Document:

ex105.htm

Exhibit 10.5

 

PLEDGE AND ESCROW AGREEMENT

 

 

           This Escrow Agreement is dated as of the 18th day of April, 2011  among the shareholders identified on Schedule A (“Pledgors”) and The Brainy Brands Company, Inc., a Delaware corporation (“Pledgee”), and Grushko & Mittman, P.C. (the “Escrow Agent”):

 

WITNESSETH:

 

           WHEREAS, the the Pledgors are the holders of shares of common stock issued by the Pledgee as identified on Schedule A (the “Shares”); and

 

           WHEREAS, the Pledgors and the Pledgee desire that the Shares, together with accompanying executed stock powers, be held in escrow to be released as described herein; and

 

           WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to the terms and conditions of this Agreement;

 

           NOW THEREFORE, the parties agree as follows:

 

ARTICLE I

INTERPRETATION

 

           1.1.           Definitions.  Whenever used in this Agreement, the following terms shall have the following respective meanings:

 

§ “Agreement” means this Agreement and all amendments made hereto and thereto by written agreement between the parties;

 

§ “Offering” shall have the meaning ascribed to such term in the Subscription Agreement.

 

§ “Revenue Target” shall mean gross cash revenues from sales in the ordinary course of business, net of returns and refunds, as recognized in accordance with generally accepted accounting principles (“GAAP”) and the gross cash receipts from long-term licensing fees received during the Measurement Period [as defined in Section 3.1(a)] even if such entire licensing fees are not included in revenues pursuant to GAAP,  in the aggregate amount of not less than $2,000,000 during the Measurement Period. 

 

§ “Subscribers” shall have the meaning ascribed to such term in the Subscription Agreement.

 

§ “Subscription Agreement” shall mean the Subscription Agreement, dated on or about the date hereof, between The Brainy Brands Company, Inc. and the Subscribers identified on Schedule I thereto.

 

           1.2.           Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto pertaining to the Shares and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. There are no warranties, representations and other agreements made by the parties in connection with the subject matter hereof except as specifically set forth in this Agreement.

 

           1.3.           Extended Meanings.  In this Agreement words importing the singular number include the plural and vice versa; words importing the masculine gender include the feminine and neuter genders.  The word “person” includes an individual, body corporate, partnership, trustee or trust or unincorporated association, executor, administrator or legal representative.

 

           1.4.           Waivers and Amendments.  This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance.  Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder.

 

           1.5.           Headings.  The division of this Agreement into articles, sections, subsections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

 

 

 

  

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           1.6.           Law Governing this Agreement.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts located in the state and county of New York.  Both parties and the individuals executing this Agreement and other agreements on behalf of the Pledgors and the Pledgee agree to submit to the jurisdiction of such courts and waive trial by jury.  The prevailing party (which shall be the party which receives an award most closely resembling the remedy or action sought) shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.

 

           1.7.           Specific Enforcement, Consent to Jurisdiction.  The Pledgors and the Pledgee acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injuction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.  Subject to Section 1.6 hereof, each of the Pledgors and the Pledgee hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.

 

ARTICLE II

DELIVERIES TO THE ESCROW AGENT

 

           2.1.           Pledgors’ Deliveries.  Together with the execution of this Agreement the Pledgors shall deliver the Shares to the Escrow Agent in certificated form, together with duly executed medallion guarateed stock powers for each of the delivered certificates (collectively, the “Escrow Property”).

 

           2.2.           Intention to Create Escrow Over the Escrow Property.  The Pledgors and the Pledgee intend that the Escrow Property shall be held in escrow by the Escrow Agent pursuant to this Agreement for their benefit as set forth herein.

 

           2.4.           Escrow Agent to Retention and Delivery of the Escrow Property.  The Escrow Agent shall hold and release the Escrow Property only in accordance with the terms and conditions of this Agreement.

 

ARTICLE III

RELEASE OF ESCROW PROPERTY

 

           3.1.           Release of Escrow.  Subject to the provisions of Section 4.2, the Escrow Agent shall release the Escrow Property as follows:

 

                      (a)           Commencing on the filing of the Pledgee’s annual report with the SEC for the period ended December 31, 2011 (the “December 31 10K”) but no later than March 30, 2012, the Pledgee may deliver to the Escrow Agent and the Pledgors a written notice that during the period commencing January 1, 2011 and ending on December 31, 2011 (the “Measurement Period”), the Pledgee recorded not less than the Revenue Target, as reported in the Pledgee’s December 31 10K filed with the SEC together with a written certification from the auditors of Pledgee certifying that the Revenue Target has been met (the “Pledgee Release Notice”).  Not sooner than five (5) business days after receipt of the Pledgee Release Notice, the Escrow Agent shall release the Escrow Property to the Pledgor and the Escrow Property shall remain subject to the terms of the Lockup Agreement dated November 24, 2010 (as such Lockup Agreement may have been amended from time to time) and the Lockup Agreement dated as of the date hereof.

