PLEDGE AND SECURITY AGREEMENT
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This PLEDGE AND SECURITY AGREEMENT ("Agreement"), dated as of October 11,
2000, is made by Robert C. McShirley, an individual ("Debtor"), in favor of
VSource, Inc., a Nevada corporation ("Secured Party").
In order to induce Secured Party to extend credit facilities to
Borrower under the Promissory Note of even date herewith (the "Note"), and for
other good and valuable consideration, the receipt and adequacy of which hereby
are acknowledged, Debtor agrees as follows:
1. Pledge of Collateral. For valuable consideration, Debtor hereby
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pledges to Secured Party, and grants to Secured Party a security interest in,
not less than 100,000 shares of Debtor's shares of Common Stock of Secured
Party, the certificates for which are listed in Exhibit A hereto, and all cash
and non-cash proceeds of all of the foregoing property and all rights, titles,
interests, privileges and references appertaining or incident to the foregoing
property (collectively, the "collateral").
2. Indebtedness Secured. This Agreement and the security interest
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created hereby are given for the purpose of securing: (a) payment and
performance of each agreement of Debtor contained herein; (b) payment and
performance of all indebtedness and obligations of Debtor under the Note; and
(c) any and all amendments, modifications, supplements, renewals or extensions
of any of the foregoing, whether such amendments, modifications, supplements,
renewals or extensions are evidenced by new or additional instruments, documents
or agreements or change the rate of interest on any indebtedness secured hereby
or the maturity thereof, or otherwise. All indebtedness and obligations secured
hereby are hereinafter collectively referred to as the "indebtedness." The term
"indebtedness" shall also include, without limitation on the foregoing, all
interest that accrues on all or any part of the indebtedness after the filing of
any petition or pleading by or against Debtor for a proceeding under any chapter
or provision of any present or future federal bankruptcy legislation or
amendments thereto.
3. Representations and Warranties of Debtor. Debtor represents,
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warrants and agrees that all existing and future collateral is and will be owned
by Debtor free and clear of all liens and rights of others, other than the
security interest created under this Agreement.
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4. Covenants of Debtor. As long as any of the indebtedness remains
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owing to Secured Party, unless Secured Party otherwise consents in writing:
(a) Debtor shall (i) immediately deliver all collateral
capable of delivery, whether now or hereafter held or acquired, to the Secured
Party or its agent, (ii) at the request of Secured Party at any time and from
time to time, execute all financing statements and other documents reasonably
deemed necessary or advisable by Secured Party to create and perfect a security
interest in, or otherwise relating to, the collateral, (iii) at its sole cost
and expense, defend any claims against the collateral or any action that might
affect the collateral or any interests therein, (iv) do all acts which may be
necessary to preserve, process, develop, maintain and protect the collateral and
Debtor's rights and interests therein, and (v) pay all taxes, assessments and
other charges imposed on or relating to the collateral, and all reasonable costs
and expenses, including reasonable attorneys' fees, incurred by Secured Party in
connection with the enforcement of this Agreement; and
(b) Debtor shall not (i) sell, assign, exchange, transfer,
encumber or otherwise dispose of, or contract to sell, assign, exchange,
transfer, encumber or otherwise dispose of, any of the collateral or any part
thereof or any interest therein, (ii) abandon, alter, amend, cancel, modify,
release, relinquish, supplement, terminate or waive, or enter into or give any
agreement, approval or consent with respect to, any of the collateral or any
part thereof or any interest therein; or (iii) take any action with respect to
the collateral which is inconsistent with the provisions or purposes of this
Agreement or which would adversely affect the rights of Secured Party hereunder.
5. Possession of Collateral; Voting Rights. Secured Party shall hold
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the share certificate evidencing the collateral until the indebtedness is paid
in full. Debtor shall retain any rights to vote the collateral; provided,
however, upon the occurrence of an Event of Default, Secured Party's nominee
shall be entitled to vote the collateral.
6. Action by Secured Party.
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(a) In the event that Debtor fails to perform any obligation
on its part to be performed hereunder, then Secured Party may, but without any
obligation to do so and without notice to or demand upon Debtor, perform the
same and take such other action as Secured Party may deem necessary to protect
the collateral or its security interest therein, Secured Party being hereby
authorized (without limiting the general nature of the authority hereinabove
conferred) to pay, purchase, contest and compromise any encumbrance, charge or
lien which in the reasonable judgment of Secured Party appears to be prior or
superior to its security interest, and in exercising any such powers and
authority to pay necessary expenses, employ counsel and pay reasonable
attorneys' fees. Debtor hereby agrees to repay immediately and without demand
all reasonable sums so expended by Secured Party, together with interest from
the date of expenditure at the highest legal rate ("Default Rate").
