EXHIBIT 2(B)
PLEDGE AGREEMENT
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This Pledge Agreement (the "Agreement") is made as of February 1, 2002, by and
among GREENLAND CORPORATION, a California corporation ("Pledgor"), ASHFORD
CAPITAL LLC, a California Limited Liability Company, REGENTS CAPITAL WEST,
MICHAEL CUMMINGS, MONDO MARSHALL, GREG WILBER, SANDRA STEWART and JOHN M. PITKIN
jointly and not alternatively or otherwise ("Pledgees"), and WALTER WRIGHT
("Pledge Holder") with reference to the following facts:
A. In addition to definitions contained within the operative provisions of
this Agreement:
1. "Company" means W3M, INC, a California corporation doing business as
Paradigm Cabling Systems.
2. "Sellers' Shares" shall mean all of the following property of the
Shareholders: all shares of the capital stock of W3M Inc. dba Paradigm Cabling
Systems, a California corporation, including common stock and all convertible
preferred shares together with medallion signature guaranteed stock powers
("Security Shares"). Such shares represent one hundred percent of the
outstanding equity and equity interests of W3M Inc. dba Paradigm Cabling
Systems. Such Collateral shall include, but not be limited to, all the
Shareholders right, title and interest in and to the Security Shares, together
with the proceeds of any sale, exchange, liquidation or other disposition,
whether voluntary or involuntary, and including but not limited to any
securities, Instruments, and all benefits and entitlements evidenced by or
arising out of the Security Shares and all other securities, Instruments and
other property (whether real or personal, tangible or intangible) issued or
accepted in substitution for, or in addition to, the foregoing, and all
dividends, interest, cash, instruments, distributions, income, securities and
any other property (whether real or personal, tangible or intangible) at any
time received, receivable or otherwise distributed in respect of, or in exchange
for, the foregoing, whether now owned or hereafter acquired, and any and all
improvements, additions, replacements, substitutions and any and all Proceeds
arising out of or derived from the foregoing.
3. "Note" means that certain Secured Promissory Note of even date in the
original principal amount of $2,916,667 executed by Pledgor and made payable to
Pledgees jointly and not alternatively.
4. "Purchase Agreement" means that certain Stock Purchase Agreement dated
January 31, 2002, among Company, Pledgees as "Sellers," and Pledgor as "Buyer."
B. Pursuant to the Purchase Agreement, Pledgor has purchased Sellers' Shares
from Pledgees, has executed the Note in favor of Pledgees, and has agreed to
pledge Sellers' Shares to Pledgees as security for payment of the Note.
C. Pledge Holder is willing to hold Sellers' Stock, in pledge, pursuant to
the terms of this Agreement.
THE PARTIES THEREFORE AGREE AS FOLLOWS:
1. Pledge of Sellers' Shares. To secure payment of the Note and performance
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by Pledgor of all of the terms and conditions set forth in this Agreement and
any other documents executed by Pledgor in connection therewith (collectively,
the "Obligations"), Pledgor hereby assigns and grants to Pledgees, jointly and
not alternatively or otherwise, a security interest in Sellers' Shares.
Concurrently with the execution of this Agreement, Pledgor will endorse an
assignment separate from certificate in blank, attach the same to each
certificate representing Sellers' Shares, and deliver such certificates with
such assignments attached to Pledge Holder.
2. Duration of Pledge; Pledgor's Right to Retain Sellers' Stock Duration
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of Pledge. This Agreement, and the pledge of Sellers' Stock made hereunder,
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shall remain in effect until such date as the Note has been paid in full, all
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other Obligations of Pledgor have been fully performed and paid, and Sellers'
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Stock is released by Pledge Holder.
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Notwithstanding any other provisions of this Agreement to the contrary, if
Pledgor has paid Pledgees at least One Million Dollars ($1,000,000) in principal
under the Note, plus all accrued interest thereon to the date of such principal
payment, but thereafter defaults under the Note, (i) Pledgees may retain all
such payments received from Pledgor; (ii) Pledgees shall reacquire title to all
of Seller's Shares except any Shares paid for by proceeds in excess of One
Million Dollars ($1,000,000) representing principal payments. Any Shares
retained by the Seller will be free and clear of this Pledge Agreement and any
other rights or claims of Pledgees thereto; and (iii) Sellers shall release
Buyer from any and all other obligations in connection with payment of the Note
and the Purchase Price as defined in the Purchase Agreement.
