UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 3, 2015
ENCORE BRANDS, INC.
(Exact Name of Registrant as Specified in Charter)
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Nevada
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5182
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26-3597500
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(State or Other Jurisdiction
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(Primary Standard Industrial
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(IRS Employer
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of Incorporation)
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Classification Code Number)
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Identification No.)
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2215-B Renaissance Drive
Las Vegas, NV 89119
(310) 699-9937
(Address and telephone number of registrant’s principal executive offices)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 15a-12 under the Exchange Act (17 CFR 240.15a-12)
[ ] Pre-commencement communications pursuant to Rule 15d-2(b) under the Exchange Act (17 CFR 240.15d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On February 24th, 2015 Encore Brands, Inc. (“Encore”) entered into a material definitive agreement to acquire the master license and worldwide rights for the electronic cigarette brand Jak from Sago Technology, Inc. (“Sago”). The agreement provides that Encore Brands will form a new entity, Jak Marketing Group, Inc. (“JMG”), which will acquire the master license to operate and manage the business.
In addition to the license, Encore Brands has entered into a management agreement whereby two principles of Sago will manage the business of JMG for a minimum of 36 months. The management agreement includes certain performance incentives and equity in JMG to be earned over the 36 month period.
Furthermore, Encore has entered into a purchase agreement with Sago for a 10 percent ownership stake in Sago Technology and its assets, including the Jak trademark.
Founded in 2011 by Mr. Jack Saleh, Mr. Saleh has developed and successfully launched the Jak electronic cigarette brand in Chicago, IL achieving wholesale revenue of one million dollars in 2013 and two million dollars in 2014. The brand has became one of the top 10 retail ecig brands sold in Chicago convenience stores as of June 2014.*
Less than a decade old, the electronic cigarette market is still in its infancy, but has grown to an estimated 3 billion dollars worldwide in 2015. While e-cigarette products are not currently regulated in the US, it is anticipated that this will happen at some point in the near future with the resulting taxation dollars aimed at improved product safety, meeting FDA requirements and education against smoking.
While the anticipated regulation may cause some additional cost of goods sold or require the need for some sort of wholesale license. Management does not believe this will impede the growth in sales of these nicotine delivery devices as more and more data is accumulated about its long-term use in comparison to conventional tobacco products.
This unique consumer brand represents an opportunity for Encore to execute on its consumer brand strategy in a rapidly growing market segment with a high margin product and acquire experienced and motivated management in the process.
The Purchase Agreement, the Management Agreement and Master License agreement have been included as an attachment to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about the parties. The representations, warranties and covenants contained in the Agreements were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Agreements. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Agreements and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Sago Technology or Encore Brands or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Agreements, which subsequent information may or may not be fully reflected in Encore Brand’s public disclosures.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Effective February 25, 2015, the company entered into a purchase agreement and master license agreement (the “Agreements”) with Sago Technology for the Jak e-cigarette brand. The master license requires the company to purchase the existing Sago inventory at its cost as well as buying the current accounts receivable. In addition, the company will use it best efforts to provide the funding necessary to operate the existing business up to and including the use of the company’s credit line with TCA Global Credit Master Fund.
Furthermore, it is agreed that the company will raise an additional 1 million dollars over the next 6 months to be used for the growth and operations of the JMG business. At the time of the deposit of these funds into the JMG operating account the company will receive a 10 percent equity share of Sago Technology, Inc. and its assets.
*6/2014 IRI Data
Item 9.01 Exhibits
The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.
Exhibits Description
10.1 Master License Agreement
Dated February 25, 2015 between the company and Sago Technology, Inc
10.2 Management Agreement
Dated February 25, 2015 between the company and Sago Technology, Inc
10.5 Purchase Agreement
Dated February 25, 2015 between the company and Sago Technology, Inc
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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ENCORE BRANDS, INC.
