Document:

ex1017.htm

EXHIBIT 10.17

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (the “Agreement”) dated as of September 22, 2010, by and among Brainy Acquisitions, Inc., a Georgia corporation, with headquarters located at 460 Brogdon Rd., Suite 400, Suwanee, GA 30024 (the “Company”), and the purchaser identified on the signature page hereto (including its successors and assigns (the “Purchaser”)).

 

WHEREAS, the Purchaser desires to purchase from the Company a secured debenture in the principal amount of $110,000 in substantially the form attached hereto as Exhibit A (the “Debenture”);

 

WHEREAS, the Company’s obligations under the Debenture are secured by substantially all of the assets of the Company pursuant to a security agreement dated on or about the date hereof between the Company and the Purchaser (the “Security Agreement”);

 

WHEREAS, this Agreement, the Security Agreement, and the Debenture are collectively referred to as the “Transaction Documents”;

 

WHEREAS, the Company desires that Purchaser purchase the Debenture;

 

NOW, THEREFORE, in consideration of the foregoing and on the basis of the respective representations, warranties, covenants, agreements, undertakings and obligations set forth herein, and intending to be legally bound hereby, the parties agree as follows:

 

ARTICLE 1

 

PURCHASE AND SALE OF THE DEBENTURE

1.1           Purchase and Sale of Debenture.  Upon the terms and subject to the conditions set forth in this Agreement, the Company agrees to sell, assign, transfer and deliver to Purchaser and Purchaser hereby agrees to purchase at the Closing (as defined in Section 2) and accept delivery from the Company, the Debenture free of all liens, pledges, mortgages, security interests, charges, restrictions, adverse claims or other encumbrances of any kind or nature whatsoever, for the consideration specified herein.

 

ARTICLE 2

 

CLOSING

 

2.1           Closing.  As used herein the Closing Date shall mean the day when all conditions precedent to (i) the Purchaser’s obligations to purchase the Debenture and (ii) the Company’s obligations to issue the Debenture have been satisfied or waived.  On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company shall sell and the Purchaser shall purchase the Debentures. The closing of the purchase and sale of the Debenture is referred to herein as the “Closing”.

 

The Closing Date shall occur on September 22, 2010, at the offices of Sichenzia Ross Friedman Ference LLP, New York, New York 10066, at 10:00 a.m., or at such other time and place as the parties may agree.

 

  

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2.2          Deliveries.

 

       (a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to the Purchaser:

 

(i)   this Agreement duly executed by the Company;

 

(ii)  a Debenture in the principal amount equal to $110,000;

 

(iii)  the Security Agreement duly executed by the Company;

 

(iv)  an “all assets” UCC-1 financing statement for filing in the State of Georgia pursuant to the Security Agreement;

 

(v)  An opinion of counsel, independent to the Company in form and substance acceptable to Purchaser, stating that: (i) the Company is validly organized andin good standing in the State of Georgia, (ii) the Company has full authority to carry out the terms of the Transaction Documents, (iii) the Company has taken all necessary and appropriate action to authorize the execution and delivery of the Transaction Documents, and (iv) the Transaction Documents are enforceable in accordance with their terms, against Company. The opinion will further contain such additional matters reasonably required by Purchaser’s counsel; and

 

