SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 28, 1996
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Warner Insurance Services, Inc.
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(Exact name or registrant as specified in its charter)
Delaware 0-13124 13-2698053
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(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
17-01 Pollitt Drive, Fair Lawn, New Jersey 07410
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 794-4800
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N/A
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(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events.
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On March 31, 1996 (the "Closing Date"), Warner
Insurance Services, Inc., a Delaware corporation ("Warner"),
entered into a series of transactions with Software Investments
Limited ("SIL") and Care Corporation Limited ("Care") involving
a capital infusion by SIL and the grant by Care to Warner of an
exclusive license for the Care software system for use in the
workers' compensation and group health claims administration
markets in Canada, Mexico and Central and South America. Both
SIL and Care are controlled by The Care Trust, a Jersey,
Channel Islands Discretionary Settlement, the beneficiaries of
which are the family interests of Mark D. Johnston.
The capital infusion by SIL initially amounts to
$3,022,391 and is in the form of the sale by Warner to SIL of
an aggregate of 1,412,758 shares of common stock, par value
$.01 per share, of Warner ("Common Stock") for $2.00 per share
and the sale by Warner to SIL of five-year warrants, at $1.00
per warrant, to purchase an aggregate of 196,875 shares of
Warner Common Stock at $2.00 per share. A portion of such
funds was used to fund a $1.6 million settlement with Clarendon
National Insurance Company ("Clarendon"), the one
customer/creditor which did not participate in the
restructuring transaction announced by Warner on March 4, 1996
(the "Restructuring").
In addition, Warner has assigned to SIL the rights
Warner retained in the Restructuring to repurchase (a), for a
period of six months from March 1, 1996, 1,628,100 shares,
which represents one-half of the Warner Common Stock issued as
part of the Restructuring, at a cash purchase price equal to
the greater of $3.00 or 50% of the then market price per share
of Warner Common Stock and (b) five-years warrants to acquire
776,562 shares of Warner Common Stock, which represents one-
half of the warrants issued as part of the Restructuring, at
$2.00 per share at a purchase price of $1.00 per warrant. SIL
has agreed to acquire the warrants within 30 days from the
Closing Date and to exercise such warrants within 5 days of its
acquisition, which, upon exercise and payment, will result in
Warner receiving an additional $1,553,124.
As part of the overall transaction, Care has granted
to Warner an exclusive license for the Care software system for
use in the workers' compensation and group health claims
administration markets in Canada, Mexico and Central and South
America in exchange for 2,500,000 shares of Warner Common
Stock. If the license results in $5,000,000 or more in revenue
by Warner during the three years following the Closing Date,
then the shares will be fully earned. Otherwise, depending on
the level of revenue reached, Warner will have the right to
<PAGE>
repurchase portions of the shares at $.01 per share based upon
revenues actually achieved. Based on aggregate net sales in
excess of $10,000,000 from a maximum of two separate sales
during such three period, Warner may be required to grant to
Care five-year warrants to buy an additional 1,000,000 shares
of Warner Common Stock at $2.00.
<PAGE>
Item 7. Financial Statements and Exhibits.
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The following exhibits are filed as a part of this report.
(c) Exhibits:
10.1 Stock Purchase Agreement, dated as of March 31, 1996
10.2 Assignment of Repurchase Rights, dated as of March
31, 1996
10.3 Warrant, dated as of March 31, 1996
10.4 Exclusive Software License Agreement, dated as of
March 31, 1996
10.5 Settlement Agreement, dated as of March 28, 1996
99. Press Release of Warner, dated April 3, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
WARNER INSURANCE SERVICES, INC.
Dated: April 8, 1996 By: /s/ Raul F. Calvo
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Name: Raul F. Calvo
Title: Vice President
<PAGE>
EXHIBIT INDEX
Exhibit Description
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10.1 Stock Purchase Agreement, dated as of March 31, 1996
10.2 Assignment of Repurchase Rights, dated as of March
31, 1996
10.3 Warrant, dated as of March 31, 1996
10.4 Exclusive Software License Agreement, dated as of
March 31, 1996
10.5 Settlement Agreement, dated as of March 28, 1996
99. Press Release of Warner, dated April 3, 1996
Exhibit 10.1
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of March 31, 1996 by and
among WARNER INSURANCE SERVICES, INC., a
Delaware corporation (hereinafter called
"Warner"), SOFTWARE INVESTMENTS LIMITED, a
British Virgin Islands corporation
(hereinafter called "SIL") and CARE
CORPORATION LIMITED, a British Virgin Islands
corporation (hereinafter called "Care").
WHEREAS, Warner, through its subsidiary COVER-ALL Systems, Inc.,
a Delaware corporation ("COVER-ALL"), is in the business of providing
software solutions for the property, casualty and healthcare insurance
industries;
WHEREAS, Care has certain rights to the Care software system, as
described in detail on Schedule I annexed hereto (the "Care System");
WHEREAS, SIL desires to make an investment in Warner in
accordance with the terms herein set forth and Care desires to transfer to
Warner certain rights to the Care System for Canada, Mexico, Central
America and South America, all upon the terms herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and the
representations, warranties and covenants herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. SALE OF SHARES.
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(a) On the Closing Date (as hereinafter defined), Warner
agrees to issue and sell to SIL and SIL agrees to pay for and acquire from
Warner, 1,000,000 shares (the "Warner Shares") of Warner Common Stock, $.01
par value (the "Warner Common Stock") at a price of $2.00 per share or an
aggregate purchase price of $2,000,000;
(b) On the Closing Date Warner agrees to issue and sell to
SIL and SIL agrees to pay for and acquire from Warner (i) 412,758 shares of
Warner Common Stock (the "Clarendon Shares") at a price of $2.00 per share
or an aggregate purchase price of $825,516 and (ii) five year Warrants to
purchase 196,875 shares of Warner Common Stock at $2.00 per share at a
price of $1.00 per warrant or an aggregate purchase price of $196,875. The
Warrants (the "Clarendon Warrants") shall be in the form of Exhibit A
annexed hereto.
2. TRANSFER OF OPTION RIGHTS TO SIL.
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On the Closing Date, Warner agrees to transfer and assign to SIL, and shall
enter into a separate Repurchase Rights Assignment (the "Repurchase Rights
Assignment") to evidence such transfer and assignment, Warner's rights to
repurchase (the "Repurchase Rights") (i) 1,628,100 shares of Warner Common
Stock (the "Restructuring Shares") issued by Warner on March 1, 1996
pursuant to the Restructuring Agreement dated as of March 1, 1996 by and
among Warner, 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 (the "Restructuring Agreement") and (ii) 776,562
Warrants (the "Restructuring Warrants") issued by Warner pursuant to the
Restructuring Agreement, such Repurchase Rights being set forth in
Section 8.4 of the Restructuring Agreement.
3. EXERCISE OF REPURCHASE RIGHTS BY SIL AND EXERCISE OF
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RESTRUCTURING WARRANTS BY SIL. SIL hereby agrees within thirty (30) days
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of the Closing Date hereunder to exercise in full the Repurchase Rights
assigned to SIL pursuant to Section 2 hereof as to the Restructuring
Warrants. Within five (5) days of the exercise of the Repurchase Rights to
acquire the Restructuring Warrants by SIL, SIL hereby agrees to exercise
the Restructuring Warrants in full for 776,562 shares of Warner Common
Stock and pay Warner $2.00 per share or an aggregate of $1,553,124.
In the event that SIL has not exercised the Repurchase Rights,
assigned to SIL pursuant to Section 2 hereof, as to the Restructuring
Shares on or prior to the date which is twenty-one (21) calendar days
preceding the expiration date of the Repurchase Rights, the parties hereto
agree that (i) the assignment of the Repurchase Rights shall terminate and
be of no further force or effect, (ii) the full right to and interest in
the Repurchase Rights shall automatically revert to Warner without any
further action on the part of any party hereto, and (iii) SIL shall have no
further right to or interest in said Repurchase Rights.
4. USE OF PROCEEDS. Warner shall use the proceeds from the
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sale of the Warner Shares (i) to complete the development of the COVER-ALL
system for policy and premium for worker's compensation and (ii) for
working capital. Warner shall use the proceeds from the sale of the
Clarendon Shares and the Clarendon Warrants for the funding of any
settlement with Clarendon National Insurance Company. Warner shall use the
proceeds of the exercise of the Restructuring Warrants by SIL for working
capital.
5. LICENSE FOR CANADA AND LATIN AND SOUTH AMERICA. On the
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Closing Date, Care will transfer to Warner rights to the Care System for
Canada, Mexico, Central America and South America (the "Licensed
Territory") pursuant to the terms and conditions of the Exclusive Software
License Agreement annexed hereto as Exhibit B (the "International License")
and in consideration therefor Warner shall issue to Care 2,500,000 shares
of Warner Common Stock (the "License Shares").
The License Shares shall be subject to the following terms and
conditions with Warner having the right to repurchase all or a part of such
shares on the following terms and conditions:
(a) If during the period ending three (3) years after the
Closing Date, Warner has not recognized cumulative Net Sales (as
hereinafter defined) in excess of $999,999, then Warner shall have the
right to repurchase all the License Shares from Care at a price of $.01 per
share.
(b) If during the period ending three (3) years after the
Closing Date Warner recognizes cumulative Net Sales from $1,000,000 to
$1,999,999, then Warner shall have the right to repurchase 2,000,000 of the
License Shares at a price of $.01 per share, provided, however, that the
License Shares repurchasable by Warner shall be reduced by 1 share for each
$2.00 of Net Sales in excess of $1,000,000.
(c) If during the period ending three (3) years after the
Closing Date Warner recognizes cumulative Net Sales from $2,000,000 to
$2,999,999, then Warner shall have the right to repurchase 1,500,000 of the
License Shares at a price of $.01 per share, provided, however, that the
License Shares repurchasable by Warner shall be reduced by 1 share for each
$2.00 of Net Sales in excess of $2,000,000.
(d) If during the period ending three (3) years after the
Closing Date Warner recognizes cumulative Net Sales from $3,000,000 to
$3,999,999, then Warner shall have the right to repurchase 1,000,000 of the
License Shares at a price of $.01 per share, provided, however, that the
License Shares repurchasable by Warner shall be reduced by 1 share for each
$2.00 of Net Sales in excess of $3,000,000.
(e) If during the period ending three (3) years after the
Closing Date Warner recognizes cumulative Net Sales from $4,000,000 to
$4,999,999, then Warner shall have the right to repurchase 500,000 of the
License Shares at a price of $.01 per share, provided, however, that the
License Shares repurchasable by Warner shall be reduced by 1 share for each
$2.00 of Net Sales in excess of $4,000,000.
(f) If during the period ending three (3) years after the
Closing Date Warner recognizes cumulative Net Sales of $5,000,000 or more,
then Warner shall not have the right to repurchase any of the License
Shares.
(g) The determination of Net Sales for purposes of this
Section 5 shall be made by the independent auditors then auditing the books
and records of Warner, which shall be a nationally recognized auditing firm
or such other auditing firm which is reasonably acceptable to Care, whose
determination shall be binding on Warner and Care for all purposes. Except
as otherwise provided herein, Net Sales shall be accrued and recognized in
accordance with generally accepted accounting principles ("GAAP")
consistently applied. "Net Sales" for purposes of this Section 5 shall
mean License Revenue (as hereinafter defined) less (i) cost of sales
related to such License Revenue (which shall include marketing, advertising
and selling expenses) and (ii) commissions related to such License Revenue.
"License Revenue" for purposes of this Section 5 shall mean all revenue of
Warner, COVER-ALL or any affiliate thereof (other than SIL or Care to the
extent either or both may at any time be considered an affiliate) in
respect of any transaction in any way related to or involving the Care
System in the Licensed Territory. License Revenue shall exclude revenues
received by Warner in respect of the COVER-ALL system or systems included
within or as part of a sale to a customer of the Care System, provided that
Warner shall make a just and equitable allocation of total revenues
received from any sale to the Care System portion of such sale based upon
appropriate business practices and customs and usage. Warner's independent
auditors shall determine, and Warner shall notify Care of, the amount of
cumulative Net Sales (A) for any fiscal quarter or part thereof during the
applicable period within 45 days after the end of such fiscal quarter and
(B) for such period within 45 days after the expiration of three (3) years
(or five (5) years in the case of subsection (i)) from the Closing Date.
(h) Any repurchase right granted to Warner hereunder shall
be exercisable no earlier than sixty (60) days and no later than ninety
(90) days after the expiration of three (3) years (or five (5) years in the
case of Subsection (i)) from the Closing Date by written notice given by
Warner to Care, which notice shall set a time, place and date of closing
(no earlier than fifteen (15) days before and no later than thirty (30)
days after the date of notice) at which closing Warner shall deliver a
check payable to Care in the full amount of the repurchase price payable
against delivery by Care of a certificate or certificates representing the
shares being repurchased by Warner duly endorsed in blank.
(i) Notwithstanding the foregoing subsections (a) through
(h), if at the expiration of three (3) years from the Closing Date
(i) Warner has repurchase rights to any License Shares and (ii) at such
date Warner is a party to a binding contract or contracts in respect of any
transaction in any manner related to or involving the Care System within
the Licensed Territory, which contract or contracts calls for payments
after such date as a result of delay or based upon shared revenues and such
payments have not been accrued as Net Sales under GAAP by Warner as of such
date, then Warner's repurchase rights shall be deferred for another two (2)
year period and at the end of such two (2) year period Care shall be given
credit for any Net Sales of Warner accrued from such contract or contracts
in such two (2) year period in determining the number of License Shares
which Warner has the right to repurchase pursuant to this Section 5.
(j) During the period covered by Warner's repurchase rights
hereunder, the certificates representing the License Shares shall bear the
following legend:
"Warner Insurance Services, Inc. has the right to
repurchase certain or all of these shares in accordance
with the terms of a Stock Purchase Agreement dated as
of March __, 1996 by and among Warner Insurance
Services, Inc., Software Investments Limited and Care
Corporation Limited. A copy of this Agreement is
available at the headquarters of Warner Insurance
Services, Inc., 18-01 Pollitt Drive, Fair Lawn, New
Jersey 07410."
(k) If in the period of three (3) years from the Closing
Date, Warner generates aggregate Net Sales (as herein defined) in excess of
$10,000,000 from a maximum of two (2) separate sales of the Care System in
the Licensed Territory, then Warner shall grant to Care Warrants (the
"Bonus Warrants") to acquire 1,000,000 shares of Warner Common Stock at a
price of $2.00 per share. Such Warrants shall otherwise be identical in
form to the Clarendon Warrants, except they shall be dated the date of
issue and expire five (5) years thereafter.
6. CLOSING DATE. The closing of the transactions herein
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contemplated (the "Closing") will take place on March [26], 1996, at 10:00
A.M. at the offices of Reid & Priest LLP, 40 West 57th Street, New York,
New York 10019 or such other date and time as the parties may mutually
agree upon (the "Closing Date").
7. REPRESENTATIONS AND WARRANTIES OF WARNER. In order to
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induce SIL and Care to enter into this Agreement and to consummate the
transactions contemplated hereunder, Warner hereby represents and warrants
to SIL and Care as follows:
7.1 DUE INCORPORATION AND POWER. Each of Warner and COVER
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-ALL is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now being
conducted and to own, lease and operate its properties as and in the places
where such business is now conducted and such properties are now owned,
leased or operated. Warner has all requisite corporate power to execute
and deliver this Agreement, the Clarendon Warrants, the Bonus Warrants, the
International License and the Repurchase Rights Assignment, and to perform
its obligations under each such agreement.
7.2 CAPITALIZATION. The authorized capital stock of Warner
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consists of 20,000,000 shares of Common Stock, $.01 par value. As of the
date hereof, [11,817,105] shares of Common Stock of Warner are issued and
outstanding. Except as set forth on Schedule 7.2 annexed hereto, there are
no other outstanding rights, options or convertible securities giving any
party the right to acquire equity securities of Warner. The Warner Shares,
the Clarendon Shares and the License Shares to be issued by Warner
hereunder shall upon issuance thereof, be duly authorized, validly issued,
fully paid and non-assessable. The shares of Warner Common Stock covered
by the Repurchase Rights Assignment have been duly authorized and are
validly issued, fully paid and non-assessable, the Restructuring Warrants
have been duly authorized and sufficient numbers of shares of Warner Common
Stock have been reserved for issuance upon the exercise thereof, and when
such shares are issued and paid for in accordance with the terms of the
Restructuring Warrants, such shares of Warner Common Stock shall be duly
authorized, validly issued, fully paid and non-assessable. The Clarendon
Warrants and the Bonus Warrants have been duly authorized by Warner and
sufficient numbers of shares of Warner Common Stock have been reserved for
issuance upon exercise of the Clarendon Warrants or the Bonus Warrants and
when shares of Warner Common Stock are issued and paid for in accordance
with the terms of the Clarendon Warrants or the Bonus Warrants, as the case
may be, such shares of Warner Common Stock shall be duly authorized,
validly issued, fully paid and non-assessable.
