-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q8Q5YMUjjdkb5dWxG4HWJrjhkyRGHwb6e49i0ihYhMEI9ezKyZDH7xyGUhvpwuXk Qk0tJQbcCTA5w2b/yGqUgw== 0000950116-97-001724.txt : 19970918 0000950116-97-001724.hdr.sgml : 19970918 ACCESSION NUMBER: 0000950116-97-001724 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970915 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PROVIDENT AMERICAN CORP CENTRAL INDEX KEY: 0000768892 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 232214195 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-38359 FILM NUMBER: 97680079 BUSINESS ADDRESS: STREET 1: 2500 DEKALB PIKE CITY: NORRISTOWN STATE: PA ZIP: 19404-0511 BUSINESS PHONE: 2152792500 MAIL ADDRESS: STREET 1: 2500 DEKALB PIKE STREET 2: PO BOX 511 CITY: NORRISTOWN STATE: PA ZIP: 19404-0511 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PROVIDENT AMERICAN CORP CENTRAL INDEX KEY: 0000768892 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 232214195 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 2500 DEKALB PIKE CITY: NORRISTOWN STATE: PA ZIP: 19404-0511 BUSINESS PHONE: 2152792500 MAIL ADDRESS: STREET 1: 2500 DEKALB PIKE STREET 2: PO BOX 511 CITY: NORRISTOWN STATE: PA ZIP: 19404-0511 SC 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1) PROVIDENT AMERICAN CORPORATION - -------------------------------------------------------------------------------- (Name of Issuer) Common Voting Stock - -------------------------------------------------------------------------------- (Title of Class of Securities) 743832-990 - -------------------------------------------------------------------------------- (CUSIP Number) Anthony R. Verdi, Chief Financial Officer, Provident American Corporation, 2500 DeKalb Pike, P. O. Box 511, Norristown, PA 19404-0511 Telephone: (610) 279-2500 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 10, 1997 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. CUSIP No. 743832-990 - -------------------------------------------------------------------------------- 1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above Persons Alvin H. Clemens ("Mr. Clemens") ...............................Social Security No.: ###-##-#### - ------------------------------------------------------------------------------------------------------------------- 2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) ............................................................................................. (b) ........................................................................................... X - ------------------------------------------------------------------------------------------------------------------- 3) SEC Use Only - ------------------------------------------------------------------------------------------------------------------- 4) Source of Funds (See Instructions) ....................................................SC, BK, PF - ------------------------------------------------------------------------------------------------------------------- 5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) ................................................................................................. - ------------------------------------------------------------------------------------------------------------------- 6) Citizenship or Place of Organization.....................................United States of America - ------------------------------------------------------------------------------------------------------------------- Number of 7) Sole Voting Power.....................................................3,827,869 Shares Bene- ficially 8) Shared Voting Power............................................................ Owned by Each 9) Sole Dispositive Power................................................3,827,869 Reporting Person With 10) Shared Dispositive Power....................................................... - ------------------------------------------------------------------------------------------------------------------- 11) Aggregate Amount Beneficially Owned by Each Reporting Person..................................................................................3,827,869 - ------------------------------------------------------------------------------------------------------------------- 12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions).................................................................................... - ------------------------------------------------------------------------------------------------------------------- 13) Percent of Class Represented by Amount in Row (11)............................................38% - ------------------------------------------------------------------------------------------------------------------- 14) Type of Reporting Person (See Instructions)....................................................IN ................................................................................................. ................................................................................................. ................................................................................................. .................................................................................................
Item 1. Security and Issuer. Common Voting Stock Provident American Corporation 2500 DeKalb Pike P. O. Box 511 Norristown, PA 19404-0511 Item 2. Identity and Background. (a) Alvin H. Clemens ("Mr. Clemens") (b) 2500 DeKalb Pike, Norristown, Pennsylvania 19404-0511 (c) Chairman and Chief Executive Officer Provident American Corporation 2500 DeKalb Pike, P.O. Box 511 Norristown, PA 19404-0511 Holding Company for Life Insurance Company (d) Mr. Clemens has not, during the last five years, been convicted in a criminal proceeding. (e) Mr. Clemens has not, during the last five years, been a party to a civil proceeding resulting in a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to federal or state securities laws or finding any violation with respect to such laws. (f) United States of America Item 3. Source and Amount of Funds or Other Consideration. o Pursuant to the terms of an Amended and Restated Stock Exchange Agreement entered into as of February 27, 1989 (the "Stock Exchange Agreement"), a copy of which was attached as Exhibit "A" to Mr. Clemens's Schedule 13D filed on or about October 17, 1989, Mr. Clemens acquired 2,702,902 shares of Common Voting Stock, $.10 par value, of Issuer in exchange for transfer to the Issuer of 200,000 shares of the Common Stock of Maine National Life Insurance Company ("Maine National"), $5.50 par value, constituting all of the issued and outstanding shares of the Common Stock of Maine