--------------------------------------------------------------------------------

EXHIBIT 10.7
 
STOCK PLEDGE AGREEMENT
 
THIS STOCK PLEDGE AGREEMENT (“Pledge Agreement”) is made and entered into this
8th day of June, 2010, by and between Visualant, Incorporated (“Visualant” or
“Pledgor”), James M. Gingo (“Gingo” or “Secured Party”), and Brownstein, Rask,
Sweeney, Kerr, Grim, DeSylvia & Hay, LLP (“Pledgeholder”).
 
WHEREAS, Pledgor and Secured Party entered into a Stock Purchase Agreement dated
June 8, 2010 (the “Purchase Agreement”), pursuant to which Gingo sold to
Visualant, and Visualant purchased from Gingo, 100 shares of the common stock of
TransTech Systems, Inc. (“TTS”), constituting all of the issued and outstanding
stock of TTS; and
 
WHEREAS, as part of the consideration for the purchase of said TTS stock,
Visualant issued to Gingo a Promissory Note in the amount of Two Million Three
Hundred Thousand U.S. Dollars ($2,300,000) (the “Note”); and
 
WHEREAS, in order to provide additional security for the due performance by
Visualant of its obligations under the Note and the Purchase Agreement (the
“Obligations”), Visualant has agreed to enter into and agreed to cause TTS to
enter into a Security Agreement of even date hereof granting a security interest
to Pledgeholder in the assets of TTS (“Security Agreement”) and enter into this
Pledge Agreement granting a security interest in all of the shares of TTS stock
acquired by Visualant pursuant to the Purchase Agreement.
 
NOW, THEREOFRE, in consideration of the foregoing Recitals and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

1.           Pledge of Shares; Grant of Security Interest.  Pledgor hereby
pledges and assigns, and shall deliver to Kirkham E. Hay to be held by the
Pledgeholder for the benefit of Secured Party, one or more stock certificates
for one hundred (100) shares of the common stock of TTS owned by Pledgor (the
“TTS Shares”), duly endorsed in blank or with a duly executed stock power
attached.    In addition, the Pledgor grants a security interest to the Secured
Party in such shares and authorizes the Secured Party or the Pledgeholder to
file UCC financing statements for filing with respect to the TTS Shares and the
Pledgor hereby irrevocably authorizes and directs the Pledgeholder holding those
TTS Shares on behalf of the Pledgor and Secured Party, on receipt of a copy of
this Pledge Agreement, to hold the TTS Shares and all security entitlements
arising from them on behalf of, and subject to the instruction and control of,
the Secured Party until the Secured Party advises the Pledgeholder in writing
that the Secured Party has released its security interest in the TTS Shares.
 
2.           Right to Vote Shares; Dividends.  Until all Obligations are
fulfilled, Secured Party shall be entitled to vote the TTS Shares for all
purposes, including, but not limited to, voting for directors in his sole
discretion. With respect to voting the TTS Shares, this section constitutes an
irrevocable appointment of a proxy, coupled with an interest, which shall
continue until all Obligations secured under this Pledge Agreement are performed
in full. If at any time or from time to time, with respect to the TTS Shares,
the Pledgor receives or becomes entitled to receive any dividend or any other
distribution, whether in cash, securities or other property, for any reason,
including, without limitation, liquidation, stock split, spin-off, split-up,
reclassification, combination of shares, or the like, or in the event of any
reorganization, consolidation, or merger, the Pledgor shall immediately deliver
to the Secured Party all such dividends, including cash dividends, or other
distributions, in pledge, as additional security under this Pledge
Agreement.  The Pledgor shall immediately notify TTS to deliver all such cash,
dividends or distributions directly to the Secured Party.  The Secured Party may
endorse, in the name of the Secured Party or the Pledgor, any and all
instruments by which any payment on the Obligations may be made and may take any
action that the Secured Party may deem appropriate from time to time, in the
Secured Party’s name or in the name of Pledgor, to enforce collection of the
Obligations.  For this purpose, the Pledgor appoints the Secured Party as its
attorney-in-fact, under a power coupled with an interest, with full power of
substitution.  All dividends, distributions or other payments which are received
by a Pledgor contrary to the provisions of this section shall be received in
trust for the benefit of the Secured Party, shall be segregated from other
property or funds of such Pledgor and shall be forthwith paid over to the
Secured Party as collateral for the obligations of the Pledgor under the Note
and Purchase Agreement in the same form as so received (with any necessary
endorsement).
 
