Exhibit 4
MOVABLE HYPOTHEC
THIS AGREEMENT DATED AS OF February 10, 2004.
GRANTED BY: VITALSTATE, INC., a New York corporation having its
executive offices located at 0000 Xxxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxx, X0X 0X0;
(hereinafter called the "BORROWER")
IN FAVOUR OF: SCEPTER HOLDINGS INC., a Canadian corporation having
a place of business at 000 Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxx,
X0X 0X0;
(hereinafter called the "LENDER")
WHEREAS pursuant to the Loan Agreement (as defined herein), the Borrower is
and/or may become indebted to the Lender;
WHEREAS the Borrower has agreed to grant a hypothec to the Lender to secure,
inter alia, the repayment of its obligations under the Loan Agreement and the
Notes (as defined herein);
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. DEFINITIONS
The following words and expressions, when used in this Agreement or in its
appendices, shall have the following meanings unless otherwise dictated by the
context:
"BANKING DAY" means a day, other than a Saturday or a Sunday, on which banking
institutions in Montreal and Toronto, Canada, and New York, New York State, USA,
are generally open for business.
"BORROWER" shall mean Vitalstate, Inc. and any assignee or successor thereto and
includes any corporation resulting from the amalgamation of the Borrower with
any other Person or Persons.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"HYPOTHEC" shall mean the hypothec and security established by the Borrower in
favour of the Lender pursuant to this Agreement.
"HYPOTHECATED PROPERTY" shall mean the property hypothecated hereunder more
fully described in Section 4 of this Agreement.
"LENDER" shall mean Scepter Holdings Inc. as well as any assignee or successor
thereto.
"LOAN AGREEMENT" shall mean the loan agreement entered into between the Lender,
the Borrower, Vitalstate Canada Ltd. and Vitalstate US, Inc. as of February 10,
2004, as it has been or may be amended, restated, renewed, extended or otherwise
modified from time to time.
"NOTES" shall mean the series of secured promissory notes to be issued by the
Borrower to the Lender as evidence of the loans granted to the Borrower pursuant
to the Loan Agreement.
"PERSON(S)" shall mean any legal or natural person, corporation, company, firm,
joint venture, partnership, whether general, limited or undeclared, trust,
association, unincorporated organization, Governmental Authority or other entity
of whatever nature.
2. AMOUNT OF HYPOTHEC
To secure the performance of its obligations mentioned in Section 3, the
Borrower hereby hypothecates in favour of the Lender the Hypothecated Property
for a principal amount of Two Million Nine Hundred Thousand Canadian Dollars
(CA$2,900,000) plus an additional hypothec equal to twenty per cent (20%) of
such amount for a total amount of Three Million Four Hundred and Eighty Thousand
Canadian Dollars (CA$3,480,000), the whole with interest from the date of this
Agreement at an annual rate of twenty-five per cent (25%).
3. SECURED OBLIGATIONS
3.1 The Hypothec shall guarantee the performance of all obligations, both
present and future, of the Borrower towards the Lender resulting from
the following: (a) the Loan Agreement, from any credit listed therein
or from any credit which may be added thereto by means of an amendment,
renewal, restatement or replacement of such credit and (b) the Notes.
The Hypothec shall also guarantee the performance of the obligations
and the payment of the amounts set out in this Agreement and all
reasonable costs incurred by the Lender in order to observe or perform
the undertakings of the Borrower under this Agreement.
3.2 In addition, the Hypothec shall guarantee all of the Borrower's present
and future, direct and indirect obligations towards the Lender,
including any which are consistent with the above description, which do
not yet exist but will in future, as well as any obligations resulting
from future agreements with the Lender. Any future obligation secured
by this Agreement shall be deemed to be an additional obligation which
the Borrower is assuming under this Agreement.
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4. HYPOTHEC: DESCRIPTION OF HYPOTHECATED PROPERTY
4.1 The Borrower hereby hypothecates in favor of the Lender the following
property:
4.1.1 Accounts receivable - any and all accounts receivable,
contract rights and other rights to payment for the sale of
goods.
