COLLATERAL PLEDGE AGREEMENT
EXHIBIT
10.5
This
Collateral Pledge Agreement (“Agreement”) dated March
30,
2007,
is made by QUALMAX,
INC.,
a
Delaware corporation having its principal place of business at 000 Xxxx Xxxxx
Xxxxxx, Xxxxxx, XX 00000 (“Pledgor”) in favor of P&S
SPIRIT, LLC,
a
Nevada limited liability company, having its principal office at 0000 Xxxxxxxxxx
Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 (“Secured Party”).
Background
A. To
induce
Secured Party to extend credit to New
World Brands, Inc.,
a
Delaware corporation and a subsidiary of Pledgor (sometimes herein referenced
as
“Borrower,”) as evidenced by that certain Term Loan and Security Agreement dated
as of even herewith between Secured Party and Borrower (as amended, restated,
supplemented, or replaced from time to time, the “Loan Agreement”), Pledgor
executes and delivers this Agreement to Secured Party. All capitalized terms
used herein and not otherwise defined shall have the same meanings assigned
to
such terms in the Loan Agreement.
B. This
Agreement is given and is intended to provide additional security for the
Obligations.
NOW
THEREFORE, for other good and sufficient consideration, the receipt of which
is
hereby acknowledged, Pledgor, intending to be legally bound hereby, covenants
and agrees as follows:
1. Pledgor,
for the purpose of granting a continuing lien and security interest, does hereby
assign, pledge, hypothecate, deliver and set over to Secured Party, its
successors and assigns, the investment properties and other assets described
on
Schedule I attached hereto and made part hereof, together with any additions,
exchanges, replacements, and substitutions therefore, and distributions with
respect thereto, and the proceeds thereof, including, without limitation, all
of
the stock and/or membership interests in the corporations and limited liability
companies listed on Schedule I attached hereto, whether now owned or hereafter
acquired by Pledgor or in which Pledgor now or hereafter has any rights, options
or warrants, together with any certificates representing such interest and
all
rights (but none of the obligations) under or arising out of the applicable
organizational documents of such corporation and/or limited liability company
(collectively, the “Pledged Collateral”).
2. The
pledge and security interest described herein shall continue in effect to secure
all Obligations from time to time incurred or arising unless and until all
Obligations have been indefeasibly paid and satisfied in full.
3. Pledgor
hereby represents and warrants that:
1
(a)
Except as pledged
herein, Pledgor has not sold, assigned, transferred, pledged or granted any
option or security interest in or otherwise hypothecated the Pledged Collateral
in any manner whatsoever and the Pledged Collateral is pledged herewith free
and
clear of any and all liens, security interests, encumbrances, claims, pledges,
restrictions, legends, and options;
(b) Pledgor
has the full capacity to execute, deliver, and perform under this Agreement
and
to pledge the Pledged Collateral hereunder;
(c) This
Agreement constitutes the valid and binding obligation of Pledgor, enforceable
in accordance with its terms, and the pledge of the Pledged Collateral referred
to herein is not in violation of and shall not create any default under any
agreement, undertaking or obligation of Pledgor;
(d) The
Pledged Collateral has been duly and validly authorized and issued by the issuer
thereof and such Pledged Collateral is fully paid for and
non-assessable;
(e) Pledgor
is pledging hereunder all of the Pledgor’s interest and ownership in all the
entities listed on Schedule I attached hereto;
(f) Contemporaneously
with the execution hereof, Pledgor is delivering to Secured Party all stock
certificate, representing or evidencing the Pledged Collateral in the
corporations listed on Schedule I, accompanied by duly executed instruments
of
transfer or assignments in blank, to be held by Secured Party in accordance
with
the terms hereof;
(g) Pledgor
hereby confirms that Secured Party is authorized to file all UCC-1 financing
statements that are required under the UCC (as defined below) to perfect any
security interest granted hereunder;
(h) Pledgor
has delivered to each corporation and limited liability company on Schedule
I
attached hereto, a Pledge Instruction, substantially in the form of Exhibit
A
attached hereto, and has caused such corporation and/or limited liability
company to register the security interest granted hereunder on its books and
records and to deliver to Secured Party an Acknowledgment of Registration
Statement, substantially in the form of Exhibit B attached thereto; and
(i) Pledgor
will not permit any limited liability company identified on Schedule I to
certificate any of its membership interest or “opt into” Article 8 of the
Uniform Commercial Code.
