Document:

exhibit10-5.htm

Exhibit 10.5

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT, dated as of January 30, 2015 (this “Agreement”), is by and between Sago Technology (the “Seller”) and Jak Marketing Group Inc., a Nevada corporation (the “Purchaser”) and wholly owned subsidiary of Encore Brands, Inc.

 

WITNESSETH:

 

WHEREAS, Jack Saleh owns 95% of the issued and outstanding shares of the Seller and Steve McVicar owns 5% of the issued and outstanding shares of the Seller; and

 

WHEREAS, the Company owns and operates the business known as Jak ECig, an electronic cigarette brand headquartered in East Dundee, Illinois; and

 

WHEREAS, the Purchaser is a wholly owned subsidiary of a public company whose shares of common stock, par value $0.001 per share (the “Encore Common Stock”), are registered with the Securities and Exchange Commission and quoted for trading on the OTC Markets under the ticker symbol “ENCB;” and

 

WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser desires to purchase from the Seller, shares of common stock of the Seller on the terms and conditions set forth below; and

 

WHEREAS, the Seller desires to grant the Purchaser the right and authority to distribute the brand Jak Ecig worldwide during the period commencing on the date of this Agreement and before the closing of the sale of the shares of common stock of the Seller;

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and agreements set forth herein, the parties hereto agree as follows:

 

ARTICLE I

 

SALE AND PURCHASE OF COMPANY SHARES; MANAGEMENT OF COMPANY

 

1.1 Transfer of Company Shares.  Subject to the terms and conditions set forth in this Agreement and in reliance upon the representations and warranties of the Seller and the Purchaser herein set forth, at the Closing as defined below in Section 3.1, the Seller shall sell, transfer, convey, assign and deliver to the Purchaser, and the Purchaser shall purchase from the Seller, by appropriate assignments and other instruments satisfactory to the Purchaser and its counsel, shares of common stock of the Seller representing 10% (ten percent) of the outstanding shares.

 

1.2 Master License and Management Agreements.  It is the Purchaser’s intention to provide the Seller with funding prior to the closing of the sale of the shares of common stock of the Seller to the Purchaser and to otherwise take actions that are expected to improve the operations of the Seller.  Accordingly, concurrently with the execution and delivery of this Agreement, the Seller is entering into that certain Management Agreement and Master License Agreement, a copy of which is attached hereto as Exhibit A (the “Management Agreement”), and Exhibit B (the “Master License Agreement”), pursuant to which the sales, distribution, operations and business affairs of the brand will be managed by the Seller.  Upon execution of the Master License Agreement, the Purchaser will be required to purchase all of Seller’s current inventory and Accounts Receivable at book value.

 

  

  

  

ARTICLE II

 

PURCHASE PRICE

 

2.1 Purchase Price.  In consideration for the shares of common stock of the Seller, the Purchaser shall provide to the Seller the purchase price (the “Purchase Price”) as follows:

 

(i) Access to a credit line, currently in place with Trafalgar Global Credit Master Fund, in an amount up to five hundred thousand ($500,000), the form of which is attached hereto as Exhibit A; and

 

(ii) One million dollars ($1,000,000) to be used for the operations and growth of the Jak ECig business.

 

ARTICLE III

 

THE CLOSING

 

3.1 Time and Place of Closing.  The closing of the transactions contemplated hereby (the “Closing”) shall take place at the offices of the Company, located at 1525 Montana Ave Suite C., Santa Monica, California 90403 at 10:00 a.m. local time on the third business day after the Seller has delivered to the Purchaser the documents and statements (as required in Section 6.1, below) (the “Closing Date”), as such date may be changed upon agreement of the parties hereto.

 

3.2 Actions at the Closing.  At the Closing, the Seller and the Purchaser shall take such action and execute and deliver such agreements and other documents and instruments as necessary or appropriate to effect the transactions contemplated by this Agreement in accordance with its terms and conditions, including, without limitation, the following:

 

(a) The Purchaser shall deliver to the Seller (i) the bank statements and other necessary documents to confirm that one million dollars ($1,000,000) has been deposited in the Purchaser’s bank accounts for purposes of operating the Jak Ecig business.

 

(b) The Seller shall procure that written resolutions of the Seller be adopted so as to approve:

 

(i) the transactions contemplated by this Agreement and the execution and delivery by the Seller's directors of any documents necessary to transfer the shares of common stock of the Seller;

 

(ii) the execution, delivery and performance of the Management Agreement;

 

(iii) the issuance of new share certificates in respect of the shares of common stock of the Seller registered in the name of the Purchaser; and

 

  

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(c) The Seller shall deliver to the Purchaser:

 

(i) Board resolutions and instruments of transfer in respect of the shares of common stock of the Seller duly completed and signed in favor of the Purchaser;

 

(ii) Stock certificate representing 10% of the outstanding shares of common stock of the Seller registered in the name of Purchaser.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

The Seller hereby  represents and warrants to the Purchaser that:

 

4.1 Title to Company Shares.  Jack Saleh and Steve McVicar are the sole legal and beneficial owners of shares of capital stock of the Seller, and upon consummation of the purchase contemplated herein, the Purchaser will acquire from the Seller shares of common stock of the Seller representing 10% of the issued and outstanding shares of common stock of the Seller, free and clear of all liens, claims, encumbrances or restrictions (save for the restrictions required by applicable securities laws). No person has any agreement or option or any right capable of becoming an agreement for the purchase of shares of common stock of the Seller.

 

4.2 Authority to Execute and Perform Agreements.  The Seller has the full right, power and authority to enter into, execute and deliver this Agreement and the Management Agreement, and to transfer, convey and sell to the Purchaser at the Closing shares of common stock of the Seller representing 10% of the issued and outstanding shares of common stock of the Seller.