4.1.2 Inventory - any and all inventory, including, without
limitation, any and all goods held for sale or lease or being
processed for sale or lease, including, without limitation,
all materials, work in process, finished goods, and other
tangible property held for sale or lease; and
4.1.3 Other property - The following property shall also be affected
by the Hypothec granted under this Agreement:
4.1.3.1 the proceeds of any sale, lease or other disposal of
any Hypothecated Property (including, without
limitation, cash, deposit accounts (whether or not
comprised solely of proceeds), certificates of
deposit), as well as of any property acquired in
replacement thereof;
4.1.3.2 any insurance benefit or compensation for
expropriation relating to the Hypothecated Property;
4.1.3.3 the principal of, and fruits and income generated by,
the Hypothecated Property;
4.1.3.4 any and all instruments, documents, registers,
invoices and accounts evidencing or related to the
Hypothecated Property.
5. REPRESENTATIONS
5.1 The Borrower hereby makes the following representations:
5.1.1 it is the unconditional and absolute owner of the Hypothecated
Property, with the exception of future
property;
5.1.2 the Hypothecated Property is free and clear of any priority,
legal or conventional hypothec, charge, encumbrance,
garnishment, right of rescission, right of repossession or any
other rights;
5.1.3 the taxes, levies, assessments and fees affecting the
Hypothecated Property have all been paid to date, without
subrogation;
5.1.4 to the best of its knowledge, no suit or proceeding has been
instituted against it or is likely to affect the Hypothecated
Property;
5.1.5 it has executed no undertaking likely to impair the value of
the Hypothec;
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5.1.6 it is not in default as defined in this Agreement.
6. COMMITMENTS
6.1 The Borrower hereby makes the following commitments:
6.1.1 to advise the Lender in writing of any change in its name and
trade names or in the contents of the representations made in
Section 5;
6.1.2 to advise the Lender in writing of the names of any insurance
carriers which are party to the insurance policies specified
in this Agreement.
6.2 Information - To provide the Lender with any information which it may
reasonably request in relation to the Hypothecated Property or to
ascertain whether or not the Borrower is fulfilling its commitments and
obligations. The Borrower shall advise the Lender of any fact or event
likely to adversely affect the value of the Hypothecated Property or
the Borrower's financial position.
6.3 Access to premises - To allow the Lender, at all reasonable times under
the circumstances and at the Borrower's expense, to examine the
Hypothecated Property, to inspect it and to valuate it and to provide
access to the premises where such Hypothecated Property may be found.
6.4 Maintenance - To maintain the Hypothecated Property in a proper state
of maintenance and repair and in compliance with any laws and
regulations which may be applicable from time to time. The Borrower
shall make no substantial changes and shall proceed with no demolition;
nor shall it allow the Hypothecated Property to deteriorate or use it
or allow it to be used for illicit purposes.
6.5 Maintenance of Hypothec - To constantly maintain in full force and
effect and to keep enforceable against third persons the Hypothec
granted hereunder; to do any things and to sign any documents required
(including notices of renewal) so that the Hypothec granted hereunder
may have full effect over all Hypothecated Property and be constantly
enforceable against third persons.
6.6 Loss or damage - To advise the Lender forthwith of any loss or damage
and to expeditiously take any action so that the insurance carrier may
pay benefits to the Lender, insofar as the latter is entitled to such
benefits. The Lender shall be authorized to allocate all or part of any
insurance benefits to reducing amounts due under this Agreement (even
where such amounts have not yet become due or payable); however, such
reduction shall not occur until the Lender has advised the Borrower of
its decision to so allocate such benefits. The Lender may also choose
to allocate all or part of the insurance benefits to payment of any
replacement, repair or reconstruction costs.
6.7 Lease, sale, disposal - To notify the Lender forthwith if any part of
the Hypothecated Property is leased, sold, assigned or otherwise
disposed of, if such transaction is not made in the ordinary course of
the Borrower's business.
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6.8 Compliance with the law - To comply with the requirements of all laws
and regulations applicable to the operation of its business and to the
holding of the Hypothecated Property, including environmental
legislation.
7. DEFAULT
7.1 The Borrower shall be in default in each of the following cases, and
no notice or prior notice shall be required:
7.1.1 where there occurs an "Event of Default" (as defined in the
Loan Agreement) or where there is default under any other
present or future agreement between the Borrower and the
Lender; 7.1.2 where the Borrower fails to fulfil any of its
commitments under this Agreement and such failure is not
remedied by the Borrower within five (5) business days of
receipt of written notice from the Lender specifying the
nature of such failure;
7.1.3 where a statement or representation made under this Agreement,
or the content of any documents, statements or certificates
provided with respect to this Agreement or to the Loan
Agreement, turns out to be false or misleading.
