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Exhibit 10.1

 
SECURITIES PURCHASE AGREEMENT

Dated as of March 25, 2014

by and among

4LICENSING CORPORATION,

CLEVELAND CAPITAL, L.P.,

PRESCOTT GROUP AGGRESSIVE SMALL CAP MASTERFUND, GP

and,

solely for purposes of Section 5.3,

THE GUARANTORS LISTED ON ANNEX I
 
 

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TABLE OF CONTNTS
 

  Page  
ARTICLE I.        PURCHASE AND SALE
1
 
 
1.1
The Notes and Warrants
1
 
1.2
The Issuance and Sale of the Notes and Warrants
1
 
1.3
Exemption from Registration
2
 
ARTICLE II.       THE CLOSINGS
2
 
 
2.1
Deliveries at the Closings
2
 
ARTICLE III.     REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3
 
 
3.1
Organization; Good Standing; Qualification and Power
3
 
3.2
Authorization; Enforceability
3
 
3.3
Noncontravention
4
 
3.4
Compliance with Laws; Organizational Documents
4
 
3.5
Capitalization of the Company
4
 
3.6
Intellectual Property
5
 
3.7
Material Agreements
5
 
3.8
Brokers
5
 
3.9
Financial Statements
5
 
3.10
No Consent or Approval Required
6
 
3.11
Changes
6
 
3.12
Absence of Undisclosed Liabilities
6
 
3.13
Insurance
7
 
3.14
Title to Assets, Properties and Rights
7
 
3.15
Taxes
7
 
3.16
Litigation and Other Proceedings
8
 
ARTICLE IV.     REPRESENTATIONS AND WARRANTIES OF BUYER
8
 
 
4.1
Experience; Accredited Investor Status
8
 
4.2
Company Information
8
 
4.3
Investment
8
 
4.4
Transfer Restrictions
9
 
4.5
Brokers or Finders
9
 
4.6
Organization; Good Standing; Qualification and Power
9

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TABLE OF CONTENTS
(continued)
 

 
Page
 
 
4.7
Authorization
9
 
4.8
No Consent or Approval Required
9
 
 
ARTICLE V.       OTHER AGREEMENTS
10
 
 
 
5.1
Financial Covenants
10
 
5.2
Reservation of Common Stock
10
 
5.3
Subsidiary Guarantees
10
 
5.4
Additional Notes and Warrants
11
 
5.5
Anti-Dilution
12
 
 
ARTICLE VI.     MISCELLANEOUS
12
 
 
 
6.1
Survival of Agreements
12
 
6.2
Expenses
12
 
6.3
No Third Party Beneficiaries
12
 
6.4
Complete Agreement
12
 
6.5
Successors and Assigns
13
 
6.6
Counterparts
13
 
6.7
Press Releases and Public Announcements
13
 
6.8
Notices
13
 
6.9
Governing Law
15
 
6.10
Amendments and Waivers
15
 
6.11
Termination
15
 
6.12
Headings
15
 
6.13
Certain Definitions
15
 
6.14
Incorporation of Schedules and Exhibits
18
 
6.15
Rules of Construction
18
 
6.16
Severability
19
 
6.17
Loss of Note or Warrant
19

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ANNEXES
 

Annex I List of Guarantors

 
EXHIBITS
 

Exhibit A Form of Notation of Guarantee

Exhibit B Form of Promissory Note

Exhibit C Form of Warrant

 
SCHEDULES

1.2(b) Subscription Amount; Warrant Amount

3.5(a)(i) Capitalization of the Company - Authorized Capital Stock (pre-Closing)

3.5(a)(ii) Capitalization of the Company - Issued Capital Stock (pre-Closing)

3.5(b) Outstanding Warrants, Options, Rights, Agreements, etc.

3.11 Changes

3.14 Title to Assets, Properties and Rights

iii

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SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”), is made as of March 25,
2014, by and among 4Licensing Corporation (the “Company”), Cleveland Capital,
L.P. (“Cleveland Capital”), Prescott Group Aggressive Small Cap Masterfund, GP
(“Prescott Group”, and together with Cleveland Capital, “Buyers”), and, solely
for purposes of Section 5.3, the Guarantors list on Annex I (the “Guarantors”).
 
WHEREAS, the Company has authorized the sale to Buyers of the Notes and the
Warrants; and
 
WHEREAS, Buyers wish to purchase, and the Company wishes to issue and sell, the
Notes and the Warrants on the terms and subject to the conditions set forth
herein.
 
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company, Buyers,
and, solely with respect to Section 5.3, the Guarantors, hereby agree as
follows:
 
ARTICLE I.
 
PURCHASE AND SALE
 

1.1 The Notes and Warrants.

 
The Company has authorized the issuance and sale to Buyers of the Notes and the
Warrants.

1.2 The Issuance and Sale of the Notes and Warrants.

 
(a)            The closings of the sales of the Notes and the Warrants (each, a
“Closing”) shall take place at the offices of Jones Day, 901 Lakeside Avenue,
Cleveland, Ohio, at 10:00 a.m., Cleveland, Ohio time, on the date hereof or such
other date(s) and time(s) as each of the Buyers and the Company may agree (each,
a “Closing Date”).  At the Closings, on the terms and subject to the conditions
contained herein, the Company shall issue, sell and deliver to Buyers, and
Buyers shall, severally and not jointly, purchase and acquire from the Company,
up to an aggregate principal amount of $1,650,000 of Notes and Warrants, free
and clear of any Liens and with no restrictions on the transfer thereof (in each
case other than pursuant to the Transaction Documents and pursuant to the
federal securities laws).
 
(b)            The amount payable by each Buyer to the Company for purchase of
such Buyer’s Notes and Warrants pursuant to this Agreement, and the principal
amount of the Notes to be purchased by such Buyer (the “Subscription Amount”)
and the number of shares of Common Stock issuable pursuant to such Buyer’s
Warrant (the “Warrant Amount”), are set forth in the statement attached hereto
as Schedule 1.2(b).

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1.3 Exemption from Registration.

