<PAGE>
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): November 30, 1999
------------------
PROVIDENT AMERICAN CORPORATION
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(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 19401
-------------------------------------------------
(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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<PAGE>
Item 2. Acquisition or Disposition of Assets
The following information is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the Consolidated Financial Statements of the Company and its subsidiaries, and
the notes thereto, appearing in the Company's reports filed with the Securities
and Exchange Commission ("SEC"). Except for the historical information contained
herein, this Current Report on Form 8-K, contains certain forward-looking
statements regarding the Company's business and prospects that are based upon
numerous assumptions about future conditions which may ultimately prove to be
inaccurate and actual events and results may materially differ from anticipated
results described in such statements. Such forward-looking statements involve
risks and uncertainties, such as historical and anticipated losses; uncertainty
of future results, new business challenges, risks associated with brand
development, competition, funding; need for additional capital, management of
potential growth; new management team, dependence on key personnel, dependence
on the Internet, dependence on strategic alliances with Internet providers,
liability for information retrieved from the Internet, uncertain acceptance of
the Internet as a medium for health insurance sales, risk capacity constrains;
reliance on internally developed systems; system development risks, dependence
on third party systems, rapid technological change, risk of system failure, A.M.
Best's insurance ratings, dependence on key suppliers of insurance products,
dependence upon third party claims administration services, changes in the
insurance industry, insurance industry factors, health care reform legislation,
government regulation and legal uncertainties, potential conflicts of interest,
risk associated with the Year 2000 and absence of dividends. Any one or a
combination of these factors could have a material adverse effect on the
Company's business, financial condition and results of operations. These
forward-looking statements represent the Company's judgment as of the date of
this report. The Company disclaims, however, any intent or obligation to update
these forward-looking statements.
<PAGE>
Sale of Provident Indemnity Life Insurance Company to AHC Acquisition, Inc.
- ---------------------------------------------------------------------------
On November 30, 1999, Provident American Corporation ("PAMCO") sold its
wholly owned insurance subsidiary, Provident Indemnity Life Insurance Company
("PILIC") together with wholly owned subsidiaries Richard E. Field & Associates,
Inc ("REF") and Coastal Services Eastern, Inc. ("CSE") to AHC Acquisition, Inc.
("AHC"), a newly formed Pennsylvania business corporation. AHC is owned by Alvin
H. Clemens, the Company's and PILIC's Chairman of the Board of Directors. The
sale was completed in accordance with the Stock Purchase Agreement dated August
16, 1999 and the First Amendment to Stock Purchase Agreement dated October 27,
1999.
In accordance with the terms of the Stock Purchase Agreement PAMCO
purchased PILIC's home office building for $4.7 million and 545,916 shares of
HealthAxis.com, Inc. ("HealthAxis") cumulative preferred stock, par value $1
Series A ("HealthAxis Stock"), originally purchased by PILIC, for $2.8 million
which equates to a $4.71 price per share plus interest at the rate of 8% per
annum thereon from the date of acquisition of such shares by PILIC through
November 30, 1999. The $7.2 million difference between the $14.7 million
required payment amount and the sum of purchase price of the building and the
HealthAxis Stock was made in the form of a capital contribution from PAMCO to
PILIC. The aforementioned transactions occurred on November 30, 1999. Also in
accordance with the terms of the Stock Purchase Agreement PAMCO transferred
100,000 shares of the HealthAxis Stock to AHC together with registration rights
previously granted to PILIC to AHC valued at $1.2 million.
Prior to closing PAMCO assumed all of PILIC's employees and related
employee obligations. At closing PAMCO entered into an Employee and Facility
Lease Agreement with PILIC whereby PILIC will reimburse PAMCO for PAMCO's' out
of pocket employee costs related to services provided on PILIC's behalf. The
Stock Purchase Agreement provides that any cost associated with the termination
of certain executives along with certain taxes incurred by PILIC prior to the
effective date in connection with any of the transactions contemplated in the
Stock Purchase Agreement shall be borne by PAMCO. The Employee and Facility
Lease Agreement further provides that PAMCO will lease to PILIC office space,
furniture and equipment for a period of up to one year at no cost in accordance
with The Stock Purchase Agreement. A copy of the Employee and Facility Lease
Agreement is filed as Exhibit 99.1 hereto.
