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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 0-13124
COVER-ALL TECHNOLOGIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-2698053
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
18-01 POLLITT DRIVE, FAIR LAWN, NEW JERSEY 07410
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(201)794-4800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ----
Number of shares outstanding at August 2, 1996:
16,716,897 shares of Common Stock, par value $.01 per share.
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<PAGE>
COVER-ALL TECHNOLOGIES INC.
AND SUBSIDIARIES
INDEX TO FORM 10-Q FOR THE QUARTER ENDED
June 30, 1996
Page No.
---------
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995. . . . . . . . . 2-3
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995. . . . . . . 5-6
Notes to Consolidated Financial Statements . . . . . 7-11
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . 12-14
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 14-15
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
COVER-ALL TECHNOLOGIES INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER
1996 1995
---------- --------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . $ 3,584,889 $ 1,576,745
Accounts receivable, less allowance for
doubtful accounts of $306,341 and none . 1,486,506 1,763,890
Income taxes receivable . . . . . . . -- 2,300,000
Prepaid expenses. . . . . . . . . . . . . . 369,495 5,355
----------- -----------
Total current assets. . . . . . . . . 5,440,890 5,645,990
----------- -----------
Property and equipment, at cost:
Furniture, fixtures and equipment . . . . 3,021,159 3,095,529
Less accumulated depreciation . . . . . . . (2,495,071) (2,369,873)
----------- -----------
Property and equipment-net. . . . . 526,088 725,656
Software license, less amortization
of $125,001 4,874,999 --
----------- -----------
Capitalized software, less amortization
of $838,085 and $489,227. . . . . . . . 1,652,734 1,510,782
----------- -----------
Other assets. . . . . . . . . . . . . . 178,056 486,726
----------- -----------
$12,672,767 $ 8,369,154
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable. . . . . . . . . . . . $ 743,401 $ 955,060
Accrued liabilities . . . . . . . . . . . . .2,980,576 4,123,641
Unearned revenue. . . . . . . . . . . . . . 305,000 635,564
Liabilities in excess of assets of ISD
business discontinued in 1996 . . . . . . -- 8,648,368
------------- ------------
Total current liabilities . . . . . . . 4,028,977 14,362,633
------------ ------------
Deferred income taxes . . . . . . . . . . 20,000 20,000
------------ ------------
Commitments and contingencies (Note 4)
Stockholders' equity (deficit):
Common stock, $.01 par value; authorized
30,000,000 shares, issued 17,350,258 and
9,194,890 shares. . . . . . . . . . . . 173,503 91,949
Warrants outstanding. . . . . . . . . . . . 455,729 --
Capital in excess of par value. . . . . . 26,592,711 10,414,253
Accumulated (deficit) . . . . . . .. . . (16,030,946) (13,952,474)
Treasury stock at cost - 633,986 shares . (2,567,207) (2,567,207)
------------ -----------
Total stockholders' equity (deficit). 8,623,790 (6,013,479)
------------ ------------
$ 12,672,767 $ 8,369,154
============ ============
See accompanying notes.
<PAGE>
COVER-ALL TECHNOLOGIES INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
----------------------- ------------------------
1996 1995 1996 1995
---------- ----------- ----------- ----------
Revenues:
Licenses $ 502,241 $ 402,337 $ 707,242 $ 838,322
Maintenance 528,333 296,981 1,035,437 501,566
Professional
services 866,387 226,068 1,274,385 639,198
---------- ---------- ---------- -----------
1,896,961 925,386 3,017,064 1,979,086
----------- ----------- ---------- -----------
Costs and expenses:
Research and
development
expenses 1,219,328 312,815 2,176,892 1,336,735
Cost of sales 623,700 297,607 916,767 595,061
Sales and marketing 203,577 101,717 321,736 217,287
General and
administrative 1,130,822 493,637 1,680,141 1,103,453
Special charges -- -- -- 1,165,000
----------- ----------- ----------- ---------
3,177,427 1,205,776 5,095,536 4,417,536
----------- ----------- ----------- ---------
Loss from
continuing
operations (1,280,466) (280,390) (2,078,472) (2,438,450)
Loss from
discontinued
operations -- (3,102,807) -- (4,432,339)
----------- ----------- ----------- ------------
Net loss $(1,280,466) $(3,383,197) $(2,078,472) $(6,870,789)
=========== =========== =========== ===========
Loss per share from
continuing
operations $( 0.08) $( 0.03) $( 0.16) $( 0.28)
=========== =========== =========== ===========
Net loss per
share $( 0.08) $( 0.40) $( 0.16) $( 0.80)
=========== =========== =========== ===========
Weighted average
number of
common shares
outstanding 16,314,436 8,560,904 13,014,557 8,557,709
=========== =========== =========== ===========
See accompanying notes.
<PAGE>
COVER-ALL TECHNOLOGIES INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED
June 30,
---------------------------
1996 1995
----------- ------------
Cash flows from operating activities:
Net loss from continuing operations . . . . .$(2,078,472) $(2,438,450)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation. . . . . . . . . . . . . . . . 168,741 170,757
Amortization of capitalized software
and software license . . . . . . . . . . . 473,859 182,433
Accounts receivable . . . . . . . . . . 277,384 (1,985,720)
Income taxes receivable . . . . . . . . . . 2,300,000 2,136,028
Deferred income taxes . . . . . . . . . . . -- 500,000
Prepaid expenses. . . . . . . . . . . . . . (364,140) (344,430)
Other assets. . . . . . . . . . . . . . . . 308,670 54,452
Accounts payable. . . . . . . . . . . . . . (211,659) (133,752)
Accrued liabilities . . . . . . . . . . . . (1,077,925) 2,213,685
Unearned revenue. . . . . . . . . . . . . . (330,564) 148,137
---------- ---------
Net cash (used for) provided from continuing
operating activities. . . . . . . . . . . . . (534,106) 503,140
----------- -----------
Loss from discontinued operations . . . . -- (4,432,339)
Decrease in net liabilities of discontinued
operations. . . . . . . . . . . . . . . . . (1,670,028) 272,489
----------- -----------
Net cash used for discontinued operating
activities. . . . . . . . . . . . . . . . . . (1,670,028) (4,159,850)
----------- -----------
Net cash used for operating activities. . . . . (2,204,134) (3,656,710)
---------- -----------
Cash flows from investing activities:
Proceeds from sale of fixed maturity
investments . . . . . . . . . . . . . . . . -- 3,872,500
Capital expenditures. . . . . . . . . . . . . (34,313) (21,726)
Capitalized software expenditures . . . . . . (490,810) (524,881)
-------------- -----------
Net cash (used for) provided from investing
activities. . . . . . . . . . . . . . . . . . (525,123) 3,325,893
-------------- -----------
Cash flows from financing activities:
Payments on credit lines. . . . . . . . . . . -- (2,000,000)
Net proceeds from issuance of common stock. . 4,737,401 12,334
----------- -----------
Net cash provided from (used for) financing
activities. . . . . . . . . . . . . . . . . . 4,737,401 (1,987,666)
----------- -----------
Change in cash and cash equivalents . . . . . . 2,008,144 (2,318,483)
Cash and cash equivalents beginning of period . 1,576,745 6,407,801
----------- -----------
Cash and cash equivalents end of period . . . . $ 3,584,889 $ 4,089,318
=========== ===========
Supplemental disclosures of noncash investing and financing activities:
Financing:
---------
The Company in connection with the discontinuance of ISD issued Common
Stock and Warrants for $6,978,340 as a result of the restructuring
agreement. (See Note 2.)