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March 3, 2015
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By: /s/ Alex G. McKean
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Alex G. McKean
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Chief Financial Officer
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Exhibit 10.1
MASTER LICENSE AGREEMENT
AGREEMENT made as of the day of February 13, 2015 by and between Sago Technology Inc., a corporation having its principal place of business at 785 Woodfern Drive, Hampshire, IL 60140 ("Supplier"), and Jak Marketing Group, Inc., a Nevada corporation having its principal place of business at 1525 Montana Ave, Santa Monica, CA 90402 ("JMG").
WITNESSETH
WHEREAS, Supplier wishes to grant JMG the exclusive right to sell the Supplier's products to distributors, and a non-exclusive right to sell the Supplier’s products to retailers, in a defined territory as set forth herein; and
WHEREAS, JMG desires to be the master licensor for Supplier's products and accepts the responsibility for selling the Supplier’s products to distributors and retailers in the manner described in this Agreement.
NOW THEREFORE, in consideration of the mutual covenants contained in this Agreement, Supplier and JMG, intending to be legally bound, agree as follows:
1. Definitions. When used in this Agreement:
(a) "Products” shall mean the products set forth in Exhibit A subject to the provisions of Section 9 below as well as any and all related packaging, devices, containers, labels, point of sale materials, promotional materials, etc. connected with the Jak Brand electronic cigarette.
(b) "Territory" shall mean the geographic territory set forth on Exhibit B attached hereto.
(c) "Initial Term" shall mean the period commencing as of the date of this Agreement and continuing for three (3) years thereafter.
(d) "Renewal Term" shall mean the period commencing as of the first day following the end of the Initial Term and continuing for three (3) years thereafter.
(e) "Contract Year" shall mean each twelve month period during the term of this Agreement commencing on the date of this Agreement and ending 12 months later.
(f) "Unit" shall mean any e-cigarette device, disposable, refillable or cartridge.
2. Appointment.
(a) Supplier hereby appoints JMG as the master licensor of the Products for the Territory.
(b) JMG hereby accepts appointment as the master licensor of the Products for the Territory and shall, during the term of this Agreement, use all reasonable efforts to promote the Products throughout the Territory including online worldwide.
(c) JMG shall coordinate its activities of distributing the Products with Supplier. JMG and Supplier shall devise mutually acceptable methods of operation in order to expedite the shipment, and handling of the Products as well as any other joint activities intended by this Agreement.
3. Duration.
The term of this Agreement shall be the Initial Term, unless sooner terminated in accordance with Section 11. Upon the expiration of the Initial Term, unless either party has provided the other party with sixty (60) days advance written notice of an intent to terminate this Agreement, this Agreement shall automatically be extended for successive Renewal Terms, unless sooner terminated in accordance with Section 11.
In the event there is a significant change of ownership of Supplier, Supplier (or its successor) agrees not to terminate or fail to renew this Agreement for a period of one (1) year after the effective date of such significant change of ownership. For purposes of the preceding sentence, a "significant change of ownership" shall include but not be limited to any change in business form, identity or ultimate ownership by way of merger, sale, consolidation or share transfer that results in a change of more than 50% of the ownership of Supplier.
4. Terms of Sale and Payment
(a) Supplier shall sell Products to JMG at the delivered unit prices F.O.B. 165 Prairie Lake Rd, Ste K, East Dundee, IL 60118 as set forth on Exhibit C attached hereto. JMG shall also cover the cost of shipping, freight and clearance fees, costs and expenses, which amounts shall be within the range set forth on Exhibit C attached hereto. Pricing as set forth on Exhibit C shall remain in effect for one year from the date of this Agreement. Payment shall be made to the Supplier and shall be due twenty four (24) hours from the date of delivery to JMG’s warehouse.
(b) One year from the date of this Agreement, Supplier may increase the price of the Products upon ninety (90) days prior written notice to JMG. Notwithstanding the proceeding, price increases charged to JMG shall not be greater than the price increases experienced by Supplier from its manufacturers.