3. Irrevocable Proxy; Voting of Units Irrevocable Proxy; Voting of
Units. Upon execution of this Agreement, Pledgor will execute and deliver to
Pledgees a written irrevocable proxy coupled with an interest and with a power
of substitution to vote Sellers' Stock on all Company matters. Such proxy shall
be in the form of Exhibit A attached hereto and incorporated by reference.
Pledgees will use such proxy, however, only in the event of a Default (as
defined below). Unless and until a Default occurs, Pledgor shall retain all
rights to vote Sellers' Shares in the affairs of Company.
4. Covenants, Representations, and Warranties of Pledgor. Until such time
as the Note has been paid in full and all other Obligations of Pledgor have been
discharged in full, Pledgor warrants, represents, and covenants with Pledgees as
follows:
4.1 Pledgor agrees to pay the Note in timely fashion and not to default or
breach the Purchase Agreement, except as set forth hereinabove.
4.2 Pledgor will not cause or permit Sellers' Shares or any interest therein
to be further pledged, encumbered, or otherwise subjected to claims of any
creditor.
4.3 Pledgor will not cause or permit Sellers' Shares or any interest therein
to be sold, assigned, or otherwise beneficially transferred, except with the
written consent of Pledgees.
4.4 Pledgor represents and warrants that all of Sellers' Shares is fully
issued and beneficially owned by Pledgor and stands of record in the name of
Pledgor as owner.
5. Default Default. Pledgor hereby agrees that the occurrence of any of
the following events shall constitute a "Default" under this Agreement entitling
Pledgees to exercise the remedies set forth in Section 6 below:
5.1 The occurrence of a Default (as defined therein) under the Note or a
material breach of the Purchase Agreement.
5.2 The breach or failure to perform by Pledgor of any of the
representations, warranties, covenants or agreements made or to be performed by
it under this Agreement and such breach or failure continues without cure for a
period of thirty (30) days after Pledgees give Pledgor written notice thereof.
5.3 The breach or failure to perform by Pledgor of any of the
representations, warranties, covenants or agreements made or to be performed by
it under the Purchase Agreement and such breach or failure continues without
cure for a period of thirty (30) days after Pledgees give Pledgor written notice
thereof.
6. Remedies on Default Remedies on Default. In the event of a Default
hereunder, Pledgees then, or at any time thereafter, at their sole option and
without demand first being made and without further notice to Pledgor, may do
any one or more of the following:
6.1 Declare all sums, or any portion thereof, secured hereby immediately due
and payable. Pledgees option to declare only a portion of sums due immediately
due and payable is not a waiver by Pledgee to subsequently declare the balance
of said sums due at a later date nor is it a waiver of any rights or remedies of
Pledgees pursuant to the terms of this Agreement.
6.2 Proceed with foreclosure of the security interest held by Pledgees and
the sale of Sellers' Stock in any manner permitted by law or provided for
herein.
6.3 Exercise any remedies available to Pledgees under California law.
6.4 Exercise the absolute right (as regards Pledgor) to direct Pledge Holder
to sell Sellers' Shares, or any portion thereof, at any one or more sales. Any
such sale may be made at either public or private sale at Pledge Holder's place
of business or elsewhere, and may be made either for cash or upon credit as
Pledgees may deem to be fair exercising their reasonable discretion. As
compensation for services required to comply with Pledgees' directions, Pledge
Holder may request additional fees. Pledgees or their nominees shall have the
right to bid on and purchase any or all of Sellers' Shares so sold, and shall be
entitled to cancel up to the entirety of the principal balance and accrued but
unpaid interest under the Note before being required to bid any cash at any such
sale. Any sale or other disposition of Sellers' Shares hereunder shall comply
with the requirements of securities and all other applicable laws
6.4.1 Pledgor shall be entitled to all notices of sale, advertisements, and
performances required by law. Any sale hereunder may be conducted by an
auctioneer, by Pledge Holder, or by an agent or employee of Pledge Holder.
