SECURED PROMISSORY NOTE
$810,000 April 8, 1997
FOR VALUE RECEIVED, GLOBAL HEALTH ALTERNATIVES, INC., a
Delaware corporation (the "Maker") having an office at 193 Middle Street, Suite
201, Portland Maine 04101 hereby promises to pay to the order of NATURAL HEALTH
TRENDS CORP., a Florida corporation (the "Payee"), at the office of the Payee at
2001 West Sample Road, Pompano Beach, Florida 33064 or at such other place as
the Payee of this Note may designate in writing from time to time, the principal
sum of EIGHT HUNDRED TEN THOUSAND ($810,000) DOLLARS together with interest
thereon at the prime rate of interest as set forth by Citibank, N.A., New York,
New York ("Citibank"). In the event of a change in the Prime Rate by Citibank,
the interest rate shall change on the first day of the month following the date
of the change of the Prime Rate. Principal and interest shall be payable on
December 31, 1997 or ON DEMAND by the Payee, whichever shall first occur, in
lawful money of the United States and in immediately available funds; provided
that, in the event of the consummation of the transactions contemplated by the
Agreement and Plan of Reorganization, dated as of March 19, 1997 (the
"Reorganization Agreement"), among Maker, Payee and GHA Holdings, Inc.
("Holdings"), Payee shall contribute this Secured Promissory Note to the capital
of Holdings.
The following shall be deemed "Events of Default" hereunder:
(a) If any payment hereunder or under the Security Agreement
shall not be made when due or demanded;
(b) if the Maker fails to maintain in force the insurance
required under the Security Agreement or except as otherwise provided in the
Security Agreement, removes, sells, transfers, encumbers, sublets or parts with
possession of the Collateral or any part thereof (other than as contemplated by
the Reorganization Agreement) or attempts to do any of the foregoing;
(c) if the Maker shall fail to perform or comply with any of
the other terms, covenants, or conditions of this Note, the Reorganization
Agreement or the Security Agreement;
(d) if the Collateral or any part thereof be seized or levied
upon under legal process;
(e) if the Maker defaults under or breaches any of the terms,
covenants or conditions of any other security agreement, conditional sales
contract, lease, instrument, note or agreement it may now have or hereafter make
with Payee or Holdings;
42329.3
(f) if Payee ceases doing business as a going concern, other
than as contemplated by the Reorganization Agreement, or makes or sends notice
of an intended bulk sale or makes an assignment for the benefit of creditors;
(g) if any proceedings are commenced by or against Maker under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
receivership, liquidation or dissolution law or statute of any jurisdiction,
whether now or hereafter in effect;
(h) if a receiver, trustee or conservator be appointed for any
of Maker's property; or
(i) if any guaranty, representation or statement made herein
by Maker or contained in any separate statement in writing in connection
herewith, including, without limitation, any financial statements furnished to
Payee by or on behalf of Maker, is untrue or incomplete in any material respect.
Unless the Payee otherwise elects, in the Payee's sole
discretion, this Note shall automatically become immediately due and payable,
without further notice or demand, upon the occurrence of any event of default
hereinabove described and shall bear interest until paid in full at the Prime
Rate plus five (5%) percent per annum. Upon the acceleration of the entire or
any portion of the unpaid balance of this Note, the holder, without prejudice to
any other rights, is authorized to proceed against Maker and shall not be
required to have recourse to any security given for payment of this Note.
Nothing contained in this Note shall require the Maker to pay
interest at a rate exceeding the maximum rate permitted by applicable law. If
the amounts payable to the Payee on any date shall exceed the maximum
permissible amount, such amounts shall be automatically reduced to the maximum
permissible amount, and the payments for any subsequent period, to the extent
less than that permitted by applicable law, shall, to that extent, be increased
by the amount of such reduction. In the event that the period from the due date
of such payment is not long enough to cause the payments due hereunder not to
exceed the maximum amount permitted by applicable law, then the Payee at its
option shall have the right (i) to extend the amount of time for such payment
such that the payments shall not be deemed to exceed the maximum amount
permitted by applicable or (ii) to reduce the amounts payable under this Note.
In the event of the termination of the Reorganization
Agreement, the Payee shall have the right at its option to convert the amounts
due under this Note in, whole or in part, into fully paid and nonassessable
shares of Common Stock of the Maker at the conversion price of $2.25 per share
(the "Conversion Price"), by surrender of this Note to the Maker, together with
a notice indicating the amount to be converted.
The Conversion Price in effect at any time and the number and
kind of securities purchasable upon the conversion of this Note shall be subject
to adjustment from time to time upon the happening of certain events as follows:
42329.3
-2-
(a) If the Maker shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, then the Conversion
Price in effect at the time of the effective date or record date, as the case
may be, for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Conversion Price by a fraction,
the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action.
(b) Whenever the Conversion Price payable upon conversion of
the Note is adjusted pursuant to the preceding paragraph the number of shares of
Common Stock purchasable upon conversion of this Note shall simultaneously be
adjusted by multiplying the number of shares of Common Stock initially issuable
upon conversion of this Note by the Conversion Price in effect on the date
hereof and dividing the product so obtained by the Conversion Price, as
adjusted.
The Maker acknowledges that the Payee has advanced monies to
the Maker under this Note in accordance with the Reorganization Agreement. The
Maker acknowledges that the principal sum hereunder exceeds the actual amount of
funds received by the Maker. The Maker understands that the amount in excess of
the amounts received by the Maker represents the costs and expenses of the Payee
in obtaining the amounts received by the Maker and that the Payee would not have
incurred all of such costs and expenses if Payee had not done so on behalf of
the Maker. The Maker acknowledges and agrees that such costs and expenses relate
to the costs of the Payee in obtaining the amount of funds received by the
Maker, including, but not limited to, finder's fees, commissions and counsel
fees, and that the Maker is obligated hereunder to the Payee for the full amount
of this Note, including such costs and expenses.
At the option of Maker, the unpaid balance of this Note may be
prepaid in whole or in part, from time to time, without penalty or premium.
Except as otherwise expressly provided herein, Maker hereby
waives presentment, demand for payment, dishonor, notice of dishonor, protest
and notice of protest.
The liability of Maker hereunder shall be unconditional. No
act, failure or delay by the holder hereof to declare a default as set forth
herein or to exercise any right or remedy it may have hereunder, or otherwise,
shall constitute a waiver of its rights to declare such default or to exercise
any such right or remedy at such time as it shall determine in its sole
discretion.
Maker further agrees to pay all costs of collection, including
a reasonable attorney's fee and all costs of levy or appellate proceedings or
review, or both, in case the principal or any interest thereon is not paid at
the respective maturity thereof, or in case it becomes necessary to protect the
security hereof, whether suit be brought or not.