The Stock Purchase Agreement includes various warranties,
representations, covenants and conditions, including but not limited to certain
non-compete and non-solicitation agreements with AHC regarding the future sale
of health insurance products for a three-year period commencing on December 31,
1998 by licensed insurance agents of PILIC. Notwithstanding the foregoing,
HealthAxis, and its affiliates (as defined therein) may freely solicit the sale
of and distribute health and all other types of insurance products on behalf of
any person or entity through Internet websites, or other means of electronic
commerce, including but not limited to, sales of such products on behalf of
PILIC or AHC pursuant to the Individual Medical Products Carrier Partner
Agreement among Provident American Life and Health Insurance Company ("PALHIC"),
and HealthAxis dated December 29, 1998 and the Carrier Partner Agreement among
PALHIC and HealthAxis dated December 14, 1998.
2
<PAGE>
The transaction was approved by the boards of directors of all parties
to the transaction and the Pennsylvania Department of Insurance. The Board of
the Company also received a fairness opinion. The First Amendment to Stock
Purchase Agreement dated October 27, 1999 removed the requirement for the
Company's shareholders to approve the transaction.
Based upon PAMCO's fulfillment of its obligations to PILIC under the
Stock Purchase Agreement the Company will not have any liability with respect to
PILIC's insurance business, capital and surplus, and business operations, except
for the liability of PAMCO and its successors under the PAMCO Guaranty Agreement
with the Reassurance Company of Hannover ("RCH"), the Stock Pledge Agreement
with RCH, the Provident American Life and Health Insurance Company ("PALHIC")
Purchase Agreement together with the ceding commission liability recorded on the
Company's books in connection with agreements with RCH and the Company's
obligation to lease to PILIC office space, furniture and equipment.
On November 15, 1999 the Commonwealth of Pennsylvania's Department of
Insurance (`the Department") approved PAMCO's sale of PILIC to AHC, a newly
formed Pennsylvania business corporation. AHC is owned by Alvin H. Clemens, the
Company's and PILIC's Chairman of the Board of Directors. The Department's
approval was contingent upon the following conditions: (1) AHC shall provide
copies of the closing documents within five business days of the closing, (2)
AHC or PILIC shall provide an accounting for reinsurance relative to the
preneed, final expense and other life insurance business of PILIC within five
days after the consummation of agreements for the reinsurance, and (3) PILIC
shall settle all inter-company receivable and payable balances with the Company
within thirty days from closing. On November 19, 1999 the Pennsylvania
Department of Insurance approved PAMCO's capital contribution to PILIC as
required under the Stock Purchase Agreement.
3
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of business acquired.
Not applicable.
(b) Pro-forma Financial Information.
The following unaudited pro-forma consolidated
balance sheet at September 30, 1999, and the unaudited
pro-forma condensed consolidated statements of operations for
the nine months ended September 30, 1999 and for the year
ended December 31, 1998 give effect to the sale of PILIC and
its subsidiaries. The unaudited pro-forma financial
information is based on the historical financial statements of
the Company giving effect to the sale of PILIC and its
subsidiaries as if they occurred on January 1, 1998.
The unaudited pro-forma financial statements are
presented for informational purposes only and do not purport
to be indicative of the financial position which would
actually have existed or the results of the operations which
would actually have been obtained if the transactions had
occurred in the periods indicated below or which may exist or
be obtained in the future. The unaudited pro-forma condensed
financial information should be read in conjunction with the
notes thereto and the Company's historical consolidated
financial statements and notes thereto included in the
Company's annual report on Form 10-K/A for the year ended
December 31, 1998 and quarterly report on form 10-Q for the
quarter ended September 30, 1999.