 
 
 
1

--------------------------------------------------------------------------------

 
 
 
3.           Recapitalization.  If at any time following the date of this Pledge
Agreement, a stock dividend, or other issuance of debt or equity securities is
approved and declared by the Board of Directors of TTS, or a stock split or
reverse stock split is effected with respect to the shares of stock of TTS, the
TTS Shares now subject to this Pledge Agreement shall be increased or decreased
proportionately, and all issued and outstanding TTS Shares are to be at all
times subject to this Pledge Agreement.
 
4.           Covenants Of Pledgor With Respect To TTS and the TTS Shares.  The
Pledgor acknowledges and agrees that under this Pledge Agreement Secured Party
has all voting rights in the TTS Shares.  Until all Obligations are paid in
full, satisfied and fulfilled, unless otherwise agreed in writing by the Secured
Party, to the extent that Pledgor has any legal or beneficial interest in the
TTS Shares, the Pledgor shall cooperate with Secured Party to cause TTS to:
 
(a)           Not amend its articles of incorporation or bylaws, or adopt a plan
of liquidation or dissolution;
 
(b)           Not pay any amounts as dividends, nor make any intercompany loans
or transfers of any nature or kind to any party, including, but not limited to,
accepting investments for TTS, borrowing funds, a loan or transfer or any other
intercompany transaction of any kind or nature from TTS to Pledgor;
 
(c)           Not increase or change the compensation, whether directly or
indirectly, of any person employed by TTS;
 
(d)           Not create, incur, assume, or suffer to exist any obligation for
borrowed money other than current accounts payable and similar current
liabilities incurred in the ordinary course of business from the date of this
Pledge Agreement;
 
 
 

 
 
2

--------------------------------------------------------------------------------

 

 
(e)           During any calendar year, not make capital expenditures (as
determined in accordance with generally accepted accounting principles) that
would exceed $__________ in the aggregate;
 
(f)           Not merge with or into or consolidate with any other corporation,
or sell, lease, transfer, or otherwise dispose of in a single transaction more
than one percent (1%) of its assets (other than in the ordinary course of
business);
 
(g)           Not issue or sell any shares of common stock or other equity
securities of TTS, any security convertible into or exchangeable for any common
stock or other equity securities of TTS, or any option, warrant, or other
instrument that obligates TTS to transfer or sell shares of common stock or
other equity securities of TTS; and
 
(h)           Maintain insurance in such amounts and against such liabilities
and hazards as is reasonable for the industry in which TTS operates.
 
Pledgor hereby grants Secured Party an Irrevocable Power of Attorney coupled
with an interest with respect to all operations and control of TTS.  Without
limiting the above grant, Pledgor agrees that Secured Party as an individual
will administer and control TTS and Pledgor agrees not to negotiate or execute
any documents, nor take any action whatsoever with respect to TTS without the
express written consent of Secured Party, which may be given in Secured Party’s
sole discretion.  Without limiting the generality of the foregoing, Secured
Party’s written consent shall be necessary in connection with any and all
actions, negotiations and documents with respect to TTS.  In the event of any
conflict between the instructions of Secured Party with respect to TTS or any
action to be taken TTS, Pledgor irrevocably consents and instructs that the
instructions of Secured Party will be followed.
 
