purchase price of the Right under certain
circumstances, including the acquisition of 20% of the outstanding Common
Stock. All rights holders, except the acquiror, may purchase a number of
shares of Common Stock equal to $10.00 (subject to adjustment under the
terms of the Rights Plan) divided by 50% of the market price of the
Company's Common Stock on the date which is ten days after a public
announcement by the Company that a person or group has acquired, or
obtained the right to acquire, 15% or more of the outstanding shares of
Common Stock. In the event that the Company is acquired in a merger or
other business combination transaction in which the Company is not the
surviving corporation, the rights holders may purchase the acquiror's
shares at the similar discount.
The Company may redeem the Rights at $0.01 each until ten days following
the date on which a person or group of affiliated persons has acquired, or
obtained the right to acquire, the beneficial ownership of 15% or more of
the outstanding shares of Common Stock. The Rights will expire on December
4, 1999 unless earlier redeemed by the Company.
CERTAIN PROVISIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION
The Company's Certificate contains certain provisions that would have an
effect of delaying, deferring or preventing a change of control of the
Company in connection with certain business combinations. Article Seventh
provides that the affirmative vote of not less than 80% of the outstanding
shares of voting stock is required to approve (i) the sale (or similar
transfer) of all or substantially all of the assets of the Company to a
"related corporation," (ii) the consolidation of the Company with or its
merger into a "related corporation," (iii) the merger into the Company of a
"related corporation," (iv) any agreement relating to the transactions
referred to in (i) through (iii), and (v) any amendment to said Article
Seventh. A "related corporation" is any corporation which, together with
its affiliated and associated persons (as such terms are defined) owns of
record or beneficially more than 5% of the Company's outstanding voting
stock entitled to vote on the subject transaction. The foregoing
provisions, however, do not apply if a majority of the Company's
disinterested directors approve the subject transaction, in which event
approval of such transaction shall require only such affirmative vote as is
otherwise required by law.
In addition, Article Fifth of the Certificate requires the approval of
80% of the voting stock to remove a director without cause, to alter,
repeal or modify those provisions of the Company's By-Laws relating to the
number, election and terms of directors, newly created directorships and
vacancies and removal of directors, and to amend said Article Fifth
(relating generally to the Company's Board of Directors).
TRANSFER AGENT
First Union National Bank is the Transfer Agent and Registrar for the
Company's Common Stock.
SELLING SECURITYHOLDERS
Pursuant to the ISD Agreements and the SIL/Care Agreements, the Company
has obligated itself to file and cause to become effective a registration
statement covering the Shares, Selling Securityholder Warrants and
Additional Warrants issued to the respective Selling Securityholders
thereunder. This Registration Statement is filed pursuant to such
Agreements.
An aggregate of 6,591,528 Shares are being offered by the Selling
Securityholders pursuant to this Prospectus. Of the aggregate number of
Shares offered hereby, 5,531,806 are shares of Common Stock held by the
Selling Securityholders, 862,847 are shares of Common Stock issuable upon
exercise of the Selling Securityholders Warrants and 196,875 are shares of
Common Stock issuable upon exercise of the Additional Warrants.
The Selling Securityholders are expected to sell their Shares on a
delayed or continuous basis. As a result, the Registration Statement of
which this Prospectus forms a part has been filed pursuant to Rule 415
under the Securities Act to afford holders of the Shares the opportunity to
sell them in public transactions rather than pursuant to exemptions from
the registration and prospectus delivery requirements of the Securities
Act.
The following table set forth certain information with respect to each
Selling Securityholder for whom the Company is registering the Shares for
resale to the public. The Company will not receive any of the proceeds
from the sale of such securities. Except as otherwise described under the
caption "Prospectus Summary--Recent Developments," to the Company's
knowledge there are no material relationships between any of the Selling
Securityholders and the Company, nor have any such material relationships
existed within the past three years.
COMMON STOCK COMMON STOCK
NAME OF SELLING OWNED SHARES OWNED
SECURITYHOLDER PRIOR TO OFFERING OFFERED AFTER OFFERING
--------------- ----------------- ------- --------------
Software Investments
Limited 4,100,581(1) 4,100,581(1) 0
Atlantic Employers
Insurance Company 1,894,523(2) 1,894,523(2) 0
The Robert Plan Corpo-
ration 491,173(3) 491,173(3) 0
Electric Insurance
Company 105,251(4) 105,251(4) 0
-----------------
(1) Includes an aggregate of 196,875 Shares issuable upon exercise of the
Additional Warrants. See "Prospectus Summary--Recent Developments."