(b) Secured Party shall be under no duty or obligation to (i)
preserve, process, develop, maintain or protect the collateral or any of
Debtor's rights or interests therein, or (ii) make or give any notices of
default, presentments, demands for performance, notices of nonperformance or
dishonor, protests, notices of protest or notices of any other nature whatsoever
in connection with the collateral on behalf of Debtor or any other person having
any interest therein; and Secured Party does not assume and shall not be
obligated to perform the obligations of Debtor, if any, with respect to the
collateral. Secured Party may, at any time and from time to time, without
notice or demand and at the expense of Debtor, make reasonable requests for
information concerning the collateral from any officer, director, agent or
employee of any corporation, governmental agency or instrumentality.
7. Events of Default. The occurrence of any one of the following
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events shall constitute an Event of Default:
(a) the occurrence of any Event of Default under the Note or
any other documents pertaining thereto; or
(b) any failure by Debtor to observe or perform any covenant
or agreement contained in this Agreement for more than five (5) calendar days
after receipt from Secured Party of notice of such default; or
(c) any representation or warranty made by Debtor in this
Agreement shall prove to have been false or incorrect in any material respect
when made.
8. Remedies Upon Default.
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(a) Upon the occurrence and during the continuance of an
Event of Default, Secured Party shall have in any jurisdiction where enforcement
hereof is sought, in addition to all other rights and remedies that Secured
Party may have under this Agreement and by law, all rights and remedies of a
secured party under the Uniform Commercial Code and in addition the following
rights and remedies, all of which may be exercised with or without further
notice to Debtor:
(i) to renew, extend, modify, amend, accelerate, accept
partial payments on, make allowances and adjustments and issue credits with
respect to, release, settle, compromise, compound, collect or otherwise
liquidate, on terms acceptable to Secured Party, in whole or in part, the
collateral and any amounts owing thereon or any guaranty or security therefor;
to enter into any other agreement relating to or affecting the collateral; and
to give all consents, waivers and ratifications in respect of the collateral and
exercise all other rights, powers and remedies and otherwise act with respect
thereto as if it were the owner thereof;
(ii) to enforce payment and prosecute any action or
proceeding with respect to any and all of the collateral and take or bring, in
Secured Party's name or in the name of Debtor, all steps, actions, suits or
proceedings deemed by Secured Party necessary or desirable to effect collection
of or to realize upon the collateral;
(iii) to endorse, in the name of Debtor, all checks,
notes, drafts, money orders, instruments and other evidences of payment relating
to the collateral; to transfer any or all of the collateral into the name of
Secured Party or its nominee or nominees; and to receive, open and dispose of
all mail addressed to Debtor and notify the postal authorities to change the
address for delivery thereof to such address as Secured Party may designate; and
(iv) to foreclose the liens and security interests
created under this Agreement or under any other agreement relating to the
collateral by any available judicial procedure or without judicial process; to
sell, assign, lease, or otherwise dispose of the collateral or any part thereof,
either at public or private sale, in lots or in bulk, for cash, on credit or for
future delivery, or otherwise, with or without representations or warranties,
and upon such terms as shall be acceptable to Secured Party;
all at Secured Party's sole option and as Secured Party in its sole discretion
may deem advisable.
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(b) Secured Party shall give Debtor at least five days'
written notice of sale of all or any part of the collateral or of any proposal
by Secured Party to retain the collateral or any part thereof in satisfaction of
the indebtedness. Any sale of the collateral shall be held at such time or
times and at such place or places as Secured Party may determine in the exercise
of its sole discretion. Secured Party may bid (which bid may be, in whole or in
part, in the form of cancellation of indebtedness) for and purchase for the
account of Secured Party or any nominee of Secured Party the whole or any part
of the collateral. Secured Party shall not be obligated to make any sale of the
collateral if it shall determine not to do so regardless of the fact that notice
of sale of the collateral may have been given. Secured Party may, without
notice or publication, adjourn the sale from time to time by announcement at the
time and place fixed for sale, and such sale may, without further notice, be
made at the time and place to which the same was so adjourned.
(c) Secured Party may, in its sole and absolute discretion,
sell all or any part of the collateral at private sale in such manner and under
such circumstances as Secured Party may deem necessary or advisable in order
that the sale may be lawfully conducted. Without limiting the foregoing,
Secured Party may (i) approach and negotiate with a limited number of potential
purchasers, and (ii) restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the collateral for their
own account for investment and not with a view to the distribution or resale
thereof. In the event that any of the collateral is sold at private sale (and
with the requisite notice to Debtor pursuant to Subsection (b) above), Debtor
agrees that if the collateral is sold for a price which Secured Party in good
faith believes to be reasonable, then (A) the sale shall be deemed to be
commercially reasonable in all respects, (B) Debtor shall not be entitled to a
credit against the indebtedness in an amount in excess of the sale price, and
(C) Secured Party shall incur no liability or responsibility to Debtor in
connection therewith, notwithstanding the possibility that a substantially
higher price might have been realized at a public sale.