 

4.3 Enforceability.  This Agreement and the Management Agreement have been duly and validly executed by the Seller and (assuming the due authorization, execution and delivery by the Purchaser), constitute the legal, valid and binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by general equitable principles affecting the enforcement of contracts.

 

4.4 No Violation.  The execution or delivery by the Seller of this Agreement and the Management Agreement does not violate in any material respect any applicable law or any judgment, order or decree of any court, and will not result in the creation or imposition of any lien, charge or other encumbrance upon the shares of common stock of the Seller being acquired by the Purchaser hereunder.

 

4.5 Non-Contravention.  Neither the execution and delivery of this Agreement, the Management Agreement or the other agreements contemplated hereby or thereby to be executed by the Seller nor the consummation by the Seller of the transactions contemplated hereby or thereby does or would after the giving of notice or the lapse of time or both, (i) conflict with, result in a breach of, constitute a default under, or violate the constitutional documents of the Seller; (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, amend, modify, cancel or refuse to perform under, or require any notice under any material agreement, contract, commitment, license, lease, instrument or other arrangement to which the Seller is a party or by which it is bound; or (iii) result in the creation of, or give any party the right to create, any material lien or other rights or adverse interests upon any right, property or asset of the Seller.

 

  

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4.6 Securities Laws.  The shares of common stock issued to the Purchaser pursuant to this Agreement were issued in full compliance with all applicable laws relating to the issuance or sale of securities, and the Seller has obtained all necessary permits and other authorizations or orders of exemption as may be necessary or appropriate under all applicable laws relating to the issuance or sale of securities with respect to the transactions contemplated herein.

 

4.7 No Adverse Litigation.  The Seller is not a party to any pending litigation which seeks to enjoin or restrict the Seller’s ability to sell or transfer the shares of common stock of the Seller hereunder, nor, to the knowledge of Seller, is any such litigation threatened against the Seller.  Furthermore, there is no litigation pending or, to the knowledge of Seller threatened, against the Seller, which, if decided adversely to the Seller, would prevent the Seller from being able to consummate the transactions contemplated herein.

 

4.8 Securities Representations.

 

(a) The Seller is acquiring the Encore Common Stock for the Seller’s own account for investment and not with a view to, or for resale in connection with, a distribution of the Encore Common Stock within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).  In that regard, Seller understands that (i) the shares of Encore Common Stock have not been registered under the Securities Act or under any state securities laws and are therefore restricted securities; (ii) the Encore Common Stock may not be sold or transferred unless they are registered under the Securities Act or an exemption from such registration is available; and (iii) the Purchaser may place a restrictive legend on the certificate evidencing the Encore Common Stock reflecting these restrictions.

 

(b) The Seller understands that an investment in the Encore Common Stock involves risk, and Seller has the financial ability to bear the economic risk of this investment in the Encore Common Stock, including a complete loss of such investment.

 

(c) The Seller has such knowledge and experience in financial and business matters that Seller is capable of evaluating the merits and risks of an investment in the Encore Common Stock.

 

(d) The Seller agrees not to transfer any of the Encore Common Stock except pursuant to an effective registration statement under the Securities Act or an exemption from registration.

 

  

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4.9 Representations by Seller with Respect to the Seller.

 

(a) The Seller is a corporation, validly existing and in good standing under the laws of Nevada.  The Seller has heretofore delivered to the Purchaser true and correct copies of the Seller’s constitutional documents, including its articles of incorporation, bylaws, and its minute books.

 

(b) The authorized capital of the Seller consists of 1,500 shares of common stock, of which 840 shares have been issued and are currently registered in the name of Jack Saleh, and of which 40 shares have been issued and are currently registered in the name of Steve McVicar.  The shares of common stock of the Seller, when issued and sold pursuant to the terms hereof will be validly issued, fully paid and nonassessable.  There is no outstanding voting trust agreement or other contract, agreement, arrangement, option, warrant, call, commitment or other right of any character obligating the Seller to issue, sell, redeem or repurchase any of its securities, and there is no outstanding security of any kind convertible into or exchangeable for any shares of the capital stock of the Seller.  The Seller has not granted any person the right to have shares included on a registration statement filed with the US Securities and Exchange Commission or similar authority of any other jurisdiction (i.e. so-called “registration rights”).

 

(c) Except as described below, the Seller has filed all tax returns and reports which were required to be filed on or prior to the date hereof in respect of all income, withholding, franchise, payroll, excise, property, sales, use, value-added or other taxes or levies, imposts, duties, license and registration fees, charges, assessments or withholdings of any nature whatsoever (together, “Taxes”), and has paid all Taxes (and any related penalties, fines and interest) which have become due pursuant to such returns or reports or pursuant to any assessment which has become payable.

 

(d) The Seller has conducted its business in compliance in all material respects with all applicable laws, ordinances, rules, regulations, court or administrative orders, decrees, or processes (“Applicable Laws”).  The Company has not received any written notice of violation or claimed violation of any Applicable Law.

 

(e) There is no claim, dispute, action, suit, proceeding or investigation pending or, to the knowledge of Seller, threatened, against the Seller, or challenging the validity or propriety of the transactions contemplated by this Agreement, at law or in equity or before any local, foreign or other governmental authority, board, agency, commission or instrumentality, nor to the knowledge of Seller, is any such claim, dispute, action, suit, proceeding or investigation pending or threatened.  There is no outstanding judgment, order, writ, ruling, injunction, stipulation or decree of any court, arbitrator or local, foreign or other governmental authority, board, agency, commission or instrumentality, against the Seller.  The Seller has not received any written inquiry from any local, foreign or other governmental authority, board, agency, commission or instrumentality concerning the possible violation of any Applicable Law.