4. If
an
Event of Default occurs that is continuing beyond any applicable cure period
under the Loan Agreement then Secured Party may, at its sole option, exercise
from time to time with respect to the Pledged Collateral any and/or all rights
and remedies available to it hereunder, under Article XI of the Loan Agreement
and/or under the Uniform Commercial Code as adopted from time to time in the
State of Maryland (“UCC”), or otherwise available to it, at law or in equity,
including, without limitation, the right to dispose of the Pledged Collateral
at
public or private sale(s) or other proceedings, and Pledgor agrees that, if
permitted by law, Secured Party or its nominee may become the purchaser at
any
such sale(s).
2
5. (a) In
addition to all other rights granted to Secured Party herein or otherwise
available at law or in equity, Secured Party shall have the following rights,
each of which may be exercised at Secured Party’s sole dis-cretion (but without
any obligation to do so), at any time following the occurrence of an Event
of
Default under the Loan Agreement, without further consent of Pledgor: (i)
transfer the whole or any part of the Pledged Collateral into the name of itself
or its nominee or to conduct a sale of the Pledged Collateral pursuant to the
UCC or pursuant to any other applicable law; (ii) vote the Pledged Collateral;
(iii) notify the persons obligated on any of the Pledged Collateral to make
payment to Secured Party of any amounts due or to become due thereon; and (iv)
release, surrender or exchange any of the Pledged Collateral at any time, or
to
compromise any dispute with respect to the same. Secured Party may proceed
against the Pledged Collateral, or any other collateral securing the
Obligations, in any order, and against Pledgor, as Borrower, and any other
obligor, jointly and/or severally, in any order to satisfy the Obligations.
Pledgor waives and releases any right to require Secured Party to first collect
any of the Obligations secured hereby from any other collateral of Pledgor,
as
Borrower, or any other party securing the Obligations under any theory of
marshalling of assets, or otherwise. All rights and remedies of Secured Party
are cumulative, not alternative.
(b) Pledgor
hereby irrevocably appoints Secured Party its attorney-in-fact, subject to
the
terms hereof, following the occurrence of an Event of Default under the Loan
Agreement, at Secured Party’s option: (i) to effectuate the transfer of the
Pledged Collateral on the books of the issuer thereof to the name of Secured
Party or to the name of Secured Party’s nominee, designee or assignee; (ii) to
endorse and collect checks payable to Pledgor representing distributions or
other payments on the Pledged Collateral; and (iii) to carry out the terms
and
provisions hereof.
6. The
proceeds of any Pledged Collateral received by Secured Party at any time,
whether from the sale of Pledged Collateral or otherwise, may be applied to
or
on account of the Obligations and in such order as Secured Party may elect.
In
addition, Secured Party may, in its discretion, apply any such proceeds to
or on
account of the payment of all reasonable costs, fees and expenses (including,
without limitation, reasonable attorneys’ fees) which may be incurred by Secured
Party.
7. Pledgor
recognizes that Secured Party may be unable to effect, or may effect only after
such delay which would adversely affect the value that might be realized from
the Pledged Collateral, a public sale of all or part of the Pledged Collateral
by reason of certain prohibitions contained in the Securities Act of 1933,
as
amended (“Securities Act”) and may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such securities for their own account, for investment
and not with a view to the distribution or resale thereof. Pledgor agrees that
any such private sale may be at prices and on terms less favorable to Secured
Party or the seller than if sold at public sales, and therefore recognizes
and
confirms that such private sales shall not be deemed to have been made in a
commercially unreasonable manner solely because they were made privately.