(2) Includes an aggregate of 656,250 Shares issuable upon exercise of the
Selling Securityholder Warrants. See "Prospectus Summary--Recent
Developments."
(3) Includes an aggregate of 170,139 Shares issuable upon exercise of the
Selling Securityholder Warrants. See "Prospectus Summary--Recent
Developments."
(4) Includes an aggregate of 36,458 Shares issuable upon exercise of the
Selling Securityholder Warrants. See "Prospectus Summary--Recent
Developments."
PLAN OF DISTRIBUTION
The securities offered hereby may be sold from time to time directly
by the Selling Securityholders. Alternatively, the Selling Securityholders
may from time to time offer such securities through underwriters, dealers
or agents. The distribution of securities by the Selling Securityholders
may be effected in one or more transactions that may take place on the
over-the-counter market, including ordinary brokers' transactions,
privately-negotiated transactions or through sales to one or more broker-
dealers for resale of such shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with such sales of securities. Sales of the
Shares may be made pursuant to this Prospectus or pursuant to Rule 144
under the Securities Act of 1933, as amended.
At the time a particular offer of securities is made by or on behalf
of a Selling Securityholder, to the extent required, a Prospectus will be
distributed which will set forth the number of shares and warrants being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, if any, the purchase price paid by any
underwriter for shares and warrants purchased from the Selling
Securityholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.
Under the Exchange Act, and the regulations thereto, any person
engaged in a distribution of the securities of the Company offered by this
Prospectus may not simultaneously engage in market-making activities with
respect to such securities of the Company during the applicable "cooling
off" period (nine days) prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Securityholders
will be subject to applicable provisions of the Exchange Act and the rules
and regulations thereunder, including without limitation, Rule 10b-7, in
connection with transactions in such securities, which provisions may limit
the timing of purchases and sales of such securities by the Selling
Securityholders.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed
upon for the Company by Reid & Priest LLP, New York, New York. Leonard
Gubar, a partner in such firm, is a Director of the Company. In addition,
Mr. Gubar owns 3,547 shares of Common Stock and holds options to purchase
an aggregate of 10,000 shares of Common Stock.
EXPERTS
The consolidated financial statements of Warner Insurance Services,
Inc. appearing in the Company's Annual Report (Form 10-K) for the year
ended December 31, 1995, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
<PAGE>
===================================== ================================
No dealer, salesperson or any
other person has been authorized to
give any information or to make any
representation not contained in this
Prospectus in connection with the
offer made hereby, and, if given or 6,591,528 SHARES OF COMMON STOCK
made, such information or represen-
tation must not be relied upon as
having been authorized by the Company.
This Prospectus does not constitute
an offer to sell or a solicitation
of an offer to buy the Common Stock
offered hereby in any jurisdiction
to any person to whom it is unlawful
to make such offer or solicitation
in such jurisdiction. Neither the
delivery of this Prospectus nor any
sale made hereunder shall, under WARNER INSURANCE SERVICES, INC.
any circumstances, create any impli-
cation that the information contained
herein is correct as of any time
subsequent to the date hereof, or
that there has been no change in the
affairs of the Company since the date
hereof.
------------
TABLE OF CONTENTS
Page
----
Available Information............. 2
Additional Information............ 2
Incorporation of Certain
Documents by Reference.......... 2
Prospectus Summary................ 4 ------------
Risk Factors..................... 12 PROSPECTUS
Use of Proceeds.................. 15 ------------
Dividend Policy.................. 15
Price Range of Common Stock...... 15
Description of Securities........ 16
Selling Securityholders.......... 18
Plan of Distribution............. 19
Legal Matters.................... 19
Experts.......................... 19
===================================== ================================
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be borne by the Company
in connection with the sale and distribution of the Common Stock offered
hereby. All of the amounts shown are estimates, except the SEC filing fee.