 

4.10 Schedule 4.9 contains an accurate and complete list of all contracts in respect of real property (including leases) that the Seller leases, accurate and complete copies of which have been delivered to the Purchaser.  All of such contracts included on Schedule 4.9 are valid, binding and enforceable against the Seller.

 

  

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4.11 The Company’s unaudited balance sheet and profit and loss statement at and for the year ended December 31, 2014, in the form previously delivered to the Purchaser (the “Financial Statements”), are complete and correct in all material respects, have been prepared from the books and records of the Seller and present fairly the financial condition and results of operations of the Seller as of the dates thereof and for the periods specified therein.  The books of account, financial data, schedules and other records of the Seller, including any of the foregoing delivered or made available to Purchaser in connection with the transactions contemplated hereby, have been maintained in accordance with reasonable business practices and in the course of business of the Seller, are accurate and complete in all material respects and there are no material misstatements, mistakes or omissions therein, and there have been no material transactions involving the Seller that properly should have been reflected therein that have not been accurately and completely reflected in all material respects.  The Company has no obligation or liability required to be disclosed in accordance with GAAP except for (i) liabilities disclosed in the Financial Statements, and (ii) trade payables and obligations incurred in the ordinary course of business on or after the date of the most recent balance sheet included in the Financial Statements, which do not exceed $120,000 in the aggregate.

 

4.12 The Seller has title to, or a valid leasehold interest in, all of its assets of material value to it whether real, personal, tangible or intangible.

 

4.13 To the Seller’s knowledge, no executive, key employee, or group of employees has any plans to terminate employment with the Seller.  The Seller is not a party to or bound by any collective bargaining agreement, nor has it experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes.  To the Seller’s knowledge, the Seller has not committed any unfair labor practice (as determined under any Applicable Law).

 

4.14 The Seller does not maintain any non-qualified deferred compensation plan, qualified defined contribution retirement plan, qualified defined benefit retirement plan or other material fringe benefit plan or program within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974.

 

4.15 As used in this Agreement, “Environmental, Health and Safety Requirements” means all laws, orders, permits, contracts and programs (including those promulgated or sponsored by industry associations, insurance companies and risk management companies) concerning or relating to public health and safety, worker/occupational health and safety and pollution or protection of the environment, including those relating in any way to noises, radiation or chemicals, toxic or hazardous materials, substances or wastes, each as amended and as now in effect.  The Seller and, to the knowledge of the Seller, each person for whose conduct the Seller may be held liable is, and has at all times been, in compliance in all material respects with all Environmental, Health and Safety Requirements in connection with owning, using, maintaining or operating its business, operations and assets; (b) the location at which the Seller currently operates, or had operated, any material portion of its business or currently maintains, or had maintained, any of its material properties or assets is in compliance in all material respects with all Environmental, Health and Safety Requirements; and (c) there are no pending or, to the knowledge of Seller threatened, allegations by any person that any of the Seller’s properties, assets or businesses is not or has not been conducted in compliance in all material respects with all Environmental, Health and Safety Requirements.

 

  

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ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser represents and warrants to the Seller that:

 

5.1 Organization; Authority; Due Authorization.  The Purchaser is duly organized, validly existing and in good standing under the laws of Nevada, and has all requisite power, authority and approvals required to enter into, execute and deliver this Agreement and the Management Agreement and to perform fully its obligations hereunder and thereunder.  The Purchaser has taken all actions necessary to authorize it to enter into and perform fully its obligations under this Agreement and the Management Agreement and to consummate the transactions contemplated herein and therein.  This Agreement and the Management Agreement each are legal, valid and binding obligations of the Purchaser, enforceable in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by general equitable principles affecting the enforcement of contracts.

 

5.2 No Violation.  The execution and delivery of this Agreement, the Management Agreement and the Master License Agreement, and the consummation of the transactions contemplated herein or therein will not (a) violate, conflict with, or constitute a default under any contract or other instrument to which the Purchaser is a party or by which it or its property is bound, (b) require the consent of any party to any material contract or other agreement to which the Purchaser is a party or by which it or its property is bound, or (c) violate any laws or orders to which the Purchaser or its property is subject.

 

5.3 Litigation.  There is no claim, dispute, action, suit, proceeding or investigation pending or, to the knowledge of the Purchaser, threatened, against the Purchaser, or challenging the validity or propriety of the transactions contemplated by this Agreement, at law or in equity or before any local, foreign or other governmental authority, board, agency, commission or instrumentality, nor to the knowledge of the Purchaser, is any such claim, dispute, action, suit, proceeding or investigation pending or threatened.

 

ARTICLE VI

 

COVENANTS

 

6.1 Preparation of Audited Statements.  The Seller shall engage LBB & Associates Ltd., LLP, (“LBB”), the Purchaser’s independent registered public accounting firm, at the Purchaser’s cost and expense, to (i) audit the financial statements of for the years ended December 31, 2014 and 2013, and (ii) review the unaudited financial statements for the interim periods (the foregoing financial statements are herein referred to as the “Audited Statements”).  The Audited Statements shall be prepared in accordance with accounting principles generally accepted in the United States of America and the requirements of Regulation S-K promulgated by the Securities and Exchange Commission, provided that the unaudited interim financial statements shall be prepared pursuant to the requirements for reporting on Form 10-Q and Regulation S-K.  All costs related to the preparation of the Audited Statements, including the fees of LBB, shall be borne and paid by the Purchaser.  Within three business days of the completion of the Audited Statements, the Seller shall deliver to the Purchaser a copy of the Audited Statements.