7.3 AUTHORIZATION OF AGREEMENTS; VALIDITY. The execution
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and delivery by Warner of this Agreement, the Clarendon Warrants, the
International License and the Repurchase Rights Assignment and the
consummation by Warner of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on behalf of
Warner. This Agreement has been duly executed and delivered by Warner, and
this Agreement constitutes, and, when executed, the Clarendon Warrants, the
International License and the Repurchase Rights Assignment will constitute,
the legal, valid and binding obligations of Warner, enforceable against
Warner in accordance with their respective terms, except to the extent that
such validity, binding effect and enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium and other
laws affecting creditors' rights generally from time to time in effect and
by general equitable principles.
7.4 EFFECT OF AGREEMENTS. Except as set forth on
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Schedule 7.4, neither the execution and delivery of this Agreement, the
Clarendon Warrants, the International License or the Repurchase Rights
Assignment by Warner, nor the consummation of the transactions contemplated
hereby and thereby nor compliance by Warner with the provisions of this
Agreement, the Clarendon Warrants, the International License or the
Repurchase Rights Assignment by Warner (i) violates or will violate,
conflicts or will conflict with, or results or will result in a breach of
any provision, term or condition of, or constitutes or will constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default), under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination
or acceleration under, or result in the creation of a lien upon any of the
properties or assets of Warner or any subsidiary of Warner under the terms,
conditions or provisions of (x) the Certificate of Incorporation, as
amended, or the By-Laws, as amended, of Warner, or of any of its
subsidiaries, or (y) any other agreement or instrument to which Warner or
any subsidiary of Warner is a party, or by which any of them is bound, or
any of their respective properties or assets, may be subject, or
(ii) violates any judgment, ruling, order, writ, injunction, decree, law,
statute, ordinance, rule or regulation, domestic or foreign, applicable to
Warner or any subsidiary of Warner or any of their respective properties or
assets, except in the case of each of clauses (i) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of Liens, which, in the aggregate, would not have any material
adverse effect on the condition (financial or otherwise) or the operations
or business of Warner and its subsidiaries taken as a whole, or on the
ability of the parties to consummate the transactions contemplated hereby.
7.5 PRIVATE SALE. Warner has not, either directly or
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through an agent, offered the Warner Shares, the Clarendon Shares, the
Clarendon Warrants or the License Shares to or solicited any offer to
acquire any of such securities from, or otherwise approached, negotiated or
communicated in respect of such securities with, any person so as to
require that any of such securities be registered pursuant to the
provisions of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act") or any applicable state securities law.
7.6 FILINGS, NOTICES, CONSENTS AND APPROVALS. No notice
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to, filing with, or authorization, consent or approval of, any domestic or
foreign governmental or public body, agency or authority or any person not
a party to this Agreement, is necessary in connection with the execution,
delivery and performance of this Agreement, the Clarendon Warrants, the
Bonus Warrants, the International License and the Repurchase Rights
Assignment by Warner or the consummation by Warner of the transactions
contemplated by each such agreement, except where failure to give such
notice, make such filings, or obtain such authorizations, consents or
approvals would, in the aggregate, not have material adverse effect on the
condition (financial or otherwise) or operations of Warner and its
subsidiaries taken as a whole, or on the ability of the parties to
consummate the transactions contemplated hereby.
7.7 CURRENT INFORMATION. Warner has delivered to SIL and
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Care true copies of the Restructuring Agreement and related Asset Purchase
Agreement and Exhibits, together with an unaudited pro forma balance sheet
statement of Warner giving effect to the transactions set forth in the
Restructuring Agreement and related Asset Purchase Agreement. Schedule 7.7
annexed hereto sets forth certain risk factors relating to Warner and
COVER-ALL.
7.8 UNTRUE STATEMENTS. This Agreement and the Schedules
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hereto do not contain any untrue statements of material facts with respect
to Warner and its subsidiaries, taken as a whole, or omit to state any
material facts necessary to make the statements herein and therein
contained with respect to Warner and its subsidiaries, taken as a whole not
misleading.
8. REPRESENTATIONS AND WARRANTIES OF SIL AND CARE. In order to
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induce Warner to enter into this Agreement and to consummate the
transactions contemplated hereunder, SIL and Care hereby severally
represent and warrant to Warner as follows:
8.1 CORPORATE EXISTENCE AND QUALIFICATION. Each of SIL and
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Care is a corporation duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and
has all requisite corporate power and authority to carry on its business as
now being conducted and to own, lease and operate its properties as and in
the places where such business is now conducted and such properties are now
owned, leased or operated. Each of SIL and Care has all requisite power to
execute and deliver this Agreement and to perform its obligations
hereunder.
8.2 AUTHORIZATION OF AGREEMENTS. The execution and
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delivery by SIL and Care of this Agreement, and of the International
License by Care and the transactions contemplated hereby and thereby have
been duly authorized by all requisite corporate action on behalf of each
such party. This Agreement has been duly executed and delivered by each of
SIL and Care, and this Agreement constitutes, and when executed, the
International License will constitute the legal, valid and binding
obligation of SIL and Care, as the case may be, enforceable against such
party in accordance with its respective terms except to the extent that
such validity, binding effect and enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium and other
laws affecting creditors' rights generally from time to time in effect and
by general equitable principles.
8.3 SECURITIES LAWS.
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(a) SIL and Care each acknowledge and understand that
the securities of Warner to be acquired by it hereunder have not been
registered under the Securities Act, or the securities laws of any state,
and that such securities may not be offered or sold unless first registered
under the Securities Act and any applicable state securities laws, or
unless such offer or sale is exempt from registration.
(b) Each of SIL and Care is purchasing the securities
of Warner hereunder for investment purposes, has no intention, subject to
the subsequent exercise of registration rights provided for hereunder, to
sell any of such securities and will not sell or dispose of any of such
securities in violation of applicable United States federal and state
securities laws.
(c) SIL and Care have received a copy of the most
recent annual report on Form 10-K and the three most recent quarterly
reports on form 10-Q, and is aware that Warner has suffered significant
losses, will report additional losses in the fourth quarter ended
December 31, 1995, realized additional losses in January and February 1996,
and has had serious cash flow problems.
(d) Each of SIL and Care agrees that the following
legend may be placed on any certificates evidencing the securities issued
pursuant to this Agreement:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR PURSUANT TO ANY STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE
WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL TO THE COMPANY
OR OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED."
Each of SIL and Care understand that, so long as the above legend remains
on any certificates, Warner may maintain appropriate "stop transfer" orders
with respect to such securities on its books and records and with its
registrar and transfer agent. Each of SIL and Care agree that prior to any
proposed transfer of any such securities and as a condition thereto, if
such transfer is not made pursuant to an effective Registration Statement
under the Securities Act or an opinion of counsel to Warner (or other
counsel reasonably acceptable to Warner and its counsel) that the
securities may be sold publicly without registration under the Securities
Act, SIL or Care, as the case may be, will, if requested by Warner, deliver
to Warner (i) an undertaking by the proposed transferee to execute and
deliver any and all documentation that may from time to time be requested
by Warner with respect to the matters covered by this subsection (d),
(ii) an investment covenant signed by the proposed transferee, (iii) an
agreement by such transferee to the impression of the restrictive legend
set forth above on the securities, (iv) an agreement by such transferee
that Warner may place a "stop transfer" order with Warner's transfer agent
and registrar consistent with this subsection (d), and (v) an agreement by
the transferee to indemnify Warner to the same extent as set forth in the
immediately succeeding sentence of this Section. SIL and Care acknowledge
that each understands the legal consequences of the representations and
warranties contained in this Section and each agrees severally to indemnify
Warner against any and all losses, claims, damages, expenses or liabilities
to which Warner may become subject under any federal or state securities
law, at common law, or otherwise, insofar as such losses, claims, damages,
expenses or liabilities arise out of or based upon (A) any transfer of the
securities owned by it in violation of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or the rules and
regulations promulgated under either of such Acts and applicable state Blue
Sky laws, or (B) any untrue statement of a material fact or omission to
state any material fact in connection with its representations pursuant to
this Section.
9. COVENANTS OF WARNER.
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9.1 ELECTION OF BOARD OF DIRECTORS. Warner shall take all
------------------------------
necessary action to accomplish the following: (a) on the Closing Date Mark
Donald Johnston shall be elected as a Director of Warner in the class of
1996 (due to the staggered director provisions contained in Warner's By-
Laws, as amended) as the designee of SIL and Care to Warner's Board of
Directors (a "Care Designee"); (b) a Care Designee, which may be Mark
Donald Johnston or a successor designated to Warner by SIL and Care, shall
be included as one of the management nominees for Directors of Warner at
each meeting of stockholders, beginning with the 1996 annual meeting of
stockholders, called for the purpose of reelecting such class of Directors;
(c) if the Care Designee is not elected at the 1996 annual meeting of
stockholders or any subsequent annual meeting called for the purpose of
reelecting or electing such class of Directors, Warner shall, following
such meeting, elect the Care Designee to its Board of Directors, and amend
its By-Laws to create any vacancy if required, to serve for a period equal
to the remainder of the term of such class of Directors; (d) if, at any
time, any Care Designee shall decline or be unable to serve as a Director
of Warner, another Care Designee shall be elected as a Director of Warner
to fill the vacancy thus created. Each Care Designee shall have all voting
and other rights provided to Directors of Warner generally. Warner shall
be required to comply with this Section 9.1 for as long as SIL and Care
collectively hold an aggregate of 20% or more of the issued and outstanding
shares of Warner Common Stock.
9.2 REGISTRATION RIGHTS.
-------------------
9.2.1 DEMAND REGISTRATION. (a) At any time upon
-------------------
receipt by Warner of a written request executed by SIL or Care (the
"Initiating Holder") requesting registration of a number of shares of
Common Stock at least equal to thirty percent (30%) or more of the shares
of Warner Common Stock initially issued pursuant to this Agreement to such
party on the Closing Date, (423,828 shares with respect to SIL and 750,000
shares with respect to Care) Warner will give notice of such request to
each other holder (the "Other Holders") of such shares and give them the
right to participate therein for a period of thirty (30) days after notice
in accordance with this Section 9.2.1.
(b) As soon as practicable after receipt of the
request given pursuant to Subsection (a) above, Warner shall prepare and
file with the United States Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement") under
the Securities Act covering the Warner Common Stock requested to be sold
under a Registration Statement and shall otherwise comply with its
obligations under Section 9.2.1.
(c) Warner's obligations under Section 9.2.1
shall be limited to two (2) effective Registration Statements under the
Securities Act for SIL and two (2) effective Registration Statements under
the Securities Act for Care.
9.2.2 PIGGY BACK REGISTRATION RIGHTS. (a) At any time
------------------------------
after June 30, 1996, Warner will send written notice to the holders (the
"Holders") then owning shares of Warner Common Stock acquired pursuant to
this Agreement (including shares acquired or to be acquired upon exercise
of the Clarendon Warrants, the Restructuring Warrants and the Bonus
Warrants) (collectively, the "Registrable Shares") at least thirty (30)
days prior to the filing of each and every Registration Statement filed by
Warner, whether or not pursuant to this Agreement (other than a
Registration Statement covering exclusively securities issued under an
employee option or stock purchase plan, or pursuant to a merger,
acquisition or similar transaction) and give to such Holders the right to
have included therein any Registrable Shares then held by the Holders.
Such notice must specify the proposed offering price and the plan of
distribution. Warner must receive written notice from such Holders within
fifteen (15) days after the date of Warner's written notice, indicating the
full name and address of each Holder desiring to have Registrable Shares
included for sale in such Registration Statement and the number of
Registrable Shares requested to be covered.
(b) If the registration of which Warner gives notice
is for a registered public offering involving an underwriting, Warner shall
so advise the Holders as a part of the written notice given pursuant to
Section 9.2.2(a). In such event the rights of any Holder to registration
pursuant to Section 9.2.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Shares
in the underwriting to the extent provided in this Section 9.2.2(b).
All Holders proposing to distribute their Registrable
Shares through such underwriting shall, together with Warner, enter into an
underwriting agreement in customary form with the managing underwriter
selected for such underwriting by Warner. Warner shall use its reasonable
best efforts to cause the managing underwriter of such proposed
underwritten offering to permit the Registrable Shares proposed to be
included in such registration to be included in the Registration Statement
for such offering on the same terms and conditions as any similar
securities of Warner included therein. Notwithstanding any other provision
of this Section 9.2.2, the Holders shall be entitled to include in the
registration statement all of the shares which they desire to sell for
their own account, and if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the similar securities of
Warner to be included in such registration.
If any Holder disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by written notice
to Warner and the managing underwriter. Any Registrable Shares excluded or
withdrawn from such underwriting also shall be withdrawn from such
registration, and shall not be transferred prior to such period after the
effective date of the registration statement relating thereto, as the
underwriters may require all principal shareholders and directors of Warner
to agree to.
9.2.3 MISCELLANEOUS REGISTRATION PROVISIONS. (a) In
-------------------------------------
connection with any Registration Statement filed pursuant to Sections 9.2.1
or 9.2.2 hereof:
(i) Warner's obligations under this Agreement to
include Registrable Shares in a Registration Statement shall mean shares of
Common Stock or any security received by a Holder in exchange or upon
reclassification of the Warner Common Stock;
(ii) the Holders of Registrable Shares registering
shares pursuant to Sections 9.2.1 or 9.2.2 hereof (herein "Registering
Holders") shall furnish to Warner in writing such appropriate information
(relating to the intention of such Holders as to proposed methods of sale
or other disposition of the Registrable Shares) and the identity of and
compensation to be paid to any proposed underwriters to be employed in
connection therewith as Warner, any underwriter, or the Commission or any
other regulatory authority may request;
(iii) the Registering Holders and Warner shall enter
into the usual and customary form of underwriting agreement agreed to by
Warner and any underwriter with respect to any such offering, if required,
and such underwriting agreement shall contain the customary reciprocal
rights of indemnity and contribution between Warner, the underwriters, and
the selling shareholders, including the Registering Holders, to the extent
set forth in Subsection (h) herein;
(iv) the Registering Holders shall agree that they
shall execute, deliver and/or file with or supply to Warner, any
underwriters, the Commission and/or any state or other regulatory authority
such information, documents, representations, undertakings and/or
agreements necessary to carry out the provisions of the registration
covenants contained in this Agreement and/or to effect the registration or
qualification of their Registrable Shares under the Securities Act and/or
any of the laws and regulations of any state or governmental
instrumentality;
(v) the Registering Holders shall furnish Warner with
such questionnaires and other documents regarding their identity and
background as Warner may reasonably request; and
(vi) Warner's obligation to include the Registering
Holders' Registrable Shares in a Registration Statement pursuant to Section
9.2.2 shall be subject to the written agreement of the Holders to offer the
Registrable Shares in the same manner and on the same terms and conditions
as the other securities of the same class are being offered pursuant to the
Registration Statement, if such shares are being underwritten.
(b) If and whenever Warner is required to effect the
registration of any Registrable Shares pursuant to Section 9.2.1 or 9.2.2,
Warner will use its best efforts to effect such registration to permit the
sale of such Registrable Shares in accordance with the intended method or
methods of disposition thereof, and pursuant thereto it will, as promptly
as is practicable and in accordance with the Securities Act and all
applicable rules and regulations:
(i) prepare and file with the Commission such
amendments (including post-effective amendments) and supplements to such
Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective and to
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Shares covered by such Registration
Statement until the earlier of such time as all of such Registrable Shares
have been disposed of in accordance with the intended methods of
disposition set forth in such Registration Statement or the expiration of
one hundred eighty (180) days after such Registration Statement becomes
effective;
(ii) prepare and file with the Commission any
amendment or supplement to such Registration Statement or prospectus as may
be necessary to correct any statement or omission, if at any time when a
prospectus relating to any security included in such registration is
required to be delivered under the Securities Act, any event shall have
occurred as a result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not
misleading;
(iii) notify the Registering Holders of the time when
such Registration Statement, amendment, supplement or prospectus has been
filed with the Commission;
(iv) furnish to the Holders and to any underwriter of
Registrable Shares such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus) and any amendment or supplement thereto, in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as the Holders or such underwriter may reasonably
request, and a copy of any and all transmittal letters or other
correspondence to, or received from, the Commission or any other
governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange)
relating to such offering;
(v) notify the Registering Holders after receipt of
any request by the Commission to amend or supplement such Registration
Statement or prospectus or for additional information;
(vi) advise the Registering Holders after it shall
receive notice or obtain knowledge thereof of the issuance of any order by
the Commission suspending the effectiveness of the Registration Statement
or of the limitation or threatening of any proceeding for that purpose and
make every reasonable effort to prevent the issuance of any such order or
to obtain the withdrawal of any such order; and
(vii) use its best efforts to list all such
Registrable Shares covered by such Registration Statement on the principal
securities exchange and inter-dealer quotation system on which a class of
common equity securities of Warner is then listed, and to pay all fees and
expenses in connection therewith.
(c) Warner shall pay all out-of-pocket expenses and
disbursements incurred by Warner and the Registering Holders in connection
with the Registration Statements filed by it pursuant to Sections 9.2.1 or
9.2.2, including, without limitation, all legal and accounting fees,
Commission filing fees, Exchange, NASDAQ or NASD filing fees, printing
costs, registration or qualification fees and expenses to comply with state
Blue Sky or other state securities laws, the fees of other experts, and any
expenses or other compensation paid to the underwriters; provided, however,
that such registration expenses shall not include underwriting commissions
and discounts and transfer taxes, if any.