National. Prior to such exchange, Mr. Clemens was the owner of all of the issued and - 1 - outstanding shares of the Common Stock of Maine National. The shares of Issuer issued to Mr. Clemens in exchange for the shares of Maine National constituted a portion of the Issuer's authorized but unissued shares. o On January 16, 1991, Mr. Clemens transferred 616,000 Shares to the Mark Twain Trust. o Effective April 1, 1993, Mr. Clemens purchased 550,000 shares of Issuer's Series A Cumulative Convertible Preferred Stock ("Series A Preferred") at a price of $3.64 per share. Mr. Clemens was granted a loan by Harleysville National Bank and Trust Company (the "Bank") in the amount of $2,000,000 in order to fund the purchase of the Series A Preferred. The 550,000 Shares of Series A Preferred are pledged as collateral to the Bank in connection with the loan. The Series A Preferred is voted on an "as converted" basis, and is convertible on a share-for-share basis into either Class A Common Stock (having four votes per share in connection with matters submitted to shareholders for a vote) or into Common Stock. o Effective April 1, 1993, Mr. Clemens was granted an Option to purchase 550,000 shares of Issuer's Series A Cumulative Convertible Preferred Stock at an exercise price of $3.64 per share, the terms of which are set forth in an Amended and Restated Option to Purchase Preferred Shares dated as of December 11, 1996. o Mr. Clemens was granted an Option to purchase 25,000 shares of Issuer's Common Stock at an exercise price of $8.75 per share effective as of July 16, 1996, which vest over a period of three years. As of the present date, 8,333 shares have become exercisable. o Pursuant to an Agreement to Grant Options dated as of March 10, 1997 (the "Option Contract"), the Issuer agreed to grant Mr. Clemens an option to successively purchase up to 3,300,000 shares of the Issuer's Series A Cumulative Convertible Preferred Stock ("Series A Preferred"), which option or options will be granted upon any exercise by Mr. Clemens of any previously granted option to purchase Series A Preferred, and each subsequently granted option to purchase shares of Series A Preferred from time to time. The rights set forth in the Option Contract are limited as follows: (1) the number of shares of Series A Preferred issuable upon each exercise of the Option Contract shall be limited by the number of shares of Series A Preferred which shall, as of the date of any such exercise, be authorized and unissued; (2) the number of shares of Series A Preferred issuable upon the exercise of all of the - 2 - Options granted to Mr. Clemens under the Option Contract and under a previously granted option to purchase 550,000 shares of Series A Preferred shall not in the aggregate exceed 3,850,000 shares of Series A Preferred; and (3) except upon the occurrence of a "change in control" (as defined herein), Mr. Clemens shall not be permitted to exercise an option granted under the Option Contract (i) to purchase more than 550,000 shares of Series A Preferred in any six-month period, or (ii) the effect of which would be to permit Mr. Clemens to vote more than 55% of the number of shares of the Issuer's Common Stock owned by Mr. Clemens at such time. Upon the occurrence of a "change of control" of the Issuer, Mr. Clemens shall have the right to immediately exercise all options to purchase shares of Series A Preferred, and the Issuer will make a loan to him in an amount equal to the aggregate exercise price of all options to purchase shares of Series A Preferred which Mr. Clemens may then be entitled to exercise, plus an amount equal to all federal and state income taxes incurred by Mr. Clemens in connection with the exercise (the "Loan"). The Loan shall be unsecured, and shall bear interest at the then applicable federal short-term rate, but not less than six (6%) percent per annum, with interest and principal due and payable in full five (5) years from the date of the Loan. For this purpose, a "change of control" shall mean the acquisition by any individual, entity or group (within the meaning of the Securities Exchange Act of 1934, as amended), of beneficial ownership of 25% or more of either the then outstanding shares of the Common Stock of the Issuer, or the combined voting power of the then outstanding voting securities of the Issuer entitled to vote generally in the election of directors. - 3 - Item 4. Purpose of Transaction. Investment Item 5. Interest in Securities of the Issuer. Alvin H. Clemens (a) 3,827,869 shares of Issuer's Common Voting Stock, representing 38% of outstanding shares (b) Sole power to vote and dispose of 3,827,869 shares (c) None (d) Not applicable (e) Not applicable Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. o See Response to Item 3 above. o In April 1996 the Issuer made a loan in the amount of $300,000 to Mr. Clemens and increased the principal balance of the loan to $600,000 in April 1997. The loan is collateralized by 120,000 shares of Issuer's Common Voting Stock Item 7. Material to be Filed as Exhibits. (1) Amended and Restated Option to Purchase Preferred Shares of Issuer dated as of December 11, 1996, granted to Alvin H. Clemens. (2) Option to Purchase 25,000 shares of Issuer's Common Stock dated as of July 16, 1996, granted to Alvin H. Clemens. (3) Agreement to Grant Options dated as of March 10, 1997, between Issuer and Alvin H. Clemens. (4) Promissory Note in the principal amount of $2,000,000 dated March 31, 1993, delivered by Alvin H. Clemens to Harleysville National Bank and Trust Company. - 4 - (5) Promissory Note in the original principal amount of $300,000 dated April 8, 1996, as amended by Amendment to Promissory Note dated April 8, 1997, increasing the principal balance to $600,000. After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. July , 1997 - --------------------- Date s/s Alvin H. Clemens - -------------------------------------------------- Signature Alvin H. Clemens - -------------------------------------------------- Name/Title - 5 - EX-1 2 AMENDED/RESTATED OPTION TO PURCHASE SHARES AMENDED AND RESTATED OPTION TO PURCHASE PREFERRED SHARES OF PROVIDENT AMERICAN CORPORATION THIS AMENDED AND RESTATED OPTION is dated as of the 11th day of December, 1996, effective as hereinafter set forth. PROVIDENT AMERICAN CORPORATION ("PAMCO"), intending to be legally bound, hereby grants to ALVIN H. CLEMENS ("Owner"), a Stock Option ("Option") to purchase all or any part of an aggregate of FIVE HUNDRED FIFTY THOUSAND (550,000) shares of the Series A Cumulative Convertible Preferred Stock (the "Preferred Stock"), of PAMCO, $1.00 par value (the "Shares"), on the terms and conditions hereinafter set forth. This Amended and Restated Option supersedes the Option to purchase 550,000 shares of the Preferred Stock dated as of April 1, 1993, as amended, which was granted to Owner in connection with Owner's purchase of 550,000 shares of Series A Preferred as of that date (the "1993 Option"). 