Investing:
---------
The Company acquired a software license from Care by issuing Common Stock
valued at $5,000,000. (See Note 6.)
See accompanying notes.
<PAGE>
COVER-ALL TECHNOLOGIES INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
For a summary of significant accounting policies, refer to Note 2 of Notes
to Consolidated Financial Statements included in Cover-All Technologies
Inc. (the "Company") Annual Report on Form 10-K for the year ended December
31, 1995. While the Company believes that the disclosures presented are
adequate to make the information not misleading, these consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
annual report. Certain amounts for the prior year have been reclassified
to conform with the current period's financial statement presentation. The
financial statements include on a consolidated basis the results of all
subsidiaries. All material intercompany transactions have been eliminated.
In the opinion of management, the accompanying consolidated financial
statements include all adjustments which are necessary to present fairly
the Company's financial position as of June 30, 1996 and December 31, 1995
and the results of operations for the three-and six- month periods ended
June 30, 1996 and 1995, and the cash flows for the six-month periods ended
June 30, 1996 and 1995. Such adjustments are of a normal and recurring
nature. The results of operations for the six-month period ended June 30,
1996 are not necessarily indicative of the results to be expected for a
full year.
NOTE 2 - DISCONTINUED OPERATIONS
Insurance Services Division ("ISD") revenues decreased substantially in
1995 because of lower fees attributable to the reduced number of policies
and claims being handled on contracts that were winding down or were
completed. As a result, ISD had been suffering losses and operating under
considerable uncertainty as a result of the pendency of lawsuits with
certain affiliates of The Robert Plan Corporation as described in Note 4.
In March 1996, the Company entered into a series of agreements which
provided for the transfer and discontinuance of its ISD operations and the
issuance of the Company's Common Stock and Warrants to certain customers of
the ISD business in exchange for the release of the Company from its
obligations to provide insurance services to ISD customers and to The
Robert Plan Corporation 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. These agreements have resulted in a net
loss reported in 1995 of $749,758, which included a provision for estimated
ISD losses in 1996 prior to the March 1 effective date of the settlement.
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 has
replaced the Company as the provider of insurance services to the ISD
customers. In exchange for settling the lawsuits, releasing the Company's
obligations to provide insurance services under its contracts and executing
the mutual releases, the Company issued to certain of the ISD customers and
certain parties to the litigation: (a) a total of 3,256,201 shares of the
Company's Common Stock, (b) five-year Warrants to purchase up to an
additional aggregate of 1,553,125 shares of the Company's Common Stock at
$2.00 per share and (c) cash of $2.5 million. The Company had the option,
exercisable for a period of six months to (i) purchase 50 percent of the
aforementioned 3,256,201 shares at a cash price equal to the greater of
$3.00 or 50 percent of the then market price of a share of the Company's
Common Stock and (ii) acquire 50 percent of the 1,553,125 Warrants at a
cash price equal to $1.00 per Warrant. On March 31, 1996, the Company
assigned its aforementioned repurchase option applicable to the Company's
Common Stock and Warrants to Software Investments Limited ("SIL"), which
SIL subsequently exercised, all as discussed in Note 6. As a result of the
issuance of shares described in Note 6, the antidilution provisions of the
Warrants require an adjustment of shares to 1,725,694 from 1,553,125 and a
price adjustment to $1.80 from $2.00 per share.
Accordingly, ISD operations for the three- and six-month periods ended June
30, 1995, have been reclassified and are included in the Consolidated
Statements of Operations as discontinued operations.
In late 1993, the Company established Alerion, a wholly-owned
property/casualty insurance subsidiary. By early 1994, the Company had
funded Alerion with approximately $10 million of cash and securities and
Alerion entered into a reinsurance agreement with Clarendon National
Insurance Company ("Clarendon") to reinsure a portion of the risk on
certain insurance policies written by a primary insurer. In late 1994, the
Company decided to discontinue assuming any underlying insurance risk.
This was accomplished by Alerion commuting all its rights and obligations
under the reinsurance contract back to Clarendon and paying to Clarendon
all amounts received in excess of payments made since the inception. In
1996, Alerion surrendered its Certificate of Authority to transact
insurance business in New Jersey.
NOTE 3 - COVER-ALL
With the discontinuance of ISD, COVER-ALL Systems, Inc. ("COVER-ALL"), a
wholly-owned subsidiary, is the Company's only active operation.
Accordingly, COVER-ALL operations for the three- and six-month periods
ended June 30, 1996 and 1995 are classified in the Consolidated Statements
of Operations as continuing operations.
In December 1994, management instituted a plan to downsize the COVER-ALL
organization and reduce the rate of product development to a level
consistent with the reduced level of customer installations planned in
1995. Costs of $1,165,000 were incurred and written off in the first
quarter of 1995 for executive and other severance costs as well as software
development costs. This 1995 write-off was reflected as special charges in
the Statement of Operations for the first quarter of 1995.
NOTE 4 - LITIGATION
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 ("CWP's"). 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, the two lawsuits described above were settled as part of
the overall settlement with certain of the Company's insurance services
customers. The settlement and restructuring transactions are described in
Note 2--Discontinued Operations.
On February 2, 1995, Sol M. Seltzer commenced an action in the Supreme
Court of New York against Mr. Krieger, the then Chairman of the Board and
former President of the Company, and each of the other then members of the
Board of Directors. The plaintiff, Sol M. Seltzer, who purported to sue
derivatively on behalf of the Company and COVER-ALL, sought 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, vigorously contested Mr. Seltzer's claims and on July
23, 1996 won a motion to dismiss the case.