(d) Warner shall be obligated to keep any Registration
Statement filed by it under Sections 9.2.1 and 9.2.2 effective under the
Securities Act for a period of 180 days after the actual effective date of
such Registration Statement and to prepare and file such supplements and
amendments necessary to maintain an effective Registration Statement for
such period. As a condition to Warner's obligation under this
Subsection (d), the Registering Holders will execute and deliver to Warner
such written undertakings as Warner and its counsel may reasonably require
in order to assure full compliance with relevant provisions of the
Securities Act.
(e) Warner shall use its best efforts to register or
qualify the Registrable Shares under such securities or Blue Sky laws in
such jurisdictions within the United States as the Registering Holders may
reasonably request; provided, however, that Warner reserves the right, in
its sole discretion, not to register or qualify such Registrable Shares in
any jurisdiction where such Registrable Shares do not meet with the
requirements of such jurisdiction after having taken reasonable steps to
meet such requirements or where Warner is required to qualify as foreign
corporation to do business in such jurisdiction and is not so qualified
therein or is required to file any general consent to service of process.
(f) In the event all the Registrable Shares have not been
sold on or prior to the expiration of the period specified in
Subsection (d) above, the Registering Holders hereby agree that Warner may
deregister by post-effective amendment any shares covered by the
Registration Statement, but not sold on or prior to such date. Warner
agrees that it will notify the Registering Holders of the filing and
effective date of such post-effective amendment.
(g) The Registering Holders agree that upon notification by
Warner that the prospectus in respect to any public offering covered by the
provisions hereof is in need of revision, they shall immediately upon
receipt of such notification (i) cease to offer or sell any securities of
Warner which must be accompanied by a prospectus; (ii) return all such
prospectuses in their hands to Warner; and (iii) shall not offer or sell
any securities of Warner until they have been provided with a current
prospectus and Warner has given them notification permitting them to resume
offers and sales.
(h) As a condition to the filing of a Registration
Statement pursuant to this Agreement, Warner shall indemnify and hold
harmless the Registering Holders and the underwriter(s) and controlling
person(s) of such underwriter(s) who may purchase from or sell for the
Registering Holders, any shares of Warner Common Stock, from and against
any and all losses, claims, damages, expenses or liabilities caused by any
failure of Warner to comply with the Securities Act or any rule or
regulation promulgated thereunder in connection with the registration of
the shares of Warner Common Stock or any untrue statement of a material
fact contained in the Registration Statement, any post-effective amendment
to such Registration Statement, or any prospectus included therein required
to be filed or furnished by reason of this Agreement or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make any material fact therein not
misleading, except insofar as such losses, claims, damages or liabilities
are caused by any such untrue statements or alleged untrue statements or
omissions based upon information furnished or required to be furnished in
writing to Warner by the party seeking indemnification expressly for use
therein; which indemnification shall include each person, if any, who
controls any such underwriter within the meaning of the Securities Act and
each officer, director, employee and agent of such underwriter; provided,
however, that Warner shall not be obligated to so indemnify the Registering
Holders or any such underwriter or other person referred to above unless
the Registering Holders or underwriter or other person, as the case may be,
shall at the same time or prior thereto indemnify Warner, its directors,
each officer signing the Registration Statement and each person, if any,
who controls Warner within the meaning of the Securities Act, from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, any post-effective amendment to such
Registration Statement or any prospectus or prospectus supplement required
to be filed or furnished by reason of this Agreement or caused by any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, insofar as such
losses, claims, damages or liabilities are caused by any untrue statement
or alleged untrue statement or omission based upon information furnished in
writing to Warner by the Registering Holder or underwriter expressly for
use therein.
(i) Each party entitled to indemnification under
paragraph (h) above (the "Indemnified Party") shall, promptly after receipt
of notice of any claim or the commencement of any action against such
Indemnified Party in respect of which indemnity may be sought, notify the
party required to provide indemnification (the "Indemnifying Party") in
writing of the claim or the commencement thereof; provided that the failure
of the Indemnified Party to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any liability which it may have to an
Indemnified Party pursuant to the provisions of Subsection (h), unless the
Indemnifying Party was materially prejudiced by such failure, and in no
event shall such failure relieve the Indemnifying Party from any other
liability which it may have to such Indemnified Party. If any such claim
or action shall be brought against an Indemnified Party, it shall notify
the Indemnifying Party thereof and the Indemnifying Party shall be entitled
to participate therein, and, to the extent that it wishes, jointly with any
other similarly notified Indemnifying Party, to assume the defense thereof
with counsel reasonably satisfactory to the Indemnified Party. After
notice from the Indemnifying Party to the Indemnified Party of its election
to assume the defense of such claim or action, the Indemnifying Party shall
not be liable (except to the extent the proviso to this sentence is
applicable, in which event it will be so liable) to the Indemnified Party
under Subsection (h) for any legal or other expenses subsequently incurred
by the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided that each Indemnified Party
shall have the right to employ separate counsel to represent it and assume
its defense (in which case, counsel to the Indemnifying Party shall not
represent it) if (i) upon the advice of counsel, the representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party will not have the right to assume the defense of such
claim or action on behalf of such Indemnified Party), or (ii) in the event
the Indemnifying Party has not assumed the defense thereof within ten (10)
days of receipt of notice of such claim or commencement of action, in which
case the fees and expenses of one such separate counsel shall be paid by
the Indemnifying Party. If any Indemnified Party employs such separate
counsel it will not enter into any settlement agreement which is not
approved by the Indemnifying Party, such approval not to be unreasonably
withheld. If the Indemnifying Party so assumes the defense thereof (and by
so assuming shall be solely responsible for liabilities relating to such
claim or action, and shall release the Indemnified Party from such
liabilities to the extent permitted by law, except to the extent the
Indemnified Party is not entitled to be indemnified pursuant to
Subsection (h)), it may not agree to any settlement of any such claim or
action as the result of which any remedy or relief, other than monetary
damages for which the Indemnifying Party shall be responsible hereunder,
shall be applied to or against the Indemnified Party, without the prior
written consent of the Indemnified Party. No Indemnified Party will
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect of such claim or action. In any action hereunder as to which the
Indemnifying Party has assumed the defense thereof with counsel
satisfactory to the Indemnified Party, the Indemnified Party shall continue
to be entitled to participate in the defense thereof, with counsel of its
own choice, but, except as set forth above, the Indemnifying Party shall
not be obligated hereunder to reimburse the Indemnified Party for the costs
thereof.
(j) If for any reason the indemnification provided for
above is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, claim, damage, liability or
expense referred to therein, then the Indemnifying Party in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the
amount paid or payable by the Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect
not only the relative benefits received by the Indemnified Party and the
Indemnifying Party, but also the relative fault of the Indemnified Party
and the Indemnifying Party, as well as any other relevant equitable
considerations.
9.3 ACCESS TO RECORDS AND OPERATIONS OF WARNER. Pending
------------------------------------------
the Closing of the transactions contemplated by this Agreement, SIL and
Care shall have the right to designate a representative who shall have
access to the premises of Warner for the purpose of reviewing records and
operations of Warner and COVER-ALL. All such information shall be deemed
confidential information of Warner and COVER-ALL and shall not be used by
SIL or Care for any other purpose other than to evaluate Warner and COVER-
ALL and carry out due diligence activities and if the transaction is not
consummated for any reason, all information shall be returned to Warner and
COVER-ALL and shall not be used by Care or SIL for any purpose.
10. CONDITIONS TO OBLIGATIONS OF WARNER. This Agreement and the
-----------------------------------
obligations of Warner to perform hereunder are subject to the satisfaction
by SIL or Care, or a waiver in writing by Warner, of the following
conditions, each of which is individually hereby deemed material, at or
prior to the Closing:
10.1 REPRESENTATIONS, WARRANTIES AND OBLIGATIONS. All
-------------------------------------------
representations and warranties of SIL and Care contained in this Agreement
and in the Exhibits hereto shall be true and correct commencing as of the
date hereof and ending with and on the Closing Date as though made on and
as of such Closing Date. SIL and Care shall have performed and complied
with all of their respective covenants and obligations under this Agreement
in all material respects.
10.2 CORPORATE AUTHORIZATION. On the Closing Date, SIL and
-----------------------
Care shall have delivered to Warner certified copies of the resolution(s)
adopted by the Board of Directors of SIL and Care authorizing the
execution, delivery and performance by each such party of this Agreement
and by Care of the International License, and the consummation of the
transactions contemplated hereby and thereby.
10.3 INTERNATIONAL LICENSE. On the Closing Date Care and
---------------------
Warner shall have executed and delivered the International License.
11. CONDITIONS TO OBLIGATIONS OF SIL AND CARE. This Agreement
-----------------------------------------
and the obligations of SIL and Care to perform hereunder are subject to the
satisfaction by Warner, or a waiver in writing by SIL and Care, of the
following conditions, each of which is individually hereby deemed material,
at or prior to the Closing:
11.1 CORPORATE AUTHORIZATION. On the Closing Date, Warner
-----------------------
shall have delivered to SIL and Care certified copies of the resolution(s)
of the Board of Directors of Warner authorizing the execution, delivery and
performance by Warner of this Agreement, the Clarendon Warrants, the
International License and the Repurchase Rights Assignment and the
consummation of the transactions contemplated hereby and thereby.
11.2 REPRESENTATIONS, WARRANTIES AND OBLIGATIONS. All
-------------------------------------------
representations and warranties of Warner contained in this Agreement and in
the Exhibits hereto shall be true and correct in all material respects
commencing as of the date hereof and ending with and on the Closing Date as
though made on and as of such Closing Date. Warner shall have performed
and complied with all of its respective covenants and obligations under
this Agreement in all material respects.
11.3 ISSUANCE AND DELIVERY OF SECURITIES. Warner shall
-----------------------------------
issue and deliver certificates to SIL and Care representing all securities
issuable pursuant hereto.
11.4 ELECTION OF MARK DONALD JOHNSTON. Mark Donald Johnston
--------------------------------
shall have been elected as a Director of Warner within 30 days following
the Closing Date.
12. SURVIVAL; INDEMNIFICATION. The representations, warranties,
-------------------------
covenants and agreements of Warner on the one hand, and SIL and Care on the
other hand, contained in this Agreement and the Exhibits hereto, shall
survive and remain operative and in full force following the execution and
delivery of the Agreement(s). The following provisions are applicable to
claims made under these Agreement(s):
12.1 OBLIGATION OF WARNER TO INDEMNIFY. Warner hereby
---------------------------------
agrees to indemnify, defend and hold harmless SIL and Care (and its
directors, officers, employees, affiliates and assigns) from and against
all losses, suits, proceedings, demands, judgments, damages, expenses and
costs (including reasonable attorneys' fees and disbursements)
(collectively, "Losses") which they may incur arising from any material
inaccuracy in, or any material breach of, any representation, warranty,
covenant or agreement of Warner contained in this Agreement or the Exhibits
hereto.
12.2 OBLIGATION OF SIL AND CARE TO INDEMNIFY. SIL and Care
---------------------------------------
each agree severally to indemnify, defend and hold harmless Warner (and
its directors, officers, employees, affiliates and assigns) from and
against any Losses which it may incur arising from any material inaccuracy
in, or any material breach of, any representation, warranty, covenant or
agreement of it contained in this Agreement or the Exhibits hereto.
12.3 NOTICE TO INDEMNITOR. Promptly after any party hereto
--------------------
(i) receives notice of any claim or the commencement of any action or
proceeding against it, (ii) has knowledge of any claim, action or
proceeding against it, or (iii) has knowledge of any matter for which it
intends to seek indemnification hereunder, the party seeking
indemnification (the "Indemnitee") shall, if a claim for reimbursement with
respect thereto is to be made against any party hereto obligated to provide
indemnification under Sections 12.1 or 12.2 hereof (the "Indemnitor"), give
the Indemnitor written notice of such claim or the commencement of such
action or proceeding, in all cases within sufficient time to respond to
such claim or to answer or otherwise plead in any such action. Such notice
shall be a condition precedent to the Indemnitor's obligation to provide
indemnification under this Section 12.
12.4 RIGHT TO DEFEND; COMPROMISE OF CLAIMS. The Indemnitor
-------------------------------------
shall have the right to compromise or defend, at its own expense and by its
own counsel, any matter involving the asserted liability of any Indemnitee;
provided, however, that no compromise of any claim shall be made without
the consent of the Indemnitee unless such compromise results in the full
and unconditional release of all claims against the Indemnitee by the party
asserting such claim. The opportunity to compromise or defend as herein
provided shall be a condition precedent to any liability of an Indemnitor
under the provisions of this Section 12.4. If any Indemnitor shall
undertake to compromise or defend any such asserted liability, it shall
promptly notify the Indemnitee of its intention to do so. The Indemnitee
shall cooperate with the Indemnitor and its counsel, at the Indemnitor's
sole cost and expense, in the defense against any such asserted liability
and in any compromise thereof. Such cooperation shall include, but not be
limited to, furnishing the Indemnitor with any books, records or
information reasonably requested by the Indemnitor and taking such action
as the Indemnitor may reasonably request to mitigate or reduce any claim.
After an Indemnitor has notified an Indemnitee of its intention to
undertake to compromise or defend any asserted liability, the Indemnitor
shall not be liable for any additional legal expenses incurred by the
Indemnitee, except for costs and expenses incurred in cooperating with the
Indemnitor and its counsel as herein provided, unless the Indemnitor fails
to prosecute the defense of such claim. If the Indemnitor shall desire to
compromise any such asserted liability by the payment of a liquidated
amount which the party asserting such liability is willing to accept in
exchange for fully and unconditionally releasing all claims against the
Indemnitee, and the Indemnitee shall refuse to consent to such compromise,
then the Indemnitor's liability under this Section 12 with respect to such
asserted liability shall be limited to the amount so offered in compromise.
Under no circumstances shall the Indemnitee compromise any asserted
liability without the written consent of the Indemnitor.
13. MISCELLANEOUS.
-------------
13.1 ENTIRE AGREEMENT. This Agreement, the Clarendon
----------------
Warrants, the International License and the Repurchase Rights Assignment,
the Exhibits and Schedules annexed hereto and made a part hereof, contain
the entire agreement among Warner and SIL and Care with respect to the
matters set forth herein and supersede all prior agreements and
understandings among them as to the subject matter thereof. No party shall
be bound by nor shall be deemed to have made any representations,
warranties or covenants except those contained herein.
13.2 BENEFITS; ASSIGNMENTS. All of the terms and provisions
---------------------
of this Agreement, the International License and the Repurchase Rights
Assignment shall bind and inure to the benefit of Warner and SIL and Care
and their respective successors and assigns.
13.3 NOTICES, ETC. All notices, requests, consents and
-------------
other communications hereunder shall be in writing and shall be deemed to
be duly given if personally delivered with receipt acknowledged, if mailed
by registered or certified mail, first class, postage prepaid, if delivered
by a nationally recognized overnight courier service or if transmitted by
facsimile machine (with a confirmation copy to be sent by first class mail)
addressed as follows:
(i) if to Warner:
Warner Insurance Services, Inc.
18-01 Pollitt Drive
Fair Lawn, New Jersey 07410
Tel: (201) 794-4800
Fax: (201) 791-9113
Attention: President
with a copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar, Esq.
Tel: (212) 603-2000
Fax: (212) 603-2001
or to such other address or such other person(s) as Warner may designated
by written notice to the other parties hereto.
(ii) if to SIL or Care, as follows:
Software Investments Limited
Care Corporation Limited
c/o Moore Stephens International Services
(BVI) Limited
Abbott Building
P.O. Box 3186
Main Street
Road Town
Tortola, British Virgin Islands
Attention: Carol Raward
Fax: (809) 494-3592
and
Software Investments Limited
First Floor Offices
17 Queens Street
St. Helier
Jersey, Channel Islands
Attention: Brian Lowcock or
Michael McGuiness
Fax: (011) 44-534-887901
with a copy (which shall not constitute
notice) to:
Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Attention: Alan J. Perkins, Esq.
Tel: (214) 999-3000
Fax: (214) 999-4667
or to such other address or such other person(s) as SIL or Care may
designate by written notice to the other parties hereto.
13.4 GOVERNING LAW. This Agreement is being executed in the
-------------
State of Delaware and shall be construed in accordance with and governed by
the internal laws of the State of Delaware.
13.5 SEVERABILITY. If any provision of this Agreement shall
------------
be held invalid or unenforceable, such invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
invalid or unenforceable any other severable provision of this Agreement,
and this Agreement shall be carried out as if any such invalid or
unenforceable provision were not contained herein.
13.6 MODIFICATION, WAIVERS, ETC. Neither this Agreement nor
---------------------------
any provision hereof may be changed, waived, discharged or terminated
orally but only by an instrument in writing signed by the party against
whom enforcement of the change, waiver, discharge or termination is sought.
13.7 CAPTIONS. The captions of sections and subsections of
--------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
13.8 FURTHER ASSURANCES. At any time and from time to time,
------------------
upon the reasonable request of any party hereto, the requested party shall
execute, deliver and acknowledge, or cause to be executed, delivered and
acknowledged, such further documents and instruments and do such other acts
and things as the requesting party may reasonably request in order to fully
effect the purposes of this Agreement and the transactions contemplated
hereby.
