<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 20, 1997
RISCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 0-27462 65-0335150
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1390 Main Street, Sarasota, Florida 34236
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 951-2022
-----------------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
This document contains statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.
The words "believe", "estimate", "expect", "intend", "anticipate", and similar
expressions and variations thereof identify certain of such forward-looking
statements, which speak only as of the dates on which they were made. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. Readers are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
indicated in the forward-looking statements as a result of various factors.
Readers are cautioned not to place undue reliance on these forward-looking
statements.
ITEM 5. OTHER EVENTS.
Frederick M. Dawson has been named as the Chief Executive Officer of
RISCORP, Inc. (the "Company"). Mr. Dawson was also named a director of the
Company. The Company's former Chief Executive Officer, William D. Griffin, will
remain with the Company as a non-executive Chairman of the Board of Directors.
James A. Malone, L. Scott Merritt and Richard A. Halloy resigned as
members of the Company's Board of Directors. Mr. Malone will remain with the
Company as President and Chief Operating Officer and Mr. Merritt will also
remain with the Company as Senior Vice President, Chief Investment Officer and
Treasurer. Mr. Halloy has resigned as Senior Vice President of the Company.
Mr. Griffin entered into an agreement providing that until the earlier
to occur of: (a) the 1998 Annual Shareholders' Meeting, or (b) Mr. Dawson
ceasing to be Chief Executive Officer of the Company, he will not vote his
shares to elect to or remove from the Board of Directors any individual without
the unanimous approval of the other members of the Board of Directors. This
agreement also provides that Mr. Griffin will vote his shares in favor of the
election of himself, Mr. Dawson and the three current outside directors at the
Company's 1997 Annual Shareholder Meeting.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit No.
10.1 Directors Agreement among RISCORP, Inc., William D. Griffin,
Frederick M. Dawson, Seddon Goode, Jr., Walter L. Revell and
George E. Greene III.
10.2 Employment Agreement between RISCORP, Inc., RISCORP
Management Services, Inc. and Frederick M. Dawson.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 22, 1997 RISCORP, INC.
(Registrant)
By: /s/ Frederick M. Dawson
-----------------------------------------
Frederick M. Dawson, Chief
Executive Officer
Page 2 of 3 Pages
<PAGE> 3
EXHIBIT INDEX
RISCORP, INC.
Current Report on Form 8-K
Dated May 22, 1997
EXHIBIT NO. DESCRIPTION
10.1 Directors Agreement among RISCORP, Inc., William D. Griffin,
Frederick M. Dawson, Seddon Goode, Jr., Walter L. Revell and
George E. Greene III.
10.2 Employment Agreement between RISCORP, Inc., RISCORP
Management Services, Inc. and Frederick M. Dawson.
Page 3 of 3 Pages
<PAGE> 1
EXHIBIT 10.1
DIRECTORS AGREEMENT
THIS AGREEMENT is made and entered May 19, 1997, by and among RISCORP,
Inc., a Florida corporation ("RISCORP"), William D. Griffin ("Griffin"),
Frederick M. Dawson ("Dawson"), Walter L. Revell ("Revell"), Seddon Goode, Jr.
("Goode"), and George E. Greene III ("Greene").
WHEREAS; the individual parties hereto constitute the Board of Directors
of RISCORP;
WHEREAS; Griffin is the beneficial owner of 22,176,052 shares of RISCORP
capital stock (the "shares") entitling him to 87% of the vote of all of the
outstanding capital stock; and
WHEREAS; the parties hereto wish to agree to certain governance
provisions regarding the future make-up of the Board as hereafter provided,
NOW, THEREFORE, in consideration of the premises hereafter contained, the
parties hereto, intending to be legally bound hereby agree as follows:
1. So long as Griffin is a director, he will be Chairman of the
Board.
2. Griffin will vote all the shares for each of the individual
parties hereto for director at the 1997 annual shareholders meeting of RISCORP.
3. Until RISCORP's annual shareholders meeting in 1998, the parties
will not cause any person who is not a party hereto to become a director, unless
such person is approved in advance by all of the parties hereto.
4. Until RISCORP's annual shareholders meeting in 1998, Griffin
agrees to refrain from taking any action in his capacity as a stockholder of
RISCORP, to remove any director of RISCORP and will vote his shares at all
meetings of stockholders for the election of directors in favor of the
individual parties hereto, and any other person or persons where
nomination has the approval of all of the parties hereto.
5. This Agreement shall terminate and be of no further force or
effect on the earlier to occur of May 31, 1999, or on such date Dawson is no
longer the Chief Executive Officer of RISCORP.
RISCORP, Inc.
By /s/ James A. Malone
-------------------------------
James A. Malone, President
<PAGE> 2
/s/ William D. Griffin
----------------------------------
William D. Griffin
/s/ Frederick M. Dawson
----------------------------------
Frederick M. Dawson
/s/ Walter L. Revell
----------------------------------
Walter L. Revell
/s/ Seddon Goode, Jr.
----------------------------------
Seddon Goode, Jr.
/s/ George E. Greene III
----------------------------------
George E. Greene III
2
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into and is effective as of May 19,
1997 (the "Effective Date"), by and between Frederick M. Dawson (the
"Employee"), RISCORP MANAGEMENT SERVICES, INC., a Florida corporation ("RMS"),
and RISCORP, Inc., a Florida corporation, for itself and on behalf of its
subsidiaries (collectively, with RMS referred to herein as "RISCORP").
WITNESSETH:
WHEREAS, RISCORP engages in the business of managed care workers
compensation insurance and related businesses; and
WHEREAS, RISCORP desires to employ the Employee and to enter into an
agreement embodying the terms of such employment, and the Employee desires be
employed on the following terms and conditions; and
WHEREAS, both parties acknowledge the respective advantages, benefits, and
other valuable considerations to be realized by them by virtue of such a
relationship;
THEREFORE, in light of the foregoing and in consideration of the mutual
promises and covenants contained herein, the parties agree as follows:
1. EMPLOYMENT
(a) As of the Effective Date, the Employee shall serve as Chief
Executive Officer of RISCORP, Inc. reporting to the Board of Directors
of RISCORP, Inc. The Employee shall have full management and operational
authority in consultation with the RISCORP, Inc. Board of Directors.
(b) The Employee, so long as he is employed hereunder, shall
devote his full business time to the services required of him hereunder, except
as otherwise agreed, and for paid personal time of thirty (30) days during each
12-month period following the Effective Date.
2. TERM. The term of the Employee's employment under this Agreement
shall commence on the Effective Date and shall terminate on May 31, 1999,
unless terminated sooner as hereinafter provided (the "Term of this Agreement").
<PAGE> 2
3. COMPENSATION.
(a) Base Salary. Except as otherwise provided in Section 7 hereof,
RISCORP shall pay the Employee as annual base salary from the Effective Date
through May 31, 1998, in equal semi-monthly installments, at an annual rate of
$450,000. During the period June 1, 1998 through May 31, 1999, the annual base
salary rate shall be adjusted to $600,000.
(b) Signing Bonus. Upon execution of this Agreement, RISCORP shall
pay the Employee $150,000 as a signing bonus, less applicable withholding
taxes.
