TERM LOAN AND SECURITY AGREEMENT

THIS TERM LOAN AND SECURITY AGREEMENT is entered into as of March 30 , 2007, between NEW WORLD BRANDS, INC. a Delaware corporation (“Borrower”), and P & S SPIRIT, LLC , a Nevada limited liability company (“Lender”).

WHEREAS, Borrower wish to obtain a term loan from Lender, and upon the terms and subject to the conditions set forth herein, Lender is willing to make the term loan to Borrower.

NOW, THEREFORE, Borrower and Lender, intending to be legally bound hereby, agree as follows:

1.1.   General Definitions .

As used herein, the following terms shall have the meanings herein specified:

“ Accounts ” shall mean all of Borrower’s “accounts” (as defined in the UCC), whether now existing or existing in the future, including, without limitation, all accounts receivable and all accounts created by or arising from all sales of goods or rendition of services made under Borrower’s legal name or Borrower’s trade names or styles or through Borrower’s divisions.

“ Affiliate ” shall mean any entity which directly or indirectly controls, is controlled by, or is under common control with, Borrower. For purposes of this definition, “control” shall mean the possession, directly or indirectly, of the power to (i) vote 20% or more of the securities having ordinary voting power for the election of directors of such Person, or (ii) direct or cause the direction of management and policies of a business, whether through the ownership of voting securities, by contract or otherwise and either alone or in conjunction with others or any group.

“ Anti-Terrorism Laws ” shall mean any statute, treaty, law (including common law), ordinance, regulation, rule, order, opinion, release, injunction, writ, decree or award of any Official Body relating to terrorism or money laundering, including Executive Order No. 13224 and the USA Patriot Act.

“ Asset Disposition ” shall mean any disposition (other than a disposition of Inventory in the ordinary course of Borrower’s business) of any existing or future Property of Borrower.

“ Business Day ” shall mean any day other than a Saturday, a Sunday, a legal holiday or a day on which banking institutions are authorized or required by law or other governmental action to

“ Capital Stock ” shall mean (i) in the case of a corporation, capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited liability company, membership interests and (v) any other equity interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“ Casualty Loss ” shall have the meaning given to such term in Section 7.7 .

“ Closing ” shall mean the consummation of the making of the Loan by Lender to Borrower under this Agreement.

“ Closing Date ” shall mean the date on which the Closing occurs.

“ Collateral ” shall mean any and all rights and interests in or to Property (including leasehold improvements) of Borrower, whether now owned or hereafter acquired, pledged from time to time as security for the Obligations pursuant to this Agreement or any of the other Loan Documents.

“ Contractual Obligations ” shall mean, with respect to any Person, any term or provision of any securities issued by such Person, or any indenture, mortgage, deed of trust, contract, undertaking, document, instrument or other agreement to which such Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

“ Control Agreement ” shall mean an agreement, in form and substance satisfactory to Lender, among Borrower, a Depository Institution and Lender pursuant to which such Depository Institution agrees, inter   alia , to transfer all funds of Borrower maintained in any deposit account with that Depository Institution to the control of Lender.

“ Default ” shall mean an event, condition or default which, with the giving of notice, the passage of time or both would be an Event of Default.

“ Depository Institution shall mean each depository institution where Borrower maintains a bank account and which institutions are set forth on Schedule 6.26 , along with the numbers and title of each account maintained by Borrower at such institution.

“ Event(s) of Default ” shall have the meaning provided for in Article XI .

“ Executive Order No. 13224 ” shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

“ Expenses ” shall have the meaning given to such term in Section 13.6 .

“ Excluded Taxes ” shall meaning given to such term in Section 2.7(a) .

“ Financials ” shall have the meaning given to such term in Section 6.5 .

“ Financial Statements ” shall mean the Financial Statements Borrower are obligated to deliver pursuant to Section 7.1 of this Agreement.

“ GAAP ” shall mean generally accepted accounting principles in the United States of America, as in effect on the date hereof and applied on a consistent basis with the Financials.

“ Governmental Authority” shall mean any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.