1. Purchase Price. The Shares of Preferred Stock may be purchased pursuant to this Option Agreement at a price of $3.64 per share, subject to adjustment as provided in Paragraph 6 hereof. 2. Effective Date of Grant; Termination of Option. The Option became effective and exercisable as of July 7, 1993 (the "Effective Date"). Unless sooner exercised, the Option herein granted shall expire at 5:00 p.m., ten (10) years from the Effective Date. The Option or any part hereof may be exercised at any time or from time to time up to ten (10) years from the Effective Date. 3. Method of Exercise. a. Subject to the terms and conditions hereof, the Option or any part thereof may be exercised in accordance with the terms hereof, in whole or in part, by written notice to PAMCO. b. The notice of exercise shall specify the number of Shares of Preferred Stock to be purchased, acknowledge and agree that such Shares of Preferred Stock are being purchased for investment and not for distribution or resale, and shall be accompanied by payment in cash, by certified or bank cashier's check payable to the order of PAMCO for the aggregate purchase price of the Shares of Preferred Stock purchased, or by delivery of shares of either PAMCO Common Stock, Preferred Stock, or Class A Common Stock, together with duly executed stock powers, having a Current Market Price (as hereinafter defined) equal to such purchase price. Such exercise (subject to the restrictions contained in Paragraph 7) shall be effective upon the actual receipt of such written notice and payment to PAMCO. As used herein, the term "Current Market Price" shall mean, with respect to one share of PAMCO Common Stock at any date, the average of the daily closing prices for the 30 consecutive business days before the day in question, as adjusted for any stock dividend, split, combination or reclassification that took effect during such 30 business day period, or, in case no sales took place on any day in question during such 30 business day period, the last bid price on such day, in either case on the principal national securities exchange on which the Common Stock is then listed or admitted to trading or on the National Association of Securities Dealers Automated Quotations System ("NASDAQ") National Market System, or, if the Common Stock is not listed or admitted for trading on any such exchange or on the - 2 - NASDAQ National Market System on any day in question, then such price as shall be deemed to be the last bid price quoted on the NASDAQ interdealer quotation system, then said price shall be deemed to be the last reported bid price on such day as reported by the National Quotation Bureau, Inc., provided, however, that if the Common Stock is not traded in such matter that the quotations referred to in this subsection (b) are available for the period required hereunder, the Current Market Price shall be determined on an as converted basis, or in the absence thereof, in good faith by at least a majority of the members of the Board of Directors of PAMCO. c. No rights or privileges of a shareholder of PAMCO in respect of any of the Shares of Preferred Stock issuable upon the exercise of any part of the Option shall inure to Owner, or any other person entitled to exercise the Option as herein provided, unless and until certificates representing such Shares of Preferred Stock shall have been delivered, which certificate or certificates may bear an appropriate legend indicating that the Shares of Preferred Stock represented thereby have been purchased for investment and not for distribution or resale. d. Upon the partial exercise of the Option herein granted, the Owner of the Option, upon written notification to PAMCO and the surrender of this Option to PAMCO, shall be entitled to be issued an Option to purchase such lesser number of Shares of Preferred Stock as Owner shall request. 4. Transferability. The Option shall be freely transferable by Owner in respect of the Shares of Preferred Stock for which the Option shall be exercisable at the principal office of PAMCO by Owner by presentation of the Option, properly endorsed for transfer. In the event that the Option is transferred, Owner agrees by holding this Option that Owner's Option, when - 3 - endorsed in blank, may be deemed negotiable and that Owner, when this Option shall have been endorsed, may be treated by PAMCO and all other persons dealing with the Option as the absolute owner thereof for any purpose, and as the party entitled to exercise the rights represented by this Option, or to the transfer thereof on the books of PAMCO, any notice to the contrary notwithstanding. The form of this Option is exchangeable upon the surrender thereof by Owner at the principal office of PAMCO for new Options of like tenor representing in the aggregate the right to purchase the number of Shares of Preferred Stock purchasable under the Option being exchanged, each such new Option to represent the right to purchase such number of Shares of Preferred Stock as shall be designated by Owner at the time of such surrender, but not to exceed in the aggregate the number of Shares of Preferred Stock subject hereto. 5. Dilution. In the event that prior to the delivery by PAMCO of all of the Shares of Preferred Stock in respect of which the aforesaid Option is granted, the outstanding Shares of Preferred Stock of PAMCO, including any common stock into which the Preferred Stock shall be convertible, shall be changed in number or class or exchanged for a different number or kind of shares of stock or other securities of PAMCO, whether by reason of recapitalization, reclassification, reorganization, combination, stock split or reverse stock split, or payment of a stock dividend or other similar change in capitalization, effected without receipt of consideration by PAMCO, the remaining number of Shares of Preferred Stock still subject to the Option and the purchase price therefor shall be adjusted in a manner determined by PAMCO so that the adjusted number of shares and the adjusted purchase price shall be substantially - 4 - equivalent to the remaining number of Shares of Preferred Stock still subject to the Option and the purchase price thereof prior to such change. 