(c) Supplier may decrease the prices of the Product at any time during the term of the Agreement. Such price decreases shall become effective upon JMG's receipt of written notice thereof.
(d) All carriers engaged to ship the Products from 165 Prairie Lake Rd, Ste K, East Dundee, IL 60117 to JMG (or any distributor designated by JMG in the Territory) shall be the agents of JMG. The risk of loss thereon shall pass immediately to JMG upon delivery of the Products to such carrier for shipment to the Territory. JMG shall have the right to determine the point of destination in the Territory and the method of shipment of the Products.
(e) JMG hereby agrees that, unless otherwise mutually agreed to in writing by Supplier and JMG, that JMG shall not make any distributions, pay any dividends or otherwise deliver monies to its stockholders, unless and until JMG has cash on hand that is derived from income from operations equal to or in excess of $500,000, and in the event such condition is satisfied any and all such distributions, dividends or otherwise shall be paid seventy percent to Encore Brands, Inc. and thirty percent to Supplier.
5. Product Distribution, Marketing and Advertising.
(a) JMG shall use all commercially reasonable efforts to sell the Products in theTerritory.
(b) JMG will use all commercially reasonable efforts to maintain a sales force of adequate size to represent and promote the sales of the Products throughout the Territory.
(c) JMG shall use all commercially reasonable efforts to maintain sufficient inventories of the Products to adequately service the requirements of the markets in the Territory. JMG shall promptly deliver to its customers in the Territory the Products in accordance with good business practice and local custom.
(d) JMG shall timely file all such price schedules and reports as may be prescribed by applicable laws and regulations.
(e) In order to develop sales of the Products in the Territory, a coordinated marketing, advertising, and promotional effort shall be made by Supplier and JMG. The parties shall meet once during each Contract Year to discuss plans for marketing, advertising, and promotional efforts for the following Contract Year; however, the implementation of such efforts shall be the responsibility of JMG. The nature and form of such marketing, advertising, and promotion, as well as its staffing and budgeting, shall be mutually agreed upon.
(f) JMG shall be responsible for 100% of the costs of marketing, advertising, promotions, incentives and samples.
6. Representation and Warranties of JMG.
JMG represents, warrants, and covenants to Supplier as follows:
(a) JMG has the authority to enter into and carry out its obligations under this Agreement.
(b) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in a breach of any contract or agreement to which JMG is a party.
(c) JMG maintains all necessary federal, state, and local licenses to conduct its business in all material respects as a distributor of electronic cigarettes as regulated by the FDA today and to engage in the transactions intended by this Agreement.
7. Representations and Warranties of Supplier.
Supplier represents, warrants, and covenants to JMG as follows:
(a) Supplier has the authority to enter into and carry out its obligations under this Agreement.
(b) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in a material breach of any contract or agreement to which Supplier is a party.
(c) Supplier has the right to designate and appoint JMG as the master licensor of the Products in the Territory.
(d) The Products to be sold to JMG under this Agreement shall be merchantable and fit for human consumption. In addition, the Products, including any and all related packaging, e-cigs, refills, containers, labels, point of sales materials, promotional materials, etc. shall be manufactured, packaged, and labeled in material conformity with applicable federal, state, and local laws, rules, and regulations, including but not limited to the rules and regulations of the U.S. Bureau of Alcohol, Tobacco, and Trade-Bureau, and FDA.
(e) The Products to be sold to JMG shall be free and clear of all liens. Neither the execution and delivery of this Agreement, nor compliance with its terms and provisions, will result in the creation or imposition of any lien, charge, encumbrance, or restriction of any nature upon the Product to be sold to JMG.
(f) All shipments of the Products will conform in all material respects to the samples of the Products that have been furnished to JMG.
