BRIDGE
LOAN AND INVESTMENT AGREEMENT
BY AND
BETWEEN
ENCORE
BRANDS, INC.,
a Nevada
corporation
AND
PETER
STADDON, AN INDIVIDUAL
This
BRIDGE LOAN AND INVESTMENT AGREEMENT is made this
18th day of
December, 2009, by and between
Peter Staddon, an individual (the "Lender"), and Encore Brands,
Inc., a Nevada corporation ("Encore"). The Lender and
Encore are referred to collectively herein as the
"Parties."
Whereas,
the Lender desires to make an investment in Encore.
Whereas,
in connection with the investment in Encore by the Lender the
Parties will enter into this agreement and in addition: (i) Encore
will execute a promissory note ( the “Note” ) in
favor of the Lender, and (ii) Encore will execute a warrant in
favor of the Lender whereby the Lender will have the right to
exercise the warrant to acquire shares of common stock, $0.001 par
value (the “Stock”) of Encore ( the “Warrant
” ).
In
the event of any conflict between the terms of this agreement, and
the Note or Warrant, the terms of this agreement shall
control. Terms not defined herein shall have the meaning
ascribed to them in the Note, or the Warrant.
Now
in consideration of the mutual covenants, agreements,
representations, and warranties contained in this agreement, the
Parties agree as follows:
The
Lender agrees to loan to Encore the principal amount of Fifty
Thousand ($50,000.00) Dollars (the "Loan").
In
consideration thereof, Encore will issue, cause to be executed and
deliver to the Lender the Note in the principal amount equal to the
amount of the Loan, upon the terms and conditions specified herein,
and in the form set forth in Exhibit A, hereto.
The
unpaid principal under the Note shall bear interest at the rate of
ten percent (10%) per annum.
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Financing
and Documentation Fee .
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Encore
agrees to pay a financing and documentation fee (“Financing
Fee”) to the Lender in the amount of One Thousand ($1,000.00)
Dollars.
Any
and all accrued interest together with the principal and Financing
Fee shall be due and payable to the Lender, at the Lender's address
of record, on the Maturity Date.
Encore
may, at any time, prepay the amount evidenced by the Note, in whole
or in part, without penalty or premium, by paying to the Lender, in
cash or by wire transfer or immediately available federal funds,
the amount of such prepayment which shall include accrued interest
and the Financing Fee. If any such prepayment is less
than a full repayment, then such prepayment shall be applied first
to the payment of accrued interest and the remaining balance shall
be applied to the payment of principal.
It is
expressly stipulated and agreed to be the intent of Encore and the
Lender to comply with, at all times, the applicable state law
governing the maximum rate or amount of interest payable on the
Note (or applicable federal law to the extent that it permits the
Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under applicable state law). In
the event the applicable law is judicially interpreted so as to
render usurious any amount called for under the Note or contracted
for, charged, taken, reserved or received with respect to such
indebtedness, or if any prepayment by Encore results in Encore
having paid any interest in excess of that permitted by applicable
law, then it is the express intent of both Encore and the Lender
that all excess amounts theretofore collected by Lender be credited
on the principal balance of the Note (or, if this Note has been or
would thereby be paid in full, refunded to Encore), and the
provisions of the Note shall immediately be deemed amended and the
amounts thereafter collectible hereunder and thereunder reduced,
without the necessity of the execution of any new, or amendment to
any existing, document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise
called for hereunder and thereunder.
At any
time after the execution of this agreement, the Lender shall have
the right, but not the obligation, to convert all, or
any portion, of the Loan into shares of Stock (the
“Conversion Option”). The price for the
Conversion Option shall be a fifteen (15%) percent discount to the
ten day volume weighted average price per share of Stock (the
“Conversion Price”). The Conversion Price
shall be calculated by examining trading in the Stock for the ten
trading days prior to the date the Lender elects to exercise the
Conversion Option. Upon its election to exercise the
Conversion Option, the Lender shall notify Encore in writing of
such fact, and upon Encore’s receipt of the Lender’s
notice of exercise, Encore shall request that Encore’s
market-maker, who shall be a member of the Financial Industry
Regulation Authority, Inc., provide the information required to
determine the Conversion Price. The information provided
by Encore’s market-maker shall be deemed conclusive proof of
the Conversion Price and shall be binding on the
Parties. If there shall be no over-the-counter market
for the Stock, then the Conversion Price shall be such amount, not
less than book value, as may be determined by the Board of
Directors of Encore. The Conversion Price shall be
subject to a price floor. The Lender shall have no right
to elect to exercise the Conversion Option if the Conversion Price
would be at less than $0.30 per share of Stock.
Encore
agrees to issue the Warrant to the Lender in the form of Exhibit B,
attached hereto. The Warrant will entitle the Lender to
purchase, upon exercise, the number of shares of Stock determined
according to the following formula:
where: P =
The principal amount of the Loan
Assuming
an investment of $50,000.00, the Warrant shall permit the Lender to
acquire Fifty Five Thousand (55,555) shares of
Stock. The exercise price of the Warrant shall be $0.45
per share. The Warrant shall expire two years from the
date it is issued to the Lender as indicated on the first page of
the Warrant (the “Warrant Issuance Date”).
Encore
agrees to provide piggyback registration rights to the Lender with
respect to: (i) the Stock underlying the Warrant, and (ii) the
Stock issuable to the Lender upon exercise of the Conversion Option
(collectively the “Registrable Securities”) for the two
year period after the Warrant Issuance Date. If at any
time during the two year period after the Warrant Issuance Date,
there is not an effective registration statement covering all of
the Stock underlying the Warrant and Encore shall determine to
prepare and file with the Securities and Exchange Commission a
registration statement relating to an offering for its own account
or the account of others under the Securities Act of 1933, as
amended (the “Securities Act”), of the Stock,
other
than
on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with stock
option or other employee benefit plans, then Encore shall send to
the Lender written notice of such determination and, if within
fifteen days after receipt of such notice, the Lender shall so
request in writing, then Encore shall include in such registration
statement all or any part of such Stock the Lender requests to be
registered, subject to customary underwriter cutbacks applicable to
all holders of registration rights (the “Registration
Rights”).
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Registration
Rights Expenses .
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All
fees and expenses incident to the performance of or compliance with
the Registration Rights by Encore shall be borne by Encore whether
or not any Registrable Securities are sold pursuant to a
registration statement. The fees and expenses referred
to in the foregoing sentence shall include: (i) all registration
and filing fees (including, fees and expenses (A) with respect to
filings required to be made with any securities market or exchange
on which the Stock is then listed for trading, and (B) in
compliance with applicable state securities or Blue Sky laws), (ii)
printing expenses (including, expenses of printing certificates for
Registrable Securities and of printing prospectuses, if the
printing of prospectuses i