 

                      (b)           The Pledgee may deliver to the Escrow Agent and the Pledgors a written notice on the sooner of (i) five days after the end of the Measurement Period, or (ii) after the Pledgee has filed the December 31 10K, that the Pledgee recorded less than the Revenue Target during the Measurement Period, as reported in its SEC Filings (the “Pledgors Release Notice”) .  Not sooner than five (5) business days after receipt of the Pledgors Release Notice, the Escrow Agent shall release the Escrow Property pro-rata to the Subscribers in the exact proportion that the Revenue Target is less than was required, and shall release the remaining Escrow Property to the Pledgors.  For purposes of clarification and example, if the Pledgee records a Revenue Target for the Measurement Period of 10% less than the Revenue Target which is equal to $1,800,000, then shares representing 10% of the Escrow Property will be released pro-rata to the Subscribers in the proportion as their relative investments in the Offering, and shares representing 90% of the Escrow Property shall be released to the Pledgors.

 

(c)           If the Escrow Agent does not receive the Pledgee Release Notice or the Pledgors Release Notice by March 31, 2012, then the balance of the Escrow Property still held by Escrow Agent on such date will be released to Pledgors but shall remain subject to the Lockup Agreements entered into on November 24, 2010 and on the date hereof.

 

(d)           Notwithstanding the above, upon receipt by the Escrow Agent of joint written instructions (“Joint Instructions”) signed by the Pledgors and the Pledgee, the Escrow Agent shall deliver the Escrow Property in accordance with the terms of the Joint Instructions.

 

                      (e)           Anything herein to the contrary notwithstanding, upon receipt by the Escrow Agent of a final and non-appealable judgment, order, decree or award of a court of competent jurisdiction (a “Court Order”), the Escrow Agent shall deliver the Escrow Property in accordance with the Court Order.  Any Court Order shall be accompanied by an opinion of counsel for the party presenting the Court Order to the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to the effect that the court issuing the Court Order has competent jurisdiction and that the Court Order is final and non-appealable.

 

           3.2.           Acknowledgement of Pledgors and Pledgee.  The Pledgors and the Pledgee acknowledge that the only terms and conditions upon which the Escrow Property are to be released are set forth in Sections 3 and 4 of this Agreement.  The Pledgors and the Pledgee reaffirm their agreement to abide by the terms and conditions of this Agreement with respect to the release of the Escrow Property. Any dispute with respect to the release of the Escrow Property shall be resolved pursuant to Section 4.2 or by agreement between the Pledgors and the Pledgee.

 

 

  

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3.3           Conflict.  Each of the Pledgors and the Pledgee has had an opportunity to review this Agreement and consult with counsel of their own choosing in connection with this Agreement.

 

ARTICLE IV

CONCERNING THE ESCROW AGENT

 

           4.1.           Duties and Responsibilities of the Escrow Agent.  The Escrow Agent's duties and responsibilities shall be subject to the following terms and conditions:

 

                      (a)           The Pledgors and the Pledgee acknowledge and agree that the Escrow Agent (i) shall not be responsible for or bound by, and shall not be required to inquire into whether either the Pledgors or the Pledgee are entitled to receipt of the Escrow Property pursuant to any other agreement or otherwise; (ii) shall be obligated only for the performance of such duties as are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, instrument, statement, request or document furnished to it hereunder and believed by the Escrow Agent in good faith to be genuine and to have been signed or presented by the proper person or party, without being required to determine the authenticity or correctness of any fact stated therein or the propriety or validity or the service thereof; (iv) may assume that any person believed by the Escrow Agent in good faith to be authorized to give notice or make any statement or execute any document in connection with the provisions hereof is so authorized; (v) shall not be under any duty to give the property held by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its own similar property; and (vi) may consult counsel satisfactory to Escrow Agent, the opinion of such counsel to be full and complete authorization and protection in respect of any action taken, suffered or omitted by Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel.

 

(b)           The Pledgors and the Pledgee acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and that the Escrow Agent shall not be liable for any action taken by the Escrow Agent in good faith and believed by the Escrow Agent to be authorized or within the rights or powers conferred upon the Escrow Agent by this Agreement.  The Pledgors and the Pledgee, jointly and severally, agree to indemnify and hold harmless the Escrow Agent and any of the Escrow Agent's partners, employees, agents and representatives for any action taken or omitted to be taken by the Escrow Agent or any of them hereunder, including the fees of outside counsel and other costs and expenses of defending itself against any claim or liability under this Agreement, except in the case of gross negligence or willful misconduct on the Escrow Agent’s part committed in its capacity as the Escrow Agent under this Agreement.  The Escrow Agent shall owe a duty only to the Pledgors and the Pledgee under this Agreement and to no other person.

 

                      (c)           The Pledgors and the Pledgee jointly and severally agree to reimburse the Escrow Agent for outside counsel fees, to the extent authorized hereunder and incurred in connection with the performance of its duties and responsibilities hereunder.

