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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): March 23, 1998
PROVIDENT AMERICAN CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 0-13591 23-2214195
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2500 DeKalb Pike, Norristown, Pennsylvania 19404
(Address of principal executive offices/Zip Code)
Former name, former address, and former fiscal year,
if changed since last report: N/A
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Item 5. Other Events.
On March 20, 1998, Provident American Corporation's wholly-owned
subsidiary, Provident Health Services, Inc. ("PHS"), entered into an Interactive
Marketing Agreement (the "Agreement"), dated as of February 1, 1998 and
effective as of February 1, 1998, with America Online, Inc. ("AOL"). Provident
American guarantees PHS's performance under the Agreement. The Agreement
provides that PHS will be the exclusive third-party direct marketer of
managed-care and indemnity health insurance policies, dental insurance, vision
insurance, prescription coverage, critical care insurance and long-term care
insurance coverage (collectively, the "Products") for individuals and groups of
less than fifty individuals in the United States and that AOL will advertise the
Products to its subscribers on AOL's online network under a brand name to be
used exclusively for the Products. The Products will be sold on-line through a
PHS web-site linked to the AOL service. Under the Agreement, AOL will provide to
PHS online advertising of the Products and AOL will provide its subscribers with
access to PHS's web-site. AOL subscribers who purchase the Products will be
customers of PHS or the insurance companies issuing the policies sold by PHS.
It is anticipated that Internet-based sales of the Products will
be tested in the summer of 1998 and offered generally to AOL subscribers in the
fall of 1998. The Agreement has an initial term commencing on February 1, 1998
and ending on September 30, 1999, with a renewal period of two additional years
at PHS's election. Under certain circumstances the Agreement can be extended by
AOL. Under the Agreement, PHS shall make payments totaling $8 million to AOL
during the initial term. If PHS elects the two year renewal term, then PHS shall
make an additional payment to AOL of $32.5 million. PHS also has agreed to pay
certain administrative fees to AOL if applications exceed certain levels if
certain thresholds are exceeded.
Also under the Agreement, the Company issued to AOL warrants to
purchase 300,000 shares of the Company's common stock at an exercise price of
$4.48 per share, for a period of five years commencing February 1, 1998 which
are immediately exercisable. Based upon criteria under the Agreement during the
initial term, warrants for up to 150,000 additional shares may also be granted
at an exercise price of $5.15 for a period of seven years commencing February 1,
1998, vesting quarterly. If PHS exercises its right to renew the Agreement then,
based upon the criteria under the Agreement during the renewal term, the Company
may issue warrants to AOL for the purchase of up to 300,000 additional shares at
an exercise price of $5.15 for a period of seven years commencing October 1,
1999, vesting quarterly.
Under the Agreement, online marketing and advertising for the
Products will be developed. PHS will provide online customer service to the AOL
member base in connection with the sale of the Products. Provident American is
exploring numerous financing strategies as its developing relationship with AOL
expands.
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SIGNATURE
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.
PROVIDENT AMERICAN CORPORATION
By: /s/ Benedict J. Iacovetti
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Benedict J. Iacovetti
Chief Financial Officer