(vi)  An opinion of Georgia counsel, independent to the Company, Brain Baby LLC and Asset Recovery Associates in form and substance acceptable to Purchaser, stating that: (i) Brain Baby LLC and Asset Recovery Associates are validly organized, in good standing and authorized to do business in all states in which they are respectively located or conduct business, (ii) Brain Baby LLC and Asset Recovery Associates have full authority to carry out the terms of that certain Agreement For The Purchase And Sale Of Assets Of Brainy Baby, LLC in form and substance as attached hereto as Exhibit A (the “Asset Purchase Agreement”), (iii) Brain Baby LLC and Asset Recovery Associates have taken all necessary and appropriate action to authorize the execution and delivery of the Asset Purchase Agreement and any other documents required to be executed in connection therewith, (iv) the Asset Purchase Agreement and any other documents required to be executed in connection therewith are enforceable in accordance with their terms against Brain Baby LLC and Asset Recovery Associates, (v) that there are no actions or proceedings pending before any court, administrative agency or governmental body at the time of closing which would affect either Brain Baby LLC and Asset Recovery Associates or the validity of the actions to be taken by Brain Baby LLC and Asset Recovery Associates pursuant to either the Asset Purchase Agreement or any other documents required to be executed in connection therewith.  Counsel to Brain Baby LLC and Asset Recovery Associates must opine that the execution and performance of the Asset Purchase Agreement and any other documents required to be executed in connection therewith by Brain Baby LLC and Asset Recovery Associates will not violate any Laws or any documents or any agreements whatsoever to which any of Brain Baby LLC, Asset Recovery Associates or the Company, or any of their respective affiliates are a party.  The opinion will further contain such additional matters reasonably required by Purchaser’s counsel.

 

      (b)  On or prior to the Closing Date, the Purchaser shall deliver or cause to be delivered to the Company:

 

         (i)  this Agreement duly executed by the Purchaser;

 

         (ii)  the amount of $110,000 by wire to the account specified in writing by the Company; and

 

         (iii) the Security Agreement duly executed by the Purchaser.

 

   2.3   Closing Conditions

 

(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)  the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchaser contained herein; and

 

(ii)   the delivery by the Purchaser of the items set forth in Section 2.2 (b);

 

(b)  The obligations of the Purchaser hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)  the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein;

 

  

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(ii)  all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall been performed; and

 

(iii)  the delivery by the Company of the items set forth in Section 2.2 (a).

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

3.           Representations and Warranties of the Company.  The Company represents and warrants to the Purchaser as follows:

 

(a) The Company is a corporation duly organized, validly existing, and in good standing under the laws of Georgia, and is qualified in no other state.

(b)           This Agreement has been duly executed and delivered by Company and constitutes the valid, binding and enforceable obligation of Company, subject to the applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and rights of stockholders.

(c)           The Company has full power and authority to sell and transfer the Debenture to Purchaser without obtaining the waiver, consent, order or approval of (i) any state or federal governmental authority or (ii) any third party or other person.  The Company has the corporate power, authority and capacity to carry on its business as presently conducted.

(d)           Neither the execution and delivery of the Transaction Documents nor the consummation of the transactions contemplated thereby will constitute a violation or default under any term or provision of the Certificate of Incorporation or By-Laws of the Company or of any contract, commitment, indenture, other agreement or restriction of any kind or character to which the Company is a party to or by which the Company is bound.

(e)           The Company has the corporate power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing would have a material adverse effect on the Company.  The Company is not in violation of any of the provisions of its certificate of incorporation or by-laws.  No consent, approval or agreement of any individual or entity is required to be obtained by the Company in connection with this Agreement.

(f)           There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the Company’s best knowledge, threatened against the Company or any of its properties or any of its officers or directors (in their capacities as such).  There is no judgment, decree or order against the Company that could prevent, enjoin, alter or delay any of the transactions contemplated by the Transaction Documents.

(j)            There are no material claims, actions, suits, proceedings, inquiries, labor disputes or investigations (whether or not purportedly on behalf of the Company) pending or, to the Company’s knowledge, threatened against the Company or any of its assets, at law or in equity or by or before any governmental entity or in arbitration or mediation.  No bankruptcy, receivership or debtor relief proceedings are pending or, to the best of the Company’s knowledge, threatened against the Company.

(k)            The Company has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state, local or foreign laws, judgment, decree, injunction or order, applicable to it, the conduct of its business, or the ownership or operation of its business.  References in this Agreement to “Laws” shall refer to any laws, rules or regulations of any federal, state or local government or any governmental or quasi-governmental agency, bureau, commission, instrumentality or judicial body (including, without limitation, any federal or state securities law, regulation, rule or administrative order).

