Exhibit 10.8
HYPOTHEC AND PLEDGE OF BONDS
between
AMERICAN BILTRITE (CANADA) LTD.
as Grantor
- and -
BANK OF AMERICA, NATIONAL ASSOCIATION
as Canadian Agent and Initial Canadian Lender
Dated May 20, 2005
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XXXXXX XXXXXX XXXXXXX LLP
Advocates
Xxxxxxxx, Xxxxxx, Xxxxxx
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HYPOTHEC AND PLEDGE OF BONDS entered into in Montreal, Province of Quebec, on
the 20th day of May, 2005
BETWEEN: AMERICAN BILTRITE (CANADA) LTD., as Grantor
AND: BANK OF AMERICA, NATIONAL ASSOCIATION, as
Canadian Agent and Initial Canadian Lender
WHICH PARTIES AGREE WITH EACH OTHER AS FOLLOWS:
ARTICLE 1
INTERPRETATION
1.1 Credit Agreement Definitions. The capitalized words and expressions used in
this Agreement or in any agreement, document or instrument supplemental or
ancillary hereto, unless otherwise defined or unless there be something in the
subject or the context inconsistent therewith, shall have the meanings ascribed
to them in the Credit Agreement (as defined herein).
1.2 Other Definitions. The following capitalized words and expressions, whenever
used in this Agreement or in any agreement, document or instrument supplemental
or ancillary hereto, unless there be something in the subject or the context
inconsistent therewith, shall have the following meanings:
1.2.1 "Agreement of Hypothec", "this Agreement", "this Agreement of
Hypothec", "these presents", "herein", "hereby", "hereunder" and other similar
expressions refer collectively to this Hypothec and Pledge of Bonds and to any
and every agreement or other instrument which is supplementary or ancillary
hereto or in implementation hereof, the whole as same may be amended,
supplemented, replaced or restated at any time and from time to time;
1.2.2 "Attorney" means Bank of America, National Association, in its
capacity under the Deed of Hypothec as the person holding the power of attorney
of the holders of all Bonds issued under the Deed of Hypothec for all purposes
of Article 2692 of the Civil Code of Quebec, and includes any successor and
assign thereof in such capacity;
1.2.3 "Bond" means the 25 % Mortgage Demand Bond of the Grantor in the
principal nominal amount of twenty-eight million eight hundred thousand Dollars
($28,800,000), registered in the name of Bank of America, National Association,
in its capacity as Canadian Agent under the Credit Agreement, and evidenced by
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Bond Certificate No. 1 dated May 20, 2005, together with all renewals thereof,
substitutions therefor, accretions thereto and all income and fruits therefrom;
1.2.4 "Canadian Agent" means Bank of America, National Association, in its
capacity as Canadian Agent under the Credit Agreement, and any successor
Canadian Agent appointed in accordance with the Credit Agreement;
1.2.5 "Credit Agreement" means the Amended and Restated Credit Agreement
dated as of May 20, 2005 by and among American Biltrite Inc., K&M Associates
L.P. and the Grantor, as borrowers, Fleet National Bank, as Domestic Lender and
Domestic Agent, and Bank of America, National Association, as Canadian Lender
and Canadian Agent, and the Persons who are, and from time to time become,
parties thereto as Lender, as amended, restated or replaced from time to time;
1.2.6 "Credit Obligations" means all present and future liabilities,
obligations and Indebtedness of the Grantor owing to the Canadian Agent or any
Canadian Lender (or any Affiliate of a Canadian Lender) under or in connection
with this Agreement or any other Credit Document, including obligations in
respect of principal, interest, reimbursement obligations under Canadian Letters
of Credit provided by a Canadian Lender (or an Affiliate of a Canadian Lender)
at the time of the issuance thereof, commitment fees, Canadian Letter of Credit
fees, amounts provided for in Sections 3.2.4, 3.5 and 9 of the Credit Agreement
and other fees, charges, indemnities and expenses from time to time owing by the
Grantor to the Canadian Agent or any Canadian Lender under the Credit Agreement
or under any other Credit Document (all whether accruing before or after a
Bankruptcy Default and regardless of whether allowed as a claim in bankruptcy or
similar proceedings), but excluding any and all obligations of the Grantor under
any Bond or under any Note executed pursuant to the Credit Agreement;
1.2.7 "Deed of Hypothec" means the deed of hypothec and issue of mortgage
bonds bearing formal date of May 20, 2005 between Bank of America, National
Association, in its capacity as fonde de pouvoir of the bondholders, as holder,
and the Grantor, as grantor, under which the Bond has been issued, as the same
may be amended, supplemented, replaced or restated at any time and from time to
time;
1.2.8 "Grantor" means American Biltrite (Canada) Ltd., a corporation
existing under the laws of Canada, and includes any successor thereto, including
any Person resulting from the amalgamation of the Grantor with any other Person;
1.2.9 "Hypothecated Property" has the meaning ascribed to it in Section
2.1.
