AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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COVER-ALL TECHNOLOGIES INC.
(Exact name of Registrant as specified in its charter)
18-01 POLLITT DRIVE
FAIR LAWN, NEW JERSEY
DELAWARE 07410 13-2698053
(State or other (201) 794-4800 (I.R.S. Employer
jurisdiction of (Address, including zip Identification
incorporation or code, and telephone No.)
organization) number,
including area code, of
Registrant's principal
executive offices)
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BRIAN MAGOWAN
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
COVER-ALL TECHNOLOGIES INC.
18-01 POLLITT DRIVE
FAIR LAWN, NEW JERSEY 07410
(201) 794-4800
(Name, address, including zip code, and telephone number,
including area code, of Registrant's agent for service)
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Copies of all communications, including communications sent to
agent for service, should be sent to:
LEONARD GUBAR, ESQ.
THELEN REID & PRIEST LLP
40 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 603-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: From time to time after the effective date of this
Registration Statement as determined by market conditions and
other factors.
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If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. [ ]
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. [X]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
================================================================
PROPOSED
MAXIMUM
OFFERING PROPOSED
AMOUNT TO PRICE MAXIMUM
TITLE OF BE PER AGGREGATE AMOUNT OF
SECURITIES REGISTERED SHARE(2) OFFERING REGISTRATION
TO BE REGISTERED (1) (3) PRICE(2)(3) FEE
Common Stock,
$0.01 par value . 2,500,000 $1.84375 $4,609,375 $1,281.41
================================================================
(1) Pursuant to Rule 416, this Registration Statement also
covers such indeterminable additional shares of Common Stock
as may become issuable as a result of stock dividends, stock
splits or similar transactions prior to the termination of
this Registration Statement.
(2) Estimated solely for the purpose of calculating the
registration fee.
(3) Calculated pursuant to Rule 457(c), based upon the average
of the high and low prices of the Common Stock on December
7, 1998, as reported by the Nasdaq Small Cap Market(SM).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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<PAGE>
Information contained in this prospectus is not complete and may
be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion. Dated December 14, 1998
PRELIMINARY PROSPECTUS
2,500,000 SHARES OF COMMON STOCK
COVER-ALL TECHNOLOGIES INC.
Our common stock is listed on the Nasdaq SmallCap Market(SM)
under the symbol "COVR" and it is also listed on the Philadelphia
Stock Exchange under the symbol "CVA". On December 3, 1998, the
closing sale price of the common stock was $2.06, according to
the Nasdaq SmallCap Market(SM).
These shares of common stock are being sold by Care
Corporation Limited, the selling shareholder. We will not
receive any part of the proceeds from the sale.
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CONSIDER CAREFULLY THE RISK FACTORS
BEGINNING ON PAGE 9 IN THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------------------
, 1998
<PAGE>
No one (including any salesperson or broker) is authorized to
provide oral or written information about this offering that is
not included in this prospectus. Until , all dealers
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that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscription.
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TABLE OF CONTENTS
Page
----
Where You Can Find More Information . . . . . . . . . . . . . . 3
Forward Looking Statements . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . 9
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 13
Description of Common Stock . . . . . . . . . . . . . . . . . 13
Selling Shareholder . . . . . . . . . . . . . . . . . . . . . 14
Plan of Distribution . . . . . . . . . . . . . . . . . . . . 15
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . 17
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and
copy any document we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Our SEC filings are also available
to the public at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the
information we file with them, which means we can disclose
important information to you by referring you to those documents.
The information incorporated by reference is considered to be a
part of this prospectus, and later information that we file with
the SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until the selling
shareholder sells all the shares. This prospectus is a part of a
registration statement we filed with the SEC.
1. Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (File No. 0-13124).
2. Amended Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1997 (File No. 0-13124).
3. Quarterly Reports, including any amendments to these
reports, on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998 (File No. 0-
13124).
4. Proxy Statement dated April 30, 1998 (File No. 0-
13124).
5. Current Report on Form 8-K filed on May 14, 1998 (File
No.0-13124).
6. The description of our common stock contained in our
Registration Statement on Form 8-A filed on May 22,
1996, including any amendment or report filed to update
this description.
You may request a copy of these filings, at no cost, by
writing or telephoning us at the following address: 18-01
Pollitt Drive, Fair Lawn, New Jersey 07410, Attention: Ann F.
Massey - Secretary, telephone number (201) 794-4800.
FORWARD LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss
the Company's plans and strategy for its business or state other
forward-looking statements, as this term is defined in the
Private Securities Litigation Reform Act. These statements are
subject to risks and uncertainties and, as a result, actual
results may differ materially. For a discussion of important
risks of an investment in the Common Stock, including factors
that could cause actual results to differ materially from results
referred to in the forward-looking statements, see "Risk
Factors." You should carefully consider the information set
forth under the caption "Risk Factors," including the risks
relating to historical operating losses and negative cash flows.
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THE COMPANY
GENERAL
We provide state-of-the-art software products for the
property/casualty insurance industry through our subsidiary,
COVER-ALL Systems, Inc. ("COVER-ALL").
Historically, we (under our former name, Warner Insurance
Services, Inc.) also provided services to the automobile
insurance industry including underwriting, policy maintenance and
claims adjustment services, which were carried out by our
Insurance Services Division ("ISD"). However, in March 1996, we
transferred the ISD business to a subsidiary of The Robert Plan
Corporation, as a part of a settlement of two lawsuits between us
and The Robert Plan Corporation. This settlement included the
release of the Company from our obligations under long-term
processing contracts with the customers of ISD. Because of this
settlement and release, we call the activities of the ISD
"discontinued operations" in the notes to our financial
statements. See "Discontinued Operations."
