UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 8-K


CURRENT REPORT


Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported)   October 18, 2013


SOCIAL REALITY, INC.

(Exact name of registrant as specified in its charter)


Delaware

000-54996

42-2925231

(State or other jurisdiction of
incorporation or organization)

(Commission File Number)

(I.R.S. Employer
Identification No.)


456 Seaton Street, Los Angeles, CA   90013

(Address of principal executive offices)(Zip Code)


Registrant's telephone number, including area code :   (323) 601-1145


not applicable

(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):


o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 






Item 3.02

Unregistered Sales of Equity Securities.


In furtherance to our private offering disclosed in our Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 15, 2013, on October 18, 2013 Social Reality, Inc. sold an aggregate of 1,910,000 units of its securities to seven accredited investors in a private placement exempt from registration under the Securities Act of 1933, as amended, in reliance on exemptions provided by Section 4(a)(2) and Rule 506(b) of Regulation D.  The units consisted of one share of our Class A common stock and one three year Class A Common Stock Purchase Warrant to purchase 0.5 shares of our Class A common stock as further described in our earlier Current Report on Form 8-K. We received gross cash proceeds of $955,000.  T.R. Winston & Company, LLC, a broker-dealer and member of FINRA, acted as placement agent for us.  In lieu of a 10% cash commission and a 2% cash non-accountable expense allowance otherwise payable to the placement agent for these sales, we issued it 212,060 units which are identical to the units sold to the investors in the offering.  We also agreed to issue it three year placement agent warrants to purchase 212,206 of our Class A common stock at an exercise price of $1.00 per share as additional compensation.  We are using the net proceeds for general working capital.


Item 9.01

Financial Statements and Exhibits.


(d)

Exhibits


Exhibit No.

 

Description

 

 

 

4.4

 

Form of Class A Common Stock Purchase Warrant.

10.12

 

Form of subscription agreement

10.13

 

Transaction Fee Agreement dated September 30, 2013 by and between Social Reality, Inc. and T.R. Winston & Company, LLC




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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

SOCIAL REALITY, INC.

 

 

 

Date:  October 24, 2013

By:

/s/ Chris Miglino

 

 

Chris Miglino, Chief Executive Officer










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EXHIBIT 4.4


FORM OF CLASS A COMMON STOCK PURCHASE WARRANT


THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT (i) EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, OR (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES.


[•], 2013

No. W-__


SOCIAL REALITY INC.


FORM OF CLASS A COMMON STOCK PURCHASE WARRANT

This certifies that, for good and valuable consideration, receipt of which is hereby acknowledged, [•] (“ Holder ”) is entitled to purchase, subject to the terms and conditions of this Warrant, from Social Reality Inc., a Delaware corporation (the “ Company ”), [•] fully paid and nonassessable shares of the Company’s Class A Common Stock, par value $0.001 per share (“ Class A Common ”).  Holder shall be entitled to purchase the shares of Class A Common in accordance with Section 2 at any time subsequent to the date of this Warrant set forth above and prior to the Expiration Date (as defined below).  The shares of Class A Common of the Company for which this Warrant is exercisable, as adjusted from time to time pursuant to the terms hereof, are hereinafter referred to as the “ Shares .”  This Warrant is one of a series of Warrants included in the Units issued and sold pursuant to the terms and conditions of the Company’s Confidential Private Placement Memorandum dated October 3, 2013 (the “ Memorandum ”), as may be supplemented from time to time.  


1.

Exercise Period; Price .  


1.1

Exercise Period .  This Warrant shall be immediately exercisable and the exercise period (“ Exercise Period ”) shall terminate at 5:00 p.m. Pacific time on [•] , 2016 (the “ Expiration Date ”).


1.2

Exercise Price .  The initial purchase price for each of the Shares shall be $1.00 per share.  Such price shall be subject to adjustment pursuant to the terms hereof (such price, as adjusted from time to time, is hereinafter referred to as the “ Exercise Price ”).


2.

Exercise and Payment .  


2.1

At any time after the date of this Warrant, this Warrant may be exercised, in whole or in part, from time to time by the Holder, during the term hereof, by surrender of this Warrant and the Notice of Exercise attached hereto as Annex I , duly completed and executed by the Holder, to the Company at the principal executive offices of the Company, together with payment in the amount obtained by multiplying the Exercise Price then in effect by the number of Shares thereby purchased, as designated in the Notice of Exercise.  Payment may be in cash, wire transfer or by check payable to the order of the Company in immediately available funds.  If not exercised in full, this Warrant must be exercised for a whole number of Shares.





2.2

If (a) the Company shall have failed to timely file the registration statement described in Section 3 hereof, or (b) such registration statement is not declared effective by the Securities and Exchange Commission (“ SEC ”) within ninety (90) days of its filing date, or (c) at any time thereafter during the Exercise Period there is not an effective registration statement registering the Shares, or the prospectus contained therein is not available for the issuance of the Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:


(A) = the average of the closing sale prices for the five (5) trading days immediately prior to (but not including) the exercise date;


(B) = the Exercise Price of this Warrant, as adjusted hereunder; and


(X) = the number of Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.


For purposes of Rule 144 promulgated under the Securities Act of 1933, as amended (the “ Act ”), it is intended, understood and acknowledged that the Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Memorandum (provided the SEC continues to take the position that such treatment is proper at the time of such exercise).


