SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [X] Definitive Proxy Statement
[ ] Definitive Additional [ ] Soliciting Materials
Materials Pursuant to
[ ] Confidential, for use of the Section 240.14a-11(c) or
Commission Only (as permitted Section 240.14a-12
by Rule 14a-6(e)(2))
COVER-ALL TECHNOLOGIES INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
amount on which the filing fee is calculated and state
how it was determined):
--------------------------------
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No:
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3) Filing Party:
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4) Date Filed:
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COVER-ALL TECHNOLOGIES INC.
BRIAN MAGOWAN
Chairman of the Board and Chief Executive Officer
May 7, 1999
To All Cover-All Stockholders:
I cordially invite you to attend the Annual Meeting of
Stockholders which will be held at the Marriott at Glenpointe
Hotel, 100 Frank W. Burr Boulevard, Teaneck, New Jersey 07666, on
Thursday, June 17, 1999 at 9:30 a.m., local time.
The annual election of directors will take place at the
Meeting. Personal information about the nominees for the Board
of Directors as well as information about the functions of the
Board and its committees are contained in the Proxy Statement.
Regardless of the number of shares you own or whether you
plan to attend, it is important that your shares be represented
and voted at the Meeting. You are requested to complete, sign,
date and mail the accompanying form of Proxy in the enclosed
envelope provided for that purpose (to which no postage need be
affixed if mailed in the United States) whether or not you expect
to attend the Meeting in person. The Proxy is revocable by you
at any time prior to its exercise and will not affect your right
to vote in person in the event you attend the Meeting. The
prompt return of the Proxy will be of assistance in preparing for
the Meeting and your cooperation in this respect will be greatly
appreciated.
Please read the formal notice of the Meeting and the Proxy
Statement carefully. For those of you who cannot be present at
the Meeting, I urge you to participate by completing, signing and
returning your Proxy in the enclosed envelope. Your vote is
important, and the management of Cover-All Technologies Inc.
appreciates the cooperation of stockholders in directing proxies
to vote at the Meeting.
Sincerely,
BRIAN MAGOWAN,
Chairman of the Board and
Chief Executive Officer
<PAGE>
COVER-ALL TECHNOLOGIES INC.
____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
____________________
TO THE STOCKHOLDERS OF COVER-ALL TECHNOLOGIES INC.:
The Annual Meeting of Stockholders of Cover-All Technologies
Inc., a Delaware corporation (the "Company"), will be held on
June 17, 1999 at 9:30 a.m., local time, at the Marriott at
Glenpointe Hotel, 100 Frank W. Burr Boulevard, Teaneck, New
Jersey 07666, to consider and act upon the following:
1. To elect the class of directors consisting of two
directors to serve for a term of three years and until
their successors shall have been duly elected and
qualified; and
2. To transact such other business as may properly come
before the Meeting and any adjournments thereof.
Stockholders of record at the close of business on April 26,
1999, which is the record date for the Meeting, are entitled to
receive notice of, and to vote at, the Meeting and at any
adjournment thereof. A Proxy and a Proxy Statement for the
Meeting are enclosed.
All stockholders are cordially invited to attend the Meeting
in person. Whether or not you plan to attend the Meeting, please
complete, sign, date and return the enclosed Proxy, which is
solicited by the Board of Directors of the Company, to ensure
that your shares are represented at the Meeting. Stockholders
who attend the Meeting may revoke their Proxies and vote their
shares in person.
By Order of the Board of Directors
ANN F. MASSEY
Secretary
Date: April 30, 1999
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IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE.
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<PAGE>
COVER-ALL TECHNOLOGIES INC.
____________________
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 17, 1999
____________________
GENERAL
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Cover-All
Technologies Inc., a Delaware corporation (the "Company"). These
proxies will be voted at the Annual Meeting of Stockholders of
the Company (the "Meeting") which will be held at the Marriott at
Glenpointe Hotel, 100 Frank W. Burr Boulevard, Teaneck, New
Jersey 07666, on June 17, 1999 at 9:30 a.m., local time, and at
any adjournment thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders and in this
Proxy Statement.
The principal executive offices of the Company are located
at 18-01 Pollitt Drive, Fair Lawn, New Jersey 07410. The
approximate date on which this Proxy Statement and accompanying
Proxy will first be sent or given to stockholders is April 30,
1999.
VOTING SECURITIES AND VOTE REQUIRED
Stockholders of record as of the close of business on
April 26, 1999 (the "Record Date") will be entitled to notice of,
and to vote at, the Meeting or any adjournment or adjournments
thereof. As of the Record Date, there was only one class of
voting securities of the Company outstanding, that being Common
Stock. Each holder of Common Stock on the Record Date is
entitled to one vote for each share held. The presence, in
person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a
quorum at the Meeting. Assuming a quorum is present, the
nominees for director receiving a plurality of the votes cast at
the Meeting shall be elected.
With regard to the election of directors, votes may be cast
in favor or withheld; votes that are withheld will be excluded
entirely from the vote and will have no effect except that votes
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withheld will be counted toward determining the presence of a
quorum for the transaction of business.
Abstentions and broker "non-votes" will be counted toward
determining the presence of a quorum for the transaction of
business. Abstentions may be specified on all proposals except
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the election of directors. With respect to proposals other than
the election of directors, abstentions will have the effect of a
negative vote. A broker "non-vote" will have no effect on the
outcome of any other proposals. The treatment of abstentions and
broker "non-votes" is consistent with applicable Delaware law and
the Company's By-Laws.
As of April 26, 1999, 16,993,672 shares of the Company's
Common Stock were issued and outstanding.
<PAGE>
VOTING OF PROXIES
Proxies are solicited by the Board of Directors of the
Company in order to provide every stockholder with an opportunity
to vote on all matters that properly come before the Meeting,
whether or not the stockholder attends in person. When the
enclosed form of Proxy is properly signed, dated and returned,
the shares represented will be voted by the persons named as
Proxies in accordance with the stockholder's direction. If no
direction is indicated, the shares will be voted as recommended
by the Board of Directors. The enclosed Proxy confers
discretionary authority to vote with respect to the transaction
of such other business of a procedural nature or incidental to
the Meeting as may properly come before the Meeting. As of the
date of this Proxy Statement, the Board of Directors of the
Company does not know of any other matter to be brought before
the Meeting. However, if any other matters not mentioned in the
Proxy Statement are properly brought before the Meeting or any
adjournment thereof, the persons named in the enclosed Proxy or
their substitutes will have discretionary authority to vote
proxies given in said form, or otherwise act, in respect of such
matters in accordance with their best judgment. Any stockholder
executing a form of Proxy may revoke that Proxy or may submit a
revised form of Proxy at any time before it is voted. A
stockholder may also vote by ballot at the Meeting, thereby
canceling any Proxy previously returned.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table contains information as of March 31,
1999 as to the number of shares of Common Stock beneficially
owned by (i) each person known by the Company to own beneficially
more than 5% of the Company's Common Stock, (ii) each person who
is a director of the Company, (iii) the executive officers for
whom information is included in the Summary Compensation Table,
and (iv) all persons as a group who are directors and executive
officers of the Company, and as to the percentage of outstanding
shares held by such persons on that date.