SEC filing fee........................................ $12,643.24
Legal fees and expenses............................... $40,000.00
Accounting fees and expenses.......................... $10,000.00
Miscellaneous......................................... $ 5,000.00
---------
Total fees and expenses............................ $67,643.24
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(i) The Registrant's Amended Certificate of Incorporation includes
provision that eliminates the personal liability of its directors to the
Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director to the maximum extent permitted by the Delaware General
Corporation Law ("DGCL"). The DGCL does not permit liability to be
eliminated (i) for any breach of a director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law,
(iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions, as provided in Section 174 of the DGCL, or (iv) for any
transaction for which the director derived an improper personal benefit.
(ii) Article X of the Company's By-Laws provides generally for
indemnification of all officers and directors to the fullest extent
permitted under the above-referenced Delaware statute. Section 145 of the
DGCL provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at its request in
such capacity in another corporation or business association, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
(iii) The Company also has a policy insuring it and its directors and
officers against certain liabilities.
ITEM 16. EXHIBITS.
EXHIBIT
NO. DESCRIPTION
------- -----------
2 Certificate of Merger of Warner Computer Systems, Inc. (a New
York corporation) into the Registrant, filed on June 11, 1985
[incorporated by reference to Exhibit 2 to the Registrant's
Annual Report on Form 10-K (Commission File No. 0-13124) filed
on January 29, 1986].
3(a) Certificate of Incorporation of the Registrant filed on April
22, 1985 [incorporated by reference to Exhibit 3(a) to the
Registrant's Annual Report on Form 10-K (Commission File No.
0-13124) filed on January 29, 1986].
3(b) Certificate of Amendment of Certificate of Incorporation of
the Registrant filed on May 6, 1987 [incorporated by reference
to Exhibit 3.2 to the Registrant's Registration Statement on
Form S-1 (Commission File No. 33-17533) filed on September 29,
1987].
3(c) Certificate of Amendment of Certificate of Incorporation of
the Registrant filed on March 26, 1990 [incorporated by
reference to Exhibit 3(d) to the Registrant's Quarterly Report
on Form 10-Q (Commission File No. 0-13124) filed on June 14,
1990].
3(d) Certificate of Amendment of Certificate of Incorporation of
the Registrant filed on March 18, 1992 [incorporated by
reference to Exhibit 1 to the Registrant's Current Report on
Form 8-K (Commission File No. 0-13124) filed on March 30,
1992].
3(e) Bylaws of the Registrant, as amended [incorporated by
reference to Exhibit 3(e) to the Registrant's Annual Report on
Form 10-K (Commission File No. 0-13124) filed on April 11,
1996].
4 Form of Common Stock Certificate of the Registrant
[incorporated by reference to Exhibit 4(a) to the Registrant's
Annual Report on Form 10-K (Commission File No. 0-13124) filed
on January 29, 1986].
5+ Opinion of Reid & Priest LLP as to the legality of the
securities being registered hereby.
10(a) Partnership Agreement, dated December 7, 1978, by and among
the Registrant, James R. Poole, Ira M. Cantor and Stanley A.
Rothenberg [incorporated by reference to Exhibit 10(a) to the
Registrant's Registration Statement on Form S-18 (Commission
File No. 2-88695-NY) filed on December 30, 1983].
10(b) Employment Agreement, dated as of August 1, 1990, between the
Registrant and Bradley J. Hughes [incorporated by reference to
Exhibit 10(h) to the Registrant's Annual Report on Form 10-K
(Commission File No. 0-13124) filed on January 24, 1991].
10(c) Employment Agreement, dated as of July 11, 1990, between the
Registrant and Theodore I. Botter [incorporated by reference
to Exhibit 10(j) to the Registrant's Annual Report on Form 10-
K (Commission File No. 0-13124) filed on January 24, 1991].
10(e)(1) Employment Agreement, dated as of November 1, 1992, between
the Registrant and Harvey Krieger [incorporated by reference
to Exhibit 10(h) to the Registrant's Annual Report on Form 10-
K (Commission File No. 0-13124) filed on January 28, 1993].
10(e)(2) Amendment to Employment Agreement, dated June 7, 1995, between
the Registrant and Harvey Krieger [incorporated by reference
to Exhibit 10(e)(2) to the Registrant's Annual Report on Form
10-K (Commission File No. 0-13124) filed on April 11, 1996].
10(e)(3)* Consulting Agreement, dated as of June 1, 1996, between the
Registrant and Harvey Krieger.