“ Guarantor ” shall mean M. David Kamrat, Qualmax, Inc., and any other Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations; “Guarantors” means collectively all such Persons.

“ Guaranty ” shall mean any guaranty of the obligations of Borrowers executed by a Guarantor in favor of Agent for its benefit and for the ratable benefit of Lender.

“ Highest Lawful Rate ” shall mean, at any given time during which any Obligations shall be outstanding hereunder, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness under this Agreement, under the laws of the State of Maryland (or the law of any other jurisdiction whose laws may, by order of court, be mandatorily applicable notwithstanding other provisions of this Agreement and the other Loan Documents), in any case after taking into account, to the extent permitted by applicable law, any and all relevant payments or charges under this Agreement and any other Loan Documents executed in connection herewith, and any available exemptions, exceptions and exclusions.

" Indebtedness " of a Person at a particular date shall mean all obligations of such Person which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise) and in any event, without limitation by reason of enumeration, shall include all indebtedness, debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates of such indebtedness, and all indebtedness secured by a Lien on assets owned by such Person, whether or not such indebtedness actually shall have been created, assumed or incurred by such Person. Any indebtedness of such Person resulting from the acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so created, assumed or incurred.

“ Inventory ” shall mean all of Borrower’s inventory, including without limitation, (i) all raw materials, work in process, parts, components, assemblies, supplies and materials used or consumed in Borrower’s business; (ii) all goods, wares and merchandise, finished or unfinished, held for sale or lease or leased or furnished or to be furnished under contracts of service; and (iii) all goods returned to or repossessed by Borrower.

“ Investment ” in any Person shall mean (i) the acquisition (whether for cash, property, services, assumption of Indebtedness, securities or otherwise, but exclusive of the acquisition of inventory, supplies, equipment and other property or assets used or consumed in the ordinary course of business of the applicable Borrower and Capital Expenditures not otherwise prohibited hereunder) of assets, shares of Capital Stock, bonds, notes, debentures, partnership, joint ventures or other ownership interests or other securities of such Person, or (ii) any other capital contribution to or investment in such Person. In determining the aggregate amount of Investments outstanding at any particular time, (a) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (b) there shall be deducted in respect of any Investment any cash amounts received as earnings on such Investment, whether as dividends, interest or otherwise; and (c) there shall not be deducted from or included in, as applicable, the aggregate amount of Investments any decrease or increase, as applicable, in the market value thereof.

“ Lien(s) ” shall mean any lien, charge, trust, pledge, security interest, deed of trust, mortgage, assignment or other claim or encumbrance of any kind or nature upon any interest in Property.

“ Loan ” shall mean the Term Loan provided for in Section 2.1 of this Agreement.

“ Loan Documents ” shall mean, collectively, this Agreement, the Note, the Guarantees, the Security Documents and all other documents, agreements, instruments, opinions and certificates executed and delivered in connection herewith or therewith, as the same may be modified, amended, extended, restated or supplemented from time to time.

“ Lockbox Account ” shall have the meaning given to such term in Section 2.5(b) .

“ Material Adverse Change ” shall mean a material adverse change in (a) the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrower, (b) the Collateral, (c) Borrower’s ability to perform its obligations under the Loan Documents, or (d) the validity, enforceability or availability of rights and remedies of Lender hereunder, in each case as determined by Lender in its sole but reasonable discretion.

“ Material Adverse Effect ” shall mean a material adverse effect on (a) the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrower, (b) the Collateral, (c) Borrower’s ability to perform its respective obligations under the Loan Documents, or (d) the validity, enforceability or availability of rights and remedies of Lender

“ Material Contract ” shall mean any contract or other arrangement, whether written or oral, to which a Borrower is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto could reasonably be expected to have a Material Adverse Effect.

“ Maturity Date ” shall mean January 2, 2009.

“ Net Cash Proceeds ” shall mean the aggregate cash proceeds received by Borrower in respect of any Asset Disposition, net of (a) direct costs (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and (b) taxes paid or payable as a result thereof; it being understood that “Net Cash Proceeds” shall include, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received by Borrower in any Asset Disposition.