The Pledgor further agrees that:  (a) The Pledgor shall not allow or grant any
other lien or security interest, legal or beneficial, with respect to the TTS
Shares or the assets of TTS except for the Security Agreement to Secured Party;
(b) The Pledgor shall procure, execute, and deliver from time to time any
endorsements, assignments, financing statements, and other writings deemed
necessary or appropriate by the Secured Party to perfect, maintain, and protect
the Secured Party’s security interest in the TTS Shares and its priority; and
(c) The Pledgor shall not transfer or attempt to transfer, whether by sale,
gift, or otherwise, any ownership interest in the TTS Shares without the Secured
Party’s prior written approval.
 
5.           Authorized Action By Secured Party; Proxy.  The Pledgor irrevocably
appoints the Secured Party as attorney-in-fact and grants the Secured Party a
proxy to do (but the Secured Party shall not be obligated and shall incur no
liability to the Pledgor or any third party for failure to do so), after and
during the continuance of an Event of Default (as defined in Section 6), any act
that the Pledgor is obligated by this Pledge Agreement to do and to exercise the
rights and powers that the Pledgor might exercise with respect to the TTS
Shares.  With respect to voting the TTS Shares, this section constitutes an
irrevocable appointment of a proxy, coupled with an interest, which shall
continue until all Obligations secured under this Pledge Agreement are performed
in full.
 
 

 
 
3

--------------------------------------------------------------------------------

 

 
6.           Default on Note.  Any one or more of the following events
constitutes an event of default (“Event of Default”):
 
(a)           The failure to pay within five (5) days after the due date any
amount due under the Note or the failure to perform any other obligation due
under the Note;
 
(b)           A breach of or the failure to perform any of the terms of this
Pledge Agreement, including, without limitation, the covenants contained in
Section 4;
 
(c)           The occurrence of a default under any agreement of Visualant
evidencing an obligation of Visualant to Secured Party or for borrowed money;
 
 (e)           Any representation or warranty by Pledgor whether oral or written
contains material misrepresentations or errors, and/or Pledgor violates any of
the representations, warranties or covenants in the Purchase Agreement or
breaches the Security Agreement;
 
(f)           Any of Pledgor’s own loans, guarantees, indemnifications, promises
or other debt liabilities to any third party or parties (1) become subject to a
demand of early repayment or performance due to a default on the part of
Pledgor; or (2) become due but are not capable of being repaid or performed in a
timely manner by Pledgor;
 
(g)           Any approval, license, permit or authorization of government
agencies that makes this Pledge Agreement enforceable, legal and effective is
withdrawn, terminated, invalidated or substantively changed;
 
(h)            (i)           Any other circumstances that may affect the ability
of Secured Party to exercise its right under the Pledge. For the absence of
doubt, any breach of any representations, warranties, covenants, or agreements
contained in the Purchase Agreement, the Note, this Pledge Agreement, or the
Security Agreement (individually or collectively) shall be an Event of Default
of all of the agreements.
 
7.           Remedies on Default.  On the occurrence of any Event of Default,
the Secured Party may, in the Secured Party’s sole discretion, with notice to
the Pledgor, and in addition to all other rights and remedies at law or in
equity or otherwise:
 
(a)           Declare the entire balance of the Note immediately due and
payable;
 
(b)           Register in the Secured Party’s name any or all of the TTS Shares;
 
(c)           Exercise the Secured Party’s proxy rights with respect to all or a
portion of the TTS Shares, in which event the Pledgor agrees to deliver promptly
to the Secured Party further evidence of the grant of the proxy in any form
requested by the Secured Party; and
 
(d)           Sell or otherwise dispose of the TTS Shares.
 