During March 1997, we announced several major changes as
part of our overall business strategy. Mr. Brian Magowan became
Chairman of the Board and Chief Executive Officer and Mr. Mark
Johnston became Chief Financial Officer on an interim basis. Four
of the existing Board members resigned and two additional Board
members, Messrs. Earl Gallegos and Ian Meredith, were added. We
also raised $3 million of financing through the sale of 12 1/2%
Convertible Debentures ("Debentures"), due March 2002. The
Debentures are convertible into shares of our common stock at
$1.25 per share and carry certain restrictive covenants. Mr.
Johnston served as Chief Financial Officer until January 1998,
when Mr. John R. Nobel joined the Company and replaced Mr.
Johnston as Chief Financial Officer.
OVERVIEW
We offer standard as well as customized software application
products together with implementation support services to the
property/casualty insurance industry. We derive revenue from
software contract licenses to new and existing customers and from
continuing maintenance fees for servicing the product. We also
provide professional consulting services to customize the
software for specific uses.
In December 1989, we purchased, through our subsidiary, the
assets related to the exclusive proprietary rights to a PC-based
software application for policy rating and issuance for
property/casualty insurance companies. We then enhanced this
acquired software and it is now known as our "Classic" product
line, which is one of our two current product lines.
The Classic product line is a self-contained rating,
issuance and transaction management application system utilized
in the property/casualty insurance industry. This software was
developed using the Microfocus COBOL language, and we have
upgraded this product line for use in the Windows 95 operating
system. We believe that this software product provides cost-
effectiveness and flexibility for self-contained Local Area
Network ("LAN") systems. The Classic product is in use in
approximately 50 property/casualty insurance companies. Total
Classic revenues were $6,593,000 for the year ended December 31,
1997 compared to $3,655,000 for the year ended December 31, 1996
and $2,752,000 for the year ended December 31, 1995.
Since 1993, we have been developing a second product line
entitled Total Administrative Solution ("TAS 2000") and, as of
December 31, 1997, COVER-ALL completed several modules. TAS 2000
comprises an architecture and a suite of application development
tools for property/casualty insurers designed to enable a client-
driven re-engineering of an insurer's business processes. TAS
2000 applications run on commodity priced open computer systems
and use state-of-the-art client/server software technology
provided by Oracle Corporation. Total TAS 2000 revenues were
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$1,345,000 for the year ended December 31, 1997, $1,814,000 for
the year ended December 31, 1996, and $1,367,000 for the year
ended December 31, 1995.
Regarding our software products held for sale, our TAS 2000
product line conforms to "Year 2000" as of December 31, 1997. In
1997, we modified the Classic product line to support the "Year
2000."
DISCONTINUED OPERATIONS - INSURANCE SERVICES DIVISION
ISD revenues decreased substantially in 1994 and 1995
because of lower fees attributable to the reduced number of
policies and claims being handled on contracts that were winding
down or were completed. As a result, ISD suffered losses and
operated under considerable uncertainty as a result of pending
lawsuits with certain affiliates of The Robert Plan Corporation.
In March 1996, the Company entered into a series of agreements
which provided for the transfer and discontinuance of its ISD
operations and the issuance of the Company's Common Stock and
Warrants to certain customers of the ISD business in exchange for
the release of the Company from its obligations to provide
insurance services to ISD customers and to The Robert Plan
Corporation in exchange for the settlement and dismissal of two
lawsuits. Effective March 1, 1996, the Company discontinued
providing insurance processing services to the automobile
insurance industry. The Company reflected those activities as
discontinued operations in its financial statements in the year
ended December 31, 1995.
RECENT DEVELOPMENTS
As part of the restructuring transactions in March 1996 (the
"Restructuring"), we transferred certain assets, employees,
contracts and leased premises relating to our ISD business to a
subsidiary of The Robert Plan Corporation, which replaced us as
the provider of insurance services to the ISD customers. In
exchange for settling the lawsuits, releasing our contractual
obligations to provide insurance services and executing mutual
releases, we issued to certain of the ISD customers and certain
parties to the litigation:
(a) a total of 3,256,201 shares of our common stock,
(b) five-year warrants (the "Restructuring Warrants")
to purchase up to an additional 1,553,125 shares of our common
stock at $2.00 per share, and
(c) cash of $2.5 million.
Atlantic Employers Insurance Company, a CIGNA Property and
Casualty company and ISD customer, initially acquired 2,476,547
shares of our common stock, Restructuring Warrants to purchase
1,181,250 shares and received $675,000 in cash as part of the
Restructuring. Mr. James R. Stallard, Vice President of CIGNA
Property and Casualty, was designated as a director of the
Company under the terms of the Restructuring Agreement.
As part of the Restructuring, we had the option, exercisable
for a period of six months (from March 1, 1996), to (i) purchase
50% of the 3,256,201 shares for a certain calculated cash price
and (ii) acquire 50% of the 1,553,125 Restructuring Warrants at a
cash price equal to $1.00 per warrant. As discussed below, on
March 31, 1996, we assigned this repurchase option to Software
Investments Limited ("SIL"), which SIL subsequently exercised.
As a result of the issuance of the above mentioned shares of our
common stock, the antidilution provisions of the warrants
required an adjustment from 776,562 shares at $2.00 per share to
862,847 shares at $1.80 per share.
On March 31, 1996, we entered into a series of transactions
with SIL and Care Corporation Limited ("Care") in which we:
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<PAGE>
(A) sold to SIL for total proceeds of $3,022,391:
(i) 1,412,758 shares of our common stock for $2.00
per share, and
(ii) five-year warrants (the "SIL Warrants") to
purchase a total of 196,875 shares of our common stock for $1.00
per SIL Warrant ($196,875), the exercise price of such SIL
Warrants being $2.00 per share of our common stock, and
(B) assigned to SIL the rights we retained in the
Restructuring to repurchase within six months 1,628,100 shares of
our common stock for a certain calculated cash price and our
rights to purchase from the warrantholders, for $1.00 per
warrant, Restructuring Warrants to acquire 776,562 shares of our
common stock at $2.00 per share. As a result of the issuance of
the above mentioned shares of our common stock, the antidilution
provisions of the warrants required an adjustment from 776,562
shares at $2.00 per share to 862,847 shares at $1.80 per share.