 

  

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6.2 Further Assurances. Upon the terms and subject to the conditions contained in this Agreement, the parties agree, before and after the Closing, (a) to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, (b) to execute any documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the transactions contemplated hereunder or thereunder, and (c) to cooperate with each other in connection with the foregoing.

 

6.3 Conduct of Business.  From the date hereof through the Closing Date, the Company will not, except as permitted by this Agreement or the Management Agreement, or as consented to by the Purchaser in writing, take any action inconsistent with this Agreement or the Management Agreement or with the consummation of the transactions contemplated hereby or thereby.

 

ARTICLE VII

 

CONDITIONS PRECEDENT TO CLOSING

 

7.1 Conditions to Seller’ Obligation to Close.  The obligation of the Seller to consummate the transactions provided for hereby are subject to the satisfaction, before or on the Closing Date, of each of the conditions set forth below in this Section 7.1, any of which may be waived by the Seller in writing.

 

(a) Representations, Warranties and Covenants.  (i) All representations and warranties of the Purchaser contained in this Agreement shall be true and correct at and as of the date hereof and at and as of the Closing Date, and (ii) the Purchaser shall have performed and satisfied all agreements and covenants required hereby to be performed by it before or on the Closing Date.

 

(b) No Actions or Court Orders.  There shall not be any court decision, order or injunction by any court or other governmental body that makes the purchase and sale of the shares of common stock of the Seller contemplated hereby illegal or otherwise prohibited.

 

(c) Closing Deliverables.  The Purchaser shall have delivered, or caused to be delivered, to the Seller those items set forth in Section 3.2(a) hereof.

 

7.2 Conditions to the Purchaser’s Obligation to Close.  The obligation of the Purchaser to consummate the transactions provided for hereby are subject to the satisfaction, before or on the Closing Date, of each of the conditions set forth below in this Section 7.2, any of which may be waived by the Purchaser.

 

(a) Representations, Warranties and Covenants.  (i) All representations and warranties of the Seller contained in this Agreement shall be true and correct in all material respects at and as of the date hereof and at and as of the Closing Date, and (ii) the Seller shall have performed and satisfied all agreements and covenants required hereby to be performed by them before or on the Closing Date.

 

  

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(b) No Actions or Court Orders.  There shall not be any court decision, order or injunction by any court or other governmental body that makes the purchase and sale of the shares of common stock of the Seller contemplated hereby illegal or otherwise prohibited.

 

(c) Closing Deliverables.  The Seller shall have delivered, or caused to be delivered, to the Purchaser those items set forth in Section 3.2(c) hereof, as well as a copy of the resolutions referred to in Section 3.2(b) hereof.

 

ARTICLE VIII

 

INDEMNIFICATION

 

8.1 Indemnity of the Seller.  The Seller shall jointly and severally indemnify, defend and hold harmless the Purchaser from and against, and shall reimburse the Purchaser with respect to, all liabilities, losses, costs and expenses, including, without limitation, reasonable attorneys’ fees and disbursements (collectively the “Losses”) asserted against or incurred by the Purchaser by reason of, arising out of, or in connection with any breach of any representation, warranty or covenant contained in this Agreement made by Seller or in any other document or certificate delivered by Seller pursuant to the provisions of this Agreement  or in connection with the transactions contemplated hereby or thereby; provided, that in no event shall the Seller be liable to the Purchase for indemnification for an amount in excess of $1,000,000 in the aggregate.

 

8.2 Indemnity of the Purchaser.  The Purchaser shall indemnify, defend and hold harmless the Seller from and against, and shall reimburse the Seller with respect to, all Losses asserted against or incurred by Seller by reason of, arising out of, or in connection with any breach of any representation, warranty or covenant contained in this Agreement or in the Management Agreement or made by the Purchaser or in any other document or certificate delivered by the Purchaser pursuant to the provisions of this Agreement  or in connection with the transactions contemplated hereby or thereby.

 

8.3 Indemnification Procedure.  A party (an “Indemnified Party”) seeking indemnification shall give prompt notice to the other party (the “Indemnifying Party”) of any claim for indemnification arising under this Article VIII.  The Indemnifying Party shall have the right to assume and to control the defense of any such claim with counsel reasonably acceptable to such Indemnified Party, at the Indemnifying Party’s own cost and expense, including the cost and expense of attorneys’ fees and disbursements in connection with such defense, in which event the Indemnifying Party shall not be obligated to pay the fees and disbursements of separate counsel for such Indemnified Party in such action.  In the event, however, that such Indemnified Party’s legal counsel shall determine that defenses may be available to such Indemnified Party that are different from or in addition to those available to the Indemnifying Party, in that there could reasonably be expected to be a conflict of interest if such Indemnifying Party and the Indemnified Party have common counsel in any such proceeding, or if the Indemnified Party has not assumed the defense of the action or proceedings, then such Indemnified Party may employ separate counsel to represent or defend it, and the Indemnifying Party shall pay the reasonable fees and disbursements of counsel for such Indemnified Party.  No settlement of any such claim or payment in connection with any such settlement shall be made without the prior consent of the Indemnifying Party, which consent shall not be unreasonably withheld.

 

  

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8.4 Sole and Exclusive Remedy. The parties agree that the Purchaser’s sole and exclusive remedy for breaches of any of the representations, warranties and covenants in this Agreement shall be indemnification in accordance with this Article VIII.

 

ARTICLE IX

 

MISCELLANEOUS

 

9.1 Publicity.  No party to this Agreement shall issue any press release or make any public announcement regarding the transactions contemplated by this Agreement without the prior written approval of the other party.