10(f)(1) Employment Agreement, dated as of March 22, 1994, among COVER-
ALL Systems, Inc., Michael G. Repoli and the Registrant
[incorporated by reference to Exhibit 10(f)(1) to the
Registrant's Annual Report on Form 10-K (Commission File No.
0-13124) filed on April 17, 1995].
10(f)(2) Amendment to Employment Agreement, dated August 10, 1994,
among COVER-ALL Systems, Inc., Michael G. Repoli and the
Registrant [incorporated by reference to Exhibit 10(f)(2) to
the Registrant's Annual Report on Form 10-K (Commission File
No. 0-13124) filed on April 17, 1995].
10(f)(3) Amendment to Employment Agreement, dated January 11, 1995,
among COVER-ALL Systems, Inc., Michael G. Repoli and the
Registrant [incorporated by reference to Exhibit 10(f)(3) to
the Registrant's Annual Report on Form 10-K (Commission File
No. 0-13124) filed on April 17, 1995].
10(g) Employment Agreement, dated as of January 24, 1996, among
COVER-ALL Systems, Inc., the Registrant and Peter C. Lynch
[incorporated by reference to Exhibit 10(g) to the
Registrant's Annual Report on Form 10-K (Commission File No.
0-13124) filed on April 11, 1996].
10(h) Warner Insurance Services, Inc. Tax Saver 401(k) Salary
Reduction Plan adopted May 31, 1985 and restated as of August
11, 1992 [incorporated by reference to Exhibit 10(k) to the
Registrant's Annual Report on Form 10-K (Commission File No.
0-13124) filed on January 28, 1993].
10(i) Incentive Stock Option Plan adopted by the Board of Directors
of the Registrant on February 22, 1982, and approved by the
stockholders in February 1983 as amended on December 16, 1983
and March 31, 1988 [incorporated by reference to Exhibit 10(b)
to the Registrant's Annual Report on Form 10-K (Commission
File No. 0-13124) filed on January 24, 1989].
10(j) Stock Option Agreement, dated March 22, 1990, between the
Registrant and Harvey Krieger [incorporated by reference to
Exhibit 10(q) to the Registrant's Annual Report on Form 10-K
(Commission File No. 0-13124) filed on January 24, 1991].
10(k) Stock Option Agreement, dated August 15, 1990, between the
Registrant and Bradley J. Hughes [incorporated by reference to
Exhibit 10(t) to the Registrant's Annual Report on Form 10-K
(Commission File No. 0-13124) filed on January 24, 1991].
10(l) Stock Option Agreement, dated August 15, 1990, between the
Registrant and Theodore I. Botter [incorporated by reference
to Exhibit 10(u) to the Registrant's Annual Report on Form 10-
K (Commission File No. 0-13124) filed on January 24, 1991].
10(m)(1) The 1991 Key Employee Stock Option Plan, adopted by the Board
of Directors of the Registrant on June 18, 1991, as amended on
September 6, 1991 and November 19, 1991 and approved by
stockholders on March 18, 1992 [incorporated by reference to
Exhibit 4(a) to the Registrant's Registration Statement on
Form S-8 (Commission File No. 33-44270) filed on November 26,
1991].
10(m)(2) Form of Incentive Stock Option Agreement under the 1991 Key
Employee Stock Plan [incorporated by reference to Exhibit 4(b)
to the Registrant's Registration Statement on Form S-8
(Commission File No. 33-44270) filed on November 26, 1991].
10(m)(3) Form of Non-Qualified Stock Option Agreement under the 1991
Key Employee Stock Option Plan [incorporated by reference to
Exhibit 4(c) to the Registrant's Registration Statement on
Form S-8 (Commission File No. 33-44270) filed on November 26,
1991].
10(m)(4) Form of Stock Option Agreement under the 1991 Key Employee
Stock Option Plan dated as of June 21, 1991, between the
Registrant and each of Theodore I. Botter, Thomas F. Rocchio,
and Harvey Krieger [incorporated by reference to Exhibit 4(d)
to the Registrant's Registration Statement on Form S-8
(Commission File No. 33-44270) filed on November 26, 1991].
10(m)(5) Stock Option Agreement, dated as of November 20, 1992, between
the Registrant and Bradley J. Hughes [incorporated by
reference to Exhibit 10(x)(vi) to the Registrant's Annual
Report on Form 10-K (Commission File No. 0-13124) filed on
January 28, 1993].