(g) Supplier shall defend, indemnify, and hold harmless JMG from and against any and all damages and liability, including reasonable attorneys' fees, costs and disbursements, which it may suffer as a result of, or arise out of a breach of any of Supplier's representations and warranties set forth herein, product liability, trademark infringement, or any other claims which arise from importation and distribution of the Products by JMG in accordance with the terms of this Agreement; provided, that Supplier’s indemnification obligation provided for in this Section 7(g) as well as Supplier’s other obligations to JMG for liability, damages, attorney fees, costs, or expenses provided for elsewhere in this Agreement shall not exceed One Million Dollars ($1,000,000) in the aggregate.
(h) Supplier shall maintain an adequate inventory of the Products with which to supply JMG. Supplier shall accept all reasonable orders submitted by JMG, with shipment to follow not later than sixty (60) days from receipt of an order.
(i) Supplier shall utilize its commercially reasonable best efforts to prevent the sale of unauthorized shipments of the Product in the Territory by entities or persons other than JMG. In this regard, Supplier shall not sell or otherwise transfer the Products to any wholesaler or distributor located outside the Territory whom Supplier knows, or has reason to believe, will either directly or indirectly, sell or otherwise transfer the Products into the Territory, including, but not limited to, any state agency.
(j) Supplier has made the independent decision to appoint JMG as the master licensor and as a non-exclusive distributor of the Products pursuant to the terms of this Agreement. Furthermore, Supplier has no oral or written agreement with any other person for the right to serve as the master licensor of the Products in the Territory, there are no pending, or to the knowledge of Supplier, threatened claims by any third party or distributor against Supplier arising out of or relating to the distribution of the Products in the Territory.
(k) Supplier shall defend any claim, action, suit brought against JMG for damages arising from or related to the use of Products as defined in 1(a) or from the use of brand names, packaging, point of sale materials, or labels of Products or from the breach of any provisions of this agreement and shall hold harmless and indemnify JMG against any liability, damages, attorney fees, costs, or expenses incurred in connection with any such claim, action, or suit, provided that JMG shall notify Supplier promptly of any such claim, action, or suit and cooperate in the defense thereof to the extent reasonably required by Supplier.
8. Product Liability, Insurance and Returns.
(a) During the term of this Agreement, Supplier shall maintain in full force and effect general liability insurance with product hazard coverage regarding the sale of the Products by JMG in the Territory in an amount of not less than one million ($1,000,000) dollars for a single accident occurrence in the aggregate. Supplier's insurance shall contain a broad form vendor's endorsement inuring to the benefit of JMG. Supplier shall, on an annual basis, furnish to JMG a certificate confirming such coverage.
(b) Any Products not merchantable due to patent quality deficiencies, including packaging problems or to errors committed by Supplier or its suppliers, may be returned to Supplier for full credit at JMG’s total laid-in cost provided that written notice of such deficiency, problem, or error has promptly been given to Supplier following receipt of the same by JMG. Any Products not merchantable due to latent quality deficiencies, including packaging problems or to errors committed by Supplier or its suppliers may be returned to Supplier for full credit provided that notice of such latent defect has been given to the Supplier within one (1) month after the defect has become known to JMG. Supplier will not be obliged to issue a credit for any Products which has been rendered unmerchantable by inordinate delays in shipping, improper handling or other negligent acts on the part of JMG or its customers.
9. Future Products and Territories
(a) JMG shall have the right of first refusal regarding any future product which Supplier desires to introduce into the Territory. In the event that JMG exercises its option to distribute additional products produced or sold by Supplier, Exhibit A shall be amended in writing by the parties and the term "Products" as used in this Agreement shall be deemed to include such additional products.
(b) Supplier hereby appoints JMG as its master licensor in the United States, and agrees to appoint JMG as its master licensor in all other countries worldwide, including all retail and online sales.
10. Trademarks.
(a) Supplier represents and warrants that it has the unrestricted right to use all the trademarks, brand names, service marks and other intellectual property rights in the Territory as applied to the Products ("Product Marks"). Supplier shall immediately take all appropriate steps to register and/or maintain the Product Marks in the Territory.