 
(a)            The Notes, the Warrants, the Note Shares and the Warrant Shares
(a) have not been registered under the Securities Act of 1933, as amended (the
“Securities Act”), or any applicable state or other securities laws, (b) will be
issued under an exemption or exemptions from registration under the Securities
Act and any applicable state and other securities laws, and (c) will be
restricted securities (as that term is defined in Rule 144(a)(3) promulgated
under the Securities Act) and may not be resold unless such Notes, Warrants,
Note Shares or Warrant Shares, as applicable, are registered under the
Securities Act and any applicable state and other securities laws or an
exemption from registration is available.
 
(b)            Accordingly, the certificate(s) evidencing the shares of Warrant
Shares and/or the Note Shares shall, upon issuance, contain legends in
substantially the following form (in addition to any other legends required to
be placed thereon under applicable securities laws):
 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY OTHER
APPLICABLE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR APPLICABLE SECURITIES LAWS.

 
ARTICLE II.
 
THE CLOSINGS
 

2.1 Deliveries at the Closings.

 
(a)            At each Closing, the Company shall deliver to Cleveland Capital
or Prescott Group, as applicable:
 
(i)             a Note, in the amount equal to such Buyer’s Subscription Amount;
 
(ii)           a Warrant registered in the name of such Buyer to purchase up to
a number of shares of Common Stock equal to such Buyer’s Warrant Amount;
 
(iii)          a certificate of good standing in respect of the Company issued
by the Secretary of State of the State of Delaware dated as of a date within
five Business Days of such Closing Date;
 
(iv)         a receipt evidencing receipt by the Company of the funds
transferred pursuant to Section 2.1(b)(i); and
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(v)           Notation of Guarantees, in the form attached as Exhibit A (each a
“Notation of Guarantee”), duly executed by the Guarantors.
 
(b)            At each Closing, Cleveland Capital or Prescott Group, as
applicable, shall deliver to the Company:
 
(i)             by bank wire transfer of immediately available funds to an
account designated in writing by the Company, an amount in cash equal to such
Buyer’s Subscription Amount; and
 
(ii)            a receipt evidencing receipt by such Buyer of (A) a Note, in the
amount equal to such Buyer’s Subscription Amount, and (B) a Warrant registered
in the name of such Buyer to purchase up to a number of shares of Common Stock
equal to such Buyer’s Warrant Amount.
 
ARTICLE III.
 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
The Company hereby represents and warrants to Buyers as of the date hereof as
follows:
 

3.1 Organization; Good Standing; Qualification and Power.

 
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite power and
authority to own, lease and operate its assets and to carry on its business as
presently being conducted, and is qualified to do business and is in good
standing in every jurisdiction in which the failure so to qualify or be in good
standing could reasonably be expected to have a Material Adverse Effect on the
Company.
 

3.2 Authorization; Enforceability.

 
(a)            The Company has all requisite power and authority to execute and
deliver the Transaction Documents and any and all instruments necessary or
appropriate in order to effectuate fully the terms of each such agreement and
all related transactions and to perform its obligations under each such
agreement.  The Transaction Documents other than the Notes and the Warrants have
been duly authorized by all necessary corporate action of, and executed and
delivered by, the Company, and constitute the valid and binding obligations of
the Company, enforceable against the Company in accordance with its terms,
except as enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other laws affecting creditors’ rights generally
or by general principles of equity.
 
(b)            The authorization, issuance, sale and delivery of the Notes and
the Warrants have been duly authorized by all necessary corporation action of
the Company.  The Notes and Warrants, when issued and delivered to Buyers
pursuant to this Agreement against payment of the consideration therefor as
provided herein, will constitute the valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
as enforceability thereof may be limited by any bankruptcy, reorganization,
insolvency or other laws affecting creditors’ rights generally or by general
principle of equity.
- 3 -

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3.3 Noncontravention.

 
The execution, delivery and performance by the Company of the Transaction
Documents, the consummation of the transactions contemplated thereby and
compliance with the provisions thereof required to authorize the issuance of the
Note Shares and/or the Warrant Shares, have not and will not (a) violate any
provision of the Organizational Documents of the Company, (b) violate any law to
which the Company or any of its assets is subject, (c) result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel any Contract to which the
Company is a party or by which any of the assets of the Company is bound, or (d)
result in the imposition of any Lien upon any of the assets of the Company
which, with respect to each of the foregoing clauses, could reasonably be
expected to have a Material Adverse Effect on the Company.  Other than state
blue sky securities filings, the filing of a Form D with the Securities and
Exchange Commission, any securities filings with foreign governments or agencies
or any consents that have been obtained, the Company has not been or is not
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any Governmental Entity for the execution
and delivery of the Transaction Documents.
 

3.4 Compliance with Laws; Organizational Documents.

 
The Company (a) has complied in all material respects with, and is in material
compliance with, all laws applicable to it and its business, and (b) has all
Permits used or necessary in the conduct of its business as presently conducted,
other than such Permits that, if not obtained, could not reasonably be expected
to have a Material Adverse Effect on the Company.  Such Permits are in full
force and effect, the Company has not received notice of any material violations
with respect to any thereof, and no material Proceeding is pending or, to the
Company’s knowledge, threatened to revoke or limit any thereof.
 

3.5 Capitalization of the Company.

 
(a)            Immediately prior to the Closing, (i) the authorized capital
stock of the Company consisted of the classes and amounts set forth on Schedule
3.5(a)(i), and (ii) the issued and outstanding capital stock of the Company
(separated by class and series) was as set forth on Schedule 3.5(a)(ii).
 
(b)            Except as contemplated by the Transaction Documents or as set
forth on Schedule 3.5(b), there are no (i) outstanding warrants, options,
rights, agreements, convertible securities or other commitments or instruments
pursuant to which the Company is or may become obligated to issue or sell any
shares of its capital stock or other securities or (ii) preemptive or similar
rights to purchase or otherwise acquire shares of the capital stock or other
securities of the Company pursuant to any provision of law, the Company’s
Organizational Documents or any Contract to which the Company, or to the
Company’s knowledge, any stockholder thereof, is a party.
 

3.6 Intellectual Property.

 
There is no pending or, to the Company’s knowledge, threatened, claim or
litigation against it asserting that the Company infringes upon or otherwise
violates any Intellectual Property Right of any Person (other than the Company
or Buyers).  No Proceedings in which the Company alleges that any Person is
infringing upon, or otherwise violating, any Intellectual Property Right owned
by the Company are pending, and none have been served by, instituted or asserted
by the Company, nor, to the Company’s knowledge, are any Proceedings threatened
alleging any such violation or infringement.
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3.7 Material Agreements.