 

9.2 Termination Events.

 

(a) This Agreement may be terminated at any time prior to the Closing:

 

(i) by the mutual written agreement of the Purchaser and the Seller;

 

(ii) by the Purchaser or the Seller on or after July 31, 2015 if the Closing shall not have occurred by the close of business on such date, provided that the terminating party may not be in default of any of its obligations hereunder and may not have caused the failure of the transactions contemplated by this Agreement to have occurred on or before such date;

 

(iii) by the Purchaser if there is a material breach of any representation or warranty set forth in Article IV or any covenant or agreement to be complied with or performed by the Seller pursuant to the terms of this Agreement, which breach has not been cured within 30 days of receipt by Seller from the Purchaser of written notice of such breach and the Purchaser’s intention to terminate this Agreement if such breach is not cured;

 

(iv) by the Purchaser if the Seller shall have breached, in any material respect, the Management Agreement, which breach has not been cured within 30 days of receipt by Seller from the Purchaser of written notice of such breach and the Purchaser’s intention to terminate this Agreement if such breach is not cured; or

 

(v) by the Seller if there is a breach of any representation or warranty set forth in Article V or of any covenant or agreement to be complied with or performed by the Purchaser pursuant to the terms of this Agreement.

 

(b) Upon the occurrence of any valid termination event set forth in this Section 9.2, the Purchaser and/or the Seller, as applicable, shall deliver written notice to the non-terminating party.  Upon delivery of such notice, (i) this Agreement shall terminate and the transfer of the shares of common stock of Seller contemplated hereby shall be deemed to have been abandoned without further action by the Purchaser or the Seller, and (ii) the Management Agreement shall automatically terminate.

 

  

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(c) In the event that this Agreement is validly terminated as provided in this Section 9.2, then each of the parties shall be relieved of their respective duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability to the Purchaser or the Seller; provided, however, that nothing in this Section  9.2 shall relieve the Purchaser or the Seller of any liability for any willful breach of this Agreement or the Management Agreement occurring prior to the proper termination of this Agreement.

 

9.3 Expenses.  The Seller and the Purchaser shall each bear his or its own expenses, including attorneys’, accountants’ and other professionals’ fees, incurred in connection with the negotiation and execution of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby.

 

9.4 Survival of Representations, Warranties and Agreements.  All representations, warranties and statements made by a party to this Agreement or in any document or certificate delivered pursuant hereto shall survive the Closing for a period of 15 months following the Closing and thereafter no claims for breach of any such representations, warranties or statements may be brought by any person.  Each of the parties hereto is executing and carrying out the provisions of this Agreement in reliance upon the representations, warranties, covenants and agreements contained in this Agreement and in the Management Agreement and not upon any investigation which it might have made or any representation, warranty, agreement, promise or information, written or oral, made by the other party or any other person other than as specifically set forth herein or therein.

 

9.5 Further Assurances.  If, at any time after the Closing, the parties shall consider or be advised that any further deeds, assignments or assurances in law or any other things are necessary, desirable or proper to complete the transactions contemplated herein or to vest, perfect or confirm, of record or otherwise, the title to any property or rights of the parties hereto, the parties agree that their proper officers and directors shall execute and deliver all such proper deeds, assignments and assurances in law and do all things necessary, desirable or proper to vest, perfect or confirm title to such property or rights and otherwise to carry out the purpose of this Agreement, and that the proper officers and directors of the parties are fully authorized to take any and all such action.

 

9.6 Notice.  All communications, notices, requests, consents or demands given or required under this Agreement shall be in writing and shall be deemed to have been duly given when delivered to, or received by prepaid registered or certified mail or recognized overnight courier addressed to, or upon receipt of a facsimile sent to, the party for whom intended, as follows, or to such other address or facsimile number as may be furnished by such party by notice in the manner provided herein:

 

  

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If to the Seller:

	
Sago Technology, Inc.

785 Woodfern Drive

Hampshire, IL 60140

Attention:  Jack Saleh

 

	
If to the Purchaser:

	
Encore Brands, Inc.

1525 Montana Ave Suite C

Santa Monica, CA 90403p

Attention:  Chief Executive Officer

	  	  

9.7 Entire Agreement.  This Agreement and any instruments and agreements to be executed pursuant to this Agreement, sets forth the entire understanding of the parties hereto with respect to this Agreement’s subject matter, merges and supersedes all prior and contemporaneous understandings with respect to its subject matter, and may not be waived or modified, in whole or in part, except by a writing signed by each of the parties hereto.  No waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance.  Failure of any party to enforce any provision of this Agreement shall not be construed as a waiver of its rights under such provision.

 

9.8 Successors and Assigns.  This Agreement shall be binding upon, enforceable against and inure to the benefit of, the parties hereto and their respective heirs, administrators, executors, personal representatives, successors and permitted assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person.  This Agreement may not be assigned by any party hereto except with the prior written consent of the other parties, which consent shall not be unreasonably withheld.

 

9.9 Governing Law.  This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of California applicable to agreements made and fully to be performed in such state, without giving effect to any conflicts of law principles thereof.

 

9.10 Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

9.11 Construction.  Headings contained in this Agreement are for convenience only and shall not be used in the interpretation of this Agreement.  References herein to Articles, Sections and Exhibits are to the articles, sections and exhibits, respectively, of this Agreement.  As used herein, the singular includes the plural, and the masculine, feminine and neuter gender each includes the others where the context so indicates.

 

9.12 No Other Representations or Warranties.  Except for representations and warranties made by the Seller in this Agreement, the Seller does not make or has not made any representation or warranty to the Purchaser regarding the Seller or the transactions contemplated hereby.