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,
negligence, 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.
A trial date in October 1996 has been scheduled.
In addition to the above lawsuits, the Company is named as defendant in a
number of legal actions arising from its operations. Those actions have
been considered in establishing liabilities. Management and its legal
counsel are of the opinion that the settlement of those actions will not
have a material adverse effect on financial position or results of
operations.
NOTE 5 - INCOME TAXES
For 1996 and 1995, no income tax benefit relative to the Company's
operating losses has been reflected in the Statement of Operations. A
valuation allowance was provided equal to the tax benefit that the loss
generated, since the realization of such benefit would be dependent upon
achieving future operating profits which cannot be reasonably assured.
NOTE 6 - SALE OF STOCK AND WARRANTS ON MARCH 31, 1996
On March 31, 1996, the Company entered into a series of transactions with
Software Investments Limited ("SIL") 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 the Company's Common Stock for $2.00 per share and (ii) five-year
Warrants to purchase an aggregate of 196,875 shares of the Company's Common
Stock exercisable at $2.00 per share for $1.00 per Warrant ($196,875).
(B) assigned to SIL the rights it retained in the settlement (see
Note 2) to repurchase within six months 1,628,100 shares of the Company's
Common Stock for the greater of $3.00 per share or 50 percent of the then
market price of the Company's Common Stock and its rights to purchase from
the Warrant holders for $1.00 per share five-year Warrants to acquire
776,562 shares of the Company's Common Stock at $2.00 per share. As a
result of the issuance of the above mentioned shares, the antidilution
provisions of the Warrants require an adjustment from 776,562 shares at
$2.00 per share to 862,847 shares at $1.80 per share.
On May 1, 1996, SIL acquired 1,628,101 shares of the Company's Common Stock
at $3.00 per share, and at $1.00 per Warrant, 776,562 Warrants to acquire
776,562 shares of the Company's Common Stock at $2.00 per share. SIL
exercised these Warrants on May 6, 1996, resulting in the Company receiving
$1,553,124 in additional equity. An additional 86,285 shares were issued
to SIL as a result of the change in the aggregate number of shares
underlying the Warrants pursuant to the antidilution provisions in the
Warrants as described above in Note 2.
In addition, 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, the Company has issued to Care
2,500,000 shares of the Company's Common Stock. If during the three years
after closing, this license results in $5,000,000 or more in revenues by
the Company, then the shares will be fully earned. Otherwise, depending
upon the level of revenue reached, the Company will have the right to
repurchase portions of the 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, the Company may be required to grant
to Care five-year Warrants to buy an additional 1,000,000 shares of the
Company's Common Stock at $2.00 per share.
<PAGE>
COVER-ALL TECHNOLOGIES INC.
AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Total revenues for the three months ended June 30, 1996 were $1,896,961 as
compared to $925,386 for the same period in 1995. License fees were
$502,241 for the three months ended June 30, 1996 compared to $402,337 in
the same period in 1995. For the three months ended June 30, 1996,
maintenance revenues were $528,333 compared to $296,981 in the same period
of the prior year due to renegotiations of all contracts resulting in
higher fees to customers and an increased customer base. Professional
services revenue contributed $866,387 in the three months ended June 30,
1996 compared to $226,068 in the second quarter of 1995 as a result of new
contracts signed and customers requesting additional modifications to the
existing systems. For the six months ended June 30, 1996, total revenues
were $3,017,064 as compared to $1,979,086 in the same period of the prior
year due to increased maintenance revenues as discussed above and increased
professional services from the Company's newest product line entitled 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.
For the six months ended June 30, 1996, the revenues from the TAS 2000
product line were $1,271,496 compared to $450,662 in the same period of the
prior year as a result of new contracts signed and the successful
completion of the existing contracts.
In December 1994, management adopted a plan to reduce the COVER-ALL
marketing and product development costs until revenues increased to
significantly higher levels. The total cash outlay had grown to a level of
approximately $1 million per month but the revenues from customers
continued to lag expectations. The total head count, including employees
and technical consultants, was reduced by approximately half in the first
quarter of 1995 and a business plan was adopted in 1995 which matched
slowly growing revenues with reduced costs. As a result of the
reorganization plan, costs incurred in the first quarter of 1995 for
executive severance, employee severance and write-off of software
development costs totalling $1,165,000 were reflected as special charges in
the Statement of Operations for the quarter ended March 31, 1995.
Total expenses for the three- and six-months ended June 30, 1996 were
$3,177,427 and $5,095,536 compared to $1,205,776 and $4,417,536 for the
same periods in 1995 primarily as a result of increased research and
development costs relating to the TAS 2000 product line and additional
costs related to increased revenues, and selling, general and
administrative expenses. COVER-ALL's business is characterized by rapid
technological change, and its success depends on its ability to keep its
products current based on new technologies. COVER-ALL must maintain
ongoing research and development programs to add value and expand to its
suite of products resulting in research and development expenditures
constituting a significant percentage of expenses. Sales and marketing
expenses for the three- and six-months ended June 30, 1996 were $203,577
and $321,736 compared to $101,717 and $217,287 for the same periods in 1995
primarily due to the hiring of additional personnel and increased marketing
initiatives. General and administrative expenses increased for the three-
and six-months to $1,130,822 and $1,680,141 from $493,637 and $1,103,453
for the same periods in 1995 as a result of costs incurred related to the
negotiations with SIL and Care, additional staffing and provision for
doubtful accounts.
The Company recently ceased and terminated negotiations for a significant
development contract between the Company and a prospective customer for
certain of the Company's COVER-ALL products. In spite of the short-term
setback, the long-term prospects remain positive. COVER-ALL has
successfully installed and tested certain modules of its system and
customer interest has grown significantly. Revenues are expected to
continue to increase over the next two quarters.
The Company's continued success in the near future is dependent on certain
contingencies which may not occur in the time frames anticipated or
otherwise. These contingencies include the successful completion of
continuing developmental efforts under existing software contracts within
anticipated time frames or otherwise, the successful negotiation, execution
and implementation of anticipated new software contracts, the successful
utilization of additional personnel in the marketing and technical areas,
the continuing favorable responses to the Company's products from existing
and potential new customers, and the Company's ability to complete
development and sell and license its products at prices which result in
sufficient revenues to cover costs and realize profits.