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(d) Debtor hereby acknowledges and agrees that Secured Party
shall not be limited in any way with respect to the parties to which the
collateral may be sold, whether at a public or private sale. Debtor
specifically acknowledges and agrees that Secured Party may, without any
liability whatsoever to Debtor, contact one or more competitors of Debtor,
regarding a sale of the collateral, and Secured Party may sell all or any
portion of the collateral to any one or more of such competitors or other
parties, as Secured Party deems appropriate in its capacity as a secured party
and without regard to the impact such a sale may have on Debtor, or its
management or operations.
(e) Upon consummation of any sale of the collateral, Secured
Party shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the collateral so sold. Each such purchaser at any such sale
shall hold the collateral sold absolutely free from any claim or right on the
part of Debtor, and Debtor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. If the sale of all or any part of the collateral is made on credit or
for future delivery, Secured Party shall not be required to apply any portion of
the sale price to the indebtedness until such amount is actually received by
Secured Party, and any collateral so sold may be retained by Secured Party until
the sale price is paid in full by the purchaser or purchasers thereof. Secured
Party shall not incur any liability in case any such purchaser or purchasers
shall fail to pay for the collateral so sold and, in case of any such failure,
the collateral may be sold again upon like notice.
(f) The net cash proceeds resulting from the collection,
liquidation, sale, lease or other disposition of the collateral shall be applied
first, to the reasonable costs and expenses (including reasonable attorneys'
fees) of retaking, holding, storing, processing and preparing for sale, selling,
collecting, liquidating and the like; second, to the satisfaction of all
indebtedness and obligations secured hereby in such order and manner as Secured
Party in its sole and absolute discretion may determine. Debtor shall be liable
to Secured Party and shall pay to Secured Party on demand any deficiency which
may remain after any such sale, disposition, collection or liquidation of the
collateral.
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9. Rights Independent. The security interest created hereunder is
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independent of any other security for the indebtedness given by Debtor or any
other person or any guaranty, and upon the occurrence of an Event of Default
Secured Party may proceed in the enforcement hereof independently of any other
right or remedy that Secured Party may at any time hold with respect to the
indebtedness or any other security or guaranty therefor. Secured Party may file
a separate action or actions against Debtor hereunder, whether action is brought
and prosecuted with respect to any other security or any other person or any
guarantor, or whether any other person or any guarantor is joined in any such
action or actions. Debtor waives the benefit of any statute of limitations
affecting its liability hereunder or the enforcement of the indebtedness secured
hereby. Secured Party's rights hereunder shall be reinstated and revived, and
the enforceability of this Agreement shall continue, with respect to any amount
at any time paid on account of the indebtedness which shall thereafter be
required to be restored or returned by Secured Party upon the bankruptcy,
insolvency, or reorganization of Debtor, or otherwise, all as though such amount
had not been paid. The security interest created hereunder and the
enforceability of this Agreement shall at all times remain effective to secure
the full amount of all indebtedness, including without limitation interest at
the Default Rate, even though the indebtedness or any part thereof or any other
security or guaranty therefor may be or may hereafter become invalid or
otherwise unenforceable against Debtor or any other party, and whether or not
Debtor shall have any personal liability with respect thereto. Debtor waives
notice of default, presentment, demand for payment, protest, notice of protest,
notice of nonpayment or dishonor, and all other notices and demands of any kind
whatsoever; and Debtor consents and agrees that Secured Party may, from time to
time, without notice or demand and without affecting the enforceability or
security hereof: (a) take, alter, enforce or release any additional security
for the indebtedness; or (b) release or substitute any guarantors or other
parties obligated with respect to the indebtedness.
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10. Attorney-in-Fact. Debtor hereby nominates and appoints Secured
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Party as attorney-in-fact for the following purposes and to perform any of the
following powers, which are coupled with an interest and are irrevocable until
termination of this Agreement: (a) to do all acts and things and execute all
documents which Secured Party may deem necessary or advisable to perfect and
continue perfected the security interest created by this Agreement, to preserve,
process, develop, maintain and protect the collateral and the value thereof and
Secured Party's interest therein, and to enable Secured Party to preserve,
protect or exercise any or all of the rights, powers or remedies granted to
Secured Party under this Agreement or to which Secured Party is otherwise
entitled under applicable law; (b) to do any and every act which Debtor is
obligated to do under this Agreement; (c) to prepare, sign, file and record, for
Debtor in Debtor's name, any financing statement covering the collateral; and
(d) upon the occurrence and during the continuance of any Event of Default, to
endorse and transfer the collateral upon foreclosure; provided, however, that
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Secured Party shall be under no obligation whatsoever to take any of the
foregoing actions, and Secured Party shall have no liability or responsibility
for any act or omission taken with respect thereto. Debtor hereby agrees to
repay immediately and without demand all reasonable costs and expenses incurred
or expended by Secured Party in exercising any rights or taking any action under
this Section, together with interest from the date of expenditure at the Default
Rate.