 
To the Company’s knowledge, (a) there is no material breach or default by any
party under any Contract to which the Company or any of its subsidiaries is a
party that is material to the Company’s business, operations, assets, financial
condition or operating results (each, a “Material Agreement”) and (b) each
Material Agreement is in full force and effect, constitutes the valid and
binding obligation of the respective parties thereto (assuming due execution by
the parties other than the Company or its subsidiaries, as applicable), and is
enforceable in accordance with its terms, except as enforceability thereof may
be limited by applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors’ rights generally or by general principles of equity.
 

3.8 Brokers.

 
On behalf of the Company, there is no agent, broker, investment banker,
consultant, Person or firm that has acted on behalf, or under the authority of,
the Company or, to the Company’s knowledge, any of its stockholders, or will be
entitled to any fee or commission directly or indirectly from the Company or, to
the Company’s knowledge, any of its stockholders, in connection with any of the
transactions contemplated by this Agreement.
 

3.9 Financial Statements.

 
The Company has filed with the Securities and Exchange Commission its audited
balance sheet as of December 31, 2012 (the “Statement Date”), and the audited
statements of income and cash flows for the year ending on the Statement Date
(together, the “Audited Financial Statements”) and the unaudited balance sheet
and statements of income and cash flows for the nine-month period ended
September 30, 2013 (the “Interim Financial Statements”).  The Audited Financial
Statements, together with the notes thereto, have been prepared in accordance
with GAAP, consistently applied throughout the periods indicated and present
fairly, in all material respects, the financial condition and position and
results of operation of the Company as of the Statement Date and for the period
indicated.  The Interim Financial Statements present fairly, in all material
respects, the financial condition and position and results of operation of the
Company as of the date and for the period indicated, and have been prepared in
accordance with GAAP, except for the absence of footnote disclosure and
customary year-end adjustments.
 

3.10 No Consent or Approval Required.

 
No consent, approval or authorization of, or declaration to or filing with, any
Person is required by the Company for the valid authorization, execution and
delivery by the Company of the Transaction Documents or for the consummation of
the transactions contemplated hereby or thereby, other than (a) those consents,
approvals, authorizations, declarations or filings that have been obtained or
made, as the case may be, and (b) filings pursuant to federal or state
securities and any other applicable laws (all of which filings have been made by
the Company, other than those which are required to be made after the Closings
and which will be duly made in accordance with time periods under applicable
laws) in connection with the sale of the Notes and the Warrants.
- 5 -

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3.11 Changes.

 
Except as set forth on Schedule 3.11, since December 31, 2012, there has not
been:
 
(a)            Any change in or effect on the assets, Liabilities, financial
condition or operations of the Company from that reflected in the Interim
Financial Statements, other than changes in the ordinary course of business,
none of which individually or in the aggregate has had or could reasonably be
expected to have a Material Adverse Effect on the Company;
 
(b)            Any waiver by the Company of a material right of the Company or a
material debt owed to the Company;
 
(c)            Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
 
(d)            Any debt, obligation or liability incurred, assumed or guaranteed
by the Company, except those for immaterial amounts and for current Liabilities
incurred in the ordinary course of business;
 
(e)            Any sale, assignment, license or transfer of ownership of any
Intellectual Property Rights, other than in the ordinary course of business;
 
(f)            Any change in any Material Agreement which has had or could
reasonably be expected to have a Material Adverse Effect on the Company; or
 
(g)            Any other event or condition of any character that, either
individually or cumulatively, has had or could reasonably be expected to have a
Material Adverse Effect on the Company.
 

3.12 Absence of Undisclosed Liabilities.

 
The Company has no material Liabilities, except (a) to the extent reflected or
reserved against on the balance sheet included in the Interim Financial
Statements or disclosed in the Audited Financial Statements and (b) Liabilities
arising in the ordinary course of business consistent with past practice since
December 31, 2012.  There are no material loss contingencies (as such term is
used in Statement of Financial Accounting Standards No. 5, or any successor
thereto, issued by the Financial Accounting Standards Board) of or affecting the
Company which are required to be disclosed or for which adequate provision was
required to be made on the balance sheet included in the Interim Financial
Statements or in the Audited Financial Statements which have not been disclosed
or for which adequate provision has not been made on the balance sheet included
in the Interim Financial Statements or in the Audited Financial Statements or in
the notes thereto.
- 6 -

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3.13 Insurance.

 
The Company maintains adequate insurance covering the risks of the Company, if
any, of such types and in such amounts and with such deductibles as are
customary for other companies engaged in similar lines of business.  All
insurance held by the Company is in full force and effect and is issued by
insurers of recognized responsibility.
 

3.14 Title to Assets, Properties and Rights.

 
The Company has good and marketable title (or a valid leasehold interest or
license) to all of the assets (whether real, personal or mixed) reflected as
being owned (or leased or licensed) by the Company on the balance sheet included
in the Interim Financial Statements (except for those assets subsequently
disposed of in the ordinary course of business for fair value), free and clear
of all Liens, except for (a) those Liens set forth on Schedule 3.14; (b) Liens
for current Taxes, assessments and other governmental charges not yet due and
payable and for which adequate reserves have been established on the books of
the Company; (c) easements, covenants, conditions and restrictions (whether or
not of record) as to which no material violation or encroachment exists or, if
such violation or encroachment exists, as to which the cure of such violation or
encroachment would not materially interfere with the conduct of the Company’s
business as presently conducted; (d) any zoning or other governmentally
established restrictions or encumbrances; (e) worker’s or unemployment
compensation Liens arising in the ordinary course of business; (f) mechanic’s,
materialman’s, supplier’s, vendor’s or similar Liens arising in the ordinary
course of business securing amounts which are not delinquent; and (g) those
Liens that do not, individually or cumulatively, have or could reasonably be
expected to have a Material Adverse Effect on the Company.
 