(c) Options. Upon execution of this Agreement the Employee shall be
granted options to acquire shares of RISCORP, Inc. Class A Common Stock in the
following amounts and exercise prices:
<TABLE>
<CAPTION>
Number of Shares Exercise Price
---------------- --------------
<S> <C> <C>
Tranche A 1,447,615 $ 2.75
Tranche B 542,855 $ 5.00
Tranche C 361,904 $ 7.50
Tranche D 180,952 $10.00
</TABLE>
The stock options will be evidenced by an agreement in substantially the form
of Exhibit A attached hereto. The foregoing stock options are subject to
shareholder approval. RISCORP represents and warrants that Griffin, as of the
Effective Date, is the owner (with the power to vote) of 86.9% of the
outstanding shares entitled to vote with respect to the grant of said options,
that as of the Effective Date, Griffin has approved the grant of said options
by executing a written consent with respect thereto, and that RISCORP,
forthwith upon the execution and delivery of this Agreement will take all steps
necessary to effectuate such consent under Florida law, including, without
limitation, the finish of any requisite notice to other shareholders.
(d) Deferred Cash Payment. Subject to this paragraph 3(d), RISCORP
shall pay the Employee a cash payment of $750,000 (the "Deferred Payment").
One half of the Deferred Payment ($375,000) shall be paid to Employee on
December 31, 1997 so long as the Employee is employed by RISCORP on such date
and the remainder of the Deferred Payment shall be paid to the Employee on May
31, 1999 so long as the Employee is employed by RISCORP on such date.
Notwithstanding the foregoing, in the event (i) there is a Change of Control
(as defined in Section 7 hereof), (ii) the Employee's employment is terminated
without Cause (as defined in Section 7 hereof), (iii) the Employee voluntarily
terminates his employment for Good Reason (as defined in Section 7 hereof), or
(iv) the Employee should die or become disabled, then any amount of the
Deferred Payment which has not been paid to the Employee shall become
immediately due and payable within five (5) days of any of the foregoing
events. The Employee agrees to cooperate with RISCORP in connection with
RISCORP's purchase of Key Man Life Insurance on the Employee.
2
<PAGE> 3
4. BENEFITS. During the Term of this Agreement the Employee shall
be entitled to participate in or receive benefits under any employee benefit
plan (other than any bonus plan that may not be available to RISCORP employees
generally), arrangement or perquisite made available by RISCORP now or in the
future to its similarly situated executive employees, subject to and on a
basis consistent with the terms, conditions and overall administration of such
plans, arrangements and perquisites, but subject to the understanding that the
Employee's benefits shall be no less than those afforded to any other
executive, director or employee of RISCORP. During the term of this Agreement,
RISCORP shall provide the Employee with furnished living accommodations in
the Sarasota, Florida area and an automobile for his use. In addition, RISCORP
shall reimburse the Employee for reasonable and necessary business expenses,
including travel to and from the Employee's home in Windermere, Florida and the
legal and consulting expenses incurred by the Employee in connection with this
Agreement.
5. DUTIES AND AUTHORITY OF THE EMPLOYEE; NO RELOCATION.
(a) The Employee is employed by RISCORP in an executive or
professional capacity, and shall be subject to the direction and control of the
Board of Directors of RISCORP. Subject to such direction and control, the
Employee shall provide all of the services generally associated with and
inherent in and consistent with any office to which he is appointed by RISCORP.
The Employee shall have the authority to make all personnel decisions,
including executives, subject to the authority of the Board of Directors.
(b) The Employee shall perform such other and further services,
consistent with his position as Chief Executive Officer as may reasonably be
required by RISCORP, including carrying out all of the policies and directives
of RISCORP.
(c) The Employee shall faithfully serve RISCORP in the capacities as
aforesaid, and shall at all times devote his full business time, efforts,
skills, attention and energies to performance of the duties hereunder. The
Employee shall not become engaged or involved in any activities or matters
which may adversely affect or reflect discredit on RISCORP or its respective
business, or conflict with his services to RISCORP. Nothing contained herein
shall be construed to limit or restrict the passive investment or passive
business activities of the Employee that do not interfere with his obligations
hereunder.
(d) The Employee shall not be required to relocate from Florida.
6. RELATIONSHIP AND STANDARDS. It is understood and agreed that the
Employee will comply with the standards applicable to Chief Executive Officers
similarly situated, and will also comply with the integrity code and other
policies and standards applicable to similarly situated employees of RISCORP.
3
<PAGE> 4
7. TERMINATION.
(a) Either the Employee or RISCORP may at any time terminate the
Employee's employment under this Agreement, subject to the terms hereof.
(b)(1) If the Employee's employment is terminated by RISCORP for
other than Cause, as hereinafter defined, or the Employee voluntarily
terminates his employment for Good Reason, as hereinafter defined, then RISCORP
shall pay to the Employee all unpaid amounts under Section 3(a) hereof for the
remainder of the Term of this Agreement, as if the Employee had not been
terminated.
(b)(2) If the Employee's employment is terminated by reason of his
death after December 31, 1997, there shall be paid to the personal
representatives of the Employee's estate, within thirty (30) days following the
date of his death, any unpaid accrued base salary under paragraph 3(a), plus an
amount equal to the base salary the Employee would have been entitled to
receive under paragraph 3(a) during the twelve (12) months following his date
of death had he lived and remained in the employ of RISCORP hereunder, or
during the remainder of the Term, if less.
(b)(3) If the Employee's employment is terminated by reason of
his disability, he shall retain all disability benefits to which he may be
entitled hereunder. "Disability" shall have the meaning contained in RISCORP's
disability policy covering executive officers.
(b)(4) Notwithstanding anything in subsection (b)(1) to the
contrary, if a Change of Control occurs during the Term of this Agreement,
then the following shall apply:
(i) If a Change of Control occurs on or before May 31, 1998,
the Employee shall be entitled to receive an amount equal to the difference.
between (A) $1,050,000 and (B) the amounts received by the Employee as base
salary pursuant to Section 4(a) through the date of the Change of Control.
Such amount shall be paid in a lump sum within five (5) days following the
Change of Control.
(ii) If a Change of Control occurs on or after June 1, 1998,
the Employee shall be entitled to receive an amount equal to the difference
between (A) $600,000 and (B) the amounts received by the Employee as base
salary pursuant to Section 3(a) after June 1, 1998 through the date of the
Change of Control. Such amount shall be paid in a lump sum within five (5)
days following the Change of Control.
(b)(5) In the event of any termination of the Employee's employment
to which any provision of the foregoing paragraph 7(b) applied, then in addition
to any other amounts to which the Employee may be entitled hereunder, he shall
be entitled to all accrued compensation and benefits to the termination date,
and if subparagraph (b)(1) is applicable, RISCORP shall bear the
4
<PAGE> 5
cost of the Employee's continued COBRA coverage for the maximum period during
which the Employee is entitled to maintain such coverage.
(c) Except to the extent the Change of Control provisions set forth
above would apply, in the event the Employee voluntarily terminates his
employment for other than Good Reason, , or dies on or before December 31,
1997, or if RISCORP terminates the Employee's employment for Cause, then
RISCORP shall pay to the Employee, within thirty (30) days of the date of such
termination, a lump sum payment equal to the portion of his current base salary
accrued through the date his employment terminates.