11. Amendments; Waivers. Neither this Agreement nor any provision
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hereof may be amended, modified, waived, discharged or terminated nor may any of
the collateral be released except by an instrument in writing duly signed by or
on behalf of Secured Party and Debtor. No failure or delay on the part of
Secured Party in exercising any right, power or remedy may be, or may be deemed
to be, a waiver thereof; nor may any single or partial exercise of any right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. Debtor warrants and agrees that
each of the waivers set forth in this Agreement are made with Debtor's full
knowledge of their significance and consequences, and that under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any of such waivers are determined to be contrary to any applicable law
or public policy, such waivers shall be effective only to the maximum extent
permitted by law.
12. Cumulative Remedies. The rights, powers and remedies of Secured
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Party hereunder are cumulative and not exclusive of any other right, power or
remedy which it would otherwise have.
13. Costs and Expenses in Enforcement. Debtor agrees to pay to Secured
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Party all reasonable advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by Secured Party in exercising any right,
power or remedy conferred by this Agreement, or in the enforcement hereof,
regardless of whether an action is filed hereon.
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14. Notices. All notices, requests, demands, directions and other
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communications provided for hereunder must be in writing and must be personally
delivered or mailed to the appropriate party at the address set forth on the
signature pages of this Agreement or, as to any party, at any other address as
may be designated by it in a written notice sent to all other parties in
accordance with this Section. Any notice, request, demand, direction or other
communication given by mail will be deemed effective on the third calendar day
after deposited in the United States mails with first class postage prepaid; or
if given by personal delivery, when delivered.
15. Further Assurances. Debtor agrees to do such further acts and
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things, and to execute and deliver such additional conveyances, assignments,
agreements, documents and instruments as Secured Party may at any time
reasonably request in connection with the administration or enforcement of this
Agreement or related to the collateral or any part thereof or in order to better
assure and confirm unto Secured Party its rights, powers and remedies hereunder.
Debtor hereby consents and agrees that the trustee for any of the collateral
shall be entitled to accept the provisions of this Agreement as conclusive
evidence of the right of Secured Party to effect any transfer or exercise any
right hereunder, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by Secured Party or any other person to any such
trustee.
16. Binding Agreement. This Agreement and the terms, covenants and
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conditions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that Debtor shall not
be permitted to transfer, convey or assign this Agreement or any interest herein
without the prior written consent of Secured Party. Secured Party may assign
its interest hereunder or in the collateral in whole or in part. Without
limiting the foregoing, Debtor hereby consents to the assignment by Secured
Party of all or any portion of its rights under this Agreement and all notices,
agreements and other documents which are secured hereby or referenced herein.
Debtor acknowledges and agrees that any and all rights of Secured Party under
this Agreement may be exercised from time to time by any assignee or successor
of Secured Party. Debtor agrees that any assignee's rights shall be free of all
defenses, set-offs or counterclaims which Debtor may have against Secured Party.
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17. Severability. In case any lien, security interest or other right
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of Secured Party shall be held to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect any other lien,
security interest or other right granted hereby.
18. Miscellaneous. All words used herein in the plural shall be deemed
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to have been used in the singular, and all words used herein in the singular
shall be deemed to have been used in the plural, where the context and
construction so require. Section headings in this Agreement are included for
convenience of reference only and are not a part of this Agreement for any other
purpose. Time is of the essence with respect to each provision of this Security
Agreement. As used herein the term "Debtor" shall include any successor to
Debtor, including without limitation any successor by merger.
19. Governing Law. This Agreement shall be governed by, and construed
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and enforced in accordance with, the laws of the State of California.
Notwithstanding the above, in the event that any law or laws of the State of
California shall require or otherwise dictate that the laws of any other
jurisdiction be applied in any proceeding involving this Agreement, such law
shall be disregarded with the result that the remaining laws of the State of
California shall be applied to such proceeding.
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IN WITNESS WHEREOF, Debtor and Secured Party have caused this Agreement to
be duly executed as of October 11, 2000.
"Debtor"
/s/ Robert C. McShirley
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ROBERT C. MCSHIRLEY
Address:
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___________________________
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"Secured Party"
VSOURCE, INC.
By: /s/ Sandford T. Waddell
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Name: Sandford T. Waddell
Title: Chief Financial Officer
Address:
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5740 Ralston Street, Suite 110
Ventura, California 93003
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