“ Note ” shall mean the Term Note payable to the order of Lender, evidencing the Loan.

“ Obligations ” shall mean the Loan, any other loans and advances or extensions of credit made or to be made at any time by Lender to Borrower, or to others for Borrower’s account in each case pursuant to the terms and provisions of this Agreement, or any other Loan Document, together with interest thereon (including interest which may accrue as post-petition interest in connection with any bankruptcy or similar proceeding) and, expenses, liabilities and obligations of every kind or nature which may at any time be owing by Borrower to Lender pursuant to this Agreement, any other Loan Document or otherwise, whether now in existence, hereafter arising or incurred from time to time by Borrower, and all expenses incurred at any time by Lender, as well as expenditures to protect, preserve or defend any Collateral and Lender’s rights hereunder or in the Collateral, all of the foregoing, whether unsecured or secured, due or to become due, absolute or contingent, joint or several, matured or unmatured, direct or indirect, related or unrelated and whether Borrower is liable to Lender for such indebtedness as principal, surety, endorser, guarantor or otherwise.

“ Official Body ” shall mean any national, federal, state, local or other government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether domestic or foreign.

“ Permitted Indebtedness ” shall mean the Indebtedness scheduled on Schedule 1.1 to this Agreement.

“ Permitted Investments ” shall mean:

(i)   interest-bearing demand or time deposits (including certificates of deposit) which are insured by the Federal Deposit Insurance Corporation (“FDIC”) or a similar federal insurance program; provided , however , that Borrower may, in the ordinary course of their business,

(ii)   Investments existing on the Closing Date and set forth on Schedule 1.2 attached hereto;

(iii)   marketable, direct obligations of the United States of America, its agencies and instrumentalities maturing within 365 days of the date of purchase;

(iv)   commercial paper issued by corporations, each of which shall have a net worth of at least $100,000,000, and each of which conducts a substantial part of its business in the United States of America, maturing within 270 days from the date of the original issue thereof, and which at the time of acquisition has the highest rating by Moody’s Investors Service, Inc. or Standard and Poor’s Corporation;

(v)   bankers’ acceptances, and certificates of deposit maturing within 365 days of the date of purchase which are issued by, or time deposits maintained with, an eligible institution having capital, surplus and undivided profits totaling more than $100,000,000 and which have the highest rating by Moody’s Investors Service, Inc. or Standard and Poor’s Corporation; and

(vi)   money market or similar funds that invest primarily in the types of investments referred to in clauses (i), (iii), (iv) and (v) above.

“ Permitted Liens ” shall mean:

(i)   Liens set forth on Schedule 1.3 attached hereto;

(ii)   Liens on fixed assets securing Indebtedness (including Capital Leases and purchase money Indebtedness); provided that (A) any such Lien attaches only to the assets to be financed and (B) a description of the assets so financed is furnished to Lender;

(iii)   Liens of warehousemen, mechanics, materialmen, workers, repairmen, fillers, packagers, processors, common carriers, landlords and other similar Liens arising by operation of law or otherwise, not waived in connection herewith, for amounts that are not yet due and payable or which are being diligently contested in good faith by Borrower by appropriate proceedings, provided that in any such case an adequate reserve is being maintained by Borrower for the payment of same;

(iv)   Liens for taxes, assessments or other governmental charges not yet due and payable or which are being diligently contested in good faith by Borrower by appropriate proceedings, provided that in any such case an adequate reserve is being maintained by Borrower for the payment of same in accordance with GAAP; and

(v)   deposits or pledges to secure obligations under workmen’s compensation,

“ Person ” shall mean any individual, sole proprietorship, partnership, joint venture, limited liability entity, trust, unincorporated organization, association, corporation, institution, entity, or government (including any division, agency or department thereof), and, as applicable, the successors, heirs and assigns of each.

“ Prime Rate ” shall mean the U.S. Prime Rate as published in the Money Rates section of The Wall Street Journal as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any borrower.

