Exhibit 99.1
GENIUS PRODUCTS,
INC.
NOTE AND WARRANT PURCHASE
AGREEMENT
THIS NOTE AND WARRANT PURCHASE
AGREEMENT (this “ Agreement ”) is made as of
October 4, 2005 by and among Genius Products, Inc., a Delaware
corporation (the “ Company ”), and the investors
listed on Exhibit A hereto, each of which is herein referred
to as an “ Investor ”.
THE PARTIES HEREBY AGREE AS
FOLLOWS:
SECTION 1
AMOUNT AND TERMS OF NOTES;
ISSUANCE OF WARRANTS
1.1 The Borrowing . Subject
to the terms and conditions of this Agreement, at each Closing (as
defined below), the Company shall borrow from each Investor
participating in such Closing, and each Investor participating in
such Closing shall loan to the Company, an amount equal to the Note
Amount with respect to such Closing set forth opposite such
Investor’s name on Exhibit A attached
hereto.
1.2 Issuance of Notes . All
indebtedness incurred by the Company pursuant to this Agreement
shall be evidenced by promissory notes (the “ Notes
”) in the form of Exhibit B attached hereto. From time
to time upon the funding of indebtedness hereunder, corresponding
Notes shall be completed by the Company with the name of the
respective Investor, the principal amount evidenced by such Note
and the date that the principal amount under such Note was loaned
to the Company, and each such Note shall be a binding obligation of
the Company upon execution thereof by the Company and delivery to
such Investor.
1.3 Issuance of Warrants .
Subject to the terms and conditions of this Agreement, at each
Closing, the Company shall issue to each Investor that has loaned
money to the Company a warrant in the form of Exhibit C
attached hereto (the “ Warrant ”). The Warrant
shall represent the right of each Investor to purchase up to that
number of shares of common stock, $0.0001 par value per share (the
“ Common Stock ”), of the Company (as adjusted
for stock splits, recapitalizations or other similar events) set
forth under the column “Number of Warrant Shares” set
forth opposite such Investor’s name on Exhibit A
attached hereto. The Warrant shall, unless sooner termination as
provided therein, have a term of five (5) years from the date
of issuance and shall be exercisable at an exercise price (subject
to adjustment as set forth in the Warrant) equal to the Closing
Price (as such term is defined in the Warrant) on the applicable
Closing Date.
SECTION 2
CLOSINGS
2.1 Initial Closing . The
initial closing of the funding of indebtedness hereunder and the
initial issuance of the corresponding Notes (the “ Initial
Closing ”) shall be held on the initial
date of execution of this Agreement or on such
other date as the Company and Investors loaning at least a majority
of the aggregate amount of indebtedness incurred by the Company at
the Initial Closing mutually agree upon orally or in
writing.
2.2 Subsequent Closings .
Subsequent to the Initial Closing, the Company may incur additional
indebtedness hereunder which, when combined with the indebtedness
incurred at the Initial Closing, will result in aggregate
indebtedness under this Agreement of no more than $8.0 million in
indebtedness to such additional investors as it shall select. Any
such additional investor shall execute and deliver a counterpart
signature page to this Agreement and thereby become a party to, and
be deemed an Investor under, this Agreement. All additional
Investors and all additional indebtedness incurred hereunder shall
be reflected on Exhibit A , which shall be automatically
amended without any further action by any party hereto. The closing
of the funding of such additional indebtedness hereunder and the
issuance of the corresponding Notes shall be held on such date or
at such other place as the Company and Investors loaning at least a
majority of the aggregate amount of indebtedness incurred by the
Company at such closing mutually agree upon orally or in writing
(which each such date and place, together with the Initial Closing,
are designated as a “ Closing ”).
2.3 Delivery . At each
Closing (i) each Investor participating in such Closing shall
deliver to the Company a wire transfer of immediately available
funds in the amount of such Investor’s Note Amount with
respect to such Closing set forth opposite such Investor’s
name on Exhibit A attached hereto; (ii) the Company
shall deliver to each such Investor a corresponding Note in the
principal amount of such Investor’s Note Amount and a Warrant
to purchase that number of shares of Common Stock set forth
opposite such Investor’s name under the column “Number
of Warrant Shares” on Exhibit A attached hereto
and (iii) each Investor shall execute and deliver the
registration rights agreement in the form of Exhibit D
attached hereto (the “ Registration Rights Agreement
”) to the extent not already a party thereto.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF
INVESTORS
Each Investor hereby represents,
warrants and covenants to the Company as follows:
3.1 Purchase for Own Account
. Such Investor represents that it is acquiring the Notes, the
Warrants, the Common Stock issuable upon conversion of the Notes
(if any), and the Common Stock issuable upon exercise of the
Warrants (collectively, the “ Securities ”)
solely for investment for such Investor’s own account not as
a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or
otherwise distributing the same. The acquisition by such Investor
of any of the Securities shall constitute confirmation of the
representation by such Investor that such Investor does not have
any contract, undertaking, agreement or arrangement with any person
to sell, transfer or grant participations to such person or to any
third person, with respect to any of the Securities.
2
3.2 Disclosure of Information
. Such Investor has received all the information it considers
necessary or appropriate for deciding whether to acquire the
Securities. Such Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the
Securities and the business, properties, prospects and financial
condition of the Company.
3.3 Investment Experience .
Such Investor represents that it is an investor in private
placements of securities and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that
it is capable of evaluating the merits and risks of the investment
in the Securities. If other than an individual, such Investor also
represents it has not been organized for the purpose of acquiring
the Securities. Such Investor acknowledges that any investment in
the Securities involves a high degree of risk, and represents that
it is able, without materially impairing its financial condition,
to hold the Securities for an indefinite period of time and to
suffer a complete loss of its investment.
3.4 Accredited Investor .
Such Investor represents that it is an “accredited
investor” within the meaning of Securities and Exchange
Commission (“ SEC ”) Rule 501 of Regulation D,
as presently in effect.
3.5 Further Limitations on
Disposition . Without in any way limiting the representations
set forth above, such Investor further agrees not to make any
disposition of all or any portion of the Securities unless and
until the transferee has agreed in writing for the benefit of the
Company to be bound by this Section 3 and:
(a) there is then in effect a
registration statement under the Securities Act of 1933, as amended
(the “ Act ”), covering such proposed
disposition and such disposition is made in accordance with such
registration statement; or
(b) (i) such Investor shall
have notified the Company of the proposed disposition and shall
have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition and (ii) if
reasonably requested by the Company, such Investor shall have
furnished the Company with an opinion of counsel reasonably
satisfactory to the Company that such disposition will not require
registration of such shares under the Act.
(c) Notwithstanding the provisions
of paragraphs (a) and (b) above, no such registration
statement or opinion of counsel shall be necessary for a transfer
by an Investor that is a partnership or limited liability company
to a partner of such partnership or a member of such limited
liability company or a retired partner of such partnership who
retires after the date hereof or a retired member of such limited
liability com