 

  

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9.13 Severability.  If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, this Agreement shall be interpreted and enforceable as if such provision were severed or limited, but only to the extent necessary to render such provision and this Agreement enforceable.

 

9.14 Attorneys’ Fees and Costs.  In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover judgment in any such action or proceeding, such costs, expenses and reasonable attorneys’ fees may be included in and as part of such judgment.

 

9.15 Forum Selection. Any litigation based hereon, or arising out of, under, or in connection with this Agreement , shall be brought and maintained exclusively in courts located in the County of Los Angeles, California.  Each party to this Agreement consents to the jurisdiction over him or it of each of the foregoing courts and agrees that any personal service of process may be made by registered or certified mail to the notice address as set forth in Section 9.6 hereof, and as the same may be changed from time to time as provided therein.

 

9.16 11.15           Independent Legal Advice.  Each of the Seller and the Purchaser hereby acknowledges that he has been afforded the opportunity of receiving independent legal advice concerning this Agreement, and in the event that Seller or Purchaser has executed this Agreement without the benefit of independent legal advice, he/she/it hereby waives the right to receive such independent legal advice.

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first set forth above.

 

	
SELLER:

 

Sago Technology, Inc.

 

By:________________________________

Name: Jack Saleh

Its: Chief Executive Officer

	
PURCHASER:

 

Encore Brands, Inc.

 

By:__________________________________

Name: Gareth West

Its: Chief Executive Officer

 

 

 

 

  

- 13 -

  

 

EXHIBIT A

 

MANAGEMENT AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B-1EX-10.98

 Exhibit 10.98 

SECOND AMENDMENT TO LOAN AGREEMENT 

THIS SECOND AMENDMENT TO LOAN AGREEMENT (this “Second Amendment Agreement” or “Second
Amendment”) is entered into as of February 27, 2015 (the “Amendment Date”), between First Foundation Inc., a California corporation (“Borrower”) and NEXBANK SSB
(“Lender”). 
 R E C I T A L S 

A. Borrower and Lender are parties to that certain Loan Agreement dated as of April 19, 2013 pursuant to which Borrower obtained a term
loan from Lender in the aggregate principal amount of $7,500,000 (the “Original Loan Amount”), which was evidenced by the concurrent execution and delivery to Lender by Borrower of a Promissory Note in the Original Loan Amount (the
“Original Note”). 
 B. On March 25, 2014, Borrower and Lender entered into that certain First Amendment to Loan Agreement
pursuant to which (i) the then remaining Original Loan Amount was increased by $15,000,000, bringing the outstanding principal amount thereof to $21,875,000 (the “First Amended Loan” or the “First Amended Loan
Amount”), and (ii) certain of the terms and provisions of the Original Loan Agreement were amended or amended and restated (the Original Loan Agreement, as amended or amended and restated by the First Amendment to Loan Agreement is
the “First Amended Loan Agreement”). Concurrently therewith Borrower executed and delivered to Lender an Amended and Restated Promissory Note in the principal amount of $21,875,000 in favor of Lender (the “First
Amended and Restated Note”), which thereupon superseded the Original Note and, as a result, such Original Note thereupon ceased to be of any further force or effect. 

C. As of the date hereof, the First Amended Loan Amount is $19,687,500. 

D. Borrower has requested that the outstanding principal balance of the First Amended Loan Amount be increased by $10,312,500 (the
“Additional Loan Amount”), as a result of which the outstanding principal balance of the Loan as of the Second Amendment Effective Date (as hereinafter defined) shall be $30,000,000 (the “Second Amended
Loan” or the “Second Amended Loan Amount”). 
 E. In connection with that increase in the remaining
principal amount of the First Amended Loan, Borrower and Lender are entering into this Second Amendment to amend, or amend and restate, certain of the terms and provisions of the First Amendment Agreement, in the manner and to the extent set forth
hereinafter, and Borrower has agreed to issue to Lender, on the Second Amendment Effective Date, to Lender a Second Amended and Restated Promissory Note (the “Second Amended and Restated Note”) to evidence Borrower’s
obligation to pay the principal amount of the Second Amended Loan to Lender. 
 NOW, THEREFORE, in consideration of these premises, the
respective promises and agreements of each party to the other contained herein, and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree, as follows: 

 

	1.	Amendments to the First Amended Loan Agreement. Subject to the satisfaction of the conditions set forth in Section 2 hereof, the First Amended Loan Agreement is amended as follows: 

(a) The “Recitals” in the First Amended Loan Agreement are hereby amended and restated in their entirety to incorporate into the
Loan Agreement the Recitals to this Second Amendment : 
 (b) Section 2.1 of the First Amended Loan Agreement is hereby further amended
or amended and restated as and to the extent set forth below in this Section 1: 
 (i) The terms defined in the Recitals
incorporated into this Agreement by reference to the Second Amendment are made an integral part of the Loan Agreement. 

  
 Second Amendment

 (ii) Unless the context indicates otherwise, the terms “Loan Agreement”
and or “Agreement” shall mean the Original Loan Agreement as and to the extent heretofore amended, or amended and restated, by the First Amended Loan Agreement and as and to the extent further amended, or amended and restated, by this
Second Amendment Agreement. 
 (iii) The definitions of the terms “LIBOR,” “Maturity Date,”
“Note” and “Note Rate” are hereby amended and restated to read in their entirety as follows: 
 LIBOR: With
respect to any LIBOR Reset Period, the rate of interest at which deposits in U.S. dollars are offered to major banks in the London interbank market for a ninety (90) day period on the day that is two (2) days prior to the commencement of
such LIBOR Reset Period, based on information presented by any interest rate reporting service of recognized standing selected by Lender, or if Lender determines that no interest rate reporting service has presented such information, the rate of
interest at which deposits in U. S. dollars are offered to major banks in the London interbank market for a ninety (90) day period on the day that is two (2) days prior to the commencement of such LIBOR Reset Period by any bank reasonably
selected by Lender. Under the terms of this Agreement, the applicable “LIBOR” rate is used by Lender as a reference rate. The use of ninety (90) day LIBOR as a reference rate does not mean the Borrower will actually pay interest on
the Loan pursuant to a ninety (90) day contract or any other interest rate contract. Instead, the effective interest rate under this Agreement will adjust at the beginning of each LIBOR Reset Period 

Maturity Date: May 1, 2022. 