3.15 Taxes.

 
The Company has timely filed all material tax returns that are required to be
filed, and has paid all Taxes as shown on such returns and on all assessments
received by it to the extent that such Taxes have become due, except to the
extent the Company is contesting any such assessment in good faith.  All such
returns were true and correct in all material respects. The Company has not
received notice of any material tax deficiency proposed or assessed against it,
and has not executed any waiver of any statute of limitations on the assessment
or collection of any Tax that has not yet expired.  None of the Company’s tax
returns is currently being audited by governmental authorities, and no taxing
authority has notified (or threatened) the Company, orally or in writing, that
such taxing authority will or may audit any such return.  The Company has
complied with all requirements of the Internal Revenue Code of 1986, as amended
(the “Code”), U.S. Treasury regulations and any state, local or foreign law
relating to the payment and withholding of Taxes relating to the Company, and to
the Company’s knowledge, the Company has, within the time and in the manner
prescribed by applicable law, paid over to the proper taxing authorities all
amounts required to be so withheld and paid over relating to the Company. The
charges, reserves and accruals on the books of the Company in respect of Taxes
and other governmental charges are adequate.
- 7 -

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3.16 Litigation and Other Proceedings.

 
There are no Proceedings pending or, to the Company’s knowledge, threatened
against the Company, whether at law or in equity, whether civil or criminal in
nature, that could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on the Company.
 
ARTICLE IV.
 
REPRESENTATIONS AND WARRANTIES OF BUYER
 
Each Buyer represents and warrants to the Company as follows:
 

4.1 Experience; Accredited Investor Status.

 
Buyer (a) is an accredited investor as that term is defined in Rule 501 of
Regulation D promulgated under the Securities Act and, by virtue of its
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company, (b) is capable of evaluating the
merits and risks of its investment in the Company and has the capacity to
protect its own interests, and (c) has the financial ability to bear the
economic risk of its investment in the Company.
 

4.2 Company Information.

 
Buyer has been provided access to all information regarding the business and
financial condition of the Company, its expected plans for future business
activities, material contracts, intellectual property, and the merits and risks
of its purchase of the Notes and Warrants, which Buyer has requested or
otherwise needs to evaluate an investment in the Notes and the Warrants.  Buyer
has had an opportunity to discuss the Company’s business, management and
financial affairs with directors, officers and management of the Company and has
had the opportunity to review the Company’s operations and facilities.  Buyer
has also had the opportunity to ask questions of and receive answers from, the
Company and its management regarding the terms and conditions of this investment
and all such questions have been answered to Buyer’s satisfaction.
 

4.3 Investment.

 
Buyer has not been formed solely for the purpose of making this investment and
is acquiring the Notes and the Warrants for investment for its own account, not
as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution of any part thereof.  Buyer understands that the Notes,
the Warrants, the Note Shares and the Warrant Shares have not been registered
under the Securities Act or applicable state and other securities laws and is
being issued by reason of a specific exemption from the registration provisions
of the Securities Act and applicable state and other securities laws, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Buyer’s representations as expressed
herein.
- 8 -

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4.4 Transfer Restrictions.

 
Buyer acknowledges and understands that (a) transfers of the Notes, the
Warrants, the Note Shares and the Warrant Shares are subject to transfer
restrictions contained in the Transaction Documents and under the federal
securities laws and (b) it must bear the economic risk of this investment for an
indefinite period of time because the Notes, the Warrants, the Note Shares and
the Warrant Shares must be held indefinitely unless subsequently registered
under the Securities Act and applicable state and other securities laws or
unless an exemption from such registration is available.
 

4.5 Brokers or Finders.

 
Buyer has not retained any investment banker, broker or finder in connection
with the purchase of the Notes or the Warrants.
 

4.6 Organization; Good Standing; Qualification and Power.

 
Buyer is a limited liability company duly organized, validly existing and in
good standing under the laws of its state of incorporation, has all requisite
power and authority to own, lease and operate its assets and to carry on its
business as presently being conducted, and is qualified to do business and in
good standing in every jurisdiction in which the failure so to qualify or be in
good standing could reasonably be expected to have a Material Adverse Effect on
Buyer.
 

4.7 Authorization.

 
Buyer has all requisite power and authority to execute and deliver the
Transaction Documents and any and all instruments necessary or appropriate in
order to effectuate fully the terms of each such agreement and all related
transactions and to perform its obligations under each such agreement.  Each of
the Transaction Documents has been duly authorized by all necessary corporate
action of, and executed and delivered by, Buyer, and constitutes the valid and
binding obligation of Buyer, enforceable in accordance with its terms, except as
enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other laws affecting creditors’ rights generally
or by general principles of equity.
 

4.8 No Consent or Approval Required.

 
No consent, approval or authorization of, or declaration to or filing with, any
Person shall be required by Buyer for the valid authorization, execution and
delivery by Buyer the Transaction Documents or for the consummation of the
transactions contemplated hereby or thereby other than those consents,
approvals, authorizations, declarations or filings which have been obtained or
made, as the case may be.
- 9 -

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ARTICLE V.
 
OTHER AGREEMENTS
 

5.1 Financial Covenants.

 
From the date hereof until the earlier of the termination of this Agreement or
the date on which none of the Notes issued pursuant to this Agreement remain
outstanding (such earlier date, the “Termination Date”), the Company (i) must
maintain, on a consolidated basis, a cash balance in excess of $100,000, (ii)
must maintain at least a 70% equity interest in Pinwrest Development Group, LLC
(“Pinwrest”) on a fully-diluted basis, and (iii) must not, collectively with its
subsidiaries, incur additional Indebtedness in an aggregate amount of $100,000
or more without the consent in writing of the Requisite Holders.

5.2 Reservation of Common Stock.

 
As of the date hereof, the Company has reserved and the Company shall continue
to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue the Warrant Shares pursuant to any exercise of the Warrants
issued pursuant to Section 1.2.