42329.3
-3-
Any and all notices or other communications required or
permitted to be given under this Note shall be in writing and shall be deemed to
have been duly given upon personal delivery or the mailing thereof by certified
or registered mail (a) if to Maker, addressed to it at its address set forth
above; and (b) if to Payee, addressed to it or at such other address any person
or entity entitled to receive notices may specify by written notice given as
aforesaid.
This Note may not be amended, modified, supplemented or
terminated orally.
This Note shall be binding upon Maker, its legal
representatives, successors or assigns and shall inure to the benefit of Payee
and its successors, endorsees, assigns or holder(s) in due course.
This Note shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to principles of
conflicts of law. By signing below, Maker hereby irrevocably submits to the
jurisdiction of such state and to service of process by certified or registered
mail at Maker's last known address. No provision of this Note may be changed
unless in writing signed by the Payee.
IN WITNESS WHEREOF, Maker has caused this Note to be duly
executed and delivered by its duly authorized representative as of the date and
year first above written.
GLOBAL HEALTH ALTERNATIVES, INC.
By: ________________________________
Name:
Title:
42329.3
-4-
SECURITY AGREEMENT
AGREEMENT, dated as of April 8, 1997 between GLOBAL HEALTH
ALTERNATIVES, INC., a Delaware corporation ("Debtor"), having its principal
place of business at 193 Middle Street, Suite 201, Portland, Maine 04101, and
NATURAL HEALTH TRENDS CORP., a Florida corporation (the "Secured Party"), having
its principal place of business at 2001 West Sample Road, Pompano Beach, Florida
33064.
GRANTING CLAUSE: FOR GOOD AND VALUABLE CONSIDERATION, the
receipt and sufficiency of which is hereby acknowledged, and in order to secure
an indebtedness owed by Debtor to the Secured Party as evidenced by the Secured
Promissory Note, dated April 8, 1997 in the original principal amount of
$810,000 (the "Note"), and any renewal, extensions, or replacement of the Note,
and to secure the obligations of Debtor under this Agreement and any other
obligation (which is now in existence or may hereafter come into existence) of
Debtor to the Secured Party or any subsidiary or affiliate of the Secured Party,
Debtor hereby grants to the Secured Party a lien on and security interest in the
property listed on Schedule A annexed hereto, together with all present and
future attachments, accessions, accessories, additions, substitutions and all
replacements thereto or thereof or hereafter attached to, placed upon, or used
in connection with, such property wherever located and all proceeds of the
foregoing, including any insurance proceeds relating thereto (collectively, the
"Collateral"), which lien and security interest shall be first, primary, and
subject to no other lien whatsoever. In furtherance (and not in limitation) of
the foregoing, concurrently with the execution and delivery hereof Debtor shall
execute and deliver a Pledge Agreement with Secured Party, (as so executed and
delivered, the "Pledge Agreement"), as to certain securities included among the
Collateral.
The parties further agree that:
1. DEBTOR'S WARRANTIES, REPRESENTATIONS AND COVENANTS:
Debtor hereby warrants and represents to the Secured Party (a) that the
Collateral is lawfully owned by Debtor, free and clear of all other liens,
encumbrances and security interests, and Debtor will warrant and defend title to
the same against the claims and demand of all persons; (b) that Debtor has not
granted, and will not grant, to anyone other than Secured Party any security
interest in the Collateral and, except for financing statements in favor of the
Secured Party, no Financing Statement or other instrument affecting the
Collateral, or rights therein is on file in any public filing office; (c) that
the Collateral is and shall be retained in Debtor's possession at the Debtor's
address set forth above except for such of the Collateral as constitutes
inventory that is in the possession of merchants for resale; (d) that the
Collateral is and will be used only for business or commercial purposes; (e)
that this Agreement and the Note have been validly authorized, duly executed and
delivered and constitute the valid and legally binding obligations of the
Debtor, enforceable in accordance with their respective terms and are not
violative of, or create a default under, its Certificate of Incorporation or
By-laws or under any
42326.2
order, writ, injunction or decree of any court of governmental instrumentality
or any agreement to which Debtor is a party or by which its property is bound.
2. INSURANCE: Debtor agrees that from the date hereof it will,
at its sole cost and expense, keep the Collateral insured against all risks of
loss or damage with extended coverage for not less than the greater of the
indebtedness or the Collateral's full replacement cost and that it will carry
personal injury liability and property damage liability insurance in such amount
and covering such risks as Secured Party may reasonably require. All said
insurance shall be in form and with companies satisfactory to Secured Party.
3. USE OF COLLATERAL AND OTHER DEBTOR OBLIGATIONS: All
risks of loss, theft or destruction of the Collateral shall be borne by the
Debtor. Debtor agrees that it will not use the Collateral in violation of any
statute or ordinance or applicable insurance policy and will promptly pay all
taxes, assessments, license fees and other public or private charges levied or
assessed against the Collateral and this obligation shall survive the
termination of this Agreement; that Debtor will not permit any lien, charge,
encumbrance or security interest of any kind whatsoever (other than the Secured
Party's security interest) to issue upon or attach to the Collateral; that
Debtor will not remove the collateral from its location as above set forth
without the prior written consent of Secured Party; that except in the ordinary
course of Debtor's business, Debtor will not secrete, sell, transfer, dispose
of, attempt to dispose of, substantially modify or abandon the Collateral or any
part thereof; that Debtor will sign and deliver to Secured Party such financing
statements and Continuation Statements, in form acceptable to Secured Party, as
Secured Party may, from time to time, reasonably request, or as are reasonably
necessary in the opinion of Secured Party, to establish and maintain a valid
security interest in the Collateral and Debtor will pay any related filing fees
or cost with respect thereto and for prior lien searches; and that Debtor hereby
constitutes and appoints Secured Party its true and lawful attorney-in-fact to
execute and deliver any financing statement or other documents which may be
required to establish and/or maintain Secured Party's security interest in the
Collateral. Debtor shall, at its own cost and expense, protect and defend its
title to the Collateral and defend all actions and claims which may be asserted
against the Collateral and its use thereof. Debtor will allow Secured Party and
its representatives free access to the Collateral at all reasonable times for
purposes of inspection or repair.