6. Registration. If the registration or qualification of the Shares of Preferred Stock subject to the Option under any federal or state law or the consent or approval of any governmental regulatory body or a national stock exchange is necessary as a condition of or in connection with the purchase or issuance of such Shares of Preferred Stock, PAMCO shall not be obligated to issue or deliver the certificates representing the Shares of Preferred Stock as to which the Option has been exercised unless and until such registration, qualification, consent or approval shall have been effected or obtained. 7. Owner's Obligation. Owner, by acceptance of this Option, expressly acknowledges and agrees that: (1) Owner will be solely responsible for all taxes levied by or under federal, state or municipal authority, to which Owner may be or become subject arising out of or resulting from receipt of this Option, holding or exercise thereof or holding, sale, transfer or other disposition of shares acquired on such exercise; and (2) Owner will indemnify PAMCO and its affiliates, and hold such person harmless, of, from and against any and all loss, damage, obligation or liability, and all costs and expenses (including attorneys' fees) incurred in connection therewith, which it may suffer or incur on account or by reason of any act or omission of Owner, or Owner's heirs, executors, administrators, personal representatives, successors and assigns in breach or violation of the covenants and agreements of Owner set forth herein. 8. Notification. Any notice to be given to PAMCO shall be marked to the attention of the Secretary and addressed to PAMCO at its then principal office, - 5 - and any notice to be given to Owner shall be addressed to the address then appearing in the personal records of PAMCO for Owner, or at such other address as either party may hereafter designate in writing to the other. Any such notice shall be deemed to have been properly given if and when enclosed in a properly sealed envelope addressed as aforesaid, registered or certified mail, and deposited, postage prepaid, in a post office regularly maintained by the United States Government. 9. Amendments. This Amended and Restated Stock Option Agreement supersedes the 1993 Option. Any amendments to this Amended and Restated Stock Option Agreement must be in writing, signed by each party hereto. IN WITNESS WHEREOF, PAMCO has caused this Amended and Restated Stock Option Agreement to be executed as of the day and year above first written. PROVIDENT AMERICAN CORPORATION Attest: /s/ M. F. Beausang, Jr. By: /s/ James O. Bowles - ----------------------------------- ------------------------------------ Michael F. Beausang, Jr., Secretary James O. Bowles, President [SEAL] - 6 - PURCHASE AGREEMENT To: Secretary of Provident American Corporation The undersigned, pursuant to the provisions of the attached Option, agrees to purchase _______________________ (________) Shares of the Series A Cumulative Convertible Preferred Stock of Provident American Corporation, $1.00 par value, and makes payment herewith in full therefore at the price per share provided by such Option. Date:___________________________ Signature:_____________________________ Address: ______________________________ ______________________________ ASSIGNMENT FOR VALUE RECEIVED, _________________________________ hereby sells, assigns, and transfers all of the rights of the undersigned under the Option attached hereto, with respect to the number of Shares of Preferred Stock of Provident American Corporation covered by such Option to: NAME OF ASSIGNEE ADDRESS NO. OF SHARES - ---------------- ------- ------------- Date:______________________________ Signature:_______________________ Witness:_________________________ - 7 - CASHLESS OPTION SUBSCRIPTION The undersigned, Owner of a certain Option to purchase Shares of the Preferred Stock of PAMCO, hereby agrees to subscribe to that number of Shares of the Common Stock or Class A Common Stock of PAMCO as are issuable in accordance with the provisions set forth in Paragraph 3.b of the Option, and makes payment therefor in full by surrender and delivery of this Option. Dated:__________________________ Signature:_____________________________ Print Name:____________________________ Address:_______________________________ _______________________________ Social Security No.:___________________ EX-2 3 OPTION TO PURCHASE COMMON SHARES OPTION NO.: 020D DATE OF ISSUE: July 16, 1996 OPTION TO PURCHASE TWENTY FIVE THOUSAND (25,000) COMMON SHARES OF PROVIDENT AMERICAN CORPORATION STOCK OPTION PLAN FOR DIRECTORS VOID AFTER 5:00 P.M. ON JULY 16, 2006, AS PROVIDED HEREIN Provident American Corporation ("PAMCO") intending to be legally bound, and pursuant to the Stock Option Plan for Directors, as amended, hereby grants to ALVIN H. CLEMENS ("Owner") a Stock Option ("Option") to purchase all or any part of an aggregate of TWENTY FIVE THOUSAND (25,000) common shares, $0.10 par value (the "Shares") of PAMCO on the terms and conditions hereinafter set forth. 1. Purchase Price. The Shares may be purchased pursuant to this Option Agreement at a purchase price of $8.75 per Share, subject to adjustment as provided in Paragraph 5 hereof. 2. Termination of Option. Unless sooner exercised or terminated, the Option herein granted shall expire at 5:00 p.m., ten (10) years from the date hereof; provided, however, that any unvested portion of the Option shall terminate upon the Owner's resignation as a Director of PAMCO prior to two (2) years from the date hereof. 3. Conditions and Method of Exercise. a. Subject to the terms and conditions hereof, the Option shall vest and become exercisable as follows: (i) 8,333 Shares upon the issuance of the Option, (ii) an additional 8,333 Shares one (1) year from the date hereof, and (iii) the remaining balance of 8,334 Shares two (2) years from the date hereof. Notwithstanding the foregoing, the Option herein granted shall become immediately exercisable in the event that 25% or more of the issued and outstanding Shares of the capital stock of PAMCO are transferred in a single transaction or a series of transactions extending over a period of one (1) year to a person or entity or persons or entities affiliated therewith who are not presently shareholders of PAMCO. b. An Option which is vested shall be exercisable by written notice to PAMCO. The notice of exercise shall specify the number of Shares to be purchased, acknowledge and agree that such Shares are being purchased for investment and not for distribution or resale, and shall be accompanied by payment in cash or by certified or bank cashier's check payable to the order of PAMCO for the aggregate Option price of the Shares purchased. The exercise (subject to the restrictions contained in Paragraph 7) shall be effective upon the actual receipt of such written notice and payment to PAMCO. c. No rights or privileges of a shareholder of PAMCO in respect of any Shares issuable upon the exercise of any part of an Option shall inure to the Owner, or any other person entitled to exercise an Option as herein provided, unless and until certificates representing such Shares have been delivered, which certificate(s) may bear an appropriate legend indicating that the Shares represented thereby have been purchased for investment and not for distribution or resale. - 2 - d. Upon the partial exercise of an Option, the Owner of the Option, upon written notification and surrender of the Option to PAMCO, shall be entitled to be issued an Option to purchase such lesser number of Shares as the Owner shall request. 