8.           Sale on Default. The Pledgor acknowledges that the TTS Shares are
restricted, unregistered stock that is difficult to value and for which no
public market exists.  The Pledgor agrees that the TTS Shares are not subject to
sale in a “recognized market” as described in ORS 79.0610(3)(b).  The Pledgor
and the Secured Party wish to agree to reasonable standards for conducting a
commercially reasonable sale of the TTS Shares.  Without limiting rights and
remedies otherwise available to the Secured Party, the parties agree that
compliance with the following steps shall satisfy requirements of a commercially
reasonable sale:
 
 
 
 
4

--------------------------------------------------------------------------------

 
 
 
(a)           The sale may be either a public or a private sale, at the Secured
Party’s discretion, and it may be for all or any portion of  TTS Shares;
 
(b)           The Secured Party shall set a date for public sale of the TTS
Shares, or a date after which a private sale may occur, which date shall be not
less than 30 days after the date the notice of the sale is given to the Pledgor,
and the Secured Party shall send written notification to the Pledgor in advance
regarding the date and the time of the public sale or the date after which a
private sale may occur;
 
(c)           Any public sale shall take place at a site in Oregon selected by
the Secured Party;
 
(d)           Immediately on request, the Pledgor shall provide the Secured
Party with information requested by the Secured Party for compliance with state
or federal securities laws; and
 
(e)           At any sale of any of the TTS Shares, the Secured Party may
restrict the prospective bidders or purchasers to persons or entities who, by
certain representations made by them, would render registration of the sale
under state or federal securities laws unnecessary.

9.           Notice and Cure.  Other than the payment of amounts due under the
Note, upon the occurrence of an Event of Default by Visualant under the Note,
the Stock Purchase Agreement, the Security Agreement or this Pledge Agreement,
Secured Party shall give written notice of such default to Visualant and the
Pledgeholder.  Visualant shall have a period of ten (10) days following receipt
of such written notice to cure the default.  If Visualant shall fail to cure the
default within said ten-day period, Visualant shall be deemed to have
irrevocably transferred the pledged TTS Shares to Secured Party.
 
10.           Release of Shares.  Upon full payment or satisfaction of the Note
and all Obligations, including those of the Purchase Agreement by Pledgor,
Secured Party shall give prompt written notice of such payment or satisfaction
to the Pledgeholder, Pledgeholder shall release and deliver to Visualant all TTS
Shares, and thereafter all of Secured Party’s rights in and to the TTS Shares
shall terminate.

11.           No Assignment or Encumbrances.  Except as expressly provided
herein, Pledgor and Secured Party hereby acknowledge and agree that they shall
be restricted and precluded from assigning, pledging, further encumbering,
selling or transferring the TTS Shares or any of the obligations contained in
this Pledge Agreement without the prior written consent of the other party.,
except as to the agreed upon existing pledge as may exist with the Bonderson
Family Trust.
 
 

 
5

--------------------------------------------------------------------------------

 

 
12.           Pledgeholder.  Pledgor and Secured Party hereby designate
Kirkham E. Hay of Brownstein, Rask, Sweeney, Kerr, Grim, DeSylvia & Hay, LLP as
the Pledgeholder to hold the TTS Shares pursuant to the terms of this Pledge
Agreement.
 
13.           Binding Effect; Benefit.  This Pledge Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.  Nothing in this Pledge Agreement, express or
implied, is intended to confer on any person other than the parties hereto and
their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Pledge Agreement,
including, without limitation, third party beneficiary rights.

14.           Termination.  This Pledge Agreement and each and all of the terms
and provisions hereof shall continue in full force and effect until the Note is
paid or satisfied in full and the Obligations under the Purchase Agreement have
been satisfied, unless sooner terminated by mutual agreement of Pledgor and
Secured Party.

15.           Acknowledgement and Construction.  Pledgor and Secured Party
expressly acknowledge and accept that Pledgeholder has acted as and is the
attorney for Secured Party in connection with the underlying Purchase Agreement
and Note referred to herein.  Pledgor and Secured Party further acknowledge that
they have participated jointly in the negotiation and drafting of this Pledge
Agreement.  In the event any ambiguity or question of intent or interpretation
arises, this Pledge Agreement shall be construed as if drafted jointly by the
parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Pledge Agreement.