 

                      (d)           The Escrow Agent may at any time resign as Escrow Agent hereunder by giving five (5) days prior written notice of resignation to the Pledgors and the Pledgee.  Prior to the effective date of the resignation as specified in such notice, the Pledgors and the Pledgee will issue to the Escrow Agent a Joint Instruction authorizing delivery of the Escrow Property to a substitute Escrow Agent selected by the Pledgors and the Pledgee. If no successor Escrow Agent is named by the Pledgors and the Pledgee, the Escrow Agent may apply to a court of competent jurisdiction in the State of New York for appointment of a successor Escrow Agent, and to deposit the Escrow Property with the clerk of any such court.

 

                      (e)           The Escrow Agent does not have and will not have any interest in the Escrow Property, but is serving only as escrow agent, having only possession thereof.  The Escrow Agent shall not be liable for any loss resulting from the making or retention of any investment in accordance with this Escrow Agreement.

 

                      (f)           This Agreement sets forth exclusively the duties of the Escrow Agent with respect to any and all matters pertinent thereto and no implied duties or obligations shall be read into this Agreement.

 

                      (g)           The Escrow Agent shall be permitted to act as counsel for any party to this agreement in any dispute as to the disposition of the Escrow Property, in any other dispute between the Pledgors and the Pledgee, whether or not the Escrow Agent is then holding the Escrow Property and continues to act as the Escrow Agent hereunder.

 

                      (h)           The provisions of this Section 4.1 shall survive the resignation of the Escrow Agent or the termination of this Agreement.

 

           4.2.           Dispute Resolution: Judgments.  Resolution of disputes arising under this Agreement shall be subject to the following terms and conditions:

 

                      (a)           If any dispute shall arise with respect to the delivery, ownership, right of possession or disposition of the Escrow Property, or if the Escrow Agent shall in good faith be uncertain as to its duties or rights hereunder, the Escrow Agent shall be authorized, without liability to anyone, to (i) refrain from taking any action other than to continue to hold the Escrow Property pending receipt of a Joint Instruction from the Pledgors and the Pledgee, or (ii) deposit the Escrow Property with any court of competent jurisdiction in the State of New York, in which event the Escrow Agent shall give written notice thereof to the Pledgors and the Pledgee and shall thereupon be relieved and discharged from all further obligations pursuant to this Agreement.  The Escrow Agent may, but shall be under no duty to, institute or defend any legal proceedings which relate to the Escrow Property.  The Escrow Agent shall have the right to retain counsel if it becomes involved in any disagreement, dispute or litigation on account of this Agreement or otherwise determines that it is necessary to consult counsel.

 

                      (b)           The Escrow Agent is hereby expressly authorized to comply with and obey any Court Order.  In case the Escrow Agent obeys or complies with a Court Order, the Escrow Agent shall not be liable to the Pledgors and the Pledgee or to any other person, firm, corporation or entity by reason of such compliance.

 

 

 

  

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ARTICLE V

GENERAL MATTERS

 

           5.1.           Termination.  This escrow shall terminate upon the release of the Escrow Property or at any time upon the agreement in writing of the Pledgors and the Pledgee.

 

           5.2.           Notices.   All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

 

(a)           If to the Pledgors, to address set forth on Schedule A:

With a copy by facsimile only to Escrow Agent.

(b)           If to the Pledgee:

The Brainy Brands Company, Inc.

460 Brogdon Road, Suite 400

Suwanee, GA 30024

Attn: John Benfield, CEO

Fax: (678) 762-1122

With a copy by fax only to:

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, NY 10006

Attn: Marc Ross, Esq.

Fax: (212) 930-9725

 

And a copy by facsimile only to Escrow Agent.

 

(c)           If to the Escrow Agent, to:

 

Grushko & Mittman, P.C.

515 Rockaway Avenue

Valley Stream, New York 11581

Fax: (212) 697–3575

 

or to such other address as any of them shall give to the others by notice made pursuant to this Section 5.2.

 

           5.3.           Assignment; Binding Agreement.  Neither this Agreement nor any right or obligation hereunder shall be assignable by any party without the prior written consent of the other parties hereto.  This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors and assigns.

 

 

 

  

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           5.4.           Invalidity.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal, or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.

 

           5.5.           Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile or PDF email transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof.

 

5.6           No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

[REST IF THIS PAGE LEFT INTENTIONALLY BLANK]

 

 

 

 

 

 

 

 

 

  

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5.7           Agreement.  Each of the undersigned states that he has read the foregoing Pledge and Escrow Agreement and understands and agrees to it.

PLEDGORS:

	 	 	 	 	 
	
/s/ John P. Benfield  

	 	 	
/s/ Dennis Fedoruk

	 
	
JOHN P. BENFIELD     

	 	 	
DENNIS FEDORUK

	 
	
 

	 	 	
 

	 

	 	 	 	 	 
	
/s/ Ronda Bush    

	 	 	
/s/ Jerry Bush

	 
	
RONDA BUSH   

	 	 	
JERRY BUSH

	 
	
 

	 	 	
 

	 

PLEDGEE:

THE BRAINY BRANDS COMPANY, INC.

