PLEDGE AND SECURITY AGREEMENT
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This PLEDGE AND SECURITY AGREEMENT ("Agreement"), dated as of September 18,
2000, is made by Sandford T. Waddell, 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,
all of Debtor's shares of Series 2-A Convertible Preferred Stock of Secured
Party, 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.
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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.
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.
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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.
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.
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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.
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.
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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 September 18, 2000.
"Debtor"
/s/ Sandford T. Waddell
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SANDFORD T. WADDELL
Address:
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1822 Marisol Drive
Ventura, CA 93001
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"Secured Party"
VSOURCE, INC.
By: /s/ Robert C. McShirley
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Name:
Title: CEO
Address:
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5740 Ralston Street, Suite 110
Ventura, California 93003
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