4
<PAGE>
Provident American Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
Reported Pro Forma Adjustments Pro Forma
-------- --------------------- ---------
<S> <C> <C> <C>
Revenue:
Premium: Accident and health, gross $ 71,068 $ (71,068) (2) $ -
Life and annuity, gross 4,892 (4,892) (2) -
--------- --------- -----------
Total gross premium 75,960 (75,960) -
--------- --------- -----------
Accident and health reinsurance ceded 68,803 (68,803) (2) -
Life and annuity reinsurance ceded 1,145 (1,145) (2) -
--------- --------- -----------
Total reinsurance ceded 69,948 (69,948) -
--------- --------- -----------
Net premium 6,012 (6,012) -
Net investment income 2,276 (2,036) (2) 240
Realized gains (losses) on investments (65) 65 (2) -
Gain (loss) on the sale of subsidiaries (8,028) 8,028 (2) -
Other revenue 693 (568) (2) 125
--------- --------- -----------
Total revenue 888 (523) 365
--------- --------- -----------
Benefits and expenses:
Death and other policy benefits:
Life 3,911 (3,911) (2) -
Accident and health, net of reinsurance 3,937 (3,937) (2) -
Annuity contracts and other considerations 323 (323) (2) -
Increase (decrease) in liability for future policy benefits 259 (259) (2) -
Commissions, net of ceding allowance and deferred acquisition
costs 1,264 (1,264) (2) -
Other operating expenses, net of ceding allowance
and deferred acquisition costs 15,458 (7,478) (2) 7,980
Interactive sales and marketing expense 12,100 - 12,100
Amortization of deferred policy acquisition costs 252 (252) (2) -
Interest expense 744 (428) (2) 316
Depreciation and amortization of goodwill 1,273 (554) (2) 719
--------- --------- -----------
Total benefits and expenses 39,521 (18,406) (2) 21,115
--------- --------- -----------
Income (loss) before taxes and minority interest (38,633) 17,883 (20,750)
Provision (benefit) for income taxes:
Current 21 (21) (2) -
Deferred - - -
--------- --------- -----------
Total income taxes 21 (21) -
--------- --------- -----------
-
Net income (loss) before minority interest (38,654) 17,904 (20,750)
Minority interest in net loss of subsidiary 2,188 - (2,188)
--------- --------- -----------
Net income (loss) (36,466) 17,904 (18,562)
--------- --------- -----------
Dividends on preferred stock 70 - 70
--------- --------- -----------
Net income (loss) applicable to common stock (36,536) 17,904 (18,632)
========= ========= ===========
Income (loss) per share of common stock
Basic $ (3.04) $ (1.55)
--------- -----------
Diluted $ (3.04) $ (1.55)
========= ===========
Common shares and equivalents used in computing income (loss) per
share
Basic 12,021,000 12,021,000
Diluted 12,021,000 12,021,000
</TABLE>
See notes to pro-forma condensed consolidated financial statements.
5
<PAGE>
Provident American Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
Reported Pro Forma Adjustments Pro Forma
-------- --------------------- ---------
<S> <C> <C> <C>
Revenue:
Premium: Accident and health, gross $ 110,726 $(110,728) (2) $ -
Life and annuity, gross 8,807 (8,807) (2)
--------- --------- ----------
Total gross premium 119,533 (119,533) -
--------- --------- ----------
Accident and health reinsurance ceded 49,667 (49,667) (2) -
Life and annuity reinsurance ceded 249 (249) (2) -
--------- --------- ----------
Total reinsurance ceded 49,916 (49,916) -
--------- --------- ----------
Net premium 69,617 (69,617) -
Net investment income 3,764 (3,764) (2) -
Realized gains (losses) on investments 270 (270) (2) -
Gain (loss) on the sale of subsidiaries 3,002 (12,530) (1 & 2) (9,528)
Ceding allowance, net of policy acquisition costs 799 (799) (2) -
Other revenue 47 45 (2) 92
--------- --------- ----------
Total revenue 77,499 (86,935) (9,436)
--------- --------- ----------
Benefits and expenses:
Death and other policy benefits:
Life 5,707 (5,707) (2) -
Accident and health, net of reinsurance 47,509 (47,509) (2) -
Annuity contracts and other considerations 353 (353) (2) -
Increase (decrease) in liability for future policy benefits 1,811 (1,811) (2) -
Commissions, net of ceding allowance and deferred acquisition
costs 7,139 (7,139) (2) -
Other operating expenses, net of ceding allowance
and deferred acquisition costs 25,407 (19,714) (2) 5,693
Interest expense 416 (136) (2) 280
Amortization of deferred policy acquisition costs 2,049 (2,049) (2) -
Depreciation and amortization of goodwill 1,010 (767) (2) 243
--------- --------- ----------
Total benefits and expenses 91,401 (85,185) 6,216
--------- --------- ----------
Income (loss) before taxes and minority interest (13,902) (1,750) (15,652)
Provision (benefit) for income taxes:
Current (1,030) (44) (2) (1,074)
Deferred - - -
--------- --------- ----------
Total income taxes (1,030) (44) (1,074)
--------- --------- ----------
Net income (loss) before minority interest (12,872) (1,706) (14,578)
Minority interest in net loss of subsidiary 716 - 716
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Net income (loss) (12,156) (1,706) (13,862)
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Dividends on preferred stock 254 106 (2) 360
--------- --------- ----------
Net income (loss) applicable to common stock (12,410) (1,812) (13,502)
========= ========= ==========
Income (loss) per share of common stock
Basic $ (1.20) $ (1.31)
--------- ----------
Diluted $ (1.20) $ (1.31)
========= ==========
Common shares and equivalents used in computing income (loss) per
share
Basic 10,331,000 10,331,000
Diluted 10,331,000 10,331,000
</TABLE>
See notes to pro-forma condensed consolidated financial statements.