(d) It is agreed that upon, during, and after termination of
Employee's employment under this Agreement, neither RISCORP nor the Employee
will disparage each other, nor will any public announcements, public statements
or press releases be issued concerning the departure of the Employee unless
such statement is issued jointly and by mutual agreement.
(e) For purposes of this Agreement, the term "Cause" means any of the
following:
(i) the Employee's habitual neglect of or refusal to perform his
duties (except for disability) or the material breach of any other provision of
this Agreement by the Employee;
(ii) any act of fraud, misappropriation, dishonesty or
embezzlement by the Employee; or
(iii) conviction of the Employee for a felony.
(f) For purposes of this Agreement, the term "Change of Control"
means any of the following events: (i) a dissolution, liquidation, merger,
consolidation, share exchange, or other reorganization of RISCORP, Inc. (ii)
sale or transfer (other than as security for corporate obligations) of at least
a majority of the assets or any substantial portion of the business of RISCORP,
Inc. in one or more related transactions; (iii) any sale, transfer or ownership
shift of RISCORP, Inc. stock involving more than 50% of the issued and
outstanding stock (initially determined as of September 30, 1996, and
irrespective of whether such percentage change is based on voting or economic
interests and irrespective of whether the ownership shift occurs as the result
of the issuance of new securities by RISCORP, Inc. or its subsidiaries;
provided that sales of the public float stock in the ordinary course shall be
disregarded for this purpose) in a single transaction or in a series of related
transactions (for this purpose any stock options, {excluding employee stock
options granted to existing employees of RISCORP, Inc.}, warrants, debentures
or other securities or agreements which are convertible into stock of RISCORP,
Inc. or its subsidiaries, and which are issued by RISCORP, Inc., its
subsidiaries or its shareholders, shall be deemed exercised on the date of its
issuance to the fullest extent possible and for the maximum number of shares
permitted thereunder); (iv) any transaction of the kind described in subsection
(f)(iii) involving stock (or the stock equivalents described therein) of
RISCORP Management Services, Inc., or any insurance
5
<PAGE> 6
company or operating subsidiary of RISCORP, Inc.); or (v) individuals who
constitute the Board of Directors of RISCORP, Inc. on the Effective Date
"(Incumbent Board") have ceased for any reason to constitute at least a
majority thereof; provided, however, that any person becoming a director
subsequent to the Effective Date whose election or nomination for election by
RISCORP Inc.'s shareholders, was approved by a vote of at least three-quarters
(3/4) of the directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of RISCORP in which such person is
named as a nominee for director without objection to such nomination) shall be,
for purposes of this Agreement, considered as though such person were a member
of the Incumbent Board. For purposes of this subparagraph (f), the reference
to "50% of the issued and outstanding stock" shall be deemed to be revised to
"34% of the issued and outstanding stock" if at the time of the relevant sale,
transfer or shift, William D. Griffin shall beneficially own, with power to
vote, less than 50% of the outstanding voting securities of RISCORP, Inc.
(g) For purposes of this Agreement, the term "Good Reason" means a
material reduction in the scope of the Employee's authority hereunder without
the Employees' prior written consent, or the repeated and continuing refusal of
the Board of Directors of RISCORP, Inc. to support or implement the reasonable
recommendations of the Employee or a material breach of this Agreement by
RISCORP, or the failure of the Employee to be elected as a director of RISCORP,
Inc. at any time.
(h) Notwithstanding any provision to the contrary in this Section 7,
if the Employee's employment is terminated under Section 7(b)(1) or 7(b)(4) of
this Agreement, and the Employee enters into "Competition with the Company," as
defined in Section 8 hereof, at any time within the twenty-four (24) months
following such termination, then: (i) RISCORP shall have no further obligation
to make installment payments to the Employee if so elected, and (ii) the
Employee shall be obligated to repay all amounts received under Section 7(b)(1)
or 7(b)(4) to RISCORP.
(i) Amounts payable under Section 7(b)(1) or 7(b)(4) of this
Agreement shall be deemed to be payments for the non-competition covenant
contained in Section 8(h) of the Agreement and shall not be deemed "parachute
payments" within the meaning of Section 28OG of the Code.
8. CONFIDENTIALITY AND NON-COMPETITION.
In consideration of the Employee's employment with RISCORP, Employee agrees
to the following:
(a) The Employee will not use or disclose to others at any time,
either during or after employment with RISCORP, any Trade Secrets or other
Confidential Information, as hereinafter defined, about RISCORP's business or
any of RISCORP's proprietary rights, except as required in the ordinary course
of performing employment duties of RISCORP.
6
<PAGE> 7
<TABLE>
<CAPTION>
(i) As used in this Agreement, Trade Secrets include, but are not limited to,
<S> <C>
(A) Trademarks;
(B) Trade names;
(C) Copyrights;
(D) Information services system products, whether they are particular to RISCORP or derivative
to licensed products acquired or used by RISCORP;
(E) Employee lists;
(F) Product and project information;
(G) Policyholder, customer and account lists;
(H) Agents lists and agreements;
(I) Societies and associations lists;
(J) Vendor and provider lists or agreements;
(K) Physician and medical personnel lists, medical facilities lists, medical facilities lists;
ambulatory care center lists, clinics or laboratory lists; and
(L) Business and marketing plans or reports.
</TABLE>
Confidential Information shall not include any information that is or has
become publicly available other than through the wrongful action of the
Employee. Moreover, items such as trademarks, trade names and the like which
are by their nature disclosed to the public shall not be subject to any
non-disclosure obligation hereunder, although Employee shall acquire no right
to use any such property in violation of the rights of RISCORP.
(b) Upon termination of his employment, the Employee will deliver to
RISCORP all copies of all documents or papers (including diskettes or other
medium for electronic storage of information) relating to RISCORP's business or
such Trade Secrets or Confidential Information that are in the Employee's
possession or under the Employee's control, without making copies or summaries
of any such material.
(c) Any inventions, proprietary information, or discoveries, whether
or not patentable or copyrightable, resulting from any work the Employee does
(alone or with others) as an employee of RISCORP shall be promptly disclosed to
RISCORP and shall be and remain RISCORP's exclusive property. The Employee
hereby assigns to RISCORP any rights the Employee may have or acquire in such
property and shall sign and deliver at any time any instruments confirming the
exclusive ownership by RISCORP. All inventions, proprietary information, or
discoveries that belonged to the Employee before being employed by RISCORP and
which the Employee wants to exempt from this Agreement, if any, are listed in
an attached schedule.
7
<PAGE> 8
(d) During the Term of this Agreement, the Employee shall not engage
in "Competition with the Company", as defined herein. For purposes of this
Agreement, "Competition with the Company" means the direct or indirect, on the
Employee's own behalf or in the service or on behalf of others as principal,
partner, officer, director, managerial employee or shareholder (other than as
owner of less than five percent (5%) of the outstanding voting securities of
any entity whose voting securities are traded or quoted on a national securities
market) entering into or engaging in any aspect or form of business, within the
State of Florida or in any other state in which RISCORP maintains an office and
is then doing business, relating to workers' compensation insurance (either
public or private), government fund insurance, or any form of self-insurance
(either public or private).