Amount Percent
Status of Beneficially of
Name and Address Beneficial Owner Owned(1) Class(2)
---------------------------- ----------------- ---------- --------
Software Investments Limited Beneficial Owner 2,673,458(3) 15.6%
Abbot Building of more than 5%
P.O. Box 3186 of the Company's
Main Street Common Stock
Road Town
Tortola,
British Virgin Islands
Care Corporation Limited Beneficial Owner 2,500,000(4) 14.7%
Abbot Building of more than 5%
P.O. Box 3186 of the Company's
Main Street Common Stock
Road Town
Tortola,
British Virgin Islands
Sirrom Capital Corporation Beneficial Owner 2,400,000(5) 12.4%
500 Church Street of more than 5%
Suite 200 of the Company's
Nashville, TN 37219 Common Stock
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Amount Percent
Status of Beneficially of
Name and Address Beneficial Owner Owned(1) Class(2)
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Atlantic Employers Insurance Beneficial Owner 1,925,046(6) 10.9%
Company of more than 5%
1601 Chestnut Street of the Company's
Two Liberty Place Common Stock
Philadelphia, PA 19192
Harvey Krieger Beneficial Owner 912,046(7) 5.4%
12 Vaughn Drive of more than 5%
Ramsey, NJ 07446 of the Company's
Common Stock
Brian Magowan Chairman of the 410,000(8) 2.4%
Board and Chief
Executive Officer
Earl Gallegos Director 448,000(9) 2.6%
Ian J. Meredith Director 10,000(10) *
Mark D. Johnston Director 205,000(11) 1.2%
Steve Hough Director 10,000(12) *
James R. Stallard Director 10,000(13) *
Peter C. Lynch President and Chief 197,500(14) 1.1%
Operating Officer
John R. Nobel Chief Financial 11,000(15) *
Officer
Dalia Ophir Chief Technology 205,000(16) 1.2%
Officer
Raul F. Calvo Former 0 --
Vice President and
Chief Accounting
Officer
All directors and executive 1,506,500(17) 8.2%
officers as a group
(consisting of 9 persons)
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* Less than one percent.
(1) Includes options exercisable within sixty (60) days of the
date as of which beneficial ownership is determined,
pursuant to Rule 13d-3 under the Securities Exchange Act of
1934.
(2) Based upon 16,993,672 total outstanding shares of Common
Stock on March 31, 1999, plus shares of Common Stock that
may be acquired by the person or group indicated pursuant to
any options or warrants exercisable within sixty (60) days.
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(3) Software Investments Limited ("SIL"), a British Virgin
Islands corporation, reported on Schedule 13D filed
December 7, 1998, that it beneficially owns 2,673,458 shares
of Common Stock, which includes presently exercisable
warrants to purchase 106,152 shares of Common Stock at $1.91
per warrant. SIL reported that it has sole voting and
dispositive power over such shares. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
(4) Care Corporation Limited ("Care"), a British Virgin Islands
corporation, reported on Schedule 13D filed on December 7,
1998, that it beneficially owns 2,500,000 shares of Common
Stock. Care reported that it has sole voting and
dispositive power with respect to such shares. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
(5) Represents shares of Common Stock receivable upon conversion
of 12.5% Convertible Debenture due March 2002.
(6) Includes presently exercisable warrants to purchase 686,773
shares of Common Stock at $1.72 per warrant. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
(7) Mr. Krieger reported to the Company that he beneficially
owned 912,046 shares of Common Stock as of March 31, 1999.
(8) Represents options to purchase 400,000 shares at an exercise
price of $1.25 per share pursuant to the Company's 1995
Employee Stock Option Plan and options to purchase 10,000
shares at an exercise price of $2.13 per share pursuant to
the Company's 1994 Stock Option Plan for Independent
Directors.
(9) Represents options to purchase 438,000 shares at an exercise
price of $1.25 per share pursuant to the Company's 1995
Employee Stock Option Plan and options to purchase 10,000
shares at an exercise price of $2.13 per share pursuant to
the Company's 1994 Stock Option Plan for Independent
Directors.
(10) Represents options to purchase 10,000 shares at an exercise
price of $1.94 per share pursuant to the Company's 1994
Stock Option Plan for Independent Directors.
(11) Represents options to purchase 10,000 shares at an exercise
price of $4.50 per share pursuant to the Company's 1994
Stock Option Plan for Independent Directors and options to
purchase 195,000 shares at an exercise price of $2.00 per
share pursuant to the Company's 1995 Employee Stock Option
Plan. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
(12) Represents options to purchase 10,000 shares at an exercise
price of $3.81 per share pursuant to the Company's 1994
Stock Option Plan for Independent Directors.
(13) Represents options to purchase 10,000 shares at an exercise
price of $4.50 per share pursuant to the Company's 1994
Stock Option Plan for Independent Directors.
(14) Represents options to purchase 12,500 shares at an exercise
price of $2.25 per share pursuant to the Company's 1991 Key
Employee Stock Option Plan, options to purchase 30,000
shares at an exercise price of $5.00 per share, options to
purchase 145,000 shares at an exercise price of $1.5625 per
share pursuant to the Company's 1995 Employee Stock Option
Plan, 5,000 shares owned by Mr. Lynch and 5,000 shares owned
by Mr. Lynch's wife.
(15) Represents options to purchase 5,000 shares at an exercise
price of $3.75 per share pursuant to the Company's 1995
Employee Stock Option Plan and 6,000 shares owned by Mr.
Nobel.
(16) Represents options to purchase 15,000 shares at an exercise
price of $5.00, options to purchase 40,000 shares at $2.00
per share and options to purchase 150,000 shares at an
exercise price of $2.50 pursuant to the Company's 1995
Employee Stock Option Plan.
(17) Includes 1,490,500 shares of Common Stock which may be
acquired pursuant to the exercise of outstanding stock
options.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
There are six members of the Board of Directors of the
Company classified into three classes, with the three-year term
of office of each class expiring at the meeting of stockholders
in successive years, upon the election and qualification of
successor classes. The term of office of two directors will
expire at the Meeting. The Directors in the class subject to
election will be elected to serve for a term of three years or
until their successors shall have been elected and qualified.