2.3

The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  When used in this paragraph, “ Affiliates ” of the Holder means any entity which directly or indirectly controls or is controlled by the Holder and “ Persons ” means any individual, partnership, limited liability company, limited liability partnership, corporation, trust, joint venture, joint stock company, or other entity.  For purposes of the foregoing sentence, the number of shares of Class A Common beneficially owned by the Holder and its Affiliates shall include the number of shares of Class A Common issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Class A Common which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Class A Common Equivalents, as hereinafter defined, subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2.3, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.  To the extent that the limitation contained in this Section 2.3 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this



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Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2.3, in determining the number of outstanding shares of Class A Common, a Holder may rely on the number of outstanding shares of Class A Common as reflected in (a) the Company’s most recent periodic or annual report filed with the SEC, as the case may be, (b) a more recent public announcement by the Company or (c) a more recent written notice by the Company setting forth the number of shares of Class A Common outstanding.  Upon the written request of a Holder, the Company shall within two (2) trading days confirm orally and in writing to the Holder the number of shares of Class A Common then outstanding.  In any case, the number of outstanding shares of Class A Common shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Class A Common was reported.  The “ Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the Class A Common outstanding immediately after giving effect to the issuance of shares of Class A Common issuable upon exercise of this Warrant.  The Holder, upon not less than sixty-one (61) days prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2.3, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Class A Common outstanding immediately after giving effect to the issuance of shares of Class A Common upon exercise of this Warrant held by the Holder and the provisions of this Section 2.3 shall continue to apply.  Any such increase or decrease will not be effective until the sixty-first (61 st ) day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2.3 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.  The limitations contained in this paragraph shall apply to a successor holder of this Warrant.


3.

Registration Rights .  


3.1

No later than sixty (60) days following the final Closing (the “ Filing Deadline ”), the Company will file a registration statement with the SEC to register the resale of the Shares by the Purchaser so as to permit the public resale thereof (the “ Resale Registration Statement ”).  The Company will use its reasonable efforts to ensure that such Resale Registration Statement is declared effective by the SEC within ninety (90) days of the Filing Deadline.  If (i) the Company should fail to file the Resale Registration Statement by the Filing Deadline, or (ii) it is not declared effective within ninety (90) days of the Filing Deadline, then within five (5) business says of the end of month the Company shall pay the Purchaser an amount in cash, as partial liquidated damages, equal to two percent (2%) of the aggregate purchase price paid by such Purchaser for each 30 days, or portion thereof, until the earlier of the date the deficiency is cured or the expiration of six (6) months from Filing Deadline (the “ Penalty ”).  


3.2

No Purchaser shall be entitled to a payment pursuant to this Section 3 if effectiveness of the Resale Registration Statement has been delayed or a prospectus has been unavailable as a result of (i) a failure by such Purchaser to promptly provide on request by the Company the information required under the Subscription Agreement which is part of the Memorandum (the “ Subscription Agreement ”) or requested by the SEC as a condition to effectiveness of the Resale Registration Statement; (ii) the provision of inaccurate or incomplete information by such Purchaser; or (iii) a statement or determination of the SEC that any provision of the rights of the Purchaser under the Subscription Agreement are contrary to the provisions of the Securities Act.  



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3.3

Notwithstanding any other provision of this Warrant, if any (i) any publicly-available written guidance, or rule of general applicability of the SEC staff, or (ii) oral or written comments, requirements or requests of the SEC staff to the Company in connection with the review of the Resale Registration Statement sets forth a limitation on the number of Shares to be registered in the Resale Registration Statement (the “ SEC Guidance ”) (and the Company has used its best efforts to advocate with the SEC for the registration of all or the maximum number of Shares), the number of Shares to be registered on such Resale Registration Statement will be reduced on a pro rata basis among the purchasers of Warrants issued and sold pursuant to the Memorandum based on the total number of Shares underlying Warrants held by such purchasers.  The Company shall not be liable for a Penalty to any Shares which are not permitted by the SEC to be included in the Resale Registration Statement due solely to SEC Guidance from time to time. In such case, any Penalty payable under Section 3 shall be calculated to apply only to the percentage of Shares which are permitted in accordance with SEC Guidance to be included in such Resale Registration Statement.


4.

Company’s Right to Call this Warrant .  Subject to the terms and conditions set forth herein, and providing that there is an effective registration statement registering the shares of Class A Common issuable upon exercise of this Warrant, during the Exercise Period, upon twenty (20) days prior written notice to the Holder (each, a “ Call Notice ”) following the date on which the last sale price of the Company’s Class A Common equals or exceeds $2.50 per share for twenty (20) consecutive trading days, as may be adjusted for stock splits, stock dividends and similar corporate events, and the daily average minimum volume of the Class A Common during those twenty (20) trading days is at least 100,000 shares, the Company shall have the right to call any or all of the Warrants at a call price of $0.001 per underlying Share (the " Call Price ").  Warrant holders shall have the period from the date of the Call Notice until 5 p.m., Pacific time, on the twentieth (20th) day following the Call Notice (the " Call Date ") to exercise the Warrant pursuant to the terms hereof.  Any Warrants which have been called but remain unexercised by the Call Date shall automatically terminate and no longer entitle the Holder to exercise such Warrant or to receive any consideration therefor, other than the Call Price.  For any Warrants which are not exercised by the Call Date, the Company shall promptly as possible following the Call Date pay the Call Price to the Holder of any Warrants which have been called and not exercised.


5.

Reservation of Shares .  The Company hereby agrees that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of shares of Class A Common or other shares of capital stock of the Company from time to time issuable upon exercise of this Warrant .  All such shares shall be duly authorized, and when issued upon such exercise, shall be validly issued, fully paid and non-assessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights.


6.