	 	 	 	 	 
	
By: /s/ John Benfield

	 	 	
 

	 
	
John Benfield

	 	 	
 

	 
	
Its: CEO

	 	 	
 

	 

ESCROW AGENT:

	 	 	 	 	 
	
/s/ Grushko & Mittman, P.C.

	 	 	
 

	 
	
GRUSHKO & MITTMAN, P.C.

	 	 	
 

	 
	
 

	 	 	
 

	 

ACKNOWLEDGEMENT:

The Company acknowledges the foregoing Agreement and agrees to faciliate the transactions contemplated therein.

THE BRAINY BRANDS COMPANY, INC.

	 	 	 	 	 
	
By: /s/ John Benfield

	 	 	
 

	 
	
John Benfield

	 	 	
 

	 
	
Its: CEO

	 	 	
 

	 

  

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Schedule A

	
Pledgor

	
Shares

	
JOHN P. BENFIELD

	
2,499,998

	
DENNIS FEDORUK

	
9,224,995

	
RONDA BUSH

	
2,000,003

	
JERRY BUSH

	
999,998

 

 

 

 

 

 

7ex106.htm

Exhibit 10.6

 

 

ESCROW AGREEMENT

This Agreement is dated as of the 18th day of April, 2011 among The Brainy Brand Company, Inc., a Delaware corporation (the "Company"), the parties identified on Schedule A hereto (each a “Subscriber”, and collectively “Subscribers”), and Grushko & Mittman, P.C. (the "Escrow Agent"):

 

W I T N E S S E T H:

 

WHEREAS, the Company and Subscribers have entered into Subscription Agreements calling for the sale by the Company to the Subscribers of Notes and Warrants for an Aggregate Purchase Price of up to $1,500,000; and

 

WHEREAS, the parties hereto require the Company to deliver the Notes and Warrants against payment therefor, with such Notes, Warrants and the Escrowed Funds to be delivered to the Escrow Agent to be held in escrow and released by the Escrow Agent in accordance with the terms and conditions of this Agreement; and

 

WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to the terms and conditions of this Agreement;

 

NOW THEREFORE, the parties agree as follows:

 

ARTICLE I

 

INTERPRETATION

 

1.1.           Definitions.  Capitalized terms used and not otherwise defined herein that are defined in the Subscription Agreement shall have the meanings given to such terms in the Subscription Agreement.  Whenever used in this Agreement, the following terms shall have the following respective meanings:

 

§ "Agreement" means this Agreement and all amendments made hereto and thereto by written agreement between the parties;

 

§ “Collateral Agent” shall mean SNK Consulting Services LLC;

 

§ "Escrowed Payment" means an aggregate cash payment of up to $1,500,000 which is, collectively, the Initial Closing Purchase Price and Second Closing Purchase Price;

 

§ “Initial Closing Date” shall have the meaning set forth in Section 1(b) of the Subscription Agreement;

 

§ “Initial Closing Legal Opinion” means the original signed legal opinion referred to in Section 6 of the Subscription Agreement;

 

§ “Initial Closing Notes” shall have the meaning set forth in Section 1(b) of the Subscription Agreement;

 

§ “Initial Closing Principal Amount” shall mean up to $750,000;

 

§ “Initial Closing Purchase Price” shall mean up to $750,000;

 

§ “Initial Closing Warrants” shall have the meaning set forth in Section 1(b) of the Subscription Agreement;

 

§ “Legal Fees” shall have the meaning set forth in Section 8(b) of the Subscription Agreement;

 

 

 

  

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§ “Pledge and Escrow Agreement” shall have the meaning set forth in Section 9(y) and Exhibit G of the Subscription Agreement, and the deliveries required to be made therewith;

 

§ “Second Closing Certificate” shall have the meaning set forth in Section 1(e) of the Subscription Agreement;

 

§ “Second Closing Date” shall have the meaning set forth in Section 1(c) of the Subscription Agreement;

 

§ “Second Closing Legal Opinion” shall have the meaning set forth in Section 1(e) of the Subscription Agreement;

 

§ “Second Closing Notes” shall have the meaning set forth in Section 1(c) of the Subscription Agreement;

 

§ “Second Closing Principal Amount” shall mean up to $750,000;

 

§ “Second Closing Purchase Price” shall mean up to $750,000;

 

§  “Subscription Agreement" means the Subscription Agreement (and the exhibits thereto) entered into or to be entered into by the parties in reference to the sale and purchase of the Initial Closing Notes, Second Closing Notes, and Warrants;

 

§ “Waiver and Consent” shall have the meaning set forth in Section 9(z) and Exhibit H of the Subscription Agreement;

 

§  “Warrants” shall have the meaning set forth in Section 3 of the Subscription Agreement;

 

§ Collectively, the following executed by all required signators thereto other than the Subscribers are referred to as “Company Documents”: Subscription Agreement, Initial Closing Notes, Initial Closing Warrants, Initial Closing Legal Opinion, Pledge and Escrow Agreement, Second Closing Notes, Second Closing Legal Opinion, Second Closing Certificates, and Waiver and Consent; and

 

§ Collectively, the Escrowed Payment, and the executed Subscription Agreement are referred to as "Subscriber Documents".

