Loan and Security Agreement - Pacific Capital Markets Inc. and Communicate.com Inc.
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of November 8, 2000, is
entered into between Pacific Capital Markets Inc., a British Columbia company
("PCMI"), and Communicate.com Inc., a Nevada corporation ("Borrower").
The parties agree as follows:
1. DEFINITIONS
1.1 The term "Accounts" means and includes all presently
existing and hereafter arising accounts, contract rights, instruments, notes,
drafts, documents, chattel paper and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of services
by Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower.
1.2 The term "this Agreement" means and refers to this Loan and
Security Agreement, any concurrent or subsequent riders or exhibits to this Loan
and Security Agreement, and any extensions, supplements, amendments or
modifications to or in connection with this Loan and Security Agreement and/or
to any such riders or exhibits.
1.3 The term "Collateral" means and includes each and all of
the following:
1.3.1 the Accounts;
1.3.2 the Equipment;
1.3.3 the General Intangibles;
1.3.4 the Inventory;
1.3.5 the Negotiable Collateral;
1.3.6 any money, deposit accounts or other assets of
Borrower in which PCMI receives a security interest or which hereafter come into
the possession, custody or control of PCMI; and
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1.3.8 the proceeds of any of the foregoing, including, but
not limited to, proceeds of insurance covering the Collateral, or any portion
thereof, and any and all Accounts, Equipment, General Intangibles, Inventory,
Negotiable Collateral, money, deposit accounts or other tangible and intangible
property resulting from the sale or other disposition of the Collateral, or any
portion thereof or interest therein, and the proceeds thereof.
1.4 The term "Equipment" means and includes all of
Borrower's present and hereafter acquired machinery, machine tools, motors,
equipment, furniture, furnishings, fixtures, motor vehicles, tools, parts, dies,
jigs, goods and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions and improvements
thereto, wherever located.
1.5 The term "Event of Default" means the occurrence of any
one of the events set forth in Section 7 of this Agreement.
1.6 The term "General Intangibles" means and includes all
of Borrower's present and future general intangibles and all other presently
owned or hereafter acquired intangible personal property of Borrower (including,
without limitation, any and all chooses or things in action, goodwill, patents,
trade names, trademarks, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, infringement claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, deposit accounts, tax refunds and tax refund claims) other than goods
and Accounts.
1.7 The term "Insolvency Proceeding" means and includes any
proceeding commenced by or against any person or entity under any provision of
the federal bankruptcy Code, as amended, or under any other bankruptcy or
insolvency law, including, but not limited to, assignments for the benefit of
creditors, formal or informal moratoriums, compositions or extensions generally
with its creditors.
1.8 The term "Inventory" means and includes all of
Borrower's present and future imported inventory in which Borrower has any
interest, including, but not limited to, goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing any of the
above.
1.9 The term "Judicial Officer or Assignee" means and
includes any trustee, receiver, controller, custodian, assignee for the benefit
of creditors or any other person or entity having powers or duties like or
similar to the powers and duties of a trustee, receiver, controller, custodian
or assignee for the benefit of creditors.
1.10 The term "Loan Documents" means and refers
collectively to this Agreement any other promissory note or notes executed by
Borrower to the order of PCMI, and to any other agreements entered into between
Borrower and PCMI in connection with this Agreement.
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1.11 The term "Negotiable Collateral" means and includes
all of Borrower's present and future letters of credit, advises of credit,
notes, drafts, instruments, documents, leases, and chattel paper, and Borrower's
Books relating to any of the foregoing.
1.12 The term "Obligations" means and includes any and all
loans, advances, debts, liabilities (including, without limitation, any and all
amounts charged to Borrower's account pursuant to any agreement authorizing PCMI
to charge Borrower's account), obligations, lease payments, guaranties,
covenants and duties owing by Borrower to PCMI of any kind and description
(whether advanced pursuant to or evidenced by this Agreement, any of the other
Loan Documents, or any other instrument, or by any other agreement between PCMI
and Borrower and whether or not for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including, without limitation, any debt, liability or
obligation owing from Borrower to others which PCMI may have obtained by
assignment or otherwise, and further including, without limitation, all interest
not paid when due and all expenses of PCMI which Borrower is required to pay or
reimburse by this Agreement, by law, or otherwise.