Delivery of Stock Certificates .  Within three (3) trading days after exercise, in whole or in part, of this Warrant, the Company shall issue in the name of and deliver to the Holder a certificate or certificates for the number of fully paid and nonassessable Shares which the Holder shall have requested in the Notice of Exercise.  If this Warrant is exercised in part, the Company shall deliver to the Holder a new Warrant (dated the date hereof and of like tenor) for the unexercised portion of this Warrant at the time of delivery of such stock certificate or certificates.  In lieu of delivering physical certificates representing the Shares issuable upon exercise of this Warrant, provided the Company is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (FAST) program, upon request of the Holder in the Notice of Exercise, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Shares issuable upon exercise to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.




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7.

No Fractional Shares .  This Warrant must be exercised for a whole number of Shares.  No fractional shares or scrip representing fractional Shares will be issued upon exercise of this Warrant.  Any fractional Share which otherwise might be issuable on the exercise of this Warrant as a result of the anti-dilution provisions Section 11 hereof will be rounded up to the nearest whole Share.


8.

Charges, Taxes and Expenses .  The Company shall pay all transfer taxes or other incidental charges, if any, in connection with the transfer of the Shares purchased pursuant to the exercise hereof from the Company to the Holder.


9.

Loss, Theft, Destruction or Mutilation of Warrant .  Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.


10.

Saturdays, Sundays, Holidays, Etc .  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding weekday which is not a legal holiday.


11.

Adjustment of Exercise Price and Number of Shares .  The Exercise Price and the number of and kind of securities purchasable upon exercise of this Warrant shall be subject to adjustment from time to time as follows:


11.1

Subdivisions, Combinations and Other Issuances .  If the Company shall at any time after the date hereof but prior to the expiration of this Warrant subdivide its outstanding securities as to which purchase rights under this Warrant exist, by split-up or otherwise, or combine its outstanding securities as to which purchase rights under this Warrant exist, the number of Shares as to which this Warrant is exercisable as of the date of such subdivision, split-up or combination shall forthwith be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to the Exercise Price, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant as of such date shall remain the same.


11.2

Stock Dividend .  If at any time after the date hereof the Company declares a dividend or other distribution on Class A Common payable in Class A Common or other securities or rights convertible into Class A Common (“ Class A Common Equivalents ”) without payment of any consideration by such holder for the additional shares of Class A Common or the Class A Common Equivalents (including the additional shares of Class A Common issuable upon exercise or conversion thereof), then the number of shares of Class A Common for which this Warrant may be exercised shall be increased as of the record date (or the date of such dividend distribution if no record date is set) for determining which holders of Class A Common shall be entitled to receive such dividend, in proportion to the increase in the number of outstanding shares (and shares of Class A Common issuable upon conversion of all such securities convertible into Class A Common) of Class A Common as a result of such dividend, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all the Shares issuable hereunder immediately after the record date (or on the date of such distribution, if applicable), for such dividend shall equal the aggregate amount so payable immediately before such record date (or on the date of such distribution, if applicable).




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11.3

Other Distributions .  If at any time after the date hereof the Company distributes to holders of its Class A Common, other than as part of its dissolution or liquidation or the winding up of its affairs, any shares of its capital stock, any evidence of indebtedness or any of its assets (other than cash, Class A Common or Class A Common Equivalents), then the Company may, at its option, either (i) decrease the Exercise Price of this Warrant by an appropriate amount based upon the value distributed on each share of Class A Common as determined in good faith by the Company’s Board of Directors, or (ii) provide by resolution of the Company’s Board of Directors that on exercise of this Warrant, the Holder hereof shall thereafter be entitled to receive, in addition to the shares of Class A Common otherwise receivable on exercise hereof, the number of shares or other securities or property which would have been received had this Warrant at the time been exercised.


11.4

Effect of Consolidation, Merger or Sale .  In case of any reclassification, capital reorganization, or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of any subdivision, combination, stock dividend or other distribution provided for in Sections 11.1 , 11.2 and 11.3 above), or in case of any consolidation or merger of the Company with or into any corporation (other than a consolidation or merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (in form and substance satisfactory to the holder of this Warrant), or the Company shall make appropriate provision without the issuance of a new Warrant, so that the holder of this Warrant shall have the right to receive, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the Shares theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, capital reorganization, change, merger or sale by a holder of the number of Shares then purchasable under this Warrant.  In any such case, appropriate provisions shall be made with respect to the rights and interest of Holder so that the provisions hereof shall thereafter be applicable to any shares of stock or other securities and property deliverable upon exercise hereof, or to any new Warrant delivered pursuant to this Section 11.4 , and appropriate adjustments shall be made to the Exercise Price per share payable hereunder, provided, that the aggregate Exercise Price shall remain the same.  The provisions of this Section 11.4 shall similarly apply to successive reclassifications, capital reorganizations, changes, mergers and transfers.


11.5

Antidilution Rights .  The Exercise Price will be subject to a full ratchet anti-dilution adjustment in the event the Company issues additional equity or equity-linked securities at a purchase price that is less than the Exercise Price within one (1) year from the final Closing, provided, however , no adjustment shall be made for the following:


(a)

any shares of Class A Common, including options therefor (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), issued to employees or directors of, or consultants or advisors to, the Company or any of subsidiary pursuant to a plan, agreement or arrangement approved by its Board of Directors, whether issued before or after the final Closing, provided that any options for such shares that expire or terminate unexercised or any restricted stock repurchased by the Company at cost shall not be counted toward such maximum number unless and until such shares are regranted as new stock grants (or as new options) pursuant to the terms of any such plan, agreement or arrangement;




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(b)

the actual issuance of shares of Class A Common upon the exercise or conversion of securities exercisable or convertible into shares of the Class A Common outstanding on the date of the Memorandum, as well as shares of Class A Common, options or other convertible securities issued as a dividend or distribution on the Class A Common, Class B common stock and/or Series 1 Preferred Stock;


(c)

shares of Class A Common issued pursuant to a stock split or similar reorganization;


(d)

securities issued in connection with a secondary public offering;


(e)

securities issued or issuable pursuant to strategic transactions entered into for primarily non-equity financing purposes approved by the Board of Directors;


(f)

securities issued or issuable pursuant to equipment lease financings or bank credit arrangements entered into for primarily non-equity financing purposes approved by the Board of Directors;


(g)

securities issued or issuable pursuant to an acquisition by the Company of the assets or stock of another entity; or


(h)

any securities or warrants issued to Siskey Industries, LLC for advisory services to the Company.


