Exhibit 1
LOAN AGREEMENT
LOAN AGREEMENT, dated as of February 10, 2004 (this "Agreement"), among
Vitalstate, Inc., a New York corporation, with its executive offices located at
0000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx X0X 0X0 (the "Borrower"), Vitalstate
Canada Ltd., a Canadian corporation with its executive offices located at 0000
Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx X0X 0X0, Vitalstate US, Inc., a Florida
corporation with its executive offices located at 0000 Xxxx Xxxxx Xxxx, Xxxxxxx
Xxxxx, Xxxxxxx 00000 (Vitalstate Canada Ltd. and Vitalstate US, Inc. are
hereinafter referred to both singly and collectively as the "Guarantors"), and
Scepter Holdings Inc., a Canadian corporation with an address at 000 Xxxxxxx
Xxxx, Xxxxxxx, Xxxxxxx X0X 0X0 (the "Lender").
WHEREAS, Lender has agreed to periodically make loans to the Borrower
and the Borrower has agreed to borrow from the Lender up to an aggregate
principal amount of Two Million U.S. Dollars ($2,000,000) (the "Loans") in
accordance with the terms and conditions set forth herein and in the secured
promissory note in the form annexed hereto and made a part hereof as Exhibit A
(the "Note");
WHEREAS, payment for the Note shall be guaranteed by the Guarantors
pursuant to a Guaranty annexed hereto as Exhibit B (the "Guaranty")and pursuant
to Movable Hypothecs from the Borrower and Vitalstate Canada Inc. in the forms
annexed hereto as Exhibit D-1 and Exhibit D-2, respectively (the "Hypothecs");
and
WHEREAS, the security for the Notes shall be (a) accounts receivable,
contract rights and other rights to payment for the sale of goods of Borrower
and the Guarantors and (b) inventory of Borrower and the Guarantors (singly and
collectively the "Collateral") pursuant to a Security Agreement dated even date
herewith between Borrower, the Guarantors and the Lender annexed hereto as
Exhibit C (the "Security Agreement") and pursuant to Movable Hypothecs from the
Borrower and Vitalstate Canada Ltd. in the forms annexed hereto as Exhibit D-1
and Exhibit D-2, respectively (the "Hypothecs").
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
SECTION 1. THE LOAN Subject to the terms and conditions of this Agreement, the
Lender agrees to periodically loan to the Borrower, as and when required by the
Borrower to meet its cash flow needs, and the Borrower agrees to borrow from the
Lender, at such times as Borrower shall notify Lender in writing, up to an
aggregate principal amount of Two Million U.S. Dollars ($2,000,000.00) in
tranches of One Hundred Thousand U.S. Dollars ($100,000.00) each. The Loans,
including all accrued interest thereon, are payable on demand and in all events
not later than December 31, 2004 (the "Maturity Date").
SECTION 2. NOTES; INTEREST; PAYMENTS The Loan shall be evidenced by Notes in the
form attached hereto as Exhibit A and shall be due and payable in full, subject
to earlier repayment in whole or in part upon earlier demand by Lender, on the
Maturity Date. The Borrower may from time to time prepay the Loan in whole or in
part, in increments of $10,000, without notice and without penalty, provided
that any such prepayment is accompanied by the payment of all accrued
and unpaid interest on the amount prepaid. All payments on the Notes shall be
made to the Lender at the address set forth above or such other address as
Lender shall designate in writing.
SECTION 3. CONDITIONS PRECEDENT TO THE LOAN The disbursement of each Loan
tranche shall be subject to the satisfaction, or waiver by the Lender, of the
following conditions precedent:
3.1. The Lender shall have received a Note, duly executed and delivered by the
Borrower.
3.2. The Lender shall have received the Security Agreement duly executed and
delivered by Borrower and the Guarantors as well as originals, each duly
executed by Borrower and the Guarantors, of all financing statements under the
Uniform Commercial Code, and other documents and instruments required by Lender
in connection with the Security Agreement.