The nominees for the class to be elected at the Meeting are
Earl Gallegos and Mark D. Johnston. Mr. Gallegos was named a
director of the Company in March 1997, and Mr. Johnston was named
a director of the Company in 1996.
The Company's By-Laws provide for seven members of the Board
of Directors. There was one vacancy as of the Record Date.
Proxies may not be voted for a greater number of persons
than the two nominees named. Unless otherwise indicated, all
proxies received will be voted in favor of the election to the
Board of Directors of the nominees named above. Should any of
the nominees not remain a candidate for election at the date of
the Meeting (which contingency is not now contemplated or
foreseen by the Board of Directors), proxies solicited hereby
will be voted in favor of those nominees who do remain candidates
and may be voted for substitute nominees selected by the Board of
Directors. The nominees for director receiving a plurality of
the votes cast at the Meeting shall be elected. Shares
represented by Proxy as to which authority to vote for the named
nominee is properly "withheld" will not be counted either "for"
or "against" in determining a plurality for such nominee.
The following table lists the names of the directors and the
nominees for Director, their ages, their current positions with
the Company and the expiration date of their term as director of
the Company.
Term as
Director
Name Age Position Expires
---- --- -------- --------
Brian Magowan . . . . 57 Chairman of the Board of 2000
Directors and Chief
Executive Officer
Earl Gallegos . . . . 41 Director 1999*
Steve Hough . . . . . 55 Director 2000
Mark D. Johnston . . 41 Director 1999*
Ian J. Meredith . . . 50 Director 2001
James R. Stallard . . 46 Director 2001
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* Term of class expires at the Meeting. Director indicated is a
nominee for re-election.
Brian Magowan has served as Chairman and Chief Executive
Officer of the Company since March 1997. From 1971 until August
1993, Mr. Magowan worked for the Unisys Corporation in various
capacities. In his last position with Unisys, he was Vice
President and General Manager of the Software Products Group.
Between September 1993 and March 1997, Mr. Magowan served as
Managing Partner of the consulting firm of Turnbury Associates
("Turnbury"). See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
Earl Gallegos was named a director of the Company in March
1997. Mr. Gallegos is a former Executive Vice President of
Operations for Pacific Rim Assurance Company. Mr. Gallegos spent
seven years working within all aspects of the workers'
compensation insurance company. Within the last three years,
Mr. Gallegos founded his own consulting firm, Earl Gallegos
Management, LLC, in which he performs management consulting
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within the insurance and software industries. Some of his larger
projects include implementation and management of a software
system to support a statewide managed care program and the
founding of a twenty-four hour managed care company in the state
of California. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
Steve Hough was named a director of the Company in December
1997. Mr. Hough is President of Tennecom Holdings, Inc. ("THI"),
a company which serves as the management arm for several computer
sales and service companies and as an incubator for new business
ventures. Mr. Hough established and has run Tennecom, Inc., a
computer sales and service company, since 1982. From 1982 to
1997, Mr. Hough established several subsidiaries and sister
companies of THI that develop software, refurbish and resell IBM
computer equipment and provide professional services in AS/400
and Client Server systems. Prior to 1982, Mr. Hough set up a
computer leasing division for Pearl Equipment Co., created
Computer Marketing of America, a computer sales company which he
sold to a partner in 1982, and worked for IBM in various
capacities. In connection with the issuance of the Company's
12-1/2% Convertible Debentures (the "Debentures") in March 1997
to Tandem Capital, Inc. ("Tandem"), an affiliate of Sirrom
Capital Corporation, Tandem was provided with the right to
require that its nominee be elected to the Board of Directors as
a member of the class whose term expires in 1998. In December
1997, Tandem had exercised such right with the appointment of
Mr. Hough to the Board of Directors.
Mark D. Johnston was elected a director of the Company in
1996 and served as Chief Financial Officer in 1997 on an interim
basis until John R. Nobel was named Chief Financial Officer in
January 1998. Mr. Johnston is an executive director of SIL and
Care, both of which are British Virgin Islands corporations. For
the past 7 years his responsibilities have been centered on
treasury operations, including currency management and management
of investments in international bonds, equities and derivatives.
Mr. Johnston has also been involved in the development of
educational software for use on multimedia personal computers for
the past five years and has gained considerable experience in the
rapid changes occurring in the computer industry. Mr. Johnston
is also a director of International Insurance Technologies, Inc.,
a software consulting company. Mr. Johnston was elected to the
Board of Directors pursuant to the terms of a Stock Purchase
Agreement dated as of March 31, 1996 among the Company, SIL and
Care. Under the Stock Purchase Agreement, the Company agreed to
elect Mr. Johnston as a director in the Class of 1996 as the
designee of SIL and Care. The Company further agreed that a
designee, which may be Mr. Johnston or a successor designated by
SIL and Care, shall be included as one of the management nominees
for director of the Company at each meeting of stockholders,
beginning with the 1996 Annual Meeting, and that if the designee
is not elected at the 1996 Annual Meeting or any subsequent
annual meeting called for the purpose of reelecting or electing
such class of directors, the Company shall, following such
meeting, elect the designee to its Board of Directors to serve
for a period equal to the remainder of the term of such class of
directors and amend its By-Laws to create any vacancy, if
required. The Stock Purchase Agreement further stipulates that
if, at any time, any designee shall decline or be unable to serve
as a director of the Company, another designee shall be elected
as a director to fill the vacancy thus created. Each designee
shall have all voting and other rights provided to directors of
the Company generally. The Company shall be required to comply
with the Stock Purchase Agreement for as long as SIL and Care
collectively hold an aggregate of 20% or more of the issued and
outstanding shares of the Company's Common Stock. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
Ian J. Meredith was named a director of the Company in March
1997. Mr. Meredith is the Chief Executive Officer of
International Insurance Technologies, Inc., a software consulting
company. His primary responsibility is to promote marketing and
sales of insurance software internationally. Mr. Meredith is a
director of Care Systems Corporation, a Delaware corporation and
an affiliate of Care ("CSC"), specializing in software and
services to the workers' compensation industry in the United
States. In 1992, Mr. Meredith, as CEO and Chairman, founded CSC
to develop proprietary software for the insurance and employer
markets. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
James R. Stallard was elected a director of the Company in
1996. Mr. Stallard joined CIGNA Property and Casualty in August
1994 as a Vice President. Mr. Stallard has held a variety of
management positions in underwriting, administration and systems
in the property and casualty insurance industry for nearly 26
years, and for 21 years was employed by Transamerica Insurance
Company (now known as TIG). Mr. Stallard was elected to the
Board of Directors of the Company pursuant to a Restructuring
Agreement dated as of March 1, 1996 among the Company and several
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customers and parties to two lawsuits. Under the Restructuring
Agreement, the Company agreed to elect to its Board of Directors
one designee selected by a majority in amount of the settlement
shares issued pursuant to the Restructuring Agreement.