Liquidity and Capital Resources
-------------------------------
In January 1996, the Company obtained approval from the New Jersey
Department of Insurance to dissolve its insurance subsidiary, Alerion. As
a result, plans were implemented to remove the remaining approximately $2.5
million of statutory minimum capital from Alerion. In January 1996,
approximately $2.4 million was distributed to the Company from Alerion.
There was a $1 million letter of credit outstanding with a bank at December
31, 1995 issued in connection with certain of the Company's contractual
obligations. The letter of credit expired in February 1996 and the $1
million of cash collateral was returned to the Company, $887,500 of these
funds were utilized by the Company as the cash portion of the settlement
distributed to certain ISD customers and The Robert Plan Corporation. In
addition, $1.6 million was paid by the Company to the one ISD customer who
did not participate in the settlement.
In March 1996, the Company received a $2.3 million refund of federal income
taxes paid prior to 1995.
As a result of the restructuring transactions described in Note 2 and the
series of transactions with Software Investment Limited and Care
Corporation Limited that are described in Note 6, the Company has a
positive net worth at June 30, 1996 of approximately $9 million compared to
a deficit of $6 million at December 31, 1995, a $15 million increase to
stockholders' equity.
Cash flows from continuing operations were negative in the first six months
of 1996 by $.5 million as compared with positive cash flows of $.5 million
in the same period in 1995 primarily due to payment of certain liabilities
related to the discontinued operations not transferred by the Company to a
subsidiary of The Robert Plan Corporation.
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on June 20, 1996. At
the Meeting, the stockholders of the Company elected a class of two
directors, consisting of Alfred J. Moccia and Mark D. Johnston, to serve
for a three-year term and until their successors have been elected and
qualified. The following table sets forth the results of the votes cast
for directors at the Meeting:
Director Votes For Votes Withheld
-------- --------- --------------
Alfred J. Moccia 14,395,187 615,895
Mark D. Johnston 14,473,796 537,286
The stockholders of the Company also approved an amendment to the
Certificate of Incorporation of the Company to change the name of the
Company from Warner Insurance Services, Inc. to Cover-All Technologies Inc.
by the requisite vote of a majority of the outstanding shares of Common
Stock entitled to vote on such proposal. There were 14,961,851 shares cast
in favor of the proposal and 22,151 shares cast against such proposal.
The stockholders also approved an amendment to the Company's Certificate of
Incorporation to increase the authorized number of shares of Common Stock
from 20,000,000 to 30,000,000 by the requisite vote of a majority of the
outstanding shares of Common Stock entitled to vote on such proposal.
There were 14,261,973 shares cast in favor of the proposal and 718,803
shares cast in opposition thereto.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
---------
3(a) Certificate of Amendment of Certificate of
Incorporation of the Registrant filed on June 21, 1996
[incorporated by reference to Exhibit 3(e) to the
Registrant's Registration Statement on Amendment No. 1
to Form S-3 (File No. 333-6131) filed on July 10,
1996].
3(b)* Bylaws of the Registrant, as amended.
27* Financial Data Schedule.
(b) Reports on Form 8-K.
--------------------
The Company filed a Form 8-K on July 1, 1996 under Item 5 to
reflect the events of the Annual Meeting of Stockholders.
* Filed herewith.
<PAGE>
COVER-ALL TECHNOLOGIES INC.
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COVER-ALL TECHNOLOGIES INC.
August 13, 1996 By: /s/ Alfred J. Moccia
---------------------
Alfred J. Moccia
Chairman and Chief
Executive Officer
August 13, 1996 By: /s/ Raul F. Calvo
------------------------
Raul F. Calvo
Corporate Vice President
<PAGE>
EXHIBIT INDEX
-------------
3(b) Bylaws of the Registrant, as amended.
27 Financial Data Schedule.
Exhibit
BY-LAWS OF
COVER-ALL TECHNOLOGIES INC.
(A Delaware corporation)
-------------------------------------
ARTICLE I
Meetings of Stockholders
------------------------
SECTION 1. Annual Meeting. The annual meeting of the
--------------
stockholders of COVER-ALL TECHNOLOGIES INC. (hereinafter referred
to as the "Corporation") for the election of directors and for
the transaction of such other business as may properly come
before the meeting shall be held on such date and at such time as
may be fixed by the Board of Directors (hereinafter referred to
as the "Board") or if no date and time are so fixed on the last
Tuesday in February of each year, if not a legal holiday, and if
a holiday, then on the next succeeding day not a legal holiday,
at the office of the Corporation or at such other place and at
such hour as shall be designated by the Board, or, if no such
time be fixed, then at 10:00 o'clock in the forenoon.
SECTION 2. Special Meetings. Special meetings of the
----------------
stockholders, unless otherwise prescribed by statute, may be
called at any time by the Chairman of the Board, the President or
the Board pursuant to a resolution approved by a majority of the
entire Board.
SECTION 3. Notice of Meetings. Notice of the place,
------------------
date and hour of holding each annual and special meeting of the
stockholders and the purpose or purposes thereof shall be given
personally or by mail in a postage prepaid envelope, not less
than ten nor more than fifty days before the date of such
meeting, to each stockholder entitled to vote at such meeting,
and, if mailed, it shall be directed to such stockholder at his
address as it appears on the record of stockholders, unless he
shall have filed with the secretary of the Corporation a written
request that notices to him be mailed to some other address. Any
such notice for any meeting other than the annual meeting shall
indicate that it is being issued at the direction of the Chairman
of the Board, the President or of the Board. Notice of any
meeting of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy
and shall not, prior to the conclusion of such meeting, protest
the lack of notice thereof, or who shall, either before or after
the meeting, submit a signed waiver of notice, in person or by
proxy. Unless the Board shall fix a new record date for an
adjourned meeting, notice of such adjourned meeting need not be
given if the time and place to which the meeting shall be
adjourned were announced at the meeting at which the adjournment
is taken.
SECTION 4. Quorum. At all meetings of the
------
stockholders the holders of the majority of the shares of Common
Stock of the Corporation, issued and outstanding and entitled to
vote, shall be present in person or by proxy to constitute a
quorum for the transaction of business. In the absence of a
quorum, the holders of a majority of the shares of Common Stock
present in person or by proxy and entitled to vote may adjourn
the meeting from time to time. At any such adjourned meeting at
which a quorum may be present any business may be transacted
which might have been transacted at the meeting as originally
called.