(e) If the Employee is unsure whether certain information is
Confidential Information under the terms of this Agreement, the Employee will
request clarification in writing from the Vice President of Human Resources.
(f) The Employee acknowledges that upon termination of the Employee's
employment with RISCORP, the Employee shall inform any subsequent employers of
the existence of all the terms and conditions included in Section 8 of this
Agreement that have not expired.
(g) For a period of twenty-four (24) months following the
termination of Employee's employment, the Employee shall not, directly or
indirectly, on the Employee's own behalf or in the service or on behalf of
others as principal, partner, officer, director, managerial employee or
shareholder (other than as owner of less than five percent (5%) of the
outstanding voting securities of any entity whose voting securities are traded
or quoted on a national securities market) solicit whether for present or
future monetary gain, any "Customer" of RISCORP, as defined herein. For
purposes of this Agreement, "Customer" means any person, entity or groups of
persons or entities that in any way broker, purchase or consume any service or
product of RISCORP as of the date of the termination of the Employee's
employment and within a period of one (1) year prior to said date of
termination.
(h) Upon termination of the Employee's employment, and for a period
of twenty-four (24) continuous months thereafter, the Employee shall not
engage in Competition with the Company.
(i) The Employee recognizes that RISCORP has made substantial
investments of time and money to recruit, hire and train its other employees.
Therefore, the Employee shall not, either during the Term of this Agreement
and for a period of twelve (12) continuous months after the date of
termination of the Employee's employment hereunder, recruit or hire any other
employee of RISCORP, or encourage any other employee to terminate his
employment with RISCORP.
8
<PAGE> 9
(j) The Employee acknowledges and agrees that if his business
activity or association with any partnership or corporation is enjoined in
accordance with the time and geographic limitations described above, that it
will not affect the public health, safety or welfare of the community covered
by the restrictive covenant. This covenant on the part of the Employee shall
be construed as an agreement.
(k) It is agreed by the parties hereto that if any portion of the
above covenant not-to-compete is held to be unreasonable, arbitrary, against
public policy, or for any other reason unenforceable, the covenant herein shall
be considered diminishable both as to time and geographic area; and each month
for the specified period shall be deemed a separate period of time, and the
covenant not-to-compete shall remain effective so long as the same is not
unreasonable, arbitrary or against public policy. The parties hereto agree
that in the event any court determines the specified time period or the
specified geographic area to be unreasonable, arbitrary or against public
policy, a lesser period or geographic area which is determined to be
reasonable, nonarbitrary and not against public policy shall be enforced
against the Employee.
(l) The Employee acknowledges that a violation of the terms of this
Section 8, including without limitation, a violation of any of Subsections 8(a)
through 8(i) above, shall cause irreparable injury to RISCORP, and the remedy
at law will be inadequate. Accordingly, the Employee hereby consents to
RISCORP's entering of an injunction to enforce this covenant, in addition to
any other rights and remedies RISCORP may have, at law or in equity. Further,
the Employee hereby waives the necessity of the posting of a bond in the event
RISCORP seeks a temporary injunction.
(m) It is further agreed that all of the above-described covenants
contained in this Section 8 and all provisions relating thereto shall survive
the termination of this Agreement.
9. INDEMNIFICATION. RISCORP hereby agrees to indemnify the Employee
and hold him, his heirs, assigns and personal representatives, harmless from
and against any liability, claim., damage, cost, expense or obligation
whatsoever, including attorneys' fees and other defense costs, caused by,
arising out of or related to any event, act, omission or circumstance that
occurred on or prior to the Effective Date (including, without limitation, the
employment of the Executive and the entering into of this Agreement by RISCORP)
because he is or was a director, officer, employee or agent of RISCORP.
10. ARBITRATION. The Employee and RISCORP agree that any dispute or
disagreement arising under this Agreement, any dispute or disagreement ,
regarding the interpretation or application of the language contained in this
Agreement, or any dispute or disagreement concerning the employment
relationship between the Employee and RISCORP or the termination thereof, will
be subject to final and binding arbitration conducted under the Employment
Rules and Procedures of the American Arbitration Association. Whichever party
desires to invoke this paragraph must do so by providing written notice by U.S.
Mail certified, return receipt requested, to the other party at the last known
residential address of the Employee, or at the principal at business address of
RISCORP respectively within thirty 30 days of the
9
<PAGE> 10
occurrence of the incident about which there is a dispute or disagreement, or
within thirty (30) days of the termination of employment, whichever is
applicable. The parties agree to request a panel of five (5) arbitrators, and
to engage in respective strikes until one (1) arbitrator remains. The expenses
of the arbitration, including the arbitrator's fee,will be shared equally
between the Employee and RISCORP provided that each party shall be responsible
for the fees and expenses of its own counsel, except as the arbitrator, in his
or her sole discretion, may otherwise determine.
11. WAIVER OF BREACH. It is agreed that failure on the part of one
party to this Agreement to seek to enforce the Agreement as to a specific
breach will not constitute a waiver by that party of its or his right to
enforce the Agreement as to similar or other breaches of the Agreement
thereafter.
12. AMENDMENTS; FURTHER ACTIONS. This Agreement may not be altered,
modified or amended except by a written instrument signed by each of the
parties hereto. RISCORP shall take whatever additional actions that may be
necessary or appropriate to carry out its obligations under this Agreement to
permit the Employee to enforce his rights and benefits hereunder, including any
actions required under applicable law, obtaining resolutions of its Board of
Directors or shareholders authorizing this Agreement, or, where it may be
required by any agreements or any other commitments to which RISCORP or its
subsidiaries may be a party, gaining any required consent from the other
parties thereto.
13. ASSIGNMENT; SURVIVAL OF RIGHTS. Neither this Agreement nor any
of the rights or obligations hereunder may be assigned or delegated by the
Employee; provided, however, that this Agreement and all rights and benefits of
the Employee hereunder shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, estate, executors,
administrators, heirs and beneficiaries. , All amounts payable to the Employee
under this Agreement if the Employee had lived shall be paid, in the event of
the Employee's death, to such beneficiary(ies) as the Employee specifies in
writing from time to time, or if none, to the Employee's successor trustee
under his revocable living trust agreement, or if such trust is not then
existing, then to the personal representative of his estate.
If RISCORP sells, assigns or transfers a majority of its business and
assets to any person, or if RISCORP merges into or consolidates or otherwise
combines with any person which is a continuing or successor entity, or if a
Change of Control occurs, then RISCORP shall assign all of its right, title and
interest in this Agreement as of the date of such event to the acquiring or
successor business entity, and such entity shall agree to assume and perform
all of the terms, conditions and provisions imposed by this Agreement upon
RISCORP as part of the transaction resulting in the transfer. In case of such
assignment by RISCORP and of assumption and agreement by such entity, all
further rights as well as all other obligations of RISCORP under this Agreement
thenceforth shall cease and terminate and thereafter the expression "RISCORP"
wherever used herein shall be deemed to mean such entity; provided, however,
that RISCORP shall remain jointly and severally liable to the Employee for the
performance of all of the
10
<PAGE> 11
obligations, and the payment of all of the liabilities of RISCORP hereunder.