On March 31, 1996, Care granted to us the exclusive license
for the Care software systems for use in the worker's
compensation claims administration markets in Canada, Mexico and
Central and South America (the "Care Software License"). In
exchange for this license, we issued to Care 2,500,000 shares of
our common stock at $2.00 per share to value the license at
$5,000,000 at March 31, 1996. The parties revised the license
agreement on March 14, 1997 to engage Care as the Company's
exclusive sales agent for a monthly fee of $10,000 against
commissions of 20%. Depending upon the level of revenue reached
or not reached, we had the right to repurchase all or a portion
of the shares issued to Care at $0.01 per share. Through March
31, 1998, we paid Care approximately $125,000 for its services as
our exclusive sales agent.
On May 1, 1996, SIL purchased 1,628,100 shares of our common
stock at $3.00 per share, and, at $1.00 per warrant, 862,847
warrants to purchase 862,847 shares of our common stock at $1.80
per share. SIL exercised these warrants on May 6, 1996,
resulting in our receiving $1,553,124 in additional equity.
On March 31, 1998, Care repurchased from us the Care
Software License. Also on that date, we acquired nonexclusive
worldwide reseller rights (excluding Australia, New Zealand and
the United States) to the Care software, for which we will pay,
on a per sale basis, Care's commercial list price then in effect
less the applicable reseller discount. In addition, under the
Care Software License buyback, we granted to Care the
nonexclusive right to resell our TAS 2000 software and Classic
product line outside of the United States, relieving us of paying
to Care an agency fee, as well as reducing our marketing expense.
The transaction to sell the Care Software License back to Care
was the result of our strategic decision to allocate our future
resources to TAS 2000 and the Classic product line.
In consideration for the buyback of the Care Software
License by Care, Care paid to us $500,000 in cash and issued a
$4,500,000 non-interest bearing non-recourse (except as to
collateral) note on March 31, 1998. This note was payable in
semi-annual installments of $500,000, on March 31 and September
30 of each year, which, when discounted, resulted in an amount to
be recorded of $3,893,054. The discounted note is secured by
unencumbered Cover-All common stock owned by Care. The number of
shares required as collateral on the note will vary, so that the
market value of the shares held as collateral must equal 150% of
the outstanding balance. The number of shares required as
collateral will be adjusted at each payment date based on the
market price of the Company's shares and the balance outstanding
on the payment date. Based on the market price of the Company's
common stock on March 30, 1998, approximately 1,700,000 shares
were originally pledged as collateral.
On September 30, 1998, we received the $500,000 installment
payment on this note. This money was borrowed by Care from
various persons and entities. See "Plan of Distribution." Upon
receiving this installment payment, we recalculated the number of
shares required as collateral, and Care pledged an additional
2,004,808 shares to secure the outstanding balance of the note.
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All of the 2,500,000 shares being offered by Care under this
prospectus are currently pledged by Care as collateral on the
note. The remaining approximately 1,200,000 shares pledged by
Care as collateral on the note are owned by SIL.
ADDRESS
Our executive offices are located at 18-01 Pollitt Drive,
Fair Lawn, New Jersey 07410, and our telephone number is (201)
794-4800.
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<PAGE>
THE OFFERING
Securities offered . . . . . . 2,500,000 shares of common
stock(1)
Shares of common stock 16,984,022 shares(2)
outstanding after this offering
Nasdaq SmallCap Market(SM) COVR
symbol . . . . . . . . . . . .
Philadelphia Stock Exchange CVA
symbol . . . . . . . . . . . .
Use of proceeds . . . . . . . . We will not receive any
proceeds from the sale of the
common stock by the selling
shareholder. See "Use of
proceeds."
Risk factors . . . . . . . . . The securities offered by this
prospectus involve a high
degree of risk. See "Risk
Factors."
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(1) All 2,500,000 shares of common stock offered under this
prospectus are currently pledged by Care to us as collateral
on a note, the remaining principal amount of which is
$4,000,000. This note, which does not bear interest and is
non-recourse (except as to the collateral), is payable in
semi-annual installments of $500,000, on March 31 and
September 30 of each year principal is outstanding, and may
be prepaid at any time. None of the shares can be
transferred by Care or resold pursuant to this prospectus
until released from the pledge.
(2) Does not include a total of 3,509,131 shares of common
stock issuable if and when holders of the Company's warrants
and convertible debentures exercise those warrants and
debentures, and does not include a total of 1,984,000 shares
of common stock issuable if and when holders of the
Company's options under the Company's option plans exercise
those options. In addition, this number of shares does not
include a total of 521,775 additional shares of common stock
reserved for issuance if and when holders of options that
may be granted in the future exercise those options.
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<PAGE>
RISK FACTORS
An investment in the common stock being offered by this
prospectus involves a high degree of risk. Before acquiring any
of the common stock offered by this prospectus, you should
carefully consider the following risk factors, as well as other
information described elsewhere in this prospectus.
Historical Losses for COVER-ALL. Although we have generated
profits in each of the last four fiscal quarters, we have
experienced losses from continuing operations for each of the
years ended December 31, 1997, 1996, 1995 and 1994, the two
months ended December 31, 1993 and the year ended October 31,
1993. There can be no assurance that we will be able to sustain
the profitability that we have recently achieved for any period
in the future.
Need For Additional Financing. We will need additional
financing to continue to fund the research and development of our
software products and to generally expand and grow our business.
At December 31, 1997, we had stockholders' equity of
approximately $2,847,000 and a net working capital of
approximately $1,647,000. To the extent that we will be required
to fund operating losses, our financial position would
deteriorate. There can be no assurance that we will be able to
find additional financing at all or on terms favorable to us.