10(n)(1) 1994 Stock Option Plan for Independent Directors adopted by
the Board of Directors of the Registrant on November 10, 1994
[incorporated by reference to Exhibit 10(n)(1) to the
Registrant's Annual Report on Form 10-K (Commission File No.
0-13124) filed on April 17, 1995].
10(n)(2) Form of Stock Option Agreement under the 1994 Stock Option
Plan for Independent Directors [incorporated by reference to
Exhibit 10(n)(2) to the Registrant's Annual Report on Form 10-
K (Commission File No. O-13124) filed on April 17, 1995].
10(o)(1) The 1995 Employee Stock Option Plan, adopted by the Board of
Directors of the Registrant on March 22, 1995 [incorporated by
reference to Exhibit 10(o)(1) to the Registrant's Annual
Report on Form 10-K (Commission File No. O-13124) filed on
April 17, 1995].
10(o)(2) Form of Incentive Stock Option Agreement under the 1995
Employee Stock Option Plan [incorporated by reference to
Exhibit 10(o)(2) to the Registrant's Annual Report on Form 10-
K (Commission File No. 0-13124) filed on April 17, 1995].
10(o)(3) Form of Non-Qualified Stock Option Agreement under the 1995
Employee Stock Option Plan [incorporated by reference to
Exhibit 10(o)(3) to the Registrant's Annual Report on Form 10-
K (Commission File No. 0-13124) filed on April 17, 1995].
10(p)(1) Indenture of Lease, dated as of July 1, 1994, between Fair
Lawn Industrial Park, Inc. and the Registrant for premises
located at 17-01 Pollitt Drive, Fair Lawn, New Jersey
[incorporated by reference to Exhibit 10(p)(1) to the
Registrant's Annual Report on Form 10-K (Commission File No.
0-13124) filed on April 17, 1995].
10(p)(2) Termination Agreement, dated as of June 30, 1994, among Fair
Lawn Industrial Park, Inc., Symtron Systems, Inc., and the
Registrant [incorporated by reference to Exhibit 10(p)(2) to
the Registrant's Annual Report on Form 10-K (Commission File
No. 0-13124) filed on April 17, 1995].
10(q) Lease Agreement, dated as of March 2, 1990, between the
Registrant and Polevoy Associates for premises located at 18-
01 Pollitt Drive, Fair Lawn, New Jersey [incorporated by
reference to Exhibit 10(z) to the Registrant's Annual Report
on Form 10-K (Commission File No. 0-13124) filed on
January 24, 1991].
10(r) Lease Agreement, dated as of December 11, 1991, between the
Registrant and Aetna Life Insurance Company for premises
located at 125 Belmont Drive, Somerset, New Jersey
[incorporated by reference to Exhibit 10(ee) to the
Registrant's Annual Report on Form 10-K (Commission File No.
0-13124) filed on January 24, 1992].
10(s) Rights Agreement, dated November 17, 1989, between the
Registrant and First Fidelity Bank, N.A., as Rights Agent
[incorporated by reference to Exhibit 1 to the Registrant's
Registration Statement on Form 8-A (Commission File No. 13-
2698053) filed on October 20, 1989].
10(t)(i) Severance Agreement, dated as of November 28, 1989, between
the Registrant and Harvey Krieger [incorporated by reference
to Exhibit 1 to the Registrant's Form 8-K (Commission File No.
0-13124) filed on December 6, 1989].
10(t)(ii) Severance Agreement, dated August 15, 1990, between the
Registrant and Bradley J. Hughes [incorporated by reference to
Exhibit 10(o)(i) to the Registrant's Annual Report on Form 10-
K (Commission File No. 0-13124) filed on January 24, 1991].
10(t)(iii) Severance Agreement, dated August 15, 1990, between the
Registrant and Theodore I. Botter [incorporated by reference
to Exhibit 10(t)(i) to the Registrant's Annual Report on Form
10-K (Commission File No. 0-13124) filed on January 24, 1991].
10(u)(i) Restructuring Agreement, dated as of March 1, 1996, by and
among the Registrant, Atlantic Employers Insurance Company,
Pacific Employers Insurance Company, Electric Insurance
Company, The Robert Plan Corporation, Material Damage
Adjustment Corporation, Lion Insurance Company, and National
Consumer Insurance Company [incorporated by reference to
Exhibit 10.1 to the Registrant's Form 8-K (Commission File No.