12.

Notice of Adjustments; Notices .  Whenever the Exercise Price or number of Shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall execute and deliver to the Holder a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of and kind of securities purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the Holder.


13.

Rights As Stockholder; Notice to Holders .  Nothing contained in this Warrant shall be construed as conferring upon the Holder or his or its transferees the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of stockholders for the election of directors of the Company or of any other matter, or any rights whatsoever as stockholders of the Company.  The Company shall give notice to the Holder by registered mail if at any time prior to the expiration or exercise in full of the Warrants, any of the following events shall occur:


(i)

a dissolution, liquidation or winding up of the Company shall be proposed;


(ii)

a capital reorganization or reclassification of the Class A Common (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of any subdivision, combination, stock dividend or other distribution) or any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), or in case of any sale of all or substantially all of the assets of the Company; or


(iii)

a taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) for other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other rights.




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Such giving of notice shall be simultaneous with (or in any event, no later than) the giving of notice to holders of Class A Common.  Such notice shall specify the record date or the date of closing the stock transfer books, as the case may be.  Failure to provide such notice shall not affect the validity of any action contemplated in this Section 13 .


14.

Restricted Securities .  The Holder understands that this Warrant and the Shares purchasable hereunder constitute “ restricted securities ” under the federal securities laws inasmuch as they are, or will be, acquired from the Company in transactions not involving a public offering and accordingly may not, under such laws and applicable regulations, be resold or transferred without registration under the Act, or an applicable exemption from such registration.  The Holder further acknowledges that a securities legend to the foregoing effect shall be placed on any Shares issued to the Holder upon exercise of this Warrant.

15.

Disposition of Shares; Transferability .

15.1

Transfer .  This Warrant shall be transferable only on the books of the Company, upon delivery thereof duly endorsed by the Holder or by its duly authorized attorney or representative, accompanied by proper evidence of succession, assignment or authority to transfer.  Upon any registration of transfer, the Company shall execute and deliver new Warrants to the person entitled thereto.


15.2

Rights, Preferences and Privileges of Class A Common .  The powers, preferences, rights, restrictions and other matters relating to the shares of Class A Common will be as determined in the Company’s Certificate of Incorporation, as amended, as then in effect.


16.

Miscellaneous .

16.1

Binding Effect .  This Warrant and the various rights and obligations arising hereunder shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.


16.2

Entire Agreement .  This Warrant, the Purchase Agreement and the Registration Rights Agreement of even date herewith constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements, whether oral or written, between the parties hereto with respect to the subject matter hereof.


16.3

Amendment and Waiver .  Any term of this Warrant may be amended and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holders representing a majority-in-interest of the shares of  Class A Common underlying the Warrants pursuant to the Purchase Agreement.  Any waiver or amendment effected in accordance with this Section 16.3 shall be binding upon the Holder and the Company.


16.4

Governing Law .  This Agreement shall be governed by and construed under the laws of the State of Delaware without reference to the conflicts of law principles thereof.  The exclusive jurisdiction for any legal suit, action or proceeding arising out of or related to this Warrant shall be either the California State Supreme Court, County of Los Angeles, or in the United States District Court for the Central District of California.


16.5

Headings .  The headings in this Agreement are for convenience only and shall not alter or otherwise affect the meaning hereof.




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16.6

Severability .  If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant and the balance of the Warrant shall be interpreted as if such provision were so excluded and the balance shall be enforceable in accordance with its terms.


16.7

Notices .  Unless otherwise provided, any notice required or permitted under this Warrant shall be given in the same manner as provided in the Agreement.


IN WITNESS WHEREOF , the parties hereto have executed and delivered this Warrant as of the date appearing on the first page of this Warrant.


 

THE COMPANY :

 

 

 

SOCIAL REALITY INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Its:

 

 




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ANNEX I

NOTICE OF EXERCISE

To:

Social Reality Inc.

1.

The undersigned Holder hereby elects to purchase _____________ shares of  Class A common stock, $0.001 par value per share (the “ Shares ”) of Social Reality Inc., a Delaware corporation (the “ Company ”), pursuant to the terms of the attached Warrant.  The Holder shall make payment of the Exercise Price as follows (check one):


¨

Cash Exercise ” under Section 2.1

¨

Cashless Exercise ” under Section 2.2


If the Holder is making a Cash Exercise, the Holder is hereby delivering the sum of $____________, in lawful money of the United States, to the Company in accordance with the terms of the Warrant.


If the Holder is making a Cashless Exercise, the Company shall deliver to the Holder ______________ Warrant Shares in accordance with the terms of the Warrant.


2.

Please issue and deliver certificates representing the Warrant Shares purchased hereunder to Holder:                    , Address :                                  in the following denominations: ____________________________.


Taxpayer ID No.: __________________________________


If delivery of the Warrant Shares is requested via DWAC, please check this box and provide the requested information:


¨

The Company is requested to electronically transmit the Warrant Shares issuable pursuant to this Notice of Exercise to the account of the Holder with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).


Name of DTC Prime Broker:

_______________________________

Account Number:

_______________________________


3.