“ Propert y” shall mean all personal and real property of every kind and description (whether tangible or intangible) in which a Person has any right, title or interest.

“ Proprietary Rights ” shall have the meaning given to such term in Section 6.13 .

“ Security Documents ” shall mean any existing or future agreement or document granting, creating or conferring any Lien in favor of Lender securing all or any portion of the Obligations, including, without limitation, the Stock Pledge Agreement.

“ Stock Pledge Agreement ” shall mean that certain Stock Pledge Agreement of even date herewith from Qualmax, Inc. to Lender, pledging and granting to Lender a security interest and Lien in all shares of Capital Stock of Borrower held by Qualmax, Inc.

“ Subordinated Debt ” shall mean existing Indebtedness, if any, set forth and indicated as subordinated set forth on Schedule 1.1(e) hereto and unsecured Indebtedness hereafter incurred by Borrower, which, in each case, is expressly subordinated and made junior to the payment and performance in full of the Obligations and under a written agreement acceptable to Lender.

“ Subordination Agreements ” shall mean the agreements entered into from time to time by and among Borrower, Lender, and a third party creditor of Borrower providing for the subordination of such third party creditor’s claims to those of Lender on terms and conditions satisfactory to Lender.

“ Subsidiary ” shall mean, as to any Person, (a) any corporation more than 50% of whose Capital Stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries, (b) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than a 50% interest in the total capital, total income and/or total ownership interests of such entity at any time and (c) any partnership in which such Person is a general partner.

“ Tangible Net Worth ” shall mean the value of Borrower’s total assets (including leaseholds and leasehold and reserves against assets but excluding goodwill, patents, trademarks, trade names, organization expense, unamortized debt discount and expense, capitalized or deferred research and development costs, deferred marketing expenses,, and other like intangibles, and monies due from affiliates, officers, directors, employees, shareholders, members or managers of Borrower) less total liabilities, including but not limited to accrued and deferred income taxes, but excluding the non-current portion of Subordinated Debt.

“ Taxes ” shall mean any federal, state, local or foreign income, sales, use, transfer, payroll, personal, property, occupancy, franchise or other tax, levy, impost, fee, imposition, assessment or similar charge, together with any interest or penalties thereon.

“ Third-Party Loan ” shall mean any loan, advance, deposit or extension of credit made or granted by Borrower to any other Person.

“ UCC ” shall mean the Uniform Commercial Code as in effect from time to time in the State of Maryland.

“ USA Patriot Act ” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

“ Voting Stock ” shall mean, with respect to any Person, Capital Stock issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency.

1.2.   Accounting Terms . Unless otherwise defined or specified herein, all accounting terms shall be construed herein and all accounting determinations for purposes of determining compliance with Article IX hereof and otherwise to be made under this Agreement shall be made in accordance with GAAP applied on a basis consistent in all material respects with the Financials. All Financial Statements required to be delivered hereunder from and after the Closing Date and all financial records shall be maintained in accordance with GAAP as in effect as of the date of the Financials. If GAAP shall change from the basis used in preparing the Financials, the certificates required to be delivered pursuant to Section 7.1(c) demonstrating compliance with the covenants contained herein shall include calculations setting forth the adjustments necessary to demonstrate how Borrower are in compliance with the financial covenants based upon GAAP as in effect on the Closing Date. If Borrower shall change their method of inventory accounting, all calculations necessary to determine compliance with the covenants contained herein shall be made as if such method of inventory accounting had not been so changed.

1.3.   Other Definitional Terms . Terms not otherwise defined herein which are defined in the UCC shall have the meanings given them in the UCC. It is the specific intent of Borrower and

2.1.   Term Loan . Subject to the terms and conditions of this Agreement, Lender will make a Term Loan to Borrower in the sum of One Million Dollars ($1,000,000.00) . The Term Loan shall be advanced on the Closing Date and shall be evidenced by the Note in substantially the form attached hereto as Exhibit A.

2.2.   Repayment of Loan . The Loan shall be due and payable on or before the Maturity Date, subject to mandatory prepayments or acceleration as herein provided. Borrower shall pay principal, interest, and all other amounts payable hereunder without any deduction whatsoever, including, but not limited to, any deduction for any setoff or counterclaim, all of which are hereby waived. 