Mr. Stallard, as designee, was elected as a director in the Class
of 1998 and was reelected at the Company's 1998 Annual Meeting of
Stockholders. The Company further agreed that if the designee
dies or resigns, his successor will be designated a director.
See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
In addition to Mr. Magowan who is the Chief Executive
Officer of the Company, Peter C. Lynch is the President and Chief
Operating Officer, John R. Nobel is the Chief Financial Officer,
Dalia Ophir is the Chief Technology Officer, and Ann F. Massey is
the Secretary of the Company.
Peter C. Lynch (age 38) is presently the President and Chief
Operating Officer of the Company and the President and Chief
Operating Officer of COVER-ALL, and has served as such since June
1996. Mr. Lynch joined the Company as Vice President of Sales
and Marketing of COVER-ALL in July 1994. He was appointed
President and Chief Operations Officer of COVER-ALL in 1995.
Prior to joining the Company, Mr. Lynch held various sales and
operations positions within AT&T as part of its executive
development program.
John R. Nobel (age 45) has served as Chief Financial Officer
of the Company since January 1998. From 1987 to December 1997,
Mr. Nobel held controller and finance positions with Chartwell
Leisure, Inc., Prime Hospitality Company and Simco Construction
Company. From 1983 to 1986, Mr. Nobel was employed by Arthur
Young & Co. Mr. Nobel is a Certified Public Accountant.
Dalia Ophir (age 43) has served as the Chief Technology
Officer of the Company since January 1, 1998. From 1994 until
December 1997, Ms. Ophir served as Senior Vice President/Program
Manager, TAS 2000. Ms. Ophir joined the Company in 1984 and held
various development and customer support positions through 1994.
Ann F. Massey (age 41) has served as the Company's Corporate
Secretary since April 1997. In March 1997, Ms. Massey was
appointed Controller of the Company and in March 1996, she was
appointed Assistant Treasurer of the Company. From 1994 until
February 1996, Ms. Massey served as Assistant Controller for the
insurance services division of the Company. Prior to 1994,
Ms. Massey served as the Company's Accounting Manager.
BOARD OF DIRECTORS AND COMMITTEES
There were sixteen (16) meetings of the Board of Directors of
the Company held during the last fiscal year. All current directors
attended at least 75% of the total number of meetings of the
Board and all committee meetings of the Board on which the
director served.
The Board of Directors has standing Compensation and Audit
Committees. The full Board of Directors administers each of the
1994 Non-Qualified Stock Option Plan for Consultants, the 1994
Stock Option Plan for Independent Directors and the 1995 Employee
Stock Option Plan, as amended (collectively, the "Stock Option
Plans"). Although the Company is no longer granting options
under the 1991 Key Employee Stock Option Plan, there still remain
outstanding options under this plan. The Company does not have a
standing nominating committee.
The members of the Compensation Committee are
Messrs. Magowan and Gallegos. The principal function of the
Compensation Committee is to review current and proposed
employment arrangements with existing and prospective senior
employees. During the fiscal year ended December 31, 1998, the
Compensation Committee met on two (2) occasions.
The members of the Audit Committee are Messrs. Stallard,
Gallegos and Johnston. The Audit Committee's principal functions
are (i) to consider matters relating to the administration and
audit of the Company's accounts and its financial affairs;
(ii) to supervise the Company's relationship with its independent
auditors; (iii) to recommend the appointment of independent
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auditors; and (iv) to meet with Company personnel as it deems
appropriate to carry out its functions. During the fiscal year
ended December 31, 1998, the Audit Committee met on one occasion.
In administering the Stock Option Plans, the Board of
Directors' principal function is to administer the respective
plans, including selecting the employees, consultants and
directors to whom options will be granted, determining the
number, terms and conditions of options to be granted to any such
employee, consultant or director when options are to be granted,
and establishing rules and regulations for the administration of
the respective plans.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1996, the Company entered into a series of
agreements which provided for the transfer and discontinuance of
its Insurance Services Division ("ISD") operations and the
issuance of the Company's Common Stock and warrants to
(i) 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 (ii) The Robert Plan Corporation in
exchange for the settlement and dismissal of lawsuits with The
Robert Plan Corporation.
As part of the restructuring transactions in March 1996 (the
"Restructuring"), the Company transferred certain assets,
employees, contracts and leased premises relating to its ISD
business to a subsidiary of The Robert Plan Corporation, which
replaced the Company as the provider of insurance services to the
ISD customers. In exchange for settling the lawsuits, releasing
the Company's contractual obligations to provide insurance
services and executing mutual releases, the Company issued to
certain of the ISD customers and certain parties to the
litigation: (a) a total of 3,256,201 shares of the Company's
Common Stock, (b) five-year warrants (the "Restructuring
Warrants") to purchase up to an additional 1,553,125 shares of
the Company's 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 the Company's Common Stock,
Restructuring Warrants to purchase 1,181,250 shares and $675,000
in cash as part of the Restructuring, and on March 31, 1999, held
1,238,273 of the shares and 686,773 of the such warrants.
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.
As part of the Restructuring, the Company 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. On
March 31, 1996, the Company assigned this repurchase option to
SIL, which SIL subsequently exercised. As a result of the SIL
and Care transactions of March 31, 1996 described below, the
antidilution provisions of the Restructuring Warrants required an
adjustment of shares to 1,725,694 from 1,553,125 and a price
adjustment to $1.80 from $2.00 per share. Further, as a result
of the issuance of the Debentures to Tandem on March 31, 1997,
the remaining Restructuring Warrants required an adjustment of
shares to 902,979 and a price adjustment to $1.72 per share.
Also in March 1996, the Company entered into a series of
transactions with SIL and Care whereby the Company: (A) sold to
SIL for total proceeds of $3,022,391: (i) 1,412,758 shares of the
Company's Common Stock for $2.00 per share, and (ii) five-year
warrants (the "SIL Warrants") to purchase an aggregate of 196,875
shares of the Company's Common Stock, exercisable at $2.00 per
share, for $1.00 per SIL Warrant ($196,875), and (B) assigned to
SIL the rights it retained in the Restructuring to repurchase
within six months shares of the Company's Common Stock and its
rights to purchase from the warrantholders Restructuring Warrants
to acquire 776,562 shares of the Company's Common Stock. As a
result of the issuance of these shares, the antidilution
provisions of the Restructuring Warrants required an adjustment
from 776,562 shares at $2.00 share to 862,847 shares at $1.80 per
share. As a result of the issuance of the Debentures to Tandem
on March 31, 1997, the SIL Warrants required an adjustment of
shares to 206,152 and a price adjustment to $1.91 per share. On
July 31, 1997, SIL assigned 100,000 SIL Warrants to certain
private investors.