1.2.10 "Initial Canadian Lender" means Bank of America, National
Association and its successors and permitted assigns;
1.2.11 "Secured Parties" has the meaning ascribed to it in Section 2.1.
1.3 Plural and Masculine. Unless there be something in the subject or the
context inconsistent therewith, words importing the singular only shall include
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the plural and vice versa, and words importing the masculine gender shall
include the feminine gender and vice versa.
1.4 Division in Articles. The division of this Agreement into Articles,
Sections, subsections and paragraphs and the insertion of titles are for
convenience of reference only and do not affect the meaning or the
interpretation of this Agreement.
ARTICLE 2
HYPOTHECS
2.1 Principal Hypothec. The Grantor hereby hypothecates and pledges to and in
favour of the Initial Canadian Lender, the Canadian Agent and their respective
successors, permitted transferees and permitted assigns (collectively, the
"Secured Parties"):
(a) the Bond;
(b) any securities which may be issued in replacement of the Bond subsequent to
the sale, repurchase, redemption, conversion, cancellation or any other
transformation of the Bond;
(c) all other 25% mortgage demand bonds or other securities which may be
delivered to the Canadian Agent from time to time in addition to or in
substitution of the Bond; and
(d) all fruits and revenues of or from the property referred to in paragraphs
(a), (b), and (c) above;
(collectively the "Hypothecated Property") for the sum of twenty-eight million
eight hundred thousand Dollars ($28,800,000), with interest thereon at the rate
of twenty-five percent (25 %) per annum from the date hereof.
2.2 Secured Obligations. The hypothec and pledge in Section 2.1 of this
Agreement is granted as a general and continuing collateral security for the
payment and performance by the Grantor to each of the Secured Parties of the
Credit Obligations now or hereafter owing to each of them including, without
limiting the generality of the foregoing, interest on all overdue interest, as
well as the reasonable costs and expenses incurred by the Secured Parties or any
one of them in order to preserve or realize upon the hypothec and pledge created
under the terms hereof, the Secured Parties herein acting and represented by the
Canadian Agent.
ARTICLE 3
COLLECTION OF CLAIMS
3.1 Receipt by the Canadian Agent of certain sums. The Canadian Agent, on behalf
and for the benefit of the Secured Parties, is entitled to and will collect, at
all times as of and from the date hereof, the claim represented by the Bond and
the other Hypothecated Property.
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3.2 Imputation of the sums collected by the Canadian Agent. Notwithstanding the
provisions of Articles 1572 and 2743 of the Civil Code of Quebec or any other
legal rule concerning the imputation of payments, the Canadian Agent shall apply
the amounts collected or deposited pursuant to the provisions of this Article,
in accordance with the provisions of the Credit Agreement.
3.3 Delivery of the Bond to the Canadian Agent. The Grantor shall deliver the
certificate representing the Bond to the Canadian Agent at its office in
Montreal, Province of Quebec, to be held by the Canadian Agent on behalf and for
the benefit of the Secured Parties. The Grantor hereby acknowledges, consents
and agrees that the Secured Parties may hold the Bond through the Canadian
Agent. Furthermore, the Grantor hereby acknowledges and agrees that the Bond has
been delivered to the Canadian Agent in its capacity as depositary for the
Secured Parties.
3.4 Agent owner of the Bond as regards the Attorney. Whether or not the Grantor
is in default under the Credit Obligations, the Canadian Agent shall be
considered the owner of the Bond as regards the Attorney under the Deed of
Hypothec and for all purposes of the Deed of Hypothec. The Canadian Agent is
hereby authorized to exercise all rights, remedies, powers, privileges,
guarantees and recourses available to a Bondholder under the Deed of Hypothec
and the Attorney under the Deed Hypothec shall act upon the instructions and
directions of the Canadian Agent.