2.3.   Use of Proceeds . Borrower shall apply the proceeds of Advances to (i) repay existing Indebtedness owed by Borrower’s parent, Qualmax, Inc., to Bank of America, N.A., and (ii) pay fees and expenses relating to this transaction.

2.4.   Mandatory Prepayments .

(a)   Casualty Loss . To the extent of cash proceeds received in connection with a Casualty Loss, Borrower shall (immediately upon receipt of any such proceeds) prepay the Loan in an amount equal to 100% of such cash proceeds if Lender shall have elected, at its option, to apply the proceeds realized from such Casualty Loss to the prepayment of the Loan.

(b) Asset Dispositions and Collections . Contemporaneously with the occurrence of any Asset Disposition, Borrower shall, at Lender’s option, prepay the Loan in an aggregate amount equal to the net cash proceeds.

2.5.   Payments and Computations .

(a)   Borrower shall make each payment hereunder and under the Note not later than 2:00 P.M. on the day when due. Any payment received after 2:00 P.M. (including any payment in full of the Obligations) shall be deemed received on the immediately following Business Day. All prepayments of every kind on account of the Loan shall be first applied to accrued and unpaid interest and then to the principal balance thereof.

(b)   At Lender’s request, all proceeds of Collateral shall be deposited by Borrower into either (i) a lockbox account or a blocked account (“Lockbox Account”) established at a Depository Institution, pursuant to a Control Agreement. Lender assumes no responsibility for such blocked account arrangement, including any claim or accord and satisfaction or release with respect to deposits accepted by any Depository Institution thereunder. Borrower hereby agrees to execute such agreements as Lender may require to establish the Lockbox Account.

3.1.   Interest on Loans . Interest on the Loan shall be paid in arrears on the first day of each calendar month commencing May 1, 2007, at the interest rate equal to the Prime Rate plus two percent (2%) per annum (subject to adjustment in the manner provided herein and in the Note).

3.2.   Interest After Event of Default . Interest on the amount of principal under the Loan outstanding as of the date an Event of Default occurs, and at all times thereafter until the earlier of the date upon which (a) all Obligations have been paid and satisfied in full or (b) such Event of Default shall have been cured or waived, shall be payable on demand at a rate equal to the rate or rates at which the Loan is then bearing interest, plus 200 basis points. In the event of any change in said applicable interest rate, the rate hereunder shall change, effective as of the day the applicable interest rate changes, so as to remain 200 basis points above the then applicable interest rate. To the extent permitted by applicable law, interest shall accrue at the applicable contract rate(s) provided for in this Agreement notwithstanding the occurrence of any Event of Default, acceleration of the Obligations, the entry of any judgment, or the commencement of any bankruptcy, reorganization, receivership or other proceedings.

4.1.   Description . As security for the payment of the Obligations, and satisfaction by Borrower of all covenants and undertakings contained in this Agreement and the other Loan Documents, Borrower hereby assigns and grants to Lender a continuing first (subject only to any Permitted Liens, if any) Lien on and security interest in, upon and to all of Borrower’s personal

(a)   Accounts - All of Borrower’s now owned and hereafter acquired, created, or arising Accounts;

(b)   Inventory - All of Borrower’s now owned or hereafter acquired Inventory of every nature and kind, wherever located;

(c)   General Intangibles - All of Borrower’s now owned and hereafter acquired, created or arising General Intangibles of every kind and description, including, without limitation, customer lists, choses in action, claims, books, records, goodwill, patents and patent applications, copyrights, trademarks, tradenames, service marks, tradestyles, trademark applications, trade secrets, contracts, contract rights, royalties, licenses, franchises, deposits, license, franchise and royalty agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies including without limitation, credit insurance and key man life insurance policies, and computer informa-tion, software, records and data;

(d)   Equipment - All of Borrower’s now owned and hereafter acquired Equipment, including, without limitation, machinery, vehicles, furniture and Fixtures, wherever located, and all replacements, parts, accessories, substitutions and additions thereto;