On March 31, 1996, the Company was granted by Care 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
8
<PAGE>
License"). In exchange for this license, the Company issued to
Care 2,500,000 shares of the Company's Common Stock at $2.00 per
share to value the license at $5,000,000 at March 31, 1996. The
license agreement was revised on March 14, 1997, and the Company
engaged Care as its exclusive sales agent for a monthly fee of
$10,000 against commissions of 20%. Depending on the level of
revenue reached, or not reached, under the license agreement, the
Company had the right to repurchase all or portions of the shares
issued to Care at $.01 per share. In accordance with such
engagement of Care as the Company's exclusive agent, the Company
paid Care approximately $90,000 in 1997 and approximately $30,000
in 1998.
On March 31, 1998, as a result of a strategic decision by
the Company to allocate its future resources to its TAS 2000 and
Classic product lines rather than the product line obtained by
the Care Software License, the Company negotiated a buy back of
the Care Software License. For the buy back of the Care Software
License by Care, the Company received $500,000 on March 31, 1998
and a $4,500,000 non-interest bearing note, payable in semi-
annual installments of $500,000 which, when discounted at 6%,
results in a principal amount of the note of $3,893,054. The
discounted note is collateralized by unencumbered Cover-All stock
owned by Care and a Care affiliate, SIL. The number of shares
required as collateral will vary, such 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 date. Based
on the market price of the Company's stock on March 30, 1998,
approximately 1,700,000 shares were pledged as collateral. Based
on the market price of the Company's common stock on September
30, 1998, approximately 3,700,000 shares were pledged as
collateral. Upon receipt of the first $500,000 payment under the
agreement on March 31, 1998, the Company lifted the
aforementioned $.01 per share stock repurchase restriction on the
2,500,000 shares. The Company also acquired worldwide reseller
rights (excluding Australia, New Zealand and the United States)
to the Care software. The Company has received the subsequent
payments due under the Care note, including the payment due by
March 31, 1999. Based on the market price of the Company's
common stock on March 30, 1999, approximately 1,909,000 shares
were pledged as collateral.
In separate but related agreements, Care agreed to grant to
the Company certain nonexclusive reseller rights to the Care
Software License, for which the Company is not required to pay a
license fee to Care and the Company agreed to grant to Care
nonexclusive reseller rights to the TAS 2000 software and the
Classic product line, relieving the Company of paying to Care an
agency fee, as well as reducing marketing expense to the Company.
Based on the above, and due to the related party nature of
the Care Software License buy back agreement, the Company
recorded the $1,143,054 difference between the carrying value of
the Care Software License at December 31, 1997 of $3,250,000 and
the discounted $4,393,054 buy back agreement amount to capital in
excess of par value in the first quarter of 1998.
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
1998.
Ian J. Meredith, a director of the Company, is also a
director of Care and of CSC, a Care affiliate, specializing in
software and services to the workers' compensation industry in
the United States. In 1992, Mr. Meredith, as CEO and Chairman,
founded CSC 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.
In March 1997, the Company engaged Brian Magowan as Chief
Executive Officer of the Company with compensation to be paid by
the Company to Turnbury Associates, the consulting firm of which
Mr. Magowan is a managing partner. The Company paid Turnbury
approximately $150,000 in the 1998 Fiscal Year for professional
services provided to the Company. The Company paid Mr. Magowan
$23,787 in the 1998 Fiscal Year for reimbursement of travel
9
<PAGE>
expenses in connection with his consulting services. See
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- EMPLOYMENT
AGREEMENTS OF EXECUTIVE OFFICERS."
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 CSC, a Care
affiliate, for the last two years with regard to project
management in connection with CSC's 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. This engagement ended on February 10, 1999.
Separately, pursuant to the Consulting Agreement, dated as of
April 29, 1997, between the Company and Earl Gallegos Management,
LLC, the Company engaged Mr. Gallegos as a consultant for the
10-month period of March 1997 to January 1998. Under this
Consulting Agreement, in March 1997, the Company granted
Mr. Gallegos' firm 250,000 options to purchase the Company's
common stock at $1.25 per share and granted Mr. Gallegos' firm a
bonus of 250,000 options to purchase the Company's common stock
at $1.25 per share in March 1997. The Company did not grant
Mr. Gallegos' firm any options to purchase the Company's common
stock in the 1998 fiscal year. Pursuant to a Consulting
Agreement, dated as of October 26, 1998, between the Company and
Earl Gallegos Management, LLC, the Company engaged Earl Gallegos
Management, LLC for a six to nine month period to provide project
management services for one of the Company's TAS 2000 customers.
Pursuant to this Consulting Agreement, the Company will pay
Mr. Gallegos' firm $1,100 per day plus expenses. See
"COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION."
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF
1934
The following table lists the current and former directors,
officers and beneficial owners of more than 10% of the
outstanding Common Stock (each a "Reporting Person") that failed
to file on a timely basis reports required by Section 16(a) of
the Exchange Act during the most recent fiscal year, the number
of late reports, the number of transactions that were not
reported on a timely basis and any known failure to file a
required Form by each Reporting Person:
Transactions
Untimely Known Failures
Reporting Person Late Reports Reported To File Forms
---------------- ---------------- -------- -------------
Dalia Ophir 2 4 None
Except as set forth above, the Company believes that during
the fiscal year ended December 31, 1998, its executive officers,
directors and holders of more than 10% of the Common Stock
complied with all Section 16(a) filing requirements. In making
these statements, the Company has relied upon a review of reports
on Forms 3, 4 and 5 furnished to the Company during, or with
respect to, its last fiscal year.
10
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The following table summarizes all compensation earned or
paid to the Company's Chief Executive Officer and each of the
Company's other executive officers whose total annual salary and
bonus exceeded $100,000 for services rendered in all capacities
to the Company during the fiscal years ended December 31, 1998,
1997 and 1996.
