Exhibit 5
STOCK OPTION AGREEMENT
This Agreement is made as of September 30, 1998, by and among PARADIGM
GROUP, L.L.C. (the "Holder") and Care Corporation, Limited, a British Virgin
Islands company ("Care").
RECITALS
WHEREAS, Care is the owner of 2,500,000 common shares and its affiliates
own another 2,897,306 common shares of voting stock of Cover-All
Technologies, Inc. ("COVR" or the "Corporation"), a New Jersey corporation
(such common shares being hereinafter referred to as the "Common Stock");
WHEREAS, the Holder has loaned Care money in accordance with the
September 30, 1998 "CONVERTIBLE PROMISSORY NOTE" (the "Note"), attached
hereto and made a part hereof;
WHEREAS, the terms of the Note require that Care ▇▇▇▇▇ ▇▇▇▇▇▇ an option
to acquire shares of Common Stock;
WHEREAS, Care is willing to grant to the Holder the option to purchase
Common Stock subject to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual promises of the parties to
each other and other good and valuable considerations, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereto agree as
follows:
1. RECITALS INCORPORATED. The preceding recitals are herewith incorporated
into and made a part of this Agreement.
2. GRANT OF STOCK OPTION. In further consideration of the advance by the
Holder to or on behalf of Care pursuant to the Note, and as an inducement
therefor, Care does hereby grant to Holder an Option to acquire 52,857 shares
of Common Stock (the "Option").
3. OPTION PURCHASE PRICE. The purchase price ("Purchase Price") for the
Option shall be $0, the consideration for same being the loan pursuant to the
Note.
4. OPTION EXERCISE PRICE. The Option exercise price (the "Exercise
Price"), to acquire the Common Stock shall be $1.42 per share for 30,714
shares of Common Stock, and $1.29 per share for 22,143 shares of Common Stock.
5. TIME AND METHOD OF EXERCISE. The Option is exercisable by the Holder,
in whole and not in part, beginning on the date of this Agreement. The
Holder may exercise the Option by providing written notice to Care and
tendering the full Exercise Price to Care by cashier's check.
Upon receipt of the notice and the Exercise Price, Care shall promptly tender
a certificate or certificates evidencing a sufficient number of shares of
Common Stock to COVR's transfer agent and cause the transfer agent to issue
in the name of and deliver to Holder a certificate or certificates evidencing
the number of shares of Common Stock subject to the Option. The
certificate(s) issued in the name of Holder shall bear the same restrictive
legends set forth on the certificate(s) tendered by Care.
6. TERM. The option granted herein shall expire on midnight September 30,
2000.
7. SECURITIES LAWS.
7.1 The rights granted hereunder, in accordance with this Option and the
underlying shares of Common Stock into which the Option is exercisable
have not been registered under the Securities Act of 1933, as amended
(the "Act") or under applicable state securities laws. Care shall use
its best efforts to register the underlying shares of Common Stock for
resale upon the same terms and conditions as set forth in Section 1.7
of the Note, which is incorporated herein by reference as if fully set
forth herein.
7.2 Holder recognizes that an investment in COVR involves substantial
risks. Holder has been given the opportunity to ask questions and
receive answers concerning the terms and conditions of the purchase,
COVR, Care and the businesses of each.
7.3 The Option hereunder is transferrable only pursuant to: (i) a public
offering registered under the Act; (ii) Rule 144 or Rule 144A of the
Securities and Exchange Commission (or any similar rule in force) if
such rule is available after the applicable holding period; or
(iii) any other legally available means of transfer.
7.4 There is no public market for the Option and there can be no assurance
that such public market will develop in the future or that Holder will
be able to sell or dispose of the Option. Moreover, no assignment,
sale, transfer, exchange or other disposition of the Option can be
made other than in accordance with the restrictions on transferability
set forth above.