3.3 The Lender shall have received a Hypothec duly executed and delivered by
Borrower and Vitalstate Canada Ltd., as well as originals, each duly executed by
Borrower and Vitalstate Canada Ltd., of all financing statements under Canadian
law, and other documents and instruments required by Lender in connection with
the Hypothecs.
3.4 The Lender shall have received a Guaranty duly executed and delivered by
Guarantors.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER As a material
inducement to the Lender to enter into this Agreement, the Borrower and the
Guarantors hereby represent, warrant and agree that:
4.1. Each of the Borrower and each Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite authority and legal right to incur the
obligations provided for hereunder and under the Note and to execute and deliver
and to perform and observe the provisions of this Agreement and the Loan
Documents (as hereinafter defined) to which it is a party.
4.2. The making and performance by the Borrower and the Guarantors of this
Agreement and the other Loan Documents has been, and each Note by the Borrower
shall have been, duly authorized by all necessary corporate action.
4.3. This Agreement and each other Loan Document to which it is party
constitutes or will constitute a legal and binding obligation of the Borrower,
enforceable against the Borrower in accordance with their terms. This Agreement
and each other Loan Document to which it is a party constitutes a legal and
binding obligation of the Guarantors, enforceable against them in accordance
with their terms
4.4. The chief place of business and chief executive office of the Borrower and
the Guarantors and the office where the Borrower and the Guarantors shall keep
the Collateral and their records concerning the Collateral are located at
Borrower's and Guarantors' address set forth above.
4.5. No authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third party not
already undertaken is required for exercise by Lender of its rights and remedies
hereunder.
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4.6. The Borrower and each Guarantor possesses all licenses, permits and other
authorizations required by any applicable governmental authority for the
operation and conduct of its business and is otherwise in compliance with all
laws, rules and regulations of any such governmental authority.
4.7. The Borrower has timely filed all reports required to be filed pursuant to
the Securities Exchange Act of 1934, as amended and the rules under regulations
promulgated thereunder (collectively, the "Exchange Act").
4.8. All reasonable expenses of Lender's counsel related to its negotiation and
review of this Agreement, the Note, the Guaranty and the Security Agreement will
be borne by Borrower.
4.9 The execution, delivery and performance of this Agreement and the documents
and instruments contemplated hereby does not conflict with or cause a breach or
default under, or an event that with or without the passage of time or notice,
shall constitute a breach or default, under any agreement to which the Borrower
or the Guarantors are a party or by which they are bound.
SECTION 5. COVENANTS So long as all or any portion of any Note remains
outstanding, the Borrower and the Guarantors hereby agree as follows:
5.1. They shall comply in all material respects with all applicable laws, rules,
regulations and orders of, and restrictions imposed by, governmental
authorities, the violation of which could reasonably be expected to have a
material adverse effect upon the financial condition, results, assets or
operations of them.
5.2. They shall allow representatives of the Lender, upon reasonable prior
notice, to inspect, copy and make extracts of all applicable records, and all
properties, of them at any reasonable time for any reasonable purpose.
5.3. They shall promptly notify the Lender of any litigation instituted, or to
their knowledge, threatened against them.
SECTION 6. LENDER'S RIGHT TO CURE If the Borrower fails to perform any agreement
contained herein or in any Note, the Lender may cure such event of default, and
the expenses of the Lender incurred in connection therewith shall be payable by
the Borrower.
SECTION 7. INDEMNITY AND EXPENSES
7.1. The Borrower agrees to indemnify the Lender for, from and against all
claims, losses and liabilities growing out of or resulting from this Agreement,
any Note, the Guaranty or the Security Agreement (including, without limitation,
enforcement of this Agreement or any Note, the Guaranty, the Security Agreement
or the Hypothecs) (collectively, the "Loan Documents"), except claims, losses or
liabilities resulting from the Lender's gross negligence or willful misconduct.