Annual Compensation
--------------------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation
------------------ ---- ------ ----- ------------
Brian Magowan 1998 $ -- $-- $150,000(1)
Chairman of the Board 1997 -- -- 235,800(2)
and Chief Executive 1996 -- -- 139,500(2)
Officer
Peter C. Lynch 1998 189,992 10,000 --
President and Chief 1997 178,327 -- 17,452(3)
Operating Officer 1996 157,763 -- 14,892(4)
John R. Nobel 1998 100,269 20,000 --
Chief Financial Officer 1997 -- -- --
1996 -- -- --
Dalia Ophir 1998 178,646 50,000 --
Chief Technology 1997 173,353 40,000 21,287(5)
Officer 1996 120,600 -- --
Raul F. Calvo 1998 135,541 -- --
Former Vice President 1997 131,250 5,000 24,486(6)
and Chief Accounting 1996 136,800 -- --
Officer
Long Term Compensation(1)
-----------------------------
Awards Payouts
------------------------------
All
Restricted Securities Other
Name and Stock Underlying LTIP Compen-
Principal Position Year Award(s) Options Payouts sation
------------------ ---- ---------- ---------- ------- ------
Brian Magowan 1998 -- -- -- --
Chairman of the 1997 -- 410,000 -- --
Board and Chief 1996 -- -- -- --
Executive Officer
Peter C. Lynch 1998 -- -- -- --
President and 1997 -- 145,000 -- --
Chief Operating 1996 -- 54,800 -- --
Officer
John R. Nobel 1998 -- 15,000 -- --
Chief Financial 1997 -- -- -- --
Officer 1996 -- -- -- --
Dalia Ophir 1998 -- 150,000 -- --
Chief Technology 1997 -- 50,000 -- --
Officer 1996 -- 35,400 -- --
Raul F. Calvo 1998 -- -- -- --
Former Vice 1997 -- -- -- --
President 1996 -- 34,700 -- --
and Chief
Accounting
Officer
--------------------
(1) Represents $150,000 paid to Turnbury, the consulting firm of
which Mr. Magowan is a managing partner, pursuant to the
Services Agreement, dated as of March 1, 1998, by and
between the Company and Turnbury.
(2) Represents amounts paid to Turnbury pursuant to the
Consulting Agreement, dated as of June 20, 1995, by and
between the Company and Turnbury, as amended on April 29,
1997.
(3) Represents salary in the amount of $12,375 payable in 1996
but deferred until 1997 and unused vacation in the amount of
$5,077.
(4) Represents the $14,892 value of a company car given to Mr. Lynch.
(5) Represents the difference between the outstanding principal
amount of $30,000 and accrued interest of $1,487 of an
executive loan made by the Company to Ms. Ophir in May 1996,
which was forgiven by the Company in August 1997, and
deferred salary in the amount of $10,200 originally payable
in 1996 and 1997, which was relinquished by Ms. Ophir in
August 1997.
(6) Represents salary in the amount of $9,850 payable in 1996
but deferred until 1997 and unused vacation in the amount of
$14,636.
11
<PAGE>
GRANTS AND EXERCISES OF STOCK OPTIONS
The following table sets forth certain information with
respect to stock options granted during the 1998 fiscal year to
the executive officers of the Company listed in the Summary
Compensation Table. The table also discloses the gain or
"spread" that would be realized if the options granted were
exercised on the expiration date assuming the Company's stock
price had appreciated by the percentage levels indicated annually
from the market price on the date of grant.
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECI-
ATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------- ---------------
% OF
TOTAL
OPTIONS
GRANTED
NUMBER OF TO
SECURITIES EMPLOY-
UNDERLYING EES IN EXERCISE
OPTIONS FISCAL PRICE EXPIRATION
NAME GRANTED YEAR ($/SH) DATE 5% 10%
---- ------------------ ------------------ -- ---
Brian Magowan -- -- -- -- -- --
Peter C. Lynch -- -- -- -- -- --
John R. Nobel 15,000 4.8% 3.75 12/28/02 15,341 32,052
Dalia Ophir 150,000 47.6% 2.50 6/09/00 38,438 78,750
Raul F. Calvo -- -- -- -- -- --
The following table sets forth outstanding stock options held
by the executive officers of the Company listed in the Summary
Compensation Table at December 31, 1998.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR- FISCAL YEAR-
END END(1)
NUMBER OF (#) ($)
SHARES - - - - - - - - - - - -
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- -------- ----------- ------------- -------------
Brian Magowan -- -- 410,000/0 275,000/0
Peter C. Lynch 5,000 3,750 187,500/0 54,375/0
John R. Nobel -- -- 5,000/10,000 0
Dalia Ophir 27,400 76,213 205,000/0 0
Raul F. Calvo -- -- -- --
---------------
(1) Based upon the fair market value of $1 15/16 of the
Company's Common Stock on December 31, 1998 on The Nasdaq
SmallCap Market.
12
<PAGE>
TEN YEAR OPTION/SAR REPRICINGS
The following provides information on the repricing of stock
options held by the Named Officers within the past 10 years:
LENGTH OF
ORIGINAL
NUMBER OF MARKET EXERCISE OPTION
SECURITIES PRICE OF PRICE TERM
UNDERLYING STOCK AT AT TIME REMAINING
OPTIONS TIME OF OF AT DATE
REPRICED REPRICING REPRICING NEW OF
OR OR OR EXERCISE REPRICING
AMENDED AMENDMENT AMENDMENT PRICE OR
NAME DATE (#) ($) ($) ($) AMENDMENT
---------------------------------------------------------------------
Dalia 6/9/98 150,000 2.50 4.00 2.50(1) 2 years
Ophir and 6
Chief months
Tech-
nology
Officer
-------------
(1) Represents the closing price of a share of Common Stock on the
Nasdaq National Market on June 9, 1998.
REPORT ON REPRICING OF OPTIONS/SARS
The Stock Option Plans are administered by the Board of Directors
of the Company. In order to retain the services of Dalia Ophir as the
Company's Chief Technology Officer, the Company entered into an
employment agreement, dated as of January 1, 1998, with Ms. Ophir and
an incentive stock option agreement, dated as of January 1, 1998, with
Ms. Ophir. Under the terms of her employment agreement and incentive
stock option agreement, the Company granted to Ms. Ophir an option
(the "Original Option"), pursuant to the Company's 1995 Employee Stock
Option Plan, as amended (the "Plan"), to purchase 150,000 shares of
the Company's Common Stock at an exercise price of $4.00 per share, on
the terms and conditions as set forth in her incentive stock option
agreement.
Since January 1, 1998, the date of the Original Option, the price
of the Common Stock fell to such a level that the Board of Directors
believed that the Original Option would no longer provide the desired
incentive to motivate Ms. Ophir in the performance of her duties.
Therefore, because the Company greatly valued the services Ms. Ophir
provides to the Company and the Company desired to provide Ms. Ophir
with an incentive to motivate Ms. Ophir to continue to provide
outstanding performance of her duties, in June 1998, the Board of
Directors considered repricing Ms. Ophir's stock options.
Consequently, the Board approved the repricing of Ms. Ophir's
150,000 Original Options that were exercisable at an exercise price of
$4.00 per share and new stock options (the "Repriced Options") were
granted as of June 9, 1998 under the Plan and pursuant to the terms of
a new incentive stock option agreement between Ms. Ophir and the
Company. The transaction was accomplished through the cancellation by
the Board of Directors of Ms. Ophir's Original Option and a grant of
the Repriced Options. The Repriced Options are exercisable at a price
of $2.50 per share, which was the closing price of a share of Common
Stock of the Company on the Nasdaq National Market on June 9, 1998.