4. Transferability. An Option shall be freely transferable by the Owner in respect of the Shares for which the Option shall be exercisable by presentation of the Option at the principal office of PAMCO, properly endorsed for transfer. In the event an Option is transferred, the Owner agrees by holding the Option that when endorsed in blank, the Option may be deemed negotiable and the Owner may be treated by PAMCO and all other persons dealing with the Option as the absolute owner thereof for any purpose, and as the party entitled to exercise the rights represented by the Option, or to the transfer thereof on the books of PAMCO, any notice to the contrary notwithstanding. The form of an Option is exchangeable upon its surrender by the Owner at the principal office of PAMCO for new Options of like tenor representing in the aggregate the right to purchase the number of Shares purchasable under the Option being exchanged, each such new Option to represent the right to purchase such number of Shares as shall be designated by the Owner at the time of surrender, but not to exceed in the aggregate the number of Shares subject hereto. 5. Dilution. In the event that prior to the delivery by PAMCO of all of the Shares of common stock in respect of which the Option is granted, the outstanding Shares of common stock of PAMCO shall be changed in number or class or exchanged for a different number or kind of shares of stock or other securities of PAMCO, whether by reason of recapitalization, reclassification, reorganization, combination, stock split or reverse stock split, or payment of - 3 - a stock dividend or other similar change in capitalization, effected without receipt of consideration by PAMCO, the remaining number of Shares of common stock still subject to the Option and the purchase price therefor shall be adjusted in a manner determined by PAMCO so that the adjusted number of Shares and the adjusted purchase price shall be substantially equivalent to the remaining number of Shares still subject to the Option and the purchase price thereof prior to such change. 6. Registration. If the registration or qualification of the Shares subject to an Option under any federal or state law or the consent or approval of any governmental regulatory body or a national stock exchange is necessary as a condition of or in connection with the purchase or issuance of such Shares, PAMCO shall not be obligated to issue or deliver the certificates representing the Shares as to which the Option has been exercised unless and until such registration, qualification, consent or approval has been effected or obtained. 7. Owner's Obligation. The Owner, by acceptance of this Option, expressly acknowledges and agrees that: (1) Owner will be solely responsible for all taxes levied by or under federal, state or municipal authority to which Owner may be or become subject arising out of or resulting from receipt of this Option, holding or exercise thereof or the holding, sale, transfer, or other disposition of shares acquired on such exercise; and (2) Owner will indemnify PAMCO and its affiliates, and hold such persons harmless, of, from and against any and all loss, damage, obligation or liability, and all costs and expenses (including attorneys' fees) incurred in connection therewith, which it may suffer or incur on account or by reason of any act or omission of the Owner, or - 4 - Owner's heirs, executors, administrators, personal representatives, successors and assigns in breach or violation of the covenants and agreements of the Owner set forth herein. 8. Notification. Any notice to be given to PAMCO shall be marked to the attention of the Secretary and addressed to PAMCO at its then principal office, and any notice to be given to the Owner shall be addressed to the address then appearing in the personal records of PAMCO for the Owner, or at such other address as either party may hereafter designate in writing to the other. Any such notice shall be deemed to have been properly given if and when enclosed in a properly sealed envelope addressed as aforesaid, registered or certified mail, and deposited, postage prepaid, in a post office regularly maintained by the United States Government. PROVIDENT AMERICAN CORPORATION ATTEST: /s/ Michael F. Beausang, Jr. By: /s/ Alvin H. Clemens ----------------------------- --------------------------- Michael F. Beausang, Jr. Alvin H. Clemens Secretary President [SEAL] - 5 - PURCHASE AGREEMENT To:______________________________ Date:_________________ The undersigned, pursuant to the provisions of the foregoing Option, agrees to purchase __________________________ (_________) Shares of the Common Stock of Provident American Corporation, $0.10 par value, and makes payment herewith in full therefore at the price per share provided by such Option. Signature:_____________________________ Address: ______________________________ ______________________________ - -------------------------------------------------------------------------------- ASSIGNMENT FOR VALUE RECEIVED, hereby sells, assigns, and transfers all of the rights of the undersigned under the Option attached hereto, with respect to the number of Shares of Provident American Corporation covered by such Option to: NAME OF ASSIGNEE ADDRESS NO. OF SHARES - ---------------- ------- ------------- Date:______________________________ Signature:_______________________ Witness:_________________________ - 6 - EX-3 4 AGREEMENT TO GRANT OPTIONS AGREEMENT TO GRANT OPTIONS TO PURCHASE UP TO 3,300,000 SHARES OF SERIES A PREFERRED STOCK OF PROVIDENT AMERICAN CORPORATION THIS AGREEMENT is dated as of the 10th day of March, 1997. PROVIDENT AMERICAN CORPORATION ("PAMCO"), intending to be legally bound, hereby agrees to grant to ALVIN H. CLEMENS ("Owner") an option ("Option") to purchase shares of the Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock"), of PAMCO, $1.00 par value, upon the terms and conditions hereinafter set forth, as follows: 1. Grant of Options. a. Owner is