 (l)            All representations, covenants and warranties of the Company contained in this Agreement shall be true and correct on and as of the Closing date with the same effect as though the same had been made on and as of such date.

(m)           The Company has the corporate power, authority and capacity to carry on its business as presently conducted.

 

(n)            The Company will immediately notify the Purchaser in writing of any litigation or of any investigative proceedings of a governmental agency or authority commenced or threatened against it which would or might be materially adverse to the financial condition of the Company.

 

 

  

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ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

4.           Representations and Warranties of Buyer.  The Purchaser hereby represents and warrants to the Company as follows:

 

(a)  Organization; Authority.  Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement.   and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or similar action on the part of Purchaser.  This Agreement has been duly executed by Purchaser, and when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b)  Own Account.  Purchaser understands that the Debenture constitutes “restricted securities” and has not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or any applicable state securities law and is acquiring the Debenture as principal for its own account and not with a view to or for distributing or reselling such Debenture or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Debenture in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Debenture (this representation and warranty not limiting Purchaser’s right to sell the Debenture pursuant to an effective registration statement or otherwise in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities law.

 

(c)  Purchaser Status.  At the time Purchaser was offered the Debenture, as of the date hereof it is, and as of the date of the Closing it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.  Purchaser has (i) a preexisting personal or business relationship with the Company or one or more of its directors, officers or control persons or (ii) by reason of Purchaser’s business or financial experience Purchaser is capable of evaluating the risks and merits of this investment and of protecting Purchaser’s own interests in connection with an investment in the Debenture.

 

(d)  Experience of Purchaser.  Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Debenture, and has so evaluated the merits and risks of such investment.  Purchaser is able to bear the economic risk of an investment in the Debenture and, at the present time, is able to afford a complete loss of such investment.

 

(e)  General Solicitation.  Purchaser is not purchasing the Debenture as a result of any advertisement, article, notice or other communication regarding the Debenture published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(f)  Receipt of Information.  Purchaser believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Debenture.  Purchaser further represents that through its representatives it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Debenture and the business, properties and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to it or to which it had access.  The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 3 of this Agreement or the right of Purchaser to rely thereon.

 

  

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ARTICLE 5

 

MISCELLANEOUS

 

5.1           Use of Proceeds. The Company shall use the net proceeds from the sale of the Debenture towards the purchase of the assets of The Brainy Baby Company, LLC, a Georgia limited liability company in accordance with the terms of the Asset Purchase Agreement.

 

5.1           Further Assurances.  By its signature hereto, each party consents and agrees to all of the transactions contemplated hereby.  Each party hereto shall execute, deliver, file and record any and all instruments, certificates, agreements and other documents, and take any and all other actions, as reasonably requested by any other party hereto in order to consummate the transactions contemplated hereby.

 

5.3           Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given or made if (i) sent by registered or certified mail, return receipt requested, postage prepaid, (ii) hand delivered, (iii) sent by prepaid overnight carrier, with a record of receipt or (iv) sent by facsimile (with confirmation of receipt), to the parties at the following address (or at such other addresses as shall be specified by the parties by like notice):

 

(i)            To the Company:

Brainy Acquisitions, Inc.

460 Brogdon Rd., Suite 400

Suwanee, GA 30024

Fax:

Attention:

With a copy to:

Sichenzia Ross Friedman Ference LLP

61 Broadway

New York 10006

Fax:  (212) 930-9725

Attention:  David B. Manno, Esq.

(ii)           To Purchaser:

FLM Holdings LLC

8 Hop Brook Lane

Holmdel, New Jersey 07733

Fax:

Attention:

Each notice or other communication shall be deemed to have been given on the date received.

 

  

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5.4           Entire Agreement.  This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof.

5.5           Headings.  The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to affect the meaning or interpretation of this Agreement.