6
<PAGE>
Provident American Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except preferred and common stock data)
(Unaudited)
<TABLE>
<CAPTION>
As of September 30, 1999
Reported Pro Forma Adjustments Pro Forma
-------- --------------------- ---------
<S> <C> <C> <C>
Assets
- ------
Cash and cash equivalents $ 25,924 $ (14,700) (3) $ 11,224
Prepaid interactive marketing expense 5,527 - 5,527
Property and equipment, less accumulated depreciation of $3,764 7,720 - 7,720
Goodwill, less accumulated amortization of $108 7,673 - 7,673
Other assets 1,434 - 1,434
Subsidiary assets available for sale 76,970 (76,970) (2) -
--------- --------- --------
Total Assets $ 125,248 $ (91,670) $ 33,578
========= ========= ========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Accounts payable $ 1,171 $ - $ 1,171
Accounts payable to subsidiary 7,425 (7,425) (3) -
Accrued commissions and expenses 2,393 - 2,393
Convertible Debenture 24,528 - 24,528
Federal income taxes 585 - 585
Ceding commission liability 5,450 - 5,450
Deferred Loss on the sale of PILIC 8,400 (8,400) (3 & 4) -
Other liabilities 1,406 (75) (3) 1,331
Subsidiary liabilities available for sale 76,970 (76,970) (2) -
--------- --------- --------
Total Liabilities 128,328 (92,870) 35,458
Commitments and Contingencies:
Minority Interest in HealthAxis.com, Inc.:
HealthAxis.com, Inc. preferred stock - Cumulative preferred
stock, par value $1: authorized 5,000,000 shares:
Series A, issued 100,000 - 462 (4) 462
Series B, issued 625,529 2,805 - 2,805
Series C, issued 1,526,412 7,845 - 7,845
Series D, issued 333,334 3,960 - 3,960
Stockholders' Equity:
Preferred stock, par value $1: authorized 20,000,000 shares:
Series A Cumulative convertible, none issued - - -
Common stock, par value $.10: authorized 50,000,000, issued
12,944,393 1,294 - 1,294
Common stock, Class A, par value $.10: authorized 20,000,000, none
issued - - -
Additional paid-in capital 41,392 738 (4) 42,130
Accumulated other comprehensive income 39 (39) -
Retained deficit (60,415) 39 (60,376)
--------- --------- --------
Total Stockholders' Equity (17,690) 738 (16,952)
--------- --------- --------
Total Liabilities and Stockholders' Equity $ 125,248 $ (91,670) $ 33,578
========= ========== ========
</TABLE>
See notes to pro-forma condensed consolidated financial statements.
7
<PAGE>
Provident American Corporation and Subsidiaries
Notes to Pro-forma Condensed Consolidated Financial Statements
1. Represents the net loss on the sale of PILIC and its subsidiaries as
if the sale occurred on January 1, 1998. The net loss includes a
write-off of unamortized deferred policy acquisition costs, property
and equipment, net of accumulated depreciation and certain other
assets in the amount of $1,128 together with a deferred loss on the
sale of PILIC liability from the sale of PILIC representing the
required $7,200 capital contribution and $1,200 value of the Series
A Preferred Stock transferred to AHC net of liabilities already
recorded.
