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Exhibit
10.4
COLLATERAL PLEDGE AGREEMENT
This
Collateral Pledge Agreement (“Agreement”) dated
May 31, 2007, is made by QUALMAX, INC ., a
Delaware corporation having its principal place of business at
340 West Fifth Avenue, Eugene, OR 97401
(“Pledgor”) in favor of P&S SPIRIT,
LLC , a Nevada limited liability company, having its
principal office at 2700 Lighthouse Point East, Suite 626,
Baltimore, MD 21224 (“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
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 the
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 and except as provided in Section 23 of this
Agreement, 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).
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 man
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