Stock Pledge Agreement




STOCK
PLEDGE AGREEMENT

 

This
STOCK PLEDGE AGREEMENT (this "Agreement") is entered into by and between Waldrop
Enterprises, Inc., a California corporation ("Pledgor") and The Phillip Lee
Bonnell 2004 Trust dated July 31, 2004 ("Pledgee"), effective as of January 1,
2005 (the "Effective Date").




RECITALS




As of the
Effective Date, Pledgor has purchased 3,990 shares of the stock of Netword
Publishing, Inc., a California corporation ("Company"), represented by Company's
Stock Certificate No. 6 (hereinafter collectively referred to as the "Shares"),
for a total purchase price of $460,000.00, pursuant to that certain Stock
Purchase Agreement of even date herewith (the "Acquisition
Agreement").




The
Shares were purchased with funds loaned to Pledgor by Pledgee, which loan was
evidenced by a Secured Promissory Note of even date herewith in the amount of
$451,106.91 executed by Pledgor in favor of Pledgee (the "Note").




In
further consideration of and concurrently with the execution of the Acquisition
Agreement, the Note and this Agreement, Pledgor and Pledgee have entered into an
Exclusive License Agreement dated as of January 1, 2005 (with Company as an
additional party) (the "License Agreement") and a Shareholders Agreement dated
as of January 1, 2005 (the "Shareholders Agreement) (together with a Secured
Promissory Note dated as of January 1, 2005 in the amount of $89,520.32 executed
by Pledgor in favor of Company [the "Shareholders Agreement Note"]) and Company
and Phil Bonnell have entered into an Employment Agreement dated as of January
1, 2005 (the "Employment Agreement"). 




Conditions
precedent to Pledgee's agreement to loan the foregoing funds to Pledgor pursuant
to the Acquisition Agreement and the Note and Pledgee's agreement to enter into
the License Agreement and the Shareholders Agreement, were that Pledgor's
obligations under the Acquisition Agreement, the Note, the License Agreement,
the Shareholders Agreement and the Shareholders Agreement Note would be secured
by the pledge of all of the Shares to Pledgee, all in accordance with the terms
and conditions set forth in this Agreement. 




NOW,
THEREFORE, the parties hereby agree as follows:




AGREEMENT




1. Grant
of Security Interest.
Concurrently with its execution of this Agreement, Pledgor shall deliver to
Pledgee the Stock Certificate representing the Shares, together with stock
powers covering the Shares duly executed in blank in form and substance
satisfactory to Pledgee and its counsel. As collateral security for the
performance of all of its obligations under this Agreement and the Acquisition
Agreement, the Note, the License Agreement, the Shareholders Agreement and the
Shareholders Agreement Note (including any extensions or renewals thereof or
hereof), Pledgor hereby pledges and grants to Pledgee a possessory security
interest in the Shares, together with any stock rights, rights to subscribe,
liquidating dividends, stock dividends, dividends, dividends paid in stock, new
securities, or other property to which Pledgor is or may hereafter become
entitled to receive on account of the Shares or any other collateral hereunder,
and in the event that Pledgor receives any such property, Pledgor will
immediately deliver it to Pledgee to be held by Pledgee hereunder in the same
manner as the Shares originally delivered hereunder or, in the case of cash, to
be applied to the indebtedness secured hereunder. The Shares, together with all
other monies or properties now or hereafter delivered or required to be
delivered to Pledgee hereunder, are hereinafter collectively called the
"Collateral."




2. Pledgee's
Rights. At any
time, without notice, and at the expense of Pledgor, Pledgee in Pledgee's name
or in the name of Pledgor may, but shall not be obligated to: (a) collect by
legal proceedings or otherwise, endorse, receive, and receipt for all dividends,
interest, principal payments, and other sums now or hereafter payable upon or on
account of the Collateral; (b) make any compromise or settlement Pledgee deems
desirable or proper with reference to the Collateral; (c) insure, process, and
preserve the Collateral; (d) participate in any recapitalization,
reclassification, reorganization, consolidation, redemption, stock split,
merger, or liquidation of any issuer of securities which constitute Collateral,
and in connection therewith may deposit or surrender control of the Collateral,
accept money or other property in exchange for the Collateral, and take such
action as Pledgee deems proper in connection therewith, and any other money or
property received in exchange for the Collateral shall be applied to the
indebtedness secured hereunder or held by Pledgee thereafter as Collateral
pursuant to the provisions hereof; (e) cause Collateral to be transferred to
Pledgee's name or to the name of Pledgee's nominee; and (f) except as provided
in Section 3 below, exercise as to the Collateral all the rights, powers, and
remedies of an owner necessary to exercise Pledgee's rights under this Section
2.