 

1.2.           Entire Agreement.  This Agreement along with the Company Documents and the Subscriber Documents constitute the entire agreement between the parties hereto pertaining to the Company Documents and Subscriber Documents and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties.  There are no warranties, representations and other agreements made by the parties in connection with the subject matter hereof except as specifically set forth in this Agreement, the Company Documents and the Subscriber Documents.

 

1.3.           Extended Meanings.  In this Agreement words importing the singular number include the plural and vice versa; words importing the masculine gender include the feminine and neuter genders.  The word "person" includes an individual, body corporate, partnership, trustee or trust or unincorporated association, executor, administrator or legal representative.

 

1.4.           Waivers and Amendments.  This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance.  Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder.

 

1.5.           Headings.  The division of this Agreement into articles, sections, subsections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

 

 

 

  

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1.6.           Law Governing this Agreement.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York.  Both parties and the individuals executing this Agreement and other agreements on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury.  The prevailing party (which shall be the party which receives an award most closely resembling the remedy or action sought) shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.

 

1.7.           Specific Enforcement, Consent to Jurisdiction.  The Company and Subscriber acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injuction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.  Subject to Section 1.6 hereof, each of the Company and Subscriber hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.

 

ARTICLE II

 

DELIVERIES TO THE ESCROW AGENT

 

2.1.           Initial Closing Company Deliveries.  On or about the date hereof, the Company shall deliver to the Escrow Agent the executed Subscription Agreement, the Initial Closing Notes, Initial Closing Warrants, Pledge and Escrow Agreement, and Initial Closing Legal Opinion (collectively, the “Initial Closing Company Documents”).

 

2.2.           Second Closing Company Deliveries.  On or prior to the Second Closing Date, the Company will deliver to the Escrow Agent the Second Closing Notes, Second Closing Warrants, Second Closing Certificate, and Second Closing Legal Opinion (collectively, the “Second Closing Company Documents”).

 

2.3.           Subscriber Deliveries.  On or before the Initial Closing Date, each Subscriber shall deliver to the Escrow Agent such Subscriber’s portion of the Initial Closing Purchase Price and the executed Subscription Agreement and Pledge and Escrow Agreement.  On or before the Second Closing Date, each Subscriber will deliver such Subscriber’s portion of the Second Closing Purchase Price to the Escrow Agent.   The Escrowed Payment will be delivered pursuant to the following wire transfer instructions:

 

Citibank, N.A.

1155 6th Avenue

New York, NY 10036, USA

ABA Number: 0210-00089

For Credit to: Grushko & Mittman, IOLA Trust Account

Account Number: 45208884

 

2.4.           Intention to Create Escrow Over Company Documents and Subscriber Documents.  The Subscriber and Company intend that the Company Documents and Subscriber Documents shall be held in escrow by the Escrow Agent pursuant to this Agreement for their benefit as set forth herein.

 

2.5.           Escrow Agent to Deliver Company Documents and Subscriber Documents.  The Escrow Agent shall hold and release the Company Documents and Subscriber Documents only in accordance with the terms and conditions of this Agreement.

 

ARTICLE III

 

RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS

 

3.1.           Release of Escrow.  Subject to the provisions of Section 4.2, the Escrow Agent shall release the Company Documents and Subscriber Documents as follows:

 

(a)           On the Initial Closing Date, the Escrow Agent will simultaneously release the Initial Closing Company Documents to the Subscriber and release the Subscription Agreement and the Initial Closing Purchase Price to the Company except that (i) the Pledge and Escrow Agreement will be released to Grushko &  Mittman, P.C. as escrow agent thereunder; and (ii) the Legal Fees in connection with the Initial Closing will be released to the Subscribers’ attorneys.

 

 

  

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(b)           On the Second Closing Date, the Escrow Agent will simultaneously release the Second Closing Company Documents to the Subscriber and release the Second Closing Purchase Price to the Company.

 

(c)           On each Closing Date, an amount equal to $250,000 ($500,000 in the aggregate) of the Escrowed Payment will be retained in escrow and not released pursuant to Section 3.1(a).  Such portions of the Escrowed Payment will be retained in escrow by the Escrow Agent pursuant to this Agreement in a non-interest bearing account and released to the Company or on the Company’s behalf not more frequently than one time each ten days.  A request for release must be made in writing to the Escrow Agent and Collateral Agent.  The request must include a copy of unanimously adopted resolutions of the board of directors of the Company certified by the secretary of the Company and the Company’s chief financial officer that (i) the Company is requesting a release of funds and the details thereof including the amount, purposes, and wire delivery instructions, (ii) that such requested funds are for reimbursement of funds which were timely employed in conformity in all material respects with the use of proceeds set forth on Schedule 9(e) to the Subscription Agreement under the heading “Use of Proceeds to be reimbursed After Closing”, and (iii) an Event of Default, or an event that with the giving of notice or the passage of time could become an Event of Default, has not occurred.  The Company must provide to Collateral Agent reasonably satisfactory proof that the funds for which reimbursement is sought had been used for the purposes described in part (ii) of the previous sentence.  The Escrow Agent may not release any funds pursuant to this Section 3.1(b) if an objection to such release has been made by Collateral Agent.  Deviations from Schedule 9(e) to the Subscription Agreement may be made subject to the written approval of the Collateral Agent.  Unless postponed by the Company and Collateral Agent, any funds retained in escrow on the one year anniversary of the Initial Closing Date will be released to Subscribers requesting such release in proportion to the relative amount of Note principal held by all Subscribers as of such one year anniversary date.  Upon release to the Subscribers, such sums shall be applied against amounts outstanding on the Notes in the manner set forth in the Notes.  The Escrow Agent may request any written representations, certifications and documents in Escrow Agent’s absolute discretion before releasing any funds from escrow.