6.4.2 The proceeds of the sale of any of Sellers' Shares, and all sums
received or collected by Pledge Holder from or on account of any such sale,
shall be applied in the following order: first, to the payment of reasonable
expenses incurred in connection with such sale, transfer, or delivery of
Sellers' Shares; next, to the payment of any other costs, charges, taxes, liens,
assessments, attorneys' fees or expenses reasonably incurred or paid by Pledge
Holder in exercising any right, power, or remedy conferred by this Agreement or
under the law; next, to the payment of all costs, expenses and charges of
Pledgees incurred in connection with the exercise of any remedy or any other
action taken by Pledgees under or in connection with this Agreement, including,
without limitation, the reasonable fees and costs of Pledgees' legal counsel and
other out-of-pocket expenses; next, to the outstanding amounts owed to Pledgees
under the Note, in such manner as prescribed in the Note and in such order as
Pledgees in their sole discretion may determine; and last, the remaining amount,
if any, shall be delivered to Pledgor.
6.5 In addition to any other rights or remedies Pledgees may have hereunder,
at law or in equity, in the event of a Default, Pledgees shall have the right to
vote all or any portion of Sellers' Shares pursuant to the proxy given to
Pledgees in accordance with this Agreement.
6.6 Pledgees shall have the right to enforce one or more of the remedies set
forth above successively or concurrently and any such action shall not prevent
or otherwise limit Pledgees from pursuing any further remedy which Pledgees may
have hereunder, under any other agreement, or by law. No act or failure to act
of Pledgees under this Agreement shall be deemed to be a waiver of, or an
election with respect to, Pledgees' rights under this Agreement or the laws of
the State of California.
7. Duties of Pledge Holder; Indemnification Duties of Pledge Holder;
Indemnification.
7.1 Unless a Default occurs, Pledge Holder's sole duty shall be to hold
Sellers' Stock until such time as the Note has been paid in full and all other
Obligations of Pledgor have been discharged in full. Pledge Holder shall obtain
the written consent of Pledgees as a condition precedent to the delivery of
Sellers' Shares to Pledgor. Pledgees promise that they will give such consent
immediately after all of the Obligations of Pledgor are fully performed and
paid. Pledge Holder may rely upon and shall be protected in acting or
refraining from acting upon any written notice, instruction or request furnished
to Pledge Holder and believed by Pledge Holder to be genuine and to have been
signed or presented by the party or parties purporting to have executed or
presented such documents.
7.2 Pledge Holder shall not be liable for any errors of judgment or for any
act done or step taken or permitted to be taken by Pledge Holder in good faith,
or for any mistake of fact or law, or for anything for which Pledge Holder may
do or refrain from doing in connection with this Agreement, except for acts or
omissions constituting bad faith or willful misconduct. Without limiting the
generality of the forgoing, Pledge Holder shall not be liable for any forgeries
or impersonations concern-ing any documents relied or acted upon by Pledge
Holder. Pledge Holder may seek (but in no case shall be required to seek) the
advice of legal counsel in the event of any dispute or question as to the
construction or interpretation of any provision of this Agreement or Pledge
Holder's duties hereunder. Pledge Holder shall incur no liability and shall be
fully protected in respect to action taken, omitted, or suffered by Pledge
Holder in good faith in accordance with an oral or written opinion of counsel.
If a controversy arises between one of the parties to this Agreement or between
any of the parties and any person not a party to this Agreement, Pledge Holder
shall not be required to determine or settle the same, and Pledge Holder may
retain any and all funds, securities, or other property or documents held by
Pledge Holder until the rights of the parties to the dispute shall have been
finally determined by agreement or by final order of a court of competent
jurisdiction; provided, however, that the time for appeal of any such final
order has expired without an appeal having been made. Pledge Holder shall be
entitled to assume that no such controversy has arisen unless Pledge Holder has
received a written notice of such a controversy which notice refers specifically
to this Agreement and identifies by name and address the parties to the
controversy and any court or other tribunal in which such controversy is being
adjudicated.