5.3 Subsidiary Guarantees.

 
(a)            Subject to this Section 5.3, each of the Guarantors hereby,
jointly and severally, unconditionally guarantees to each holder of the Notes
(each, a “Holder”) that: (i) the principal of, and interest on, the Notes will
be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and interest
on the Notes, if any, if lawful, and all other obligations of the Company to the
holders of a Note thereunder will be promptly paid in full or performed, all in
accordance with the terms thereof and (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at maturity, by acceleration or otherwise. 
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors will be jointly and severally
obligated to pay the same immediately.  Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
 
(b)           The Guarantors hereby agree that, to the fullest extent permitted
by applicable law, their obligations hereunder are unconditional, irrespective
of the validity, regularity or enforceability of the Notes or this Agreement,
the absence of any action to enforce the same, any waiver or consent by any
Holder with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.  Each Guarantor hereby waives, to the fullest extent
permitted by applicable law, diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice and
all demands whatsoever and covenant that this guarantee will not be discharged
except by complete performance of the obligations contained in the Notes and
this Agreement.
- 10 -

--------------------------------------------------------------------------------

(c)            If any Holder is required by any court or otherwise to return to
the Company, the Guarantors or any custodian, trustee, liquidator or other
similar official acting in relation to either the Company or the Guarantors, any
amount paid by either to such Holder, this guarantee, to the extent theretofore
discharged, will be reinstated in full force and effect.
 
(d)            Each Guarantor agrees that it will not be entitled to any right
of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby. 
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders, on the other hand, (i) the maturity of the obligations
guaranteed hereby may be accelerated as provided in the Notes for the purposes
of this guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (ii) in the event of any declaration of acceleration of such obligations as
provided in the Notes, such obligations (whether or not due and payable) will
forthwith become due and payable by the Guarantors for the purpose of this
guarantee. The Guarantors will have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under this guarantee.
 
(e)            Each Guarantor, and by its acceptance of Notes, each Holder,
hereby confirms that it is the intention of all such parties that the guarantee
of such Guarantor not constitute a fraudulent transfer or conveyance for
purposes of Title 11 of the U.S. Code or any similar federal or state law for
the relief of debtors, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to any guarantee.  To effectuate the foregoing intention, the Holders
and the Guarantors hereby irrevocably agree that the obligations of such
Guarantor will be limited to the maximum amount that will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Section 5.3, result in the obligations of such Guarantor
under its guarantee not constituting a fraudulent transfer or conveyance.
 
(f)            Within five Business Days (or such extended period as the
Requisite Holders may allow) of the acquisition or creation of any direct or
indirect subsidiary, the Company shall cause such subsidiary to execute and to
deliver to the Holders a Notation of Guarantee.
 

5.4 Anti-Dilution.

 
(a)            Prior to the Termination Date, if the Company shall issue shares
of Common Stock (or securities exercisable or convertible into Common Stock) for
a price per share that is less than the exercise price of the Warrants issued
pursuant to Section 1.2 (a “Dilutive Issuance”), then the Company shall issue to
each Buyer a Warrant (in substantially the form attached as Exhibit C but with
an exercise price equal to the share price of the Dilutive Issuance) to purchase
shares of Common Stock in an amount equal to: ((A) / (B)) – (C), where:
 
(A) = such Buyer’s Subscription Amount;
- 11 -

--------------------------------------------------------------------------------

(B) = the price per share of the Dilutive Issuance; and
 
(C) = such Buyer’s Warrant Amount.
 
(b)            Notwithstanding the foregoing, this Section 5.4 shall not apply
to issuance of shares of Excluded Stock.
 

ARTICLE VI.
 
MISCELLANEOUS
 

6.1 Survival of Agreements.

 
All agreements and covenants contained herein shall survive until all Notes are
no longer outstanding.
 

6.2 Expenses.

 
The Company will reimburse each Buyer for its fees and expenses incurred in
connection with the negotiation, execution, and delivery of this Agreement.
 

6.3 No Third Party Beneficiaries.

 
Except as expressly provided herein, this Agreement shall not confer any rights
or remedies upon any Person other than the parties hereto and their respective
successors and permitted assigns, personal representatives, heirs and estates,
as the case may be.
 

6.4 Complete Agreement.

 
This Agreement, together with the other Transaction Documents constitute the
entire agreement among the parties hereto with respect to the transactions
contemplated hereby and supersede any prior understandings, agreements or
representations by or among such parties, written or oral, that may have related
in any way to the purchase and sale of the Notes and the Warrants.
 

6.5 Successors and Assigns.

 
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.  None of the
parties hereto shall be permitted to assign its rights or obligations hereunder
without the prior written consent of the other parties hereto; provided,
however, that the Company may assign or otherwise transfer all of its rights and
obligations under this Agreement without the prior written consent of Buyers to
its successor in interest in connection with a sale of all or substantially all
of its business or assets, whether by merger, sale of stock, sale of assets or
otherwise.
- 12 -

--------------------------------------------------------------------------------

6.6 Counterparts.

 
This Agreement may be executed in any number of counterparts, each such
counterpart which shall be deemed to be an original instrument and all of which
counterparts together shall constitute one instrument.
 

6.7 Press Releases and Public Announcements.

 
The parties will agree upon the timing and content of any initial press release,
or other public communications relating to this Agreement and the transactions
contemplated herein.
 
(a)            Except to the extent already disclosed in any initial press
release or other public communication, no public announcement concerning the
existence or the terms of this Agreement or concerning the transactions
described herein shall be made, either directly or indirectly, by any of the
parties hereto without such party first obtaining the approval of the other
parties and agreement upon the nature, text, and timing of such announcement,
which approval and agreement shall not be unreasonably withheld; provided,
however, that nothing in this Section 6.7(a) shall be deemed to prohibit any
party from making any disclosure which its counsel deems necessary or advisable
in order to satisfy such party’s disclosure obligations imposed by law.
 
(b)            The party desiring to make any such public announcement shall
provide the other parties with a written copy of the proposed announcement in
sufficient time prior to public release to allow such other parties to comment
upon such announcement, prior to public release.
 

6.8 Notices.

 
All notices, requests, demands, claims and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally, via electronic mail, by facsimile, sent by nationally recognized
overnight courier or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the appropriate party at the address, email
address or facsimile number, as applicable, set forth below (or at such other
address for such party as shall be specified by like notice):

If to the Company, to:

4Licensing Corporation
767 Third Avenue
New York, New York 10017
Telephone:  (646) 822-4258
Facsimile:  (212) 754-5481
Email:  BFoster@4LicensingCorp.com
Attention:  Bruce R. Foster

- 13 -

--------------------------------------------------------------------------------

With a copy to:

Jones Day
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Telephone:  (216) 586-7103
Facsimile:  (216) 579-0212
Email:  mjsolecki@jonesday.com
Attention:  Michael J. Solecki, Esq.