SECTION 5. Organization. At each meeting of the
------------
stockholders, the Chairman of the Board, or in his absence the
President of the Corporation, shall act as chairman of the
meeting or, if no one of the foregoing officers is present, a
chairman shall be chosen at the meeting by the stockholders. The
Secretary, or in his absence or inability to act, the person whom
the chairman of the meeting shall appoint secretary of the
meeting, shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 6. Order of Business. The order of business
-----------------
at all meetings of the stockholders shall be as determined by the
chairman of the meeting.
SECTION 7. Voting. Except as otherwise provided by
------
statute or the Certificate of Incorporation, each holder of
record of shares of stock of the Corporation having voting power
shall be entitled at each meeting of the stockholders to one vote
for every share of such stock standing in his name on the record
of stockholders of the Corporation:
(a) on the date fixed pursuant to the provisions
of Section 5 of Article V of these By-Laws as the
record date for the determination of the stockholders
who shall be entitled to notice of and to vote at such
meeting; or
(b) if such record date shall not have been so
fixed, then at the close of business on the day next
preceding the day on which notice thereof shall be
given.
Each stockholder entitled to vote at any meeting of stockholders
may authorize another person or persons to act for him by a proxy
signed by such stockholder or his attorney-in-fact. Any such
proxy shall be delivered to the secretary of such meeting at or
prior to the time designated in the order of business for so
delivering such proxies. Except as otherwise required by statute
or by the Certificate of Incorporation, any corporate action to
be taken by vote of the stockholders shall require the vote of a
majority of the votes cast at a meeting of the holders of the
Common Stock of the Corporation entitled to vote thereon. Unless
required by statute, or determined by the chairman of the meeting
to be advisable, the vote on any question need not be by ballot.
On a vote by ballot, each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
SECTION 8. List of Stockholders. A list of
--------------------
stockholders as of the record date, certified by the Secretary of
the Corporation or by the transfer agent for the Corporation,
shall be produced at any meeting of the stockholders upon the
request of any stockholder made at or prior to such meeting.
SECTION 9. Inspectors. The Board may, in advance of
----------
any meeting of stockholders, appoint one or more inspectors to
act at such meeting or any adjournment thereof. If the
inspectors shall not be so appointed or if any of them shall fail
to appear or act, the chairman of the meeting shall appoint
inspectors. Each inspector, before entering upon the discharge
of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality
and according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct
the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder
entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as an
inspector of an election of directors. Inspectors need not be
stockholders.
SECTION 10. Stockholder Action; How Taken. Any action
-----------------------------
required or permitted to be taken by the stockholders must be
effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such
holders.
ARTICLE II
Board of Directors
------------------
SECTION 1. General Powers. The business and affairs
--------------
of the Corporation shall be managed under the direction of the
Board. The Board may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not
by statute or the Certificate of Incorporation directed or
required to be exercised or done by the stockholders.
SECTION 2. Number, Increase or Decrease Thereto and
----------------------------------------
Term of Office. The Board shall consist of at least three (3),
--------------
but no more than seven (7) Directors, as determined by a majority
vote of the entire Board, which number may be increased and
decreased as provided in this Section 2. The Directors shall be
classified, with respect to the term for which they severally
hold office, into three classes, as nearly equal in number as
possible, as determined by the Board, one class to hold office
initially for a term expiring at the annual meeting of
stockholders to be held in 1986, another class to hold office
initially for a term expiring at the annual meeting of
stockholders to be held in 1987, and another class to hold office
initially for a term expiring at the annual meeting of
stockholders to be held in 1988, with the members of each class
to hold office until their successors are elected and qualified.
At each annual meeting of stockholders, the successors of the
class of Directors whose term expires at that meeting shall be
elected to hold office for a term expiring at the annual meeting
of stockholders held in the third year following the year of
their election.
The term "entire Board" as used in these By-Laws means
the total number of Directors which the Corporation would have if
there were no vacancies. Nominations for the election of
Directors may be made by the Board or a committee appointed by
the Board or by any stockholder entitled to vote in the election
of Directors generally. However, any stockholder entitled to
vote in the election of Directors generally may nominate one or
more persons for election as Directors at a meeting only if
written notice of such stockholder's intent to make such
nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid to the
Secretary of the Corporation not later than (i) with respect to
an election to be held at an annual meeting of stockholders,
ninety days prior to the anniversary date of the immediately
preceding annual meeting, and (ii) with respect to an election to
be held at a special meeting of stockholders for the election of
Directors, the close of business on the tenth day following the
date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name
and address of the stockholder who intends to make the nomination
and the person or persons to be nominated; (b) a representation
that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of
all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are
to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission; and
(e) the consent of each nominee to serve as a Director of the
Corporation if so elected. The presiding officer of the meeting
may refuse to acknowledge the nomination of any person not made
in compliance with the foregoing procedure.
The Board, by the vote of a majority of the entire
Board, may increase the number of Directors. Newly created
directorships resulting from any increase in the number of
Directors and any vacancies on the Board resulting from death,
resignation, disqualification, removal or other cause shall be
filled solely by the affirmative vote of a majority of the
remaining Directors then in office, even though less than a
quorum of the Board. Any Director elected in accordance with the
preceding sentence shall hold office for the remainder of the
full term of the class of Directors in which the new directorship
was created or the vacancy occurred and until such Director's
successor shall have been elected and qualified. No decrease in
the number of Directors constituting the Board shall shorten the
term of any incumbent Director.
SECTION 3. Place of Meeting. Meetings of the Board
----------------
shall be held at the principal office of the Corporation in the
State of Delaware or at such other place, within or without such
state, as the Board may from time to time determine or as shall
be specified in the notice of any such meeting.
SECTION 4. Annual Meeting. The Board shall meet for
--------------
the purpose of organization, the election of officers and the
transaction of other business, as soon as practicable after each
annual meeting of the stockholders, on the same day and at the
same place where such annual meeting shall be held. Notice of
such meeting need not be given. Such meeting may be held at any
other time or place (within or without the State of Delaware)
which shall be specified in a notice thereof given as hereinafter
provided in Section 7 of this Article II.
SECTION 5. Regular Meetings. Regular meetings of the
----------------
Board shall be held at such time as the Board may fix. If any
day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which
would otherwise be held on that day shall be held at the same
hour on the next succeeding business day. Notice of regular
meetings of the Board need not be given except as otherwise
required by statute or these By-Laws.
SECTION 6. Special Meetings. Special meetings of the
----------------
Board may be called by the Chairman of the Board, the President
or by a majority of the entire Board.