(b) Supplier grants to JMG the unrestricted right, during the term of this Agreement, to use the Product Marks in connection with the marketing, sale, and promotion of the Products in the Territory and JMG acknowledges that its use of the Product Marks shall not create any trademark or brand ownership with JMG.
11. Termination.
(a) Supplier may terminate this Agreement and JMG's rights hereunder prior to the expiration of this Agreement by giving written notice to the JMG for any of the following grounds:
(i) That JMG, through failure to renew or because of cancellation, suspension, or revocation continuing for a period in excess of 30 days, has suffered the loss of any federal license required by law and necessary in carrying out the material provisions of the Agreement;
(ii) That JMG has failed to make payment of any invoice in accordance with the credit terms of the Supplier and has not remedied the failure after fourteen (14) days written notice (except for bona fide disputes); or
(iii) That JMG has failed to fulfill any other material terms and conditions of this Agreement and has not remedied the failure after thirty (30) days' written notice.
(b) JMG may terminate this Agreement prior to its expiration by giving written notice to Supplier based upon any of the following grounds:
(i) That Supplier has failed to honor any material commitments with regard to sales, delivery, credits, allowances, returns, packaging quality, or product quality, and that such failure continues for a period of 30 days after written notice.
(ii) That Supplier has failed to fulfill any of the material terms and conditions of this Agreement and has not remedied this failure after 30 days written notice thereof.
(c) This Agreement shall terminate automatically and without notice upon the grounds that (i) there has been filed by either party a voluntary petition in bankruptcy or arrangement under a national or federal bankruptcy statute or other voluntary proceedings under any national, federal, or local laws for the settlement or extension of payment of its obligations to general creditors, or (ii) an involuntary lien or petition in bankruptcy has been filed against either party and such involuntary lien or petition has not been dismissed within thirty (30) days.
12. Events following Termination.
(a) Upon the expiration or termination of this Agreement by either party, the following shall occur:
(i) All rights, licenses, and privileges granted to JMG under this Agreement shall immediately cease and terminate;
(ii) JMG shall discontinue the use of the Product Marks;
(iii) After repayment of, or set aside for, any and all unaffiliated third-party indebtedness, including current liabilities such as accounts payable, JMG shall make a distribution, pay a dividend or otherwise deliver to Supplier a payment equal to thirty percent of the enterprise value of JMG; and
(iv) Supplier shall purchase any and all of the Products and all other material bearing the trademark, then owned by JMG at its per unit value (excluding handling charges such as freight, insurance and customs duties).
(b) Any indebtedness of either party to the other not already due shall become immediately due and payable as of the effective date of termination of this Agreement. In no event shall either party be liable for any debts of the other party to its customers or its other creditors.
(c) The Supplier acknowledges that JMG will be engaged in the marketing and sales of its products. In order to encourage and further compensate JMG and to obtain maximal efforts, the Supplier agrees that it shall pay a sum equal to two and one-half (2.5) times the gross profit for the 12 month period immediately preceding the date of termination as compensation for termination of JMG other than pursuant to Section 11(a) above. The gross annual profit will consist of all sales recorded over and above the current annual revenues attained by Supplier in the immediate twelve months prior to the execution of this Agreement. This compensation to JMG will only become an obligation of the Supplier in the event of (i) a funding of JMG totaling three million five hundred thousand dollars ($3,500,000), or (ii) sale of the Jak brand. The compensation shall not be in lieu of any of the other rights and remedies that JMG may be legally entitled.
13. Choice of Law and Disputes.
(a) This Agreement shall be governed by the laws of the State of California.
(b) In the event that any disagreement or dispute shall arise between Supplier or JMG under any provision of the Agreement or arising out of this Agreement, such disagreement or dispute shall be submitted by the parties to arbitration by a panel of three (3) arbitrators, who shall be appointed in accordance with the rules of the American Arbitration Association. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association and shall be held in the State of California. Any award made by a majority of the arbitrators shall be binding upon the parties. Arbitration shall be the exclusive remedy for breach of this Agreement by either party, except with regard to a suit for wrongful termination of this Agreement. If either party shall refuse or neglect to appoint an arbitrator, then the arbitrator that should have been appointed by such party shall be appointed in accordance with the rules of the American Arbitration Association.