Dependence on Product Development. We are currently
investing resources in product development and expect to continue
to do so in the future. Our future success will depend on our
ability to continue to enhance our current product line and to
continue to develop and introduce new products that keep pace
with competitive product introductions and technological
developments, satisfy diverse and evolving insurance industry
requirements and otherwise achieve market acceptance. There can
be no assurance that we will be successful in continuing to
develop and market on a timely and cost-effective basis product
enhancements or new products that respond to technological
advances by others, or that these products will achieve market
acceptance.
In addition, we have in the past experienced delays in the
development, introduction and marketing of new and enhanced
products, and there can be no assurance that we will not
experience similar delays in the future. Any failure by us to
anticipate or respond adequately to changes in technology and
insurance industry preferences, or any significant delays in
product development or introduction, would have a material
adverse effect on our business, operating results and financial
condition.
No Assurance of Market Acceptance of Our Products. Our
future success will depend upon our ability to increase
significantly the number of insurance companies that purchase our
software products. As a result of the intense competition in our
industry and the rapid technological changes which characterize
it, there is no assurance that our products will achieve
significant market acceptance. Further, insurance companies are
typically characterized by slow decision-making and numerous
bureaucratic and institutional obstacles which will make our
efforts to significantly expand our customer base difficult.
Rapid Technological Change. The demand for our products is
impacted by rapid technological advances, evolving industry
standards in computer hardware and software technology, changing
insurance industry requirements and frequent new product
introductions and enhancements that address the evolving needs of
the insurance industry. The process of developing software
products such as those we offer is extremely complex and is
expected to become increasingly complex and expensive in the
future with the introduction of new platforms and technologies.
The introduction of products embodying new technologies and the
emergence of new industry standards and practices can render
existing products obsolete and unmarketable. Our future success
depends upon our ability to anticipate or respond to
technological advances, emerging industry standards and practices
in a timely and cost-effective manner. There can be no assurance
that we will be successful in developing and marketing new
products or enhancements to existing products that respond to
technological changes or evolving industry standards. The
failure to successfully respond to these changes and evolving
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<PAGE>
standards on a timely basis, or at all, could have a material
adverse effect upon our business, operating results and financial
condition.
Competition. Both the computer software and the insurance
software systems industries are highly competitive. There are a
number of larger companies, including computer manufacturers,
computer service and software companies and insurance companies,
that have greater financial resources than we do that currently
offer and have the technological ability to develop software
products similar to those offered by us. Very large insurers,
which internally develop systems similar to our systems, may or
may not become major customers of our software. These companies
present a significant competitive challenge to our business. We
compete on the basis of our service, price, system functionality
and performance and technological advances.
Dependence on Key Personnel. Our success depends to a
significant extent upon a limited number of members of senior
management and other key employees, including Brian Magowan, our
Chief Executive Officer, Peter C. Lynch, our President and Chief
Operating Officer, and Dalia Ophir, our Chief Technology Officer.
Mr. Magowan's employment contract expires December 31, 1998; Mr.
Lynch's contract expires February 28, 1999; and Ms. Ophir's
contract expires December 31, 2000. We maintain key man life
insurance on these individuals in the amount of $1,000,000 per
individual. The loss of the service of one or more key managers
or other employees could have a material adverse effect upon our
business, operating results or financial condition. In addition,
we believe that our future success will depend in large part upon
our ability to attract and retain additional highly skilled
technical, management, sales and marketing personnel.
Competition for such personnel in the computer software industry
is intense. There can be no assurance we will be successful in
attracting and retaining such personnel, and, the failure to do
so could have a material adverse effect on our business,
operating results or financial condition.
Dependence Upon Proprietary Technology; Risk of Third Party
Claims of Infringement. Our success and ability to compete
depends in part upon our proprietary software technology. We
also rely on certain software that we license from others. We
rely on a combination of trade secret, copyright and trademark
laws, nondisclosure and other contractual agreements and
technical measures to protect our proprietary rights. We
currently have no patents or patent applications pending.
Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our products
or to obtain and use information that we regard as proprietary.
There can be no assurance that the steps we take to protect our
proprietary technology will prevent misappropriation of our
technology, and this protection may not stop competitors from
developing products which function or have features similar to
our products.
While we believe that our products and trademarks do not
infringe upon the proprietary rights of third parties, there can
be no assurance that third parties will not claim that our
products infringe, or may infringe, upon their proprietary
rights. Any infringement claims, with or without merit, could be
time-consuming, result in costly litigation and diversion of
technical and management personnel, cause product shipment delays
or require us to develop non-infringing technology or enter into
royalty or licensing agreements. Royalty or licensing
agreements, if required, may not be available on terms acceptable
to us or at all. If a claim of product infringement against us
is successful and we fail or are unable to develop non-infringing
technology or license the infringed or similar technology, our
business, operating results and financial condition could be
materially adversely affected.
Dependence on Major Customers. In 1997 and 1996, our
software products operations depended on certain major customers.
One of these customers accounted for approximately 20% of total
revenues in 1997 and three of these customers accounted for
approximately 53% of total revenues in 1996. We anticipate that
our operations will continue to depend upon the continuing
business of major customers. As a result, the loss of any of
these major customers or our inability to continue to attract new
major customers could materially adversely affect our business,
operating results and financial condition.
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<PAGE>
Dependence on Key Supplier. We rely on a third party
supplier for our claims management solutions in our TAS 2000
product line. We believe this supplier's product is superior to
other products on the market and, as a result, the loss of this
product could materially adversely affect our business, operating
results and financial condition.
Shares Eligible For Resale. This prospectus covers the sale
by the selling shareholder (Care Corporation Limited) of
2,500,000 shares of our common stock. Although the selling
shareholder may sell the shares from time to time under this
prospectus, to the extent that a significant number of the shares
are sold during a short period of time, the market price of the
common stock could decline. Further, the prospect of the shares
being sold into the market (the so-called "over-hang") may in and
of itself create continuing pressures on the price of the common
stock. There are also a total of 2,505,775 shares of common
stock issuable under our stock option plans which are registered
for resale under Form S-8 under the Securities Act.