<PAGE>
13.9 COUNTERPARTS. This Agreement may be executed in
------------
several counterparts, each of which shall be deemed an original, but all of
which, when taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered in their respective names as of the date and
year first above written.
WARNER INSURANCE SERVICES, INC.
By: /s/ Raul F. Calvo
-------------------------------
Name: Raul F. Calvo
Title: Vice President
SOFTWARE INVESTMENTS LIMITED
By: /s/ Mark Donald Johnston
-------------------------------
Name: Mark Donald Johnston
Title: Director/Authorized Signatory
CARE CORPORATION LIMITED
By: /s/ Mark Donald Johnston
-------------------------------
Name: Mark Donald Johnston
Title: Director/Authorized Signatory
Exhibit 10.2
ASSIGNMENT OF REPURCHASE RIGHTS
-------------------------------
THIS ASSIGNMENT OF REPURCHASE RIGHTS dated as of the 31st day
of March, 1996 by and between WARNER INSURANCE SERVICES, INC., a Delaware
corporation ("Assignor"), and SOFTWARE INVESTMENTS LIMITED, a British
Virgin Islands corporation ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Assignor and Assignee have entered into an Stock
Purchase Agreement (the "Stock Purchase Agreement") dated as of March 31,
1996 pursuant to which, among other things, Assignor has agreed to assign,
transfer and convey to Assignee all of its rights to repurchase (the
"Repurchase Rights") (i) 1,628,100 shares of the Common Stock, $.01 par
value per share, of Assignor (the "Restructuring Shares"), issued by
Assignor pursuant to that certain Restructuring Agreement, dated as of
March 1, 1996, by and among Assignor, 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 (the "Restructuring
Agreement") and (ii) 776,562 Warrants issued by Assignor pursuant to the
Restructuring Agreement, as said Repurchase Rights are set forth in Section
8.4 of the Restructuring Agreement;
WHEREAS, pursuant to the Stock Purchase Agreement, Assignor
wishes to assign such Repurchase Rights to Assignee, and Assignee wishes to
accept such assignment, in accordance with the terms and conditions of the
Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the promises and mutual
covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree to and with each other
as follows:
1. Assignor hereby assigns, transfers, conveys and sets over to
Assignee all of Assignor's right and interest in and to the Repurchase
Rights, as said rights are set forth in Section 8.4 of the Restructuring
Agreement, a copy of said section being attached hereto as Schedule A.
2. Assignee accepts such assignment from Assignor, hereby
assumes all of the obligations, from and after the date hereof, of Assignor
with respect to the Repurchase Rights, and agrees to be bound by the
provisions of said Section 8.4 of the Restructuring Agreement as set forth
in Schedule A hereto.
3. Assignor and Assignee further covenant that each will do,
execute, act and deliver, or will cause to be done, executed, acted and
delivered, such and all other acts, transfers, assignments, powers of
attorney and assurances as Assignor, its successors and assigns, shall
reasonably require to further effect the transfer and assignment to
Assignee, its successors and assigns, of the Repurchase Rights.
4. Notwithstanding the terms of Section 8.4 of the
Restructuring Agreement, in the event that Assignee has not exercised the
Repurchase Rights being assigned hereunder, as to the Restructuring Shares
on or prior to the date which is twenty-one (21) calendar days preceding
the expiration date of the Repurchase Rights, the parties hereto
acknowledge and agree that (i) this Repurchase Rights Assignment shall
terminate and be of no further force or effect, (ii) the full right to and
interest in the Repurchase Rights shall automatically revert to Assignor
without any further action on the part of either party hereto, and (iii)
Assignee shall have no further right to or interest in said Repurchase
Rights.
5. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given and shall be effective
upon receipt if delivered by hand, by facsimile or sent by certified or
registered United States mail, postage prepaid and return receipt
requested, or by prepaid overnight express service. Notices shall be sent
to the parties at the following addresses (or at such other addresses for a
party as shall be specified by like notice; provided that such notice shall
be effective only upon receipt thereof):
If to Assignor:
Warner Insurance Services, Inc.
18-01 Pollitt Drive
Fair Lawn, New Jersey 07410
Attention: President
Fax: (201) 791-9113
With a copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar, Esq.
Fax: (212) 603-2001
If to Assignee:
Software Investments Limited
c/o Moore Stephens International Services (BVI) Limited
Abbott Building
P.O. Box 3186
Main Street, Road Town, Tortola
British Virgin Islands
Attention: Ms. Carol Raward
Fax: (809) 494-3592
With a copy to:
Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Attention: Alan J. Perkins, Esq.
Fax: (214) 999-4667
6. This Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent
of the other parties, which consent shall not be unreasonably withheld.
7. This Agreement shall be governed, construed and enforced in
accordance with the internal laws of the State of Delaware (without regard
to the choice of law provisions thereof).
8. This Agreement cannot be amended, supplemented, or changed
except by an agreement in writing that makes specific reference to this
Agreement and which is signed by the party against which enforcement of any
such amendment, supplement, or modification is sought.
9. In the event of any conflict or inconsistency between any of
the provisions contained in this Agreement and the Stock Purchase
Agreement, the provisions of the Stock Purchase Agreement shall prevail.
10. This Agreement may be signed in counterparts all of which
taken together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed on the day and year first above written.
ASSIGNOR:
WARNER INSURANCE SERVICES, INC.
By: /s/ Raul F. Calvo
-------------------------------
Name: Raul F. Calvo
Title: Vice President
ASSIGNEE:
SOFTWARE INVESTMENTS LIMITED
By: /s/ Mark Donald Johnston
--------------------------------
Name: Mark Donald Johnston
Title: Director/Authorized Signatory
<PAGE>
SCHEDULE A
8.4 Option of Warner to Purchase Settlement Shares and Warrants.
------------------------------------------------------------
(a) For a period of six months after the Closing Date, Warner shall have
the option to acquire from the Releasees 50% of the Settlement Shares at
a cash price equal to the greater of $3.00 or 50% of the then market price
of a share of Warner Common Stock. For purposes of this subsection, market
price shall mean the average closing price for a share of Warner Common
Stock on such market which is or may become the major trading market for
Warner Common Stock for the five (5) business days immediately prior to
the notice of exercise of such option, as provided for in subsection (c)
below.
(b) For a period of six months after the Closing Date Warner
shall have the option to acquire from the Releasees 50% of the Warrants at
a cash price equal to $1.00 per Warrant.
(c) The options granted hereunder shall be exercisable by
written notice by Warner to the Releasees, which notice shall set a date
and time and place of closing, which closing date shall be no earlier than
five (5) business days after the date of such notice and no later than ten
(10) business days after the date of such notice, at which closing Warner
shall deliver the consideration by certified check payable to the order of
each Releasee, and each Releasee shall deliver the securities being
acquired by Warner duly endorsed for transfer. The options granted
hereunder shall be exercised pro rata as to each Releasee based upon the
original number of Settlement Shares and/or Warrants issued to such
Releasee. The certificates for such securities will be appropriately
legended to reflect the options granted hereunder.
(d) Warner shall have the right to assign the options granted
herein in its sole discretion subject to such assignee agreeing in writing
to be bound by the provisions of this Section 8.4.
Exhibit 10.3
THIS WARRANT AND THE UNDERLYING COMMON STOCK HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS THEREOF.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON MARCH 30, 2001, OR IF NOT A
BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON THE NEXT
FOLLOWING BUSINESS DAY.
WARRANT TO PURCHASE
196,875 Shares of Common Stock
WARRANT TO PURCHASE COMMON STOCK
OF
WARNER INSURANCE SERVICES, INC.
TRANSFER RESTRICTED -- SEE SECTION 6.02
This certifies that, for good and valuable consideration,
Software Investments Limited and its registered, permitted assigns
(collectively, the "Warrantholder" or "Holder"), is entitled to purchase
from Warner Insurance Services, Inc., a Delaware corporation (the
"Company") subject to the terms and conditions hereof, at any time before
5:00 P.M., New York time, on March 30, 2001 (or, if such day is not a
business day, at or before 5:00 P.M., New York time on the next following
business day), the number of fully paid and non-assessable shares of Common
Stock, par value $.01 per share, of the Company (the "Common Stock") stated
above at the exercise price of $2.00 per share (the "Exercise Price"). The
Exercise Price and the number of shares purchasable hereunder are subject
to adjustment as provided in Article II hereof. This Warrant is issued
pursuant to a Stock Purchase Agreement dated as of March 31, 1996 (the
"Stock Purchase Agreement") by and among the Company, the Holder and Care
Corporation Limited.
<PAGE>
ARTICLE I
Duration and Exercise of Warrant
--------------------------------
Section 1.01: Duration of Warrant. Subject to the terms contained
------------ -------------------
herein, this Warrant may be exercised at any time before 5:00 P.M., New
York time, on March 30, 2001 (the "Expiration Date"), (or, if such day is
not a business day, at or before 5:00 P.M., New York time, on the next
following business day). If this Warrant is not exercised at or before
5:00 P.M., New York time, on the Expiration Date, it shall become void, and
all rights hereunder shall thereupon cease.
Section 1.02: Exercise of Warrant.
------------ -------------------
(a) The Warrantholder may exercise this Warrant, in whole or in
part, upon surrender of this Warrant with the Subscription Form hereon duly
executed, to the Company at its corporate office at 18-01 Pollitt Drive,
Fair Lawn, New Jersey 07410, or to such office as duly designated by the
Company to the Warrantholder, together with the full Exercise Price for
each Warrant Share to be purchased by tendering in lawful money of the
United States, or by certified check or bank draft payable in United States
Dollars to the order of the Company.
(b) Upon receipt of this Warrant with the Subscription Form duly
executed and accompanied by payment of the aggregate Exercise Price for the
Warrant Shares for which this Warrant is then being exercised, the Company
will promptly cause to be issued certificates for the total number of whole
shares of Common Stock for which this Warrant is being exercised (adjusted
to reflect the effect of the provisions contained in Article II hereof, if
any, and as provided in Section 4.04 hereof) in such denominations as are
required for delivery to the Warrantholder, and the Company shall thereupon
deliver such certificates to the Warrantholder. If at the time this
Warrant is exercised a registration statement is not in effect to register
under the Securities Act, the Warrant Shares issuable upon exercise of this
Warrant, the Company may place such legends on certificates representing
the Warrant Shares to indicate that the Warrant Shares have not been
registered and may not be transferred except upon compliance with the
registration requirements of the Securities Act of 1933, as amended, and
applicable state securities laws or an opinion of counsel to the Company or
of counsel reasonably satisfactory to the Company that such registration is
not required, or such other legends as may be reasonably required in the
opinion of counsel to the Company to permit the Warrant Shares to be issued
without such registration. From and after receipt by the Company of the
duly executed Subscription Form and the aggregate exercise prices and
notwithstanding that certificates in respect of the Warrant Shares may not
have been delivered, the Warrantholder shall be considered a shareholder of
the Company in respect of the Warrant Shares for all intents and purpose.
(c) In case the Warrantholder shall exercise this Warrant with
respect to less than all of the Warrant Shares that may be purchased under
this Warrant, the Company will execute a new warrant in the form of this
Warrant for the balance of such Warrant Shares and deliver such new warrant
to the Warrantholder.
(d) The Company covenants and agrees that it will pay when due
and payable any and all costs, expenses, charges and stock transfer and
similar taxes which may be payable in respect of the issue of this Warrant
or in respect of the issue of any Warrant Shares. The Company shall not,
however, be required to pay any tax imposed on income or gross receipts or
any tax which may be payable in respect of any transfer involved in the
issuance or delivery of this Warrant or at the time of surrender.
ARTICLE II
Adjustment of Warrant Shares
Purchasable and of Exercise Price
---------------------------------
The Exercise Price and the number and kind of Warrant Shares
shall be subject to adjustment from time to time upon the happening of
certain events as provided in this Article II.
Section 2.01: Mechanical Adjustments.
------------ ----------------------
(a) Anti-Dilution Provisions; Adjustment of Exercise Price. The
------------------------------------------------------
Exercise Price shall be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the Exercise Price, the
Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of Warrant Shares obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
(b) Exercise Price Adjustment Formulas. If and whenever after
----------------------------------
the date of this Warrant, the Company shall issue or sell any shares of
Common Stock (except as provided in subsection 2.01(h)) for a consideration
per share less than 95% of the Market Price (as hereinafter defined) on the
date of such issuance or sale, then forthwith the Exercise Price shall be
reduced to the prices (calculated to the nearest tenth of a cent)
determined by multiplying the Exercise Price in effect immediately prior to
the time of such issuance or sale by a fraction, the numerator of which
shall be (i) the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale (assuming the
conversion of all securities convertible into shares of Common Stock)
multiplied by the Market Price immediately prior to such issuance or sale,
and (B) the consideration, if any, received and deemed received by the
Company upon such issuance or sale, divided by (ii) the total number of
shares of Common Stock outstanding and deemed outstanding immediately after
such issuance or sale, and the denominator of which shall be the Market
Price immediately prior to such issuance or sale.
No adjustment of the Exercise Price, however, shall be made in an amount
less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which together with any adjustments so carried forward shall
amount to $.01 per share or more.
(c) Constructive Issuances of Stock; Convertible Securities;
--------------------------------------------------------
Rights and Options; Stock Dividends. For the purposes of subsection
-----------------------------------
2.01(b) above, the following provisions (i) to (viii), inclusive, shall
also be applicable:
(i) In case at any time subsequent to the date hereof,
the Company shall in any manner grant any rights to subscribe for
or to purchase, or any options for the purchase of, shares of
Common Stock or any stock or securities convertible into or
exchangeable for shares of Common Stock (such convertible or
exchangeable stock or securities being hereinafter called
"Convertible Securities"), whether or not such rights or options
or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the consideration per
share for which shares of Common Stock are issued or sold upon
the exercise of such Convertible Securities (determined by
dividing (A) the total amount, if any, received or receivable by
the Company as consideration for the granting of such rights or
options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise
of such rights or options, plus, in the case of any such rights
or options which relate to such Convertible Securities, the
minimum aggregate amount of additional consideration, if any,
payable upon the issuance or sale of such Convertible Securities
(and, if such convertible securities constitute obligations of
the Company, the principal amount of such obligations so
converted) and upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon
the exercise of such rights or options or upon the conversion or
exchange of all such Convertible Securities issuable upon the
exercise of such rights or options) shall be less than 95% of the
Market Price determined as of the date of granting such price or
options, as the case may be, then the total maximum number of
shares of Common Stock issuable upon the exercise of such rights
or options (or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise
of such rights or options) shall be deemed to be outstanding and
to have been issued for such price per share. Except as provided
in subsection 2.01(c)(iii) below, no further adjustments of the
Exercise Price shall be made upon the actual issuance of such
shares of Common Stock or of such Convertible Securities upon
exercise of such rights or options or upon the actual issuance of
such shares of Common Stock upon conversion or exchange of such
Convertible Securities.
(ii) In case at any time the Company shall in any manner
issue or sell any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which shares of Common
Stock are issuable upon such conversion or exchange (determined
by dividing (A) the total amount received or receivable by the
Company as consideration for the issuance or sale of such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (B) the total maximum number
of shares which would be issuable upon the conversion or exchange
of all such Convertible Securities) shall be less than 95% of the
Market Price determined as of the date of such issuance or sale,
then the total maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities
shall (as of the date of the issuance or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued
for such price per share; except as otherwise specified in
subsection 2.01(c)(iii) below, no further adjustments of the
Exercise Price shall be made upon the actual issuance of such
shares of Common Stock upon conversion or exchange of such
Convertible Securities.
(iii) If the purchase price provided for in any right or
option referred to in subsection 2.01(c)(i), or the additional
consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in subsection 2.01(c)(ii),
or the rate at which any Convertible Securities referred to in
subsections 2.01(c)(i) or (ii) are convertible into or
exchangeable for shares of Common Stock, shall change or a
different purchase price or rate shall become effective at any
time or from time to time (other than under or by reason of
provisions designed to protect against dilution) then, upon such
change becoming effective, the Exercise Price then in effect at
the time of such event shall forthwith be increased or decreased
to such Exercise Price as would have been obtained had the
rights, options or Convertible Securities still outstanding
provided for such changed purchase price, additional compensation
or rate of commission or exchange, as the case may be, at the
time initially granted, issued or sold. On the expiration of any
such option or right or the termination of any such right to
convert or exchange such Convertible Securities, the Exercise
Price then in effect hereunder shall forthwith be increased to
such Exercise Price as would have been obtained at the time of
such expiration or termination had such option, right or
convertible securities never been issued. If the purchase price
provided for in any right or option referred to in subsection
2.01(c)(i), or the additional consideration payable upon the
exchange or conversion of any Convertible Securities referred to
in subsections 2.01(c)(i) or (ii), or the rate at which any
Convertible Securities referred to in subsections 2.01(c)(i) or
(ii) are convertible into or exchangeable for shares of Common
Stock, shall decrease at any time under or by reason of
provisions with respect thereto designed to protect against
dilution, then, in the case of the delivery of shares of Common
Stock upon the exercise of any such right or option or upon
conversion or exchange of any such right or option or upon
conversion or exchange of any such Convertible Securities, the
Exercise Price then in effect hereunder shall forthwith be
decreased to such Exercise Price as would have been obtained had
the adjustments made upon issuance of such right or option or
Convertible Securities been made upon the basis of the issuance
of (and the total consideration computed in accordance with
subsections 2.01(c)(i) or (ii), as the case may be, received for)
the shares of Common Stock delivered as aforesaid.