 

(d)           All funds to be delivered to the Company shall be delivered pursuant to the wire instructions to be provided in writing by the Company to the Escrow Agent.

 

(e)           Notwithstanding the above, upon receipt by the Escrow Agent of joint written instructions ("Joint Instructions") signed by the Company and the Subscriber, it shall deliver the Company Documents and Subscriber Documents in accordance with the terms of the Joint Instructions.

 

(f)           Notwithstanding the above, upon receipt by the Escrow Agent of a final and non-appealable judgment, order, decree or award of a court of competent jurisdiction (a "Court Order"), the Escrow Agent shall deliver the Company Documents and Subscriber Documents in accordance with the Court Order.  Any Court Order shall be accompanied by an opinion of counsel for the party presenting the Court Order to the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to the effect that the court issuing the Court Order has competent jurisdiction and that the Court Order is final and non-appealable.

 

3.2.           Acknowledgement of Company and Subscriber; Disputes.  The Company and the Subscriber acknowledge that the only terms and conditions upon which the Company Documents and Subscriber Documents are to be released are set forth in Sections 3 and 4 of this Agreement.  The Company and the Subscriber reaffirm their agreement to abide by the terms and conditions of this Agreement with respect to the release of the Company Documents and Subscriber Documents.  Any dispute with respect to the release of the Company Documents and Subscriber Documents shall be resolved pursuant to Section 4.2 or by agreement between the Company and Subscriber.

 

ARTICLE IV

 

CONCERNING THE ESCROW AGENT

 

4.1.           Duties and Responsibilities of the Escrow Agent.  The Escrow Agent's duties and responsibilities shall be subject to the following terms and conditions:

 

(a)           The Subscriber and Company acknowledge and agree that the Escrow Agent (i) shall not be responsible for or bound by, and shall not be required to inquire into whether either the Subscriber or Company is entitled to receipt of the Company Documents and Subscriber Documents pursuant to, any other agreement or otherwise; (ii) shall be obligated only for the performance of such duties as are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, instrument, statement, request or document furnished to it hereunder and believed by the Escrow Agent in good faith to be genuine and to have been signed or presented by the proper person or party, without being required to determine the authenticity or correctness of any fact stated therein or the propriety or validity or the service thereof; (iv) may assume that any person believed by the Escrow Agent in good faith to be authorized to give notice or make any statement or execute any document in connection with the provisions hereof is so authorized; (v) shall not be under any duty to give the property held by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its own similar property; and (vi) may consult counsel satisfactory to Escrow Agent, the opinion of such counsel to be full and complete authorization and protection in respect of any action taken, suffered or omitted by Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel.

 

(b)           The Subscriber and Company acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and that the Escrow Agent shall not be liable for any action taken by Escrow Agent in good faith and believed by Escrow Agent to be authorized or within the rights or powers conferred upon Escrow Agent by this Agreement.  The Subscriber and Company, jointly and severally, agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent's partners, employees, agents and representatives for any action taken or omitted to be taken by Escrow Agent or any of them hereunder, including the fees of outside counsel and other costs and expenses of defending itself against any claim or liability under this Agreement, except in the case of gross negligence or willful misconduct on Escrow Agent's part committed in its capacity as Escrow Agent under this Agreement.  The Escrow Agent shall owe a duty only to the Subscriber and Company under this Agreement and to no other person.

 

(c)           The Subscriber and Company jointly and severally agree to reimburse the Escrow Agent for outside counsel fees, to the extent authorized hereunder and incurred in connection with the performance of its duties and responsibilities hereunder.

 

 

 

  

4

  

 

 

(d)           The Escrow Agent may at any time resign as Escrow Agent hereunder by giving five (5) days prior written notice of resignation to the Subscriber and the Company.  Prior to the effective date of the resignation as specified in such notice, the Subscriber and Company will issue to the Escrow Agent a Joint Instruction authorizing delivery of the Company Documents and Subscriber Documents to a substitute Escrow Agent selected by the Subscriber and Company.  If no successor Escrow Agent is named by the Subscriber and Company, the Escrow Agent may apply to a court of competent jurisdiction in the State of New York for appointment of a successor Escrow Agent, and to deposit the Company Documents and Subscriber Documents with the clerk of any such court.

