Exhibit 10.5 Collateral Pledge Agreement


    
      

    


                                        EXHIBIT
      10.5

     

     

    COLLATERAL
      PLEDGE AGREEMENT

     

    


    This
      Collateral Pledge Agreement (“Agreement”) dated March
      30,
      2007,
      is made by QUALMAX,
      INC.,
      a
      Delaware corporation having its principal place of business at 340 West Fifth
      Avenue, Eugene, OR 97401 (“Pledgor”) in favor of P&S
      SPIRIT, LLC,
      a
      Nevada limited liability company, having its principal office at 2700 Lighthouse
      Point East, Suite 626, Baltimore, MD 21224 (“Secured Party”).

     

    Background

     

    A. To
      induce
      Secured Party to extend credit to New
      World Brands, Inc.,
      a
      Delaware corporation and a subsidiary of Pledgor (sometimes herein referenced
      as
“Borrower,”) as evidenced by that certain Term Loan 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”), 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:

     

     

    
      
        
        

      

      
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    (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)  Pledgor
      is pledging hereunder all of the Pledgor’s interest and ownership in all the
      entities listed on Schedule I attached hereto;

     

    (f)  Contemporaneously
      with the execution hereof, Pledgor is delivering to Secured Party all stock
      certificate, representing or evidencing the Pledged Collateral in the
      corporations listed on Schedule I, accompanied by duly executed instruments
      of
      transfer or assignments in blank, to be held by Secured Party in accordance
      with
      the terms hereof;

     

    (g)  Pledgor
      hereby confirms that Secured Party is authorized to file all UCC-1 financing
      statements that are required under the UCC (as defined below) to perfect any
      security interest granted hereunder;

     

    (h)  Pledgor
      has delivered to each corporation and limited liability company on Schedule
      I
      attached hereto, a Pledge Instruction, substantially in the form of Exhibit
      A
      attached hereto, and has caused such corporation and/or limited liability
      company to register the security interest granted hereunder on its books and
      records and to deliver to Secured Party an Acknowledgment of Registration
      Statement, substantially in the form of Exhibit B attached thereto; and


     

    (i)  Pledgor
      will not permit any limited liability company identified on Schedule I to
      certificate any of its membership interest or “opt into” Article 8 of the
      Uniform Commercial Code.

     

    4.  If
      an
      Event of Default occurs that is continuing beyond any applicable cure period
      under the Loan Agreement then Secured Party may, at its sole option, exercise
      from time to time with respect to the Pledged Collateral any and/or all rights
      and remedies available to it hereunder, under Article XI of the Loan Agreement
      and/or under the Uniform Commercial Code as adopted from time to time in the
      State of Maryland (“UCC”), or otherwise available to it, at law or in equity,
      including, without limitation, the right to dispose of the Pledged Collateral
      at
      public or private sale(s) or other proceedings, and Pledgor agrees that, if
      permitted by law, Secured Party or its nominee may become the purchaser at
      any
      such sale(s).

     

     

    
      
        
        

      

      
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    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 dis-cretion (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 necessary to permit the issuer of such
      securities to register such securities for public sale under the Securities
      Act.

     

     

    
      
        
        

      

      
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    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 recog-nizes and agrees that if the Pledged
      Collateral, or a portion thereof, threatens to decline speedily in value or
      is
      of a type customari-ly 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 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.

     

    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

     

     

    
      
        
        

      

      
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    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. 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

     

     

    
      
        
        

      

      
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    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]

     

     

     

     

    
 

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, this Collateral Pledge Agreement has been executed and
      delivered as of the date first set forth above.

     

                QUALMAX,
      INC.,

                a
      Delaware
      corporation

    


    


    


                By:
      /s/ Noah
      Kamrat       

    


                Print
      Name: Noah
      Kamrat      

    


                Title:
      President       

    


    


    



    
      
        
        

      

      
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    EXHIBIT
      A

    Pledge
      Instruction

     

    BY
      THIS
      PLEDGE INSTRUCTION, dated as of the 30th day of March,
      2007,
      Qualmax, Inc. (“Pledgor”), hereby instructs New World Brands, Inc. (“Company”),
      to register a pledge and security interest in, of and to 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: [__________________] 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.

     

                  QUALMAX,
      INC.

     

     

              By:
      /s/ Noah Kamrat

     

                  Print
      Name: Noah
      Kamrat

     

                  Title:
      President       

     

    
 

    



    
      
        
        

      

      
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    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.

     

    Qualmax,
      Inc.

    340
      West
      Fifth Avenue

    Eugene,
      OR 97401

    Attention:
      __________________

    


     

    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
      30th day of March,
      2007,
      the
      undersigned (“Company”), caused the pledge of 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 Series A preferred convertible stock in New World
      Brands, Inc., 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.

     

    


    


                NEW
      WORLD BRANDS,
      INC.

    


    
                  By:
        /s/ Noah
        Kamrat       

      


                  Print
        Name: Noah
        Kamrat      

      


                  Title:
        President       

    

     

    
 

    


     

    
 

    
      
        
        

      

      
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    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
                #

            	
              Category
                of Stock Interests

            	
              Owner
                of Interest

            
	
               

              New
                World Brands, Inc.

            	
               

              DE

            	
               

              100

            	 	
               

              Series
                A Convertible Preferred

            	
               

              Pledgor

            


    

    


     

    
      	B.  	
              Pledged
                Membership Interests -
                None

            


    

     

    
 

     

     

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