3. Voting
Rights. So long
as there shall not have occurred an Event of Default hereunder, Pledgor shall
have the right to vote (or direct the voting of) any of the Shares or other
Collateral held by Pledgee hereunder.




4. Taxes
and Assessments. Pledgor
agrees to pay prior to delinquency all taxes, charges, liens, and assessments
against the Collateral, and upon the failure of Pledgor to do so, Pledgee at
Pledgee's option may pay any of them and shall be the sole judge of the legality
or validity thereof and the amount necessary to discharge the same. All
advances, charges, costs, and expenses, including reasonable attorneys' fees,
incurred or paid by Pledgee in exercising any right, power, or remedy conferred
by this Agreement or in the enforcement thereof, shall become a part of the
indebtedness secured hereunder and shall be paid to Pledgee by Pledgor
immediately and without demand, with interest thereon at the rate specified in
the Note.




5. Shareholders
Agreement. Pledgor
and Pledgee acknowledge and agree that in the event of any conflict between the
provisions of this Agreement and the provisions of the Shareholders Agreement,
the provisions of this Agreement shall prevail and be controlling. Subject to
the foregoing, the rights and remedies of Pledgee hereunder shall be cumulative
of and in addition to any rights the Company, Pledgee, Pledgor or any other
shareholder of the Company may have under the Shareholders
Agreement.




6. Representations,
Covenants and Warranties. Pledgor
hereby represents, covenants and warrants to Pledgee as follows:




(A) Pledgor
currently holds title to the Shares free and clear of all liens, claims,
security interests, and encumbrances of any kind or nature except the security
interest granted pursuant to the terms of this Agreement and the provisions of
the Shareholders Agreement.




(B) Until
such time as all obligations of Pledgor secured hereunder shall have been
satisfied in full, Pledgor will keep the Collateral free from all liens, claims,
security interests, and encumbrances of any kind or nature except the security
interest granted pursuant to the terms of this Agreement and the provisions of
the Shareholders Agreement, and will not sell, contract for sale, or otherwise
dispose of any of the Collateral or any interest or rights relating
thereto.




7. Default. The
occurrence of any one or more of the following events shall be a default
hereunder (each, an "Event of Default"): (A) Any failure to pay any principal,
interest or other amount when due under the Note (without setoff, adjustment,
counterclaim, withholding, reduction or defense of any kind), which failure
continues for three (3) business days after written notice of such failure has
been given to Pledgor; (B) any failure to pay any principal, interest or other
amount when due under the Shareholders Agreement Note (without setoff,
adjustment, counterclaim, withholding, reduction or defense of any kind), which
failure continues for three (3) business days after written notice of such
failure has been given to Pledgor; (C) any failure to pay or cause to be paid
any royalties, consulting compensation or other amounts when due under the
License Agreement (without setoff, adjustment, counterclaim, withholding,
reduction or defense of any kind), which failure continues for fifteen (15) days
after written notice of such failure has been given to Pledgor; (D) any failure
by Pledgor to fully or timely comply with any of the other terms or conditions
of the Note, this Agreement, the Acquisition Agreement, the Shareholders
Agreement, the Shareholders Agreement Note or the License Agreement, which
failure continues for fifteen (15) days after written notice of such failure has
been given to Pledgor; (E) the commencement of any proceeding or the taking of
any act by or against any of Pledgor or Pledgor's parent, subsidiary or
affiliated entities (collectively, the "Pledgor Group") for any relief under
bankruptcy, reorganization, insolvency or similar laws for the protection of
debtors, or for the appointment of a receiver of the business or assets of any
of the Pledgor Group; (F) any of the Pledgor Group makes an assignment for the
benefit of creditors, or is generally not paying (or admits an inability to pay)
debts as such debts become due, or ceases business operations or is dissolved;
or (G) any attachment, execution or other process shall be levied against any of
the Collateral.




8. Pledgee's
Remedies After Default.
Anything to the contrary herein notwithstanding, upon the occurrence of any
Event of Default, Pledgee may, in its sole and absolute discretion, and without
necessity of demand or notice, do any one or more of the following:





(A) Pledgee
may exercise any of the remedies available to Pledgee under this Agreement or
under the Note, the Acquisition Agreement, the License Agreement, the
Shareholders Agreement, the Shareholders Agreement Note, or applicable
law.