(c) In any suit for wrongful termination of this Agreement, Supplier agrees to appear in and be subject to a court of competent jurisdiction located in the State of California, to which jurisdiction the Supplier hereby submits. Supplier further agrees that service of any process upon Supplier may be made by ordinary mail at Supplier's address stated in Section 19 below. JMG shall not be required to effect service of process, upon Supplier in any other manner.
14. Business Records Related to the Product.
JMG shall maintain accurate and complete business records with respect to its sale and distribution of the Product. Such records shall be kept in such form as Supplier shall reasonably require. JMG shall make the originals of such records available to employees or agents of Supplier during regular business hours upon reasonable notice.
If any party is prevented from performing any of its obligations hereunder by an occurrence beyond its reasonable control such as, but not limited to, acts of God, fire, flood, war, insurrection, riot, government regulations, raw material shortage, strikes, or lack of common carrier facilities, then the affected party shall be excused from performance for so long as such occurrence exists.
In the event any of the terms and provisions of this Agreement are in violation of, or prohibited by, any applicable law or regulation, such terms and provisions shall be deemed as amended or deleted to conform for such law or regulation without invalidation or amending or deleting any of the other terms or conditions of this Agreement.
17. Assignment of Agreement.
Neither party may assign this Agreement without the prior written consent of the other.
18. Relationship of the Parties.
The parties acknowledge that no joint venture has been created by this Agreement, and that neither party can take any action which is legally binding on the other without the prior written consent of the party to be charged.
19. Miscellaneous.
(a) Any demand, notice, or request provided for by this Agreement shall be in writing, and shall be made by delivery or by registered or certified mail addressed to the party to whom notice is to be given or to whom a demand or request is to be made.
The addresses of the parties are as follows:
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To JMG: |
Jak Marketing Group, Inc. |
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1525 Montana Ave Suite C |
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Santa Monica, CA 90403 |
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Attention: Gareth West, President |
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To Supplier: |
Sago Technology, Inc. |
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785 Woodfern Drive |
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Hampshire, IL 60140 |
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Attention: Jack Saleh, President |
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(b) This Agreement represents the entire agreement between JMG and Supplier, and supersedes all prior oral and written arrangements and agreements with respect to the subject matter hereof, and may not be changed, except by a written agreement or amendment to this Agreement signed by both parties.
(c) Any failure by a party hereto to exercise any of its rights under this Agreement shall not be construed as a waiver of such rights; and such failure shall not preclude exercise of such rights at any later time.
(d) Section headings are for convenience only and are not to be construed as part of this Agreement.
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Jak Marketing Group, Inc. |
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By: |
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Its: |
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Sago Technology, Inc. |
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By: |
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Its: |
Exhibit A
PRODUCTS
Exhibit B
TERRITORY
Master Licensor Worldwide.