7.2 Any default on the part of the Borrower pursuant to this Agreement
shall constitute an "Event of Default" pursuant to the Loan Agreement.
8. EXERCISE OF REMEDIES IN THE EVENT OF DEFAULT
8.1 In the event of default, regardless of the hypothecary remedy which the
Lender may choose to exercise, the following provisions shall apply:
8.1.1 the Lender shall be authorized, but not required, to do the
following at the Borrower's expense, with a view to protecting
or realizing the value of the Hypothecated Property:
8.1.1.1 to continue the processing of the Hypothecated Property or
perform the operations to which the Borrower subjects such
property in the course of its business, and to acquire any
property for this purpose;
8.1.1.2 to dispose of any Hypothecated Property which is obsolete or
likely to depreciate rapidly or to become impaired;
8.1.1.3 to use the information obtained in the exercise of its rights;
8.1.1.4 to fulfil any of the Borrower's commitments;
8.1.1.5 to exercise any right attached to the Hypothecated Property;
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8.1.1.6 in the exercise of any of its rights, to use without charge
the Borrower's premises, equipment, machinery, processes,
information and intellectual property;
8.1.1.7 to borrow funds;
8.1.1.8 to ensure proper maintenance, proceed with any repairs or
renovations, undertake or complete any work, at the Borrower's
expense;
8.1.2 the Lender shall exercise its rights in good faith so that,
following such exercise, the obligations secured by the
Hypothec shall be reasonably reduced under the circumstances;
8.1.3 the Lender may itself purchase or otherwise acquire the
Hypothecated Property directly or indirectly;
8.1.4 in the exercise of its rights, the Lender shall be entitled to
waive any of its rights or of the Borrower's, even without
consideration;
8.1.5 the Lender shall not be required to make an inventory, take
out insurance or provide any other security;
8.1.6 the Borrower shall, at the Lender's request, move the
Hypothecated Property and make it available to the Lender in a
location designated by the Lender and which, in the latter's
opinion, is more appropriate under the circumstances.
8.2 Where the Lender exercises the hypothecary remedy of "taking in
payment" and the Borrower requires that the Lender proceed instead with
a sale of the Hypothecated Property in relation to which the Lender is
exercising its remedy, the Borrower hereby acknowledges that the Lender
shall not be required to abandon its remedy for taking in payment
unless, within the time allotted for surrender, the Lender (i) has been
provided with security which it deems satisfactory to the effect that
the property shall be sold at a sufficiently high price to enable the
Lender's claim to be paid in full, (ii) has been reimbursed for any
expenses then incurred by the Lender, including any fees of consultants
or legal counsel relating to such remedy, and (iii) has been provided
with the amounts required for the sale of the property; the Borrower
further acknowledges that the Lender shall alone be entitled to select
the method of sale.
8.3 The Borrower shall be deemed to have surrendered the Hypothecated
Property held by the Lender or on its behalf where the Lender has not,
within the time allotted for surrender by law or by a court, received
written notice from the Borrower that the latter was challenging the
exercise of the hypothecary remedy indicated in the prior notice.
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8.4 Where the Lender itself sells the Hypothecated Property, it shall
not be required to obtain a prior valuation from a third person.
8.5 The Hypothecated Property may be sold with a legal warranty on the part
of the Borrower or, at the Lender's option, with a total or partial
warranty exclusion; it may also be sold for cash, on an instalment
basis or subject to the terms and conditions determined by the Lender;
such sale may be rescinded in the event of non-payment of the agreed
price, and the property may then be resold.
9. GENERAL PROVISIONS
9.1 Additional security - The Hypothec granted hereunder shall be in
addition to any other hypothec or security held by the Lender, but
shall not be in replacement or exchange thereof; it shall not affect
the Lender's rights of set-off.