RISCORP will take whatever actions are necessary to assure that such acquiring
or successor entity expressly assumes the obligations of RISCORP to Employee
under this Agreement and will cause such successor entity to evidence the
assumption of such obligations in an agreement satisfactory to the Employee.
14. SEVERABILITY. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
15. ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the employment of the Employee by RISCORP.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings other than those expressly set forth herein. This Agreement
supersedes and terminates all prior agreements, arrangements and understandings
between the parties, whether oral or written, with respect to the employment of
the Employee by RISCORP.
16. NOTICES. Notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered, when delivered by facsimile with confirmed receipt
to the fax number listed below, or when mailed by United States registered
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee to:
Frederick M. Dawson
12900 Lakeview Point Court
Windermere, FL 34786
Fax No:
If to RISCORP to:
RISCORP MANAGEMENT SERVICES, INC.
1390 Main Street
Sarasota, Florida 34230
Attention: President
Fax No: (941)941-1495
or to such other address as the Employee or RISCORP shall designate in writing
in accordance with this Section 15, except that notices regarding changes in
address shall be effective only upon receipt.
11
<PAGE> 12
17. HEADINGS. Headings to sections in this Agreement are for the
convenience of the parties only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
18. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Florida without reference to the principles of conflict of laws.
The parties hereto consent to the jurisdiction of the federal and state courts
of the State of Florida in connection with any claim or controversy arising out
of or connected with this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
RISCORP MANAGEMENT SERVICES, INC.
By:/s/ James A. Malone
----------------------------------
Title: President
--------------------------------
RISCORP, Inc.
By:/s/ James A. Malone
----------------------------------
Title: President
--------------------------------
/s/ Frederick M. Dawson
----------------------------------
Employee
Frederick M. Dawson
----------------------------------
(Print Name)
12
<PAGE> 13
RISCORP, INC.
DAWSON STOCK OPTION AGREEMENT AND PLAN
DAWSON STOCK OPTION AGREEMENT AND PLAN (the "Agreement"), dated as of
May 19, 1997 (the "Date of Grant"), between Riscorp, Inc., a Florida
corporation (the "Company") and Frederick M. Dawson (the "Employee").
Capitalized terms not defined in this Agreement shall have the meanings set
forth in the Employment Agreement (the "Employment Agreement"), dated as of May
19, 1997, by and between Frederick M. Dawson, Riscorp Management Services,
Inc., and Riscorp, Inc.
THE PARTIES AGREE AS FOLLOWS:
1. Award of Options. The Company hereby awards to Employee options
(the "Options") to purchase 2,553,326 shares of Riscorp, Inc. Class A Common
Stock (the "Stock"), subject to the terms and conditions set forth in this
Agreement. The Options granted hereunder are nonqualified stock options. The
Company hereby represents that all corporate action, including approval by the
Company's stockholders, has been taken to authorize the grant of the Options
and issuance of Stock in connection with the exercise of the Options.
2. Exercise Prices. The Options shall consist of four tranches having
the per share exercise prices set forth below:
<TABLE>
<CAPTION>
Number of Shares Exercise Price
---------------- --------------
<S> <C> <C>
Tranche A 1,447,615 $2.75
Tranche B 542,855 $5.00
Tranche C 361,904 $7.00
Tranche D 180,952 $10.00
---------
Total 2,533,326
</TABLE>
3. Vesting Schedule. The Options designated as Tranches B, C and D
shall be immediately vested and exercisable from and after the Date of Grant.
Of the 1,447,615 shares purchased from and after the first anniversary of the
Date of Grant and the remaining 723,807 shares of Stock may be purchased from
and after the second anniversary of the Date of Grant and the remaining 723,808
shares of Stock may be purchased from and after the second anniversary of the
Date of Grant. Notwithstanding the foregoing, all of the Options covered by
this Agreement shall be immediately vested and exercisable in the event of a
Change of Control or the Employee's Termination of Employment (as defined
below) for any reason other than the Employee's voluntary resignation without
Good Reason or involuntary termination for Cause,.
4. Expiration of Options. The Options shall expire at the earlier of
ten years after the Date of Grant or three years after the Employee's
Termination of Employment (or one year
<PAGE> 14
in the event of the Employee's Termination of Employment due to death), subject
to immediate expiration upon the Employee's voluntary resignation without Good
Reason or involuntary termination for Cause. In the event of the Employee's
Termination of Employment due to disability, he or his personal representatives
shall be entitled to exercise the Options during the three-year period
following such Termination of Employment. In the event of the Employee's
Termination of Employment due to death, his designated beneficiary (or in the
absence of a designated beneficiary, his estate) shall be entitled to exercise
the Options during the one-year period following such Termination of
Employment.
5. Payment of Exercise Price. Any exercise of the Options shall be
pursuant to (a) written notice to the Company accompanied by payment in full of
the exercise price or (b) any other method of exercise from time to time
permitted to be used in the administration of the Company's stock option
plans. The exercise price may be paid (i) in cash, (ii) by delivery to the
Company of Stock valued at the Fair Market Value (as defined below) on the date
of exercise (excluding shares acquired from the Company less than six months
prior to such date pursuant to option exercises), or (iii) by a combination of
cash and such Stock. Upon receipt of written notice of exercise and payment,
the Company shall deliver to the Employee a certificate or certificates for
such shares. It shall be a condition to the performance of the Company's
obligation to issue or transfer Stock after exercise of the Options that the
Employee pay, or make provision satisfactory to the Company for the payment of,
any taxes which the Company is obligated to collect with respect to the issue
or transfer of Stock upon exercise.
6. Limited Right. The Employee shall be entitled to elect during the
60-day period immediately following a Change of Control, in lieu of acquiring
the shares of Stock covered by the Options, to receive, and the Company shall
be obligated to pay, in cash, in respect of each share of Stock subject to an
Option the excess of the Change of Control Price (as defined below) over the
per share exercise price of such Options.
7. Nontransferability of Options. The Options shall not be assignable
or transferable by the Employee except by will or by the laws of descent and
distribution. During the life of the Employee, the Options shall be
exercisable by the Employee only or, in the event of his disability, the
Employee's personal representative.
8. No Rights as Stockholders. The Employee shall have no rights as a
stockholder with respect to any shares issuable upon exercise of the Options
until the date a stock certificate is issued to the Employee for such shares.
Except as otherwise expressly provided in this Agreement, no adjustment shall
be made for dividends, distributions or rights for which the record date is
prior to the date of exercise, except as provided in Section 9.
9. Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that an
adjustment is determined by the Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee") to be appropriate under
the Agreement, then the Compensation Committee shall, in such manner as it may
deem equitable, adjust any or all of (i) the number and kind of shares of Stock
which may be delivered in connection with the Options hereby granted, and (ii)
the exercise price relating to the Options and/or make provision for payment of
cash or other property in respect of the Options.
