Exhibit 10.4

 

NOTE PURCHASE AGREEMENT

 

NOTE PURCHASE AGREEMENT (the "Agreement"), dated as of March [●], 2020, by and
among Genius Brands International, Inc., a Nevada corporation with offices
located at 190 N. Canon Drive, 4th Fl., Beverly Hills, CA 90210 (the "Company")
and the investor signatory hereto (the "Investor").

 

WHEREAS:

 

A.    Concurrently herewith, the Company, the Investor and certain other
investors (the "Other Investors", and together with the Investor, the
"Investors") have entered into that certain Securities Purchase Agreement, dated
March 11, 2020, pursuant to which, among other things, the Investors shall
acquire certain senior secured convertible notes (the "Notes) of the Company
(the "Securities Purchase Agreement").

 

B.     The Company and the Investor are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Section
4(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"), as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the 1933 Act.

 

C.     The Investor has authorized the issuance of a new secured promissory
Investor Note in substantially the form attached hereto as Exhibit A, pursuant
to the terms set forth herein (collectively, the "Investor Note").

 

D.    The Investor wishes to purchase Notes from the Company pursuant to the
Securities Purchase Agreement and to issue the Investor Note in full
satisfaction of the Note Purchase Price (as defined in the Securities Purchase
Agreement), and the Company wishes to (x) sell Notes to the Investor, (y)
acquire the Investor Note in full satisfaction of the Note Purchase Price and
(z) pledge the Investor Note to the Investor as collateral for its obligations
under the Notes.

 

E.     The Investor Note will be secured by a first priority security interest
in certain Eligible Assets (as defined in the Investor Note) (collectively, the
"Collateral") held in one or more collateral accounts of the Investor described
in the Investor Note (the "Collateral Account").

 

F.      Concurrently herewith, each of the Company and the Investor are entering
into that certain Master Netting Agreement, in substantially the form attached
hereto as Exhibit B (the "Master Netting Agreement"), to provide further
clarification of the Investor's right (but not, in the case of Investor only,
its obligation) to Net (as defined below) certain Obligations (as defined in the
Master Netting Agreement) arising under and across this Agreement, the Investor
Note, the Notes and the Securities Purchase Agreement (collectively, the
"Underlying Agreements") and to treat the Master Netting Agreement, this
Agreement and the other Underlying Agreements as a single agreement for the
purposes set forth herein and this Agreement and the Securities Purchase
Agreement each as a "securities contract" (11 U.S.C. § 741), or other similar
agreements.

 

 

 

 

 1 

 

 

NOW, THEREFORE, the Company and the Investor hereby agree as follows:

 

1.                  PURCHASE AND SALE OF INVESTOR NOTE.

 

(a)               Investor Note. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 5 and 6 below, the Investor agrees to issue and
sell to the Company, and the Company agrees to purchase from the Investor on the
Closing Date (as defined below), such aggregate principal amount of Investor
Note as is set forth on the signature page of the Investor attached hereto in
full satisfaction of the Note Purchase Price under the Securities Purchase
Agreement (the "Closing").

 

(b)               Closing. The Closing of the purchase of the Investor Note by
the Company shall occur at the offices of Ellenoff Grossman & Schole LLP, 1345
Avenue of the Americas, New York, New York 10105. The date and time of the
Closing (the "Closing Date") shall be 10:00 a.m., New York time, on the first
(1st) Business Day on which the conditions to the Closing set forth in Sections
5 and 6 below are satisfied or waived (or such other date or time as is mutually
agreed to by the Company and the Investor). The Closing may also be undertaken
remotely by electronic transfer of Closing documentation. As used herein
"Business Day" means any day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to
remain closed.