Pledgor agrees that Secured Party has no obligation to delay the sale of any
such securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities
Act.
3
8. In
the
event that any reclassification, readjustment, conversion into common stock,
or
other change is made or declared in the capital structure of any entity listed
on Schedule I attached hereto or Pledgor acquires or in any other manner
receives additional shares or interests in any such corporation and/or limited
liability company, or any option included within the Pledged Collateral is
exercised, any and all new, substituted or additional interest, or other
securities, issued by reason of any such change or exercise, shall be delivered
to and held by Secured Party under the terms hereof in the same manner as the
Pledged Collateral originally pledged hereunder. No distribution may be paid
to
or retained by Pledgor unless expressly permitted in the Loan
Agreement.
9. So
long
as no Default or Event of Default has occurred under the Loan Agreement, and,
until Secured Party notifies Pledgor in writing of the exercise of its rights
hereunder, Pledgor shall retain the sole right to vote the Pledged Collateral
and exercise all rights of ownership with respect to all corporate or company
questions for all purposes not inconsistent with the terms hereof.
10. Secured
Party shall have no obligation to take any steps to preserve, protect or defend
the rights of Pledgor or Secured Party in the Pledged Collateral against other
parties. Secured Party shall have no obligation to sell or otherwise deal with
the Pledged Collateral at any time for any reason, whether or not upon request
of Pledgor, and whether or not the value of the Pledged Collateral, in the
opinion of Secured Party or Pledgor, is more or less than the aggregate amount
of the Obligations secured hereby, and any such refusal or inaction by Secured
Party shall not be deemed a breach of any duty which Secured Party may have
under law to preserve the Pledged Collateral. Except as provided by applicable
law, no duty, obligation or responsibility of any kind is intended to be
delegated to or assumed by Secured Party at any time with respect to the Pledged
Collateral.
11. To
the
extent Secured Party is required by law to give Pledgor prior notice of any
public or private sale, or other disposition of the Pledged Collateral, Pledgor
agrees that ten (10) days prior written notice to Pledgor shall be a
commercially reasonable and sufficient notice of such sale or other intended
disposition. Pledgor further recog-nizes and agrees that if the Pledged
Collateral, or a portion thereof, threatens to decline speedily in value or
is
of a type customari-ly sold on a recognized market, Pledgor shall not be
entitled to any prior notice of sale or other intended disposition.
12. Pledgor
shall indemnify, defend and hold harmless Secured Party from and against any
and
all claims, losses and liabilities resulting from any breach by Pledgor of
Pledgor’s representations and covenants under this Agreement.
13. For
purposes hereof, Pledgor hereby waives notice of (a) acceptance of this
Agreement, (b) the existence and incurrence from time to time of any Obligations
under the Loan Agreement, (c) the existence of any Event of Default, the making
of demand, or the taking of any action by Secured Party under the Loan Agreement
and (d) demand and default hereunder.
14. Pledgor
hereby consents and agrees that Secured Party may at any time or from time
to
time pursuant to the Loan Agreement (a) extend or change the time of payment
and/or the manner, place or terms of payment of any and all Obligations, (b)
supplement, amend, restate, supersede, or replace the Loan Agreement or any
other Loan Documents, (c) renew, extend, modify, increase or
4
decrease
loans and extensions of credit under the Loan Agreement, (d) modify the terms
and conditions under which loans and extensions of credit may be made under
the
Loan Agreement, (e) settle, compromise or grant releases for any Obligations
and/or any person or persons liable for payment of any Obligations, (f)
exchange, release, surrender, sell, subordinate or compromise any collateral
of
any party now or hereafter securing any of the Obligations and (g) apply any
and
all payments received from any source by Secured Party at any time against
the
Obligations in any order as Secured Party may determine; all of the foregoing
in
such manner and upon such terms as Secured Party may determine and without
notice to or further consent from Pledgor and without impairing or modifying
the
terms and conditions of this Agreement which shall remain in full force and
effect.