7.5 Holder understands and agrees that the following restrictions and
limitations are applicable to this purchase and any resale or other
transfer Holder may make of the Option:
(i) A legend in substantially the following form may be placed on
any certificates evidencing the Option:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
AS AMENDED OR UNDER ANY STATE SECURITIES LAW. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, OFFERED
FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 AS AMENDED AND UNDER ANY APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
(ii) Stop transfer instructions may be instituted with respect to
the Option so as to restrict resale or other transfer thereof
in accordance herewith and the provisions of the legend set
forth in subparagraph (i) above.
(iii) The legend and stop transfer instructions described in the
above subparagraphs way be placed on any new certificates
issued upon presentment by Holder of certificates for the
Option for transfer.
8. REPRESENTATIONS AND WARRANTIES OF CARE. Care hereby represents and
warrants to Holder as follows:
8.1 ORGANIZATION, REGISTRATION, AND CORPORATE POWER. To the best of
Care's knowledge, COVR is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New
Jersey. To the best of Care's knowledge, COVR has full corporate
power and authority to carry on the business in which it is engaged.
8.2 TITLE. Care owns all right, title, and interest in and to the shares
of Common Stock into which the Option is exercisable, free and clear
of all liens, claims, charges, security interests, options,
encumbrances, or restrictions whatsoever, except for a pledge to COVR
of the shares of Common Stock held by Care pursuant to that certain
Pledge Agreement, dated as of March 31, 1998, by and between Care and
COVR. Care's affiliates own all right, title, and interest in and to
1,374,998 shares or Common Stock, free and clear of all liens, claims,
charges, security interests, options, encumbrances, or restrictions
whatsoever.
8.3 RIGHT TO SELL. Care has the absolute and unrestricted right, title,
power, and authority to sell to Holder all right, title, and interest
in and to the Option pursuant to this Agreement, to execute this
Agreement, and to perform its obligations under this Agreement.
8.4 AGREEMENT BINDING. Care has duly executed this Agreement as its own
free act and deed, and this Agreement constitutes a valid and binding
obligation of Care and is enforceable in accordance with its
provisions except to the extent the same are limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting
creditors rights generally or by general equitable principles. The
execution of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with, violate, or result in a
breach of or acceleration of any payment under any of the terms and
provisions, of or constitute a default under, the Articles of
Incorporation or Association or by-laws of Care or under any
indenture, mortgage, contract, instrument, or arrangement to which
Care is a party or by which it or they are bound.
9. REPRESENTATION AND WARRANTIES OF HOLDER. Holder hereby represents and
warrants to Care as follows:
9.1 PURCHASER SOPHISTICATION. Holder has such knowledge and experience in
financial and business matters that Holder is capable of evaluating
the merits and risks of the prospective investment and has the
capacity to protect Holder's interest in this transaction.
9.2 INVESTMENT. The Securities are for Holder's own account, and not for
the account of any other person and not with a view to distribute to
others and that no other person has or will have a direct or indirect
beneficial interest in the Option.
9.3 AGREEMENT BINDING. Holder has duly executed this Agreement as
Holder's own free act and deed, and this Agreement constitutes the
valid and binding obligation of Holder and is enforceable in
accordance with its provisions, except to the extent the same are
limited by bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditors rights generally or by general
equitable principles. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not conflict
with, violate, or result in a breach of or acceleration of any payment
under any of the terms and provisions of, or constitute a default
under, any indenture, mortgage, contract, instrument, or arrangement
to which Holder is a party or by which Holder is bound.
10. SURVIVAL. All statements, representations, warranties or covenants and
the indemnification contained in this Agreement shall survive the termination
of this Agreement the exercise of the Option granted hereunder and any breach
hereof.
11. INDEMNIFICATION.
11.1 Care shall indemnify and hold Holder harmless from and against any and
all claims, demands, losses, judgments, causes of action, costs,
expenses (including attorneys' fees and litigation expenses), and
liabilities whatever arising out of or in connection with the breach
of any warranty, representation, or covenant of Care contained in this
Agreement.