If to Cleveland Capital, to:

Cleveland Capital, L.P.
1250 Linda Street
Rocky River, Ohio 44116
Telephone:  440-333-4925
Email:  wade@clevelandcapital.com
Attention:  Wade Massad

If to Prescott Group, to:

Prescott Group Aggressive Small Cap Masterfund, GP
1924 South Utica
Suite 1120
Tulsa, Oklahoma 74104
Telephone: 918-747-3412
Facsimile:  918-742-7303
Attention:  Duminda DeSilva

All such notices and other communications shall be deemed to have been given and
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of delivery by email or facsimile, (A) when delivered prior to
5:00 p.m. (New York time) on a Business Day or (B) if delivered after 5:00 p.m.
on a Business Day or on a day that is not a Business Day, one Business Day after
delivery, (iii) in the case of delivery by nationally recognized overnight
courier, on the second Business Day following the date when sent, and (iv) in
the case of mailing, on the fifth Business Day following such mailing.
 

6.9 Governing Law.

 
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York without giving effect to the principles of conflict of
laws thereof.
 

6.10 Amendments and Waivers.

 
This Agreement may be amended or modified and the terms and conditions hereof
may be waived, only by a written instrument signed by the Company and the
Requisite Holders or, in the case of a waiver, the party or parties hereto
waiving compliance.  No delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party hereto of any right, power or privilege
hereunder, nor any single or partial exercise of any right, power or privilege
hereunder, preclude any other or other exercise thereof hereunder.  The rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies which any party hereto may otherwise have at law or in equity.
- 14 -

--------------------------------------------------------------------------------

6.11 Termination.

 
This Agreement may be terminated by a written instrument signed by the Company
and each Buyer.
 

6.12 Headings.

 
The captions to the several Articles and Sections hereof are not a part of this
Agreement, but are included merely for convenience of reference only and shall
not affect its meaning or interpretation.
 

6.13 Certain Definitions.

 
“$” or “dollar” means U.S. dollars.
 
“Agreement” has the meaning set forth in the preamble to this Agreement.
 
“Audited Financial Statements” has the meaning set forth in Section 3.9 of this
Agreement.
 
“Board” means the Board of Directors of the Company.
 
“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
 
“Buyer” has the meaning set forth in the preamble of this Agreement.
 
“Cleveland Capital” has the meaning set forth in the preamble of this Agreement.
 
“Closing” has the meaning set forth in Section 1.2(a) of this Agreement.
 
“Closing Date” has the meaning set forth in Section 1.2(a) of this Agreement.
 
“Code” has the meaning set forth in Section 3.15 of this Agreement.
 
“Common Stock” means the shares of common stock of the Company, par value $0.01
per share.
 
“Company” has the meaning set forth in the preamble to this Agreement.
 
“Contract” means any loan or credit agreement, note, bond, mortgage, indenture,
lease, sublease, purchase order, instrument, permit, concession, franchise,
license, commitment, contract, subcontract or other agreement, in each case,
whether written or oral.
- 15 -

--------------------------------------------------------------------------------

“Dilutive Issuance” has the meaning set forth in Section 5.4 of this Agreement.
 
“Excluded Stock” means (i) shares of Common Stock, or options or other equity
awards for shares of Common Stock, issued or issuable pursuant to equity
compensation plans or arrangements for officers, directors and other employees
of the Company, (ii) shares of Common Stock issued or issuable upon the
conversion or exchange of any security of the Company or its subsidiaries
convertible into or exchangeable for Common Stock outstanding as of the date
hereof, (iii) any shares of Common Stock issuable under the Warrants issued
pursuant to Section 5.4(a), (iv) any shares of Common Stock issued pursuant to
the terms and conditions of the Notes or Warrants and (v) Warrants or Notes
issued or issuable pursuant to this Agreement, including pursuant to Section
5.4(a).
 
“GAAP” means U.S. generally accepted accounting principles.
“Governmental Entity” means any domestic or foreign federal, state, municipal,
or other governmental department, commission, board, bureau, agency or
instrumentality, or any court or tribunal.
 
“Guarantors” has the meaning set forth in the preamble.  For purposes of Section
5.3 of this Agreement, “Guarantors” shall also mean all Persons that, after the
date hereof, shall execute a Notation of Guarantee.
 
“Holders” has the meaning set forth in Section 5.3(a) of this Agreement.
 
“Indebtedness” of any Person means:  any liability of any Person (a) for
borrowed money (including the current portion thereof), or (b) under any
reimbursement obligation relating to a letter of credit, bankers’ acceptance or
note purchase facility, or (c) evidenced by a bond, note, debenture or similar
instrument (including a purchase money obligation), or (d) for the payment of
money relating to leases that are required to be classified as a capitalized
lease obligation in accordance with GAAP, or (e) under interest rate swap,
hedging or similar agreements.
 
“Intellectual Property Rights” means all of the following or their substantial
equivalent or counterpart in any jurisdiction around the world: (i) patents,
patent applications and invention and patent disclosures; (ii) trademarks,
service marks, trade dress, trade names, corporate names, logos and Internet
domain names; (iii) copyrights, software, and source code and copyrightable
works; (iv) registrations and applications for any registration for any of the
foregoing; and (v) trade secrets, know-how, confidential information, inventions
and discoveries.
 
“Interim Financial Statements” has the meaning set forth in Section 3.9 of this
Agreement.
 
“Liabilities” mean any liabilities or obligations, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, and whether due or to become due, regardless of when asserted.
 
“Lien” means any security interest, pledge, lien, bailment (in the nature of a
pledge or for purposes of security), mortgage, deed of trust, the grant of a
power to confess judgment, conditional sale or title retention agreement
(including any lease in the nature thereof), charge, encumbrance, easement,
reservation, restriction, cloud, right of first refusal or first offer, option,
commitment or other similar arrangement or interest in real or personal
property, whether oral or written.
- 16 -

--------------------------------------------------------------------------------

“Material Adverse Effect” means, with respect to any Person, a material adverse
effect on the business, operations, assets, condition (financial or otherwise)
or operating results of such Person and its subsidiaries, if any, taken as a
whole.
 
“Material Agreement” has the meanings set forth in Section 3.7 of this
Agreement.
 
“Notation of Guarantee” has the meaning set forth in Section 2.1(a)(v) of this
Agreement.
 