15. This
Agreement shall remain in full force and effect and shall not be limited,
impaired or otherwise affected in any way by reason of (a) any delay in making
demand on Pledgor for, or delay in enforcing or failure to enforce, performance
or payment of Pledgor’s Obligations, (b) any failure, neglect or omission on
Secured Party’s part to perfect any lien upon, protect, exercise rights against,
or realize on, any property of Pledgor or any other party securing the
Obligations, (c) any failure to obtain, retain or preserve, or the lack of
prior
enforcement of, any rights against any person or persons or in any property,
(d)
the invalidity or unenforceability of any Obligations or rights in any
Collateral under the Loan Agreement, (e) the existence of nonexistence of any
defenses which may be available to Borrower with respect to the Obligations,
or
(f) the commencement of any bankruptcy, reorganization, liquidation, dissolution
or receivership proceeding or case filed by or against Borrower.
16. Pledgor
covenants and agrees that Pledgor shall not, without the prior written consent
of Secured Party, sell, encumber or grant any lien, security interest or option
on or with respect to any of the Pledged Collateral.
17. Pledgor
hereby authorizes and instructs each issuer of the Pledged Collateral to comply
with any instruction received by it from Secured Party in writing that states
that an Event of Default has occurred and without any other or further
instructions from Pledgor, and Pledgor agrees that each such issuer shall be
fully protected in so complying.
18. Any
failure of or delay by Secured Party to exercise any right or remedy hereunder
shall not be construed as a waiver of the right to exercise the same or any
other right or remedy at any other time.
19. This
Agreement constitutes the entire agreement between the parties hereto regarding
the subject matter hereof and may be modified only by a written instrument
signed by Pledgor and Secured Party.
20. This
Agreement, and all matters arising out of or relating to this Agreement, is
made
in and shall be governed by and construed in accordance with the laws of the
State of Maryland, and the provisions hereof shall be deemed severable in the
event of the invalidity of any provision. Pledgor irrevocably consents to the
exclusive jurisdiction of the any state or federal court in the State of
Maryland in any and all actions and proceedings whether arising hereunder or
in
connection herewith. Pledgor irrevocably agrees to service of process by
certified mail, return receipt requested
5
to
the
address set forth on the signature page hereto unless Pledgor otherwise notifies
Secured Party in accordance with the terms hereof of a change in such
address.
21. All
communications which Secured Party may provide to Pledgor herein shall be sent
to Pledgor at the address set forth in the Loan Agreement, and will be delivered
in the same fashion as Section 13.4 of the Loan Agreement.
22. This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their respective successors and assigns.
23. PLEDGOR
AND SECURED PARTY EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION OF ANY KIND ARISING OUT OF OR RELATED TO
THIS
AGREEMENT, THE LOAN AGREEMENT, THE OBLIGATIONS OR THE PLEDGED
COLLATERAL.
24. SPECIAL
OREGON NOTICE. ORAL
AGREEMENTS OR ORAL COMMITMENTS TO (1) LOAN MONEY, (2) EXTEND CREDIT, (3) MODIFY
OR AMEND ANY TERMS OF LOAN DOCUMENTS, (4) RELEASE ANY GUARANTOR, (5) FOREBEAR
FROM ENFORCING REPAYMENT OF ANY LOAN OR THE EXERCISE OF ANY REMEDY UNDER LOAN
DOCUMENTS, OR (6) MAKE ANY OTHER FINANCIAL ACCOMMODATION PERTAINING TO ANY
LOAN
ARE ALL UNENFORCEABLE UNDER OREGON LAW.
[SIGNATURE
TO FOLLOW ON SEPARATE PAGE]
6
IN
WITNESS WHEREOF, this Collateral Pledge Agreement has been executed and
delivered as of the date first set forth above.