1.13 All references to dollars refer to United States
dollars.
2. LOANS AND TERMS OF PAYMENT
2.1 Credit Facilities. Upon the request of Borrower, made in
writing at any time and from time to time prior to the termination of this Loan
Agreement and at least forty-eighty (48) prior to the proposed disbursement
date, subject to the conditions precedent in Section 2.2 below, and so long as
no Event of Default has occurred, PCMI shall lend to Borrower, up to the maximum
principal amount (exclusive of accrued interest and charges) of One Million Five
Hundred Thousand Dollars ($1,500,000). The amounts advanced hereunder shall be
used solely for the purpose of funding Borrower"s obligations under that certain
Purchase Agreement (the "Purchase Agreement"), dated the date hereof, between
Borrower and Bryan Liew, to purchase shares of Communicate.com Inc., an Alberta
corporation ("AlbertaCo), pursuant to the terms of such Purchase Agreement.
Notwithstanding anything contained in the Agreement to the contrary, PCMI shall
be obligated to advance funds to Borrower under this Agreement only to the
extent that Borrower does not have adequate funds to meet its obligations under
such Purchase Agreement.
2.2 Conditions Precedent. PCMI's olbligation to lend funds as
provided in this Agreement are subject to Borrower's satisfaction of the
following conditions:
2.2.1 The representations of Borrower contained herein shall
be true and correct in all material respects.
2.2.2 Bryan Liew and AlbertaCo shall have entered into a
severance agreement, and all terms and conditions contained therein shall have
been satisfied or waived.
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2.2.3 Borrower and Bryan Liew shall have entered into the
Purchase Agreement, and all terms and conditions under the Purchase Agreement,
with the exception of the payment of $1,500,000 to Bryan Liew, must be satisfied
or waived.
2.2.4 Borrower shall have executed and delivered to PCMI the
Promissory Note, as such documents are defined herein.
2.3 Promissory Note. The Obligations arising pursuant to Section
2.1 shall be evidenced by and shall bear interest in accordance with the terms
of a Promissory Note (the "Promissory Note"), substantially in the form of
Exhibit A attached hereto, with appropriate insertions.
2.4 Authorizations. PCMI is hereby authorized to make the loan and
the extensions of credit provided for in this Agreement based upon telephonic or
other instructions and transaction reports received from any one of the
authorized personnel of Borrower.
2.5 Interest Rates. The Obligations evidenced by the Promissory
Note shall bear interest at the rates set forth in the Promissory Note.
3. PREPAYMENT. Borrower may at any time, on five (5) days prior written
notice, prepay without premium or penalty all or part of the Obligations and
terminate this Agreement by paying to PCMI the amount of such prepayment in cash
or by a wire transfer of immediately available funds. With each prepayment
Borrower shall also pay the interest accrued on the principal amount being
prepaid to the date of such prepayment. After termination and when PCMI has
received payment and performance in full of all Obligations, PCMI shall execute
a termination of all security interests given by Borrower to PCMI, upon the
execution and delivery of mutual general releases by Borrower, any guarantor or
surety of Borrower's Obligations, and PCMI.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants to PCMI a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral, including without limitation all shares of stock of
Communicate.com Inc., an Alberta corporation owned by Borrower, in order to
secure prompt repayment of any and all Obligations owed by Borrower to PCMI and
in order to secure prompt performance by Borrower of each and all of its
covenants and obligations under this Agreement and otherwise created. PCMI's
security interest in the Collateral shall attach to all Collateral without
further act on the part of PCMI or Borrower. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, immediately upon written request therefor from PCMI, endorse and
assign such Negotiable Collateral over to PCMI and deliver actual physical
possession of the Negotiable Collateral to PCMI.
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4.2 Continuation of Security Interest. Until all Obligations,
contingent or otherwise, have been fully repaid and performed, PCMI shall retain
its security interest in all existing Collateral and Collateral arising
thereafter, and Borrower shall continue to immediately deliver to PCMI, in kind,
all collections received respecting the Accounts.