Please issue a new Warrant for the unexercised portion of the attached Warrant, if any, in the name of the undersigned.


Holder:

____________________________________________

Dated:

____________________________________________

By:

____________________________________________

Its:

____________________________________________

Address:

____________________________________________


4.

Investor Status. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.


[SIGNATURE OF HOLDER]


Name of Investing Entity: ___________________________________________________________

Signature of Authorized Signatory of Investing Entity:_____________________________________

Name of Authorized Signatory: _______________________________________________________

Title of Authorized Signatory: ________________________________________________________

Date: ___________________________________________________________________________







EXHIBIT 10.12


FORM OF SUBSCRIPTION AGREEMENT


Social Reality, Inc.

456 Seaton Street

Los Angeles, CA  90013


Gentlemen:


The undersigned subscriber or subscribers (hereinafter, the “ Purchaser ”) has received and carefully read this subscription agreement (the “ Agreement ”) and the Confidential Private Placement Memorandum dated October 3, 2013 as may be amended or supplemented from time to time, including all attachments, schedules and exhibits thereto (the “ Memorandum ,” and, together with this Agreement, the “ Offering Documents ”) which, among other things, describe the terms and conditions by which a Purchaser may invest in the offering (the “ Offering ”) of Social Reality, Inc., a Delaware corporation (the “ Company ”) pursuant to the Memorandum.  Capitalized terms used and not defined herein shall have the same meanings as in the Memorandum.


1.

Subscription .  Subject to the terms and conditions of this Agreement and the provisions of the Memorandum, the Purchaser hereby irrevocably subscribes for and agrees to purchase the number of Units (each, a “ Unit ,” and collectively, the “ Units ”) of the Company, with each Unit consisting of one share of the Company’s Class A common stock (the “ Class A Common Stock ”) and one three-year Class A Common Stock Purchase Warrant to purchase 0.5 shares of Class A Common Stock (the “ Warrants ”) on the signature page hereof at a purchase price of $0.50 per Unit (the “ Unit Purchase Price ”) and hereby tenders this Agreement, together with a check or wire transfer in such amount in favor of Signature Bank as Escrow Agent for the Company for such purchase.


The Purchaser agrees that this subscription shall be irrevocable and shall survive the death or disability of the Purchaser. The Purchaser understands that if this subscription is not accepted, in whole or in part, funds received by the Company pursuant hereto will be returned to the Purchaser, without interest accrued thereon or deduction therefrom.


2.

Acceptance of Subscription .  The Purchaser acknowledges that the Company has the right (in its sole discretion) to accept or reject this subscription, in whole or in part, for any reason, and that this subscription shall be deemed to be accepted by the Company only when it is signed on its behalf.  The Agreement either will be accepted or rejected, in whole or in part, as promptly as practical after receipt.  The Purchaser agrees that subscriptions need not be accepted in the order subscriptions are received by the Company.  Upon rejection of this Agreement for any reason, all items received with this Agreement shall be returned to the Purchaser without deduction for any fee, commission or expense and without accrued interest with respect to any money received, and this Agreement shall be deemed to be null and void and of no further force or effect.


3.

Representations, Warranties and Covenants of the Purchaser .  The Purchaser hereby represents, warrants to, and covenants with the Company and the Placement Agent as follows:


(a)

Neither the Units, the shares of Class A Common Stock included in the Units, the Warrants, or the shares of Class A Common Stock issuable upon the exercise of the Units (collectively, the “ Securities ”) offered pursuant to the Offering Documents are registered under the Securities Act of 1933, as amended (the “ Securities Act ”), or any state securities laws. The Purchaser understands that the Offering and sale of the Securities contemplated hereby is intended to be exempt from registration under the Securities Act, by virtue of Section 4(a)(2) thereof and the provisions of Rule 506(b) of Regulation D promulgated thereunder, based, in part, upon the representations, warranties and agreements of the Purchaser contained in this Agreement.


(b)

The Purchaser and the Purchaser’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively, the “ Advisors ”), acknowledges that it has received the Offering Documents, either in hard copy or electronically, and all other documents requested by the Purchaser, has carefully reviewed them and understands the information contained therein, and the Purchaser and the Advisors, if any, prior to the execution of



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this Agreement, have had access to the same kind of information as would be available in a registration statement filed by the Company under the Securities Act. Purchaser’s decision to enter into this Agreement has been made based solely on the independent evaluation by the Purchaser and its Advisors, if any.


(c)

Neither the Securities and Exchange Commission (the “ SEC ”) nor any state securities commission or other regulatory body has approved the Units, or passed upon or endorsed the merits of the Offering or confirmed the accuracy or determined the adequacy of the Offering Documents. Any representation to the contrary is a criminal offense. The Offering Documents have not been reviewed by any federal, state or other regulatory authority. The Securities are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act, and the applicable state securities laws, pursuant to registration or exemption therefrom.


(d)

All documents, records, and books pertaining to the investment in the Units (including, without limitation, the Offering Documents) have been made available for inspection by the Purchaser and its Advisors, if any.


(e)

The Purchaser and its Advisors, if any, have had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Offering of the Units and the business, financial condition, and results of operations of the Company, and all such questions have been answered by representatives of the Company to the full satisfaction of the Purchaser and its Advisors, if any.


(f)

In evaluating the suitability of an investment in the Company, the Purchaser has not relied upon any representation or other information (oral or written) other than as stated in the Offering Documents or as contained in documents so furnished to the Purchaser or its Advisors, if any, by the Company.