5.6           Counterparts.  This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

5.7           Governing Law and Jurisdiction.  This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by the laws of the State of New York, without giving effect to the conflicts of law principles thereof. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the civil or state courts of New York or in the federal courts located in the State of New York.  The parties executing this Agreement and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to submit to the jurisdiction of such courts.

5.8           Severability.  If any term or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term and provision of the Agreement shall be valid and enforced to the fullest extent permitted by law.

5.9           Amendments.  This Agreement may not be modified or changed except by an instrument or instruments in writing executed by the parties hereto.

 

[No further text on this page.]

 

 

 

 

 

 

 

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above

 

THE COMPANY:

 

BRAINY ACQUISITIONS, INC.

 

By: /s/ Tony Erwin

Name:  Tony Erwin

Title: President

PURCHASER:

FLM HOLDINGS LLC

By: /s/ Sam DelPresto

Name:  Sam DelPresto

Title:  Managing Member

 

 

 

  

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Exhibit A

Asset Purchase Agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

8ex1018.htm

EXHIBIT 10.18

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

	 
Original Issue Date: September 22, 2010

	 
$110,000.00

 

10% SENIOR SECURED DEBENTURE

DUE MARCH  , 2011

THIS DEBENTURE of Brainy Acquisitions, Inc., a Georgia corporation, having its principal place of business at 460 Brogdon Rd., Suite 400, Suwanee, GA 30024 (the “Company”), designated as its 10% Debenture, due March 22, 2011 (the “Debenture”).

FOR VALUE RECEIVED, the Company promises to pay to FLM Holdings LLC, a Nevada limited liability company, or its registered assigns (the “Holder”), the principal sum of One Hundred Ten Thousand (US$110,000) Dollars on the earlier of (i) March 22, 2011 (ii) upon the Financing Date, as defined in Section 12 (the “Maturity Date”), or (iii) the accelerated maturity date applicable in the case of any uncured Event of Default prior to maturity (the “Maturity Date”) and to pay accrued interest to the Holder as stated herein on the then outstanding principal amount of this Debenture at the rate of 10% per annum, payable in cash.

This Debenture is subject to the terms and conditions set forth in the Purchase Agreement, as well as to the following additional provisions:

Section 1.                      This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be made for such registration of transfer or exchange.

Section 2.                      This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.  Prior to due presentment to the Company for transfer of this Debenture, the Company and any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 3.                      Events of Default.

(a)           “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i) any default in the payment of the principal amount of this Debenture when the same shall become due and payable, either at Maturity or by acceleration or otherwise; or

(ii) default shall be made in the payment of interest on this Debenture when the same becomes due and payable and the default continues for a period of five (5) business days; or

 

 

  

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(iii) any representation or warranty made by the Company in the Purchase Agreement or any other Transaction Documents was incorrect in any material respect on or as of the date made; or

(iv) the Company shall fail to observe or perform any other covenant or agreement contained in this Debenture or any of the other Transaction Documents which failure is not cured, if possible to cure, within 10 calendar days after written notice of such default is sent by the Holder to the Company; or

 

(v) the Company shall commence, or there shall be commenced against the Company a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company  commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or there is commenced against the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 60 days; or the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company  suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or the Company makes a general assignment for the benefit of creditors; or the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company; or any corporate or other action is taken by the Company or any subsidiary thereof for the purpose of effecting any of the foregoing; or

 

(vi) default shall occur with respect to any indebtedness, including any Existing Indebtedness, for borrowed money of the Company or under any agreement to which the Company is a party and such default shall exceed $75,000; or

(vii) default with respect to any contractual obligation of the Company under or pursuant to any contract, lease, or other agreement to which the Company is a party and such default shall continue for more than the period of grace, if any, therein specified, if the aggregate amount of the Company’s contractual liability arising out of such default exceeds or is reasonably estimated to exceed $75,000; or

 

(viii) final judgment for the payment of money in excess of $75,000 shall be rendered against the Company and the same shall remain undischarged for a period of 60 days during which execution shall not be effectively stayed; or

 

(ix) any failure to pay non-executive employee wages.