-2-
<PAGE> 15
10. Withholding Tax. The Employee may be subject to withholding taxes
as a result of the exercise or settlement of an Option or other payment in
respect of an Option. The Employee shall pay to the Company in cash, promptly
when the amount of such obligations become determinable, all applicable
federal, state, local and foreign withholding taxes that result from each such
exercise, settlement or payment. The Employee may be elect to have shares of
Stock withheld by the Company or to tender shares of Stock to the Company to
pay the amount of tax required so to be withheld by the Company upon exercise
of an Option. Any shares of Stock so withheld or tendered will be valued as of
the date they are withheld or tendered. Unless otherwise permitted by the
Company, the value of shares of Stock withheld or tendered may not exceed the
required federal, state, local and foreign withholding tax obligations as
computed by the Company.
11. Severability. In the event that any provision of this Agreement
shall be held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of this Agreement, and the Agreement shall
be construed and enforced as if the illegal or invalid provision had not been
included.
12. Notices. All notices hereunder shall be sufficiently made if
personally delivered in writing or sent by regular mail addressed (a) to the
Employees at the Employee's address as set forth in the books and records of
the Company, or (b) to the Company at the principal office of the Company
clearly marked "Attention: President of the Company."
13. Successors. This Agreement shall be binding upon the Company and
its successors and assigns.
14. Governing Law. This Agreement shall be governed by the laws of
the State of Florida, without regard to conflict of law principles.
15. Registration Rights. The Employee shall be entitled to the
registration rights set forth in Exhibit B to the Employment Agreement.
16. Definitions.
(a) "Change of Control Price" means an amount in cash equal to
the higher of (i) the amount of cash and fair market value of property that is
the highest price per share paid (including extraordinary dividends) in any
transaction triggering the Change of Control or any liquidation of shares
following a sale of substantially all assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and 60-day period following the Change of Control.
(b) "Fair Market Value" means:
(1) the closing price per share at the close of the trading
day immediately preceding the date for which the value of Stock is being
determined if Stock is actively traded on any national securities exchange or
NASDAQ system that reports their closing prices ("publicly traded");
(2) the arithmetic mean of the final bid and asked prices
for the shares of Stock as reported for the trading day immediately preceding
the date for which the value of Stock is being determined if Stock is otherwise
traded over the counter; or
-3-
<PAGE> 16
(3) if Stock is not publicly traded, the fair market
value as determined in good faith by the Compensation Committee. For purposes
of this Section 16(b)(3), Fair Market Value shall be determined on a fully
distributed basis without regard to, among other things, illiquidity, the
effect of the Options, shareholder distributions, initial public offering
market discounts, or change of control premiums, while taking into account all
relevant facts and circumstances including, but not limited to, the future
business plans of the Company.
(c) "Termination of Employment" shall not be deemed to have
occurred so long as the Employee is employed by (i) the Company, (ii) any entity
that directly or through one or more intermediaries is controlled by the
Company, (iii) any entity in which the Company has a significant equity
interest, as determined by the Compensation Committee, or (iv) any entity in
which William D. Griffin owns, directly or indirectly (after application of the
attribution rules of Section 318 of the Internal Revenue Code of 1986, as
amended), more than 50% of the total outstanding equity interests, determined
on a voting or value basis.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RISCORP, INC.
By:/s/ James A. Malone
--------------------------
James A. Malone
President
Employee hereby accepts and agrees to be bound by all the terms and
conditions of this Agreement.
/s/ Frederick M. Dawson
-----------------------------
FREDERICK M. DAWSON
-4-
<PAGE> 17
EXHIBIT B TO EMPLOYMENT AGREEMENT BETWEEN RISCORP AND
FREDERICK M. DAWSON EFFECTIVE MAY 19, 1997
This Exhibit B to the aforesaid Employment Agreement (the "Employment
Agreement") sets forth the agreement between the Employee and RISCORP
concerning the rights of the Employee to require RISCORP to register under the
Securities Act of 1933 (the "Act") the shares of Class A stock of RISCORP (the
"Option Shares") that the Employee may acquire upon exercise of the options
granted to the Employee in accordance with the Employment Agreement and Exhibit
A thereto (the "Options"). All capitalized terms not otherwise defined herein
shall have the meaning ascribed to such terms in the Employment Agreement.
1. Securities Subject to the Employee's resignation rights. "Registrable
Securities" shall mean the shares of Class A Stock that may be acquired by the
Employee upon exercise of the Options until such time as (i) a registration
statement covering such Registrable Securities has been declared effective and
such Registrable Securities have been disposed of pursuant to such effective
registration statement or (ii) such Registrable Securities are transferred
pursuant to Rule 144 (or any similar provision then in force) under the Act,
whichever is earlier. Notwithstanding any other provision hereof, however,
RISCORP shall not be required to comply with any demand or request for
registration pursuant hereto if, at the time thereof, RISCORP shall be
qualified to register the Registrable Securities on Form S-8 under the Act, and
shall have filed, caused to become effective and kept current, and made
available to the Employee such number of prospectuses contained therein as the
Employee may request, a registration statement on said Form S-8, which
registration statement shall relate solely to the "plan" to issue options to
the Employee which is embodied in the Employment Agreement and Exhibit A
thereto.
2. Demand Registrations.
(a) Request for Registration. At any time after the Effective Date of
the Employment Agreement, The Employee may make a written request for
registration under the Act of any or all of the total number of Registrable
Securities then outstanding (a "Demand Registration"); provided that RISCORP
need effect only two (2) Demand Registrations pursuant to this Section 2(a).
Each such request for a Demand Registration will specify the aggregate number
of shares of Registrable Securities proposed to be sold (which shall be not less
than 250,000 shares) and will also specify the intended method of disposition
thereof.
(b) Effective Registration and Expenses. A registration will not
count as a Demand Registration until it has become effective. In each
registration initiated as a Demand Registration, RISCORP will pay or cause to
be paid all Registration Expenses (as defined in Section 6 below) in connection
therewith, whether or not the registration statement becomes effective.
(c) Underwriting. If The Employee so elects, the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the
form of an underwritten offering
1
<PAGE> 18
through the underwriter(s) he designates; provided, however, that such
underwriter must be reasonably satisfactory to RISCORP. If the underwriter does
not limit the number of Registrable Securities to be underwritten in a Demand
Registration, RISCORP may include securities for its own account or the account
of others in such registration if the underwriters so agree and if the number
of Registrable Securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
(d) Delay of Demand Registration. Notwithstanding any other provision
of this Agreement, if the underwriters for RISCORP determine that an offering
by RISCORP then being conducted or in registration would be adversely affected
by a Demand Registration, RISCORP may delay such a Demand Registration for a
period of up to sixty (60) DAYS.
3. Piggy-back Registration.
(a) If RISCORP proposes to file a registration statement (other than a
Demand Registration) under the Act with respect to an offering by RISCORP for
its own account or for the account of others (other than a registration
statement on Form S-8 or filed in connection with an exchange offer or an
offering of securities solely to RISCORP's existing stockholders) of any class
of security of RISCORP, then RISCORP shall in each case give written notice of
such proposed filing to the Employee at least ten (10) days before the
anticipated filing date, and such notice shall offer the Employee the
opportunity to register such Registrable Securities as the Employee may request
(a "Piggy-back Registration"). On request of the Employee received by RISCORP
within ten (10) days after the receipt by the Employee of RISCORP's notice of
intention to file the proposed registration statement, RISCORP shall include in
such registration and qualification for sale under the blue sky or securities
laws of the various states, and in any underwriting in connection therewith,
the number of shares of Registrable Securities held and requested to be
registered by the Employee, which may be all or part of the Employee's
Registrable Securities.