7.3 Pledge Holder may resign and be discharged from its duties or
obligations hereunder by giving notice in writing to the parties of such
resignation, specifying a date when such resignation shall take effect. Upon
the effective date of such resignation, Pledge Holder shall stand fully relieved
and discharged of any further duties hereunder. In such event, the parties
hereto shall appoint a successor to Pledge Holder and, upon their failure to do
so within ten (10) days after the effective date of Pledge Holder's resignation,
the Superior Court of the State of California in and for the County of San Diego
shall appoint a successor to Pledge Holder upon application of any or all of the
parties hereto.
7.4 Pledgor and Pledgees, jointly and severally, agree to indemnify Pledge
Holder for, and to hold Pledge Holder harmless from and against, any loss,
liability, or expense incurred without bad faith or willful misconduct on the
part of Pledge Holder and arising out of or in connection with Pledge Holder's
entering into this Agreement and carrying out the duties and responsibilities of
Pledge Holder hereunder, including the costs of defending itself against any
claim or liability, and to pay or reimburse Pledge Holder immediately upon
request for all of Pledge Holder's fees, expenses, disbursements, and advances,
including reasonable attorneys' fees, incurred by Pledge Holder in connection
with its duties hereunder. Provided, however, that the obligation of Pledgee to
indemnify Pledge Holder shall not mature unless and until Pledgor has failed to
satisfy a judgment or arbitration award requiring Holder to indemnify Pledge
Holder.
7.5 Pledge Holder undertakes to perform only such duties as are expressly
set forth herein. If Pledge Holder becomes involved in litigation or for any
reason finds it necessary to become involved in litigation, Pledge Holder is
authorized either (i) to deposit with the clerk of the court in which such
litigation is pending any and all funds, securities, or other property held by
Pledge Holder pursuant hereto; or (ii) to interplead all interested parties in
any court of competent jurisdiction and to deposit with the clerk of such court
any funds, securities, or other property held by Pledge Holder pursuant to this
Agreement. Upon the happening of either of the above, Pledge Holder shall stand
fully relieved and discharged of any further duties hereunder.
7.6 Pledge Holder will bill Pledgees for its fees incurred in acting
pursuant hereto, and Pledgees shall be responsible for paying Pledge Holder's
fees; provided, however, that Pledgees shall be entitled to immediate
reimbursement for one-half of Pledge Holder's fees by Pledgor. For services
performed pursuant to this Agreement, Pledge Holder will bill Pledgees in
accordance with Pledge Holder's usual schedule of fees and charges.
8. Notices Notices.
8.1 All notices or consents to be given by any party hereunder to any other
party or parties hereto shall be given in writing, by personal service, by first
class mail, registered or certified, postage prepaid, by wire, mailgram or
telegram, or by Fedex, overnight mail, courier service or messenger. Any notice
given to any party shall include the transmission or delivery of a copy of the
notice to Pledge Holder.
8.2 Notice given other than by personal service shall be duly addressed to
the address shown in the signature provisions at the end of this document, or
shall be directed to such other address as the party receiving notice may
hereafter specify in writing.
8.3 Notices shall be deemed to have been duly given on the date of delivery
to the party to whom the same is directed, or, if earlier, on the fifth day
after mailing if mailed in California as aforesaid to the party to whom the same
is directed.
9. Assignability of Agreement Assignability of Agreement.
9.1 Pledgor shall have no right to assign or otherwise transfer this
Agreement or the rights, benefits or obligations of Pledgor created by this
Agreement to any person, firm, corporation, partnership, or other entity.
9.2 Pledgees may assign their rights, benefits or obligations hereunder to
any assignee of the Note and/or their respective interests in the Note.
10. Entire Agreement Entire Agreement. This Agreement constitutes the
entire understanding among the parties hereto with respect to the pledge of
Sellers' Shares, superseding all negotiations, prior discussions, and
preliminary agreements. This Agreement may not be changed, modified, or amended
except by a writing executed by all of the parties hereto.