“Note Shares” means the shares of Common Stock issuable in lieu of cash
principal or interest payments pursuant to the terms of the Notes.
 
“Notes” means the Promissory Notes of the Company, in substantially the form
attached as Exhibit B, to be delivered to Buyers at the Closings in accordance
with Section 2.1 and any note or notes delivered in exchange replacement or
therefor.
 
“Organizational Documents” means the documents by which any Person (other than
an individual) establishes its legal existence or which govern its internal
affairs.
 
“Permits” means all permits, licenses, authorizations, registrations,
franchises, approvals, consents, certificates, variances and similar rights
obtained, or required to be obtained, from Governmental Entities.
 
“Person” means and includes an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a Governmental Entity (or any
department, agency, or political subdivision thereof).
 
“Pinwrest” has the meaning set forth in Section 5.1 of this Agreement.
 
“Prescott Group” has the meaning set forth in the preamble to this Agreement.
 
“Proceeding” means any action, suit, proceeding, complaint, charge, hearing,
inquiry or investigation before or by a Governmental Entity or an arbitrator.
 
“Requisite Holders” means, at any time, all of the Holders.
 
“Securities Act” has the meaning set forth in Section 1.3 of this Agreement.
 
“Statement Date” has the meaning set forth in Section 3.9 of this Agreement.
 
“Subscription Amount” has the meaning set forth in Section 1.2(b) of this
Agreement.
- 17 -

--------------------------------------------------------------------------------

“Tax” as used in this Agreement, means, with respect to any Person, (a) all
income taxes (including any tax on or based upon net income, gross income,
income as specially defined, earnings, profits or selected items of income,
earnings or profits) and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, alternative or add-on
minimum taxes, customs duties and other taxes, fees, assessments or charges of
any kind whatsoever, together with all interest and penalties, additions to tax
and other additional amounts imposed by any taxing authority (domestic or
foreign) on such Person (if any) and (b) any liability for the payment of any
amount of the type described in clause (a) above as a result of being a
“transferee” (within the meaning of Section 6901 of the Code or any other
applicable Law) of another entity or a member of an affiliated or combined
group.
 
“Termination Date” has the meaning set forth in Section 5.1 of this Agreement.
 
“Transaction Documents” mean this Agreement, the Notes and the Warrants.
 
“Warrant Amount” has the meaning set forth in Section 1.2(b) of this Agreement.
 
“Warrant Shares” means the shares of Common Stock issuable upon the exercise of
the Warrants.
 
“Warrants” means Common Stock purchase warrants, in substantially the form
attached as Exhibit C, to be delivered to Buyers at the Closings in accordance
with Section 2.1 and any warrant or warrants delivered in exchange or
replacement therefor.
 

6.14 Incorporation of Schedules and Exhibits.

 
The schedules and exhibits identified in this Agreement are incorporated herein
by reference and made a part hereof.
 

6.15 Rules of Construction.

 
The term “this Agreement” means this agreement together with all schedules and
the exhibits hereto, as the same may from time to time be amended, modified,
supplemented or restated in accordance with the terms hereof.  In this
Agreement, the term “the Company’s knowledge” or “the knowledge of the Company”
means the knowledge of each officer of the Company, which could have been
acquired after making such reasonable due inquiry and exercising such reasonable
diligence as a prudent business person could have made or exercised in the
management of his or her business affairs, including reasonable due inquiry of
those key employees and professionals of the Company who could reasonably be
expected to have actual knowledge of the matters in question. Accounting terms
used but not otherwise defined herein shall have the meanings given to them
under GAAP.  The use in this Agreement of the term “including” means “including,
without limitation.”  The words “herein,” “hereof,” “hereunder” and other words
of similar import refer to this Agreement as a whole, including the schedules
and exhibits, as the same may from time to time be amended, modified,
supplemented or restated, and not to any particular section, subsection,
paragraph, subparagraph or clause contained in this Agreement.  All references
to sections, schedules and exhibits mean the sections of this Agreement and the
schedules and exhibits attached to this Agreement, except where otherwise
stated.  The title of and the section and paragraph headings in this Agreement
are for convenience of reference only and shall not govern or affect the
interpretation of any of the terms or provisions of this Agreement.  The use
herein of the masculine, feminine or neuter forms shall also denote the other
forms, and words imparting the singular number only shall include the plural and
vice versa, as in each case the context may require or permit.  Where specific
language is used to clarify by example a general statement contained herein,
such specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates.  The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
- 18 -

--------------------------------------------------------------------------------

6.16 Severability.

 
In the event that any provision of this Agreement is determined to be invalid or
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall remain in full force and effect without such provision.  In such
event, the parties hereto shall in good faith attempt to negotiate a substitute
clause for any provision declared invalid or unenforceable, which substitute
clause shall most nearly approximate the intent of the parties hereto in
agreeing to such invalid provision, without itself being invalid.
 

6.17 Loss of Note or Warrant.

 
Upon receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of a Note, any Note exchanged for it, or a Warrant,
and indemnity reasonably satisfactory to the Company (in case of loss, theft or
destruction) or surrender and cancellation of such Note or Warrant (in case of
mutilation), the Company will make and deliver to Buyer in lieu of such Note or
Warrant a new Note or Warrant, as applicable, of like tenor.
 
{Signature pages follow.}
- 19 -

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company, Buyers, and with respect to Section 5.3, the
Guarantors, have caused their duly authorized representatives to execute this
Agreement as of the date first above written.
 
 
 
4LICENSING CORPORATION
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 

 
[Signature Page to Purchase Agreement]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company, Buyers, and with respect to Section 5.3, the
Guarantors, have caused their duly authorized representatives to execute this
Agreement as of the date first above written.
 
 
CLEVELAND CAPITAL, L.P.
 
 
 
 
 
 
By:
/s/ Wade Massad
 
 
 
Name: Wade Massad
 
 
 
Title: Co-Managing Member
 
 
 
Cleveland Capital Management L.L.C.
 
 
 
G.P. of Cleveland Capital, L.P.
 

 
[Signature Page to Purchase Agreement]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company, Buyers, and with respect to Section 5.3, the
Guarantors, have caused their duly authorized representatives to execute this
Agreement as of the date first above written.
 