(b) RISCORP shall use its best efforts to cause the managing
underwriter or underwriters of a proposed underwritten offering to permit the
Employee to include such Registrable Securities in such offering on the same
terms and conditions as any similar securities of RISCORP included therein.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
such offering delivers an opinion to the Employee that the number of shares
which the Employee or RISCORP intends to include in such offering is so large
as to materially and adversely affect the success of such offering (including
the price at which such securities can be sold), then the amount of securities
to be offered for the account of the Employee shall be reduced to the extent
necessary to reduce the number of shares to be included in such offering to the
number recommended by such managing underwriter or underwriters.
4. Holdback Agreements
(a) Restrictions on Public Sale by The Employee. To the extent not
2
<PAGE> 19
inconsistent with applicable law, the Employee agrees not to effect any public
sale or distribution of Common Stock during the fourteen (14) days prior to,
and during the 120-day period beginning on, the date of his election to include
Registrable Securities, in a registration statement filed by RISCORP, but only
if and to extent requested in writing (with reasonable prior notice) by the
managing underwriter or underwrites in the case of an underwritten public
offering by RISCORP of securities similar to the Registrable Securities or by
RISCORP in the case of such an offering that is not underwritten.
(b) Restrictions on Public Sale by RISCORP. RISCORP agrees not to
effect any public sale or distribution of Common Stock during the 30-day period
beginning on, the effective date of any registration statement which includes
Registrable Securities (except as part of such registration).
5. Registration Procedures
Whenever any Registrable Securities are to be registered pursuant to
Section 2 or 3 of this Agreement, whether in connection with any Demand
Registration or any Piggy-back Registration, RISCORP will promptly:
(a) prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement which includes the Registrable
Securities and use its reasonable best efforts to cause such registration
statement to become effective; provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, including
documents incorporated by reference after the initial filing of the
registration statement, RISCORP will furnish to the Employee and to the
underwriters, if any, draft copies of all such documents proposed to be filed
as promptly as practicable prior thereto, which documents will be subject to
the reasonable review of the Employee and such underwriters, and RISCORP will
not, unless required by law, file any registration statement or amendment
thereto to any prospectus or any supplement thereto (including such documents
incorporated by reference) to which the Employee shall reasonably object.
RISCORP will notify the Employee of any stop order issued or threatened by the
Commission in connection therewith and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be necessary to
keep the registration statement effective for a period of not less than 120
days (or such shorter period which will terminate when all Registrable
Securities covered by such registration statement have been sold or withdrawn,
but not prior to the expiration of the applicable period referred to in Section
4(3) of the Act and Rule 174 thereunder, if applicable); cause the prospectus
to be supplemented by any required prospectus supplement; and as so
supplemented to be filed pursuant to Rule 424 under the Act; and comply with
the provisions of the Act applicable to it with respect to the disposition of
all securities covered by such registration statement during the applicable
period in accordance with
3
<PAGE> 20
the intended methods of disposition thereof set forth in such registration
statement or supplement to the prospectus;
(c) furnish to the Employee and the underwriter or underwriters, if
any, without charge, such number of conformed copies of the registration
statement and any post-effective amendment thereto and such number of copies of
the prospectus (including each preliminary prospectus) and any amendments or
supplements thereto, and any documents incorporated by reference therein, as
the Employee or such underwriter may request in order to facilitate the
disposition of the Registrable Securities being sold by such holder (it being
understood that RISCORP consents to the use of the prospectus and any amendment
or supplement thereto by the Employee and the underwriter or underwriters, if
any, in connection with the offering and sale of the Registrable Securities
covered by the prospectus or any amendment or supplement thereto);
(d) notify the Employee at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Act, when RISCORP
becomes aware of the happening of any event as a result of which the prospectus
included in such registration statement (as then in effect) contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements therein in light of the circumstances under which they were
made, not misleading and, as promptly as practicable thereafter, prepare and
file with the Commission and furnish a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain any untrue statements
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(e) make generally available to its security holders an earnings
statement satisfying the provisions of Section 11(a) of the Act no later than
60 days after the end of the 12-month period beginning with the first day of
RISCORP'S first fiscal quarter commencing after the effective date of the
registration statement, which earnings statement shall cover said 12-month
period, and which requirement will be deemed to be satisfied if RISCORP timely
files complete and accurate information on forms 10-Q and 8-K under the
Exchange Act and otherwise complies with Rule 158 under the Act as soon as
possible;
(f) make reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible moment;
(g) if requested by the managing underwriter or underwriters or the
Employee, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters
requests, or the Employee reasonably requests, to be included therein,
including, without limitation, with respect to the principal amount of
Registrable Securities being sold by the Employee to such underwriter or
underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of the underwritten offering
of the Registrable Securities to be sold in such offering, and promptly make
4
<PAGE> 21
all required filings of such prospectus supplement or post-effective amendment;
(h) as promptly as practicable after filing with the Commission of any
document which is incorporated by reference into a registration statement,
deliver a copy of such document to the Employee;
(i) on or prior to the date on which the registration statement is
declared effective, use its reasonable best efforts to register or qualify, and
cooperate with the Employee, the underwriter or underwriters, if any, and their
counsel, in connection with the registration or qualification of the
Registrable Securities covered by the registration statement for offer and sale
under the securities or blue sky laws of each state and other jurisdiction of
the United States as the Employee or any such underwriter requests in writing,
to use its reasonable best efforts to keep each such registration or
qualification effective, including through new filings, or amendments or
renewals, during the period such registration statement is required to be kept
effective and to do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions of the Registrable Securities
covered by the applicable registration statement; provided that RISCORP will
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action which would subject it to
general service of process in any such jurisdiction where it is not then so
subject;
(j) cooperate with the Employee and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities sold
under the registration statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or the Employee may request;
(k) use its reasonable best efforts to cause the Registrable
Securities covered by the registration statement to be registered with or
approved by such other governmental agencies or authorities within the United
States including the blue sky or securities administrators of such
jurisdictions as may be requested by the Employee, as may be necessary to
enable the Employee or the underwriter or underwriters, if any, to consummate
the disposition of such securities;
(l) if applicable, enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions as the
Employee or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities.