(g)

The Purchaser is unaware of, is in no way relying on, and did not become aware of the Offering of the Units directly or indirectly through or as a result of, any form of general solicitation or general advertising including, without limitation, any press release, article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or the internet (including without limitation, internet “blogs,” bulletin boards, discussion groups or social networking sites) in connection with the Offering and sale of the Units and is not subscribing for the Units and did not become aware of the Offering of the Units through or as a result of any seminar or meeting to which the Purchaser was invited by, or any solicitation of a subscription by, a person not previously known to the Purchaser in connection with investments in securities generally.


(h)

Other than T.R. Winston & Company, LLC who is acting as placement agent (the “Placement Agent”) for the Company in the Offering, the Purchaser is not aware of any person and has been advised that no person, will receive from the Company any compensation as a broker, finder, adviser or in any other capacity in connection with the purchase of the Units.


(i)

The Purchaser, either alone or together with its Advisors, if any, has such knowledge and experience in financial, tax, and business matters, and, in particular, investments in securities, so as to enable it to utilize the information made available to it in connection with the Offering, to evaluate the merits and risks of an investment in the Units and the Company and to make an informed investment decision with respect thereto.


(j)

The Purchaser understands that the Company will review this Agreement and the Purchaser’s Confidential Purchaser Questionnaire which is attached hereto as Exhibit A and incorporated herein by such reference and the Company is hereby given authority by the Purchaser to call the Purchaser's bank or place of employment or otherwise investigate or review the financial standing of the Purchaser; and it is further agreed that the Company reserves the unrestricted right to reject or limit any subscription and to close the offer at any time.


(k)

The Purchaser is not relying on the Company, the Placement Agent or any of their respective employees or agents with respect to the legal, tax, economic and related considerations of an investment in the Units, and the Purchaser has relied on the advice of, or has consulted with, only its own Advisors, if any.




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(l)

The Purchaser represents that the Units are being purchased for the Purchaser’s own account, for investment purposes only and not with a view for distribution or resale to others. The Purchaser agrees that the Purchaser will not sell or otherwise transfer the Securities unless the Securities are registered under the Securities Act or unless in the opinion of counsel satisfactory to the Company an exemption from such registration is available. The Purchaser understands that the Securities have not been registered under the Securities Act by reason of a claimed exemption under the provisions of the Securities Act which depends, in part, upon the Purchaser's investment intention. In this connection, the Purchaser understands that it is the position of the SEC that the statutory basis for such exemption would not be present if the Purchaser's representation merely meant that the Purchaser’s present intention was to hold such Units for a short period, such as the capital gains period of tax statutes, for a deferred sale or for any other fixed period. The Purchaser realizes that the SEC might regard a purchase with an intent inconsistent with the Purchaser’s representation to the Company, and a sale or disposition thereof, as a deferred sale to which the exemption is not available.


(m)

The purchase of the Units represents a high risk capital investment and the Purchaser is able to afford an investment in a speculative venture having the risks and objectives of the Company. The Purchaser must bear the substantial economic risks of the investment in the Units indefinitely because none of the Securities may be sold, hypothecated or otherwise disposed of unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration is available. Legends shall be placed on the Securities to the effect that they have not been registered under the Securities Act or applicable state securities laws and appropriate notations thereof will be made in the Company's books. Stop transfer instructions will be placed with the transfer agent of the Securities.


(n)

The Purchaser has adequate means of providing for such Purchaser's current financial needs and foreseeable contingencies and has no need for liquidity of its investment in the Units for an indefinite period of time.


(o)

The Purchaser satisfies any special suitability or other applicable requirements of his state of residence and/or the state in which the transaction by which the Units are purchased occurs.


(p)

The Purchaser is aware that an investment in the Units involves a number of very significant risks and has carefully read and considered the matters set forth under the caption “Risk Factors” in the Offering Documents, and, in particular, acknowledges that the Company has a history of losses and is engaged in a highly competitive business.


(q)

The Purchaser meets the requirements of at least one of the suitability standards for an “accredited investor” as that term is defined in Regulation D under the Securities Act, and has truthfully and accurately completed the Purchaser’s Confidential Purchaser Questionnaire contained herein.


(r)

The Purchaser: (i) if a natural person, represents that the Purchaser has reached the age of 21 and has full power and authority to execute and deliver this Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof; (ii) if a corporation, partnership, or limited liability company or partnership, or association, joint stock company, trust, unincorporated organization or other entity, such entity is duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold the Units, the execution and delivery of this Agreement has been duly authorized by all necessary action, this Agreement has been duly executed and delivered on behalf of such entity and is a legal, valid and binding obligation of such entity; or (iii) if executing this Agreement in a representative or fiduciary capacity, represents that it has full power and authority to execute and deliver this Agreement in such capacity and on behalf of the subscribing individual, ward, partnership, trust, estate, corporation, or limited liability company or partnership, or other entity for whom the Purchaser is executing this Agreement, and such individual, partnership, ward, trust, estate, corporation, or limited liability company or partnership, or other entity has full right and power to perform pursuant to this Agreement and make an investment in the Company, and represents that this Agreement constitutes a legal, valid and binding obligation of such entity. The execution and delivery of this Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which the Purchaser is a party or by which it is bound.



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(s)

Any information which the Purchaser has heretofore furnished or is furnishing herewith to the Company and/or the Placement Agent is complete and accurate and may be relied upon by the Company and the Placement Agent in determining the availability of an exemption from registration under Federal and state securities laws in connection with the Offering. The Purchaser further represents and warrants that it will notify and supply corrective information to the Company and the Placement Agent immediately upon the occurrence of any change therein occurring prior to the Company's issuance of the Units.