 

(e)           The Escrow Agent does not have and will not have any interest in the Company Documents and Subscriber Documents, but is serving only as escrow agent, having only possession thereof.  The Escrow Agent shall not be liable for any loss resulting from the making or retention of any investment in accordance with this Escrow Agreement.

 

(f)           This Agreement sets forth exclusively the duties of the Escrow Agent with respect to any and all matters pertinent thereto and no implied duties or obligations shall be read into this Agreement.

 

(g)           The Escrow Agent shall be permitted to act as counsel for the Subscriber in any dispute as to the disposition of the Company Documents and Subscriber Documents, or in any other dispute between the Subscriber and Company, whether or not the Escrow Agent is then holding the Company Documents and Subscriber Documents and continues to act as the Escrow Agent hereunder.

 

(h)           The provisions of this Section 4.1 shall survive the resignation of the Escrow Agent or the termination of this Agreement.

 

4.2.           Dispute Resolution: Judgments.  Resolution of disputes arising under this Agreement shall be subject to the following terms and conditions:

 

(a)           If any dispute shall arise with respect to the delivery, ownership, right of possession or disposition of the Company Documents and Subscriber Documents, or if the Escrow Agent shall in good faith be uncertain as to its duties or rights hereunder, the Escrow Agent shall be authorized, without liability to anyone, to (i) refrain from taking any action other than to continue to hold the Company Documents and Subscriber Documents pending receipt of a Joint Instruction from the Subscriber and Company, or (ii) deposit the Company Documents and Subscriber Documents with any court of competent jurisdiction in the State of New York, in which event the Escrow Agent shall give written notice thereof to the Subscriber and the Company and shall thereupon be relieved and discharged from all further obligations pursuant to this Agreement.  The Escrow Agent may, but shall be under no duty to, institute or defend any legal proceedings which relate to the Company Documents and Subscriber Documents.  The Escrow Agent shall have the right to retain counsel if it becomes involved in any disagreement, dispute or litigation on account of this Agreement or otherwise determines that it is necessary to consult counsel.

 

(b)           The Escrow Agent is hereby expressly authorized to comply with and obey any Court Order.  In case the Escrow Agent obeys or complies with a Court Order, the Escrow Agent shall not be liable to the Subscriber and Company or to any other person, firm, corporation or entity by reason of such compliance.

 

ARTICLE V

 

GENERAL MATTERS

 

5.1.           Termination.  This escrow shall terminate upon the release of all of the Company Documents and Subscriber Documents or at any time upon the agreement in writing of the Subscriber and Company.

 

 

  

5

  

 

 

5.2.           Notices.   All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

 

(a)           If to the Company, to:

The Brainy Brands Company, Inc.

460 Brogdon Road, Suite 400

Suwanee, GA 30024

Attn: John Benfield, CEO

Fax: (678) 762-1122

With a copy by fax only to:

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, NY 10006

Attn: Marc Ross, Esq.

Fax: (212) 930-9725

 

(b)           If to the Subscriber, to: the addresses and fax numbers listed on Schedule A hereto.

(c)           If to the Collateral Agent, to:

SNK Consulting Services LLC

6895 W. Nighthawk Drive

Post Fall, Idaho 83854

Attn: Susan U

Fax: (208) 930-4090

 

(d)           If to the Escrow Agent, to:

Grushko & Mittman, P.C.

515 Rockaway Avenue

Valley Stream, New York 11581

Fax: (212) 697-3575

 

or to such other address as any of them shall give to the others by notice made pursuant to this Section 5.2.

 

5.3.           Interest.  The Escrowed Payment shall not be held in an interest bearing account nor will interest be payable in connection therewith.  In the event the Escrowed Payment is deposited in an interest bearing account, the Subscriber shall be entitled to receive any accrued interest thereon, but only if the Escrow Agent receives from the Subscriber the Subscriber’s United States taxpayer identification number and other requested information and forms.

 

5.4.           Assignment; Binding Agreement.  Neither this Agreement nor any right or obligation hereunder shall be assignable by any party without the prior written consent of the other parties hereto.  This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors and assigns.

 

 

 

 

  

6

  

 

5.5.           Invalidity.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal, or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.

 

5.6.           Counterparts/Execution.  This Agreement may be executed in any number of counterparts and by different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile transmission and delivered by facsimile transmission.

 

5.7.           Agreement.  Each of the undersigned states that he has read the foregoing Escrow Agreement and understands and agrees to it.

 

	 	

THE BRAINY BRAND COMPANY, INC.

	 
	 	

the “Company”

	 
	 	 	 
	 	 	 
	
 

	
By: 

	/s/ John Benfield, CEO	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

	 	

ESCROW AGENT:

	 
	 	 	 	 
	
 

	
By: 

	/s/ Grushko & Mittman, P.C.	 
	 	 	GRUSHKO & MITTMAN, P.C.	 
	 	 	 	 
