Exhibit 5
MOVABLE HYPOTHEC
THIS AGREEMENT DATED AS OF February 10, 2004.
GRANTED BY: VITALSTATE CANADA LTD., a Canadian corporation having its
registered office located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇ ▇▇▇;
(hereinafter called the "GRANTOR")
IN FAVOUR OF: SCEPTER HOLDINGS INC., a Canadian corporation having a place of
business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇;
(hereinafter called the "CREDITOR")
WHEREAS pursuant to a Loan Agreement (as defined herein), the Creditor has
agreed to loan up to US$2,000,000 to the Borrower (as defined herein);
WHEREAS pursuant to Section 3.3. of the Loan Agreement, the Grantor has agreed
to execute and deliver a Guaranty (as defined herein) in favour of the Creditor;
WHEREAS in order to further secure the repayment of its obligations under the
Guaranty and under the Loan Agreement, the Grantor has agreed to grant a
hypothec to the Creditor;
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.
"CREDITOR" shall mean Scepter Holdings Inc. as well as any assignee or successor
thereto.
"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.
"GRANTOR" shall mean Vitalstate Canada Ltd. and any assignee or successor
thereto and includes any corporation resulting from the amalgamation of the
Grantor with any other Person or Persons.
"GUARANTY" shall mean the guaranty entered into between the Grantor and
Vitalstate US, Inc. in favour of the Creditor, as it has been or may be amended,
restated, renewed, extended or otherwise modified from time to time.
"HYPOTHEC" shall mean the hypothec and security established by the Grantor in
favour of the Creditor pursuant to this Agreement.
"HYPOTHECATED PROPERTY" shall mean the property hypothecated hereunder more
fully described in Section 4 of this Agreement.
"LOAN AGREEMENT" shall mean the loan agreement entered into between the
Creditor, the Borrower, the Grantor 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.
"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 Grantor
hereby hypothecates in favour of the Creditor 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 Grantor towards the Creditor resulting from
the following: (a) the Guaranty and (b) the Loan Agreement. 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 Creditor in order to observe or perform the
undertakings of the Grantor under this Agreement.
3.2 In addition, the Hypothec shall guarantee all of the Grantor's present
and future, direct and indirect obligations towards the Creditor,
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 Creditor. Any future obligation secured
by this Agreement shall be deemed to be an additional obligation which
the Grantor is assuming under this Agreement.
2
4. HYPOTHEC: DESCRIPTION OF HYPOTHECATED PROPERTY
4.1 The Grantor hereby hypothecates in favour of the Creditor 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 Grantor 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;
3
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;
5.1.6 all of the property owned by the Grantor is located in the
province of Quebec;
5.1.7 it is not in default as defined in this Agreement.
6. COMMITMENTS
6.1 The Grantor hereby makes the following commitments:
6.1.1 to advise the Creditor 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 Creditor 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 Creditor with any information which it may
reasonably request in relation to the Hypothecated Property or to
ascertain whether or not the Grantor is fulfilling its commitments and
obligations. The Grantor shall advise the Creditor of any fact or event
likely to adversely affect the value of the Hypothecated Property or
the Grantor's financial position.
6.3 Access to premises - To allow the Creditor, at all reasonable times
under the circumstances and at the Grantor'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 Grantor
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.
4
6.6 Loss or damage - To advise the Creditor forthwith of any loss or damage
and to expeditiously take any action so that the insurance carrier may
pay benefits to the Creditor, insofar as the latter is entitled to such
benefits. The Creditor 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 Creditor has advised the
Grantor of its decision to so allocate such benefits. The Creditor 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 Creditor 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 Grantor's business.
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 Grantor 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 Grantor and the
Creditor, including, without limiting the generality of the
foregoing, under the Guaranty;
7.1.2 where the Grantor fails to fulfil any of its commitments under
this Agreement and such failure is not remedied by the Grantor
within five (5) business days of receipt of written notice
from the Creditor 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 or to the Guaranty, turns out to be false or
misleading.
7.2 Any default on the part of the Grantor pursuant to this Agreement or
pursuant to the Guaranty 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
Creditor may choose to exercise, the following provisions shall apply:
5
8.1.1 the Creditor shall be authorized, but not required, to do the
following at the Grantor'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
Grantor 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 Grantor's commitments;
8.1.1.5 to exercise any right attached to the Hypothecated
Property;
8.1.1.6 in the exercise of any of its rights, to use without
charge the Grantor'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 Grantor's expense;
8.1.2 the Creditor 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 Creditor may itself purchase or otherwise acquire the
Hypothecated Property directly or indirectly;
8.1.4 in the exercise of its rights, the Creditor shall be entitled
to waive any of its rights or of the
Grantor's, even without consideration;
8.1.5 the Creditor shall not be required to make an inventory, take
out insurance or provide any other security;
8.1.6 the Grantor shall, at the Creditor's request, move the
Hypothecated Property and make it available to the Creditor in
a location designated by the Creditor and which, in the
latter's opinion, is more appropriate under the circumstances.
8.2 Where the Creditor exercises the hypothecary remedy of "taking in
payment" and the Grantor requires that the Creditor proceed instead
with a sale of the Hypothecated Property in relation to which the
Creditor is exercising its remedy,
6
the Grantor hereby acknowledges that the Creditor shall not be
required to abandon its remedy for taking in payment unless, within
the time allotted for surrender, the Creditor (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
Creditor's claim to be paid in full, (ii) has been reimbursed for any
expenses then incurred by the Creditor, 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 Grantor further acknowledges that the Creditor shall alone be
entitled to select the method of sale.
8.3 The Grantor shall be deemed to have surrendered the Hypothecated
Property held by the Creditor or on its behalf where the Creditor has
not, within the time allotted for surrender by law or by a court,
received written notice from the Grantor that the latter was
challenging the exercise of the hypothecary remedy indicated in the
prior notice.
8.4 Where the Creditor 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 Grantor or, at the Creditor'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
Creditor; 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 Creditor, but
shall not be in replacement or exchange thereof; it shall not affect
the Creditor'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-
7
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 Creditor may grant extensions, take or surrender
security, make accommodations, grant discharges or releases or
otherwise transact with the Grantor, at its discretion, without thereby
restricting its rights hereunder or reducing the Grantor'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 Creditor.
9.5 Putting in default - Time is of the essence in this contract. The
Grantor 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.
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 Creditor
shall not be prevented from exercising any other right resulting from
this Agreement, from the Loan Agreement, from the Guaranty, from any
deed granting a security in favour of the Creditor or from any
legislation; the Creditor's rights shall be cumulative, and not
alternative. Failure to exercise any of its rights shall not
constitute, for the Creditor, a waiver of any future exercise of such
right. The Creditor 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 Creditor is hereby irrevocably appointed the
Grantor'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 Grantor may fail or
refuse to sign or do.
9.9 Delegation - The Creditor 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 Creditor may
provide to such other person any information which it possesses about
the Grantor or the Hypothecated Property.
9.10 Liability - The Creditor 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.
8
9.11 Successors - The rights conferred upon the Creditor hereby shall extend
to any successor, including any entity resulting from the merger of the
Creditor 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 compris ▇▇▇ ▇▇▇▇, 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.
[REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK-
SIGNATURE PAGE TO FOLLOW]
9
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 CANADA LTD.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇ Per: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: CFO
Address: SCEPTER HOLDINGS INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ Per: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇ -----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
10