7.2. The Borrower will upon demand pay to the Lender the amount of any and all
reasonable expenses, including the reasonable fees and disbursements of its
counsel, which the Lender may incur in connection with:
(i) the exercise or enforcement of any of the rights of the Lender
hereunder or under any other Loan Document; or
(ii) the failure by the Borrower to perform or observe any of the
provisions hereof or any other Loan Document
SECTION 8. EVENTS OF DEFAULT; REMEDIES
8.1. An event of default shall be deemed to have occurred upon the occurrence of
any of the following events:
(a) Any amount payable on the Loan shall not be paid when due or when
demand is made therefor; or
(b) Other than a failure to pay the Loan when due or when demand is made
therefor, a breach or failure of performance by the Borrower of any
covenant, condition or agreement on its part to be observed or
performed contained in this Agreement or by any party in any Loan
Document which shall not have been cured within five (5) business days
after receipt by the Borrower of notice thereof given by the Lender;
or
(c) Any material representation or warranty made by either Borrower or any
Guarantor in any Loan Document shall prove to have been false or
breached in any material respect on and as of the date on which made;
or
(d) The Borrower or any Guarantor shall be adjudged to be insolvent or
unable to pay its debts as they mature or any receiver, trustee,
liquidator, custodian or like officer be appointed to take custody,
possession or control of any property of the Borrower or any
Guarantor; or
(e) if the Borrower or any Guarantor shall:
(i) admit in writing its inability to pay its debts generally as they
become due; or
(ii) file a petition in bankruptcy or petition to take advantage of
any insolvency act; or
(iii) make assignment for the benefit of creditors; or
(iv) consent to the appointment of a receiver of the whole or any
substantial part of its property; or
(v) on a petition in bankruptcy filed against it, be adjudicated a
bankrupt; or
(vi) file a petition or answer seeking reorganization or arrangement
under the Federal bankruptcy laws or any other applicable law or
statute of Canada or any province thereof or of the United States
of America or any state, district or territory thereof; or
(f) if a court of competent jurisdiction shall enter an order, judgment,
or decree appointing, without the consent of the Borrower or any
Guarantor, as applicable, a receiver of the whole or any substantial
part of the its property, and such order,
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judgment or decree shall not be vacated or set aside or stayed within
ninety (90) days from the date of entry thereof; or
(g) if, under the provisions of any other law for the relief or aid of
debtors, any court of competent jurisdiction shall assume custody or
control of the whole or any substantial part of Borrower's or any
Guarantor's property and such custody or control shall not be
terminated or stayed within (90) days from the date of assumption of
such custody or control; or
(h) if the Borrower or any Guarantor sells or otherwise transfers all or
substantially all of its assets.
8.2. If an event of default shall have occurred and be continuing:
(a) The Lender may (by written notice delivered to the Borrower) declare
all or any portion of the Loan immediately due and payable.
(b) The Lender shall also be entitled to exercise all its rights and
remedies as may exist at law or as set forth in this Agreement and/or
the Notes.
(c) The Lender shall be entitled to collect interest at the maximum rate
of interest allowed by applicable law on the unpaid principal balance
of the Notes from and after the occurrence of an event of default
until such event of default is cured or waived by Lender.
SECTION 9. MISCELLANEOUS
9.1. All covenants and agreements in this Agreement by or on behalf of either
party shall bind and inure to the benefit of their respective successors and
assigns, including any subsequent holder of any Note. This Agreement may not be
assigned by the Borrower unless the Lender shall given prior written consent
thereto.
9.2. Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under applicable law, then such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement.
9.3. This Agreement may be executed in separate counterparts, each of which is
deemed to be an original hereof, and all of which taken together shall
constitute one and the same agreement.
9.4. Descriptive headings in this Agreement are inserted for convenience of
reference only and are not intended to be part of or affect the meaning or
interpretation of this Agreement.
9.5. The parties hereto acknowledge that the transactions contemplated by this
Agreement and the exhibits hereto bear a reasonable relation to the State of New
York. This Agreement shall be enforced in accordance with, and all questions
regarding the construction, validity, interpretation and purpose of this
agreement shall be governed by, the internal laws of the State of New York,
without
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giving effect to provisions thereof regarding conflict of laws. Any action to
enforce the terms of this Agreement or any of its exhibits shall be brought
exclusively in the state and/or federal courts situate in the County and State
of New York. Service of process in any action by the Lender to enforce the terms
of this Agreement may be made by serving a copy of the summons and complaint, in
addition to any other relevant documents, in the manner set forth in Section 9.6
hereof.