0-13124) filed on March 7, 1996].
10(u)(ii) Form of Warrant issued by the Registrant pursuant to the
Restructuring Agreement listed as Exhibit 10(x)(i) above
[incorporated by reference to Exhibit 10.2 to the Registrant's
Form 8-K (Commission File No. 0-13124) filed on March 7,
1996].
10(u)(iii) Asset Purchase Agreement, dated as of March 1, 1996, by and
among the Registrant, MDA Services, Inc. and The Robert Plan
Corporation [incorporated by reference to Exhibit 10.3 to the
Registrant's Form 8-K (Commission File No. 0-13124) filed on
March 7, 1996].
10(v)(i) Stock Purchase Agreement, dated as of March 31, 1996, by and
among the Registrant, Software Investments Limited and Care
Corporation Limited [incorporated by reference to Exhibit 10.1
to the Registrant's Form 8-K (Commission File No. 0-13124)
filed on April 8, 1996].
10(v)(ii) Repurchase Rights Assignment, dated as of March 31, 1996,
between the Registrant and Software Investments Limited
[incorporated by reference to Exhibit 10.2 to the Registrant's
Form 8-K (Commission File No. 0-13124) filed on April 8,
1996].
10(v)(iii) Warrant, dated as of March 31, 1996, issued by the Registrant
to Software Investments Limited [incorporated by reference to
Exhibit 10.3 to the Registrant's Form 8-K (Commission File No.
0-13124) filed on April 8, 1996].
10(v)(iv) Exclusive Software License Agreement, dated as of March 31,
1996, by and among the Registrant, Care Corporation Limited
and COVER-ALL Systems, Inc. [incorporated by reference to
Exhibit 10.4 to the Registrant's Form 8-K (Commission File No.
0-13124) filed on April 8, 1996].
10(w) Settlement Agreement dated April 1, 1996 between the
Registrant and Clarendon National Insurance Company
[incorporated by reference to Exhibit 10.5 to the Registrant's
Form 8-K (Commission File No. 0-13124) filed on April 8,
1996].
21 Subsidiaries of the Registrant [incorporated by reference to
Exhibit 21 to the Registrant's Annual Report on Form 10-K
(Commission File No. 0-13124) filed on April 11, 1996].
23(a)* Consent of Ernst & Young LLP.
23(b) Consent by Reid & Priest LLP.
24 Power of Attorney (included on the signature page).
--------------
* Filed herewith.
+ To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change
to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Company's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act which is incorporated by refer-
ence in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised, that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by any director, officer or controlling person in
connection with the securities being registered, the Company will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against the public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fair Lawn, State of New Jersey,
on the 14th day of June, 1996.
WARNER INSURANCE SERVICES, INC.
By:/s/ ALFRED J. MOCCIA
----------------------------------
Alfred J. Moccia,
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Alfred J. Moccia and
Leonard Gubar, or either of them, as his true and lawful attorney-in-fact
and agent, with full powers of substitution and re-substitution, for him in
his name, place and stead, to sign in any and all capacities any and all
amendments (including post-effective amendments) to this Registration
Statement on Form S-3 and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Commission, granting unto
such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities
designed and on the 14th day of June, 1996.
SIGNATURES TITLE
---------- -----
/s/ ALFRED J. MOCCIA President and Chief Executive
------------------------- Officer and Director
Alfred Moccia (Principal Executive Officer)
/s/ RAUL F. CALVO Vice President
------------------------- (Principal Financial Officer
Raul F. Calvo and Principal Accounting Officer)
/s/ HARVEY KRIEGER Director
-------------------------
Harvey Krieger
/s/ LEONARD GUBAR Director
-------------------------
Leonard Gubar
/s/ PETER R. LASUSA Director
-------------------------
Peter R. Lasusa
------------------------- Director
Pamela J. Newman
/s/ JAMES R. STALLARD Director
-------------------------
James R. Stallard
/s/ MARK D. JOHNSTON Director
-------------------------
Mark D. Johnston
<PAGE>
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
10(e)(3) Consulting Agreement, dated as of
June 1, 1996, between the Registrant
and Harvey Krieger.
23(a) Consent of Ernst & Young LLP,
independent auditors of the Company.