16.           Attorneys’ Fees and Costs.  If the Pledgor or Secured Party
institutes any legal proceedings to settle any controversy arising under this
Pledge Agreement or to enforce any provision of this Pledge Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
attorneys’ fees and costs from the non-prevailing party.

17.           Waiver.  No right or obligation under this Pledge Agreement shall
be deemed to have been waived unless evidenced by a writing signed by the party
against whom the waiver is asserted, or by its duly authorized
representative.  Any waiver will be effective only with respect to the specific
instance involved, and will not impair or limit the right of the waiving party
to insist upon strict performance of the right or obligation in any other
instance, in any other respect, or at any other time.

18.           Severability.  If any term or provision of this Pledge Agreement,
or the application of such term or provision, becomes or is declared by a court
of competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Pledge Agreement shall continue in full force and effect, and the
application of such term or provision to other persons or circumstances shall be
interpreted so as to effect the intent of the parties to the maximum extent
possible.  The parties further agree to replace such void or unenforceable term
or provision of this Pledge Agreement with a valid and enforceable term or
provision that shall achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable term or provision.
 
 

 
 
6

--------------------------------------------------------------------------------

 

 
19.           Governing Law.  This Pledge Agreement shall be governed by and
construed in accordance with the internal laws of the State of Oregon,
regardless of the laws that might otherwise govern under applicable conflicts of
laws principles.

20.           Amendment.  To be effective, any modification or amendment to this
Pledge Agreement must be made in a writing signed by the Pledgor and the Secured
Party.

21.           Headings.  The section headings contained in this Pledge Agreement
are inserted for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.

22.           Notice.  Any notice required or permitted under this Pledge
Agreement shall be in writing and shall be deemed to have been duly given or
made either: (a) when personally delivered to the designated party; or (b) three
(3) days after being deposited in the U.S. mail by certified or registered mail,
postage prepaid, return receipt requested, and properly addressed to the party
to which it is directed.  A communication will be deemed to be properly
addressed if sent to the Pledgor, Secured Party or Pledgeholder at the address
indicated on the signature page hereto.  At any time during the term of this
Pledge Agreement, the Pledgor, Secured Party or Pledgeholder may change the
address to which notices and other communications must be sent by providing
written notice of a new address to the other parties in the manner specified in
this Section 22.  Any change of address will be effective ten (10) days after
notice is given.

23.           Counterparts.  This Pledge Agreement may be executed in multiple
counterparts and by facsimile, all of which shall be considered one and the same
agreement and shall become effective when such counterparts or facsimiles have
been signed by each of the parties hereto and delivered to the other party, it
being understood that all parties need not sign the same counterpart.

 

 
[Signatures on following page]
 
 
 
 
 

 
 
7

--------------------------------------------------------------------------------

 

 
IN WITNESS WHEREOF, the parties hereto have executed this Pledge Agreement as of
the date first above written.
 

Pledgor:     Visualant, Incorporated         Address:     500 Union Street,
Suite 406 /s/  Ronald P. Erickson  
Seattle, WA  98101
By:  Ronald P. Erickson    Fax: (206) 855-8767 Its:  President and CEO          
            Secured Party:         Address:     12142 NE Sky Lane, Suite 130
/s/  James M. Gingo    
Aurora, OR  97002
James M. Gingo   Fax: ________________                   Pledgeholder:    
Brownstein, Rask, Sweeney, Kerr,     Grim, DeSYLVIA & Hay, LLP         Address:
    1200 SW Main Street /s/  Kirkham E. Hay  
Portland, OR 97205
By:    Kirkham E. Hay   Fax: (503) 221-1074 Its:  _____________________________
               

 

 
 
 
8

--------------------------------------------------------------------------------