Additionally, 902,979 warrants can be exercised at $1.72, and
206,152 warrants can be exercised at $1.91. Further 2,400,000
convertible debentures can be exercised at any time for $1.25 per
share.
No Assurance of Continued Quotation on the Nasdaq SmallCap
Market(SM). Our common stock is listed on the Nasdaq SmallCap
Market(SM). However, we cannot assure that we will be able to
satisfy the criteria for continued listing on the Nasdaq SmallCap
Market(SM). For continued listing on the Nasdaq SmallCap
Market(SM), a company must, among other things, have (1) either
$2 million in net tangible assets, $35 million in market
capitalization or $500,000 net income, (2) $1 million in market
value of public float and (3) a minimum bid price of $1.00 per
share. If we are unable to satisfy the requirements for
continued listing on the Nasdaq SmallCap Market(SM), trading, if
any, in the common stock would be conducted in the over-the-
counter market in what are commonly referred to as the "pink
sheets" or on the NASD OTC Electronic Bulletin Board. In such an
event, an investor may find it difficult to sell, or to obtain
accurate price quotations as to the market price of, the shares
offered by this prospectus.
"Penny Stock" Regulations May Impose Certain Restrictions on
Marketability of Securities. The SEC has adopted regulations
which generally define "penny stock" to be an equity security
that has a market price of less than $5.00 per share. Because
our common stock is currently listed on the Nasdaq SmallCap
Market(SM), these securities are exempt from the definition of
"penny stock." However, if our common stock is removed from
listing by the Nasdaq SmallCap Market(SM) at any time, the common
stock may become subject to rules that impose additional sales
practice requirements on broker-dealers who sell such securities
to persons other than established customers and accredited
investors (generally those with assets in excess of $1,000,000,
or annual incomes exceeding $200,000 or $300,000, together with
their spouse).
For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of
such securities and have received the purchaser's prior written
consent to the transaction. Additionally, for any transaction,
other than exempt transactions, involving a penny stock, the
rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the penny
stock market. The broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the
broker-dealer is the sole market-maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over
the market. Finally, monthly statements must be sent disclosing
recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
Consequently, the "penny stock" rules may restrict the ability of
broker-dealers to sell our securities and may affect the ability
of investors to sell our securities in the secondary market.
Potential Loss of Tax Credits. Under the United States
Internal Revenue Code, companies that have not been operating
profitably are allowed to apply certain of these past losses to
offset future tax liabilities they may incur once they reach
profitability. These credits are known as net operating loss
carryforwards. At December 31, 1997, we had approximately
$24,000,000 in net operating loss carryforwards, $3,000,000 of
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<PAGE>
which expire in 2012, $14,000,000 of which expire in 2011, and
$7,000,000 of which expire in 2010. Because of the provisions of
the Tax Reform Act of 1986, however, we may not get the full
benefit of these credits. Under these provisions, a company is
limited in utilizing net operating loss carryforward credits if
there occurs a change in more than 50% of the company's ownership
within a three year period. Because of the stock we issued
during our restructuring in March 1996, and other stock which we
may issue under the outstanding convertible debentures, we may
experience an ownership change which could limit our future use
of the net operating loss carryforward credits.
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<PAGE>
USE OF PROCEEDS
We will not directly receive any of the proceeds from the
sale of the common stock offered by this prospectus. However,
the shares offered under this prospectus are currently pledged by
Care to us as collateral on a note, the remaining principal
amount of which is $4,000,000. None of the shares can be
transferred by Care or resold pursuant to this prospectus until
released from the pledge, either after the note principal is paid
to us or upon our return of shares to Care as a part of the
adjustment made, as of March 31 and September 30 of each year, to
the amount of pledged collateral in order for the value of the
collateral to be 150% of the outstanding principal balance on the
note. See "Plan of Distribution" and "The Company - Recent
Developments."
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 30,000,000 shares
of common stock, par value $0.01 per share. As of October 28,
1998, there were 16,984,022 shares of common stock outstanding.
The holders of shares of common stock are entitled to one
vote per share on all matters to be voted on by stockholders.
The holders of shares of common stock may not cumulate their
votes in elections for directors, which means that holders of
more than half of the outstanding shares of common stock can
elect all our directors standing for election.
The holders of shares of common stock are entitled to
receive such dividends as may be declared from time to time by
the Board of Directors in its discretion from any assets legally
available therefor. If we dissolve, whether voluntary or
involuntary, the holders of common stock are entitled to share
ratably in our assets legally available for distribution to our
stockholders. The holders of common stock have no preemptive,
subscription, conversion or redemption rights and are not subject
to further calls or assessments or rights of redemption by the
Company.
CLASSIFICATIONS OF THE BOARD OF DIRECTORS
The Certificate of Incorporation provides that we have three
classes of Board of Directors, with the term of each class to run
for three years and expire at successive annual meetings of the
stockholders. Thus, it would take a minimum of two annual
meetings of the stockholders to change the majority of the Board
of Directors. Only the Board of Directors may fill vacancies on
the Board of Directors that may occur between annual meetings.
In addition, any director elected to fill a vacancy on the Board
will serve for the balance of the term of the replaced director.