4. DEFAULT: Debtor shall be in default (an "Event of Default")
under the terms of this Agreement and the Note upon the occurrence of any of the
following: (a) if the Debtor shall fail to make any payment under the Note or
this Agreement when due or when demanded; (b) if the Debtor fails to maintain in
force the required insurance or except as otherwise provided herein, removes,
sells, transfers, encumbers, sublets or parts with possession of the Collateral
or any part thereof (other than as contemplated by the Agreement and Plan of
Reorganization, dated as of March 19, 1997 (the "Reorganization Agreement"),
among Debtor, Secured Party and GHA Holdings, Inc.) or attempts to do any of the
foregoing; (c) if the Debtor shall fail to perform or comply with any of the
other terms, covenants, or conditions of this Agreement, the Reorganization
Agreement, the Note or the Pledge Agreement; (d) if the Collateral or any part
thereof shall be seized or levied upon under legal process; (e) if the Debtor
defaults under or
42326.2
-2-
breaches any of the terms, covenants or conditions of any other security
agreement, conditional sales contract, lease, instrument, note or agreement it
may now have or hereafter make with Secured Party; (f) if Debtor ceases doing
business as a going concern, other than as contemplated by the Reorganization
Agreement, or makes or sends notice of an intended bulk sale (other than as
contemplated by the Reorganization Agreement) or makes an assignment for the
benefit of creditors; (g) if any proceedings are commenced by or against Debtor
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, receivership, liquidation or dissolution law or statute of any
jurisdiction, whether now or hereafter in effect; (h) if a receiver, trustee or
conservator be appointed for any of Debtor's property; or (i) if any guaranty,
representation or statement made herein by Debtor or contained in any separate
statement in writing in connection herewith or in connection with the
Reorganization Agreement, including, without limitation, any financial
statements furnished to Secured Party by or on behalf of Debtor, is untrue or
incomplete in any material respect.
Upon the occurrence of any Event of Default, the indebtedness
secured hereby and all other obligations then owing by the Debtor to Secured
Party shall, if Secured Party so elects, become immediately due and payable and
Secured Party shall have all of the rights and remedies of a secured party under
the Uniform Commercial Code as enacted in the State of New York and any other
applicable laws, and it shall then be lawful for, and Secured Party is hereby
authorized and empowered, with the aid and assistance of any person or persons,
to enter any premises where the Collateral or any part thereof is, or may be,
placed, and to assemble and/or remove same and/or to render it unusable and/or
sell and dispose of such Collateral at one or more public or private sales upon
at least five (5) days written notice to Debtor of such sale (which notice and
method of sale Debtor hereby agrees is commercially reasonable), and Secured
Party may be a buyer of the Collateral thereat. The proceeds of each such sale
shall be applied by Secured Party toward the payment of expenses of retaking,
including transportation, storage, refurbishing, preparing such sale,
advertising, selling and all related charges and disbursements in connection
therewith and the indebtedness and interest secured hereby. Should the proceeds
of any such sale be insufficient to fully pay all the items above mentioned,
Debtor hereby covenants and agrees to pay any deficiency to Secured Party. In
the event that an Event of Default has occurred and is continuing, Secured Party
may employ any of the remedies set forth herein regardless of whether Secured
Party exercises its right to make a demand under the Note.
If Secured Party employs counsel for the purpose of effecting collection of any
monies due hereunder (whether or not Secured Party has retaken the Collateral or
any part thereof) or for the purpose of recovering the Collateral, or for the
purpose of protecting Secured Party's interest because of the occurrence of any
Event of Default of Debtor, Debtor agrees to pay reasonable attorneys' fees and
such attorneys' fees shall be a lien on the Collateral herein and the proceeds
thereof. Secured Party may require Debtor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties. All rights and remedies hereunder are
cumulative and not exclusive and a waiver by Secured Party of any breach by
Debtor or the terms, covenants, and conditions hereof shall not constitute a
waiver of future breaches or defaults or Events of Default and no failure or
delay on the part of Secured Party in exercising any of its options, powers,
rights or remedies or partial or single exercise thereof, shall constitute a
waiver thereof.
42326.2
-3-
5. WAIVER OF TRIAL BY JURY: Debtor hereby waives the right of
a jury trial in any action or proceeding by either party, or assigns, arising
out of the subject matter of this Agreement, the Collateral, or the Note or
other obligations secured hereby.
6. NOTICES: All notices hereunder shall be contained in a
written instrument transmitted (i) in person, (ii) by first class, registered or
certified mail, return receipt requested, (iii) by telefacsimile or telex
(confirmed by written notice in the manner specified in (ii) above), or (iv) by
overnight delivery, each addressed to such party at the address set forth on the
first page of this Agreement or such other address as may be designated by due
notice.
7. MISCELLANEOUS: This Agreement supersedes all prior
agreements, contains the entire understanding relating to its subject matter and
is binding on the parties and their successors and assigns. No provision may be
modified, terminated or waived except by an express writing signed by both
parties. No waiver will constitute a waiver of any other or future breach. This
Agreement was accepted in, is to be governed by and construed in accordance with
the internal laws (excluding the laws concerning conflicts of laws) of, and any
dispute adjudicated exclusively in, the State of New York, where both parties
hereby consent to jurisdiction in any state or federal court located in such
jurisdiction, and any action therein may be commenced by written notice thereof
to the addresses set forth above. The provisions hereof are severable and this
Agreement will be enforced to the maximum extent permitted by applicable law.
This Agreement may be executed in counterparts and may be executed by facsimile,
which will be deemed an original.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered as of the day and year first above written.
DEBTOR
GLOBAL HEALTH ALTERNATIVES, INC.
By:_____________________________________
Name:
Title:
SECURED PARTY
NATURAL HEALTH TRENDS CORP.
By:_____________________________________
Name:
Title:
42326.2
-4-
SCHEDULE A
DEBTOR: GLOBAL HEALTH ALTERNATIVES, INC.
SECURED PARTY: NATURAL HEALTH TRENDS CORP.
To secure payment and performance of all indebtedness and obligations
owed to Secured Party, Debtor grants to Secured Party a continuing security
interest in the following, whether now owned or existing or hereafter acquired
or arising or in which Debtor now has or may hereafter acquires any rights:
A. All of the Debtor's right, title and interest in and to all the
issued and outstanding shares of stock of Ellon, Inc., a Delaware corporation
and Maine Naturals, Inc., a Delaware corporation, both of which are wholly-owned
subsidiaries of the Debtor.
B. All accounts, accounts receivable, contract rights, instruments,
letters of credit, acceptances, guarantees, drafts or other forms of obligations
and receivables of Debtor arising from the sale or lease of inventory, or the
rendition of services by Debtor in the ordinary course of business or otherwise
(all of the foregoing herein collectively called accounts), whether or not the
accounts be listed on any schedules, assignments or reports furnished to Secured
Party from time to time, and whether or not the accounts are now existing or are
created at any time hereafter; together with all goods, inventory and
merchandise returned by or reclaimed by or repossessed from customers on such
accounts, wherever such goods, inventory and merchandise are located, and all
proceeds thereof, including but not limited to, proceeds of insurance thereon;
and all guaranties, securities, and liens which Debtor may hold for the payment
of any accounts, including without limitation, all rights of stoppage in
transit, replevin and reclamation and all other rights and remedies of any
unpaid vendor or lienor, and all liens held by the Debtor as a mechanic
contractor, subcontractor, materialman, machinist, manufacturer, artisan, or
otherwise, including without limitation the following contract rights: (1) the
rights of the Debtor in Natural Relief - 1222, United States Patent No.