24 Power of Attorney (included on the
signature page)
Exhibit 10(e)(3)
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of June 1, 1996 by and
between WARNER INSURANCE SERVICES, INC., a Delaware corporation
("Warner"), with offices at 18-01 Pollitt Drive, Fair Lawn, New
Jersey 07410, and HARVEY KRIEGER, an individual ("Consultant")
residing at 12 Vaughn Drive, Ramsey, New Jersey 07446.
W I T N E S S E T H
WHEREAS, Consultant has been a party to an Employment
Agreement, dated as of November 1, 1992, between Warner and
Consultant, as amended by that certain Amendment to Employment
Agreement, dated as of June 7, 1995 (collectively referred to as
the "Employment Agreement"); and
WHEREAS, effective as of May 31, 1996 the Employment
Agreement has been terminated; and
WHEREAS, Warner desires to engage Consultant following
such termination of the Employment Agreement, and Consultant
desires to provide consulting services to Warner, all on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and
of the mutual covenants contained in this Agreement, Warner and
Consultant hereby agree as follows:
1. Engagement of Consultant. Warner, effective on
------------------------
the date hereof, hereby retains Consultant, and Consultant hereby
accepts such position, to serve as a consultant to Warner in
accordance with the terms and conditions herein set forth.
2. Term. The term of this Agreement (the "Engagement
----
Term") shall commence on the date first above written and shall
terminate on May 31, 1997. The Engagement Term shall not be
renewed.
3. Duties. From time to time during the Engagement
------
Term, Consultant shall be available to consult with the President
and Chief Executive Officer of Warner at times reasonably
convenient to Consultant and the President and Chief Executive
Officer, taking into consideration the Consultant's other then
existing business obligations. Consultant shall not be required
to render services hereunder at any location or for any specified
period of time or hours on any day, week, month or year nor to
attend any meetings or conferences or report for duty at any
location.
4. Consulting Fee. In consideration of the services
--------------
to be rendered by Consultant to Warner under this Agreement,
Warner shall pay or cause to be paid to Consultant during the
Engagement Term, and Consultant shall accept, a consulting fee
("Consulting Fee") at the rate of One Hundred and Fifty Thousand
Dollars ($150,000). Such sum shall be paid to Consultant as an
independent contractor and not as an employee and shall be paid
in equal monthly installments beginning on June 1, 1996.
5. Independent Contractor. Consultant's services
----------------------
hereunder shall be rendered as an independent contractor and
Consultant shall not act as an agent, employee, partner, or legal
representative of Warner or any of its affiliated companies for
any purpose whatever, and shall have no power or authority to
incur or create any obligations or liability of any kind for or
on behalf of Warner or such affiliates. Consultant acknowledges
that his relationship with Warner is as an independent contractor
and not as an employee for all purposes, including payment of
social security withholding tax and all other federal, state and
local taxes. Consultant also acknowledges that as an independent
contractor he is not eligible for participation, or entitled to
participate, in Warner's pension or profit plan(s), if any.
6. Benefits, Expenses, etc.
------------------------
6.1 Health Benefits. During the Engagement Term,
---------------
Warner shall continue to cover Consultant, at Warner's expense,
under the health plan presently in effect or hereafter instituted
by Warner.
6.2 Expenses. Consultant acknowledges that he is not
--------
entitled to, and will not receive, access to an office,
reimbursement for expenses incurred in rendering consulting
services hereunder or any other benefits, except as specified in
Section 6.1 hereof, similar to those provided under the
Employment Agreement or traditionally linked to status as a
Warner employee.
7. Death or Disability. If Consultant dies or
-------------------
becomes disabled during the Engagement Term, Warner shall have no
further obligations hereunder other than to continue to pay the
Consulting Fee to Consultant's estate, legal representative,
heirs, successors, assigns or other beneficiaries for the
duration of the Engagement Term.