9.6. Any notice provided for in this Agreement must be in writing and must be
either (a) hand delivered, (b) mailed by registered or certified first class
mail, postage prepaid with return receipt requested, (c) sent by reputable
overnight courier service for next business morning delivery, to the address
indicated above or to such other address or to the attention of such other
person as the recipient party shall have specified by prior written notice to
the sending party.
Any notice under this Agreement shall be deemed to have been given (i) on the
date such notice is hand delivered or delivered by reputable overnight courier
service, or (ii) three (3) days after the date of mailing if mailed by certified
or registered mail.
9.7. This Agreement and all exhibits and schedules hereto embody the complete
agreement and understanding between the parties with respect to the subject
matter hereof and thereof and supersedes and preempts any prior understandings,
agreements and/or representations by or between the parties, written or oral,
related to the subject matter hereof in any way.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.
VITALSTATE, INC.
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
Title: CFO
VITALSTATE CANADA LTD.
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
Title: CFO
VITALSTATE US, INC.
By: /s/ Xxxxx Xxxxx
-------------------------------------
Name: Xxxxx Xxxxx
Title: CFO
SCEPTER HOLDINGS INC.
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
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EXHIBIT A
THIS NOTE HAS BEEN ISSUED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH SUCH REQUIREMENTS OR A WRITTEN OPINION OF
COUNSEL ACCEPTABLE TO THE OBLIGOR THAT SUCH TRANSFER WILL NOT RESULT IN ANY
VIOLATION OF SUCH LAWS OR AFFECT THE LEGALITY OF ITS ISSUANCE.
SECURED PROMISSORY NOTE
No. __
$100,000 _________, 2004
FOR VALUE RECEIVED, the undersigned, Vitalstate, Inc., a New York
corporation with offices at 0000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx X0X 0X0 (the
"Obligor"), hereby promises to pay to the order of Scepter Holdings Inc. (the
"Holder"), a Canadian corporation with offices at 000 Xxxxxxx Xxxx, Xxxxxxx,
Xxxxxxx X0X 0X0 the principal sum of One Hundred Thousand US dollars ($100,000)
payable as set forth below. The Obligor also promises to pay to the order of the
Holder interest on the principal amount hereof at a rate per annum equal to
eight percent (8%), which interest shall be payable at such time as the
principal is due hereunder. Interest shall be calculated on the basis of the
year of 365 days and for the number of days actually elapsed. Any amounts of
interest and principal not paid when due, including upon an Event of Default (as
hereinafter defined), shall bear interest at the maximum rate of interest
allowed by applicable law. The payments of principal and interest hereunder
shall be made in currency of the United States of America that at the time of
payment shall be legal tender therein for the payment of public and private
debts.
This Note shall be subject to the following additional terms and
conditions:
1. Payments. Interest and principal due on this Note are payable on demand by
the Holder and in all events no later than December 31, 2004 (the "Maturity
Date"); provided however, that the parties may mutually agree to extend the
terms of this Note beyond the Maturity Date. In the event that any payment
to be made hereunder shall be or become due on Saturday, Sunday or any
other day which is a legal bank holiday under the laws of Canada, such
payment shall be or become due on the next succeeding business day and
interest shall accrue during such extension of time
2. Optional Prepayment. The Obligor and the Holder understand and agree that
the principal amount of this Note plus all accrued interest due thereon may
be prepaid by the Obligor, in its discretion, at any time prior to the
Maturity Date in accordance with section 2 of the Loan Agreement (as
defined below).
3. Loan Agreement. This Note is given under and pursuant to the terms and
conditions of that certain Loan Agreement among Obligor, Vitalstate Canada
Ltd., Vitalstate US, Inc., and Holder dated as of February 10, 2004 (the
"Loan Agreement") and is delivered subject to the terms, conditions and
covenants and undertakings contained therein, which by this reference are
incorporated herein. All capitalized terms used but not defined in this
Note shall have the meanings assigned to such terms in the Loan Agreement.