5,032,400; (2) the rights of the Debtor pursuant to the agreement between the
Debtor and Mebo Holding Corp.; and (3) any and all future rights of the Debtor
to market Natural Relief - 1222 through the National Football League.
C. All inventory (other than consigned inventory) of Debtor wherever
located, including without limitation, all goods manufactured or acquired for
sale or lease, and any piece goods, raw materials, work in process and finished
merchandise, findings or component materials, and all supplies, goods,
incidentals, office supplies, packaging materials and any and all items used or
consumed in the operation of the business of the Debtor or which contribute to
the finished product or to the sale, promotion and shipment thereof, in which
Debtor now or at anytime hereafter may have an interest, whether or not such
inventory is listed in any reports furnished to Secured Party from time to time;
all inventory whether or not the same is in transit
42326.2
-5-
or in the constructive, actual or exclusive occupancy of possession of Debtor or
is held by Debtor or by others for Debtor's account including without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers; all inventory which may be located
on premises of Debtor or of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or third parties; all insurance proceeds
and products of any and all of the foregoing resulting from the sale, lease or
other disposition of inventory, including cash, accounts, contract rights, other
non-cash proceeds and trade-ins; and with respect to after-acquired inventory,
the security interest shall be a purchase money security interest.
D. All machinery, equipment, fixtures, furniture, furnishings,
improvements, tools, fuel and goods of any kind, whether now owned or hereafter
acquired or in which Debtor may in the future acquire an interest.
E. All documents, instruments, documents of title, policies and
certificates of insurance, guaranties, securities, chattel paper,
deposits,proceeds of insurance, cash liens or other property owned by the Debtor
or in which it had an interest which are now or may hereafter be in the
possession of Debtor or as to which Debtor may hereafter control possession by
documents of title or otherwise, including, but not limited to, all property
allocable to unshipped orders.
F. All bank accounts,including, but not limited to, deposit accounts,
now existing or hereafter arising, together with the right to withdraw from said
bank accounts and make deposits to the same.
G. All general intangibles, now existing or hereafter owned or
acquired, including, but not limited to, patents, patent applications,
trademarks, trademark registrations and applications therefor, trade names,
trade processes, copyrights, copyright registrations and applications therefor,
licenses, franchises, tax refunds and corporate name and good will of Debtor's
business.
H. All books, records, customer lists, supplier lists, ledgers,
evidence or shipping, invoices, purchase orders, sale orders and all other
evidences of Debtor's business records, including all cabinets, drawers and
furniture that may hold the same, all whether now owned or in existence or
hereafter arising or acquired.
I. All renewals, substitutions, replacements, additions, accessions,
proceeds and products of any and all of the foregoing.
42326.2
-6-
SECURITY AGREEMENT
AGREEMENT, dated as of April 8, 1997 among ELLON, INC., a
Delaware corporation and MAINE NATURALS, INC., a Delaware corporation (each, the
"Debtor"), having its principal places of business at 193 Middle Street, Suite
201, Portland, Maine 04101 and 644 Merrick Road, Lynbrook, New York 11563, and
NATURAL HEALTH TRENDS CORP., a Florida corporation (the "Secured Party") having
its principal place of business at 2001 West Sample Road, Pompano Beach, Florida
33064.
WHEREAS, Ellon, Inc. and Maine Naturals, Inc. are both
wholly-owned subsidiaries and will each derive a substantial benefit from the
amounts advanced to Global Health Alternatives, Inc. ("GHA") by the Secured
Party; and
WHEREAS, the Secured Party would not have advanced such
amounts to the debtor without this Agreement.
GRANTING CLAUSE: FOR GOOD AND VALUABLE CONSIDERATION, the
receipt and sufficiency of which is hereby acknowledged, and in order to secure
the obligations of Debtor under a guarantee (the "Guarantee") of even date
herewith and any other obligation (which is now in existence or may hereafter
come into existence) of Debtor to the Secured Party or any subsidiary or
affiliate of the Secured Party, Debtor hereby grants to the Secured Party a lien
on and security interest in the property listed on Schedule A annexed hereto,
together with all present and future attachments, accessions, accessories,
additions, substitutions and all replacements thereto or thereof or hereafter
attached to, placed upon, or used in connection with, such property wherever
located and all proceeds of the foregoing, including any insurance proceeds
relating thereto (collectively, the "Collateral"), which lien and security
interest shall be first, primary, and subject to no other lien whatsoever.
The parties further agree that:
1. DEBTOR'S WARRANTIES, REPRESENTATIONS AND COVENANTS:
Debtor hereby warrants and represents to the Secured Party (a) that the
Collateral is lawfully owned by Debtor, free and clear of all other liens,
encumbrances and security interests, and Debtor will warrant and defend title to
the same against the claims and demand of all persons; (b) that Debtor has not
granted, and will not grant, to anyone other than Secured Party any security
interest in the Collateral and, except for financing statements in favor of the
Secured Party, no Financing Statement or other instrument affecting the
Collateral, or rights therein is on file in any public filing office; (c) that
the Collateral is and shall be retained in Debtor's possession at the Debtor's
address set forth above except for such of the Collateral as constitutes
inventory that is in the possession of merchants for resale; (d) that the
Collateral is and will be used only for business or commercial purposes; (e)
that this Agreement and the Guarantee have been validly authorized, duly
executed and delivered and constitute the valid and legally binding obligations
of the Debtor, enforceable in accordance with their respective terms and are not
43577.1
violative of, or create a default under, its Certificate of Incorporation or
By-laws or under any order, writ, injunction or decree of any court of
governmental instrumentality or any agreement to which Debtor is a party or by
which its property is bound.
2. INSURANCE: Debtor agrees that from the date hereof it will,
at its sole cost and expense, keep the Collateral insured against all risks of
loss or damage with extended coverage for not less than the greater of the
indebtedness or the Collateral's full replacement cost and that it will carry
personal injury liability and property damage liability insurance in such amount
and covering such risks as Secured Party may reasonably require. All said
insurance shall be in form and with companies satisfactory to Secured Party.