(b)           If any Event of Default occurs, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become immediately due and payable in cash.  Commencing upon an Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at the rate of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law.  The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a Debenture holder until such time, if any, as the full payment under this Section shall have been received by it.  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 4.    Reserved.

 

Section 5. This Debenture is a direct obligation of the Company, and the obligation of the Company to repay this Debenture is absolute and unconditional, and is expressly senior to all Existing Indebtedness (as that term is defined in Section 21 below) all of which Existing Indebtedness is and shall be expressly subordinated to this Debenture pursuant to this Section 5.

 

Section 6.  Interest on the amount advanced will accrue on this Debenture from the date hereof until the Maturity Date at the rate of ten percent (10% per annum), which shall be due on the first day of each month, beginning October 1, 2010 and continuing until the Maturity Date and payable upon the Maturity Date.  If any portion of this Debenture is outstanding on the Maturity Date, interest at the rate of eighteen percent (18%) per annum or the highest rate allowed by law, whichever is lower, shall accrue on the outstanding principal of this Debenture from the Maturity Date to and including the date of payment by the Company.  All past due interest shall accrue on a daily basis and shall be payable in cash. The Holder may demand payment of all or any part of this Debenture, together with accrued interest, if any, and any other amounts due hereunder, as of the Maturity Date or any date thereafter.

Section 7.    Security Interest.  This Debenture shall be secured by the assets of the Company, as set forth in the Security Agreement.

           Section 8.     Subject to Section 12, any payment made by the Company to the Holder, on account of this Debenture shall be applied in the following order of priority: (i) first, to any amounts other than principal and accrued interest, if any, hereunder, (ii) second, to accrued interest, if any, through and including the date of payment, and (iv) then, to principal of the Debenture.

           Section 9.      The outstanding principal of the loan, or any portion thereof, evidenced by this Debenture may be prepaid at the option of the Company, together with accrued interest thereon, without penalty at any time.

           Section 10.   Reserved.

Section 11.  Reserved.

 

  

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   Section 12.   The term "Financing Date" means the date on which Pubco (defined below) closes a private offering of convertible debt financing (“New Financing”), pursuant to a Confidential Private Offering Memorandum, and which New Financing shall include as a condition of closing the closing of a “reverse transaction” pursuant to which the Company shall become a wholly-owned subsidiary of a corporation that files periodic reports under the Securities Exchange Act of 1934, as amended, and whose shares of common stock are eligible for quotation on the Over-the-Counter Bulletin Board (“Pubco”). Pursuant to the initial closing of the New Financing, the Company shall cause Pubco to issue to the Holder, and the Holder shall accept, in full satisfaction of the Company’s obligations with respect to the outstanding principal on the Debenture, a convertible debenture in the principal amount of $110,000, under the same terms and conditions applicable to the convertible debentures sold to purchasers under the New Financing.

 

   Section 13.   In the event of a Change of Control taking place otherwise than in connection with the New Financing, Holder, at its option, will have the right (a) immediately prior to the Change in Control, to convert the Debenture into securities of the Company of the same class as those held by the persons acquiring control of the Company, or (b) to require the Company, upon the Change in Control, to purchase the Debenture at a purchase price of 125% of the price, plus accrued interest.  The Company shall give Holder 20 days notice prior to the event of a Change of Control.

   Section 14.    This Debenture shall be governed by and interpreted in accordance with the laws of the State of New York for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. The Company and the Holder consent to the exclusive jurisdiction of the state courts of the State of New York located in New York County and the United States District Court for the Southern District of New York in connection with any dispute arising under this Debenture and hereby waive, to the maximum extent permitted by law, any objection, including any objection based on forum non convenes, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Holder in enforcement of or protection of any of its rights under this Debenture. The Company and the Holder hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter arising out of or in connection with the Debenture

 

           Section 15. Reserved.