9.2 Notices - All notices and other communications provided for hereunder
shall, unless otherwise stated herein, be in writing to the party for
whom it is intended and shall be mailed, sent or delivered, to such
party at its address set forth below with its signature or shall be
sent by telecopier or other means of rapid communication at its rapid
communication address set forth below with its signature, or at such
other address or rapid communication address as shall be designated by
such party in a written notice to the other parties hereto. All such
notices and communications shall be effective (i) if mailed, three (3)
Banking Days after deposited in the mail, first class, postage prepaid,
(ii) if delivered, when delivered and (iii) if sent by telecopier or
other means of rapid communication, on the date of transmission if
transmitted before 3:00 p.m. (Montreal time) on a Banking Day or, in
any other case, on the next following Banking Day. In the event of a
postal strike or any slow-down in the postal service, no notice of or
communication by mail shall be effective if sent during, or within five
(5) Banking Days prior to the commencement of, such strike or slow-down
unless it is actually received by the party to whom it is addressed
and, in such event, it shall be effective only on the date of actual
receipt.
9.3 Time allotted - The Lender may grant extensions, take or surrender
security, make accommodations, grant discharges or releases or
otherwise transact with the Borrower, at its discretion, without
thereby restricting its rights hereunder or reducing the Borrower's
liability.
9.4 Continuing security - The Hypothec shall constitute a continuing
security which shall subsist notwithstanding the occasional, total or
partial satisfaction of the obligations secured hereby; it shall have
full and complete effect until such time as a total discharge has been
executed by the Lender.
9.5 Putting in default - Time is of the essence in this contract. The
Borrower shall be in default of performing its obligations hereunder by
the mere lapse of the time allowed for such performance or by the mere
materialization of the due date, without notice or prior notice.
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9.6 Execution in Counterparts - This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and
the same agreement.
9.7 Cumulative remedies - By exercising any of its rights, the Lender shall
not be prevented from exercising any other right resulting from this
Agreement, from the Loan Agreement, from any deed granting a security
in favour of the Lender or from any legislation; the Lender's rights
shall be cumulative, and not alternative. Failure to exercise any of
its rights shall not constitute, for the Lender, a waiver of any future
exercise of such right. The Lender may exercise its rights hereunder
without having to exercise its rights against any other person
responsible for the payment of the obligations secured hereby and
without having to realize any other security guaranteeing such
obligations.
9.8 Irrevocable mandate - The Lender is hereby irrevocably appointed the
Borrower's representative with power of substitution for purposes of
the following paragraph, with a view to doing any thing or signing any
paper, power of attorney or document which it deems appropriate for
purposes of exercising its rights or which the Borrower may fail or
refuse to sign or do.
9.9 Delegation - The Lender may delegate to another person the exercise of
its rights or remedies or the performance of its obligations under this
Agreement or under the law; in such an event, the Lender may provide to
such other person any information which it possesses about the Borrower
or the Hypothecated Property.
9.10 Liability - The Lender shall not be liable for any material damage
which may result through its fault or that of its servants or of any
persons with whom it has contracted for purposes of protecting or
exercising its rights, unless such damage is the result of gross
negligence or wilful misconduct.
9.11 Successors - The rights conferred upon the Lender hereby shall extend
to any successor, including any entity resulting from the merger of the
Lender with another person.
9.12 Governing Law - Notwithstanding anything to the foregoing provided for
in the Loan Agreement, this Agreement shall be governed by and
construed in accordance with the laws of the Province of Quebec as the
same may from time to time be in effect.
9.13 Language - The parties hereby confirm their express wish that the
present Agreement and all documents and agreements directly and
indirectly related thereto, including notices, be drawn up in English.
Notwithstanding such express wish, the parties agree that any of such
documents, agreements and notices or any part thereof or of this
Agreement may be drawn up in French. Les parties reconnaissent leur
volonte expresse que la presente convention ainsi que tous les
documents et conventions qui s'y rattachent directement ou
indirectement, y
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compris xxx xxxx, soient rediges en langue anglaise. Nonobstant telle
volonte expresse, les parties conviennent que n'importe quel desdits
documents, conventions et avis ou toute partie de ceux-ci ou de cette
convention puissent etre rediges en langue francaise.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective representatives thereunto duly authorized as of the date
first above written.
Address: VITALSTATE, INC.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxxx Per: /s/ Xxxxx Xxxxx
------------------------------
Name: Xxxxx Xxxxx
Title: CFO
Address:
000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
SCEPTER HOLDINGS INC.
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxx
Per: /s/ Xxxxxx Xxxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
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