PROMISSORY NOTE
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$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.
/s/ -----------------
ALVIN H. CLEMENS
PLEDGE AND SECURITY AGREEMENT
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THIS PLEDGE AND SECURITY AGREEMENT ("Agreement") made this 8th day of
April, 1996, by and between ALVIN H. CLEMENS ("Pledgor") and PROVIDENT AMERICAN
CORPORATION, a Pennsylvania corporation ("Secured Party").
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. Creation of Security Interest. Pledgor hereby grants to
Secured Party a security interest in and pledges to the Secured Party the
Collateral described in Exhibit "A" attached hereto, together with any proceeds
thereof ("Collateral"). Pledgor hereby delivers the Collateral to Secured Party,
together with a stock power of attorney duly endorsed in blank, or such other
documents of transfer as shall be necessary to effectuate the transfer of title
of the Collateral.
2. Debt Secured. Pledgor has borrowed from the Secured Party the
sum of Three Hundred Thousand ($300,000) Dollars, in accordance with the terms
and conditions of a Promissory Note dated as of the date hereof (the "Note"),
which shall be repayable as set forth in the Note.
3. Representations, Warranties, and Covenants of Pledgor. Pledgor
represents, warrants and covenants to Secured Party that:
a. Pledgor is the legal and beneficial owner of the
Collateral.
b. The Collateral has been validly issued, is fully paid
and non-assessable and is owned by Pledgor free and clear of all security
interests, liens, restrictions, charges, and other encumbrances of any nature
other than the lien created hereby.
c. The execution, delivery, and performance of this
Agreement do not violate the provisions of or cause a default or constitute an
event which, with notice or the lapse of time or both, would constitute a
default on the part of Pledgor under any law or any contract, agreement, or
other instrument or judgment or decree to which Pledgor is a party or by which
he is bound.
d. The Collateral is not the subject of any present or
threatened suit, action, arbitration, or administrative or other proceeding, and
Pledgor knows of no reasonable grounds for the institution of any such
proceeding.
e. Pledgor shall, at his expense, defend Secured Party's
right, title and security interest in and to the Collateral against the claims
of any person, corporation or other entity.
f. Pledgor shall not:
(1) sell, convey, or otherwise dispose of any
of the Collateral or any interest therein;
or
(2) create, incur or permit to exist any
security interest, lien, charge or
encumbrance whatsoever with respect to any
of the Collateral other than the lien
created hereby.
g. This Agreement constitutes the valid and binding
obligation of Pledgor enforceable in accordance with its term.
4. Voting Rights. Prior to the occurrence of an Event of Default
(as defined herein), Pledgor shall have the right to vote the Collateral. Upon
the occurrence of any Event of Default, Secured Party shall immediately have the
right to vote the Collateral as if the absolute owner thereof, whether or not
the Collateral shall have been registered in the name of Secured Party.
5. Custodial Duties.
a. Secured Party's sole duty with respect to the
Collateral shall be to exercise reasonable care in the physical custody and
preservation of the Collateral. Secured Party shall be relieved of all
responsibility for the Collateral, or any portion thereof, upon surrendering it
or tendering surrender of it to Pledgor.
b. Secured Party shall have no duty or responsibility to
take any steps (i) to preserve any rights in the Collateral against prior
parties, (ii) to protect, perfect, preserve or maintain any security interest
given to secure the Collateral, (iii) to protect the Collateral from decline in
value, (iv) to ascertain any maturities or exercise or accept any calls,
conversions, exchanges, offers, tenders, or similar matters relating to any
Collateral, or (v) to send notices, perform services or take any action in
connection with the management of the Collateral.
6. Powers of Escrow Agent With Respect to Collateral.
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a. Secured Party shall have the power, in its sole
discretion, and after five (5) days' written notice to Pledgor, to take one or
more of the following actions, but shall be under no duty or responsibility to
exercise or withhold the exercise of these rights, powers, privileges, and
options, and shall not have any liability for any failure or delay in doing so,
other than to account for property actually received by Secured Party:
(1) receive all income, dividends,
distributions or other property and apply
them against the liabilities of
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Pledgor, in any priority, or hold the same
as additional Collateral;
(2) make any compromise or settlement deemed
advisable with respect to any of the
Collateral;
(3) renew, extend, or otherwise change the
terms and conditions of the Note or the
Collateral;
(4) take or release any other collateral as
security for any of the Collateral;
(5) take or release any guarantor, endorser,
surety, or other party to the Note or the
Collateral; and
(6) execute any necessary endorsements,
assignments, or other instruments or
conveyances or transfer with respect to the
Collateral to effect Secured Party's
remedies under Section 9 hereof.
b. Pledgor hereby irrevocably makes, constitutes and
appoints Secured Party as Pledgor's true and lawful attorney-in-fact to take one
or more of the actions, rights, powers, privileges and options set forth in
Section 6.a hereof.
7. Obligations of Pledgor.
a. Without the prior written consent of Secured Party,
Pledgor will not sell, exchange, transfer, or otherwise dispose of the
Collateral or any of Pledgor's rights therein or under this Agreement, or permit
any lien or security interest to attach to same except that created by this
Agreement.
b. Pledgor will not permit anything to be done that may
impair the value of any of the Collateral or the security intended to be
afforded by this Agreement.