(iv) In case of the issuance of shares of Common Stock or
Convertible Securities of the Company as a dividend or
distribution upon any shares of Common Stock of the Company, such
shares of Common Stock or Convertible Securities, as the case may
be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(v) In case at any time any shares of Common Stock or
Convertible Securities or any rights or options to purchase any
such shares of Common Stock or Convertible Securities shall be
issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company therefor,
without deduction therefrom of any expenses incurred or any
underwriting or selling commissions or concessions paid by the
Company in connection therewith or any underwriting or selling
discounts allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such shares of Common Stock or
Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration
other than cash payable to the Company shall be deemed to be the
fair value of such consideration as determined by the Board of
Directors of the Company, without deduction therefrom of any
expenses incurred or any underwriting or selling commissions or
concessions paid by the Company in connection therewith or any
underwriting or selling discounts allowed by the Company in
connection therewith. In case any shares of Common Stock or
Convertible Securities shall be issued in connection with any
merger of another corporation into the Company, the amount of
consideration therefor shall be deemed to be the fair value, as
determined by the Board of Directors of the Company, of such
portion of the assets of such merged corporation as such Board
shall determine to be attributable to such shares of Common
Stock, Convertible Securities, rights or options, as the case may
be.
(vi) In case at any time the Company shall take a record
of the holders of its Common Stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable in
shares of Common Stock or in Convertible Securities, or (B) to
subscribe for or purchase shares of Common Stock or Convertible
Securities, then such record date shall be deemed to be the date
of the issuance or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting
of such right or subscription or purchase, as the case may be.
(vii) "Market Price" shall mean, as of any day, the closing
sale price of the shares of Common Stock on such day on the New
York Stock Exchange or the American Stock Exchange (or if the
Common Stock shall not then be listed on either such exchange,
the closing sale price on the principal (determined by the
highest volume averaged for a period of twenty consecutive
business days prior to the day as to which "Market Price" is
being determined) national securities exchange (as defined in the
Securities Exchange Act of 1934, as amended) on which the Common
Stock may then be listed) or, if there shall have been no sales
on such exchange or exchanges on such day, the averages of the
high and low sales prices of the Common Stock on such day on the
NASDAQ National Market System or, if the Common Stock is not
included in the NASDAQ National Market System, the average of the
bid and asked prices at the end of such day or, if the Common
Stock shall not be so listed, the average of the bid and asked
prices at the end of the day in the over-the-counter market as
reported by NASDAQ or, if the Common Stock is not included on
NASDAQ, as reported by the National Quotation Bureau, Inc. or any
successor organization, in each such case, averaged for a period
of twenty consecutive business days prior to the day as to which
"Market Price" is being determined.
(viii) The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such
shares shall be considered an issuance or sale of shares of
Common Stock for the purposes of subsection 2.01(b).
(d) Effect of Certain Dividends. In case at any time the
---------------------------
Company shall declare a dividend upon the shares of Common Stock payable
otherwise than out of earnings or earned surplus (other than in a partial
or total liquidation or dissolution of the Company) and otherwise than in
shares of Common Stock or Convertible Securities, the Exercise Price in
effect immediately prior to the declaration of such dividend shall be
reduced by an amount equal, in the case of a dividend in cash, to the
amount thereof payable per share of Common Stock or, in the case of any
other dividend, to the fair value thereof per share of Common Stock as
determined by the Board of Directors of the Company. For the purposes of
the foregoing, a dividend other than in cash shall be considered payable
out of earnings or earned surplus only to the extent that such earnings or
earned surplus are charged an amount equal to the fair value of such
dividend as determined by the Board of Directors of the Company. Such
reductions shall take effect as of the date on which a record is taken for
the purpose of such dividend, or if a record is not taken, the date as of
which the holders of record of shares of Common Stock entitled to such
dividends are to be determined. As used in this subsection 2.01(d), the
term "dividend" shall mean any distribution to the holders of shares of
Common Stock. Except as provided in this subsection 2.01(d), no adjustment
in the Exercise Price and no change in the number of Warrant Shares so
purchasable shall be made pursuant to this Section 2.01 as a result of or
by reason of any such dividend.
(e) Stock Splits and Reverse Splits. In case at any time the
-------------------------------
Company shall subdivide its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of shares
purchasable pursuant to this Warrant immediately prior to such subdivision
shall be proportionately increased, and conversely, in case at any time the
Company shall combine its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock purchasable upon the exercise of this Warrant immediately
prior to such combination shall be proportionately reduced. Except as
provided in this subsection 2.01(e), no adjustment in the Exercise Price
and no exchange in the number of Warrant Shares so purchasable shall be
made pursuant to this Section 2.01 as a result of or by reason of any such
subdivision or combination.
(f) Effect of Reorganization and Assets Sales. If any capital
-----------------------------------------
reorganization or reclassification of the capital stock of the Company, or
consolidation of the Company with or merger of the Company into another
corporation, or the sale of all or substantially all of its assets to
another corporation, shall be effected in such a way that holders of shares
of Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for shares of Common Stock, then, as a
condition of such reorganization, reclassification, consolidation, merger
or sale, lawful and adequate provision shall be made whereby each holder of
Warrants shall thereafter have the right to receive upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of
Common Stock of the Company immediately theretofore receivable upon the
exercise of such Warrants, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of shares of such
stock immediately theretofore so receivable upon exercise had such
reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with
respect to the rights and interests of such holder to the end that the
provisions hereof (including, without limitation, provisions for adjustment
of the Exercise Price and of the number of shares issuable upon exercise)
shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise of such Warrants. The Company shall not effect any such
consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or of the corporation
purchasing such assets shall assume by written instrument executed and
mailed or delivered to each Warrantholder, the obligation to deliver to
such Warrantholder such shares of stock, securities or assets as, in
accordance with the foregoing provisions such Warrantholder may be entitled
to receive, and containing the express assumption of such successor
corporation of the performance and observance of the provisions of this
Warrant to be performed and observed by the Company and of all liabilities
and obligation of the Company hereunder.
(g) Accountants' Certificate. Upon each adjustment of the
------------------------
Exercise Price and upon each change in the number of Warrant Shares, then
and in each such case, the Company will promptly obtain a certificate of a
firm of independent certified public accountants of recognized standing
selected by the Company's Board of Directors, who may be the regular
auditors of the Company, stating the adjusted Exercise Price and the new
number of Warrant Shares so issuable, or specifying the other shares of
stock, securities or assets and the amount thereof receivable as a result
of such change in rights, and setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based. The
Company will promptly mail a copy of such accountant's certificate to the
Warrantholders, which certificate shall be conclusive evidence of the
correctness of the computation with respect to any such adjustment of the
Exercise Price and any such change in the number of such Warrant Shares so
issuable.
(h) No Adjustments Required. Notwithstanding anything herein to
-----------------------
the contrary, there shall be no adjustment in the Exercise Price in
connection with (i) the grant of any option, or the exercise of any option
granted under any employee benefit plan or stock option plan or (ii) upon
the exercise of any Convertible Security, in either case outstanding on the
date of this Warrant including this Warrant.
Section 2.02: Notice of Adjustment. Whenever the number of Warrant
------------ --------------------
Shares or the Exercise Price is adjusted as herein provided, the Company
shall prepare and deliver to the Warrantholder a certificate signed by its
Chairman of the Board, President, any Vice President, Treasurer or
Secretary, setting forth the adjusted number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price of such Shares
after such adjustment, setting forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which
adjustment was made.
Section 2.03: No Adjustment for Dividends. Except as provided in
------------ ---------------------------
Section 2.01 of this Agreement, no adjustment in respect of any cash
dividends payable out of earnings or earned surplus shall be made during
the term of this Warrant or upon the exercise of this Warrant.
Section 2.04: Form of Warrant After Adjustments. The form of this
------------ ---------------------------------
Warrant need not be changed because of any adjustments in the Exercise
Price or the number or kind of the Warrant Shares, and any Warrant
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this Warrant, as initially
issued.
ARTICLE III
Compliance with the Securities Act
-----------------------------------
The Holder acknowledges that the Warrant Shares, in its hands,
will be restricted securities which may not be sold or offered for sale in
the absence of an effective registration statement under the Securities Act
or an opinion of counsel satisfactory to the Company that such registration
is not required. With respect to any offer, sale or other disposition of
any Warrant Shares, the Holder will give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a
written opinion of such Holder's counsel, to the effect that such offer,
sale or other distribution may be effected without registration or
qualification (under federal law and applicable state law then in effect).
Promptly upon receiving such written notice and reasonably satisfactory
opinion, if so requested, the Company, as promptly as practicable, shall
notify such Holder that such Holder may sell or otherwise dispose of the
Warrant Shares, all in accordance with the terms of the notice delivered to
the Company. If a determination has been made pursuant to this Article III
that the opinion of counsel for the Holder is not reasonably satisfactory
to the Company, the Company shall so notify the Holder promptly after such
determination has been made. Each certificate representing the Warrant
Shares thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the
Securities Act, unless in the opinion of counsel for the Company such
legend is not required, in order to ensure compliance with the Securities
Act. The Company may issue stop transfer instructions to its transfer
agent and registrar in connection with such restrictions. The Warrant
Shares are entitled to certain rights of registration as provided in the
Stock Purchase Agreement.
ARTICLE IV
Other Provisions Relating
to Rights of Warrantholder
--------------------------
Section 4.01: No Rights as Shareholder; Notice to Warrantholder.
------------ -------------------------------------------------
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or his transferees the right to vote or to receive dividends
or to consent or to receive notice as a shareholder in respect of any
meeting of shareholders for the election of directors of the Company or of
any other matter or any rights whatsoever as shareholders of the Company,
except to the extent specifically provided for herein; provided, however
that the Warrantholder shall be delivered all notices and other
communications sent by the Company to its shareholders. Without limiting
the foregoing, in case at any time: (1) the Company shall declare any
dividend payable in Common Stock or any distribution (other than cash
dividends) to the holders of the Common Stock; (2) the Company shall make
an offer for subscription pro rata to the holders of its Common Stock of
--- ----
any additional shares of stock of any class or other rights; (3) there
shall be any capital reorganization, or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all of its assets to, another corporation; or
(4) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company; then, in any one or more of such cases, the
Company shall give notice to the Warrantholder of the date on which (a) the
books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (b) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall also
specify the date as of which the holders of Common Stock of records shall
participate in such dividend, distribution or subscription rights, or shall
be entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up as the case may be.
Such written notice shall be given not less than 10 days and not more than
90 days prior to the record date on which the Company's transfer books are
closed in respect thereto and such notice may state that the record date is
subject to the effectiveness of a registration statement under the
Securities Act, or to a favorable vote of stockholders, if either is
required.
Section 4.02: Lost, Stolen, Mutilated or Destroyed Warrant. If this
------------ --------------------------------------------
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such
terms as to indemnity or otherwise as it may in its reasonable discretion
impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as,
and in substitution for, this Warrant.
Section 4.03: Reservation of Shares.
------------ ---------------------
(a) The Company covenants and agrees that at all times it shall
reserve and keep available for the exercise of this Warrant such number of
authorized shares of Common Stock or other securities as are sufficient to
permit the exercise in full of this Warrant.
(b) The Company shall use its best efforts to maintain or secure
the listing of the Warrant Shares upon the securities exchange or automated
quotation system, if any, upon which shares of its Common Stock are then
listed.
(c) The Company covenants that all shares of Common Stock issued
on exercise of this Warrant will be validly issued, fully paid,
non-assessable and free of preemptive rights.
Section 4.04: No Fractional Shares. Anything contained herein to the
------------ --------------------
contrary notwithstanding, the Company shall not be required to issue any
fraction of a share in connection with the exercise of this Warrant. In
any case where the Warrantholder would, except for the provisions of this
Section 4.04, be entitled under the terms of this Warrant to receive a
fraction of a share upon exercise of this Warrant and receipt of the
Exercise Price, the Company shall not be required to issue any fraction of
a share, but rather, will adjust the aggregate Exercise Price for such
fraction of a share to which the Warrantholder would otherwise be entitled.
ARTICLE V
Treatment of Warrantholder
--------------------------
Prior to due presentment for registration or transfer of this
Warrant, the Company may deem and treat the Warrantholder as the absolute
owner of this Warrant (notwithstanding any notation of ownership or other
writing hereon) for the purpose of any exercise hereof and for all other
purposes of the Company shall not be affected by any notice to the
contrary.
ARTICLE VI
Split-Up, Combination,
Exchange and Transfer of Warrant
--------------------------------
Section 6.01: Split-Up, Combination, Exchange and Transfer of
------------ -----------------------------------------------
Warrant. Subject to and limited by the provisions of Section 6.02 hereof,
-------
this Warrant may be split up, combined or exchanged for another Warrant or
Warrants containing the same terms to purchase a like aggregate number of
Warrant Shares. If the Warrantholder desires to split up, combine or
exchange this Warrant, he shall make such request in writing delivered to
the Company and shall surrender to the Company this Warrant and any other
Warrants to be so split up, combined or exchanged. Upon any such surrender
for a split-up, combination or exchange, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case
may be, as so requested. The Company shall not be required to effect any
split-up, combination or exchange which will result in the issuance of a
Warrant entitling the Warrantholder to purchase upon exercise a fraction of
a share of Common Stock or a fractional Warrant. The Company may require
such Warrantholder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split-up, combination or
exchange of Warrants.
Section 6.02: Restrictions on Transfer. This Warrant may be
------------ ------------------------
exercised and this Warrant and the Warrant Shares may not be sold,
hypothecated, assigned or transferred (a "Transfer"), except only in
accordance with and subject to the provisions of the Securities Act and the
rules and regulations promulgated thereunder. The Warrantholder shall have
the benefit of the certain registration rights for the Warrant Shares as
provided in the Stock Purchase Agreement.
ARTICLE VII
Other Matters
-------------
Section 7.01: Successors and Assigns. All the covenants and
------------ ----------------------
provisions of this Warrant shall be binding upon and inure to the benefit
of the Company and the Holder and their respective successors and assigns.
Section 7.02: Amendments and Waivers. The provisions of this
------------ ----------------------
Warrant, including the provisions of this sentence, may not be amended,
modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given unless the Company has obtained the
written consent of the Holder. The Warrantholder shall be bound by any
consent authorized by this Section whether or not certificates representing
his Warrant have been marked to indicate such consent.
Section 7.03: Counterparts. This Warrant may be executed in any
------------ ------------
number of counterparts and by the parties hereto in separate counterparts,
each of which so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
Section 7.04: Governing Law. This Warrant shall be governed by and
------------ -------------
construed in accordance with the laws of the State of Delaware.
Section 7.05: Severability. In the event that any one or more of the
------------ ------------
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provisions in every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
Section 7.06: Integration/Entire Agreement. This Warrant is intended
------------ ----------------------------
by the parties as a final expression of their agreement and intended to be
a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein other
than as to registration rights set forth in the Restructuring Agreement as
to which the Warrant Shares shall be entitled. This Warrant supersedes all
prior agreements and understandings between the parties with respect to
such subject matter.
Section 7.07: Notices. Any notice, demand, request or other
------------ -------
communication required or permitted hereunder shall be in writing and shall
be deemed to have been duly given if personally delivered or mailed by
registered or certified mail or overnight courier, postage prepaid, at the
respective addresses of the parties as set forth herein. Any party hereto
may by notice so given change its address for future notice hereunder.
Notice shall conclusively be deemed to have been given when delivered in
the manner set forth above and shall be deemed to have been received when
delivered. Copies of all notices to the Company shall be given to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar
and all notices to the Warrantholder shall be given to:
Software Investments Limited
Abbott Building
P.O. Box 3187
Main Street
Road Town, Tortola, British Virgin Islands
with a copy (which shall not constitute notice) to:
Gardere & Wynee, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Attention: Alan J. Perkins, Esq.
Section 7.08: Headings. The Article and Section headings herein are
------------ --------
for convenience only and are not part of this Warrant and shall not affect
the interpretation thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the
Company under its corporate seal as of the 31st day of March, 1996.
WARNER INSURANCE SERVICES, INC.
By: /s/ Raul Calvo
-------------------------------
Name: Raul Calvo
Title: Vice President
(Corporate Seal)
ATTEST:
/s/ Leonard Gubar
-------------------------------
Assistant Secretary
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, ____________________________ hereby sells, assigns
and transfers unto ________________________ the within Warrant Certificate,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint _____ ____________________ attorney, to
transfer said Warrant Certificate on the books of the within-named Company
with respect to the number of Warrants set forth below, with full power of
substitution in the premises:
Name(s) of
Assignee(s) Address No. of Warrants
---------- ------- ---------------
And if said number of Warrants shall not be all the Warrants represented by
the Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the Warrants
represented by said Warrant Certificate.
Dated: ________________, _____.
________________________________________
Note: The above signature should correspond
exactly with the name on the face of this
Warrant Certificate.
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
WARNER INSURANCE SERVICES, INC.
