kl06021_ex10-5.htm


    
      

    

     

    Exhibit
      10.5

    
 

    
      COLLATERAL
        PLEDGE AGREEMENT

       

      (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 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 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)  Pledger
        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 2700 Lighthouse
        Point East, Suite 626, Baltimore, MD 21224, Attention:  Selvin Passen,
        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.

      340
        West
        Fifth Avenue

      Eugene,
        OR  97401

      Attention:  M.
        David Kamrat

      


       

      P&S
        Spirit, LLC

      2700
        Lighthouse Point East

      Suite
        626

      Baltimore,
        MD 21224

      Attention:  Selvin
        Passen, M.D.

      Telephone:  (410)
        327-9650

      FAX:  (410)
        327-9656

      


      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. David
        Kamrat________________________________________                                                                                     

      


                      Name:
        M. David
        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