(B) Pledgee
may sell,
assign and deliver or otherwise dispose the whole or any part of the Collateral
at public or private sale in order to satisfy any part of the obligations of
Pledgor now existing or hereinafter arising under this Agreement or under the
Note, the
Acquisition Agreement, the License Agreement, the Shareholders Agreement, or the
Shareholders Agreement Note, in accordance with the provisions and procedures
set forth in the California Uniform Commercial Code. In connection with
any such
sale, Pledgee or its assigns may purchase all or any part of the
Collateral.

 

(C) Pledgee
may retain all the Collateral in full satisfaction of Pledgor's obligations
under the Note in accordance with the provisions and procedures set forth in the
California Uniform Commercial Code. 

 

(D) Pledgee
may exercise any rights, options, or remedies available to Pledgee under the
Shareholders Agreement and/or permit the Company or any other shareholders of
the Company to exercise any rights, options, or remedies available to them under
the Shareholders Agreement.




(E) Pledgee
may exercise any other right or remedy available to Pledgee under the California
Uniform Commercial Code or any other applicable law.

 

Pledgor
shall, upon Pledgee's request, fully cooperate with Pledgee in connection with
the disposition of any and all of
the Collateral, including without limitation, signing and delivering any
documents which Pledgee shall reasonably request to permit disposition of the
Collateral. 

 

9. Recourse
Obligation. Pledgor
waives any right to require Pledgee to proceed against or exhaust any Collateral
or pursue any other remedy in Pledgee's power whatsoever. Pledgor hereby
expressly agrees that recourse may be had against Pledgor personally for all of
the indebtedness secured hereby, including any deficiency remaining after sale
or disposition of the Collateral by Pledgee pursuant to the terms
hereof.




10. Transfer
of Indebtedness. Upon
the transfer of all or any part of the indebtedness of Pledgor secured hereby,
Pledgee may transfer all or any part of the Collateral, and Pledgee shall be
fully discharged thereafter from all liability and responsibility in respect of
all such Collateral so transferred, and the transferee shall be vested with all
the rights and powers of Pledgee hereunder with respect to such Collateral so
transferred; but with respect to any Collateral not so transferred, Pledgee
shall retain all rights and powers hereby given.




11. Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given upon receipt through personal delivery, overnight courier,
facsimile transmission, or U.S. first class mail, return receipt request, to the
parties at the following addresses and facsimile numbers (or at such other
address or facsimile number for a party as shall be specified by like
notice):




If to
Pledgor:     If to
Pledgee:

Waldrop
Enterprises, Inc.    The
Phillip Lee Bonnell 2004 Trust

95
Argonaut, Suite 240    c/o
Carlsmith Ball LLP

Aliso
Viejo, CA 92656    444 South
Flower St., 9th Floor


Attention:
President and General Counsel  Los
Angeles, CA 90071

Facsimile:
(949) 716-0858    Attention:
Steve Bradford

        Facsimile:
(213) 623-0032




12. Miscellaneous.




(A) Any
waiver, express or implied, of any provision hereunder and any delay or failure
by Pledgee to enforce any provision shall not preclude Pledgee from enforcing
any such provision thereafter.




(B) Pledgor
shall, at the request of Pledgee, execute such other agreements, documents, or
instruments in connection with this Agreement as Pledgee may reasonably deem
necessary.




(C) This
Agreement shall be governed and construed in accordance with the laws of the
State of California (but without regard to California principles of conflict of
laws). The parties hereto consent to the personal and subject matter
jurisdiction of the Courts of the State of California and consent to venue, for
all purposes, to be held in and for the County of Los Angeles.



(D) All
rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies otherwise provided by law. Any single or partial exercise of
any right or remedy shall not preclude the further exercise thereof or the
exercise of any other right or remedy.




(E) All terms
not defined herein are used as set forth in the California Uniform Commercial
Code.




IN
WITNESS WHEREOF, the parties hereto have executed this Stock Pledge Agreement as
of the Effective Date.




"PLEDGOR"




WALDROP
ENTERPRISES, INC.










By:_____________________________

William
H. Waldrop, President










By:_____________________________

Joseph
Wade Mezey, Secretary




"PLEDGEE"



THE
PHILLIP LEE BONNELL 2004 

TRUST
DATED JULY 31, 2004










By:_____________________________

Phillip
Lee Bonnell, Trustee