COLLATERAL PLEDGE AGREEMENT (IP GEAR, LTD.)
Exhibit
10.5
(IP
GEAR, LTD.)
This
Collateral Pledge Agreement (“Agreement”) dated May 31, 2007, is made by
NEW WORLD BRANDS, INC., a Delaware corporation having its
principal place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(“Pledgor”) in favor of P&S SPIRIT, LLC, a Nevada limited
liability company, having its principal office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (“Secured Party”).
Background
A. To
induce Secured Party to extend credit to Pledgor (sometimes herein
referenced as “Borrower,”) as evidenced by that certain Credit Line 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”), and that certain Credit Line Note in the principal face amount of
One Million Fifty Thousand Dollars ($1,050,000.00) from Borrower payable
to the
order of Secured Party, 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:
(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) ▇▇▇▇▇▇▇
is the legal and beneficial owner of One Hundred Percent (100%) of the issued
and outstanding capital stock of the corporation identified on Schedule I
attached hereto;
(f) Pledgor
is pledging hereunder an amount equivalent to Sixty-Five Percent (65%) of
Pledgor’s interest and ownership in the corporation identified on Schedule I
attached hereto;
(g) Contemporaneously
with the execution hereof, Pledgor is delivering to Secured Party one or
more
stock certificates, representing or evidencing the Pledged Collateral in
the
corporation 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;
(h) 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;
(i) 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
(j) 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,
2
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).
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 discretion (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
3
necessary
to permit the issuer of such securities to register such securities for public
sale under the Securities Act.
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 recognizes and agrees that if the
Pledged Collateral, or a portion thereof, threatens to decline speedily in
value
or is of a type customarily 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, its managers, members,
officers, employees, agents, representatives, accountants, attorneys, and
their
respective successors and assigns, 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.
4
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 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.
5
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
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.
NEW
WORLD BRANDS,
INC.,
a
Delaware
corporation
By:______________________________
Print
Name:________________________
Title:_____________________________
7
EXHIBIT
A
Pledge
Instruction
BY
THIS
PLEDGE INSTRUCTION, dated as of the ___ day of May, 2007, New World Brands,
Inc.
(“Pledgor”), hereby instructs IP Gear, Ltd. (“Company”), to register a pledge
and security interest in, of and to sixty-five percent (65%) 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 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇,
M.D. 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.
NEW
WORLD BRANDS,
INC.
By:______________________________
Print
Name:________________________
Title:_____________________________
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.
New
World
Brands, Inc.
▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: M.
▇▇▇▇▇ ▇▇▇▇▇▇
P&S
Spirit, LLC
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇
▇▇▇▇▇▇, M.D.
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
FAX: (▇▇▇)
▇▇▇-▇▇▇▇
On
the
31st day of May, 2007, the undersigned (“Company”), caused the pledge of
sixty-five percent (65%) 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 convertible preferred stock in IP Gear, Ltd., 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.
IP
GEAR,
LTD.
By:
/s/ M. ▇▇▇▇▇
Kamrat________________________________________
Name:
M. ▇▇▇▇▇
Kamrat______________________________________
Title:
CEO_______________________________________
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
No.
%
of total outstanding
|
Category
of Stock Interests
|
Owner
of Interest
|
|
IP
Gear, Ltd.
|
Israel
|
65%
|
Pledgor
|
|
B.
|
Pledged
Membership Interests -
None
|
10