11. Attorneys' Fees Attorneys' Fees. In the event that any party to
this Agreement shall initiate or bring any action or proceeding against any
other party hereto to enforce or declare any rights herein created, or to bring
about or to declare the termination, cancellation, or rescission of this
Agreement, the prevailing party or parties in such action or proceeding shall be
entitled to receive from the other party or parties all reasonable attorneys'
fees and costs incurred in connection therewith; provided, however, that in
cases not involving Pledge Holder's bad faith or intentional misconduct, Pledge
Holder shall be entitled to indemnification and reimbursement of its attorneys'
fees in accordance with the provisions of Section 7.4 of this Agreement,
including attorneys' fees and legal costs which may be awarded against Pledge
Holder in favor of a prevailing party. Any demand, claim, cause of action,
lawsuit or other proceeding arising out of or relating to this Agreement shall
be governed by the provisions contained in Sec. 10.5 of the Purchase Agreement.
12. Waivers Waivers. No waiver of any term, provision, or condition of
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or be construed as a further or continuing waiver of any
such term, provision, or condition of this Agreement. No waiver shall be
effective unless written and signed by the party to be charged.
13. General Provisions General Provisions.
13.1 Section titles or captions contained in this Agreement are inserted
only as a matter of convenience and for reference only, and in no way define,
limit, extend, or describe the scope of this Agreement or the intent of any
provision hereof.
13.2 Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural, and the use of any
gender, be it masculine, feminine, or neuter, shall include all of the genders,
and the word "person" or "entity" shall include corporation, firm, partnership,
or any other form of combination or association.
13.3 This Agreement and all amendments hereto may be executed in several
counterparts, and all so executed shall constitute one agreement binding upon
all of the parties hereto, notwithstanding the fact that all of the parties are
not signatory to the original or to the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first written above.
Addresses for Notice:
Pledgor: GREENLAND CORPORATION
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By: /s/ Thomas Beener, COO
2111 Palomar Airport Road
Suite 200
Carlsbad, Ca 92009
Pledgees
ASHFORD CAPITAL LLC
JOHN M. PITKIN
SANDRA STEWART
MICHAEL CUMMINGS
REGENTS CAPITAL WEST
GREG WILBER
MONDO MARSHALL
EXHIBIT A
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IRREVOCABLE PROXY
The undersigned, as the holders of all outstanding shares (the "Shares") of
Common and Convertible Preferred Stock of W3M, INC., a California corporation
doing business as Paradigm Cabling Systems (the "Company"), irrevocably appoints
and constitutes ASHFORD CAPITAL LLC, a California Limited Liability Company,
REGENTS CAPITAL WEST, MICHAEL CUMMINGS, MONDO MARSHALL, GREG WILBER, SANDRA
STEWART and JOHN M. PITKIN jointly and not alternatively or otherwise ("Proxy
Holder"), as its attorney and proxy to attend meetings, vote, give consents, and
in all other ways to act in its place and stead according to their respective
interests in the Shares sold to holder, upon the occurrence of a Default (as
defined in the Pledge Agreement hereinafter described) under the Pledge
Agreement. Proxy Holder shall have full power of substitution. Any and all
proxies heretofore given by the undersigned in connection with the
above-described Shares are hereby revoked.
This Proxy is given with respect to all of the undersigned's stock ownership in
the Company, whether now or hereafter owned.
The Secretary of the Company is hereby authorized and directed to rely without
investigation upon any certificate by Proxy Holder delivered thereto, certifying
that a Default has occurred under the Pledge Agreement and that, as a
consequence thereof, Proxy Holder has the authority granted by the undersigned
under the terms of this Proxy.
This Proxy is made and delivered pursuant to that certain Pledge Agreement dated
as of February 1, 2002 (the "Pledge Agreement"), by and among the undersigned as
Pledgor, Proxy Holder as Pledgees, pursuant to which Pledge Agreement said
Shares have been pledged by the undersigned to Proxy Holder.
This Proxy is coupled with an interest, is irrevocable, and shall remain in
full force and effect until the termination of the Pledge Agreement and the
pledge of said Units thereunder is redeemed.
Dated as of February 1, 2002
GREENLAND CORPORATION
By: /s/ Thomas Beener, COO