(t)

The Purchaser has significant prior investment experience, including investments in non-registered securities. The Purchaser is knowledgeable about investments in small and thinly capitalized, development stage companies. The Purchaser has a sufficient net worth to sustain a loss of its entire investment in the Company in the event such a loss should occur. The Purchaser's overall commitment to investments which are not readily marketable is not excessive in view of the Purchaser’s net worth and financial circumstances and the purchase of the Units will not cause such commitment to become excessive. The investment is a suitable one for the Purchaser.


(u)

No oral or written representations have been made, or oral or written information furnished, to the Purchaser or its Advisors, if any, in connection with the Offering which are in any way inconsistent with the information contained in the Offering Documents.


(v)

Within five (5) days after receipt of a request from the Company, the Purchaser will provide such information and deliver such documents as may reasonably be necessary to comply with any and all laws and ordinances to which the Company is subject.


(w)

By executing and delivering this Agreement, the Purchaser covenants to the Company and the Placement Agent that, except with the prior written permission of the Company, it shall at all times keep confidential and not divulge, furnish or make accessible to anyone any information contained in the Offering Documents, including the exhibits and attachments thereto. The provisions of this Section 3(w) shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by the parties hereto with respect to the transactions contemplated hereby.


(x)

The Purchaser understands and agrees that all certificates representing the Units will contain the following restrictive legend:


THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.


(y)

The Purchaser should check the Office of Foreign Assets Control (“ OFAC ”) website at <http://www.treas.gov/ofac> before making the following representations . The Purchaser represents that the amounts invested by it in the Company in the Offering were not and are not directly or indirectly derived from activities that contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. Federal regulations and Executive Orders administered by OFAC prohibit, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals. The lists of OFAC prohibited countries, territories, persons and entities can be found on the OFAC website at <http://www.treas.gov/ofac>. In addition, the programs administered by OFAC (the “ OFAC Programs ”)



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prohibit dealing with individuals 1 or entities in certain countries regardless of whether such individuals or entities appear on the OFAC lists.


(z)

To the best of the Purchaser’s knowledge, none of: (1) the Purchaser; (2) any person controlling or controlled by the Purchaser; (3) if the Purchaser is a privately-held entity, any person having a beneficial interest in the Purchaser; or (4) any person for whom the Purchaser is acting as agent or nominee in connection with this investment is a country, territory, individual or entity named on an OFAC list, or a person or entity prohibited under the OFAC Programs. Please be advised that the Company may not accept any amounts from a prospective investor if such prospective investor cannot make the representations set forth in the preceding paragraph. The Purchaser agrees to promptly notify the Company and the Placement Agent should the Purchaser become aware of any change in the information set forth in these representations. The Purchaser understands and acknowledges that, by law, the Company may be obligated to “freeze the account” of the Purchaser, either by prohibiting additional subscriptions from the Purchaser, declining any redemption requests and/or segregating the assets in the account in compliance with governmental regulations. The Purchaser further acknowledges that the Company may, by written notice to the Purchaser, suspend the redemption rights, if any, of the Purchaser if the Company reasonably deems it necessary to do so to comply with anti-money laundering regulations applicable to the Company or any of the Company’s other service providers. These individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs.


(aa)

To the best of the Purchaser’s knowledge, none of: (1) the Purchaser; (2) any person controlling or controlled by the Purchaser; (3) if the Purchaser is a privately-held entity, any person having a beneficial interest in the Purchaser; or (4) any person for whom the Purchaser is acting as agent or nominee in connection with this investment is a senior foreign political figure 2 , or any immediate family 3 member or close associate 4 of a senior foreign political figure, as such terms are defined in the footnotes below.


(bb)

If the Purchaser is affiliated with a non-U.S. banking institution (a “ Foreign Bank ”), or if the Purchaser receives deposits from, makes payments on behalf of, or handles other financial transactions related to a Foreign Bank, the Purchaser represents and warrants to the Company that: (1) the Foreign Bank has a fixed address, other than solely an electronic address, in a country in which the Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank maintains operating records related to its banking activities; (3) the Foreign Bank is subject to inspection by the banking authority that licensed the Foreign Bank to conduct banking activities; and (4) the Foreign Bank does not provide banking services to any other Foreign Bank that does not have a physical presence in any country and that is not a regulated affiliate.


(cc)

( For ERISA plans only ) The fiduciary of the ERISA plan represents that such fiduciary has been informed of and understands the Company’s investment objectives, policies and strategies, and that the decision to invest “plan assets” (as such term is defined in ERISA) in the Company is consistent with the provisions of ERISA that require diversification of plan assets and impose other fiduciary responsibilities. The Purchaser fiduciary or plan (a) is responsible for the decision to invest in the Company; (b) is independent of the Company or any of its affiliates; (c) is qualified to make such investment decision; and (d) in making such decision, the Purchaser fiduciary or plan has not relied primarily on any advice or recommendation of the Company or any of its affiliates.


(dd)

The Purchaser: (i) if a natural person, represents on its behalf; or (ii) if a corporation, partnership, or limited liability company or partnership, or association, joint stock corporation or other entity, represents on its behalf and the behalf of its officers, directors and principal stockholders, connected with the Purchaser at the time of this Agreement, that it is not subject to any “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii)

————————

1  These individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs.

2  A “senior foreign political figure” is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government owned corporation. In addition, a “senior foreign political figure” includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure.

3  “Immediate family” of a senior foreign political figure typically includes the figure’s parents, siblings, spouse, children and in-laws.

4  A “close associate” of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure.



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under the Securities Act (a “ Disqualifying Event ”), except for a Disqualifying Event covered by Rule 506(d)(2) or (d)(3).