(e)   Deposit Accounts - All of Borrower’s now existing and hereafter acquired or arising Deposit Accounts, reserves and credit balances of every nature, wherever located, and all documents and records associated therewith;

(f)   Property in Lender’s Possession - All personal property of Borrower, now or hereafter in the possession of Lender;

(g)   Investment Property - All of Borrower’s now owned or hereafter acquired Investment Property of every kind;

(h)   Letter of Credit Rights - All of Borrower’s now owned or hereafter acquired Letter of Credit Rights;

(i)   Commercial Tort Claims - All of Borrower’s now owned or hereafter acquired Commercial Tort Claims;

(j)   Other Property - All of Borrower’s now owned or hereafter acquired or created Instruments and other notes receivable, Goods, Chattel Paper, Documents (including bills of lading, warehouse receipts and other documents of title), Payment Intangibles, guarantees, Supporting Obligations, letters of credit, rights of rescission, stoppage in transit, replevin, and reclamation, and returned, reclaimed and repossessed goods; and

(k)   Proceeds - The Proceeds (including, without limitation, insurance proceeds),

4.2.   Lien Documents . At Closing, and thereafter from time to time as Lender deems necessary, Borrower shall execute and/or deliver to Lender or authorize, as applicable, the following (all in form and substance satisfactory to Lender): 

(a)   Financing Statements - Financing statements, which Lender may file in any jurisdiction where any Collateral is or may be located and in any other jurisdiction that Lender deems appropriate; and

(b)   Other Agreements - Any other agreements, documents, instruments and writings, including, without limitation, trademark , patent and/or copyright security agreements and amendments or supplements thereto, as may be required by Lender to evidence, create, perfect or protect Lender’s Liens and security interests in the Collateral.

4.3.   Other Actions . Borrower will defend the Collateral against all Liens (other than Permitted Liens), claims and demands of all Persons at any time claiming the same or any interest therein. Borrower agrees to comply with the requirements of all state and federal laws and requests of Lender in order for Lender to have and maintain a valid and perfected first security interest (subject only to Permitted Liens, if any) in the Collateral including, without limitation, executing such documents as Lender may require to obtain Control (as defined in the UCC) over all Letter of Credit Rights, Deposit Accounts and Investment Property. Lender is hereby authorized by Borrower to file any financing statements covering the Collateral or an amendment that adds collateral covered by a financing statement or an amendment that adds a debtor to a financing statement, in each case whether or not Borrower’s signature appears thereon. Borrower hereby authorizes Lender to file financing statements and amendments to financing statements describing the Collateral in any filing office as Lender, in its reasonable discretion, may determine, including financing statements listing “All Assets” in the collateral description therein, as well as language indicating that the acquisition by a third party of any right, title or interest in or to the Collateral without Lender’s consent, shall be a violation of Lender’s rights. In addition to the foregoing, Borrower shall perform all further acts that may be lawfully and reasonably required by Lender to secure Lender and effectuate the intentions and objects of this Agreement, including, but not limited to, the execution and delivery of continuation statements, amendments to financing statements, security agreements, contracts and any other documents required hereunder. Borrower shall use commercially reasonable efforts to obtain acknowledgment and waiver agreements from the owner or lessor of any warehouse or distribution location and Borrower shall endeavor to obtain acknowledgment and waiver agreements from the owner or lessor of each showroom location. At Lender’s request, Borrower shall immediately deliver to Lender all documents or items for which Lender must receive possession to obtain and/or maintain perfected security interests, including without limitation, all notes, letters of credit, certificates and documents of title, chattel paper, warehouse receipts, instruments, and any other similar Collateral. 