3. USE OF COLLATERAL AND OTHER DEBTOR OBLIGATIONS: All
risks of loss, theft or destruction of the Collateral shall be borne by the
Debtor. Debtor agrees that it will not use the Collateral in violation of any
statute or ordinance or applicable insurance policy and will promptly pay all
taxes, assessments, license fees and other public or private charges levied or
assessed against the Collateral and this obligation shall survive the
termination of this Agreement; that Debtor will not permit any lien, charge,
encumbrance or security interest of any kind whatsoever (other than the Secured
Party's security interest) to issue upon or attach to the Collateral; that
Debtor will not remove the collateral from its location as above set forth
without the prior written consent of Secured Party; that except in the ordinary
course of Debtor's business, Debtor will not secrete, sell, transfer, dispose
of, attempt to dispose of, substantially modify or abandon the Collateral or any
part thereof; that Debtor will sign and deliver to Secured Party such financing
statements and Continuation Statements, in form acceptable to Secured Party, as
Secured Party may, from time to time, reasonably request, or as are reasonably
necessary in the opinion of Secured Party, to establish and maintain a valid
security interest in the Collateral and Debtor will pay any related filing fees
or cost with respect thereto and for prior lien searches; and that Debtor hereby
constitutes and appoints Secured Party its true and lawful attorney-in-fact to
execute and deliver any financing statement or other documents which may be
required to establish and/or maintain Secured Party's security interest in the
Collateral. Debtor shall, at its own cost and expense, protect and defend its
title to the Collateral and defend all actions and claims which may be asserted
against the Collateral and its use thereof. Debtor will allow Secured Party and
its representatives free access to the Collateral at all reasonable times for
purposes of inspection or repair.
4. DEFAULT: Debtor shall be in default (an "Event of Default")
under the terms of this Agreement upon the occurrence of any of the following:
(a) if the Debtor shall fail to make any payment under the Guarantee or this
Agreement when due or when demanded; (b) if the Debtor fails to maintain in
force the required insurance or except as otherwise provided herein, removes,
sells, transfers, encumbers, sublets or parts with possession of the Collateral
or any part thereof (other than as contemplated by the Agreement and Plan of
Reorganization, dated as of March 19, 1997 (the "Reorganization Agreement"),
among GHA, Secured Party and GHA Holdings, Inc.) or attempts to do any of the
foregoing; (c) if GHA shall fail to comply with the terms, covenants and
conditions of the Reorganization Agreement, or a note in the original principal
amount of $810,000 as of the date hereof, a security agreement as of the date
43577.1
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hereof or a pledge agreement as of the date hereof; (d) if the Debtor shall fail
to perform or comply with any of the other terms, covenants, or conditions of
this Agreement, the Reorganization Agreement; (e) if the Collateral or any part
thereof shall be seized or levied upon under legal process; (f) if the Debtor
defaults under or breaches any of the terms, covenants or conditions of any
other security agreement, conditional sales contract, lease, instrument, note or
agreement it may now have or hereafter make with Secured Party; (g) if Debtor
ceases doing business as a going concern, other than as contemplated by the
Reorganization Agreement, or makes or sends notice of an intended bulk sale
(other than as contemplated by the Reorganization Agreement) or makes an
assignment for the benefit of creditors; (h) if any proceedings are commenced by
or against Debtor under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, liquidation or dissolution law or statute of
any jurisdiction, whether now or hereafter in effect; (i) if a receiver, trustee
or conservator be appointed for any of Debtor's property; or (j) if any
guaranty, representation or statement made herein by Debtor or contained in any
separate statement in writing in connection herewith or in connection with the
Reorganization Agreement, including, without limitation, any financial
statements furnished to Secured Party by or on behalf of Debtor, is untrue or
incomplete in any material respect.
Upon the occurrence of any Event of Default, the indebtedness
secured hereby and all other obligations then owing by the Debtor to Secured
Party shall, if Secured Party so elects, become immediately due and payable and
Secured Party shall have all of the rights and remedies of a secured party under
the Uniform Commercial Code as enacted in the State of New York and any other
applicable laws, and it shall then be lawful for, and Secured Party is hereby
authorized and empowered, with the aid and assistance of any person or persons,
to enter any premises where the Collateral or any part thereof is, or may be,
placed, and to assemble and/or remove same and/or to render it unusable and/or
sell and dispose of such Collateral at one or more public or private sales upon
at least five (5) days written notice to Debtor of such sale (which notice and
method of sale Debtor hereby agrees is commercially reasonable), and Secured
Party may be a buyer of the Collateral thereat. The proceeds of each such sale
shall be applied by Secured Party toward the payment of expenses of retaking,
including transportation, storage, refurbishing, preparing such sale,
advertising, selling and all related charges and disbursements in connection
therewith and the indebtedness and interest secured hereby. Should the proceeds
of any such sale be insufficient to fully pay all the items above mentioned,
Debtor hereby covenants and agrees to pay any deficiency to Secured Party. In
the event that an Event of Default has occurred and is continuing, Secured Party
may employ any of the remedies set forth herein regardless of whether Secured
Party exercises its right to make a demand under the Guarantee. If Secured Party
employs counsel for the purpose of effecting collection of any monies due
hereunder (whether or not Secured Party has retaken the Collateral or any part
thereof) or for the purpose of recovering the Collateral, or for the purpose of
protecting Secured Party's interest because of the occurrence of any Event of
Default of Debtor, Debtor agrees to pay reasonable attorneys' fees and such
attorneys' fees shall be a lien on the Collateral herein and the proceeds
thereof. Secured Party may require Debtor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties. All rights and remedies hereunder are
cumulative and not
43577.1
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exclusive and a waiver by Secured Party of any breach by Debtor or the terms,
covenants, and conditions hereof shall not constitute a waiver of future
breaches or defaults or Events of Default and no failure or delay on the part of
Secured Party in exercising any of its options, powers, rights or remedies or
partial or single exercise thereof, shall constitute a waiver thereof.
5. WAIVER OF TRIAL BY JURY: Debtor hereby waives the right of
a jury trial in any action or proceeding by either party, or assigns, arising
out of the subject matter of this Agreement, the Collateral, or the Note or
other obligations secured hereby.
6. NOTICES: All notices hereunder shall be contained in a
written instrument transmitted (i) in person, (ii) by first class, registered or
certified mail, return receipt requested, (iii) by telefacsimile or telex
(confirmed by written notice in the manner specified in (ii) above), or (iv) by
overnight delivery, each addressed to such party at the address set forth on the
first page of this Agreement or such other address as may be designated by due
notice.