           Section 16. Reserved.

           Section 17. Reserved.

   Section 18.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any notice of conversion, shall be in writing and delivered personally, or sent by registered or certified mail return recipt requested postage prepaid or by a nationally recognized overnight courier service, addressed to the Company, at the addresses set forth above, or such other address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section.  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, or sent by registered or certified mail return recipt requested postage prepaid or by a nationally recognized overnight courier service addressed to the Holder at the address of such Holder appearing on the books of the Company, or if no such address appears, at the principal place of business of such Holder.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the second Business Day following the date of mailing, if sent by certified mail return recipt requested postage prepaid or by nationally recognized overnight courier service, or (ii) upon actual receipt by the party to whom such notice is required to be given. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

Section 19.   If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

Section 20. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Debenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holders, but will suffer and permit the execution of every such as though no such law has been enacted. This Debenture shall not be construed more strictly against one party than against the other to the extent that it may have been prepared primarily by counsel of one of the parties, the parties agreeing that both the Holder and the Company have contributed substantially and materially to the preparation of this Debenture and were represented by experienced and knowledgeable counsel in the negotiation and drafting of this Debenture.

Section 21. Definitions.  For the purposes hereof, in addition to the terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined herein have the meanings given to such terms in the Purchase Agreement, and (b) the following terms shall have the following meanings:

“Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

“Change of Control” as used herein shall mean the occurrence of the following events (provided, that, a Change of Control shall not include any transaction effected in connection with a New Financing):

(i)           A sale, transfer, or other disposition by the Company through a single transaction or a series of transactions occurring within a 90-day period of securities of the Company representing Beneficial Ownership (as defined below) of fifty (50%) percent or more of the combined voting power of the Company’s then outstanding securities to any “Unrelated Person” or “Unrelated Persons” acting in concert with one another.  For purposes of this definition, the term “Person” shall mean and include any individual, partnership, joint venture, association, trust corporation, or other entity (including a “group” as referred to in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“1934 Act”)).  For purposes of this definition, the term “Unrelated Person” shall mean and include any Person other than the Company, a wholly-owned subsidiary of the Company, an existing shareholder, or an employee benefit plan of the Company.

 

  

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(ii)           A sale, transfer, or other disposition through a single transaction or a series of transactions occurring within a 90-day period of all or substantially all of the assets of the Company to an Unrelated Person or Unrelated Persons acting in concert with one another.

(iii)           A change in the ownership of the Company through a single transaction or a series of transactions occurring within a 90-day period such that any Unrelated Person or Unrelated Persons acting in concert with one another become the “Beneficial Owner,” directly or indirectly, of securities of the Company representing at least fifty-one (51%) percent of the combined voting power of the Company’s then outstanding securities.  For purposes of this Agreement, the term “Beneficial Owner” shall have the same meaning as given to that term in Rule 13d-3 promulgated under the 1934 Act, provided that any pledgee of voting securities is not deemed to be the Beneficial Owner of the securities prior to its acquisition of voting rights with respect to the securities.

(iv)           Any consolidation or merger of the Company with or into an Unrelated Person, unless immediately after the consolidation or merger the holder of the Common Stock of the Company immediately prior to the consolidation or merger are the beneficial owners of securities of the surviving corporation representing at least fifty-one (51%) percent of the combined voting power of the surviving corporation’s then outstanding securities.

“Existing Indebtedness ” means all the Company’s preexisting debt obligations (principal and interest) outstanding on the date hereof.

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

“Purchase Agreement” means the Securities Purchase Agreement, dated as of the date hereof, to which the Company and the original Holder are parties, as amended, modified or supplemented from time to time in accordance with its terms.

“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.

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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.

 

	 	
BRAINY ACQUISITIONS, INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Tony Erwin	 
	 	 	Name: /s/ Tony Erwin	 
	 	 	Title:  President	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

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