STOCKHOLDER RIGHTS PLAN
On November 17, 1989, we adopted a Stockholder Rights Plan
and declared a dividend distribution of one Right for each
outstanding share of common stock. Under certain conditions,
each Right initially entitles the registered holder of this Right
to purchase one-fifth of one share of common stock at a purchase
price of $10.00, subject to adjustment. The Rights will be
exercisable only (1) if a person or group has acquired, or
obtained the right to acquire, 15% or more of the outstanding
shares of common stock (other than a person that acquires the
stock directly from the Company in a transaction that the
Company's independent Directors determine to be in the best
interests of the Company and its stockholders) or (2) following
the commencement of a tender offer or exchange offer for 15% or
more of the then outstanding shares of common stock. Each Right
will entitle its holder to receive, upon exercise, common stock
(or, in certain circumstances, cash, property, or other
securities of the Company) having a value equal to two times the
purchase price of the Right under certain circumstances,
including the acquisition of 20% of the outstanding Common Stock.
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<PAGE>
All rights holders, except the acquiror, may purchase a number of
shares of common stock equal to $10.00 (subject to adjustment
under the terms of the Rights Plan) divided by 50% of the market
price of the Company's common stock on the date which is ten days
after a public announcement by the Company that a person or group
has acquired, or obtained the right to acquire, 15% or more of
the outstanding shares of common stock. If some other company
acquires the Company in a merger or other business combination
transaction in which the Company is not the surviving
corporation, the rights holders may purchase the acquiror's
shares at a similar discount.
The Company may redeem the Rights at $0.01 each until ten
days following the date on which a person or group of affiliated
persons has acquired, or obtained the right to acquire, the
beneficial ownership of 15% or more of the outstanding shares of
common stock. The Rights will expire on December 4, 1999 unless
earlier redeemed by the Company.
CERTAIN PROVISIONS IN OUR CERTIFICATE OF INCORPORATION
Our Certificate of Incorporation contains certain provisions
that would have an effect of delaying, deferring or preventing a
change of control of the Company in connection with certain
business combinations. Article Seventh provides that the
affirmative vote of at least 80% of the outstanding shares of
voting stock is required to approve (1) the sale (or similar
transfer) of all or substantially all of the assets of the
Company to a "related corporation," (2) the consolidation of the
Company with, or its merger into, a "related corporation," (3)
the merger into the Company of a "related corporation," (4) any
agreement relating to the transactions referred to in (1) through
(3), and (5) any amendment to said Article Seventh. A "related
corporation" is any corporation which, together with its
affiliated and associated persons (as such terms are defined)
owns of record or beneficially more than 5% of the Company's
outstanding voting stock entitled to vote on the subject
transaction. These provisions, however, do not apply if a
majority of the Company's disinterested directors approve the
subject transaction, in which event approval of such transaction
shall require only such affirmative vote as is otherwise required
by law.
In addition, Article Fifth of the Certificate requires the
approval of 80% of the voting stock to remove a director without
cause, to alter, repeal or modify those provisions of the
Company's By-Laws relating to the number, election and terms of
directors, newly created directorships and vacancies and removal
of directors, and to amend said Article Fifth (relating generally
to the Company's Board of Directors).
TRANSFER AGENT
First Union National Bank is the Transfer Agent and
Registrar for the Company's common stock.
SELLING SHAREHOLDER
Under the Care Software License buyback agreement, we must
file and cause to become effective a registration statement
covering the shares issued to the selling shareholder thereunder.
We have filed this Registration Statement according to the terms
of this buyback agreement.
A total of 2,500,000 shares of common stock are being
offered by the selling shareholder under this prospectus. All of
the 2,500,000 shares offered under this prospectus are currently
pledged by Care to us as collateral on a note. None of the
shares can be transferred by Care or resold pursuant to this
prospectus until released from the pledge, either after the note
principal is paid to us or upon our return of shares to Care as a
part of the adjustment made, as of March 31 and September 30 of
each year, to the amount of pledged collateral in order for the
value of the collateral to be 150% of the outstanding principal
balance on the note. See "Plan of Distribution" and "The Company
- Recent Developments."
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<PAGE>
The following table sets forth certain information with
respect to the selling shareholder for whom we are registering
the shares for resale to the public. We will not receive any of
the proceeds from the sale of these shares. See "The
Company Recent Developments," "Plan of Distribution."
COMMON COMMON
STOCK STOCK
OWNED OWNED
PRIOR TO SHARES AFTER
NAME OF SELLING SHAREHOLDER OFFERING OFFERED OFFERING
--------------------------- -------- ------- --------
Care Corporation Limited (1) 2,500,000 2,500,000 0
(1) In addition to Care Corporation Limited, any of the
persons or entities listed in the "Plan of
Distribution" section may become selling shareholders
upon the exercise of their conversion right or stock
option as described therein. See "Plan of
Distribution."
The Mirror Trust, a Jersey, Channel Islands Discretionary
Settlement, owns a majority interest in the issued capital of
both Care and SIL. The ultimate beneficiaries of the Mirror
Trust are the Johnston family interests, one of whom, Mark D.
Johnston, is a director of the Company. Mr. Johnston is an
executive director of Care and SIL. In March 1997, Mark D.
Johnston was appointed Chief Financial Officer of the Company on
an interim basis and served in such a capacity until January 22,
1998.
Mr. Ian J. Meredith, a director of the Company, is also a
director of Care and of Care Systems Corporation, a Delaware
corporation and an affiliate of Care Corporation Limited,
specializing in software and services to the workers'
compensation industry in the United States. In 1992,
Mr. Meredith, as CEO and Chairman, founded Care Systems
Corporation to develop proprietary software for the insurance and
employer markets. A company owned by a trust for the benefit of
Mr. Meredith's children owns a minority interest in the issued
capital of Care. Mr. Meredith has no ownership in and exercises
no control with respect to such company.
Mr. Earl Gallegos, a director of the Company, is also a
principal shareholder of Earl Gallegos Management, LLC, which
provides management consulting services to businesses. Earl
Gallegos Management, LLC has been a consultant for Care Systems
Corporation, a Delaware corporation and an affiliate of Care
Corporation Limited, for the last two years with regard to
project management in connection with the Care Systems' contract
for technology services to the Bureau of Workers' Compensation
for the State of Ohio. Additionally, effective August 1, 1998,
Earl Gallegos Management, LLC was requested to provide consulting
services for the overall management of CARE Information Services,
a division of Care Corporation Limited.