	 	 	 	 

                                                          

 

“SUBSCRIBERS”:

 

 

 

	
ALPHA CAPITAL ANSTALT

	  	
WHALEHAVEN CAPITAL FUND LIMITED

	  	  	  
	
By:  /s Konrad Ackermann

	  	
By:  /s/ Vadim Mats

	

Name: Konrad Ackermann

	  	

Name: Vadim Mats

	

Title: Director

	  	

Title: CFO

	  	  	  
	
WHALEHAVEN OPPORTUNITIES FUND L.P.

	  	

FLM HOLDINGS LLC

	  	  	  
	
By:  /s/ Vadim Mats

	  	

By:  /s/ Sam DelPresto

	

Name:Vadim Mats

	  	

Name: Sam DelPresto

	

Title: CFO

	  	

Title: Managing Member

	  	  	  
	
BRIO CAPITAL L.P.

	  	

AMPERSAND MANAGEMENT AS TRUSTEE

	  	  	

OF THE MUNT TRUST

	  	  	  
	
By: /s/ Shaye Hirsch

	  	

By: /s/ Jean Paul Le Coeq

	

Name: Shaye Hirsch

	  	

Name: Jean Paul Le Coeq

	

Title: Shaye Hirsch

	  	

Title: Director

	  	  	  
	
BRISTOL INVESTMENT FUND LTD.

	 	

CANYONS TRUST

	  	  	  
	
By:  /s/ Paul Kessler

	  	

By:  /s / James Heekin

	

Name: Paul Kessler

	  	

Name: James Heekin

	

Title: Director

	  	

Title: Trustee

	  	  	  
	
BRISTOL CAPITAL LLC

	  	
PARK INVESTMENT HOLDINGS, LLC

	  	  	  
	
By:  /s/ Paul Kessler

	  	

By: /s/ Steven Spiegel

	

Name: Paul Kessler

	  	

Name: Steven Spiegel

	

Title: Manager

	  	

Title: Steven Spiegel

	  	  	  
	
OSHER CAPITAL PARTNERS LLC

	  	  
	  	  	  
	
By:  /s/ Ari Kluger

	  	  
	

Name: Ari Kluger

	  	  
	

Title: Managing Member

	  	  
	  	  	  

 

 

 

  

7

  

 

 

SCHEDULE A TO ESCROW AGREEMENT

	
SUBSCRIBER AND ADDRESS

	
INITIAL CLOSING PRINCIPAL AMOUNT AND PURCHASE PRICE

	
SECOND CLOSING PRINCIPAL AMOUNT AND PURCHASE PRICE

	
ALPHA CAPITAL ANSTALT

Pradafant 7

9490 Furstentums

Vaduz, Lichtenstein

Fax: 011-42-32323196

	
$137,500.00

	
$137,500.00

	
WHALEHAVEN CAPITAL FUND LIMITED

560 Sylvan Avenue

Englewood Cliffs, N.J. 07632

Fax: (201) 586-0258

	
$125,000.00

	
$125,000.00

	
WHALEHAVEN OPPORTUNITIES FUND L.P.

560 Sylvan Avenue

Englewood Cliffs, N.J. 07632

Fax: (201) 586-0258

	
$25,000.00

	
$25,000.00

	
FLM HOLDINGS LLC

8 Hop Brook Lane

Holmdel, New Jersey 07733

	
$150,000.00

	
$150,000.00

	
BRIO CAPITAL L.P.

401 E. 34th Street – Suite South 33C

New York, NY 10016

Attn: Shaye Hirsch

Fax: (646) 390-2158

	
$37,500.00

	
$37,500.00

	
AMPERSAND MANAGEMENT AS TRUSTEE OF THE MUNT TRUST

20 Rue Etienne Dumont

1204 Geneva 3, Switzerland

Attn: Jean Paul Le Coeq

Fax: +41 22 321 3526

	
$25,000.00

	
$25,000.00

	
BRISTOL INVESTMENT FUND, LTD.

c/o Bristol Capital Advisors, LLC

6353 W. Sunset Blvd., Suite 4006

Hollywood, CA 90028

Attn: Amy Wang, Esq.

Fax: (323) 960-3805

	
$50,000.00

	
$50,000.00

	
CANYONS TRUST

c/o Bristol Capital Advisors, LLC

6353 W. Sunset Blvd., Suite 4006

Hollywood, CA 90028

Attn: Amy Wang, Esq.

Fax: (323) 960-3805

	
$50,000.00

	
$50,000.00

	
BRISTOL CAPITAL, LLC

c/o Bristol Capital Advisors, LLC

6353 W. Sunset Blvd., Suite 4006

Hollywood, CA 90028

Attn: Amy Wang, Esq.

Fax: (323) 960-3805

	
$50,000.00

	
$50,000.00

	
PARK INVESTMENT HOLDINGS, LLC

1559 East 38th Street

Brooklyn, New York 11234

Attn: Steven Spiegel

Fax: (866) 883-9035

	
$37,500.00

	
$37,500.00

	
OSHER CAPITAL PARTNERS LLC

5 Sansberry Lane

Spring Valley, NY 10977

Fax: (917) 591-3401

	
$62,500.00

	
$62,500.00

	
TOTALS

	
$750,000.00

	
$750,000.00

 

 

8

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