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, shares of Common Stock, as provided for therein,
and tenders herewith payment of the purchase price in full in the form of
cash or a certified or official bank check in the amount of $ .
Please issue a certificate or certificates for such Common Stock in
the name of, and pay any cash for any fractional share to:
Name_______________________________
(Please Print Name, Address and Social
Security No.)
Signature___________________________
Note: The above signature should correspond
exactly with the name on the first page of
this Warrant Certificate or with the name of
the assignee appearing in the assignment form
below.
And if said number of shares shall not be all the shares purchasable
under the within Warrant Certificate, a new Warrant Certificate is to be
issued in the name of said undersigned for the balance remaining of the
shares purchasable thereunder less any fraction of a share paid in cash.
Exhibit 10.4
EXCLUSIVE SOFTWARE LICENSE AGREEMENT
This Agreement is made as of March 31, 1996, by and between
CARE CORPORATION LIMITED, a company incorporated in the British
Virgin Islands ("CCL"), WARNER INSURANCE SERVICES, INC., a
Delaware corporation ("WARNER"), and, for the limited purposes of
joining in Sections 4, 6, 8, 10, 11, 21, and 22, COVER-ALL
SYSTEMS, INC., a Delaware corporation and wholly owned subsidiary
of WARNER ("COVER-ALL").
RECITALS
A. CCL is the exclusive worldwide owner, except in the
Commonwealth of Australia, the Dominion of New Zealand, and the
United States of America, of all rights in certain computer
software and related documentation pertaining to the
administration of worker's compensation, as set forth and
described in Attachment A hereto (hereinafter referred to as the
"CARE Software").
B. Pursuant to a separate agreement by and between CCL and
WARNER, entered into contemporaneously with this Agreement (the
"Stock Purchase Agreement"), CCL and WARNER intend that WARNER
issue to CCL 2,500,000 (two million five hundred thousand)
shares, $.01 par value, of WARNER's common stock (the "CCL
Shares").
C. In consideration of WARNER's issuing the CCL Shares,
CCL and WARNER further intend that, in accordance with this
Agreement, CCL grant to WARNER an exclusive, fully paid up,
perpetual license for the CARE Software in Canada, Mexico,
Central America, and South America, while retaining all rights
outside of Canada, Mexico, Central America, and South America.
IN CONSIDERATION OF the Stock Purchase Agreement, the terms
and conditions of this Agreement, the premises contained herein,
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, CCL, WARNER, and
COVER-ALL, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS. The capitalized terms in this Section shall
have the meanings specified in this Section.
A. "CCL Rights" mean all of CCL's rights in the CARE
Software. For purposes of this Agreement, unless otherwise
clearly required by the context thereof, "CARE Software"
includes any CARE Modifications (as defined in Section 3) as
they are made.
B. "Closing Date" has the meaning assigned to it in the
Stock Purchase Agreement.
C. "Information" means any specifications, documentation,
software programs, software listings, designs, drawings,
data, customer listings, customer records, financial
records, business information, and any other information of
any kind whatsoever, whether in machine readable or visually
readable form, that is proprietary and/or confidential to
CCL, WARNER, or COVER-ALL.
D. "License Revenue" has the meaning assigned to it in the
Stock Purchase Agreement.
E. "Licensed Rights" means all the CCL Rights in the
Licensed Territory including, but not limited to, the rights
to use, possess, modify, prepare derivative works based in
whole or in part on the CARE Software, and sublicense the
CARE Software for use in the Licensed Territory.
F. "Licensed Territory" means all of the territory of
Canada, Mexico, Central America, and South America, and
expressly excludes the United States of America, its
territories and possessions including, but not limited to,
the Commonwealth of Puerto Rico.
G. "Net Sales" has the meaning assigned to it in the Stock
Purchase Agreement.
H. "Software Documentation" means the documents set forth
on Attachment A.
2. GRANT. CCL hereby grants to WARNER an exclusive, fully paid
up, perpetual license to the Licensed Rights in accordance with
this Agreement (the "Warner License"), including, but not limited
to, the right to:
A. use the CARE Software internally (including the right
for third party contractors to use) for development,
support, and training;
B. market the CARE Software, including the right to
conduct and provide demonstrations;
C. sublicense the CARE Software to end-users for use in
the Licensed Territory;
D. create CARE Modifications;
E. create and distribute copies of the CARE Software
consistent with the grant in this Section and the terms of
this Agreement; and
F. sublicense to COVER-ALL all of the rights set forth in
subsections A through E above and grant to COVER-ALL the
right to sublicense such rights, in the Licensed Territory,
to authorized distributors of COVER-ALL.
CCL shall deliver to WARNER, on or before the expiration of
one week after the date of this Agreement, two copies of the CARE
Software, one in source code format and one in object code
format, on a removable disk suitable for use on an IBM R/S 6000,
or other form of magnetic media as may be mutually agreed upon by
CCL and WARNER, and the Software Documentation.
CCL and WARNER agree that the intent of this Section is to
cause WARNER to be the exclusive licensee of all of the CCL
Rights in the Licensed Territory and for CCL to retain all other
rights to the CARE Software outside the Licensed Territory.
3. MODIFICATIONS. For all modifications made to the CARE
Software ("CARE Modifications") including, without limitation,
error corrections, updates, enhancements, versions, releases, and
derivative works, and related documentation, whether made by
WARNER or by any other entity, including without limitation CCL,
the following reciprocal rights apply:
A. WARNER shall be deemed to be the exclusive licensee of
the rights to CARE Modifications in the Licensed Territory
and such rights shall be considered part of the Licensed
Rights without additional cost to WARNER.
B. CCL shall be deemed to have retained, without cost to
CCL, all other rights to the CARE Modifications including,
without limitation, all rights outside of the Licensed
Territory.
C. CCL and WARNER shall use reasonable efforts to
establish a written procedure and schedule to inform each
other of CARE Modifications, to specify the CARE
Modifications that each party wants provided to it, and to
establish a schedule for providing such CARE Modifications
to the other party or to an entity specified in writing by
the other party, which written procedure and schedules shall
be incorporated into a letter agreement between CCL and
WARNER, which shall expressly be binding on any successors
and permitted assigns, within 60 days after the date of this
Agreement or such later date as the parties may mutually
agree.
D. The CARE Modifications shall be deemed to be part of
the CARE Software.
4. DEVELOPMENT AND MARKETING EFFORTS COVENANT. WARNER and
COVER-ALL agree to use their commercially reasonable best efforts
to (i) develop and market the CARE Software in the Licensed
Territory and (ii) generate License Revenue and Net Sales.
Without limiting the foregoing and subject to the availability of
adequate capital resources, for the three-year period ending
after the date hereof WARNER, or WARNER and its subsidiaries,
shall have a development and marketing budget in an aggregate
amount equal to not less than 20% of anticipated Net Sales of
$5,000,000 for such period. WARNER shall prepare and submit,
after approval by the Board of Directors of WARNER, to CCL, for
its advice and input, an annual budget plan for each of the next
three years after the Closing Date for development and marketing
expenditures of at least $333,333, and WARNER agrees to expend at
least two-thirds of the $333,333 in each such year by utilizing
such marketing firms or marketing consultants as designated by
CCL. WARNER shall submit the budget plan (1) for the first year
after the Closing Date within 30 days after the date hereof and
(2) for each of the next two years by February 28 of the next
calendar year. The failure of WARNER to submit any annual budget
plan when required, to approve such plans (as originally proposed
or as modified with CCL's consent) within a reasonable time after
submission thereof, or to fund a development and marketing budget
pursuant to such plans or in such aggregate amount for whatever
reason, shall constitute a breach of this covenant, which breach
shall result in WARNER having a nonexclusive license of the
Licensed Rights thereafter; provided, however, that WARNER shall
have 30 days to remedy any such failure.
5. SOFTWARE SUPPORT SERVICES. CCL shall provide, or shall
arrange for the provision of, reasonable support services to
WARNER for the maintenance and support of the CARE Software, such
services to be provided to WARNER at usual and customary rates.
Within 60 days after the date of this Agreement, CCL and WARNER
shall enter into a written agreement with respect to the support
services to be provided (the "Support Services Agreement"). The
Support Services Agreement shall, to the extent commercially
foreseeable, to provide for a class of support services based
upon the support standards set forth in Attachment B hereto.
Upon execution by WARNER and CCL, the Support Services Agreement
shall be appended to and incorporated into and made a part of
this Agreement in substitution of Attachment B.
6. TERMINATION. Either party may terminate this Agreement upon
written notice to the other party if the other party breaches any
of the provisions herein; provided the non-breaching party has
first given the other party notice of such breach and the other
party has failed to cure such breach within thirty days after
receipt of such notice. The Warner License terminates upon
termination of this Agreement immediately and without notice.
7. INJUNCTIVE RELIEF. In addition to such other rights as the
parties may have at law and in equity, the parties may, without
the requirement of posting bond, enforce the provisions of this
agreement by injunctive relief including, without limitation, by
obtaining specific performance.
8. CONFIDENTIALITY.
A. WARNER, CCL, and COVER-ALL shall use their commercially
reasonable best efforts to protect the trade secrets
contained in the CARE Software and shall also provide
appropriate safeguards to prevent the disclosure of the CARE
Software to any entity that has not executed an agreement
providing for the confidentiality and non-disclosure of the
CARE Software.
B. Each party agrees and acknowledges that any Information
that is furnished or made available or otherwise disclosed
to another party pursuant to this Agreement is valuable
proprietary and/or confidential information of the
disclosing party and shall remain the property of the
disclosing party.
D. The parties agree that all Information shall be kept
strictly confidential and shall be treated by the receiving
party and by any person authorized, pursuant to the terms of
this Agreement, to have access thereto, as being valuable
confidential and proprietary Information of the disclosing
party. The receiving party shall protect the disclosing
party's Information from unauthorized use or disclosure
using the same standard of care which it uses to protect its
own proprietary and/or confidential information.
E. The receiving party of any Information shall not,
without the prior written consent of the disclosing party,
disclose, provide, or otherwise make available any item of
Information to any person or entity other than those of its
employees, agents, or representatives who have a need to
know such Information in order for the receiving party to
carry out its obligations or exercise its rights hereunder.
The receiving party shall require its employees, agents, or
representatives who have access to Information to be made
aware of its confidential and/or proprietary nature and of
the applicable requirements relative to maintaining the
confidence of such Information. The receiving party shall
enforce these provisions for the benefit of the disclosing
party.
F. The obligations and limitations set forth in this
Section shall not apply to Information that is: (i) at any
time available to the public other than as a consequence of
a breach of this Agreement by the receiving party; (ii) at
any time rightfully received by one of the parties from a
third party which has the right to transmit and does
transmit such Information to the receiving party; (iii)
rightfully known to the receiving party without any
limitation on use or disclosure prior to receipt of such
Information, as substantiated by a writing predating the
date of this Agreement; and (iv) independently developed by
personnel of a party who have not had access to whatsoever
to such Information.
G. The Receiving Party shall not be prohibited from
disclosing Information pursuant to a valid and effective
order issued by a court of competent jurisdiction or
governmental authority having appropriate statutory powers,
but any such disclosure shall be made only to the extent so
ordered and only if the receiving party timely notifies the
disclosing party prior to such disclosure so that the
disclosing party may intervene in response to any such order
for disclosure.
H. The obligations of this Section shall survive the
termination of this Agreement.
9. CCL WARRANTIES. CCL hereby makes the express warranties and
representations described in this Section.
A. CCL warrants and represents that it has full authority
to enter into this Agreement and to grant to WARNER the
rights granted in this Agreement.
B. CCL warrants and represents that the CARE Software and
CARE Modifications, as delivered to WARNER, do not infringe
the copyright, patent, or trademark rights, or
misappropriate the trade secrets, of any entity.
C. CCL warrants and represents that its signature set
forth below has been and is on the date of this Agreement
duly authorized by all necessary and appropriate corporate
action to execute this Agreement.
D. CCL warrants and represents that it has not taken any
action which would affect its status as the owner of the
entire right, title, and interest in and to, and the right
to license, the Licensed Rights, and CCL has the right to
disclose and license the same to WARNER, free and clear of
any and all liens or other security interests or
encumbrances, restrictions, equities, or claims of every
kind and nature whatsoever. There are no contracts,
commitments, or understandings or other obligations of CCL
with or to any person with respect to the Licensed Rights,
or otherwise relating in any manner to the subject matter
of, or in any way conflicting with any of the obligations of
CCL under, this Agreement.
E. CCL warrants (i) for a period of 90 days from the date
of the first delivery by WARNER of the CARE Software to a
client (a "CCL Warranty Period") that the CARE Software as
originally delivered to WARNER will perform substantially in
accordance with the technical and functional specifications
as set forth in the Software Documentation with respect to
the administration of worker's compensation claims in the
United States and (ii) for a period of 90 days from the date
of delivery to WARNER (a "CCL Warranty Period"), that the
CARE Modifications delivered after the date of this
Agreement will perform substantially in accordance with the
technical and functional specifications thereof. As
WARNER's sole remedy upon the breach of the warranty set
forth in this subsection, if WARNER notifies CCL, before the
expiration of the applicable CCL Warranty Period, that the
CARE Software or the CARE Modification has failed to perform
substantially in accordance with the respective
specifications thereof, then CCL shall at no charge to
WARNER promptly correct any such performance failure and
deliver to WARNER a corrected and fully functioning version
of the CARE Software.
10. WARNER AND COVER-ALL WARRANTIES. WARNER and COVER-ALL
hereby make the express warranties and representations described
in this Section.
A. WARNER and COVER-ALL each warrant and represent that it
has full authority to enter into this Agreement.
B. WARNER and COVER-ALL each warrant and represent that
its signature set forth below has been and is on the date of
this Agreement duly authorized by all necessary and
appropriate corporate action to execute this Agreement.
C. WARNER warrants and represents that the CARE
Modifications, as delivered to CCL by WARNER, do not
infringe the copyright, patent, or trademark rights, or
misappropriate the trade secrets, of any entity.
D. WARNER warrants for a period of 90 days from the date
of delivery to CCL by WARNER (the "Warner Warranty Period")
that the CARE Modifications delivered after the date of this
Agreement will perform substantially in accordance with the
technical and functional specifications thereof. As CCL's
sole remedy upon the breach of the warranty set forth in
this subsection, if CCL notifies WARNER, before the
expiration of the applicable WARNER Warranty Period, that
any such CARE Modification has failed to perform
substantially in accordance with the specifications thereof,
then WARNER shall at no charge to CCL promptly correct any
such performance failure and deliver to CCL a corrected and
fully functioning version of the CARE Modification.
11. CCL'S INTELLECTUAL PROPERTY INDEMNITY. CCL shall defend,
indemnify, and hold WARNER and COVER-ALL and any sublicensee of
WARNER or COVER-ALL (each an "Indemnitee") harmless from and
against all damages, actions, settlements, judgments, claims, and
demands made against, recovered against, suffered by, and/or
incurred by an Indemnitee and which arise out of a claim that the
CARE Software, as delivered to WARNER or COVER-ALL, infringes the
copyright, patent, or trademark rights, or misappropriates the
trade secrets, of any entity. CCL's indemnity in this Section
shall be subject to the following terms and conditions (for
purposes of the following subsections, "WARNER" shall be deemed
to include "COVER-ALL"):
A. WARNER shall promptly notify CCL in writing when WARNER
has actual knowledge of any such claim.
B. WARNER shall require any sublicensee to promptly notify
WARNER when such WARNER sublicensee has actual knowledge of
any such claim. In order to avail itself of CCL's indemnity
in this Section, any WARNER sublicensee must have so
notified WARNER.
C. CCL's indemnity of any sublicensee of WARNER shall be
limited to the extent of the underlying sublicense from
WARNER, which sublicense must be consistent with the terms
and conditions of this Agreement.
D. CCL shall have complete control over the defense,
settlement, and compromise of any such claim; provided,
however, that the Indemnitee may participate in the defense
with counsel of its own choice and at its own expense.
E. WARNER agrees, and shall require any sublicensee to
agree (if an Indemnitee), to cooperate reasonably in the
defense, settlement, and compromise of such claim at CCL's
expense, except that if an Indemnitee desires to retain its
own counsel, it shall do so at its own cost and expense.
F. If the CARE Software becomes the subject of any such
claim, or if the CARE Software is held to constitute such an
infringement, and the use of the CARE Software by an
Indemnitee is enjoined, CCL shall, at its expense and at its
option, use its commercially reasonable best efforts either
(i) to procure for the Indemnitee the right to continue
using the CARE Software or (ii) to create CARE Modifications
to make it functionally equivalent and non-infringing.
G. CCL shall have no liability for any such claim based
upon (i) use of other than the most current version of the
CARE Software made available to WARNER by CCL (including any
and all CARE Modifications provided to WARNER by CCL) if
such claim would have been avoided by the use of such
version or (ii) infringement resulting from WARNER's
modifications, adaptation, or enhancement of the CARE
Software.
12. PROTECTION OF THE CARE SOFTWARE.
A. If any party to this Agreement shall become aware of
any infringement by any third party of the CARE Software in
the Licensed Territory or any misappropriation of a trade
secret by any third party relating to the CARE Software in
the Licensed Territory, it shall promptly notify the other
of such infringement.