8. Non-Disclosure. In consideration of the
--------------
engagement of Consultant by Warner hereunder and the benefits to
be derived therefrom by Consultant, Warner and Consultant hereby
agree as follows:
8.1 Non-Disclosure of Confidential Information.
------------------------------------------
Consultant acknowledges that it is the policy of Warner to
maintain as secret and confidential (i) all valuable and unique
information, (ii) other information heretofore or hereafter
acquired by Warner and deemed by it to be confidential and (iii)
information developed or used by Warner or any affiliated entity
relating to the business, operations, employees and customers of
Warner or any affiliated entity including, but not limited to,
any pricing practices, customer lists, financial data or employee
information (all such information described in clauses (i), (ii)
and (iii) above is hereinafter referred to as "Confidential
Information"). The parties recognize that by reason of
Consultant's employment by Warner prior to the date hereof and by
reason of his engagement as a consultant to Warner after the date
hereof, Consultant has acquired and will acquire Confidential
Information. Consultant recognizes that all such Confidential
Information is the property of Warner and its affiliated
entities. Consultant therefore agrees that for the period of
this Agreement and continuing after the date of termination of
the Engagement Term, Consultant shall not, except in the proper
performance of his duties under this Agreement, directly or
indirectly, without the prior written consent of Warner disclose
to any person, firm, company or other entity other than Warner or
its affiliated entities, whether or not such person, firm,
company or other entity is a competitor of Warner or any of its
affiliated entities, and shall use his best efforts to prevent
the publication or disclosure of, any Confidential Information
obtained by, or which has come to the knowledge of, Consultant
prior or subsequent to the date hereof. Confidential Information
does not include information which is known to the public or
becomes known to the public through no fault of Consultant.
8.2 Consultant's Obligations Upon Termination of this
-------------------------------------------------
Agreement. Upon termination of the engagement of Consultant
---------
under this Agreement, Consultant shall return to Warner all
documents and copies of documents in his possession relating to
any Confidential Information, including, but not limited to,
internal and external business forms, manuals, correspondence,
contracts, notes, lists and computer programs and data, and
Consultant shall not make or retain any copy or extract of any of
the foregoing.
8.3 Investments by Consultant. Warner and Consultant
-------------------------
acknowledge that nothing contained herein shall prohibit
Consultant from acquiring equity securities of a publicly held
company engaged in activities which are similar to or competitive
with the business of Warner and its affiliated entities.
9. Notices. Any notice, request, information or
-------
other document to be given under this Agreement to any party by
any other party shall be in writing and delivered personally,
sent by registered or certified mail, postage prepaid, delivered
by a nationally recognized overnight courier service or
transmitted by fax addressed as follows:
(i) if to Warner:
Warner Insurance Services, Inc.
18-01 Pollitt Drive
Fair Lawn, New Jersey 07410
Telephone: (201) 794-4800
Fax: (201) 791-9113
Attention: President and Chief Executive Officer
with a copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Telephone: (212) 603-2000
Fax: (212) 603-2001
Attention: Leonard Gubar, Esq.
(ii) if to Consultant:
Harvey Krieger
12 Vaughn Drive
Ramsey, New Jersey 07446
or to such other address as either party hereto may hereafter
designate in writing to the other party, provided that any notice
of a change of address shall become effective only upon receipt
thereof.
10. Successors and Assigns. This Agreement shall be
----------------------
binding upon and shall inure to the benefit of Warner and
Consultant and their respective heirs, legal representatives,
successors and permitted assigns.
11. Entire Agreement. This Agreement contains the
----------------
entire understanding between Warner and Consultant with respect
to the engagement of Consultant and supersedes all prior
negotiations and understandings between Warner and Consultant
with respect thereto. This Agreement may not be amended or
modified except by a written instrument signed by Warner and
Consultant.
12. Severability. In the event any one or more
------------
provisions of this Agreement is held to be invalid or
unenforceable, such illegality or unenforceability shall not
affect the validity or enforceability of the other provisions
hereof and such other provisions shall remain in full force and
effect, unaffected by such invalidity or unenforceability.
13. Governing Law. This Agreement shall be
-------------
interpreted, construed and enforced in accordance with the
internal laws of the State of New York.
14. Headings. The headings of sections and
--------
subsections of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement.
15. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
WARNER INSURANCE SERVICES, INC.
By: /s/ Alfred J. Moccia
----------------------------
Name: Alfred J. Moccia
Title: President and Chief
Executive Officer
CONSULTANT
/s/ Harvey Krieger
-------------------------------
Harvey Krieger
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-3 No. 333-0000)
and related Prospectus of Warner Insurance Services, Inc. for
the registration of 6,591,528 shares of its common stock and to
the incorporation by reference therein of our report dated April
4, 1996, with respect to the consolidated financial statements
and schedule of Warner Insurance Services, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1995,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Hackensack, New Jersey
June 11, 1996