Exhibit C
PRICING
See Attached
Exhibit 10.2
MANAGEMENT AGREEMENT
This Management Agreement (this “Agreement”), is entered into on November 20, 2014, by and among Jak Marketing Group, Inc., a Nevada corporation (“JMG”), Sago Technology, Inc., a Nevada corporation (“ST”), and Jack Saleh and Steve McVicar, each natural persons. JMG and ST, Jack Saleh and Steve McVicar are each referred to individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, Jack Saleh (the “Seller”) and Steve McVicar currently own 100% of the issued and outstanding capital stock of ST; and
WHEREAS, concurrently with the execution of this Agreement, JMG has entered into the certain Purchase Agreement with the Seller pursuant to which JMG has agreed to purchase 10% (ten percent) of the issued and outstanding shares of capital stock of ST from the Seller; and
WHEREAS, ST is engaged in the business of operating the electronic cigarette brand named Jak Ecig located in East Dundee, Illinois (the “Business”); and
WHEREAS, the Parties anticipate that the purchase of 10% (ten percent) of the shares of ST’s outstanding capital stock from the Seller will be completed (the “Sago Technology Closing”) by no later than June 30, 2015, or such later date as the Parties may agree to pursuant to the Purchase Agreement; and
WHEREAS, the Parties agree and acknowledge that JMG needs additional capital to ramp up its operations and to increase its revenues and profitability; and
WHEREAS, Encore Brands and its subsidiaries has obtained a credit facility of up to $5,000,000 (the “Credit Facility”) from TCA Global Credit Master Fund, LP (the “Lender”), $500,000 of which Encore Brands is willing to make available to JMG prior to the Sago Technology Closing provided that those funds are used for the benefit of JMG and the Business; and
WHEREAS, provided that funds from the Credit Facility are used for the benefit of JMG and the Business, JMG is willing to fully and unconditionally repay all loan advances and be responsible for all other obligations under the Credit Facility; and
WHEREAS, JMG desires to give ST the right to manage JMG and the Business prior to the Sago Technology Closing in the manner set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties covenant and agree as follows:
1. Incorporation of Recitals. The foregoing recitals are an integral part of this Agreement and are incorporated herein by reference.
2. Engagement. Effective immediately and continuing after the Sago Technology Closing, JMG hereby engages ST to control, manage and supervise the day-to-day operations of the Business (the “Day-to-Day Operations”), and ST hereby accepts such engagement. This Agreement may be terminated by either ST or JMG upon written notice to the other party if the Sago Technology Closing has not occurred by June 30, 2015, and the failure of the Sago Technology Closing to take place has not been caused by the terminating party’s action or inaction.
3. Duties and Authority of Sago Technology. ST through its representatives Jack Saleh and Steve McVicar, agrees to use commercially reasonable efforts to direct and instruct JMG employees in the operation of the Business. In carrying out the purposes and intent of the foregoing, ST agrees that the Day-to-Day Operations shall include the following:
(1) direct the activities of JMG in the operation of the Business and otherwise oversee the operation of the Business;
(2) administration of all commercial banking activities for all JMG accounts, including checks, wires, transfers, customer credits, bank charges, etc., with Jack Saleh and Steve McVicar having check signing authority, and those other accounts shared with Encore Management;
(3) maintaining complete and accurate financial and other records respecting activities hereunder, and issue directions and instructions to JMG employees as to maintaining complete and accurate financial and other records of JMG in accordance with good business practices;
(4) Jack Saleh shall serve as the President of JMG and report directly to the board of Encore Brands, Inc and be required to participate in quarterly meetings and supply timely and accurate information and updates as to the current and projected status of the Business to the best of his knowledge.
(5) make decisions regarding the selection, hiring, salaries, promotion, discharge, supervision and the terms of employment of the employees of JMG, and with respect to contractors and other agents of JMG, and Jack Saleh shall receive annual base compensation in the amount of $120,000 and Steve McVicar shall receive annual base compensation in the amount of $90,000;
(6) performing such other services of an advisory and management nature as necessitated by the ordinary course of the Business; and
(7) overseeing the payment by JMG of (i) all of its operating expenses, (ii) all of its taxes and governmental obligations, and (iii) all payments required to be made to the Lender by JMG under the TCA Credit Facility.
4. Management Fees. In consideration of ST’s provision of the Services hereunder, JMG will pay ST a royalty of $.30 (thirty cents) per unit of Jak brand electronic cigarettes sold. These fees are to be accounted for monthly in arrears and paid within 15 days of each month end. In addition to the foregoing royalty payments, payments to ST shall include monthly rent in an amount of $1,600 per month as required to maintain offices and warehouse space necessary to manage the brand. Annually the Parties shall have a good faith conversation regarding upward adjustment of the amount of the royalty payment per unit.