4.3 Perfection of Security Interest. Borrower shall execute and
deliver to PCMI, concurrent with Borrower's execution of this Agreement, and at
any time or times hereafter at the request of PCMI, all financing statements,
continuation financing statements, fixture filings, security agreements, chattel
mortgages, assignments, endorsements of certificates of title, applications for
titles, affidavits, reports, notices, schedules of accounts, letters of
authority and all other documents that PCMI may reasonably request, in form
satisfactory to PCMI, to perfect and maintain perfected PCMI's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under this Agreement. Borrower hereby irrevocably
makes, constitutes and appoints PCMI (and any of PCMI's officers, employees or
agents designated by PCMI) as Borrower's true and lawful attorney with power,
upon Borrower's failure or refusal to comply with its undertakings contained in
this Section 4.3, to sign the name of Borrower on any of the above-described
documents or on any other similar documents which need to be executed, recorded
and/or filed in order to perfect or continue perfected PCMI's security interest
in the Collateral. In order to perfect PCMI's security interest in Borrower's
deposit accounts maintained at any financial institutions at which Borrower, now
or in the future, maintains deposit accounts, Borrower agrees to execute a form
of notification to such financial institutions in order to notify them of PCMI's
security interests in such deposit accounts.
5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower makes the
following representations and warranties which shall be deemed to be continuing
representations and warranties so long as any credit hereunder shall be
available and until the Obligations have been repaid in full:
5.1 Existence and Rights.
5.1.1 Borrower is duly organized and existing under the laws
of the State of Nevada and is qualified and licensed to do business and is in
good standing in any state in which the conduct of its business or its ownership
of property requires that it be so qualified;
5.1.2 Borrower has the right and power to enter into this
Agreement and each of the other Loan Documents;
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5.1.3 Borrower has the power, authority, rights and franchises
to own its property and to carry on its business as now conducted;
5.2 Agreement Authorized. The execution, delivery and performance by
Borrower of this Agreement and each of the other Loan Documents: (a) have been
duly authorized and do not require the consent or approval of any governmental
body or other regulatory authority; and (b) shall not constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws.
5.3 Binding Agreement. This Agreement is the valid, binding and
legally enforceable obligation of Borrower in accordance with its terms.
5.4 No Conflict. The execution, delivery and performance by Borrower
of this Agreement and each of the other Loan Documents: (a) shall not constitute
an event of default under any agreement, indenture or undertakings to which
Borrower is a party or by which it or any of its property may be bound or
affected; (b) are not in contravention of or in conflict with any law or
regulation; and (c) do not cause any lien, charge or other encumbrance to be
created or imposed upon any such property by reason thereof.
6. BORROWER'S NEGATIVE COVENANTS. Borrower covenants and agrees that so
long as any credit hereunder shall be available and until the Obligations have
been repaid in full, unless PCMI shall otherwise consent in writing, Borrower
shall not do any of the following:
6.1 Relocate of Chief Executive Office. Borrower will not, without
thirty (30) days prior written notification to PCMI, relocate its chief
executive office.
6.2 Business Structure and Operations. Borrower shall not, without
PCMI's prior written consent:
6.2.1 Other than sales or leases of Inventory in the ordinary and
usual course of Borrower's business as presently conducted, sell, lease, or
otherwise dispose of, move, relocate (except in connection with a relocation of
Borrower's business facility) or transfer, whether by sale or otherwise, any of
Borrower's assets;
6.2.2 Change Borrower's name or form of entity, or add any new
fictitious name;
6.2.3 Acquire, merge or consolidate with or into any other
business organization;
6.2.4 Enter into any transaction not in the ordinary and usual
course of Borrower's business;
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6.2.5 Incur any debts outside the ordinary and usual course of
Borrower's business, except for renewals or extensions of existing debts;
6.2.6 Make any advance or loan except in the ordinary course of
business;