B. CCL, may, at its expense, institute suit against such
infringer, and WARNER shall fully cooperate with CCL to
enjoin such infringement or acts and shall, if requested by
CCL, join with CCL as a party to any action brought by CCL
for such purpose. CCL shall bear all expenses connected
with the foregoing, except that if WARNER desires to retain
its own counsel, it shall do so at its own cost and expense.
C. If CCL, after being notified of such infringement or
misappropriation, elects not to institute suit against such
infringer, then WARNER may, at its expense, institute suit
against such infringer, and CCL shall fully cooperate with
WARNER to enjoin such infringement or misappropriation and
if reasonably necessary, shall, if requested, join with
WARNER as a party to any action brought by WARNER for such
purpose. WARNER shall bear all expenses connected with the
foregoing, except that if CCL desires to retain its own
counsel, if shall do so at its own cost and expense.
D. Any recovery as a result of any infringement or
misappropriation pursuant to this provision shall belong
solely to the party instituting such action.
13. INDEMNITY. Each party shall indemnify and hold harmless the
other party, and such other party's licensees, officers,
directors, employees, agents, and other representatives, from and
against any loss, damage, liability (including any liability by
reason of a bona fide settlement of a claim, action, suit, or
proceeding), or expense (including reasonable attorneys' fees)
arising out of or connected with any breach or inaccuracy of any
representation, warranty or covenant by it contained in this
Agreement or in any certificate or other instrument or document
delivered pursuant to this Agreement, or any claim, action, suit,
or proceeding asserted or instituted arising out of any matter or
thing covered by such representations, warranties or covenants.
In the event that either party shall breach or otherwise
fail to perform any of its obligation under this Agreement, the
non-breaching party may, at its election, and in addition to any
and all other remedies it may have under this Agreement or
otherwise, perform any such obligations.
The obligations of indemnity under this Section shall
survive all performances under this Agreement.
14. DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTIES GRANTED IN
THE SECTION ENTITLED "CCL WARRANTIES," CCL MAKES NO OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
15. GOVERNING LAW AND VENUE. This Agreement shall be governed
by the laws of the State of Delaware, U.S.A., except for its laws
relating to choice of law.
16. NO WAIVER. No failure to exercise and no delay in
exercising any right, power, or remedy under this Agreement will
operate as a waiver. Nor will any single or partial exercise of
any right, power, or remedy preclude any other or further
exercise of that or any other right, power, or remedy.
17. REMEDIES CUMULATIVE. All remedies provided for in this
Agreement are cumulative and in addition to such other remedies
as may be available at law and in equity.
18. SEVERABILITY. If any provision of this Agreement is
declared or found to be illegal, unenforceable, or void, then the
parties will be relieved of all obligations arising under such
provision, but only to the extent that such provision is illegal,
unenforceable, or void, it being the intent and agreement of the
parties that this Agreement will be deemed amended by modifying
such provision to the extent necessary to make it legal and
enforceable while preserving its intent or, if that is not
possible, by substituting another provision that is legal and
enforceable and achieves the same intent. If the remainder of
this Agreement will not be affected by such declaration or
finding and is capable of substantial performance, then each
provision not so affected will be enforced to the extent
permitted by law.
19. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which taken together shall constitute one
instrument.
20. RELATIONSHIP OF PARTIES. This Agreement does not create a
partnership or joint venture relationship, nor does it authorize
either party to serve as the legal representative or agent of the
other. CCL and WARNER are independent contractors and will
remain independent contractors unless hereafter agreed otherwise
in writing. No party will have any right or authority to assume,
create, or incur any liability or any obligation of any kind,
express or implied, against or in the name or on behalf of any
other party.
21. ASSIGNMENT. WARNER may assign this Agreement only with
the prior express, written consent of CCL; provided, that,
without the consent of CCL, WARNER may assign this Agreement to
COVER-ALL and COVER-ALL, without the consent of CCL, may assign
this Agreement in connection with the transfer of all or
substantially all of COVER-ALL's assets or in connection with a
merger or consolidation of COVER-ALL into a third party.
22. NOTICE. Any notices or demands required to be given herein
shall be given to the parties in writing, and by certified mail,
return receipt requested, at the addresses hereinafter set forth,
or to such other addresses as the parties may hereinafter
substitute by written notice given in the manner prescribed in
this Section:
A. NOTICE TO WARNER OR COVER-ALL:
Warner Insurance Services, Inc.
18-01 Pollitt Drive
Fair Lawn, New Jersey 07410
Attention: President
with a copy (which shall not constitute notice) to:
Leonard Gubar, Esq.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
B. NOTICE TO CCL:
Care Corporation Limited
c/o Moore Stephens International Services (BVI) Limited
Abbott Building
P. O. Box 3186
Main Street
Road Town
Tortola, British Virgin Islands
Telecopy No.: (809) 494-3592
Attention: Carol Raward
with a copy (which shall not constitute notice) to:
Alan J. Perkins, Esquire
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
23. BINDING EFFECT. This Agreement shall inure to the benefit
of and bind the parties hereto, and their successors and
permitted assigns.
24. SECTION HEADINGS. All section headings contained herein are
for convenience or reference only and are not intended to define
or limit the scope of any provision of this Agreement.
25. EXPENSES FOR ENFORCEMENT. In the event either party hereto
is required to employ an attorney to enforce the provisions of
this Agreement or is required to commence legal proceedings to
enforce the provisions hereof, the prevailing party shall be
entitled to recover from the other, reasonable attorney's fees
and court costs incurred in connection with such enforcement,
including, but not limited to, collection agency fees, reasonable
attorney fees, litigation fees, and costs of investigation and
litigation.
26. ENTIRE AGREEMENT. It is expressly agreed that this
Agreement and its attachment embody the entire agreement of the
parties in relation to the subject matter herein, and that there
is no other oral or written agreement or understanding between
the parties at the time of execution hereunder. Further, this
Agreement cannot be modified except by the written agreement of
all parties hereto.
[THE NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE.]
<PAGE>
IN WITNESS WHEREOF, WARNER and CCL have each have caused
this Agreement to be executed and delivered as of the date first
above written.
WARNER INSURANCE SERVICES, INC. CARE CORPORATION LIMITED
By: /s Raul F. Calvo By: /s/ Mark Donald Johnston
------------------------ -------------------------
Name: RAUL F. CALVO Name: MARK DONALD JOHNSTON
---------------------- -----------------------
Title: VICE PRESIDENT Title: DIRECTOR/AUTHORIZED
--------------------- SIGNATORY
----------------------
COVER-ALL SYSTEMS, INC.
By: /s/ Peter C. Lynch
------------------------
Name: PETER C. LYNCH
----------------------
Title: PRESIDENT
---------------------
Exhibit 10.5
SETTLEMENT AGREEMENT
--------------------
SETTLEMENT AGREEMENT, dated as of the 28th day of March, 1996, by
and between WARNER INSURANCE SERVICES, INC., a Delaware corporation
("Warner") and CLARENDON NATIONAL INSURANCE COMPANY, a New Jersey
corporation ("Clarendon").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Warner and Clarendon are parties to that certain
Agreement, dated as of October 8, 1992, by and between Clarendon and Warner
(hereinafter referred to as the "Services Contract") pursuant to which
Warner has performed insurance services for Clarendon;
WHEREAS, the parties acknowledge that on March 1, 1996, Warner
transferred (the "Transfer") certain of its assets relating to Warner's
Insurance Services Division (the "ISD Assets") to MDA Services, Inc., a
Delaware corporation and a wholly-owned subsidiary of The Robert Plan
Corporation and that from such date, Warner has terminated its Insurance
Services Division;
WHEREAS, Warner desires to be released from its future
obligations under the Services Contract and Clarendon desires to release
Warner from such obligations under the Services Contract as herein set
forth;
WHEREAS, to induce Clarendon to release Warner from such
obligations under the Services Contract, Warner will make a lump sum cash
payment to Clarendon in the total amount of $1.6 million.
NOW THEREFORE, in consideration of the mutual premises and the
representations, warranties and covenants herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
Section 1. Settlement Payment. On the Closing Date (as
------------------
hereinafter defined), Warner shall make a cash payment to Clarendon in the
total amount of $1.6 million (the "Settlement Payment").
Section 2. Services Contract Release. On the Closing Date, in
-------------------------
consideration of the Settlement Payment to Clarendon pursuant to Section 1
hereto, Clarendon shall release Warner from its obligations under the
Services Contract, and such release shall be in, or substantially in the
form annexed hereto as Exhibit A ("the Services Contract Release").
Section 3. Closing Date. The closing of the settlement
------------
transactions herein contemplated (the "Closing") will take place on March
29, 1996 at 10:00 A.M. at the offices of Reid & Priest LLP, 40 West 57th
Street, New York, New York 10019 or such other date and time upon which the
parties may mutually agree (the "Closing Date").
Section 4. Representations and Warranties of Warner. In order
----------------------------------------
to induce Clarendon to enter into this Agreement and to consummate the
transactions contemplated hereunder, Warner hereby represents and warrants
to Clarendon as follows:
4.1 Corporate Existence and Qualification. Warner is a
-------------------------------------
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now being conducted and to own, lease
and operate its properties as and in the places where such business is now
conducted and such properties are now owned, leased or operated. Warner
has all requisite corporate power to execute and deliver this Settlement
Agreement and the Services Contract Release, and to perform its obligations
under each such agreement.
4.2 Authorization of Settlement Agreement; Services Contract
--------------------------------------------------------
Release; Settlement Payment; Validity. The execution and delivery by
-------------------------------------
Warner of this Settlement Agreement and the Services Contract Release, and
the payment of the Settlement Payment, have been duly authorized by all
requisite corporate action on behalf of Warner. This Settlement Agreement
has been duly executed and delivered by Warner, and the Settlement
Agreement constitutes, and, when executed, the Services Contract Release
will constitute, the legal, valid and binding obligations of Warner,
enforceable against Warner in accordance with their respective terms,
except to the extent that such validity, binding effect and enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally from time
to time in effect and by general equitable principles.
4.3 Effect of Agreements. Neither the execution and delivery of
--------------------
this Settlement Agreement, the Services Contract Release by Warner, nor
compliance by Warner with the provisions of this Agreement and the Services
Contract Release by Warner (i) violates or will violate, conflicts or will
conflict with, or results or will result in a breach of any provision, term
or condition of, or constitutes or will constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of a lien upon any of the properties or assets of
Warner or any subsidiary of Warner under the terms, conditions or
provisions of (x) the Certificate of Incorporation, as amended, the
By-Laws, as amended, of Warner, or of any of its subsidiaries, or (y) any
other agreement or instrument to which Warner or any subsidiary of Warner
is a party, or by which any of them is bound, or any of their respective
properties or assets, may be subject, or (ii) violates any judgment,
ruling, order, writ, injunction, decree, law, statute, ordinance, rule or
regulation, domestic or foreign, applicable to Warner or any other
subsidiary of Warner or any of their respective properties or assets,
except in the case of each of clauses (i) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, which, in the aggregate, would not have any material
adverse effect on the condition (financial or otherwise) or the operations
of Warner and its subsidiaries taken as a whole, the business or on the
ability of the parties to consummate the transactions contemplated hereby.
4.4 Performance of Services Contract. Warner has and will
--------------------------------
perform, or will cause MDA Services, Inc. to perform, all of Warner's
obligations under the Services Contract up to the Closing Date, except for
the following obligations which are being released by Clarendon in this
transaction:
(i) refunds due Clarendon as a result of commission
adjustments (swing up/down);
(ii) return commission due Clarendon;
(iii) Warner's obligation to reimburse Clarendon for
uncollected premium due from insureds; subject, however, to
Warner's obligation to transfer claims for such uncollected
premium to Clarendon pursuant to Section 6.3 hereof; and
(iv) Warner's claims run-off obligations to Clarendon
after the Closing Date.
Section 5. Representations and Warranties of Clarendon. In
-------------------------------------------
order to induce Warner to enter into this Settlement Agreement and to
consummate the transactions hereunder, Clarendon hereby represents and
warrants to Warner as follows:
5.1 Corporate Existence and Qualification. Clarendon is a
-------------------------------------
corporation duly incorporated, validly existing and in good standing under
the laws of the State of New Jersey and has all requisite corporate power
and authority to carry on its business as now being conducted and to own,
lease and operate its properties as and in the places where such business
is now conducted and such properties are now owned, leased or operated.
Clarendon has all requisite corporate power to execute and deliver this
Settlement Agreement and the Services Contract Release, and to perform its
obligations under each such agreement.
5.2 Authorization of Settlement Agreement and Services Contract
-----------------------------------------------------------
Release; Validity. The execution and delivery by Clarendon of this
-----------------
Settlement Agreement and the Services Contract Release and the consummation
by Clarendon of the settlement transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on behalf of
Clarendon. This Settlement Agreement has been duly executed and delivered
by Clarendon, and this Settlement Agreement constitutes, and when executed,
the Services Contract Release will constitute, the legal, valid and binding
obligations of Clarendon, enforceable against Clarendon in accordance with
their respective terms, except to the extent that such validity, binding
effect and enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally from time to time in effect and by general equitable
principles.
5.3 Effect of Agreements. Neither the execution and delivery of
--------------------
this Settlement Agreement, or the Services Contract Release by Clarendon,
nor compliance by Clarendon with the provisions of this Settlement
Agreement or the Services Contract Release by Clarendon (i) violates or
will violate, conflicts or will conflict with, or results or will result in
a breach of any provision, term or condition of, or constitutes or will
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of a lien upon
any of the properties or assets of Clarendon or any affiliated entity of
Clarendon under the terms, conditions or provisions of (x) the charter
documents of Clarendon or any of its affiliated entities, or (y) any other
agreement or instrument to which Clarendon or any affiliated entity of
Clarendon is a party, or by which any of them is bound, or any of their
respective properties or assets, may be subject, or (ii) violates any
judgment, ruling, order, writ, injunction, decree, law, statute, ordinance,
rule or regulation, domestic or foreign, applicable to Clarendon or any
other affiliated entity of Clarendon or any of their respective properties
or assets, except in the case of each of clauses (i) and (ii) above, for
such violations, conflicts, breaches, defaults, terminations, accelerations
or creations of liens, which, in the aggregate, would not have any material
adverse effect on the condition (financial or otherwise) or the operations
of Clarendon and its affiliated entities taken as a whole, the business or
on the ability of the parties to consummate the transactions contemplated
hereby.
Section 6. Covenants of Warner.
-------------------
6.1 Covenant to Pay for Servicing of Clarendon Business by MDA
----------------------------------------------------------
Services, Inc. Until the Closing Date. Warner covenants and agrees to pay
-------------------------------------
the full amount of the cost of servicing the insurance services business of
Clarendon (the "Clarendon Insurance Services Business") by MDA Services,
Inc., accrued from the date of Transfer until the Closing Date, which
Warner would have been obligated to service under the Services Contract
prior to the Transfer of the ISD Assets.
6.2 Covenant to Pay for Costs of Clarendon Business Up to the
---------------------------------------------------------
Closing Date. Warner covenants and agrees to remain fully responsible for
------------
and to pay all costs incurred and accrued (including all legal and any
other allocated loss adjustment expenses) in connection with servicing the
Clarendon Insurance Services Business up to the Closing Date.
6.3 Covenant to Assign Causes of Action. Warner covenants and
-----------------------------------
agrees to duly assign and transfer to Clarendon in writing on the Closing
Date pursuant to the form of Assignment attached hereto as Exhibit B any
and all rights, claims, and causes of action it may have against insureds
and third party insurance producers arising out of the Clarendon Insurance
Services Business; and Warner covenants and agrees to deliver to Clarendon
within three (3) business days of the Closing Date a list of such insureds
and third party insurance producers against whom Warner or Clarendon has or
may have such rights, claims or causes of action, which list shall set
forth the names and addresses of such persons, the amount of claim against
each and the status of each such claim (i.e., pending reports of salvage,
----
subrogation, return premium, return producer commission and bad debts).
6.4 Covenant to Deliver Data to Clarendon and Perform the
-----------------------------------------------------
Following Acts. Warner covenants and agrees to deliver or cause to be
--------------
delivered to Clarendon, and to perform, or cause to be performed, the
following acts to enable Clarendon to service the Clarendon Insurance
Services Business pursuant to Section 7.2 hereof:
(a) All mail and electronic communications (i.e., fax,
----
telephone, etc.) directed to Clarendon (or to Warner or MDA Services, Inc.
on behalf of Clarendon) regarding the Clarendon Insurance Services Business
will be promptly forwarded to Clarendon. For this purpose, Clarendon will
arrange for a FedEx envelope supply or courier service.
(b) All telephone inquiries received by Warner or MDA
Services, Inc. after the Closing Date regarding Clarendon Insurance
Services Business shall be redirected to a telephone number to be supplied
by Clarendon on the Closing Date.
(c) Within three (3) business days after the Closing Date,
modem access must be made available to Clarendon to enable it or its
representatives to access the policy system and claims system utilized by
Warner to administer the Clarendon Insurance Services Business. Warner
shall cause MDA Services, Inc. to provide such modem access at Warner's
expense.
(d) Similarly, within three (3) business days after the
Closing Date, hard copies of policies, correspondence and relevant
documents pertaining to the Clarendon Insurance Services Business must be
made available to Clarendon at Clarendon's request. For this purpose,
Warner shall cause MDA Services, Inc. to provide such hard copies at
Warner's expense.