7. MISCELLANEOUS: This Agreement supersedes all prior
agreements, contains the entire understanding relating to its subject matter and
is binding on the parties and their successors and assigns. No provision may be
modified, terminated or waived except by an express writing signed by both
parties. No waiver will constitute a waiver of any other or future breach. This
Agreement was accepted in, is to be governed by and construed in accordance with
the internal laws (excluding the laws concerning conflicts of laws) of, and any
dispute adjudicated exclusively in, the State of New York, where both parties
hereby consent to jurisdiction in any state or federal court located in such
jurisdiction, and any action therein may be commenced by written notice thereof
to the addresses set forth above. The provisions hereof are severable and this
Agreement will be enforced to the maximum extent permitted by applicable law.
This Agreement may be executed in counterparts and may be executed by facsimile,
which will be deemed an original.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered as of the day and year first above written.
DEBTOR
ELLON, INC.
By:_____________________________________
Name:
Title:
43577.1
-4-
MAINE NATURALS, INC.
By:_____________________________________
Name:
Title:
SECURED PARTY
NATURAL HEALTH TRENDS CORP.
By:_____________________________________
Name:
Title:
43577.1
-5-
SCHEDULE A
DEBTOR: ELLON, INC.
MAINE NATURALS, INC.
SECURED PARTY: NATURAL HEALTH TRENDS CORP.
To secure payment and performance of all indebtedness and obligations
owed to Secured Party, Debtor grants to Secured Party a continuing security
interest in the following, whether now owned or existing or hereafter acquired
or arising or in which Debtor now has or may hereafter acquires any rights:
A. All accounts, accounts receivable, contract rights, instruments,
letters of credit, acceptances, guarantees, drafts or other forms of obligations
and receivables of Debtor arising from the sale or lease of inventory, or the
rendition of services by Debtor in the ordinary course of business or otherwise
(all of the foregoing herein collectively called accounts), whether or not the
accounts be listed on any schedules, assignments or reports furnished to Secured
Party from time to time, and whether or not the accounts are now existing or are
created at any time hereafter; together with all goods, inventory and
merchandise returned by or reclaimed by or repossessed from customers on such
accounts, wherever such goods, inventory and merchandise are located, and all
proceeds thereof, including but not limited to, proceeds of insurance thereon;
and all guaranties, securities, and liens which Debtor may hold for the payment
of any accounts, including without limitation, all rights of stoppage in
transit, replevin and reclamation and all other rights and remedies of any
unpaid vendor or lienor, and all liens held by the Debtor as a mechanic
contractor, subcontractor, materialman, machinist, manufacturer, artisan, or
otherwise.
B. All inventory (other than consigned inventory) of Debtor wherever
located, including without limitation, all goods manufactured or acquired for
sale or lease, and any piece goods, raw materials, work in process and finished
merchandise, findings or component materials, and all supplies, goods,
incidentals, office supplies, packaging materials and any and all items used or
consumed in the operation of the business of the Debtor or which contribute to
the finished product or to the sale, promotion and shipment thereof, in which
Debtor now or at anytime hereafter may have an interest, whether or not such
inventory is listed in any reports furnished to Secured Party from time to time;
all inventory whether or not the same is in transit or in the constructive,
actual or exclusive occupancy of possession of Debtor or is held by Debtor or by
others for Debtor's account including without limitation, all goods covered by
purchase orders and contracts with suppliers and all goods billed and held by
suppliers; all inventory which may be located on premises of Debtor or of any
carriers, forwarding agents, truckers, warehousemen, vendors, selling agents or
third parties; all insurance proceeds and products of any and all of the
foregoing resulting from the sale, lease or other disposition of inventory,
including cash, accounts, contract rights, other non-cash proceeds and
trade-ins; and
43577.1
-6-
with respect to after-acquired inventory, the security interest shall be a
purchase money security interest.
C. All machinery, equipment, fixtures, furniture, furnishings,
improvements, tools, fuel and goods of any kind, whether now owned or hereafter
acquired or in which Debtor may in the future acquire an interest.
D. All documents, instruments, documents of title, policies and
certificates of insurance, guaranties, securities, chattel paper,
deposits,proceeds of insurance, cash liens or other property owned by the Debtor
or in which it had an interest which are now or may hereafter be in the
possession of Debtor or as to which Debtor may hereafter control possession by
documents of title or otherwise, including, but not limited to, all property
allocable to unshipped orders.
E. All bank accounts,including, but not limited to, deposit accounts,
now existing or hereafter arising, together with the right to withdraw from said
bank accounts and make deposits to the same.
F. All general intangibles, now existing or hereafter owned or
acquired, including, but not limited to, patents, patent applications,
trademarks, trademark registrations and applications therefor, trade names,
trade processes, copyrights, copyright registrations and applications therefor,
licenses, franchises, tax refunds and corporate name and good will of Debtor's
business.
G. All books, records, customer lists, supplier lists, ledgers,
evidence or shipping, invoices, purchase orders, sale orders and all other
evidences of Debtor's business records, including all cabinets, drawers and
furniture that may hold the same, all whether now owned or in existence or
hereafter arising or acquired.
H. All renewals, substitutions, replacements, additions, accessions,
proceeds and products of any and all of the foregoing.
43577.1
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PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of April 8, 1997 between GLOBAL
HEALTH ALTERNATIVES, INC., a Delaware corporation (the "Pledgor") and NATURAL
HEALTH TRENDS CORP., a Florida corporation (the "Pledgee").
W I T N E S S E T H :
WHEREAS, this Pledge Agreement is being executed and delivered
to the Pledgee pursuant to the terms of the Security Agreement, dated as of the
date hereof (the "Security Agreement"), by and between the Pledgor and the
Pledgee;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and in the Security Agreement, and in further consideration of
the making of the loan represented by the Secured Promissory Note, dated April
8, 1997, in the principal amount of $810,000 issued by Pledgor in favor of
Pledgee (the "Note"), the parties hereto do hereby covenant and agree as
follows:
SECTION I
For purposes of this Pledge Agreement, the following terms
shall have the following meanings. All capitalized terms used but not defined
herein shall have the respective meanings assigned to them in the Security
Agreement.
"Collateral" shall mean the Pledged Shares and, subject to
Section V hereof, and to the extent permitted by applicable law, all rights with
respect thereto, and all proceeds of such Pledged Shares and such rights.
"Default" shall mean an event which with the giving of notice
or the passage of time, or both, would consitute an Event of Default.
"Event of Default" shall mean an event as so defined in the
Security Agreement.
"Liabilities" shall mean all the obligations of the Pledgor to
the Pledgee, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to become
due, under the Security Agreement and the Note.
"Pledged Shares" shall mean all the shares of capital stock of
Ellon, Inc., a Delaware corporation and Maine Naturals, Inc., a Delaware
corporation owned of record and beneficially by the Pledgor, as identified with
more particularity on Schedule A hereto.
42380.2
SECTION II
To secure the payment of and performance of all the
Liabilities, the Pledgor hereby pledges to the Pledgee, and grants to the
Pledgee a security interest in and lien upon, the Collateral.
