UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
report (Date of earliest event reported): April 29, 2008
PACIFICHEALTH LABORATORIES,
INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
(State or
Other Jurisdiction of Incorporation)
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000-23495
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22-3367588
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(Commission
File Number)
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(IRS
Employer Identification No.)
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100 Matawan Road, Suite 420 Matawan,
NJ
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07747-3913
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(Registrant’s
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.03.
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
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On April
29, 2008, PacificHealth Laboratories, Inc. (the “Company”) and Grand Bank, N.A.
entered into a Business Loan Agreement (the “Loan Agreement”) upon the Company’s
receipt of the executed Loan Agreement from Grand Bank. Pursuant to
the Loan Agreement, dated April 21, 2008, the Company borrowed $675,000 from
Grand Bank (the “Loan”), evidenced by a revolving credit promissory note (the
“Note”). The Company intends to use proceeds from the Loan to fund
the Company’s business operations.
Repayment
Terms; Interest Rate
The
Company’s obligations under the Loan Agreement and the Note are secured by a
Commercial Pledge Agreement, dated April 21, 2008, by and between the Company
and Grand Bank (the “Pledge Agreement”) pursuant to which the Company has
pledged a Collateral Account Agreement with Oppenheimer which will be funded by
Company assets valued at a minimum of $1,350,000 and maintained by Oppenheimer
(the “Pledged Account”). Grand Bank will receive monthly statements
from Oppenheimer from the Pledged Account, and the Company is required to
maintain a maximum outstanding Loan to Pledged Account value (“loan to value”)
of no greater than 70% at all times during the term of the Loan. If
the outstanding loan to value exceeds 70%, Grand Bank will require the Company
to either pay down the Loan so that the loan to value is 70% or less or provide
additional collateral. A failure by the Company to maintain a 70%
loan to value will be considered an event of default under the
Loan.
Interest
on the unpaid principal balance of the Note accrues at a rate equal to the Wall
Street Journal Prime as such rate may change from day to day, but will not be
less than 5.00%. Amounts due under the Note are payable in
consecutive monthly payments of accrued interest until maturity at which time
all principal and any accrued but unpaid interest is due and
payable. The Note matures on April 21, 2009. In the event
that the Company is in default under any of the covenants below, in addition to
the remedies set forth below, the interest rate on the Note shall automatically
increase by 1.50%. In
addition, if the Company fails to provide signed financial statements and tax
returns as required under the Loan documents, the interest rate on the Note for
the period beginning 30 days after written notice of such default and ending
upon the curing of such default shall increase by 0.50% for the first 30 days of
such default and increase an additional 0.50% during each 30 day period
thereafter during which the default continues.
Covenants
So long
as any amounts remain outstanding under the Loan Agreement and the Note, the
Company is required to maintain a 70% loan to value (discussed above) and comply
with various customary disclosure and operations requirements. In
addition, the Company is not permitted to: (A) create, incur or assume any other
indebtedness (including capital leases), except for trade debt incurred in the
normal course of business; (B) sell, transfer, mortgage, assign, pledge, lease,
grant a security interest in, or encumber any of the Company’s assets (except
for permitted liens); (C) sell with recourse any of the Company’s accounts,
except to Grand Bank; (D) engage in any business activities substantially
different from those in which the Company is presently engaged; (E) cease
operations, liquidate, merger, transfer, acquire or consolidate with any other
entity; (F) change the Company’s name, dissolve or transfer or sell collateral
pledged to Grand Bank outside the ordinary course of business; (G) pay any
dividends on the Company’s stock (other than dividends payable in stock); (H)
loan, invest in or advance money or assets to any person or entity; (I)
purchase, create or acquire any interest in any other enterprise or entity; or
(J) incur any obligation as surety or guarantor other than in the ordinary
course of business.