2. Represents amounts included in the Company's financial statements as
reported related to PILIC and its subsidiaries together with the
activity if its insurance operations which for the purpose of these
proforma financial statements were deducted whereas PILIC and its
subsidiaries were assumed sold on January 1, 1998.
3. Represents cash consideration at closing.
4. Represents the value of shares issued to AHC Acquisition Corporation
as consideration for the sale of PILIC.
(c) Exhibits.
The following exhibits are filed herewith:
S-K Item
Number Description
- ------ -----------
99.1 Employee and Facility Lease Agreement dated November 30,
1999 between Provident American Corporation ("PAMCO") and
Provident Indemnity Life Insurance Company ("PILIC").
8
<PAGE>
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
Date: December 8, 1999 By: /s/ Francis L. Gillan III
-----------------------------
Francis L. Gillan III
Chief Financial Officer and
Treasurer
9
<PAGE>
EXHIBIT INDEX
-------------
S-K Item
Number Description
- ------ -----------
99.1 Employee and Facility Lease Agreement dated November 30,
1999 between Provident American Corporation ("PAMCO") and
Provident Indemnity Life Insurance Company ("PILIC").
<PAGE>
EMPLOYEE AND FACILITY LEASE AGREEMENT
-------------------------------------
THIS EMPLOYEE AND FACILITY LEASE AGREEMENT ("Agreement"), made the 30th
day of November, 1999, between PROVIDENT INDEMNITY LIFE INSURANCE COMPANY, a
Pennsylvania corporation with offices at 2500 DeKalb Pike, P.O. Box 500,
Norristown, Pennsylvania 19404 ("PILIC") and PROVIDENT AMERICAN CORPORATION, a
Pennsylvania corporation with offices at 2500 DeKalb Pike, P.O. Box 500,
Norristown, Pennsylvania 19404 ("PAMCO").
BACKGROUND
A. PAMCO is the owner of PILIC.
B. WHEREAS, PAMCO has entered into a Stock Purchase Agreement with AHC
Acquisition, INC. ("AHCAI") dated August 16, 1999, to sell all of the shares of
PILIC.
B. Certain of PAMCO's employees provide administrative support to
PILIC.
C. PILIC therefor desires to lease certain employees and their
facilities and equipment from PAMCO to assist with the transition of PILIC's
business to AHCAI.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereby agree as follows:
1. Lease of Employees. PAMCO agrees to provide to PILIC in Norristown,
Pennsylvania, the services of the employees identified on Exhibit "A" attached
hereto and made a part hereof (singularly, "the Employee", collectively, "the
Employees") for a term of twelve (12) months commencing December 1, 1999 subject
to PAMCO's ability to terminate an Employee in accordance with Section 2 hereof.
PAMCO has no obligation to hire or recruit new employees or to supervise the
Employees or any new Employees. Any new hires will be employed by PILIC directly
and will not be subject to this Agreement. PILIC understands that PAMCO has the
right to terminate or retain the Employees at the termination or expiration of
this Agreement. While they are the subject of this Agreement, the Employees will
provide services to PILIC and PAMCO on the percentage basis set forth in Exhibit
"A".
<PAGE>
2. Employee Lease Payments. PILIC agrees to pay to PAMCO, by wire transfer to
the account designated by PAMCO, the cost of the Employees' current
compensation, employer taxes, the proportionate share of the cost of workers'
compensation insurance on the Employees, and any other out-of-pocket costs
related to the Employees plus benefits for the Employees, as applicable, at the
percentage per Employee attributed to PILIC in Exhibit "A". The lease payments
shall be payable to PAMCO by PILIC in bi-weekly installments commencing on the
30th day of November, 1999 but not later than 2 days prior to PAMCO's first
payroll date after November 30, 1999. When the services of any of the Employees
is no longer needed by PILIC for any reason, PILIC shall notify PAMCO in writing
prior to removing the Employee from Exhibit "A" hereof.
3. Employment Relationship. The Employees shall at all times remain at-will
employees of PAMCO.