3.5 Exercise of the right to vote. So long as any part of the Credit Obligations
remains outstanding, the Canadian Agent, on behalf and for the benefit of the
Secured Parties, shall have the right to vote at any special or general meeting
at which a holder of the Bond has the right to vote and shall also be authorized
to appoint any other Person to exercise said right to vote.
ARTICLE 4
REMEDIES
4.1 Default under the Credit Obligations. Upon the occurrence of an Event of
Default that is continuing and has not been waived, the Canadian Agent, on
behalf and for the benefit of the Secured Parties, may:
4.1.1 demand immediate payment on the Bond, without presentment, protest
or other notice of any kind, all of which are hereby expressly waived by the
Grantor, and exercise all of the rights and recourses granted to a Bondholder
under the terms of the Deed of Hypothec; and
4.1.2 exercise all rights and recourses provided hereunder or by law.
4.2 In the exercise of its recourses, (a) the Canadian Agent may directly or
indirectly purchase or acquire the Hypothecated Property, (b) where the Canadian
Agent sells the Hypothecated Property, it shall not be required to obtain any
evaluation by a third party, and (c) the Canadian Agent may choose to sell the
Hypothecated Property with legal warranty given by the Grantor or with complete
or partial exclusion of such warranty.
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4.3 Notwithstanding that the Bond is payable on demand, each Secured Party,
acting through the Canadian Agent, agrees that it will not demand payment of the
Bond unless and until an Event of Default has occurred and is continuing.
4.4 Notwithstanding the principal amount of the Bond, the Grantor shall not have
any obligation to make any payment for, and upon realization of the Hypothecated
Property, the Canadian Agent and the Secured Parties shall not be entitled to
recover, an amount which is higher than the total of the actual amount due to
the Secured Parties under or in respect of the Credit Obligations.
ARTICLE 5
MISCELLANEOUS
5.1 Separate Security. This Agreement and the hypothecs created herein are and
shall be in addition to and not in substitution for any other security held by
any one of the Secured Parties or the Canadian Agent for the fulfillment of the
Credit Obligations and shall thus not operate as a novation of any of the Credit
Obligations. The Grantor shall, if applicable, be in default by the mere lapse
of time, without any notice putting the Grantor in default being required.
5.2 Continuing Security. The hypothecs created hereunder shall constitute
continuing security which shall remain in full force and effect until the Credit
Obligations shall have been fulfilled in full and the hypothecs hereunder shall
have been cancelled. The Grantor expressly acknowledges, for the purpose of
Article 2797 of the Civil Code of Quebec, that until it shall have received a
written notice from the Canadian Agent to the effect that the Credit Obligations
have been fulfilled in full, it binds and obliges itself again continuously
under the Credit Obligations. The extinction or reduction of the Credit
Obligations for any reason whatsoever shall not in any way extinguish or reduce
the hypothecs created hereunder and, unless expressly cancelled in whole or in
part by the Canadian Agent, such hypothecs shall, to the extent not so
cancelled, subsist with respect to the Credit Obligations, whether now or
hereafter incurred. The hypothec and pledge hereunder are in addition to and not
in substitution of or in replacement for any other hypothec, security interest
or other security held by or for the benefit of the Canadian Agent or the
Secured Parties.
5.3 Notices. Except as otherwise specified herein, all notices, request, demands
or other communications to or upon the respective parties hereto shall be deemed
to have been duly given or made to the party to which such notice, request,
demand or other communication is required or permitted to be given or made under
this Agreement, when delivered to such party in accordance with the provisions
of the Credit Agreement.
5.4 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability, without invalidating the
remaining provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.
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5.5 Governing Law. This Agreement and the interpretation and enforcement thereof
shall be governed by and in accordance with the laws of the Province of Quebec.
The Grantor irrevocably submits to the non-exclusive jurisdiction of the courts
of the Province of Quebec with respect to any matter arising hereunder or in
relation herewith.