PLAN OF DISTRIBUTION
A selling shareholder may from time to time sell the shares
directly or offer the shares through underwriters, dealers or
agents. The distribution of securities by a selling shareholder
may be effected in one or more transactions that may take place
on the over-the-counter market, including ordinary brokers'
transactions, privately-negotiated transactions or through sales
to one or more broker-dealers for resale of such shares as
principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage
fees or commissions may be paid by the selling shareholder in
connection with such sales of shares. Sales of the shares may be
made pursuant to this prospectus or pursuant to Rule 144 under
the Securities Act.
At the time a particular offer of shares is made by or on
behalf of a selling shareholder, to the extent required, a
prospectus will be distributed which will set forth the number of
shares being offered and the terms of the offering, including the
name or names of any underwriters, dealers or agents, if any, the
purchase price paid by any underwriter for shares purchased from
a selling shareholder and any discounts, commissions or
concessions allowed or reallowed or paid to dealers, and the
proposed selling price to the public.
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<PAGE>
On September 30, 1998, Care borrowed a total of $560,000
from the persons and entities listed below. Pursuant to the
Convertible Promissory Note issued by Care to each of these
persons and entities, the holder of the note has the right to
convert the principal and accrued and unpaid interest thereunder
into shares of our common stock, which would be transferred by
Care to the holder and could consist, in whole or in part, of the
2,500,000 shares of common stock offered under this prospectus.
The right to convert may be exercised any time beginning December
14, 1998, and continuing through September 30, 2000. The notes
each bear interest at 9% per year, require quarterly payments of
accrued and unpaid interest, and require payment of the principal
balance on September 30, 2000, if not earlier converted.
In connection with this financing, Care also granted each of
these persons and entities an option to acquire additional shares
of our common stock, which would be transferred by Care to the
holder and could consist, in whole or in part, of the 2,500,000
shares of common stock offered under this prospectus. The
options were exercisable beginning on September 30, 1998, for a
two-year period.
We are not a party to the notes or the stock options. The
obligations under the notes and the stock options to transfer
shares of common stock are solely Care's obligations.
All of the 2,500,000 shares offered under this prospectus
are currently pledged by Care to us as collateral on a note, the
remaining principal amount of which is $4,000,000. This note,
which does not bear interest and is non-recourse (except as to
the collateral), is payable in semi-annual installments of
$500,000, on March 31 and September 30 of each year principal is
outstanding, and may be prepaid at any time. None of the shares
can be transferred by Care or resold pursuant to this prospectus
until released from the pledge, either after the note principal
is paid to us or upon our return of shares to Care as a part of
the adjustment made, as of March 31 and September 30 of each
year, to the amount of pledged collateral in order for the value
of the collateral to be 150% of the outstanding principal balance
on the note. See "The Company - Recent Developments."
If any of these persons and entities exercise the conversion
right or the stock option, and Care fulfills its obligations with
shares of common stock that are part of the 2,500,000 shares
offered under this prospectus, these persons and entities would
also be selling shareholders under this prospectus as transferees
of Care. None of these persons and entities are otherwise
affiliated with Care and are not affiliated with us. The
following table lists each of these persons and entities and the
number of shares of common stock offered under this prospectus
each would own if (1) each person and entity exercises the
conversion right in full as to the original principal amount of
its note and exercises the stock option in full and (2) Care
transfers shares of common stock constituting part of the
2,500,000 shares offered under this prospectus. Each person and
entity could own additional shares of common stock offered under
this prospectus if it (1) elects to convert accrued and unpaid
interest under the notes or (2) the market price of the common
stock is lower than $1.29 per share at the time of any note
conversion.
COMMON STOCK
POTENTIALLY TO
BE OWNED
AND SALEABLE IN
NAME OFFERING
---- ---------------
Joseph A. Rosin 194,609
Paradigm Group, L.L.C. 207,895
Randall S. Goulding 9,287
Pochter Family Limited 30,184
Partnership
Rodney Zech 2,321
Jerome P. Seiden 46,438
Marshall Katzman 13,931
Horberg Trust 46,438
-------
TOTAL 551,103
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LEGAL MATTERS
Our counsel, Thelen Reid & Priest LLP of New York, New York,
will issue for us an opinion about certain legal matters relating
to the shares.
EXPERTS
Moore Stephens, P.C., Cranford, New Jersey, independent
auditors, audited our consolidated financial statements and
schedule as of December 31, 1997 and for the year ended December
31, 1997, as set forth in their report thereon. Ernst & Young
LLP, Hackensack, New Jersey, independent auditors, audited our
financial statements and schedule as of December 31, 1996 and for
the two years ended December 31, 1996 and 1995, as set forth in
their report, both of which are incorporated in this prospectus by
reference.
Our consolidated financial statements are incorporated by
reference in reliance on, to the extent applicable, the reports
of Moore Stephens, P.C. and Ernst & Young LLP, respectively,
given on the authority of these firms as experts in accounting
and auditing.
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<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be borne by
the Company in connection with the sale and distribution of the
Common Stock offered hereby. All of the amounts shown are
estimates, except the SEC filing fee.
SEC filing fee . . . . . . . . . . . . . . . . . $1,281.41
Legal fees and expenses . . . . . . . . . . . $10,000.00*
Accounting fees and expenses . . . . . . . . . . $16,000.00*
Miscellaneous . . . . . . . . . . . . . . . . . $ 5,000.00
----------
Total fees and expenses . . . . . . . . . . $32,281.41
==========
-------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(i) The Company's Amended Certificate of Incorporation
includes a provision that eliminates the personal liability of
its directors to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director to the maximum
extent permitted by the Delaware General Corporation Law
("DGCL"). The DGCL does not permit liability to be eliminated
(i) for any breach of a director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock
repurchases or redemptions, as provided in Section 174 of the
DGCL, or (iv) for any transaction for which the director derived
an improper personal benefit.