4. Facilities and Equipment Lease. PILIC hereby agrees to lease from PAMCO and
PAMCO agrees to lease to PILIC for non-exclusive use in Norristown,
Pennsylvania, the office space ("Office Space"), furniture, software, systems
and equipment ("Equipment") identified on Exhibit "B" attached hereto and made a
part hereof (The Office Space and Equipment are collectively referred to
hereafter as the "Facilities".) for a term beginning on December 1, 1999, and
ending twelve (12) months thereafter at no charge.
5. Covenants of PILIC. PILIC covenants with PAMCO as follows:
(a) although PILIC will be supervising the Employees, they will remain
employed by PAMCO and therefor PILIC has no authority to, and will not, take any
adverse action with respect to any of the Employees (i.e., discipline or
suspension);
(b) even though the Employees will continue to be employed by PAMCO,
not to discriminate against any of the Employees or violate any federal, state
or local employment laws with respect to the Employees;
(c) to report to PAMCO and provide PAMCO with records confirming all
hours worked by any non-exempt Employees promptly at the conclusion of any pay
period;
(d) to follow PAMCO's employee policies and procedures in all material
respects regarding the Employees;
(e) to purchase and maintain fidelity and/or errors and omission
insurance on the Employees in an amount and with such carrier as is reasonably
acceptable to PAMCO; and
-2-
<PAGE>
(f) upon the expiration or termination of this Agreement, to return the
Facilities to PAMCO in the same condition as received, reasonable wear and tear
excepted.
(g) to incur all severance, accrued vacation and related costs paid to
Employees upon their termination in accordance with Exhibit A with the exception
of Alvin H. Clemens, Anthony R. Verdi and Francis L. Gillan III which shall be
paid 100% by PAMCO.
(h) to reimburse PAMCO for out of pocket telephone and postage costs
incurred by PAMCO in regards to PILIC's operations.
6. Covenants of PAMCO. PAMCO covenants with PILIC as follows:
(a) to provide to PILIC pertinent and necessary information regarding
the Employees, their compensation and benefits in order for the parties to make
the calculation of the lease installments described in Section 1 above;
(b) not to discriminate against any of the Employees or violate any
federal, state or local employment laws with respect to the Employees;
(c) to pay wages to the Employees and collect and pay
employment-related taxes and to use best efforts to provide employee benefits
under plans or policies currently in existence to the Employees;
(d) to provide cleaning of the Office Space and to provide for any
repairs required in the ordinary course to the Office Space. PAMCO shall not be
responsible for maintenance, repair or replacement of the Equipment; and
(e) to maintain property and casualty insurance on the Office Space.
7. Waiver of Claim. PAMCO and PILIC agree to and hereby waive all rights of
recovery and causes of action against the other for damage to Property caused by
any of the perils covered or coverable by a standard (all risk) Special Form
policy or contents insurance, notwithstanding that any such damage or
destruction may be due to the negligence of either party or persons claiming
under or through them.
-3-
<PAGE>
8. Destruction of Facilities. If the Facilities are destroyed by fire or other
casualty, then either party may terminate this Agreement on ten (10) days'
notice to the other.
9. Confidentiality. PAMCO and PILIC will each hold in confidence all documents,
materials and other information which it shall have obtained in confidence
during the term of this Agreement, and at the end of the term shall return to
the other party all copies of confidential documents and materials which have
been furnished in connection therewith.
10. PAMCO's Remedies. If PILIC fails to pay any lease installment when due or
violates any other term of this Agreement, PAMCO may, by giving five (5) days'
notice to PILIC, exercise any of the following remedies:
(a) Terminate this Agreement. Upon the termination of this Agreement
for any cause, PILIC shall release the Employees to PAMCO; and
(b) Exercise any other remedies permitted by law.
All remedies of PAMCO shall be cumulative and concurrent.
11. Risk of Loss and Workers Compensation Insurance. PAMCO shall, at PILIC's
cost, maintain workers compensation insurance in force with insurance carriers
qualified to do business in Pennsylvania. PAMCO shall deliver to PILIC the
policies or evidence of insurance. PAMCO's failure to secure or maintain such
insurance shall constitute a breach under this Agreement and PILIC may effect
such insurance.