Brian Magowan
Earl Gallegos
James R. Stallard
Mark D. Johnston
Ian J. Meredith
Steve Hough
(Members of the Board of Directors)
13
<PAGE>
EMPLOYMENT AGREEMENTS OF EXECUTIVE OFFICERS
In March 1997, the Company engaged Brian Magowan as Chief
Executive Officer of the Company. Pursuant to a compensation package
amended by the Board of Directors on April 29, 1997, the Company paid
Turnbury, the consulting firm of which Mr. Magowan is a managing
partner, $12,500 per month, plus expenses, for services rendered by
Mr. Magowan. Additionally, the Company granted Mr. Magowan five-year
options to purchase 400,000 shares of Common Stock, exercisable at
$1.25 per share. As of March 1, 1998, the Company entered into a
services agreement with Turnbury, whereby the Company, effective as of
January 1, 1998, agreed to continue to retain Mr. Magowan as Chief
Executive Officer of the Company. The services agreement expired on
December 31, 1998 and provides for a retention fee consisting of an
annual fee of $150,000, payable in equal monthly installments, plus a
bonus based upon the financial results of the Company.
The Company entered into an employment agreement with Peter C.
Lynch, dated as of March 1, 1998, whereby the Company agreed to
continue to retain Mr. Lynch as President of the Company. The
employment agreement expired on February 28, 1999 and provided for
compensation of $190,000 plus bonus. The Company entered into a new
employment agreement with Mr. Lynch, dated as of March 1, 1999,
whereby the Company agreed to continue to retain Mr. Lynch as
President of the Company. The March 1, 1999 agreement shall continue
month to month and provides for an annual salary of $210,000 plus
bonus.
The Company entered into an employment agreement with John R.
Nobel, dated as of January 15, 1998, whereby the Company engaged Mr.
Nobel as Chief Financial Officer of the Company. The employment
agreement expires December 31, 1998 and provided for compensation of
$110,000 plus bonus. Additionally, the Company granted Mr. Nobel
options to purchase 15,000 shares of Common Stock, exercisable at
$3.75 per share.The Company entered into an employment agreement with
John R. Nobel, dated as of February 19, 1999, whereby the Company
agreed to retain Mr. Nobel as Chief Financial Officer of the Company.
The employment agreement expires December 31, 1999 and provides for
compensation of $130,000 plus bonus. Additionally, the Company
granted Mr. Nobel options to purchase 25,000 shares of Common Stock,
exercisable at $1.75 per share. The employment agreement may be
renewed jointly by the Company providing written offer of continued
employment upon terms and conditions no less favorable to Mr. Nobel
than those set forth in the employment agreement at least ninety (90)
days prior to the expiration date and by Mr. Nobel accepting such
offer within ten (10) days of the delivery of the offer of renewal by
the Company.
In January 1998, the Company engaged Dalia Ophir as Chief
Technology Officer of the Company. The employment agreement expires
on December 31, 2000 and provides for compensation at the annual rate
of $180,000 (subject to annual increases) plus bonus. The agreement
provides Ms. Ophir with incentive stock options to purchase 150,000
shares of Common Stock, exercisable at $4.00 per share, pursuant to
the Company's 1995 Employee Stock Option Plan. On June 6, 1998, in a
letter agreement from the Company to Ms. Ophir, the Company repriced
the option exercise price to $2.50 per share. The employment
agreement may be renewed for successive one year terms jointly by the
Company and Ms. Ophir by providing written notice of renewal to each
other at least thirty (30) days prior to the expiration of the then
current term.
On April 1, 1996, the Company and COVER-ALL entered into an
employment agreement with Raul F. Calvo, Vice President and Chief
Accounting Officer of the Company. The employment agreement expired
on December 31, 1998 and provided for compensation at the annual rate
of $131,250. Mr. Calvo's employment was terminated as of July 10,
1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1998, the Compensation Committee consisted of
Messrs. Magowan and Gallegos. Mr. Magowan serves as the Chairman of
the Board and Chief Executive Officer of the Company. Mr. Gallegos
serves as a director of the Company and served as a consultant to the
Company for the period of March 1997 to January 1998. Mr. Gallegos 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 CSC, a Care affiliate, for
14
<PAGE>
the last two years with regard to project management in connection
with CSC's 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. The engagement ended on February 10,
1999. Separately, pursuant to the Consulting Agreement, dated as of
April 29, 1997, between the Company and Earl Gallegos Management, LLC,
the Company engaged Mr. Gallegos as a consultant for the 10-month period
of March 1997 to January 1998. Under this Consulting Agreement, in
March 1997, the Company granted Mr. Gallegos' firm 250,000 options to
purchase the Company's common stock at $1.25 per share and granted
Mr. Gallegos' firm a bonus of 250,000 options to purchase the Company's
common stock at $1.25 per share. The Company did not grant
Mr. Gallegos' firm any options to purchase the Company's common stock in
the 1998 fiscal year. Pursuant to a Consulting Agreement, dated as of
October 26, 1998, between the Company and Earl Gallegos Management,
LLC, the Company engaged Earl Gallegos Management, LLC for a six to
nine month period to provide project management services for one of the
Company's TAS 2000 customers. Pursuant to this Consulting Agreement,
the Company will pay Mr. Gallegos' firm $1,100 per day plus expenses.
COMPENSATION OF DIRECTORS
In 1998, the Company's outside directors received no compensation
for their services as directors of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation program developed by the Compensation Committee
has required management to set goals at the beginning of each fiscal
year for increasing income before taxes from the previous year in
order to evaluate management's performance. Salary increases for each
fiscal year have been based upon the Company attaining the earnings
performance targets for the preceding fiscal year, unusual achieve-
ments, and cost of living. Bonuses, if any, are divided among the
executive group after evaluation of each individual's performance, in
consultation with senior management. Option grants are similarly
based. The Chairman of the Board and Chief Executive Officer of the
Company is separately evaluated by the Committee which takes into
consideration overall Company performance in attaining established
targets for income before taxes and developing and achieving short
term and long term goals for the Company's business. For the 1998
Fiscal Year, bonuses were paid to certain employees and to the Chief
Executive Officer on the basis of the 1998 performance of the Company.