(e)(1) Within five (5) business days after the Closing
Date, Warner will, or will cause MDA Services, Inc. to, pack-up and make
available to Clarendon or its representatives for removal the following:
(i) All open claim files in numbered sequence by
feature.
(ii) All open salvage files.
(iii) All SIU files.
(iv) All unmatched mail, reports, appraisals or other
documents which have not been matched to a particular claim
file and any mail matched to a file but with respect to
which no response has been made and no action has been
taken, such mail to be designated by sticker "New Mail."
(e)(2) Within three (3) weeks following the Closing Date,
Warner will, or will cause MDA Services, Inc. to, pack-up and make
available to Clarendon or its representatives for removal, all closed claim
files in sequential order by feature type and all closed salvage files;
provided, however, that Clarendon may elect within five (5) business days
after the Closing Date to leave such files on the premises of Warner or MDA
Services, Inc. for up to thirty (30) additional days before pick-up.
(f) Within five (5) business days after the Closing Date,
tape in access format of all claims by feature with the following data:
(i) Insured's name.
(ii) Claimant's name.
(iii) Claim number.
(iv) Policy number.
(v) Feature type.
(vi) Claim status.
(g) Within three (3) business days after the Closing Date,
a copy of the salvage system data base, if in existence.
(h) Within five (5) business days after the Closing Date, a
print-out of:
(i) Pending salvage.
(ii) Current suit log.
(iii) Current complaint log.
(iv) Diary by feature, including all old diary (year
2000).
(v) Pending subrogation files.
(i) Immediately following the end of the month in which the
Closing Date occurs, the following reports:
(i) Detailed report of all transactions (the 110
Report) and detailed reports of each outstanding feature
(the 300 Report).
(ii) Large loss and excess medical report (XM Report).
(iii) Incurred loss by accident year report.
(j) Within seven (7) business days following the end of the
month in which the Closing Date occurs, the following reports from
inception to date:
(i) Losses paid net of salvage and subrogation.
(ii) Losses paid - recoverable from UCJF.
(iii) Salvage and Subrogation recovered.
(iv) Loss reserves.
(v) Loss reserves recoverable from UCJF.
(vi) Agents balance recoverables.
(k) On the Closing Date Warner shall send a letter to all
third-party providers (i.e. attorneys, appraisers, adjusters, etc.) in
----
connection with the Clarendon Insurance Services Business advising them
that Clarendon has assumed the obligation to service the Clarendon
Insurance Services Business; that all invoices for their services provided
up to the Closing Date should be sent to Warner and that Warner will be
responsible for the payment of same; and that any future services that are
requested by Clarendon will be paid for directly by Clarendon.
(l) Warner will perform, or will cause MDA Services, Inc.
to perform, any other act necessary or desirable in Clarendon's reasonable
judgment to enable Clarendon to assume the servicing of the Clarendon
Insurance Services Business.
6.5 Covenant to Maintain Errors and Omissions Insurance. Warner
---------------------------------------------------
covenants and agrees to maintain its current third party administrators
professional liability insurance coverage of $5,000,000 in the aggregate
through December 31, 1996, naming Clarendon as its interest may appear, and
Warner represents and warrants to Clarendon that such insurance is in full
force and effect and fully paid for.
6.6 Covenant to Execute Services Contract Release and to Pay the
------------------------------------------------------------
Settlement Payment. On the Closing Date, Warner covenants and agrees to
------------------
execute and deliver the Services Contract Release and to pay the Settlement
Payment.
6.7 Representations and Warranties. All representations and
------------------------------
warranties of Warner contained in this Settlement Agreement shall be true
and correct as of the date hereof and on the Closing Date as though made on
and as of such Closing Date. Warner shall have complied with all of its
covenants and obligations under this Agreement in all material respects.
Section 7. Covenants of Clarendon.
----------------------
7.1 Covenant to Execute Services Contract Release. On the
---------------------------------------------
Closing Date, Clarendon shall execute the Services Contract Release.
7.2 Covenant as to Clarendon Insurance Services Business.
----------------------------------------------------
Clarendon acknowledges that from March 1, 1996 through and including the
Closing Date, the Clarendon Insurance Services Business, which had been
previously serviced by Warner under the Services Contract, has been
serviced by MDA Services, Inc. Clarendon covenants and agrees that from
and after the Closing Date, Clarendon will provide for the servicing of its
Clarendon Insurance Services Business at its own cost and expense and that
Warner shall not be liable in any manner therefor except as otherwise
expressly provided in this Agreement.
7.3 Representations and Warranties. All representations and
------------------------------
warranties of Clarendon contained in this Settlement Agreement shall be
true and correct commencing as of the date hereof and on the Closing Date
as though made on and as of such Closing Date.
Section 8. Survival; Indemnification. The representations,
-------------------------
warranties, covenants and agreements of Warner on the one hand, and
Clarendon on the other hand, contained in this Settlement Agreement and the
Services Contract Release shall survive and remain operative and in full
force following the execution and delivery of this Settlement Agreement and
the Services Contract Release, respectively. The following provisions are
applicable to claims made under the Settlement Agreement and the Services
Contract Release:
8.1 Obligation of Warner to Indemnify. Warner hereby agrees to
---------------------------------
indemnify, defend and hold harmless Clarendon (and its directors, officers,
employees, affiliates and assigns) from and against all claims, losses,
suits, proceedings, demands, judgments, damages, expenses and costs
(including reasonable attorneys' fees and disbursements) (collectively,
"Losses") which Clarendon may incur relating to any material inaccuracy in,
or any material breach of, any representation, warranty, covenant or
agreement of Warner contained in this Settlement Agreement or the Services
Contract Release.
8.2 Obligation of Clarendon to Indemnify. Clarendon hereby
------------------------------------
agrees to indemnify, defend and hold harmless Warner (and its directors,
officers, employees, affiliates and assigns) from and against any Losses
which it may incur arising from any material inaccuracy in, or any material
breach of, any representation, warranty, covenant or agreement of Clarendon
contained in this Settlement Agreement or the Services Contract Release.
8.3 Notice to Indemnitor. Promptly after any party hereto has
--------------------
knowledge of any matter for which it intends to seek indemnification
hereunder, the party seeking indemnification (the "Indemnitee") shall, if a
claim for indemnity with respect thereto is to be made against any party
hereto obligated to provide indemnification under Sections 8.1 or 8.2
hereof (the "Indemnitor"), give the Indemnitor written notice of such claim
or the commencement of such action or proceeding, in all cases within
sufficient time to respond to such claim or to answer or otherwise plead in
any such action. Such notice shall be a condition precedent to the
Indemnitor's obligation to provide indemnification under this Section 8.
8.4 Right to Defend; Compromise of Claims. The Indemnitor shall
-------------------------------------
have the duty to defend and right to compromise, at its own expense and by
its own counsel, any matter involving the asserted liability of any
Indemnitee; provided, however, that no compromise of any claim shall be
-------- -------
made without the consent of the Indemnitee unless such compromise results
in the full and unconditional release of all claims against the Indemnitee
by the party asserting such claim. The opportunity to compromise or defend
as herein provided shall be a condition precedent to any liability of an
Indemnitor under the provisions of this Section 8.4. If any Indemnitor
shall undertake to compromise or defend any such asserted liability, it
shall promptly notify the Indemnitee of its intention to do so. The
Indemnitee at Indemnitor's expense shall cooperate with the Indemnitor and
its counsel in the defense against any such asserted liability and in any
compromise thereof. Such cooperation shall include, but not be limited to,
furnishing the Indemnitor with any books, records or information reasonably
requested by the Indemnitor and taking such action as the Indemnitor may
reasonably request to mitigate or reduce any claim. After an Indemnitor
has notified an Indemnitee of its intention to defend any asserted
liability, the Indemnitor shall not be liable for any additional legal
expenses incurred by the Indemnitee unless the Indemnitor fails to
prosecute the defense of such claim. If the Indemnitor shall desire to
compromise any such asserted liability by the payment of a liquidated
amount which the party asserting such liability is willing to accept in
exchange for fully and unconditionally releasing all claims against the
Indemnitee, and the Indemnitee shall refuse to consent to such compromise,
then the Indemnitor's liability under this Section 8 with respect to such
asserted liability shall be limited to the amount so offered in compromise.
Under no circumstances shall the Indemnitee compromise any asserted
liability without the written consent of the Indemnitor.
Section 9. Miscellaneous.
-------------
9.1 Entire Agreement. This Settlement Agreement and the
----------------
Services Contract Release contain the entire agreement between Warner and
Clarendon with respect to the matters set forth herein and supersede all
prior agreements and understandings among them as to the subject matter
thereof. No party shall be bound by nor shall be deemed to have made any
representations, warranties or covenants except those contained herein.
9.2 Benefits. All of the terms and provisions of this
--------
Settlement Agreement and the Services Contract Release shall bind and inure
to the benefit of Warner and Clarendon and their respective successors and
assigns.
9.3 Notices, Etc. All notices, requests, consents and other
------------
communications hereunder shall be in writing and shall be deemed to be duly
given (i) upon receipt, if personally delivered with receipt acknowledged,
(ii) not less than three (3) business days after mailing, if mailed by
registered or certified mail, first class, postage prepaid, and (iii) on
the next business day, if delivered by a nationally recognized overnight
courier service or if transmitted by facsimile machine addressed as
follows:
(i) if to Warner:
Warner Insurance Services, Inc.
18-01 Pollitt Drive
Fair Lawn, New Jersey 07410
Attention: President
Tel: (201) 794-4800
Fax: (201) 791-9113
with a copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar, Esq.
Tel: (212) 603-2000
Fax: (212) 603-2001
or to such other address or such other person(s) as Warner may designate by
written notice to the other parties hereto.
(ii) if to Clarendon:
Clarendon National Insurance Company
1177 Avenue of the Americas
Floors 44 and 45
New York, New York 10036
Attention: Mr. Ralph Milo
Tel: (212) 805-9700
Fax: (212) 805-9800
with a copy to
Alan B. Litner, Esq.
18 East 48th Street
New York, New York 10017
Tel: (212) 758-4255
Fax: (212) 644-5609
or to such other address or such the person(s) as each Customer may
designate by written notice to the other parties hereto.
9.4 Governing Law; Submission to Jurisdiction. (i) This
-----------------------------------------
Agreement shall be construed in accordance with and governed by the
internal laws of the State of New York.
(ii) The parties hereto (A) submit for themselves in any
legal action or proceeding relating to the enforcement of the rights of and
obligations under this Agreement to the jurisdiction of the New York State
Supreme Court, New York County, Commercial Part and the appellate courts
therefrom, (B) consent that any such action or proceeding shall be brought
in such courts, and waive any objection each may have now or hereafter have
to the venue of any such action or proceeding in any such court, (C) agree
that service of process of any such action or proceeding may be effected by
certified mail (or substantially similar form of mail), postage prepaid, to
the appropriate party at its address as set forth herein and service made
shall be deemed to be completed upon the earlier of actual receipt or five
(5) days after the same shall have been posted as aforesaid, and (D) agree
that nothing herein shall affect the right to effect service of process in
any other manner permitted by law.
9.5 Severability. If any provision of this Settlement Agreement
------------
shall be held invalid or unenforceable, such invalidity or unenforceability
shall attach only to such provision and shall not in any manner affect or
render invalid or unenforceable any other severable provision of this
Settlement Agreement, and this Settlement Agreement shall be carried out as
if any such invalid or unenforceable provision were not contained herein.
9.6 Modification, Waivers, Etc. Neither this Settlement
---------------------------
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.
9.7 Captions. The captions of sections and subsections of this
--------
Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
9.8 Further Assurances. At any time and from time to time, upon
------------------
the reasonable request of any party hereto, the requested party shall
execute, deliver and acknowledge, or cause to be executed, delivered and
acknowledged, such further documents and instruments and do such other acts
and things as the requesting party may reasonably request in order to fully
effect this Agreement.
9.9 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but all of which,
when taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto either individually or by
their duly authorized representatives have caused this Settlement
Agreement to be executed and delivered in their respective names as of the
date and year first above written.
WARNER INSURANCE SERVICES, INC.
By: /s/ Raul F. Calvo
------------------------------------
Name: Raul F. Calvo
Title: Vice President
CLARENDON NATIONAL INSURANCE COMPANY
By: /s/ Ralph Milo
------------------------------------
Name: Ralph Milo
Title: President
Exhibit 99
Warner Insurance Services, Inc. 17-01 POLLITT DRIVE, FAIR LAWN,
NJ 07410 / 201 794-4800
FOR INFORMATION CONTACT:
ALFRED J. MOCCIA
PRESIDENT
FOR: WARNER INSURANCE SERVICES, INC.
WARNER INSURANCE SERVICES, INC.
ANNOUNCES STOCK AND WARRANTS PURCHASE AND LICENSING
TRANSACTION WITH SOFTWARE INVESTMENTS LIMITED AND
CARE CORPORATION LIMITED AS WELL AS
SETTLEMENT WITH CLARENDON NATIONAL INSURANCE COMPANY
------------------------------------------------------
Fair Lawn, NJ - April 3, 1996 -- Warner Insurance Services, Inc.
("Warner") announced today that it has entered into a series of
transactions with Software Investments Limited ("SIL") and Care
Corporation Limited ("Care") which involve:
(i) the sale by Warner to SIL of 1,000,000 shares of
Warner Common Stock for $2.00 per share, the proceeds of which
will be used for working capital;
(ii) the sale by Warner to SIL of 412,758 shares of
Warner Common Stock at $2.00 per share and the sale by Warner to
SIL, at $1.00 per warrant, of five-year warrants to purchase an
aggregate of 196,875 shares of Warner Common Stock at $2.00 per
share. These funds, aggregating $1,022,391, will be used to fund
Warner's settlement with Clarendon National Insurance Company
("Clarendon"), the one customer/creditor which did not
participate in the restructuring transaction previously announced
by Warner on March 4, 1996. These securities represent the
original portions, together with $112,500 in cash, allocated to
Clarendon in the restructuring transaction if they had
participated. Warner has now settled with Clarendon for a cash
payment of $1.6 million;
(iii) the assignment to SIL of the rights Warner
retained in the restructuring transaction to repurchase, for a
period of six months, 1,628,100 shares of the Warner Common Stock
issued in the restructuring transaction (50% of the total shares
issued in the restructuring transaction) at a cash purchase price
equal to the greater of $3.00 or 50% of the then market price of
a share of Warner Common Stock and five-year warrants to acquire
776,562 shares of Warner Common Stock (50% of the total warrants
issued in the restructuring transaction) at $2.00 per share at a
purchase price of $1.00 per warrant. SIL has agreed to acquire
the warrants within 30 days and to exercise such warrants within
5 days of their acquisition, resulting in Warner receiving an
additional $1,553,124 which will be used for working capital; and
(iv) the grant by Care to Warner of an exclusive
license for the Care software system for use in the workers'
compensation and group health claims administration markets in
Canada, Mexico and Central and South America. Clients using the
Care Software within the U.S. include K-MART, Nabisco, Publix
SuperMarkets Inc., City of Houston and Houston Independent
Schools Districts. In exchange for this license, Warner will
issue to Care an additional 2,500,000 shares of Warner Common
Stock. If during the three years after closing, this license
results in $5,000,000 or more in revenues by Warner, then the
shares will be fully earned. Otherwise, depending upon the level
of revenue reached, Warner 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, Warner may
be required to grant to Care additional five-year warrants to buy
an additional 1,000,000 shares of Warner Common Stock at $2 per
share.
SIL and Care are controlled by The Care Trust, a Jersey, Channel
Islands Discretionary Settlement, the beneficiaries of which are
the family interests of Mark D. Johnston, which Discretionary
Settlement is the majority shareholder of Care. As a result of
these transactions, SIL and Care together will own, in the
aggregate, approximately 28% of Warner's then outstanding Common
Stock. Additionally, Mark Donald Johnston of Monaco, will join
the Board of Directors of Warner at its next meeting.
COVER-ALL intends to utilize the Care software system together
with its own premium and policy issuance software which it is
developing to create a "24 hour" product which will put COVER-ALL
on firm ground to enter the workers' compensation/healthcare
marketplace on an international basis. Alfred J. Moccia,
President and Chief Executive Officer of Warner, stated that "...
the stock purchase and licensing transactions with SIL and Care
will provide Warner with a significant cash infusion as well as
enable COVER-ALL to enter the healthcare software applications
market. The combination of the COVER-ALL TAS 2000 technology,
will offer an attractive solution to the administrative
processing needs in the international marketplace."
COVER-ALL is a provider of state-of-the-art computer products for
the property casualty insurance industry specializing in
strategic insurance software solutions and development tools for
rating, coding and issuing policies, as well as administering
client claims, direct billing, agency billing, client billing,
agencies, general ledger, and statistical and financial reporting
utilizing the latest client-server, relational database
technology. COVER-ALL continues to receive strong inquiry about
its newly developed client-server based administration modules
and tools that have been developed utilizing ORACLE-based
products.
Warner Common Stock is currently quoted on the OTC Bulletin Board
under the symbol "WISI."
# # #
Warner Insurance Services, Inc.