(m) make available for inspection by the Employee, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Employee or any such
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of RISCORP (collectively, the
"Records"), as shall be reasonably necessary to enable them to
5
<PAGE> 22
exercise their due diligence responsibility, and cause RISCORP's officers,
directors and employees to supply all information requested by any such
Inspector in connection with such registration statement; provided that RISCORP
shall not be required to provide any information under this paragraph if to do
so would cause RISCORP to forfeit an attorney-client privilege that was
applicable to such information; and provided further, that Records which
RISCORP determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed to the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the registration statement or (ii) the release of such Records
is ordered pursuant to an subpoena or other order from a court of competent
jurisdiction; provided that prior to furnishing any such information, RISCORP
shall be entitled to require the Employee to enter into a confidentiality
agreement in customary form and subject to customary exceptions and provided,
further, that any decision not to disclose information pursuant to clause (i)
shall be made after consultation with counsel for RISCORP and counsel for the
Employee; and the Employee agrees that he will, upon learning that disclosure of
such Records is sought in a court of competent jurisdictions give notice to
RISCORP and allow RISCORP at its expense, to undertake appropriate action and to
prevent disclosure of the Records deemed confidential; and
(n) use reasonable efforts to obtain a cold comfort letter
from RISCORP's independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort letters as the
Employee or the underwriters, if any, shall reasonably request.
Upon receipt of any notice from RISCORP of the happening of any event
of the kind descried in subsection (d) of this Section 5, the Employee will
forthwith discontinue disposition of the Registrable Securities until receipt
of the copies of the supplemented or amended prospectus contemplated by
subsection (d) of this Section 5 or until it is advised in writing (the
"Advice") by RISCORP that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filing which are incorporated
by reference in the prospectus and, if so directed by RISCORP, the Employee
will, or will request the managing underwriter or underwriters, if any, to
deliver to RISCORP (at RISCORP's expense) all copies, other than permanent file
copies then in such holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event RISCORP shall give any such notice, the time periods mentioned in
subsection (b) of this Section 5 shall be extended by the number of days during
the period from and including the date of the giving of such notice to and
including the date when the Employee shall have received the copies of the
supplemented or amended prospectus contemplated by subsection (d) of this
Section 5 or the Advice.
6. Registration Expenses. All expenses incident to RISCORP's performance
of or compliance with this Agreement including without limitation, all
Commission and securities exchange or NASD registration and filing fees, fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable securities), rating agency fees, printing
expenses, messenger and
6
<PAGE> 23
delivery expenses, internal expenses (including without limitation all salaries
and expenses of RISCORP's officers and employees performing legal or accounting
duties), the fees and expenses incurred in connection with the listing of the
securities to be registered, if any, on each securities exchange on which
similar securities issued by RISCORP are then listed and reasonable fees and
disbursement of counsel for RISCORP and its independent certified public
accountants (including the expenses of any special audit or "cold comfort"
letters required by or incident to such performance) securities act liability
insurance (if RISCORP elects to obtain such insurance), the reasonable fees and
expenses of any special experts retained by RISCORP in connection with such
registration, incurred in connection with each registration hereunder (but not
including any underwriting fees, discounts or commissions attributable to the
sale of Registrable Securities, or fees and expenses of counsel for the
Employee, which shall be paid by the Employee) will be borne by RISCORP. All
such expenses required to be borne by RISCORP are herein called "Registration
Expenses."
7. Indemnification; Contribution
(a) Indemnification by RISCORP, RISCORP agrees to indemnify and hold
harmless the Employee, its officers, directors and each person who controls
such holder (within the meaning of the Act, and any agent or investment
adviser thereof against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue or alleged untrue statement of material fact contained in any
registration statement, any amendment or supplement thereto, any prospectus or
preliminary prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same arise out of or are based
upon any such untrue statement or omission based upon information with respect
to the Employee furnished in writing to RISCORP by or on behalf of the Employee
expressly for use therein, provided that, in the event that the prospectus shall
have been amended or supplemented and copies thereof, as so amended or
supplemented shall have been furnished to the Employee prior to the
confirmation of any sales of Registrable Securities, such indemnity with
respect to the prospectus shall not inure to the benefit of the Employee if the
person asserting such loss, claim, damage or liability did not, at or prior to
the confirmation of the sale of the Registrable Securities to such person,
receive a copy of the prospectus as so amended or supplemented and the untrue
statement or omission of a material fact contained in the prospectus was
corrected in the prospectus as so amended or supplemented. In connection with
an underwritten offering, RISCORP will indemnify the underwriters thereof,
their officers and directors and each person who controls such underwriters
(within the meaning of the Act) to the same extent as provided above with
respect to the indemnification of the Employee except with respect to
information provided by the underwriter specifically for inclusion therein.
(b) Indemnification by The Employee. In connection with any
registration statement in which the Employee participates, the Employee will
furnish to RISCORP in writing such information with respect to the Employee as
RISCORP reasonably requests for use in connection with any such registration
statement or prospectus and agrees to indemnify, to the
7
<PAGE> 24
extent permitted by law, RISCORP, its directors and officers and each person
who controls RISCROP (within the meaning of the Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue statement of
a material fact or any omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not misleading, to the
extent, but only to the extent, that such untrue statement is contained in or
such omission relates to any information with respect to the Employee so
furnished in writing by such holder specifically for inclusion in any
prospectus or registration statement. In no event shall the liability of the
Employee hereunder be greater in amount than the dollar amount of the proceeds
received by the Employee upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person
entitled to indemnification hereunder agrees to give prompt written notice to
the indemnifying party after the receipt by such person of any written notice of
the commencement of any action, suit, proceeding or investigation or threat
thereof made in writing for which such person will claim indemnification or
contribution pursuant to this Agreement and, unless in the reasonable judgment
of counsel of such indemnified party a conflict of interest may exist between
such indemnified party and the indemnifying party with respect to such claim,
permit the indemnifying party to assume the defense of such claim. Whether or
not such defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without its
consent (but such consent will not be unreasonably withheld). No indemnifying
party will consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation. If the indemnifying party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such additional counsel
or counsels.
(d) Contribution.
(i) If the indemnification provided for in this Section 7
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a
8
<PAGE> 25
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access of information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 7(c), any reasonable
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 7(d), no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities and underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which such underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission, and the Employee shall not be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities of the Employee were offered to the public exceeds the amount of any
damages which the Employee has otherwise been required to pay by reason of such
untrue statement or omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(iii) If indemnification is available under this Section 7,
the indemnifying parties shall indemnify each indemnified party to the full
extent provided in Section 7(a) and (b) without regard to the relative fault of
and said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 7(d).
8. Transfer or Assignment of Registration Rights. The rights to cause
RISCORP to register Registrable Securities granted pursuant to this Agreement
may be transferred or assigned by the Employee to a transferee or assignee of
the Registrable Securities; provided, however, that the transferee or assignee
of such rights assumes the obligations of such transferor or assignor, as the
case may be, under this Agreement.
9. Remedies. In addition to being entitled to exercise all rights granted
by law, including recovery of damages, the Employee will be entitled to
specific performance of its rights under this Agreement. RISCORP agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at
law would be adequate.
10. Governing Law. This Agreement shall be governed by, and construed
under, the laws of Florida.
9
<PAGE> 26
11. Entire Agreement. This Agreement, together with the Employment
Agreement (including the Exhibits thereto) constitutes the entire agreement of
the parties concerning its subject matter and supersedes any prior or
contemporaneous agreements among them concerning its subject matter.
12. Modification. This Agreement may be modified or amended only in a
writing executed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RISCORP, INC.
By: /s/ James A. Malone
------------------------------
James A. Malone
President
/s/ Frederick M. Dawson
------------------------------
Frederick M. Dawson
10