Subordination
Agreement
In
connection with the Loan, Robert Portman (the Company’s Chairman of the Board of
Directors, Chief Executive Officer and Chief Scientific Officer) and Stephen
Kuchen (the Company’s Chief Financial Officer, Treasurer, Secretary and
Director) entered into a Subordination Agreement, dated April 21, 2008, with
Grand Bank (the “Subordination Agreement”). Under the terms of the
Subordination Agreement, Mr. Portman and Mr. Kuchen agreed to subordinate all
indebtedness owed by the Company to Mr. Portman and Mr. Kuchen, as well as any
security interests in collateral securing that indebtedness, to the indebtedness
to the Loan and security interests of Grand Bank.
Default
Under the
terms of the Loan Agreement, the Note and the Pledge Agreement, an event of
default includes: (A) a payment default; (B) failure by the Company to comply
with the terms and covenants of the Loan documents; (C) a default by the Company
under any other agreement which is deemed by Grand Bank to affect the Company’s
ability to pay the indebtedness due under the Loan; (D) the making of any
materially false statements by the Company to Grand Bank; (E) the Company’s
insolvency; (F) defective collateralization under the Loan documents; (G) any
change in ownership of 25% or more of the Company’s common stock; (H) any
material adverse change in the Company’s financial condition; or (I) Grand
Bank’s good faith determination that the Loan is insecure. The
Company is permitted a thirty day grace period (which may be extended in Grand
Bank’s sole discretion) to cure any “curable” non-payment default, provided the
Company has not been given notice of a similar default during the preceding
twelve month period. If there occurs a default that is not cured
during the applicable grace period, Grand Bank may accelerate the maturity of
all amounts due under the Loan Agreement and the Note and foreclose upon its
security interest in the Company’s pledged collateral.
THE
ABOVE DESCRIPTION OF, AMONG OTHER THINGS, THE TERMS OF THE LOANAGREEMENT, THE
NOTE, THE PLEDGE AGREEMENT AND THE SUBORDINATION AGREEMENT IS QUALIFIED IN ITS
ENTIRETY BY THE LOAN AGREEMENT, THE NOTE, THE PLEDGE AGREEMENT AND THE
SUBORDINATION AGREEMENT WHICH ARE INCORPORATED BY REFERENCE
HEREIN. THE COMPANY IS FILING THE LOAN AGREEMENT, THE NOTE, THE
PLEDGE AGREEMENT AND THE SUBORDINATION AGREEMENT AS EXHIBITS 10.1, 10.2, 10.3
AND 10.4, RESPECTIVELY, TO THIS CURRENT REPORT ON FORM 8-K.
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Item
9.01.
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Financial
Statements and Exhibits.
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(d) Exhibits.
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Exhibit Number
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Description
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10.1
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Business
Loan Agreement, dated April 21, 2008, by and between PacificHealth
Laboratories, Inc. and Grand Bank, N.A.
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10.2
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Promissory
Note, in the original principal amount of $675,000, issued on April 21,
2008 by PacificHealth Laboratories, Inc. in favor of Grand Bank,
N.A.
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10.3
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Commercial
Pledge Agreement, dated April 21, 2008, by and between PacificHealth
Laboratories, Inc. and Grand Bank, N.A.
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10.4
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Subordination
Agreement, dated April 21, 2008, by and among PacificHealth Laboratories,
Inc., Robert Portman, Stephen Kuchen and Grand Bank,
N.A.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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PACIFICHEALTH
LABORATORIES, INC. |
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Dated:
May 2, 2008
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By:
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/s/ Stephen P. Kuchen
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Stephen
P. Kuchen
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Chief
Financial Officer
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Exhibit
Index
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Exhibit Number
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Description
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10.1
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Business
Loan Agreement, dated April 21, 2008, by and between PacificHealth
Laboratories, Inc. and Grand Bank, N.A.
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10.2
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Promissory
Note, in the original principal amount of $675,000, issued on April 21,
2008 by PacificHealth Laboratories, Inc. in favor of Grand Bank,
N.A.
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10.3
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Commercial
Pledge Agreement, dated April 21, 2008, by and between PacificHealth
Laboratories, Inc. and Grand Bank, N.A.
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10.4
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Subordination
Agreement, dated April 21, 2008, by and among PacificHealth Laboratories,
Inc., Robert Portman, Stephen Kuchen and Grand Bank,
N.A.
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