4.4  Searches and Certificates .

Borrower shall, prior to or at Closing, and thereafter as Lender may determine from time to time, at Borrower’s expense, obtain (and Lender may also do so, at its option, but at Borrower’s expense from time to time) the following searches (the results of which are to be consistent with the warranties made by Borrower in this Agreement in any other Loan Document):

(a)   UCC searches with the Secretary of State of Borrower’s jurisdiction of organization;

(b)   Judgment, federal tax lien and state tax lien searches, in Borrower’s jurisdiction of organization and each state or other jurisdiction where Borrower maintains its executive office, a place of business, or any Property; and

(c)   Searches of ownership and Lien status of intellectual property in the appropriate governmental offices.

The obligation of Lender to extend the Loan shall be subject to the satisfaction, on or prior to the Closing Date, of the following conditions precedent (all agreements and documents from Borrower or any other Person to be in form and substance acceptable to Lender, in its sole discretion):

(a)   Executed Loan Documents . Receipt by Lender of duly executed copies of: this Agreement, the Note, the Security Documents, and all other Loan Documents.

(b)   Organizational Documents . Receipt by Lender of the following:

(i)   Charter Documents . Copies of the articles or certificates of incorporation or other charter documents of Borrower certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation and certified by a secretary or assistant secretary of Borrower to be true and correct as of the Closing Date.

(ii)   Bylaws/Operating Agreement . A copy of the bylaws or operating agreement, as applicable, of Borrower certified by a secretary or assistant secretary of Borrower to be true and correct as of the Closing Date.

(iii)   Resolutions . Copies of resolutions or unanimous written consent of the board of directors or members, as applicable, of Borrower approving and adopting the Loan Documents, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of Borrower to be true and correct and in force and effect as of the Closing Date.

(iv) Good Standing . Copies of a certificate of good standing, existence or its equivalent with respect to Borrower certified as of a recent date by the appropriate Governmental Authorities of the state or other jurisdiction of organization and each other jurisdiction in which the failure to so qualify and be in good standing could reasonably be expected to have a Material Adverse Effect.

(v)   Incumbency . An incumbency certificate of Borrower certified by a secretary or assistant secretary of Borrower to be true and correct as of the Closing Date.

(c)   Financial Statements . Receipt by Lender of Borrower’s preliminary, unaudited Financial Statements for the fiscal year ending December 31, 2006 and such other information relating to Borrower as Lender may reasonably require.

(d)   Opinions of Counsel . Receipt by Lender of an opinion, or opinions (which shall cover, among other things, authority, legality, validity, binding effect, enforceability, absence of conflict with laws, organizational documents, and attachment and perfection of liens), satisfactory to Lender, addressed to Lender and dated the Closing Date, from legal counsel to Borrower.

(e)   Personal Property Collateral . Lender shall have received duly authorized or, if required executed, UCC financing statements and other lien documents for filing including all necessary documents (including lien termination documents by any existing lender) to perfect Lender’s security interest in the Collateral, all as may be required by Lender.

(f)   Priority of Liens . Lender shall have received satisfactory evidence that (i) Lender holds a perfected Lien on all Collateral and (ii) none of the Collateral is subject to any other Liens other than Permitted Liens.

(g)   Evidence of Insurance . Receipt by Lender of copies of insurance policies or certificates of insurance (on Acord form 27) of Borrower evidencing liability and casualty insurance meeting the requirements set forth in the Loan Documents, including, without limitation, naming Lender as loss payee (as to property and casualty coverage) and as additional insured (as to liability coverage).

(h)   Consents . Receipt by Lender of evidence that all governmental, shareholder, member and third party consents and approvals required in connection with the transactions contemplated hereby and expiration of all applicable waiting periods without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on such transactions or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable which in the judgment of Lender could have such effect.

(i)   Fees and Expenses . Payment by Borrower of all fees and Expenses owed to Lender.

(j) Other . Receipt by Lender of such other documents, instruments, agreements or information as are required to be provided herein or under any other Loan Documents or as may otherwise be or have been requested by Lender.

In order to induce Lender to enter into this Agreement and to make available the Loan contemplated hereby, Borrower hereby represents and warrants to Lender.

6.1.   Organization and Qualification . Borrower (i) is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation or organization, (ii) has the power and authority to own its Property and assets and to transact the businesses in which it is presently, or proposes to be, engaged, and (iii) is duly qualified and is authorized to do business and is in good standing in every jurisdiction in which the failure to be so qualified could reasonably be expected to have a Material Adverse Effect.