8. Events of Default. The occurrence of any of the following
events shall, at the option of Secured Party, without notice or demand,
constitute a default on the part of Pledgor hereunder ("Event of Default").
a. If there occurs any breach, failure or violation by
Pledgor (i) in the payment or performance of any of Pledgor's obligations or
liabilities as set forth in the Note, or (ii) in the performance of any of the
terms and conditions of this Agreement.
b. If Pledgor shall become insolvent or shall file a
voluntary petition to effect a plan or other arrangement with creditors, or if
Pledgor shall be adjudicated bankrupt or shall make an assignment for the
benefit of creditors, or shall apply for a consent to the appointment of any
receiver or trustee of all or a part of Pledgor's property, or as may be
applicable, Pledgor shall institute dissolution or liquidation proceedings.
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9. Remedies Upon Event of Default. Upon the occurrence of an
Event of Default, Secured Party shall have the right to do any of the following:
a. Secured Party may exercise all the rights and remedies
given to a secured party by the Pennsylvania Uniform Commercial Code.
b. Secured Party may have the Collateral registered in its
name or that of its nominee.
c. Secured Party may proceed to foreclose the security
interest given to it hereunder by selling all or any part of the Collateral in
whole or in part, at the same or different times, at public or private sale,
upon such terms as it deems best, for cash, upon credit or for future delivery
and, in connection therewith, Secured Party may grant options. Secured Party or
its nominee may purchase all or any part of the Collateral, absolutely freed and
discharged from any equity or redemption and from all trusts or other claims
whatsoever. If any of the Collateral is sold by Secured Party upon credit or for
future delivery, Secured Party shall not be liable for the failure of the
purchaser to pay for the same, and, in the event of any such failure, Secured
Party may resell such Collateral.
d. The proceeds of any sale of the Collateral shall be
applied as follows: (i) to pay all costs and expenses of every kind incurred by
Secured Party in connection with any actual or attempted sale, including
brokers' and attorneys' fees; (ii) to the satisfaction of all obligations of
Pledgor under the Note; (iii) to the payment of any other amounts required by
applicable laws, and (iv) to Pledgor in the event of any surplus. Pledgor shall
continue to be liable for any deficiency. In no event shall Pledgor be credited
with any part of the proceeds of any sale of the Collateral until such payment
thereon has actually been received by Secured Party.
e. Secured Party shall give Pledgor ten (10) days' prior
notice of the time and place of any public sale and of the time after which any
private sale or other disposition is to be made, which notice Pledgor agrees is
reasonable.
f. Pledgor recognizes that Secured Party may be unable to
effect a public sale of all or any part of the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933 (the "Act"), and therefore
may resort to one or more private sales to a restricted group of purchasers who
will be obligated to agree, among other things to acquire the Collateral for
their own account, for investment and without a view to the distribution or
resale thereof. Pledgor acknowledges that private sales so made may be at prices
and other terms less favorable to Secured Party than if the Collateral was sold
at public sale, and agrees Secured Party has no obligation to delay the sale of
any of the Collateral for the period of time necessary to permit the issuer of
the securities which are being sold (even if the issuer would agree), to
register such securities for sale under the Act. Pledgor agrees that private
sales made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner.
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g. The remedies provided herein in favor of Secured Party
shall not be deemed exclusive, but shall be cumulative, and shall be in addition
to all other legal and equitable remedies which Secured Party may have.
10. Termination of Agreement. This Agreement shall terminate upon
the full payment by Pledgor to Secured Party of all amounts due under the Note
and the completion of Pledgor's obligations under this Agreement.
11. Miscellaneous.
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a. Secured Party may waive any default or remedy a default
in any reasonable manner without waiving such subsequent default, and Secured
Party may waive or delay the exercise of any right or remedy under this
Agreement without waiving the right or remedy of any other right or remedy
hereunder.
b. This Agreement shall be binding upon and shall inure to
the benefit of the respective heirs, executors, administrators, successors and
assigns of the parties hereto.
c. All notices, requests, demands, or other communications
provided for herein shall be in writing and shall be deemed to have been given
when sent by registered or certified mail, return receipt requested, addressed
to the parties at such address as either party shall designate to the other from
time to time.
d. This Agreement may not be amended, modified or
terminated, except in writing and executed by all parties hereto, and no waiver
of any provision or consent hereunder shall be effective unless executed in
writing by the waiving or consenting party.
e. This Agreement shall not be assignable by Pledgor
without the prior written consent of Secured Party.
f. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Pennsylvania.
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IN WITNESS WHEREOF, the parties hereto have placed their hands
and seals as of the day and year above first written.
PLEDGOR:
- --------------------- ---------------------------
Witness ALVIN H. CLEMENS
SECURED PARTY:
PROVIDENT AMERICAN CORPORATION
Attest:
By:
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Michael F. Beausang, Jr., Secretary Anthony R. Verdi, Treasurer
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EXHIBIT "A"
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COLLATERAL
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100,000 shares of the common stock of PROVIDENT AMERICAN CORPORATION,
together with all dividends or other distributions issued with respect
thereto.
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