Document:

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, TrusteeSecured Promissory Note

SECURED
PROMISSORY NOTE

 

$89,520.32           January
1, 2005 

No
Interest          Aliso
Viejo, California

FOR VALUE
RECEIVED, the undersigned, WALDROP ENTERPRISES, INC., a California corporation
("Waldrop"), promises to pay to the order of NETWORD PUBLISHING, INC., a
California corporation ("Netword"), at c/o 444 South Flower St., 9th Floor, Los
Angeles, California 90071, Attn: Steve Bradford, or such other person or place
as Payee shall designate from time to time in writing, in lawful money of the
United States of America and in immediately available funds, the principal sum
of EIGHTY-NINE THOUSAND FIVE HUNDRED TWENTY AND 32/100 DOLLARS ($89,520.32),
plus any other amounts owing hereunder, on the terms and conditions specified in
this Secured Promissory Note (this "Note"). As long as an Event of Default shall
not have occurred, amounts owing under this Note shall not bear interest. As
used herein, "Maker" means Waldrop and "Payee" means Netword or any subsequent
holder hereof.

 

Principal
and interest hereunder shall be paid in nine (9) monthly installments commencing
on or before January 15, 2005 and continuing on or before the fifteenth (15th)
day of each month thereafter through September 15, 2005. Each of the first eight
(8) monthly installment payments shall be in the amount of Ten Thousand Dollars
($10,000.00), and the ninth (9th) and last monthly installment payment shall be
in the amount of all principal plus any interest and other payment obligations
then remaining outstanding. All payments (or prepayments) shall be applied in
the following order: (a) first, to any fees, costs and expenses; (b) then, to
any accrued and unpaid interest; and (c) then, to the unpaid principal amount.
Maker's obligations under this Note are made pursuant to that certain
Shareholders Agreement dated January 1, 2005 (the "Shareholders Agreement")
between Maker and The Phillip Lee Bonnell 2004 Trust dated July 31, 2004 (the
"Trust") and are secured by Maker's shares of stock in Payee pursuant to that
certain Stock Pledge Agreement between Maker and the Trust dated as of January
1, 2005 (the "Pledge Agreement"). 

 

The
following shall constitute events of default under this Note (individually, an
"Event of Default"): (a) Any failure to pay any principal, interest or other
amount when due under the terms of this 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 Maker; (b) any failure to pay any principal, interest or other
amount when due under the terms of the "Acquisition Agreement Note" (as
hereinbelow defined) (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 Maker; (c)
any failure to pay any royalties, consulting compensation or other amounts when
due under that certain License Agreement between Maker, Payee and the Trust
dated as of January 1, 2005 (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 Maker; (d) any failure by Maker to fully and timely comply with
any of the other terms or conditions of this Note, the Shareholders Agreement,
the Pledge Agreement, the License Agreement, that certain Acquisition Agreement
between Maker and the Trust dated as of January 1, 2005 (the "Acquisition
Agreement"), or that certain $451,106.91 Secured Promissory Note from Maker to
the Trust pursuant to the Acquisition Agreement (the "Acquisition Agreement
Note"), which failure continues for fifteen (15) days after written notice of
such failure has been given to Maker; (e) the commencement of any proceeding or
the taking of any act by or against any of Maker or Maker's parent, subsidiary
or affiliated entities (collectively, the "Maker 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 Maker Group; or (f) any of the Maker 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.

 

Anything
to the contrary herein notwithstanding, upon the occurrence of any Event of
Default, Payee shall have the right, in its sole and absolute discretion, to
exercise any of the remedies available to Payee under this Note, under the
Pledge Agreement, under the License Agreement, under the Shareholders Agreement,
under the Acquisition Agreement, under the Acquisition Agreement Note, and under
applicable law, and all unpaid principal plus any accrued interest and other
amounts owing under this Note shall thereupon be forthwith due and payable at
Payee's option without further notice, demand or presentment for payment, and
interest on those amounts shall be computed at a default rate of eighteen
percent (18%) per annum or the maximum rate permitted by applicable law,
whichever is lower.