 
PRESCOTT GROUP AGGRESSIVE SMALL CAP MASTERFUND, GP
 
 
 
 
 
 
By:
/s/ Phil Frohlich
 
 
 
Name: Phil Frohlich
 
 
 
Title: Founder/Manager
 

 
[Signature Page to Purchase Agreement]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company, Buyers, and with respect to Section 5.3, the
Guarantors, have caused their duly authorized representatives to execute this
Agreement as of the date first above written.
 
 
4KIDS DIGITAL GAMES, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 
 
 
 
 
 
4KIDS ENTERTAINMENT HOME VIDEO, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 
 
 
 
 
 
4KIDS ENTERTAINMENT LICENSING, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 
 
 
 
 
 
4KIDS ENTERTAINMENT MUSIC, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 
 
 
 
 
 
4KIDS PRODUCTIONS, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 

 
[Signature Page to Purchase Agreement]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company, Buyers, and with respect to Section 5.3, the
Guarantors, have caused their duly authorized representatives to execute this
Agreement as of the date first above written.
 
 
4KIDS WEBSITES, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 
 
 
 
 
 
4LC SPORTS & ENTERTAINMENT, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 
 
 
 
 
 
4LC TECHNOLOGY, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 
 
 
 
 
 
4SIGNT LICENSING SOLUTIONS, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 
 
 
 
 
 
LEISURE CONCEPTS INTERNATIONAL, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 

 
[Signature Page to Purchase Agreement]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company, Buyers, and with respect to Section 5.3, the
Guarantors, have caused their duly authorized representatives to execute this
Agreement as of the date first above written.
 
 
THE SUMMIT MEDIA GROUP, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 
 
 
 
 
 
WORLD MARTIAL ARTS PRODUCTIONS, INC.
 
 
 
 
 
 
By:
/s/ Bruce R. Foster
 
 
 
Name: Bruce R. Foster
 
 
 
Title: CEO
 

 
[Signature Page to Purchase Agreement]
 

--------------------------------------------------------------------------------

Annex I

List of Guarantors

1. 4Kids Digital Games, Inc.

 

2. 4Kids Entertainment Home Video, Inc.

 

3. 4Kids Entertainment Licensing, Inc.

 

4. 4Kids Entertainment Music, Inc.

 

5. 4Kids Productions, Inc.

 

6. 4Kids Websites, Inc.

 

7. 4LC Sports & Entertainment, Inc.

 

8. 4LC Technology, Inc.

 

9. 4signt Licensing Solutions, Inc.

 

10. Leisure Concepts International, Inc.

 

11. The Summit Media Group, Inc.

 

12. World Martial Arts Productions, Inc.

1

--------------------------------------------------------------------------------

Exhibit A
Form of Notation of Guarantee
See attached.
2

--------------------------------------------------------------------------------

Exhibit B
Form of Promissory Note
See attached.

3

--------------------------------------------------------------------------------

Exhibit C
Form of Warrant
See attached.
4

--------------------------------------------------------------------------------

DISCLOSURE SCHEDULES
 
TO THE SECURITIES PURCHASE AGREEMENT
BY AND AMONG

4LICENSING CORPORATION,

CLEVELAND CAPITAL, L.P.,

PRESCOTT GROUP AGGRESSIVE SMALL CAP MASTERFUND, GP

THE GUARANTORS LISTED ON ANNEX I

DATED AS OF

MARCH 25, 2014
5

--------------------------------------------------------------------------------

In connection with that certain Securities Purchase Agreement, dated as of March
25, 2014 (the “Purchase Agreement”), by and among 4Licensing Corporation (the
“Company”), Cleveland Capital, L.P., Prescott Group Aggressive Small Cap
Masterfund, GP (collectively, “Buyers”) and the Guarantors party thereto, the
Company hereby delivers these Schedules to the Company’s representations and
warranties contained in the Purchase Agreement (which schedules are hereinafter
referred to as the “Disclosure Schedules”) and to other matters in the Purchase
Agreement.  The section numbers in these Schedules correspond to the section
numbers in the Purchase Agreement; provided, however, that any information
disclosed herein under any section number will be deemed to be disclosed and
incorporated into any other section of the Purchase Agreement.  Where any
representation or warranty is limited or qualified by the materiality of the
matters to which the representation or warranty is given, the inclusion of any
matter in any Disclosure Schedule does not constitute a determination or
admission by the Company or the Sellers that such matter is material.  Nothing
in the Disclosure Schedules constitutes an admission of any liability or
obligation of the Company to any third party, nor an admission to any third
party against the interests of the Company.  The captions contained in these
Disclosure Schedules are for convenience of reference only and do not form a
part of the Disclosure Schedules.  Capitalized terms used herein but not
otherwise defined have the meanings ascribed to them in the Purchase Agreement.
6

--------------------------------------------------------------------------------

SCHEDULE 1.2(b)
TO
SECURITIES PURCHASE AGREEMENT

Initial Subscription Amount; Warrant Amount

Party
 
 
Initial Subscription Amount
   
Warrant Amount
 
Cleveland Capital
 
$
150,000
     
153,061
 
Prescott Group
 
$
1,500,000
     
1,530,612
 
Total:
 
$
1,650,000
     
1,683,673
 

--------------------------------------------------------------------------------

SCHEDULE 3.5(a)(i)
TO
SECURITIES PURCHASE AGREEMENT

Capitalization of the Company – Authorized Capital Stock (pre-Closing)
 

1. Common Stock, $0.01 par value; authorized 40,000,000 shares.

 

2. Preferred Stock, $0.01 par value; authorized 3,000,000 shares

--------------------------------------------------------------------------------

SCHEDULE 3.5(a)(ii)
TO
SECURITIES PURCHASE AGREEMENT

Capitalization of the Company – Issued Capital Stock (pre-Closing)

1. Common Stock, $0.01 par value; issued 15,838,879 shares.

 

2. Preferred Stock, $0.01 par value; no shares issued.

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SCHEDULE 3.5(b)
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SECURITIES PURCHASE AGREEMENT

Outstanding Warrants, Options, Rights, Agreements, etc.

1. Outstanding Options – Common Stock – 919,000 shares.

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SCHEDULE 3.11
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SECURITIES PURCHASE AGREEMENT

Changes

None.

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SCHEDULE 3.14
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SECURITIES PURCHASE AGREEMENT

Title to Assets, Properties and Rights

None.

 

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