SECTION III
The Pledgor represents and warrants to, and covenants with,
the Pledgee as follows:
(a) the execution, delivery and performance of this Pledge
Agreement and the pledging of the Collateral hereunder do not and will not
conflict with, result in a violation of, or constitute a default under any
agreement binding upon the Pledgor or its property;
(b) the Pledged Shares are and will continue to be owned by
the Pledgor free and clear of any lien, security interest, charge, pledge,
claim, right or other encumbrance (each a "Lien") of any other Person except the
Lien hereunder and the rights of the Pledgee under and pursuant to the Agreement
and Plan of Reorganization, dated as of the date hereof, among the Pledgee, the
Pledgor and GHA Holdings, Inc. (the "Reorganization Agreement"), and the
security interest of the Pledgee in the Pledged Shares and the proceeds thereof
is and will continue to be prior to and senior to the rights of all others;
(c) this Pledge Agreement is the legal, valid, binding and
enforceable obligation of the Pledgor, enforceable in accordance with its terms;
(d) the Pledgor shall, from time to time, upon request of the
Pledgee, promptly deliver to the Pledgee such stock powers, proxies, and similar
documents, satisfactory in form and substance to the Pledgee, and take such
other actions, with respect to the Collateral as the Pledgee may reasonably
request; and
(e) subject to Sections IV and VI, and except as contemplated
by the Reorganization Agreement, the Pledgor shall not, so long as any
Liabilities are outstanding, sell, assign, exchange, pledge or otherwise
transfer or encumber any of its rights in and to any of the Collateral.
SECTION IV
The Pledged Shares shall be released from this Pledge
Agreement only upon indefeasible payment in full of all Liabilities. The Pledgee
may from time to time, after any Default or Event of Default, and without prior
notice to the Pledgor, transfer all or any part of the Collateral not
theretofore registered in the name of the Pledgee, into the name of the Pledgee
or its nominee, with or without disclosing that such Collateral is subject to
any rights of the Pledgor and may from time to time, whether before or after any
of the Liabilities shall become due and payable, without notice to the Pledgor,
take all or any of the following actions: (a) notify the parties obligated on
any of the Collateral to make payment to the Pledgee of any amounts due or to
become due thereunder, (b) release or exchange all or any part of the
42380.2
Collateral or compromise or extend or renew for any period (whether or not
longer than the original period) any obligations of any nature of any party with
respect thereto, and (c) take control of any proceeds of the Collateral.
SECTION V
Concurrently with the execution and delivery of this
Agreement, the Pledgor shall deliver to the Pledgee certificates for the Pledged
Shares, each such certificate duly signed in blank by the Pledgor or accompanied
by a stock transfer power duly signed in blank by the Pledgor and each such
certificate accompanied by all required documentary or stock transfer tax
stamps. So long as no Default or Event of Default shall have occurred and be
continuing, (i) the Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of this Pledge Agreement, including but
not limited to Section III(e) hereof, and (ii) the Pledgor shall be entitled to
receive any and all cash dividends or other distributions paid in respect of the
Collateral. The Pledgee shall be entitled, but shall not be required, to deliver
such certificates together with any such stock transfer power to the respective
issuers and receive new certificates registered in the name of the Pledgee or
its nominee, or its successor and assigns, at any time while the Note is
outstanding.
SECTION VI
If an Event of Default shall be existing, in addition to the
rights it may have under the Security Agreement, the Note, and this Agreement,
or by virtue of any other instrument, (a) the Pledgee may exercise, with respect
to the Collateral, from time to time any rights and remedies available to it
under the Uniform Commercial Code as in effect from time to time in the State of
New York or the states of incorporation of the issuers, or otherwise available
to it and (b) the Pledgee shall have the right, for and in the name, place and
stead of the Pledgor, to execute endorsements, assignments, stock powers and
other instruments of conveyance or transfer with respect to all or any of the
Collateral. Written notification by the Pledgee to the Pledgor of intended
disposition of any of the Collateral three (3) business days prior to such
disposition shall be deemed commercially reasonable notice thereof. Any proceeds
of any disposition of Collateral may be applied by the Pledgee to the payment of
expenses in connection with the Collateral, including, without limitation,
reasonable attorneys' fees and legal expenses, and any balance of such proceeds
may be applied by the Pledgee toward the payment of such of the Liabilities as
are in default, and in such order of application, as the Pledgee may from time
to time elect. No action of the Pledgee permitted hereunder shall impair or
affect its rights in and to the Collateral. All rights and remedies of the
Pledgee expressed hereunder are in addition to all other rights and remedies
possessed by it, including, without limitation, those contained in the documents
referred to in the definition of Liabilities in Section I hereof.
In any sale of any of the Collateral after an Event of Default
shall have occurred, the Pledgee is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including, without limitation, compliance with such procedures as may restrict
42380.2
the number of prospective bidders and purchasers or further restrict such
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of such Collateral), or in order to obtain such
required approval of the sale or of the purchase by any governmental regulatory
authority or official, and the Pledgor further agrees that such compliance shall
not result in such sale's being considered or deemed not to have been made in a
commercially reasonable manner, nor shall the Pledgee be liable or accountable
to the Pledgor for any discount allowed by reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION VII
Upon the indefeasible payment in full of all Liabilities, this
Pledge Agreement shall terminate and the Pledgee shall forthwith assign,
transfer and deliver to the Pledgor, against receipt and without recourse to the
Pledgee, all Collateral then held by the Pledgee pursuant to this Pledge
Agreement.
SECTION VIII
No failure or delay on the part of the Pledgee in exercising
any right or remedy hereunder or under any other document which confers or
grants any rights in the Pledgee in respect of the Liabilities shall operate as
a waiver thereof nor shall any single or partial exercise of any such right or
remedy preclude any other or further exercise thereof or the exercise of any
other right or remedy of the Pledgee.
SECTION IX
This Pledge Agreement shall be binding upon and inure to the
benefit of the Pledgor, the Pledgee and their respective successors and assigns,
except that the Pledgor may not assign or transfer its rights hereunder without
the prior written consent of the Pledgee (which consent shall not unreasonably
be withheld). Each duty or obligation of the Pledgor to the Pled- gee pursuant
to the provisions of this Pledge Agreement shall be performed in favor of any
person or entity designated by the Pledgee, and any duty or obligation of the
Pledgee to the Pledgor may be performed by any other person or entity designated
by the Pledgee.