 

In
addition to any default interest owing, if any payment owing hereunder is not
received by Payee within ten (10) days after the due date thereof, a late charge
of five percent (5%) of the amount due and unpaid shall be added to the
delinquent amount to compensate Payee for the expenses of handling the
delinquency. Maker agrees that such late charge represents a good faith and
reasonable estimate of the probable cost to Payee of such delinquency. Maker
acknowledges that during the time that any such amount shall be in default,
Payee will incur losses which are impracticable, costly, inconvenient, and
difficult to ascertain, and that such late charge represents a reasonable sum
considering all of the circumstances existing on the date of the execution of
this Note and represents a reasonable estimate of the losses Payee will incur by
reason of late payment. Acceptance of such late charge shall not constitute a
waiver of the default with respect to the overdue payment, and shall not prevent
Payee from exercising any of the other rights and remedies available as
described in this Note.

 

Maker for
itself and its representatives, successors, and assigns waives presentment,
demand, protest, and notice of dishonor and waives any right to be released by
reason of any extension of time or change in terms of payment. Although Payee
may, in its sole discretion, elect to waive the effect of the occurrence of an
Event of Default, any such waiver shall not be deemed to constitute a waiver of
the effect of any future Event of Default or of any other default. No waiver
shall be binding unless in writing. 

 

Maker
shall have the right, at any time or from time to time, to prepay all or any
portion of this Note, without penalty. All sums payable by Maker pursuant to
this Note shall be payable without notice or demand. 

 

Maker
shall have no right of setoff whatsoever against any payment due hereunder by
reason of any obligations of Payee or for any other reason. All payments due
hereunder shall be made without setoff, adjustment, counterclaim, withholding,
reduction or defense of any kind. The liability of Maker hereunder is absolute
and unconditional. Time is of the essence as to each term or provision of this
Note.

 

If this
Note is not paid when due under the terms hereof, Maker agrees to pay all costs
of collection, including, but not limited to, attorneys' fees incurred by Payee
in connection with such collection, whether or not suit is filed
hereon.

 

The
relationship of Maker, on the one hand, and Payee, on the other hand, is, and at
all times shall remain, solely that of borrower and creditor. Payee shall not
under any circumstances be construed to be a partner or joint venturer of Maker;
nor shall Payee under any circumstances be deemed to be in a relationship of
confidence or trust or a fiduciary relationship with Maker, or to owe any
fiduciary duty to Maker. This Note is the result of negotiations between and has
been reviewed by Maker and Payee and their respective counsel; accordingly, this
Note shall be deemed to be the product of Maker and Payee, and no ambiguity
shall be construed in favor of or against Maker or Payee. Maker acknowledges and
agrees that it intends the literal words of this Note and that no parol evidence
shall be necessary or appropriate to establish Maker's or Payee's actual
intentions. If any provision of this Note shall be held invalid for any reason
whatsoever, then that provision shall be modified to the extent necessary to be
held valid.

 

This Note
is made for the sole protection and legal benefit of Maker and Payee, and their
permitted successors and assigns, and no other person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Note.

 

This Note
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).

 

MAKER
IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE
MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA LOCATED IN THE COUNTY OF
LOS ANGELES; AND BY ITS EXECUTION AND DELIVERY HEREOF, MAKER ACCEPTS AND
CONSENTS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT SUCH
JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BY PAYEE IN WRITING, WITH RESPECT
TO ANY ACTION OR PROCEEDING BROUGHT HEREUNDER BY EITHER MAKER OR PAYEE. MAKER
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO STAY OR TO
DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE ANY OF SUCH COURTS ON THE BASIS
OF FORUM
NON CONVENIENS.

 

MAKER
HEREBY IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION,
CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
NOTE, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS.

 

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 requested, 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
Maker:     If to
Payee:

Waldrop
Enterprises, Inc.    Netword
Publishing, Inc.

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    Facsimile:
(213) 623-0032

      
Attention: Steve Bradford

 

The
proceeds of the loan evidenced by this Note are not intended or allowed for
personal, family, or household uses. This Note consists of three (3)
pages.

 

"Maker"

 

WALDROP
ENTERPRISES, INC.

By:______________________________   By:______________________________

William
H. Waldrop, President     Joseph
Wade Mezey, Secretary

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