SECTION 7. Notice of Meetings. Notice of each special
------------------
meeting of the Board (and of each regular meeting for which
notice shall be required) shall be given by the Secretary as
hereinafter provided in this Section 7, in which notice shall be
stated the time and place of the meeting. Except as otherwise
required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be
mailed, postage prepaid, to each director, addressed to him at
his residence or usual place of business, by first-class mail, at
least two days before the day on which such meeting is to be
held, or shall be sent addressed to him at such place by
telegraph, telex, cable or wireless, or be delivered to him
personally or by telephone, at least 24 hours before the time at
which such meeting is to be held. A written waiver of notice,
signed by the director entitled to notice, whether before or
after the time stated therein shall be deemed equivalent to
notice. Notice of any such meeting need not be given to any
director who shall, either before or after the meeting, submit a
signed waiver of notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of notice
to him.
SECTION 8. Quorum and Manner of Acting. Except as
---------------------------
hereinafter provided, a majority of the entire Board shall be
present in person or by means of a conference telephone or
similar communications equipment which allows all persons
participating in the meeting to hear each other at the same time
at any meeting of the Board in order to constitute a quorum for
the transaction of business at such meeting; and, except as
otherwise required by statute or the Certificate of
Incorporation, the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the
Board. In the absence of a quorum at any meeting of the Board, a
majority of the directors present thereat may adjourn such
meeting to another time and place. Notice of the time and place
of any such adjourned meeting shall be given to the directors who
were not present at the time of the adjournment and, unless such
time and place were announced at the meeting at which the
adjournment was taken, to the other directors. At any adjourned
meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and
the individual directors shall have no power as such.
SECTION 9. Action Without a Meeting. Any action
------------------------
required or permitted to be taken by the Board at a meeting may
be taken without a meeting if all members of the Board consent in
writing to the adoption of the resolutions authorizing such
action. The resolutions and written consents thereto shall be
filed with the minutes of the Board.
SECTION 10. Telephonic Participation. One or more
------------------------
members of the Board may participate in a meeting by means of a
conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence in person at the meeting.
SECTION 11. Organization. At each meeting of the
------------
Board, the Chairman of the Board or, in his absence, the
President or another director chosen by a majority of the
directors present shall act as chairman of the meeting and
preside thereat. The Secretary (or, in his absence, any person
-- who shall be an Assistant Secretary, if any of them shall be
present at such meeting -- appointed by the chairman) shall act
as secretary of the meeting and keep the minutes thereof.
SECTION 12. Resignations. Any director of the
------------
Corporation may resign at any time by giving written notice of
his resignation to the Board, the Chairman of the Board, the
President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it
shall become effective shall not be specified therein,
immediately upon its receipt, and, unless otherwise specified
therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 13. Vacancies. Vacancies and newly created
---------
directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole
remaining director. If there are no directors in office, then a
special meeting of stockholders for the election of directors may
be called and held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship,
the directors then in office shall constitute less than a
majority of the whole Board (as constituted immediately prior to
any such increase), the Court of Chancery may, upon application
of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having
the right to vote for such directors, summarily order an election
to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the
directors then in office, in the manner provided by statute.
When one or more directors shall resign from the Board, effective
at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill
such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and
each director so chosen shall hold office until the next
election of directors and until their successors shall be
elected and qualified.
SECTION 14. Removal of Directors. Any Director may be
--------------------
removed from office, without cause, only by the affirmative vote
of the holders of 80% of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the
election of Directors, voting together as a single class.
SECTION 15. Compensation. The Board shall have
------------
authority to fix the compensation, including fees and
reimbursement of expenses, of directors for services to the
Corporation in any capacity.
ARTICLE III
Executive and Other Committees
------------------------------
SECTION 1. Executive and Other Committees. The Board
------------------------------
may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of
two or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent
provided in the resolution shall have and may exercise the powers
of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; provided, however,
that in the absence or disqualification of any member of such
committee or committees, the member or members thereof present
at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any
such absent or disqualified member. Each committee shall keep
written minutes of its proceedings and shall report such minutes
to the Board when required. All such proceedings shall be
subject to revision or alteration by the Board; provided,
however, that third parties shall not be prejudiced by such
revision or alteration.
SECTION 2. General. A majority of any committee may
-------
determine its action and fix the time and place of its meetings,
unless the Board shall otherwise provide. Notice of such
meetings shall be given to each member of the committee in the
manner provided for in Article II, Section 7. The Board shall
have any power at any time to fill vacancies in, to change the
membership of, or to dissolve any such committee. Nothing herein
shall be deemed to prevent the Board from appointing one or more
committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such
committee shall have or may exercise any authority of the Board.
SECTION 3. Action Without a Meeting. Any action
------------------------
required or permitted to be taken by any committee at a meeting
may be taken without a meeting if all of the members of the
committee consent in writing to the adoption of the resolutions
authorizing such action. The resolutions and written consents
thereto shall be filed with the minutes of the committee.
SECTION 4. Telephone Participation. One or more
-----------------------
members of a committee may participate in a meeting by means of a
conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence in person at the meeting.
ARTICLE IV
Officers
--------
SECTION 1. Number and Qualifications. The officers of
-------------------------
the Corporation shall include the Chairman of the Board, the
President, one or more Vice Presidents, the Treasurer, and the
Secretary. Any two or more offices may be held by the same
person; except the offices of (i) Chairman of the Board and
Secretary and (ii) President and Secretary; provided that when
all of the issued and outstanding stock of the Corporation is
held by one person, such person may hold all or any combination
of offices. Such officers shall be elected from time to time by
the Board, each to hold office until the meeting of the Board
following the next annual meeting of the stockholders, or until
his successor shall have been duly elected and shall have
qualified or until his death, or until he shall have resigned, or
have been removed, as hereinafter provided in these By-Laws.
The Board may from time to time elect, or delegate to the
Chairman of the Board or the President the power to appoint, such
other officers (including one or more Assistant Treasurers and
one or more Assistant Secretaries) and such agents, as may be
necessary or desirable for the business of the Corporation. Such
other officers and agents shall have such duties and shall hold
their offices for such terms as may be prescribed by the Board or
by the appointing authority.
SECTION 2. Resignations. Any officer of the
------------
Corporation may resign at any time by giving written notice of
his resignation to the Board, the President or the Secretary.
Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt; and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 3. Removal. Any officer or agent of the
-------
Corporation may be removed, either with or without cause, at any
time, by the Board at any meeting of the Board or, except in the
case of an officer or agent elected or appointed by the Board, by
the Chairman of the Board.