 

(c)               Delivery of Investor Note in Satisfaction of Note Purchase
Price; Securities Contract; Netting Safe Harbor. On the Closing Date, the
Investor shall duly execute the Investor Note, registered in the name of the
Company, in full satisfaction of the Note Purchase Price pursuant to the
Securities Purchase Agreement, and, in accordance with the instructions of the
Company in the Flow of Funds Letter (as defined in the Securities Purchase
Agreement), the Investor shall maintain physical possession of the Investor Note
as Collateral (as defined in the Note) securing the Note. For the avoidance of
doubt, the Investor Note is deemed simultaneously delivered (x) by the Investor
to the Company at the Closing hereunder and (y) delivered by the Company to the
Investor at the Closing (as defined in the Securities Purchase Agreement) under
the Securities Purchase Agreement, as Collateral for the Note purchased by the
Investor thereunder. Other than the issuance of the Note to the Investor
pursuant to the Securities Purchase Agreement, the Company shall not be required
to pay any additional consideration for the issuance of the Investor Note
hereunder. The Company hereby acknowledges and agrees that the rights and
obligations of the Investor under the Master Netting Agreement, hereunder and
under the other Underlying Agreements and the rights and obligations of the
Company under the Master Netting Agreement, hereunder and under the other
Underlying Agreements arise in a single integrated transaction and constitute
related and interdependent obligations within such transaction. The Company and
the Investor hereby acknowledge and agree that this Agreement and the Securities
Purchase Agreement each is a "securities contract" as defined in 11 U.S.C. § 741
and that Investor shall have all rights in respect of the Master Netting
Agreement, this Agreement and the other Underlying Agreements as are set forth
in 11 U.S.C. § 555 and 11 U.S.C. § 362(b)(6), including, without limitation, all
rights of credit, deduction, setoff, offset, recoupment, and netting
(collectively, "Netting" or "Net") as are available under the Master Netting
Agreement, this Agreement and the other Underlying Agreements, and all Netting
provisions of the Note, the Master Netting Agreement and the Investor Note,
including without limitation the provisions set forth in Section 7 of the
Investor Note, are hereby incorporated in this Agreement and made a part hereof
as if such provisions were set forth herein.

 

 

 2 

 

 

2.                  COMPANY'S REPRESENTATIONS AND WARRANTIES.

 

The Company represents and warrants, as of the date hereof and as of the Closing
Date in which the Company is purchasing the Investor Note hereunder, that:

 

(a)               No Sale or Distribution. The Company is acquiring the Investor
Note for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof. The Company does not
presently have any agreement or understanding, directly or indirectly, with any
Person (as defined in the Securities Purchase Agreement) to distribute any of
the Investor Note.

 

(b)               Sophisticated Investor. The Company is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D), and has such
knowledge and experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Investor Note.

 

(c)               Reliance on Exemptions. The Company understands that the
Investor Note is being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Investor is relying in part upon the truth and accuracy of,
and the Company's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Company set forth herein in order to
determine the availability of such exemptions and the eligibility of the Company
to acquire the Investor Note.

 

(d)               Information. The Company and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Investor and materials relating to the offer and sale of the Investor
Note that have been requested by the Company. The Company and its advisors, if
any, have been afforded the opportunity to ask questions of the Investor.
Neither such inquiries nor any other due diligence investigations conducted by
the Company or its advisors, if any, or its representatives shall modify, amend
or affect the Company's right to rely on the Investor's representations and
warranties contained herein. The Company understands that its investment in the
Investor Note involves a high degree of risk. The Company has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Investor
Note.

 

(e)               No Governmental Review. The Company understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Investor Note or
the fairness or suitability of the investment in the Investor Note nor have such
authorities passed upon or endorsed the merits of the offering of the Investor
Note.

 

(f)                Transfer or Resale. The Company understands that: (i) the
Investor Note has not been and is not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred without the consent of the Investor (and any Prohibited Transfer (as
defined in the Investor Note) shall be subject to certain recoupment rights and
netting against the Note to be issued to the Investor concurrently with the
Closing hereunder) and (ii) neither the Investor nor any other Person is under
any obligation to register the Investor Note under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.

 

 

 

 3 

 

 

(g)               Legends. The Company understands that the certificates or
other instruments representing the Investor Note shall bear any legend required
by the "blue sky" laws of any state and a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
such stock certificates):

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
SUCH STATE SECURITIES LAWS, OR AN EXEMPTION FROM REGISTRATION THEREUNDER, IN
EACH CASE, TO THE EXTENT APPLICABLE HERETO.

 

3.                  REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.

 

The Investor represents and warrants to the Company as of the date hereof and as
of the Closing Date as follows:

 

(a)               Authorization; Enforcement; Validity. The Investor has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and the Investor Note and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") and to issue the Investor Note in accordance with the terms hereof
and thereof. The execution and delivery of the Transaction Documents by the
Investor and the consummation by the Investor of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the Investor
Note has been duly authorized by the Investor's board of directors, investment
manager or other governing body and no further filing, consent, or authorization
is required by the Investor. This Agreement and the other Transaction Documents
have been duly executed and delivered by the Investor, and constitute the legal,
valid and binding obligations of the Investor, enforceable against the Investor
in accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.