12. Disclaimer of Warranties.
(a) NO WARRANTIES BY PAMCO. PAMCO MAKES NO WARRANTY, EXPRESS OR
IMPLIED, TO ANYONE, AS TO THE FITNESS, CAPACITY, CREDENTIALS, EXPERIENCE,
PERFORMANCE OR ANY OTHER ASPECT OF THE EMPLOYEES OR FACILITIES. PAMCO further
disclaims any liability for loss, damage, or injury to PILIC or third parties as
a result of any act or failure to act by Employees whether arising from PAMCO's
negligence or application of the laws of strict liability. PILIC acknowledges
that the Facilities are being delivered "as is". PAMCO has no obligation to
supervise the Employees or service, replace, repair or maintain the Equipment.
PAMCO has no obligation (1) to retain the Employees, (2) to replace the
Employees or (3) to recruit new Employees for any of the Employees who terminate
or who for any reason are unable to perform their assigned duties.
(b) Waiver of Indirect Damages Regardless of Cause. PILIC will not
assert any claim whatsoever against PAMCO for loss of anticipatory profits or
any other indirect, special or consequential damages under this Agreement.
-4-
<PAGE>
13. Miscellaneous.
(a) Governing Law/Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania. The parties hereto agree to consent to the jurisdiction and venue
of the courts of the Commonwealth of Pennsylvania located in Montgomery County,
Pennsylvania, and of the United States District Court for the Eastern District
of Pennsylvania, and agree that all disputes between the parties shall be
litigated only therein.
(b) Successors and Assigns. Except as set forth herein, the parties
shall not have the right to assign this Agreement without the prior written
consent of the other party hereto. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
administrators, successors and assigns.
(c) Notice. Any notice hereunder, if mailed, shall be deemed given and
received seventy-two (72) hours after mailing by certified mail, return receipt
requested, and if sent by professional express service, notice shall be deemed
given and received at the time of actual delivery. Notices shall be sent to the
addresses set forth above, or such other addresses as the parties shall
designate in writing from time to time:
(d) Entire Agreement; Amendments; and Waivers. This Agreement, and any
other agreements expressly referenced herein, constitutes the entire
understanding and agreement among the parties hereto relative to the subject
matter hereof and supersedes any prior agreements or understandings of the
parties of hereto. Any amendments to this Agreement must be in writing, signed
by each party hereto. The failure of any party hereto to enforce at any time any
provision of this Agreement shall not be construed to be a waiver of the
provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to constitute
a waiver of any other or subsequent breach.
(e) Partial Invalidity. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal, or unenforceable provision had
never been contained herein, unless the deletion of the provision or provisions
would result in such a material change as to cause completion of the
transactions contemplated herein to be unreasonable.
(f) Execution in Counterparts. This Agreement may be executed by the
parties hereto signing the same instrument, or by each party hereto signing a
separate counterpart or counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
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<PAGE>
(g) Waivers. PILIC and PAMCO may, by written instrument, extend the
time for the performance of any of the obligations or other acts of the other
party and with respect to this Agreement (a) waive any inaccuracies in the
representations and warranties of the other party in this Agreement, (b) waive
compliance with any of the covenants of the other party contained in this
Agreement, and (c) waive the other party's performance of any of its obligations
set out in this Agreement.
(i) Titles and Headings. Titles and headings to Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth above.
PROVIDENT AMERICAN CORPORATION
By:
-----------------------------
President
PROVIDENT INDEMNITY LIFE
INSURANCE COMPANY:
By:
-----------------------------
President
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<PAGE>
EXHIBIT "A"
EMPLOYEE LIST
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Name Percentage of services to be
---- ----------------------------
[* * *]
<PAGE>
EXHIBIT "B"
FACILITY AND EQUIPMENT LIST
---------------------------
Office space currently occupied on the 3rd floor of 2500 DeKalb Pike
Office space currently occupied (or equivalent office space) by life
administration and life marketing at 2500 DeKalb Pike
Storage space currently occupied in the attic section of the original (front)
section of 2500 DeKalb Pike and the garage
Furniture, cabinets and equipment currently used by all individuals leased to
PILIC listed on exhibit A
Provident's LAN's and software currently used by PILIC accounting, life
administration and life marketing staff including but not limited to: Great
Plains General Ledger and Great Plains Accounts Payable system