SECTION X
This Agreement supersedes all prior agreements, contains the
entire understanding relating to its subject matter and is binding on the
parties and their successors and assigns. No provision may be modified,
terminated or waived except by an express writing signed by both parties. No
waiver will constitute a waiver of any other or future breach. This Agreement
was accepted in, is to be governed by and construed in accordance with the
internal laws (excluding the laws concerning conflicts of laws) of, and any
dispute adjudicated exclusively in, the State of New York, where both parties
hereby consent to jurisdiction in any state or federal court located in such
jurisdiction, and any action therein may be commenced by written notice thereof
to the addresses set forth above. The provisions hereof are severable and this
Agreement will
42380.2
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be enforced to the maximum extent permitted by applicable law. This Agreement
may be executed in counterparts and may be executed by facsimile, which will be
deemed an original.
SECTION XI
All notices, requests, instructions or documents hereunder
shall be in writing and delivered personally or by facsimile transmission
(confirmed by mail as follows) or sent by United States mail, registered or
certified, return receipt requested, with proper postage prepaid, as follows:
(1) if to the Pledgee:
Neal R. Heller, Esq.
Natural Health Trends Corp.
2001 West Sample Road
Pompano Beach, Florida 33064
with a copy to:
Martin C. Licht, Esq.
Lane & Mittendorf LLP
320 Park Avenue
New York, New York 10022
(2) If to the Pledgor:
Sir Brian Wolfson
Global Health Alternatives, Inc.
44 Welbeck Street
London W1M 7HF England
with a copy to:
Robert C. Bruce
Global Health Alternatives, Inc.
193 Middle Street
Portland, Maine 04101
and:
Claude A. Baum, Esq.
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
42380.2
-5-
or at such other address as either of the parties may designate by written
notice to the other party. If delivered personally or by facsimile transmission,
the date on which a notice, request, instruction or document is delivered shall
be the date on which such delivery in person or by facsimile transmission is
made, and, if delivered by mail, the date on which such notice, request,
instruction or document is deposited in the mail shall be the date of delivery.
Each notice, request, instruction or document shall bear the date on which it is
delivered.
SECTION XII
Wherever possible each provision of this Pledge Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision hereof shall be prohibited by or invalid
under such law, such provisions shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions hereof.
IN WITNESS WHEREOF, this Pledge Agreement has been duly
executed by the parties hereto as of the day and year first above written.
PLEDGOR:
GLOBAL HEALTH ALTERNATIVES, INC.
By:__________________________
Name:
Title:
PLEDGEE:
NATURAL HEALTH TRENDS CORP.
By:__________________________
Name:
Title
42380.2
-6-
GUARANTEE
To induce NATURAL HEALTH TRENDS CORP. (the "Lender"), to enter into
various agreements with, and in consideration of the extension of credit by the
Lender to GLOBAL HEALTH ALTERNATIVES, INC. (the "Borrower"), as evidenced by the
note in the original principal amount of $810,000 (the "Note"), each of the
undersigned (collectively, the "Guarantor"), unconditionally and irrevocably,
jointly and severally, guarantees to the Lender, and any successors and assigns
thereof, the full and prompt payment when due, by acceleration or otherwise, of
the payment and the performance of all obligations, absolute or contingent, now
or hereafter existing, arising in any manner as a result of the Note between the
Borrower and the Lender (collectively, the "Obligations").
Each of the undersigned are wholly-owned subsidiaries of the Borrower
and each of the undersigned shall derive a substantial benefit as a result of
the extension of credit by the Lender to the Borrower.
The obligation of the Guarantor hereunder is direct, unconditional and
primary and may be enforced by the Lender without regard to the validity or
enforceability of the Obligations.
The Guarantor hereby waives diligence, presentment, protest, notice of
acceptance hereof and of all other notices and demands of any kind to which the
Guarantor may be entitled. The Guarantor further waives notice of and hereby
consents to any agreements or arrangements whatever made or which may be made by
the Lender with the Borrower, including, without limitation, agreements and
arrangements or payments, extensions, subordinations, composition, arrangement,
discharge or release of the whole or any part of the Obligations, or for the
change or surrender of any and all security, and the same shall in no way impair
the Guarantor's liability hereunder. Presentment, demand, protest and notice of
protest of any negotiable instruments are also hereby waived.
No act, failure to act, or omission of any kind on the part of the
Guarantor, the Lender or any other person, corporation or entity shall be deemed
to be a legal or equitable discharge or release of the obligation of the
Guarantor hereunder. This instrument is a continuing Guarantee and nothing shall
discharge or satisfy the liability of the Guarantor hereunder except the full
payment of the Obligations followed by the Lender's express release hereof. This
instrument shall not be affected by the death or incapacity of the Guarantor.
The Guarantor further agrees that this instrument shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of the principal of or interest on any of the Obligations
guaranteed hereby is rescinded or must otherwise be restored or returned by the
Lender upon the insolvency, bankruptcy or reorganization of the Borrower, or
otherwise, all as though such payment had not been made.
43573.2
If any legal action or actions are instituted by the Lender to enforce
any of its rights hereunder, the Guarantor covenants to pay the Lender for all
expenses incurred relative to such legal action or actions, including, but not
limited to, court costs and attorneys' fees and expenses and will be deemed to
have automatically assigned to the Lender all claims and demands which the
Guarantors may then or thereafter have against the Borrower. The Lender is
authorized and empowered to proceed against any Guarantor on the Guarantor's
liability hereunder without joining the Borrower or any other guarantor. Each of
the undersigned's liability hereunder shall be joint and several. This is a
guarantee of payment and not of collection and there shall be no duty or
obligation upon the Lender to proceed against the Borrower or to exhaust any
remedy against the Borrower, any collateral furnished, or any other guarantee or
security relating to the Obligations before bringing suit or instituting
proceedings of any kind against any Guarantor.
The Guarantors warrant that this Guarantee has been fully authorized
and is fully enforceable in accordance with its terms. The failure or
forbearance of the Lender to exercise any right hereunder, or otherwise granted
by law or other agreement, shall not affect or release the liability of the
Guarantor, and shall not constitute a waiver of such right unless so stated in
writing.
This Guarantee cannot be changed or terminated orally, shall be
interpreted according to the internal laws of the State of New York, shall be
binding upon the heirs, executors, administrators, successors and permitted
assigns of the Guarantor and shall inure to the benefit of the Lender, their
heirs, executors, administrators, successors and assigns. This Guarantee was
accepted in, and any dispute adjudicated exclusively in, the State of New York,
where the Guarantor consents to service of process and jurisdiction. This
document may be executed in counterparts and by facsimile, all of which shall be
deemed originals for all purposes.
IN WITNESS WHEREOF, the undersigned has executed this Guarantee as of
the 8th day of April, 1997.
ELLON, INC.
By: ______________________________
Name:
Title:
MAINE NATURALS, INC.
By: ______________________________
Name:
Title:
43573.2
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