Note or Second Amended and Restated Note: That certain Amended and Restated Promissory Note, dated and executed by Borrower as of
February 27, 2015 in the aggregate principal amount of $30,000,000 made payable to the order of Lender, evidencing the Second Amended Loan.” 

Note Rate: A rate per annum equal to the sum of (a) LIBOR for the then-current LIBOR Reset Period plus (b) 375 basis
points (3.75%). 
 (iii) The definitions of “LIBOR Business Day” and “Original Note” are
hereby deleted in their entirety. 
 (c) Section 4.1(a) of the Loan Agreement is hereby amended and restated to read in its entirety as
follows: 
 “(a) The maximum aggregate principal amount of the Loan shall not exceed THIRTY MILLION DOLLARS
($30,000,000) (the “Loan Amount”). No principal amount repaid may be reborrowed.” 
 (d) Section 5.2, titled
“Required Principal and Interest Payments,” is hereby amended and restated in its entirety to read as follows: 

“Commencing on April 1, 2015 and continuing on each Payment Date thereafter, until the Loan and all accrued interest
thereon has been paid in full, installments of principal in the amount of $250,000 plus accrued interest thereon shall be due and payable on each Payment Date (unless the principal balance is less than such required installment amount, and in such
case, the remaining principal balance of the Note shall be due and payable on the Payment Date). The outstanding principal balance of the Loan and any and all accrued but unpaid interest hereon shall be due and payable in full on the Maturity Date
or if such Payment Date has been accelerated to an earlier date in accordance with this Agreement and the other Loan Documents, then on such earlier 

  

					
			2		Second Amendment

 
date. All payments (whether of principal or of interest) shall be deemed credited to Borrower’s account only if received by 2:00 p.m. Dallas time on a Business Day; otherwise, such payment
shall be deemed received on the next Business Day.” 
  

	2.	Conditions Precedent to effectiveness of Second Amendment. Notwithstanding any contrary provision, this Second Amendment shall be effective on the first Business Day upon which all of the following conditions
precedent have been satisfied (the “Second Amendment Effective Date”): 

  

	 	(a)	Lender shall have received counterparts of this Second Amendment executed by Borrower on the signature page hereof and delivered by Borrower to Lender, against delivery by Lender to Borrower of counterparts of this
Second Amendment executed by Lender; 

  

	 	(b)	Lender shall have received the Second Amended Promissory Note executed by Borrower, in exchange for the delivery by Lender to Borrower of the originally signed First Amended and Restated Note; 

 

	 	(c)	No Default or Event of Default shall have occurred and be continuing or shall result after giving effect to this Second Amendment; and 

 

	 	(d)	Lender shall have received from or on behalf of Borrower such other instruments and documents incidental and appropriate to the transactions provided for in this Second Amendment, and all such documents and instruments
shall be in form and substance reasonably satisfactory to Lender 

 (It is hereby agreed that execution of this Second
Amendment by Lender shall evidence conclusively that all of the foregoing conditions have been fulfilled). 
  

	3.	Disbursement of Additional Loan Amount. Lender agrees to disburse the Additional Loan Amount (as defined above) in its entirety to Borrower within one (1) Business Day following the Second Amendment
Effective Date, provided that no Material Adverse Change has occurred with respect to Borrower and its Subsidiaries, considered as a whole, and no Default or Event of Default has occurred and is continuing hereunder. 

 

	4.	Reaffirmation of Loan Documents and Liens. Except as and to the extent amended or amended and restated in this Second Amendment, any and all of the terms and provisions of the Original Loan Agreement and the
other Loan Documents, as and to the extent heretofore amended by the First Amendment, shall be unchanged and remain in full force and effect and, as so amended or amended and restated hereby are in all respects ratified and confirmed by Borrower,
except for the First Amended and Restated Note which, on the Second Amendment Effective Date, (i) will be superseded in its entirety by the Second Amended and Restated Note, (ii) will cease to be of any further force or effect and
(iii) will cease to be one of the Loan Documents. Borrower hereby agrees that, except as and to the extent expressly provided otherwise in this Second Amendment, the amendments and modifications herein contained shall in no manner affect or
impair the liabilities, duties and obligations of Borrower under the Original Loan Agreement and the other Loan Documents, as heretofore amended by or pursuant to the First Amendment, or the Liens securing the payment and performance thereof.
Borrower further confirms that the liens and security interests in the Collateral created under such Loan Documents secure Borrower’s obligations under such Loan Documents and any other obligations for borrowed money that Borrower may incur
hereafter to Lender. 