SECTION 4. Vacancies. A vacancy in any office,
---------
whether arising from death, resignation, removal or any other
cause, may be filled for the unexpired portion of the term of the
office which shall be vacant, in the manner prescribed in these
By-Laws for the regular election or appointment to such office.
SECTION 5. The Chairman of the Board. The Chairman of
-------------------------
the Board shall be the chief executive officer of the Corporation
and shall have general and active responsibility for and
authority over the general and active management of the business
of the Corporation and general and active supervision and
direction over the other officers, agents and employees and shall
see that their duties are properly performed. He shall, if
present, preside at each meeting of the stockholders and of the
Board and shall be an ex-officio member of all committees of the
Board. He shall perform all duties incident to the office of
Chairman of the Board and chief executive officer and such other
duties as may from time to time be required of him by the Board.
SECTION 6. The President. The President shall be the
-------------
chief operating officer of the Corporation and shall have general
and active responsibility for and authority over supervision and
direction of the business and affairs of the Corporation and over
its several officers, subject, however, to the direction of the
Chairman of the Board and the control of the Board. At the
request of the Chairman of the Board, or, if the President is a
member of the Board at such time, in the case of the Chairman of
the Board's absence or inability to act, the President shall
perform the duties of the Chairman of the Board and when so
acting shall have all the powers of, and be subject to all the
restrictions upon, the Chairman of the Board. He shall perform
all duties incident to the office of President and such other
duties as from time to time may be assigned to him by the Board,
the Chairman of the Board or these By-Laws.
SECTION 7. Vice Presidents. Each Vice President,
---------------
including any Executive Vice President, shall perform all such
duties as from time to time may be assigned to him by the Board.
SECTION 8. The Treasurer. The Treasurer shall
-------------
(a) have charge and custody of, and be
responsible for, all the funds and securities of the
Corporation;
(b) keep full and accurate accounts of receipts
and disbursements in books belonging to the
Corporation;
(c) deposit all monies and other valuables to the
credit of the Corporation in such depositaries as may
be designated by the Board;
(d) receive, and give receipts for, monies due
and payable to the Corporation from any source
whatsoever;
(e) disburse the funds of the Corporation and
supervise the investment of its funds as ordered or
authorized by the Board, taking proper vouchers
therefor; and
(f) in general, perform all the duties incident
to the office of Treasurer and such other duties as
from time to time may be assigned to him by the Board,
the Chairman of the Board or the President.
SECTION 9. The Secretary. The Secretary shall
-------------
(a) keep or cause to be kept in one or more books
provided for the purpose, the minutes of all meetings
of the Board, the committees of the Board and the
stockholders;
(b) see that all notices are duly given in
accordance with the provisions of these By-Laws and as
required by law;
(c) be custodian of the records and the seal of
the Corporation and affix and attest the seal to all
stock certificates of the Corporation (unless the seal
of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and
attest the seal to all other documents to be executed
on behalf of the Corporation under its seal;
(d) see that the books, reports, statements,
certificates and other documents and records required
by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident
to the office of Secretary ad such other duties as from
time to time may be assigned to him by the Board or the
President.
SECTION 10. Officers' Bonds or Other Security. If
---------------------------------
required by the Board, any officer of the Corporation shall give
a bond or other security for the faithful performance of his
duties, in such amount and with such surety or sureties as the
Board may require.
SECTION 11. Compensation. The compensation of the
------------
officers of the Corporation for their services as such officers
shall be fixed from time to time by the Board; provided, however,
that the Board may delegate to the Chairman of the Board or the
President the power to fix the compensation of officers and
agents appointed by the Chairman of the Board or the President,
as the case may be. An officer of the Corporation shall not be
prevented from receiving compensation by reason of the fact that
he is also a director of the Corporation, but any such officer
who shall also be a director (except in the event that there is
only one director of the Corporation) shall not have any vote in
the determination of the amount of compensation paid to him.
ARTICLE V
Shares, etc.
------------
SECTION 1. Stock Certificates. Each owner of stock of
------------------
the Corporation shall be entitled to have a certificate, in such
form as shall be approved by the Board, certifying the number of
shares of stock of the Corporation owned by him. The
certificates representing shares of stock shall be signed in the
name of the Corporation by the Chairman of the Board, the
President or a Vice President and by the Secretary, Treasurer or
an Assistant Secretary and sealed with the seal of the
Corporation (which seal may be a facsimile, engraved or
printed). In case any officer who shall have signed such
certificates shall have ceased to be such officer before such
certificates shall be issued, they may nevertheless be issued by
the Corporation with the same effect as if such officer were
still in office at the date of their issue.
SECTION 2. Books of Account and Record of
------------------------------
Stockholders. There shall be kept correct and complete books and
------------
records of account of all the business and transactions of the
Corporation. The stock record books and the blank stock
certificate books shall be kept by the Secretary or by any other
officer or agent designated by the Board.
SECTION 3. Transfers of Shares. Transfers of shares
-------------------
of stock of the Corporation shall be made on the stock records of
the Corporation only upon authorization by the registered holder
thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a
transfer agent or transfer clerk, and on surrender of the
certificate or certificates for such shares properly endorsed or
accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. The person in whose name shares of
stock shall stand on the record of stockholders of the
Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation. Whenever any transfers of shares shall
be made for collateral security and not absolutely and written
notice thereof shall be given to the Secretary or to such
transfer agent or transfer clerk, such fact shall be stated in
the entry of the transfer.
SECTION 4. Regulations. The Board may make such
-----------
additional rules and regulations, not inconsistent with these
By-Laws, as it may deem expedient concerning the issue, transfer
and registration of certificates for shares of stock of the
Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more
transfer clerks and one or more registrars and may require all
certificates for shares of stock to bear the signature or
signatures of any of them.
SECTION 5. Fixing of Record Date. The Board may fix,
---------------------
in advance, a date not more than fifty nor less than ten days
before the date then fixed for the holding of any meeting of the
stockholders or before the last day on which the consent or
dissent of the stockholders may be effectively expressed for any
purpose without a meeting, as the time as of which the
stockholders entitled to notice of and to vote at such meeting or
whose consent or dissent is required or may be expressed for any
purpose, as the case may be, shall be determined, and all persons
who were shareholders of record of voting stock at such time,
and no others, shall be entitled to notice of and to vote at such
meeting or to express their consent or dissent, as the case may
be. The Board may fix, in advance, a date not more than fifty
nor less than ten days preceding the date fixed for the payment
of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidence of rights or
evidences of interest arising out of any change, conversion or
exchange of capital stock or other securities, as the record
date for the determination of the stockholders entitled to
receive any such dividend, distribution, allotment, rights or
interests, and in such case only the stockholders of record at
the time so fixed shall be entitled to receive such dividend,
distribution, allotment, rights or interests.