In 1998, the Company entered into (i) a services agreement with
Turnbury, to engage Mr. Magowan as Chairman and Chief Executive
Officer of the Company, pursuant to which the Company agreed to pay
Turnbury $12,500 per month, plus expenses, five-year options to
purchase 400,000 shares of Common Stock, exercisable at $1.25 per share
and a bonus payment of $100,000 if the Company achieves projected sales
goals for the 1998 Fiscal Year, (ii) an employment agreement to engage
Ms. Ophir as Chief Technology Officer of the Company, pursuant to which
the Company agreed to pay Ms. Ophir $180,000 per year (subject to annual
increases) and incentive stock options to purchase 150,000 shares of
Common Stock, exercisable at $2.50 per share, pursuant to a subsequent
repricing agreement, (iii) an employment agreement to engage Mr. Nobel
as Chief Financial Officer, pursuant to which the Company agreed to pay
Mr. Nobel $110,000 per year plus bonus, and options to purchase 15,000
shares of Common Stock, exercisable at $3.75 per share, and (iv) an
employment agreement to engage Mr. Lynch as President of the Company,
pursuant to which the Company agreed to pay Mr. Lynch $190,000 per year
plus bonus.
Brian Magowan
Earl Gallegos
(Members of the Compensation Committee)
15
<PAGE>
PERFORMANCE GRAPH
Displayed below is a graph which compares the cumulative total
stockholder returns (including reinvestment of dividends) from the
period from October 31, 1993 through December 31, 1998 on an
investment of $100 in (i) the Company's Common Stock, (ii) the Russell
2000 Index (an index of small capitalization companies), and (iii) two
indices of peer groups selected by the Company. Stockholders are
advised that historical results are not necessarily indicative of
future performance.
-----------------------------------------
CUMULATIVE TOTAL RETURN
12/93 12/94 12/95 12/96 12/97 12/98
COVER-ALL TECHNOLOGIES
INC. COVR 100 48 30 30 79 38
New Peer Group 100 142 223 323 381 448
Old Peer Group 100 129 254 303 491 855
Russell 2000 100 98 126 147 180 179
16
<PAGE>
AUDITORS
The Company's independent public auditors are Moore Stephens,
P.C., Cranford, New Jersey. A representative of Moore Stephens, P.C.
will be present at the Meeting and available to respond to appropriate
questions and, in addition, such representative will be given an
opportunity to make a statement at the Meeting if the representative
desires. At a meeting held on August 4, 1997, the Board of Directors
of the Company approved the engagement of Moore Stephens, P.C. as its
independent auditors for the fiscal year ending December 31, 1997 to
replace Ernst & Young LLP, who were dismissed as auditors of the
Company effective August 4, 1997. Proposals for performing the audit
services were received from both firms, and the change was made for
cost-saving reasons. The members of the Company's audit committee
approved the change. The reports of Ernst & Young LLP on the
Company's financial statements for the past fiscal year did not
contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope, or accounting
principles.
In connection with the audits of the Company's financial
statements for each of the two fiscal years ended December 31, 1995
and 1996, and in the subsequent interim period, there were no
disagreements with Ernst & Young LLP on any matters of accounting
principles or practices, financial statement disclosure, or auditing
scope and procedure which, if not resolved to the satisfaction of
Ernst & Young LLP, would have caused Ernst & Young LLP to make
reference to the matter in their report.
ANNUAL REPORT
All stockholders of record as of April 26, 1999 have or are
currently being sent a copy of the Company's Annual Report for the
fiscal year ended December 31, 1998 (the "Annual Report") which
contains audited financial statements of the Company and complies with
all of the disclosure requirements of the Company's 1998 Annual Report
on Form 10-K as filed with the Securities and Exchange Commission.
The Annual Report is deemed to be part of the material for the
solicitation of Proxies. If a stockholder has not received a copy of
the Annual Report, a copy of the Annual Report may be requested by
writing to the Secretary, Cover-All Technologies Inc., 18-01 Pollitt
Drive, Fair Law, New Jersey 07410.
STOCKHOLDER PROPOSALS
If a stockholder intends to present a proposal at the Company's
2000 Annual Meeting of Stockholders and seeks to have the proposal
included in the Company's Proxy Statement relating to that meeting,
pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as
amended, the proposal must be received by the Company no later than
the close of business on January 8, 2000. If a stockholder wishes to
present a matter at the 2000 Annual Meeting of Stockholders that is
outside of the processes of Rule 14a-8, the Company must receive
notice of such matter on or before March 23, 2000. After that date,
the proposal will be considered untimely and the Company's proxies
will have discretionary voting authority with respect to such matter.
Any proposals, as well as any related questions, should be directed to
the Secretary of the Company.
MISCELLANEOUS
The Company will bear all of the costs of solicitation of proxies.
In addition to solicitation of proxies by use of the mails, directors,
officers and employees (who will receive no compensation therefor in
addition to their regular remuneration) of the Company may solicit the
return of proxies by telephone, telegram or personal interview.
It is important that proxies be returned promptly. Stockholders
are, therefore, urged to fill in, date, sign and return the proxy
immediately. No postage need be affixed if mailed in the enclosed
envelope in the United States.
By Order of the Board of Directors
ANN F. MASSEY
Secretary
Date: May 7, 1999
17
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
COVER-ALL TECHNOLOGIES INC.
The undersigned, a stockholder of COVER-ALL TECHNOLOGIES INC., a
Delaware corporation (the "Company"), does hereby appoint Brian Magowan and
John R. Nobel and each of them as Proxies with full power of substitution in
each of them, in the name, place and stead of the undersigned, to vote at the
Annual Meeting of Stockholders of the Company to be held at the Marriott at
Glenpointe Hotel, 100 Frank W. Burr Boulevard, Teaneck, New Jersey 07666, on
June 17, 1999 at 9:30 a.m., local time, and at any adjournment or adjournments
thereof, all of the shares of the Company's Common Stock that the undersigned
would be entitled to vote if personally present.
The undersigned hereby instructs said proxies or their substitutes:
1. TO ELECT A CLASS OF DIRECTORS CONSISTING OF TWO DIRECTORS TO SERVE
FOR A TERM OF THREE YEARS AND UNTIL THEIR SUCCESSORS SHALL HAVE
BEEN DULY ELECTED AND QUALIFIED:
[ ] Vote FOR the nominees listed [ ] WITHHOLD AUTHORITY to
below vote for the nominees
listed below
NOMINEE: Earl Gallegos, Mark D. Johnston
2. DISCRETIONARY AUTHORITY: TO VOTE WITH DISCRETIONARY AUTHORITY
WITH RESPECT TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE
THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
(continued, and to be signed on reverse side)
<PAGE>
(continued from other side)
THIS PROXY WILL BE VOTED AS SPECIFIED EXCEPT THAT IF NO
INSTRUCTIONS ARE INDICATED, IT WILL BE VOTED FOR PROPOSAL 1.
Please sign exactly as your name appears
hereon. If stock is held jointly,
signature should include both names.
Administrators, Trustees, Guardians and
others signing in a representative
capacity, please give your full titles.
Dated: , 1999
--------------------------
(L.S.)
--------------------------
(L.S.)
--------------------------
Signature(s)
Please Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope.
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