6.2.   Liens . There are no Liens in favor of any Person with respect to any Property of Borrower other than Permitted Liens. 

6.3.   No Conflict . The execution and delivery by Borrower of this Agreement and each of the other Loan Documents executed and delivered in connection herewith and the performance of the obligations of Borrower hereunder and thereunder and the consummation by Borrower of the transactions contemplated hereby and thereby: (i) are within the powers of Borrower; (ii) are duly authorized by the Board of Directors of Borrower and, if necessary, its stockholders or members; (iii) are not in contravention of the terms of the articles or certificate of incorporation or bylaws of Borrower or of any Contractual Obligations; (iv) do not require the consent, registration or approval of any Governmental Authority or any other Person; (v) do not contravene any statute, law, ordinance regulation, rule, order or other governmental restriction applicable to or binding upon Borrower; and (vi) will not, except as contemplated herein for the benefit of Lender, result in the imposition of any Liens upon any Property of Borrower under any existing indenture, mortgage, deed of trust, loan or agreement or other material agreement or instrument to which Borrower is a party or by which it or any of its Property may be bound or affected.

6.4.   Enforceability . The Agreement and all of the other Loan Documents are the legal, valid and binding obligations of Borrower, and are enforceable against Borrower in accordance with their terms.

6.5.   Financial Data. Borrower shall have furnished to Lender and Lender the following Financial Statements (the “Financials”): (i) the consolidated balance sheet of Borrower as of, and statements of income, retained earnings and changes in financial position for the fiscal year ended December 31, 2005, audited by independent certified public accountants, and (ii) the unaudited consolidated and consolidating balance sheet of Borrower as of, and statement of income, and retained earnings for the fiscal year ending December 31, 2006, prepared by the chief financial

6.6.   Locations of Offices, Records and Inventory . Borrower’s chief executive office and all other places of business (with a separate itemization for warehouse locations) are set forth in Schedule 6.6 hereto, and the books and records of Borrower and all chattel paper and all records of accounts are located at the chief executive offices of Borrower. There is no address in which Borrower has any Collateral other than the addresses as set forth on Schedule 6.6. Schedule 6.6 also contains a true, correct and complete list of (i) the legal names and addresses of each landlord, warehouseman, filler, processor and packer at which Inventory is stored, or equipment is located. None of the receipts received by Borrower from any warehouseman, filler, processor or packer states that the goods covered thereby are to be delivered to bearer or to the order of a named person or to a named person and such named person’s assigns.

6.7.   Business Names . Borrower has not used any legal or fictitious name during the five (5) years preceding the date hereof, other than the legal name shown on its Articles or Certificate of Incorporation or Articles, as it may be amended to the date hereof, delivered to Lender and those names as set forth on Schedule 6.7.

6.8.   Affiliates and Subsidiaries . There are no Affiliates or direct or indirect Subsidiaries of Borrower except as set forth on Schedule 6.8. No Borrower is a party to any partnership or joint venture except as set forth on Schedule 6.8. 

6.9.   Judgments or Litigation . Except as set forth on Schedule 6.9, there is no material (a) judgment, order, writ or decree outstanding against Borrower or (b) pending or, to the best of Borrower’s knowledge, threatened litigation, contested claim, governmental, administrative or regulatory investigation, arbitration, or governmental audit (for taxes or otherwise) or proceeding by or against Borrower. No judgment, order, writ, decree, pending or threatened litigation, contested claim, investigation, arbitration and governmental proceeding pertaining to Borrower (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect.

6.10.   Defaults . Borrower is not in default under any Contractual Obligations which default could reasonably be expected to have a Material Adverse Effect.

6.11.   Compliance with Law . Borrower has not violated or failed to comply with (including without limitation in the ownership and use of its Property and the conduct of its business) any statute, law, ordinance, regulation, rule or order of any foreign, federal, state or local government, or

6.12.   Compliance with Environme