ARTICLE 6
CERTAIN RIGHTS AND RESPONSABILITIES OF THE CANADIAN AGENT
6.1 The responsibility of the Canadian Agent with regard to any Hypothecated
Property is limited to exercising the same degree of care which the Canadian
Agent gives to valuable property at the branch or office where the Hypothecated
Property is held by it. Subject to Article 7 hereof, the Grantor agrees that the
Canadian Agent shall have the right to hold and to transfer the Hypothecated
Property to, to be held subject to the terms of this Agreement by, another
Person and such holding by such transferee shall constitute, and be deemed to
constitute, continuous holding of the Hypothecated Property by the Canadian
Agent. The Attorney shall not assign or transfer the Bond unless the assignee or
transferee shall, in writing and prior to or concurrently with the assignment or
transfer, expressly acknowledge that it has taken communication of this
Agreement and that it agrees and confirms that its rights in the Bond are
subject to the terms and conditions of this Agreement.
6.2 After the occurrence of an Event of Default that is continuing and has not
been waived, in the event the Grantor fails to observe or perform any of its
obligations or undertakings under this Agreement, the Canadian Agent may, but
shall not be obliged to, perform the same and any reasonable fees, costs or
expenses incurred in so doing shall be forthwith due and payable by the Grantor
to the Canadian Agent, with interest at the annual rate equal to the Base Rate,
calculated from the date incurred, payable on demand, and shall form part of the
Credit Obligations.
6.3 All sums received by the Canadian Agent in the exercise of its rights
arising under or pursuant to this Agreement or by law may be held by the
Canadian Agent as Hypothecated Property, or may be applied by the Canadian Agent
to the payment of the Credit Obligations, whether or not then exigible,
including any reasonable fees, costs or other expenses incurred by the Canadian
Agent and secured hereunder.
6.4 The exercise by the Canadian Agent of any of its rights shall not prevent it
from exercising any other rights it may have arising from this Agreement or by
law; the rights of the Canadian Agent are cumulative and not alternative. The
Canadian Agent may waive any provision hereof or any default; however, the
non-exercise by the Canadian Agent of any of its rights or any such waiver shall
not constitute a renunciation of the exercise thereafter of such right or a
renunciation of any other provision or of any other default. The Canadian Agent
may exercise the rights arising from this Agreement without having exercised its
rights against any other Person liable for the payment of the Credit
Obligations, or any of them, and without having realized any other security
securing the Credit Obligations.
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6.5 The Canadian Agent is only required to exercise reasonable prudence and
diligence in the exercise of its rights or the fulfillment of its obligations
and, in any event, the Canadian Agent is only responsible for its intentional or
gross fault. The Grantor shall indemnify the Canadian Agent for any losses or
reasonable expenses incurred by the Canadian Agent, or damages claimed against
the Canadian Agent, for which the Canadian Agent is not so responsible.
6.6 The Canadian Agent may delegate to any other Person, or be represented by
any other Person in, the exercise of its rights or the fulfillment of its
obligations resulting from this Agreement; the Canadian Agent may furnish to
such Person any information which the Canadian Agent may have concerning the
Grantor or the Hypothecated Property provided that, prior to providing any such
information to any Person, such Person shall have provided the Grantor with a
written undertaking to comply with the restriction contained in Section 12 of
the Credit Agreement.
6.7 In the event of any inconsistency, contradiction or conflict between the
provisions hereof and the provisions of the Credit Agreement, the provisions of
the Credit Agreement shall prevail to the extent of such inconsistency,
contradiction or conflict. For greater certainty, notwithstanding anything to
the contrary in this Agreement, (i) any and all amounts paid or credited by or
on behalf of the Grantor hereunder shall be paid or credited, as the case may
be, strictly in accordance with the Credit Agreement, and (ii) the rights of the
Secured Parties under this Agreement or in respect of the Hypothecated Property
may not be assigned or transferred except in compliance with the provisions of
the Credit Agreement.
ARTICLE 7
LANGUAGE
English Language/Langue Anglaise. The parties hereto have expressly required
that this Agreement and all agreements, documents and notices relating thereto
be drafted in the English language. Les parties aux presentes ont expressement
exige que le present acte et tous autres contrats, documents et avis qui y sont
afferents soient rediges en langue anglaise.
IN WITNESS WHEREOF the parties hereto have signed this Agreement as of the date
and in the place first hereinabove mentioned.
AMERICAN BILTRITE (CANADA) LTD.
Per: /s/ Xxxx-Xxxxxxxxx Xxxxxxx
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Xxxx-Xxxxxxxxx Xxxxxxx
Representative
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BANK OF AMERICA, NATIONAL
ASSOCIATION, as Canadian Agent, for
itself and on behalf of the Initial
Canadian Lender
Per: /s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
Representative