 

(b)               Issuance of Investor Note. The issuance of the Investor Note
is duly authorized and upon issuance in accordance with the terms of the
Transaction Documents shall be free from all taxes, liens and charges with
respect to the issue thereof. Assuming the accuracy of each of the
representations and warranties set forth in Section 2 of this Agreement, the
offer and issuance by the Investor of the Investor Note is exempt from
registration under the 1933 Act.

 

 

 

 

 4 

 

 

(c)               No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Investor and the consummation by the Investor of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Investor Note) will not (i) result in a violation of the
Investor's organizational documents or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Investor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including foreign, federal
and state securities laws and regulations) applicable to the Investor or by
which any property or asset of the Investor is bound or affected, except, in the
case of clause (ii) and (iii) above, for such violations, conflicts, breaches,
defaults, losses, terminations of rights thereof, or accelerations which, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
(as defined below). "Material Adverse Effect" means any material adverse effect
on (i) the business, properties, assets, liabilities, operations (including
results thereof) or condition (financial or otherwise) of the Investor, (ii) the
transactions contemplated hereby or in any of the other Transaction Documents or
(iii) the authority or ability of the Company or any of its Subsidiaries (as
defined in the Securities Purchase Agreement) to perform any of their respective
obligations under any of the Transaction Documents.

 

(d)               Consents. The Investor is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any
government, court, regulatory, self-regulatory, administrative agency or
commission or other governmental agency, authority or instrumentality, domestic
or foreign, of competent jurisdiction (a "Governmental Authority") or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof. The Investor is unaware of any facts or
circumstances that might prevent the Investor from obtaining or effecting any of
the registration, application or filings pursuant to the preceding sentence.

 

(e)               No General Solicitation. The Investor has not engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Investor Note.

 

(f)                No Integrated Offering. Neither the Investor nor any Person
acting on its behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under circumstances
that would require registration of the issuance of the Investor Note under the
1933 Act, whether through integration with prior offerings or otherwise. Neither
the Investor nor any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of the
issuance of any of the Investor Note under the 1933 Act.

 

(g)               Sufficient Collateral. As of the Closing Date the bank and/or
brokerage account(s) described on Schedule I to the Investor Note, which
Collateral secures the Investor Note in accordance therewith, contains at least
the Note Purchase Price of Eligible Assets as of the Closing Date.

 

(h)               Full Recourse. The Investor Note is a full recourse obligation
of the Investor.

 

 

 

 

 5 

 

 

4.                  COVENANTS.

 

(a)               Reasonable Best Efforts. Each party shall use its reasonable
best efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 5 and 6 of this Agreement.

 

(b)               Fees. The Company shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or broker's commissions
relating to or arising out of the transactions contemplated hereby. The Company
shall pay, and hold the Investor harmless against, any liability, loss or
expense (including, without limitation, reasonable attorney's fees and
out-of-pocket expenses) arising in connection with any claim relating to any
such payment. Except as otherwise set forth in the Transaction Documents or the
Securities Purchase Agreement, each party to this Agreement shall bear its own
expenses in connection with the sale of the Investor Note to the Investors.

 

(c)               Taxes. The Company will pay, and save and hold the Investor
harmless from any and all liabilities (including interest and penalties) with
respect to, or resulting from any delay or failure in paying, stamp and other
taxes (other than income taxes), if any, which may be payable or determined to
be payable on the execution and delivery or acquisition of the Investor Note.

 

5.                  CONDITIONS TO THE INVESTOR'S OBLIGATION TO SELL. The
obligation of the Investor hereunder to issue and sell the Investor Note to the
Company at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Investor's sole benefit and may be waived by the Investor at any time in
its sole discretion by providing the Company with prior written notice thereof:

 

(a)               The Company shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Investor.

 

(b)               All conditions to the Investor's closing of the transactions
contemplated by the Securities Purchase Agreement shall have been satisfied
(except for such conditions waived in writing by the Investor) and the Investor
Note is being issued hereunder in full satisfaction of the Note Purchase Price.