the owner of an Option to purchase 550,000 shares of Series A Preferred Stock in accordance with the terms and conditions of an Option to Purchase Preferred Shares dated as of April 1, 1993, as amended (the "1993 Option"). b. PAMCO hereby agrees to grant to Owner an Option to purchase up to an additional 3,300,000 shares of Series A Preferred Stock, upon the following terms and conditions: Upon the exercise of an Option or Options to purchase a share or shares of Series A Preferred Stock by Owner (either pursuant to the 1993 Option or with respect to an Option granted under this Agreement), without further action, PAMCO shall be deemed to have successively granted to Owner an option or options to purchase that number of shares of Series A Preferred Stock as shall equal the number of shares of Series A Preferred Stock for which an Option or Options has theretofore been exercised by Owner, it being the intention of PAMCO that Owner shall successively be granted an Option or Options in order that Owner shall at all times and notwithstanding any prior exercise of any Option or Options, have the right and option to purchase 550,000 shares of Series A Preferred Stock. The obligation of PAMCO to issue Options to Owner shall be limited as follows: (1) the number of shares of Series A Preferred Stock issuable upon each exercise of this Option shall be limited by the number of shares of Series A Preferred Stock which shall, as of the date of any such exercise, be authorized and unissued; (2) the number of Shares of Series A Preferred Stock issuable upon the exercise of all of the Options granted to Owner hereunder and under the 1993 Option shall not in the aggregate exceed 3,850,000 shares of Series A Preferred Stock; and (3) except upon the occurrence of a "change of control" (as hereinafter defined), Owner shall not be permitted to exercise an option granted hereunder (i) to purchase more than 550,000 shares of Series A Preferred Stock in any six-month period or (ii) to purchase shares of Series A Preferred Stock which would result in Owner controlling more than 55% of the outstanding voting rights for all classes of PAMCO's Common Voting Stock, $.10 par value ("Common Stock") from time to time outstanding and entitled to vote, after giving effect to all other shares of PAMCO's Common Stock owned by Owner at such time. c. Notwithstanding the foregoing, upon the occurrence of a "change of control" of PAMCO, the limitation set forth in subparagraph 1.b.(2) above shall no longer be applicable, and Owner shall be permitted to immediately and successively exercise Options to purchase Series A Preferred Stock subject only to the limitations set forth in subparagraphs 1.b.(1) and (3) above. 2. Purchase Price. The exercise price for the purchase of the shares of Series A Preferred Stock pursuant to this Agreement shall be equal to the - 2 - Current Market Price (as hereinafter defined) per share of PAMCO's Common Stock as of the date of grant, subject to adjustment as provided in Paragraph 7 hereof. As used herein, the term "Current Market Price" shall mean, with respect to one share of PAMCO Common Stock at any date, the average of the daily closing prices for the 30 consecutive business days before the day in question, as adjusted for any stock dividend, split, combination or reclassification that took effect during such 30 business day period, or, in case no sales took place on any day in question during such 30 business day period, the last bid price on such day, in either case on the principal national securities exchange on which the Common Stock is then listed or admitted to trading or on the National Association of Securities Dealers Automated Quotations System ("NASDAQ") National Market System, or, if the Common Stock is not listed or admitted for trading on any such exchange or on the NASDAQ National Market System on any day in question, then such price as shall be deemed to be the last bid price quoted on the NASDAQ interdealer quotation system, then said price shall be deemed to be the last reported bid price on such day as reported by the National Quotation Bureau, Inc., provided, however, that if the Common Stock is not traded in such matter that the quotations referred to in this subsection (b) are available for the period required hereunder, the Current Market Price shall be determined in good faith by at least a majority of the members of the Board of Directors of PAMCO. 3. Effective Date of Grant; Termination of Option. a. This Agreement shall become effective as of March 10, 1997 ("Effective Date"). b. Unless sooner exercised, the Option or Options to be granted hereunder shall expire at 5:00 p.m., ten (10) years from the date of grant. - 3 - 4. Method of Exercise. a. Subject to the terms and conditions hereof, the Option or any part thereof may be exercised in accordance with the terms hereof, in whole or in part, by written notice to PAMCO. b. The notice of exercise shall specify the number of shares of Series A Preferred Stock to be purchased, acknowledge and agree that such shares of Series A Preferred Stock are being purchased for investment and not for distribution or resale, and shall be accompanied by payment in cash, by certified or bank cashier's check payable to the order of PAMCO for the aggregate purchase price of the shares of Series A Preferred Stock purchased. Such exercise (subject to the restrictions contained in Paragraph 9) shall be effective upon the actual receipt of such written notice and payment to PAMCO. c. No rights or privileges of a shareholder of PAMCO in respect of any of the shares of Series A Preferred Stock issuable upon the exercise of any part of the Option shall inure to Owner, or any other person entitled to exercise the Option as herein provided, unless and until certificates representing such shares of Series A Preferred Stock shall have been delivered, which certificate or certificates may bear an appropriate legend indicating that the shares of Series A Preferred Stock represented thereby have been purchased for investment and not for distribution or resale. 