QUALMAX,
INC.,
a
Delaware
corporation
By:
/s/ Xxxx
Xxxxxx
Print
Name: Xxxx
Xxxxxx
Title:
President
7
EXHIBIT
A
Pledge
Instruction
BY
THIS
PLEDGE INSTRUCTION, dated as of the 30th day of March,
2007,
Qualmax, Inc. (“Pledgor”), hereby instructs New World Brands, Inc. (“Company”),
to register a pledge and security interest in, of and to all of the Pledgor’s
right, title and interest in Company now and hereafter owned by the Pledgor
(“Interests”) in favor of P&S Spirit, LLC (“Secured Party”).
1. Pledge
Instructions.
Company
is hereby instructed by the Pledgor to register all of the Pledgor’s right,
title and interest in and to all of the Pledgor’s Interests as subject to a
pledge and security interest in favor of Secured Party who, upon such
registration of pledge, shall become a registered pledgee of the Interests
with
all rights incident thereto.
2. Acknowledgment
of Registration Statement.
Company
is hereby instructed by Pledgor to promptly inform Secured Party of the
registration of the pledge by sending an Acknowledgment of Registration
Statement, substantially in the form of Exhibit B attached hereto, to Secured
Party at the address of 0000 Xxxxxxxxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX
00000, Attention: [__________________] with a copy to Pledgor at its address
set
forth in the Collateral Pledge Agreement.
3. Warranties
of the Pledgor.
Pledgor
hereby warrants that Pledgor has the power to originate this
instruction.
IN
WITNESS WHEREOF, Pledgor has caused this Pledge Instruction to be duly executed
and delivered as of the date first above written.
QUALMAX,
INC.
By:
/s/ Xxxx Xxxxxx
Print
Name: Xxxx
Xxxxxx
Title:
President
8
EXHIBIT
B
Acknowledgment
of Registration Statement
THIS
STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF THE TIME
OF
ISSUANCE. DELIVERY OF THIS STATEMENT, OF ITSELF, CONFERS NO RIGHTS ON THE
RECIPIENT. THIS STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT NOR A
SECURITY.
Qualmax,
Inc.
000
Xxxx
Xxxxx Xxxxxx
Xxxxxx,
XX 00000
Attention:
__________________
P&S
Spirit, LLC
0000
Xxxxxxxxxx Xxxxx Xxxx
Xxxxx
000
Xxxxxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxxx, M.D.
Telephone:
(000) 000-0000
FAX:
(000) 000-0000
On
the
30th day of March,
2007,
the
undersigned (“Company”), caused the pledge of all of the interests in the
Company owned by Qualmax, Inc., which as of the date hereof is Certificate
# 2,
evidencing 100 shares of the Series A preferred convertible stock in New World
Brands, Inc., in favor of P&S
Spirit, LLC, to
be
registered on the books and records of Company. To the knowledge of undersigned
(including, without limitation, any information which may appear on the
undersigned’s books and records) there are no other liens, restrictions or
adverse claims to which the interests identified herein are, or may be subject,
as of the date hereof.
NEW
WORLD BRANDS,
INC.
By:
/s/ Xxxx
Xxxxxx
Print
Name: Xxxx
Xxxxxx
Title:
President
9
SCHEDULE
I
Pledged
Collateral
The
following Pledged Collateral is hereby pledged by Pledgor to Secured Party
pursuant to the Collateral Pledge Agreement to which this Schedule is
attached:
| A. |
Pledged
Corporation
|
|
Name
of Entity
|
State
of Formation
|
Number
of Shares Pledged
|
Certificate
#
|
Category
of Stock Interests
|
Owner
of Interest
|
|
New
World Brands, Inc.
|
DE
|
100
|
Series
A Convertible Preferred
|
Pledgor
|
| B. |
Pledged
Membership Interests -
None
|
10