SECTION 6. Lost, Destroyed or Mutilated Certificate.
----------------------------------------
The holder of any certificate representing shares of stock of the
Corporation shall immediately notify the Corporation of any loss,
destruction or mutilation of such certificate, and the
Corporation may issue a new certificate of stock in the place of
any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have
been mutilated, and the Board may, in its discretion, require
such owner or his legal representative to give to the Corporation
a bond in such sum, limited or unlimited, and in such form and
with such surety or sureties as the Board in its absolute
discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged
loss or destruction of any such certificate, or the issuance of
such new certificate. Anything herein to the contrary
notwithstanding, the Board, in its absolute discretion, may
refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Delaware.
ARTICLE VI
Contracts, Checks, Drafts, Bank Accounts, Etc.
----------------------------------------------
SECTION 1. Execution of Contracts. Except as
----------------------
otherwise required by statute, the Certificate of Incorporation
or these By-Laws, any contract or other instrument may be
executed and delivered in the name and on behalf of the
Corporation by such officer of officers (including any assistant
officer) of the Corporation as the Board may from time to time
direct. Such authority may be general or confined to specific
instances as the Board may determine. Unless authorized by the
Board or expressly permitted by these By-Laws, no officer or
agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit
or to render it pecuniarily liable for any purpose or to any
amount.
SECTION 2. Loans. Unless the Board shall otherwise
-----
determine, the Chairman of the Board, the President or any
Vice-President may effect loans and advances at any time for the
Corporation from any bank, trust company or other institution, or
from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or
other certificates or evidences of indebtedness of the
Corporation, but no officer or officers shall mortgage, pledge,
hypothecate or transfer any securities or other property of the
Corporation other than in connection with the purchase of
chattels for use in the Corporation's operations, except when
authorized by the Board.
SECTION 3. Checks, Drafts, etc. All checks, drafts,
-------------------
bills of exchange or other orders for the payment of money out of
the funds of the Corporation, and all notes or other evidence of
indebtedness of the Corporation, shall be signed in the name and
on behalf of the Corporation by such persons and in such manner
as shall from time to time be authorized by the Board.
SECTION 4. Deposits. All funds of the Corporation not
--------
otherwise employed shall be deposited from time to time to the
credit of the Corporation in such banks, trust companies or other
depositaries as the Board may from time to time designate or as
may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be
delegated by the Board. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, checks,
drafts and other orders for the payment of money which are
payable to the order of the Corporation may be endorsed, assigned
and delivered by any officer or agent of the Corporation.
SECTION 5. General and Special Bank Accounts. The
---------------------------------
Board may from time to time authorize the opening and keeping of
general and special bank accounts with such banks, trust
companies or other depositaries as the Board may designate or as
may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be
delegated by the Board. The Board may make such special rules
and regulations with respect to such bank accounts, not
inconsistent with the provisions of these By-Laws, as it may deem
expedient.
ARTICLE VII
Offices
-------
SECTION 1. Registered Office. The registered office
-----------------
of the Corporation shall be in the City of Wilmington, County of
New Castle, State of Delaware, and the registered agent of the
Corporation shall be The Corporation Trust Company, whose
address is Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
SECTION 2. Other Offices. The Corporation may also
-------------
have such offices, both within or without the State of Delaware,
as the Board may from time to time determine or the business of
the Corporation may require.
ARTICLE VIII
Fiscal Year
-----------
The fiscal year of the Corporation shall be determined
by the Board.
ARTICLE IX
Seal
----
The seal of the Corporation shall be circular in form,
shall bear the name of the Corporation and shall include the
words and numbers "Corporate Seal," "Delaware" and the year of
incorporation.
ARTICLE X
Indemnification
---------------
Any person made a party to any action or proceeding
(whether or not by or in the right of the Corporation to procure
a judgment in its favor or by or in the right of any other
corporation) by reason of the fact that he, his testator or
intestate, is or was a director, officer or employee of the
Corporation, or of any corporation which he served as such at the
request of the Corporation, shall be indemnified by the
Corporation against judgments, fines, amounts paid in settlement
and reasonable expenses, including attorneys' fees, actually and
necessarily incurred by him in connection with the defense of or
as a result of such action or proceeding, or in connection with
any appeal therein, to the full extent permitted under the laws
of the State of Delaware from time to time in effect. The
Corporation shall have the power to purchase and maintain
insurance for the indemnification of such directors, officers and
employees to the full extent permitted under the laws of the
State of Delaware from time to time in effect. Such right of
indemnification shall not be deemed exclusive of any other rights
of indemnification to which such director, officer or employee
may be entitled.
ARTICLE XI
Amendment
---------
The Board shall have power to make, alter, amend and
repeal the By-Laws (except so far as the By-Laws adopted by the
stockholders shall otherwise provide). Any By-Laws made by the
Directors under the powers conferred hereby may be altered,
amended or repealed by the Directors or by the stockholders.
Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, those provisions of
the By-Laws relating to the number, election and terms of the
Directors, newly created Directorships and vacancies or removal
of Directors shall not be altered, amended or repealed and no
provision inconsistent therewith shall be adopted without the
affirmative vote of the holders of at least 80% of the combined
voting power of the then outstanding shares of stock entitled to
vote generally in the election of Directors, voting together as a
single class.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM COVER-ALL TECHNOLOGIES INC. FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,584,889
<SECURITIES> 0
<RECEIVABLES> 1,792,847
<ALLOWANCES> 306,341
<INVENTORY> 0
<CURRENT-ASSETS> 5,440,890
<PP&E> 3,021,159
<DEPRECIATION> 2,495,071
<TOTAL-ASSETS> 12,672,767
<CURRENT-LIABILITIES> 4,028,977
<BONDS> 0
<COMMON> 173,503
0
0
<OTHER-SE> 8,450,287
<TOTAL-LIABILITY-AND-EQUITY> 12,672,767
<SALES> 0
<TOTAL-REVENUES> 3,017,064
<CGS> 0
<TOTAL-COSTS> 916,767
<OTHER-EXPENSES> 4,178,769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,078,472)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,078,472)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,078,472)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