5. Loan Upon Change of Control. a. Upon the occurrence of a "change of control" (as hereinafter defined) of PAMCO, PAMCO shall make a loan to Owner (the "Loan"). The Loan shall be in an amount equal to the total exercise price payable by Owner to PAMCO for Owner to exercise all of the Series A Preferred Stock - 4 - Options, limited in the aggregate to the purchase of 3,850,000 shares of Series A Preferred Stock, plus an amount equal to all federal, state, and local income taxes incurred by Owner in connection with the exercise of all of such Options. b. In the alternative, Owner shall have the right to give written notice to PAMCO that Owner has exercised that number of Series A Preferred Stock Options, up to the aggregate total of 3,850,000 Options (limited, however, as set forth in Paragraph 1.b hereof), and advise PAMCO of the amount of the total exercise price thereof. In such event, the total exercise price thereof shall be deemed to have been paid by Owner as if PAMCO had made a portion of the Loan to Owner, and Owner had used the portion of the Loan to pay the total exercise price. Simultaneously, PAMCO shall lend to Owner the balance of the Loan in an amount equal to the aggregate total federal, state, and local income taxes incurred by Owner as set forth herein. d. The Loan shall be unsecured and shall bear interest at the then applicable federal short-term rate, but not less than six (6%) percent per annum. Interest shall accrue and the entire balance of principal and interest shall be due and payable in full five (5) years from the date of the Loan. For purposes hereof, a "change of control" shall mean the acquisition by any individual, entity or group (within the meaning of the Securities Exchange Act of 1934, as amended), of beneficial ownership of 25% or more of either the then outstanding shares of the Common Stock of PAMCO, or the combined voting power of the then outstanding voting securities of PAMCO entitled to vote generally in the election of directors. 6. Transferability. The Option shall not be transferable by Owner to any other person or entity without the prior written consent of PAMCO, except - 5 - that it shall be transferable by will or in accordance with the laws of descent and distribution, and in such event, shall be exercisable by Owner's heirs or the personal representative of Owner's estate. 7. Dilution. In the event that prior to the delivery by PAMCO of all of the shares of Series A Preferred Stock in respect of which the aforesaid Option is granted, the outstanding shares of Series A Preferred Stock of PAMCO, including any common stock into which the Series A Preferred Stock shall be convertible, shall be changed in number or class or exchanged for a different number or kind of shares of stock or other securities of PAMCO, whether by reason of recapitalization, reclassification, reorganization, combination, stock split or reverse stock split, or payment of a stock dividend or other similar change in capitalization, effected without receipt of consideration by PAMCO, the remaining number of shares of Series A Preferred Stock still subject to the Option and the purchase price therefor shall be adjusted in a manner determined by PAMCO so that the adjusted number of shares and the adjusted purchase price shall be substantially equivalent to the remaining number of shares of Series A Preferred Stock still subject to the Option and the purchase price thereof prior to such change. 8. Registration. a. If the registration or qualification of the shares of Series A Preferred Stock, or any shares into which such may be converted, is required under any federal or state law or the consent or approval of any governmental regulatory body or a national stock exchange is necessary as a condition of or in connection with the purchase or issuance of any such shares, PAMCO shall not be obligated to issue or deliver the certificates representing such shares unless (i) it shall have received an opinion of counsel in form and - 6 - substance satisfactory to PAMCO that an exemption therefrom exists, or (ii) until such registration, qualification, consent, or approval shall have been effected or obtained. b. Owner shall have the right to demand the registration of all of the shares which are issuable upon exercise of all of the Options that are the subject of this Agreement, including the 1993 Option, in accordance with the terms and conditions of the Amended and Restated Registration Rights Agreement dated as of February 27, 1989 ("Registration Rights Agreement") entered into between Owner and PAMCO. The Registration Rights Agreement shall be deemed to be amended hereby as follows: (1) The definition of the term "Shares" set forth in Paragraph 2, Certain Definitions, shall be amended in its entirety to read as follows: "Shares" shall mean (i) the 2,702,902 shares of PAMCO Common Stock issued to Clemens pursuant to the Stock Exchange Agreement, (ii) all of the shares of PAMCO's Series A Cumulative Convertible Preferred Stock, $1.00 par value ("Series A Preferred"), all of the shares of PAMCO's Class A Common Stock, $.10 par value, into which the Series A Preferred shall have been converted, and all of the shares of PAMCO Common Stock into which the Class A Common Stock shall have been converted, (iii) all shares of PAMCO Common Stock, Series A Preferred, and Class A Common Stock issued to Clemens in the future upon his exercise of any option granted to him pursuant to the Amended and Restated Stock Option Agreement dated as of February 27, 1989, the Amended and Restated Option to Purchase Preferred Shares dated as of April 1, 1993, and the Agreement to Grant Options to Purchase up to 3,300,000 Shares of Series A Preferred Stock dated as of March 10, 1997, and (iv) any PAMCO Common Stock, Series A Preferred, and/or Class A Common Stock issued to Clemens upon any stock split, stock dividend, recapitalization or similar event." - 7 - (2) Paragraph 5.(a), Request For Registration, shall be amended to read as follows: "(a) Request for Registration. If PAMCO shall receive from Clemens at any time or times a written request that PAMCO effect any registration with respect to all or a part of the Shares, PAMCO will:" (3) Paragraph 7, Expenses of Registration, shall be amended to read as follows: "7. Expenses of Registration. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to this Agreement shall be borne by PAMCO, and all Selling Expenses shall be borne by the Holders, including PAMCO, of the securities so registered pro rata on the basis of the number of their shares so registered; provided, however, that Clemens shall be required to pay one-half of any Registration Expenses if the registration was requested by Clemens, and shall be required to pay all of the Registration Expenses if the registration statement does not become effective as a result of the withdrawal of a request for registration by Clemens, unless such withdrawal is due to the misconduct of PAMCO or due to a material adverse change in the assets, business, condition or prospects of PAMCO occurring prior to the effectiveness of the registration statement, in which case PAMCO shall continue to bear such expenses." 