11.2 Holder shall indemnify and hold Care harmless from and against any and
all claims, demands, losses, judgments, causes of action, costs,
expenses (including attorneys' fees and litigation expenses), and
liabilities whatsoever arising out of or
in connection with the breach of any warranty, representation, or
covenant of Holder contained in this Agreement.
12. RESTRUCTURES. If any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of COVR's assets is
effected in a way that holders of shares of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for such Common Stock, Holder will have
the right, prior to consummation of such transaction, to acquire and receive
(in lieu of or in addition to what Holder would have received upon exercise
of such holder's stock option), such securities or assets as may be issued or
payable with respect to the exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of such
holder's Option had such exchange not taken place.
13. ADDITIONALLY ACQUIRED STOCK. Care agrees that the term "Common Stock"
as used herein shall include any and all other shares of capital stock of
COVR, including voting, nonvoting, preferred or common acquired by Care at
anytime during the option period provided in this Agreement.
14. ENCUMBRANCES. Except as otherwise disclosed herein, Care agrees not to
encumber the Common Stock or Option, in any way, during the option period
provided in this Agreement, and other similar agreements resulting from the
Convertible Promissory Notes totaling $560,000, issued to others and to this
Holder collectively, all as of September 30, 1998.
15. TAX EFFECT. Care agrees to cooperate with Holder in structuring the
transactions contemplated herein to obtain the overall best tax effect for
the Holder.
16. ENTIRE AGREEMENT. This Agreement comprises the entire agreement of the
parties concerning the subject matter contained in this Agreement and
supersedes all previous understandings, negotiations, discussions and
agreements whether expressed in writing or orally.
17. GOVERNING LAW, JURISDICTION, VENUE. This Agreement shall be enforced and
construed according to the laws of the State of Illinois without taking into
account the impact of conflicts of laws as applied in Illinois. The Illinois
courts, Federal or State, will have personal jurisdiction over the parties
hereto for all claims, controversies or disputes arising out of or relating
to this Agreement and the agreements contemplated hereby and venue will be in
▇▇▇▇ County, Illinois.
18. NOTICES. All communications under this Agreement shall be in writing,
shall be sent by telex or facsimile transmission (and confirmed by certified
mail) or mailed by first class or express mail, postage prepaid to the
address specified below, and shall be deemed to have been given when received
or, if sent by prepaid certified mail, return receipt requested, within three
(3) business days of when so mailed:
If to Care: If to Holder:
Care Corporation PARADIGM GROUP, L.L.C.
c/o Moore ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Channel Islands
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Gardere & ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
19. ASSIGNMENT. This Agreement shall benefit only the parties to this
Agreement and may not be assigned without the prior written consent of the
other parties.
20. ACCEPTANCE BY FACSIMILE. A facsimile copy of this Agreement, which
includes the signature of all parties shall be legally binding and
enforceable as if it was an original document.
21. AMBIGUITIES. Each party to this Agreement waives any common law,
statutory, or equitable presumption against the drafter of contract
ambiguities in a document.
22. SEVERABILITY. If any covenant or other provision of this Agreement is
invalid, illegal or incapable of being enforced by reason of any rule of law,
administrative order, judicial decision or public policy, all other
conditions, covenants, and provisions of this Agreement shall, remain in full
force and effect, and no covenant or provision shall be deemed dependent upon
any other covenant or provision unless expressly stated. This Agreement, in
such circumstances, shall be deemed modified to the extent necessary to
render enforceable the provisions of this Agreement and the parties grant to
any court making a determination as to the illegality, invalidity or
enforceability of any provision contained in this Agreement, the power and
authority to modify the scope, duration or area, or all of them. Such
provision shall be applicable in its modified form.
23. COUNTERPART. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute a single instrument.
24. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties hereto to the same extent as if each
such successor and assign were, in each case, named a party to this Agreement.
Each of the undersigned understands and agrees to all of the provisions
above and acknowledges receipt of a copy of this Agreement.
In Witness Whereof the Parties have executed this Agreement on the date
written above.
PARADIGM GROUP
Holder Care Corporation, Limited:
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
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Managing Director
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Director
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