6.2.7 Make any distribution or declare or pay any dividends (in
cash or in stock) on, or purchase, acquire, redeem or retire any of its capital
stock, of any class, whether now or hereafter outstanding; or
6.2.8 Suspend or go out of business.
7. EVENTS OF DEFAULT. Any one or more of the following events shall
constitute an Event of Default by Borrower under this Agreement:
7.1 Failure to Pay Obligations. If Borrower fails to pay when due
and payable or when declared due and payable all or any portion of the
Obligations owing to PCMI (whether of principal, interest, taxes, reimbursement
of expenses of PCMI, or otherwise);
7.2 Failure to Perform. If Borrower fails or neglects to perform,
keep or observe any term, provision, condition, covenant, agreement, warranty or
representation contained in this Agreement, in any of the other Loan Documents,
or in any other present or future agreement between Borrower and PCMI and such
failure continues for ten (10) calendar days after written notice thereof from
PCMI to Borrower;
7.3 Voluntary Insolvency Proceeding. If an Insolvency Proceeding
is commenced by Borrower;
7.4 Involuntary Insolvency Proceeding. If an Insolvency Proceeding
is commenced against Borrower;
7.5 Interruption of Business. If Borrower is enjoined, restrained
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
7.6 Cure Periods. Notwithstanding anything contained in this
Section 7 to the contrary, PCMI shall refrain from exercising its rights and
remedies and an Event of Default shall not be deemed to have occurred by reason
of the occurrence of: (i) an event set forth in Section 7.4 of this Agreement
if, within thirty (30) calendar days from the date thereof, the same is
discharged or dismissed, or (ii) any of the events set forth in Section 7.5 of
this Agreement if, within ten (10) calendar days from the date thereof, the same
is released, discharged, dismissed, bonded against or satisfied; provided,
however, if the event is the institution of Insolvency Proceedings against
Borrower, PCMI shall not be obligated to make advances to Borrower during such
cure period.
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8. PCMI'S RIGHTS AND REMEDIES
8.1 Remedies. Upon the occurrence of an Event of Default by
Borrower under this Agreement, and subject to the cure periods set forth herein,
PCMI may, at its election, without notice of its election and without demand, do
any one or more of the following, all of which are authorized by Borrower:
8.1.1 Declare all Obligations, whether evidenced by this
Agreement, by the Promissory Note or otherwise, immediately due and payable;
8.1.2 Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and PCMI;
8.1.3 Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of PCMI, but without
affecting PCMI's rights and security interest in the Collateral and without
affecting the Obligations owing by Borrower to PCMI; and
8.1.4 Convert, upon at least ten (10) days notice, all or any
of the advances made hereunder into shares of Common Stock of Borrower, at a
conversion ratio of eighty percent (80%) of the average selling price of
Borrower"s common stock as reported on the Over-the-Counter market (or if not
traded on the Over-the-Counter market, on such other medium as Borrower"s common
stock may be traded) during the fifteen (15) prior trading days prior to the
date of notice.
8.2 Cumulative Rights. PCMI's rights and remedies under this
Agreement and all other agreements shall be cumulative. PCMI shall have all
other rights and remedies not inconsistent herewith as provided under the
Uniform Commercial Code and adopted in the State of Nevada, by law, or in
equity. No exercise by PCMI of one right or remedy shall be deemed an election,
and no waiver by PCMI of any default on Borrower's part shall be deemed a
continuing waiver. No delay by PCMI shall constitute a waiver, election or
acquiescence by it.
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9. NOTICES. Unless otherwise provided in this Agreement,
all notices or demands by any party relating to this Agreement shall be in
writing and either personally served or sent by regular United States mail,
postage prepaid, to Borrower or to PCMI, as the case may be, at its address set
forth below:
If to Borrower: Communicate.com Inc.
360 " 220 Cambie Street
Vancouver, BC V6B 2M9
Canada
Attn: Graham Heal, Director
Fax: (604) 687-2192
If to PCMI: Pacific Capital Markets Inc.
c/o Jeffs & Company Law Corporation
1100 Melville Street, 6th Floor
Vancouver, British Columbia
V6E 4A6
Attn: __________________, President
Facsimile Number (604) 664-0671
The parties hereto may change the address at which they are to receive notices
and the facsimile number at which they are to receive facsimiles hereunder, by
notice in writing in the foregoing manner given to the other. All notices or
demands sent in accordance with this Section 13 shall be deemed received on the
earlier of the date of actual receipt or five (5) days after the deposit thereof
in the mail.
10. CHOICE OF LAW. The validity of this Agreement, its
construction, interpretation and enforcement, and the rights of the parties
hereunder and concerning the Collateral, shall be determined under, governed by,
and construed in accordance with the laws of the Province of British Columbia.