9. Owner's Obligation. Owner, by acceptance of this Option, expressly acknowledges and agrees that: (1) Owner will be solely responsible for all taxes levied by or under federal, state or municipal authority, to which Owner may be or become subject arising out of or resulting from receipt of this Option, holding or exercise thereof or holding, sale, transfer or other disposition of shares acquired on such exercise; and (2) Owner will indemnify PAMCO and its affiliates, and hold such person harmless, of, from and against - 8 - any and all loss, damage, obligation or liability, and all costs and expenses (including attorneys' fees) incurred in connection therewith, which it may suffer or incur on account or by reason of any act or omission of Owner, or Owner's heirs, executors, administrators, personal representatives, successors and assigns in breach or violation of the covenants and agreements of Owner set forth herein. 10. Notification. Any notice to be given to PAMCO shall be marked to the attention of the Secretary and addressed to PAMCO at its then principal office, and any notice to be given to Owner shall be addressed to the address then appearing in the personal records of PAMCO for Owner, or at such other address as either party may hereafter designate in writing to the other. Any such notice shall be deemed to have been properly given if and when enclosed in a properly sealed envelope addressed as aforesaid, registered or certified mail, and deposited, postage prepaid, in a post office regularly maintained by the United States Government. 11. Miscellaneous. a. Time of Essence. Time is of the essence of each and every term and condition of this Agreement. b. Withholding of Taxes in Shares of Stock. In the event that any federal or state income taxes are due by Owner upon the exercise of any option to purchase shares of Series A Preferred Stock, including the 1993 Option, then Owner shall have the right to deliver to PAMCO shares of PAMCO Common Stock, Class A Common Stock, or shares of Series A Preferred Stock having a Current Market Price equal to the income taxes required to be withheld. c. Governing Law/Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of - 9 - 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. d. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, administrators, successors and assigns. IN WITNESS WHEREOF, PAMCO has caused this Agreement to be executed as of the day and year above first written. PROVIDENT AMERICAN CORPORATION Attest: Michael F. Beausang, Jr. By: /s/ James O. Bowles - ----------------------------------- -------------------------- Michael F. Beausang, Jr., Secretary James O. Bowles, President [SEAL] - 10 - PURCHASE AGREEMENT To: Secretary of Provident American Corporation The undersigned, pursuant to the provisions of the attached Option, agrees to purchase _______________________ (________) Shares of the Series A Cumulative Convertible Preferred Stock of Provident American Corporation, $1.00 par value, and makes payment herewith in full therefore at the price per share provided by such Option. Date:______________________ Signature:_____________________________ Address: ______________________________ ______________________________ Tax I.D. No.___________________________ - 11 - EX-5 5 PROMISSORY NOTE PROMISSORY NOTE $300,000.00 April 8, 1996 The undersigned, ALVIN H. CLEMENS ("Clemens"), hereby promises to pay to the order of PROVIDENT AMERICAN CORPORATION, a Pennsylvania corporation, the sum of Three Hundred Thousand and 00/100 ($300,000.00) Dollars, together with interest at the rate of five and one-third (5.33%) percent per annum. The Note shall be repayable interest only for two (2) years from the date hereof, the first interest payment being due and payable on April 8, 1997, and the second interest payment being due and payable on April 8, 1998; the entire principal balance, together with all accrued and unpaid interest thereon, shall be due and payable on April 8, 1999. The undersigned shall have the right to prepay in whole or in part any amounts due under this Note, without penalty. And further, the undersigned does hereby authorize and empower the Prothonotary, Clerk of Court or any Attorney of any Court of Record of Pennsylvania, or elsewhere, to appear for and to confess judgment against him for the above sum, as of any term, past, present or future, with or without declaration, with costs of suit, release of errors, without stay of execution, and with 15% added for collection fees; and the undersigned also waives the right of inquisition on any real estate that may be levied upon to collect this Note and does hereby voluntarily condemn the same and authorize the Prothonotary to enter upon the writ of execution his said voluntary condemnation, and he further agrees that said real estate may be sold on a writ of execution and he hereby waives and releases all relief from any and all appraisement, stay or exemption laws of any State, now in force or hereafter to be passed. ------------------------------------- ALVIN H. CLEMENS AMENDMENT TO PROMISSORY NOTE THIS AMENDMENT TO PROMISSORY NOTE ("Note") is made and dated as of the 8th day of April, 1997, by and between Alvin H. Clemens ("Clemens"), an individual residing at 907 Exeter Crest, Villanova, Pennsylvania, and PROVIDENT AMERICAN CORPORATION, a Pennsylvania corporation ("PAMCO"). BACKGROUND A. Clemens executed and delivered to PAMCO a Promissory Note dated April 8, 1996 in the original principal amount of $300,000 (the "Note"). B. The parties are desirous of amending the Note as hereinafter set forth. 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. Principal Balance. The principal balance of the Note shall be increased to Six Hundred Thousand ($600,000) Dollars. 2. Repayment of Principal. The entire principal balance of the Note shall be due and payable in full on April 8, 1999. 3. Payment of Interest. The Note shall bear interest at the rate of five and one-third (5.33%) percent per annum through April 7, 1997, and shall bear interest at the rate of five and three-quarters (5.75%) percent per annum thereafter. Interest shall accrue and shall be due and payable, together with the principal balance, on April 8, 1999. 4. Ratification. As herein amended, the Note is ratified, approved, and affirmed, and remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Promissory Note as of the day and year first above-written. Witness: /s/ Eva M. Seeton /s/ Alvin H. Clemens (SEAL) - ---------------------------------- ------------------------------------ ALVIN H. CLEMENS PROVIDENT AMERICAN CORPORATION Attest: /s/ M. F. Beausang, Jr. By: /s/ James O. Bowles - ---------------------------------- ------------------------------------ M. F. Beausang, Jr., Secretary James O. Bowles, President -----END PRIVACY-ENHANCED MESSAGE-----