To the extent of any inconsistency
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between any term or condition of this Note and any term or condition of the
Loan Agreement, the provisions of this Note shall control.
4. Security Agreement. Simultaneous with the execution and delivery of this
Loan Agreement, Obligor, Vitalstate Canada Ltd. and Vitalstate US, Inc.
have executed and delivered to Holder a Security Agreement ("Security
Agreement") securing performance of their obligations under the Loan
Agreement and this Note.
5. Unconditional Guaranty and Pledge. The obligations of Obligor to pay all
sums due and owing under this Note (including, without limitation, section
12 of this Note) is unconditionally guaranteed by Vitalstate Canada Ltd.
and Vitalstate US, Inc. (singly and collectively the "Guarantors"), each a
wholly owned subsidiary of the Obligor, pursuant to a Guaranty, of even
date herewith, and is secured by certain assets of the Obligor and the
Guarantors as more fully described in the Security Agreement executed by
the Obligor and Guarantors .
6. No Waiver. No failure or delay by the Holder in exercising any right, power
or privilege under the Note shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law. No course of dealing between the
Obligor and the Holder shall operate as a waiver of any rights by the
Holder.
7. Waiver of Presentment and Notice of Dishonor. The Obligor and all
endorsers, guarantors and other parties that may be liable under this Note
hereby waive presentment, notice of dishonor, protest and all other demands
and notices in connection with the delivery, acceptance, performance or
enforcement of this Note.
8. Place of Payment. All payments of principal of this Note and the interest
due hereon shall be made as set forth in section 2 of the Loan Agreement .
9. Events of Default. The entire unpaid principal amount of this Note and the
interest due hereon shall forthwith become and be due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, upon the occurrence of an event of default (as
such term is used in section 8 of the Loan Agreement)
10. Remedies. In case any one or more of the Events of Default specified in
Section 9 hereof shall have occurred and be continuing, the Holder may
proceed to protect and enforce its rights whether by suit and/or equity
and/or by action of law, whether for the specific performance of any
covenant or agreement contained in this Note or in aid of the exercise of
any power granted in this Note, or the Holder may proceed to enforce the
payment of all sums due upon the Note or enforce any other legal or
equitable right of the Holder.
11. Costs and Expenses. The Obligor shall bear all reasonable legal expenses of
Holder in connection with the negotiation, drafting and execution of the
Loan Documents (as such term is defined in section 7 of the Loan Agreement)
and related documents (including an amendment to the Holder's Schedule 13D
with respect to its investment in the Obligor). In the event Obligor
defaults under its obligations hereunder, the Holder shall be entitled to
recover all of its reasonable attorney's fees and costs incurred in
enforcing its rights under any of the Loan Documents.
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12. Amendments. No amendment, modification or waiver of any provision of this
Promissory Note nor consent to any departure by the Obligor therefrom shall
be effective unless the same shall be in writing and signed by Holder and
then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given.
13. Governing Law. This Promissory Note shall be deemed to be a contract made
under the laws of New York and shall be governed and construed in
accordance with the laws of said state without giving effect to principles
of conflicts of law.
14. Headings and Construction. The headings of the paragraphs of this
Promissory Note are inserted for convenience of reference only and shall
not be deemed to constitute a part hereof. Words used herein of any gender
shall be construed to include any other gender where appropriate and words
used herein which are either singular or plural shall be construed to
include the other where appropriate.
15. Successors and Assigns. The provisions hereof shall be binding upon and
shall insure to the benefit of Obligor, Guarantor and Holder and their
respective successors and assigns.
16. Partial Invalidity. If any provision of this Promissory Note is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Promissory Note as a whole but this Promissory Note shall
be construed as though it did not contain the particular provision or
provisions held to be invalid or unenforceable, and the rights and
obligations of the parties shall be construed and enforced only to such
extent as shall be permitted by law.
IN WITNESS WHEREOF, the OBLIGOR has signed this Note this ___ day of _________
2004.
OBLIGOR:
Vitalstate, Inc.
By:
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Name:
Title:
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