(ii) Article X of the Company's By-Laws provides generally
for indemnification of all officers and directors to the fullest
extent permitted under the above-referenced Delaware statute.
Section 145 of the DGCL provides that a corporation may indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or
was serving at its request in such capacity in another
corporation or business association, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
(iii) The Company also has a policy insuring it and its
directors and officers against certain liabilities.
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<PAGE>
ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION
---------- -----------
2 Certificate of Merger of Warner Computer Systems,
Inc. (a New York corporation) into the Registrant,
filed on June 11, 1985 [incorporated by reference
to Exhibit 2 to the Registrant's Annual Report on
Form 10-K (Commission File No. 0-13124) filed on
January 29, 1986].
4 Form of Common Stock Certificate of the Registrant
[incorporated by reference to Exhibit 4(a) to the
Registrant's Annual Report on Form 10-K
(Commission File No. 0-13124) filed on January 29,
1986].
5* Opinion of Thelen Reid & Priest LLP as to the
legality of the Common Stock being registered
hereby.
23(a)* Consent of Ernst & Young LLP.
23(b)* Consent of Moore Stephens, P.C.
23(c)* Consent by Thelen Reid & Priest LLP (included in
Exhibit 5).
24 Power of Attorney (included on the signature page).
---------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule
424(b) promulgated under the Securities Act if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the Registration
Statement.
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement;
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<PAGE>
provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the SEC by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(4) That, for purposes of determining any liability under
the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act)
which is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised, that in
the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by any director,
officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against the public policy
as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Fair Lawn, State of New Jersey, on the 7th day of December,
1998.
COVER-ALL TECHNOLOGIES INC.
By: /s/ Brian Magowan
---------------------------
Brian Magowan
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and
officer whose signature appears below constitutes and appoints
Brian Magowan and John R. Nobel, or either of them, as his true
and lawful attorney-in-fact and agent, with full powers of
substitution and re-substitution, for him in his name, place and
stead, to sign in any and all capacities any and all amendments
(including post-effective amendments) to this Registration
Statement on Form S-3 and to file the same, with all exhibits
thereto and other documents in connection therewith, with the
Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that such attorneys-in-fact
and agents, or any of them, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons
in the capacities designed and on the 7th day of December, 1998.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Brian Magowan
----------------- Chairman of the December 7, 1998
Brian Magowan Board and
Chief Executive
Officer
(Principal
Executive
Officer)
/s/ John R. Nobel
----------------- Chief Financial December 7, 1998
John R. Nobel Officer
(Principal
Financial
Officer and
Principal
Accounting
Officer)
/s/ Earl Gallegos
-------------------- Director December 4, 1998
Earl Gallegos
/s/ Ian J. Meredith
--------------------- Director December 2, 1998
Ian J. Meredith
/s/ James R. Stallard
--------------------- Director December 4, 1998
James R. Stallard
/s/ Mark D. Johnston
-------------------- Director December 4, 1998
Mark D. Johnston
/s/ Steve Hough
-------------------- Director December 4, 1998
Steve Hough
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<PAGE>
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
5 Opinion of Thelen Reid & Priest LLP
23(a) Consent of Moore Stephens, P.C.
23(b) Consent of Ernst & Young LLP
23(c) Consent of Thelen Reid & Priest LLP
(included in Exhibit 5)
24 Power of Attorney (included on the
signature page)
THELEN REID & PRIEST LLP
40 West 57th Street
New York, NY 10019
New York, New York
December 7, 1998
Cover-All Technologies Inc.
18-01 Pollitt Drive
Fair Lawn, New Jersey 07410
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Cover-All Technologies
Inc., a Delaware corporation (the "Registrant"), in connection
with the preparation and filing with the Securities and Exchange
Commission (the "Commission") of the above-captioned Registration
Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), relating to the
resale by the holder named therein of up to an aggregate of
2,500,000 shares of common stock, $.01 par value per share, of
the Registrant (the "Shares").
In connection therewith, we have examined the
Certificate of Incorporation and the By-Laws of the Registrant,
resolutions of the Board of Directors of the Registrant and the
Registration Statement. We also have made such inquiries and
have examined originals or copies of other instruments as we have
deemed necessary or appropriate for the purpose of this opinion.
For purposes of such examination, we have assumed the genuineness
of all signatures on and the authenticity of all documents
submitted to us as originals, and the conformity to the originals
of all documents submitted to us as certified or photostatic
copies.
Based upon the foregoing, we are of the opinion that
the Shares are duly authorized, validly issued, fully paid and
non-assessable shares of common stock of the Registrant.
We hereby consent to the filing of this opinion as
Exhibit 5.1 to the Registration Statement and to the reference
therein to our firm under the caption "Legal Matters." In giving
the foregoing consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Commission
promulgated thereunder.
Very truly yours,
/s/ Thelen Reid & Priest LLP
THELEN REID & PRIEST LLP
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on
Form S-3 of our report dated March 31, 1998, on our audit of
the financial statements and financial statement schedule of
Cover-All Technologies Inc. We also consent to the references
to our firm under the captions "Experts" and "Selected Financial
Data."
MOORE STEPHENS, P.C.
Certified Public Accountants
Cranford, New Jersey
December 7, 1998
Exhibit 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-3) and related
Prospectus of Cover-All Technologies Inc. for the registration of
2,500,000 shares of its common stock and to the incorporation by
reference therein of our report dated April 11, 1997, with
respect to the consolidated financial statements and schedule of
Cover-All Technologies Inc. for the years ended December 31, 1996
and 1995 included in its Annual Report (Form 10-K) for the year
ended December 31, 1997, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Hackensack, New Jersey
December 7, 1998