 

(c)               The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such specified date), and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.

 

6.                  CONDITIONS TO THE COMPANY'S OBLIGATION TO PURCHASE. The
obligation of the Company hereunder to purchase the Investor Note at the Closing
in satisfaction, in full, of the Note Purchase Price is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
the Investor with prior written notice thereof:

 

 

 6 

 

 

(a)               The Investor shall have (A) duly executed and delivered to the
Company (A) each of the Transaction Documents (to the extent contemplated to be
executed by the Investor pursuant to its terms) and (B) duly executed the
Investor Note.

 

(b)               All conditions to the Company's closing of the transactions
contemplated by the Securities Purchase Agreement shall have been satisfied
(except for such conditions waived in writing by the Company) and the Investor
Note is being issued hereunder in full satisfaction of the Note Purchase Price.

 

(c)               The representations and warranties of the Investor shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such specified date), and the Investor shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Investor at or prior to the Closing Date.

 

(d)               The Investor shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale of the
Investor Note.

 

7.                  TERMINATION.

 

In the event that the Closing shall not have occurred on or prior to the
termination of the Securities Purchase Agreement, this Agreement shall
automatically terminate.

 

8.                  MISCELLANEOUS.

 

(a)               Governing Law; Jurisdiction; Jury Trial.

 

All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

 

 7 

 

 

(b)               Counterparts.

 

This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party. In the event that any signature is delivered by facsimile transmission or
by an e-mail which contains a portable document format (.pdf) file of an
executed signature page, such signature page shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such signature page were an
original thereof.

 

(c)               Headings; Gender.

 

The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement. Unless the
context clearly indicates otherwise, each pronoun herein shall be deemed to
include the masculine, feminine, neuter, singular and plural forms thereof. The
terms "including," "includes," "include" and words of like import shall be
construed broadly as if followed by the words "without limitation." The terms
"herein," "hereunder," "hereof" and words of like import refer to this entire
Agreement instead of just the provision in which they are found.

 

(d)               Severability.

 

If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

 

(e)               Entire Agreement; Amendments.

 

This Agreement, the Securities Purchase Agreement, the other Transaction
Documents (as defined herein) and the Transaction Documents (as defined in the
Securities Purchase Agreement) and the schedules and exhibits attached hereto
and thereto and the instruments referenced herein and therein supersede all
other prior oral or written agreements between the Investors, the Company, its
Subsidiaries, their affiliates and Persons acting on their behalf solely with
respect to the matters contained herein and therein, and this Agreement, the
other Transaction Documents (as defined herein) and the Transaction Documents
(as defined in the Securities Purchase Agreement), the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
contain the entire understanding of the parties solely with respect to the
matters covered herein and therein. For clarification purposes, the Recitals are
part of this Agreement. No provision of this Agreement may be amended or waived
other than by an instrument in writing signed by the Company, the Investor and
the Required Holders.

 

 

 

 8 

 

 

(f)                Notices.

 

Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Agreement shall be governed by the provisions
of Section 9(f) of the Securities Purchase Agreement.

 

(g)               Successors and Assigns.

 

This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. No party may assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
other party.

 

(h)               No Third Party Beneficiaries.

 

This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person.

 

(i)                 Survival.

 

The representations, warranties, agreements and covenants shall survive each
Closing. The Investor shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.

 

(j)                 Further Assurances.

 

Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

 

(k)               Construction.

 

The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction
will be applied against any party.

 

[Signature Page Follows]

 

 

 

 9 

 

 

 

IN WITNESS WHEREOF, the Investor and the Company have caused their respective
signature page to this Note Purchase Agreement to be duly executed as of the
date first written above.

 

 

COMPANY:

 

 

GENIUS BRANDS INTERNATIONAL, INC.

          By: ____________________________   Name:   Title:

 

 

 

 

 

 

 

 

 

 

 

 

 10 

 

 

IN WITNESS WHEREOF, the Investor and the Company have caused their respective
signature page to this Note Purchase Agreement to be duly executed as of the
date first written above.

 

 

INVESTORS:

 

 

[INVESTOR]

          By: ___________________________   Name:   Title:       Aggregate
Principal Amount of Investor Note:

$_____________________________

 

 

 

 

 

 11