The parties agree that all actions or proceedings arising in connection with
this Agreement shall be tried and litigated only in the provincial and federal
courts located in the Province of British Columbia. Borrower waives any right it
may have to assert the doctrine of forum non conveniens or to object to such
venue and hereby consents to any court ordered relief.
11. GENERAL PROVISIONS
11.1 Representations and Warranties Repeated. Each
representation, warranty and agreement contained in this Agreement shall be
automatically deemed repeated with each advance and shall be conclusively
presumed to have been relied on by PCMI regardless of any investigation made or
information possessed by PCMI. The warranties, representations and agreements
set forth herein shall be cumulative and in addition to any and all other
warranties, representations and agreements which Borrower shall give, or cause
to be given, to PCMI, either now or hereafter.
11.2 Binding Agreement. This Agreement shall be binding
and deemed effective when executed by Borrower and accepted and executed by
PCMI.
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11.3 Right to Grant Participations. This Agreement shall
bind and inure to the benefit of the respective successors and assigns of each
of the parties; provided, however, that Borrower may not assign this Agreement
or any rights hereunder without PCMI's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by PCMI shall
release Borrower from its Obligations to PCMI. PCMI may assign this Agreement
and its rights and duties hereunder. PCMI reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, PCMI's rights and benefits hereunder. In connection therewith, PCMI
may disclose all documents and information which PCMI now or hereafter may have
relating to Borrower or Borrower's business.
11.4 Indemnification. In consideration of the execution
and delivery of this Agreement and the extension of financial accommodations by
PCMI to Borrower pursuant to this Agreement, Borrower agrees to indemnify, save,
exonerate, and hold PCMI, and each of the officers, directors, employees and
agents of PCMI (herein collectively called the "Indemnitees" and individually
called an "Indemnitee") free and harmless from and against any and all actions,
claims, causes or action, suits, losses, liabilities, damages, and expenses,
including, without limitation, reasonable attorneys' fees (including allocated
costs for in-house legal services provided and attorneys' fees in all bankruptcy
proceedings) and disbursements (herein collectively called the "Indemnified
Liabilities"), which may be incurred by or asserted against the Indemnitees or
any Indemnitee as a result of, or arising out of, or relating to, or in
connection with, any investigation, litigation, or proceeding related to any use
made or proposed to be made by Borrower of the proceeds of any advance or loan
made hereunder, or the consummation of the transactions contemplated hereby,
whether or not any such Indemnitee is a party thereto, and, if and to the extent
that the foregoing undertaking may be unenforceable for any reason, Borrower
hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities as is permissible under applicable law.
If any action, suit, or proceeding arising from any of
the foregoing is brought against PCMI, or any Indemnitee or affiliate of an
Indemnitee indemnified or intended to be indemnified pursuant to this Section
11.4, Borrower, to the extent and in the manner directed by the Indemnitee or
intended Indemnitee, shall resist and defend such action, suit, or proceeding or
cause the same to be resisted and defended by counsel designated by Borrower
(which counsel shall be reasonably satisfactory to the Indemnitee or intended
Indemnitee). Each Indemnitee shall use its best efforts to cooperate in the
defense of any such action, writ, or proceeding. Borrower shall have no
obligation to any Indemnitee under this Section 11.4 to the extent that the
Indemnified Liabilities resulted from the gross negligence or willful misconduct
on the part of any Indemnitee. The Obligations of Borrower under this Section
11.4 shall survive the termination of this Agreement and the discharge of the
Borrower's other Obligations hereunder.
11.5 Section Headings. Section headings and section
numbers have been set forth herein for convenience only. Unless the contrary is
compelled by the context, everything contained in each section applies equally
to this entire Agreement.
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11.6 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against PCMI or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
11.7 Severability. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
11.8 Modification and Merger. This Agreement cannot be
changed or terminated orally. All prior agreements, understandings,
representations, warranties and negotiations, if any, are merged into this
Agreement.
11.9 Good Faith Requirement. The parties intend and
agree that their respective rights, duties, powers, liabilities, obligations and
discretions shall be performed, carried out, discharged and exercised reasonably
and in good faith.
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IN WITNESS WHEREOF, Borrower has executed this Agreement.
Communicate.com Inc., a Nevada
corporation
By
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Title:
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Pacific Capital Markets Inc., a British Columbia
corporation
By
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Title:
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Exhibit A
Form of Promissory Note
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