5. Further Consideration. In addition to royalties, ST and or Seller shall have the ability to earn equity of up to 30% of the outstanding shares of JMG for its continued management of the Business, which equity securities shall be exchangeable for shares of Encore Brands capital stock with the number of shares to be received upon exchange to be calculated taking into consideration the fair market value of the assets net of liabilities being contributed by JMG to Encore Brands or its subsidiary or affiliate relative to the fair market value of all of the assets net of liabilities being contributed to Encore Brands or its subsidiaries or affiliates. Commencing upon the execution of the Purchase Agreement for a period of 36 months thereafter, ST or Seller shall be granted the shares in equal installments annually in arrears. In the event of a purchase, sale or buy out of the Jak Ecig brand the vesting period would be accelerated and the equity grant become fully vested immediately prior to completion of a sale. ST and Seller shall have customary registration rights with respect to the shares of capital stock of Encore Brands.
6. Covenant of Sago Technology. ST and its representatives covenant and agree to comply in all material respects with all applicable laws and regulations in connection with the performance of the Day-to-Day Operations, and to take all actions reasonably required to cause JMG to be in compliance in all material respects with all laws and regulations relating to the Business.
7.1 Further Assurances. The Parties agree (i) to furnish upon request to each other such further information, (ii) to execute and deliver to each other such other documents, and (iii) to do such other acts and things, all as any other Party may reasonably request for the purpose of carrying out the intent of this Agreement.
7.2 Effect of Headings. The Section headings used in this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any of the provisions hereof.
7.3 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of California.
7.4 Entire Agreement and Modification. This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof, and supersedes all prior agreements or understandings as to such subject matter. This Agreement may not be amended or modified except by a written agreement duly executed by each of the Parties hereto.
7.5 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
7.6 Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if it is delivered by a nationally recognized courier or other means of personal service, or sent by facsimile or registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:
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If to Sago Techology:
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Sago Technology, Inc
785 Woodfern Drive
Hampshire, IL 60140
Attention: Jack Saleh
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If to Encore Brands:
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Jak Marketing Group, Inc C/O Encore Brands, Inc.
1525 Montana Ave C
Santa Monica, CA 90403
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Any Party may give any notice, request, demand, claim, or other communication hereunder using any other means, but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the individual for whom it is intended. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.
7.7 Waivers. No waiver by any Party of any misrepresentation or breach of any provision hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent misrepresentation or breach of any provision hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence.
7.8 Execution of Agreement; Counterparts. This Agreement may be executed and delivered (including by facsimile or other electronic transmission) in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
7.9 Third-Party Beneficiaries. The provisions of this Agreement are for the benefit of Sago Technology, Inc and Jak Marketing Group, Inc and not for any other person. However, should any third party institute proceedings, this Agreement shall not provide any such person with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those provided herein.
IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the date first set forth above.
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JAK MARKETING GROUP, INC.
By: ______________________
Gareth West
Chief Executive Officer
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SAGO TECHNOLOGY, INC.
By: ______________________
Its: ______________________
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AGREED AND ACCEPTED
By:____________________________
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
(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.
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.
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.
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.
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.
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.
(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.
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.
(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:
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Sago Technology, Inc.
785 Woodfern Drive
Hampshire, IL 60140
Attention: Jack Saleh
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If to the Purchaser:
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Encore Brands, Inc.
1525 Montana Ave Suite C
Santa Monica, CA 90403p
Attention: Chief Executive Officer
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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.
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.
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SELLER:
Sago Technology, Inc.
By:________________________________
Name: Jack Saleh
Its: Chief Executive Officer
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PURCHASER:
Encore Brands, Inc.
By:__________________________________
Name: Gareth West
Its: Chief Executive Officer
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EXHIBIT A
MANAGEMENT AGREEMENT
Encore Brands (GM) (USOTC:ENCB)
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Von Mai 2024 bis Jun 2024
Encore Brands (GM) (USOTC:ENCB)
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Von Jun 2023 bis Jun 2024