  

	5.	 Representations and Warranties. As a material inducement for Lender to enter into this Second Amendment Agreement, Borrower hereby
represents and warrants to Lender (with the knowledge and intent that Lender is relying upon the same in entering into this Second Amendment) that, as of the Second Amendment Effective Date, and after giving effect to the transactions contemplated
by this Amendment: (a) all representations and warranties of the Borrower in the Original Loan Agreement and in all the other Loan Documents, as and to the extent amended and restated in this Second Amendment Agreement, are true and correct in
all material respects, as though made on the date hereof, except as and to the extent that 

  

					
			3		Second Amendment

 
(i) any of those representations and warranties speak to a different specific date or may have otherwise been made inaccurate by the mere passage of time; or (ii) the facts or
circumstances on which any of those representations and warranties were based have been changed by transactions or events not prohibited by the Loan Documents; or (iii) Borrower discloses to Lender otherwise in the Borrower Disclosure Schedules
as updated by Borrower, delivered to Lender at least two (2) Business Days prior to the Second Amendment Effective Date and approved of by Lender, which approval shall not be unreasonably withheld or delayed; (b) no Default or Event of
Default exists under the Loan Documents as amended by and after giving effect to this Second Amendment; (c) this Second Amendment has been duly authorized and approved by all necessary corporate action of Borrower and requires the consent of no
other Person, and is binding and enforceable against Borrower in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws, now or hereafter in
effect, relating to or limiting the rights of creditors’ and general equitable principles, regardless of whether the issue of enforceability is considered in a proceeding in equity or at law; and (d) the execution, delivery and performance
by Borrower of this Second Amendment does not and, to the knowledge of Borrower, will not, by the passage of time, the giving of notice, or both: (i) require any governmental approval which Borrower is required to obtain, other than such
as have been obtained and are in full force and effect; (ii) violate any applicable law to which Borrower is subject; (iii) conflict with, result in a breach of, or constitute a default under the Constituent Documents of Borrower;
(iv) conflict with, result in a breach of, or constitute a default under any indenture, agreement, or other instrument to which Borrower is a party or by which it or any of its properties may be bound; or (v) result in or require the
creation or imposition of any Lien (other than a Permitted Lien) upon any property now owned or hereafter acquired by Borrower (the failure of which, in the case of clauses (i), (ii), (iv) and (v) of this Section 5(b), would have,
either individually or in the aggregate, a Material Adverse Change on Borrower and its Subsidiaries considered as a whole). 
  

	6.	Reserved. 

  

	7.	Miscellaneous. 

  

	 	(a)	This Second Amendment shall be deemed to constitute a Loan Document for all purposes and in all respects. Unless the context in which they are used indicates otherwise, the terms “hereunder,”
“hereof,” “herein” or words of like import contained in this Second Amendment shall refer to this Second Amendment as a whole and not to the sections, paragraphs or clauses of this Second Amendment where such terms may appear.

  

	 	(b)	The Loan Documents shall remain unchanged and in full force and effect, except as and to the extent modified or amended by this Second Amendment or the Second Amended and Restated Note, and, as so modified or amended,
are hereby ratified and confirmed by the parties. The parties further agree that the execution, delivery and effectiveness of this Second Amendment shall not, except as otherwise expressly provided herein, operate as a waiver of any of the
respective rights of Lender or Borrower under any of the Loan Documents (as and to the extent modified or amended by this Second Amendment or the Second Amended and Restated Note). 

 

	 	(c)	All of the terms and provisions of this Second Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 

 

	 	(d)	This Second Amendment may be executed in one or more counterparts and by different parties hereto in separate counterparts each of which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same
document. Delivery of photocopies of the signed signature pages to this Second Amendment by facsimile or electronic mail shall be effective as delivery of manually executed counterparts of this Second Amendment. 

  

					
			4		Second Amendment

	 	(e)	THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS, AS AND TO THE EXTENT HERETOFORE AMENDED, OR AMENDED AND RESTATED, BY THE FIRST AMENDMENT AND AS AND TO THE EXTENT FURTHER AMENDED, OR AMENDED AND RESTATED, BY THIS
SECOND AMENDMENT, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR CONTEMPORANEOUS AGREEMENTS (WHETHER WRITTEN OR ORAL) OF THE PARTIES RELATING TO THE SUBJECT MATTER OF, THE LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AND TO THE EXTENT AMENDED OR AMENDED AND RESTATED BY THE FIRST AMENDMENT AND AS AND TO THE EXTENT FURTHER AMENDED OR AMENDED AND RESTATED BY THIS SECOND AMENDMENT. 

 

	 	(f)	The headings or captions used in this Second Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the respective
meaning thereof. 

  

	 	(g)	If any provision of this Second Amendment is held to be invalid, illegal or unenforceable in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

  

	 	(h)	On the Second Amendment Effective Date, and subject to the execution and delivery by Borrower of the Second Amended and Restated Note, the First Amended and Restated Note shall cease to be outstanding or effective and
Lender shall deliver to Borrower on such date the First Amended and Restated Note, (and if not previously delivered by Lender to Borrower, the Original Note) heretofore signed and delivered to Lender by Borrower. 

 

	 	(i)	This Amendment shall be construed in accordance with and governed by the laws of the State of Texas. 

[Remainder of Page Intentionally Left Blank; Signature Pages Follow.] 

  

					
			5		Second Amendment

 IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple counterparts to
be effective as of date first set forth above. 
  

							
					BORROWER:
			
					FIRST FOUNDATION, INC.,
					a California corporation
				
					By:		   /s/ JOHN MICHEL

							Name: John Michel
							Title: Chief Financial Officer

  

  
 Signature Page to
Second Amendment to Loan Agreement 
 (First Foundation, Inc.) 

							
					LENDER:
			
					NEXBANK SSB
				
					By:		   /s/ RHETT A. MILLER III

					Name:		Rhett A. Miller III
					Title:		Senior Vice President & Chief Credit Officer

  

  
 Signature Page to
Second Amendment to Loan Agreement 
 (First Foundation, Inc.)

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