(ee)

THE PURCHASER ACKNOWLEDGES AND AGREES THAT THE CLASS A COMMON STOCK IS PUBLICLY QUOTED ON THE OTC BULLETIN BOARD AND THAT BY ACCEPTING THE MEMORANDUM THE PURCHASER AGREES WITH THE COMPANY TO MAINTAIN IN STRICT CONFIDENCE ALL NON-PUBLIC INFORMATION, INCLUDING, BUT NOT LIMITED TO, THE EXISTENCE OF THE OFFERING AND ANY OTHER NON-PUBLIC INFORMATION REGARDING THE COMPANY OBTAINED FROM THIS MEMORANDUM AND ANY OTHER TRANSACTION DOCUMENT AND/OR FROM THE COMPANY, THE PLACEMENT AGENT AND/OR EITHER OF THEIR AUTHORIZED AGENTS.  THE COMPANY HAS CAUSED THESE MATERIALS TO BE DELIVERED TO THE PURCHASER IN RELIANCE UPON SUCH AGREEMENT AND UPON RULE 100(B)(2)(II) OF REGULATION FD AS PROMULGATED BY THE SEC.


The foregoing representations and warranties are true and accurate as of the date hereof, shall be true and accurate as of the date of delivery of this Agreement and accompanying documents to the Company and Placement Agent and shall survive such delivery. If, in any respect, those representations and warranties shall not be true and accurate prior to delivery of the payment pursuant to paragraph 1, the undersigned shall immediately give written notice to the Company and the Placement Agent specifying which representations and warranties are not true and accurate and the reason therefor.  In addition, the Purchaser agrees to notify the Company and the Placement Agent immediately in writing if the Purchaser ceases to be an “accredited investor” within the meaning of Rule 501(a) of Regulation D under the Securities Act. Until the Purchaser provides a notice described in the preceding two sentences, the Company and the Placement Agent may rely on the representations, warranties, covenants and agreements contained herein in connection with any matter related to the Company and/or the Placement Agent. Without limiting the generality of the preceding sentence, the Company and the Placement Agent may assume that all such representations and warranties are correct in all respects as of the date hereof and may rely on such representations and warranties in determining whether (i) the Purchaser is suitable as a purchaser of Units, (ii) Units may be sold to the Purchaser or any other Purchaser without first registering the Units under the Securities Act or any other applicable securities laws, (iii) the conditions to the acceptance of subscriptions for Units have been satisfied, and (iv) the Purchaser meets the eligibility standards set by the Company.


4.

Representations, Warranties and Covenants of the Company .  The Company hereby represents, warrants to and covenants with the Purchaser as follows:


(a)

The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware.  The Company is not in violation of any of the provisions of its certificate of incorporation, by-laws or other organizational or charter documents, each as may be amended (the “ Internal Documents ”). Except as described in the Memorandum, the Company has no subsidiaries and does not have an equity interest in any other firm, partnership, association or other entity. The Company is qualified to transact business as a foreign corporation and is in good standing under the laws of each jurisdiction where the location of its properties or the conduct of its business makes such qualification necessary, except where the failure to be so qualified would not have a material adverse effect on the business, assets, liabilities, results of operations, condition (financial or otherwise), properties or prospects of the Company.


(b)

The Company has all power and authority to: (i) conduct its business as presently conducted and as proposed to be conducted as described in the Memorandum; (ii) enter into and perform its obligations under this Agreement; and (iii) issue, sell and deliver the Units. The execution and delivery of each of the Agreement and the issuance, sale and delivery of the Units has been duly authorized by all necessary corporate action. This Agreement has been duly executed and when delivered will constitute upon due execution and delivery, will constitute, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors’ rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and except that no representation is made herein regarding the enforceability of the Company’s obligations to provide indemnification and contribution remedies under the securities laws and subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity).



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(c)

The Units will be duly and validly issued, fully paid and non-assessable, and free from all taxes or liens with respect to the issue thereof and shall not be subject to preemptive rights, rights of first refusal and/or other similar rights of stockholders of the Company and/or any other person.


(d)

As of the date of the Memorandum, the capitalization of the Company is as set forth in the Memorandum.


(e)

The Company has timely filed (subject to 12b-25 filings with respect to certain periodic filings) all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) (all of the foregoing filed with the SEC prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to herein as the “ SEC Documents ”). The SEC Documents have been made available to the Purchaser via the SEC’s EDGAR system.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. In addition, as of each Closing, the SEC Documents, together with any additional documents filed with the SEC after the date hereof and through the date of Closing, when taken in their entirety, shall not contain any untrue statements of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the date upon which they were made and the circumstances under which they were made, not misleading.  As of their respective dates, the financial statements of the Company included in the SEC Documents (“ Company Financial Statements ”) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect at the time of the filing. The Company Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“ GAAP ”), consistently applied, during the periods involved except (i) as may be otherwise indicated in such Company Financial Statements or the notes thereto; or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).


(f)

Other than as expressly disclosed in the SEC Documents or in the Memorandum, no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or its property is pending or, to the best knowledge of the Company, threatened that (i) could reasonably be expected to have a material adverse effect on the performance of this Agreement or the other Offering Documents by the Company or the consummation of any of the transactions contemplated hereby or thereby, and/or (ii) could reasonably be expected to have a material adverse effect on the Company’s operations.  


(g)

The Company owns or leases all such properties as are necessary to the conduct of its operations as presently conducted.


(h)

The Company is not in (i) violation or default of any provision of its Internal Documents; (ii) default or material violation of the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject; and/or (iii) default or material violation of any statute, law, rule, regulation, judgment, order or decree applicable to the Company of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its properties, as applicable.


(i)

The Company has filed all U.S. federal, state and local tax returns that are required to be filed or has requested extensions thereof and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against the Company, to the extent that any of the foregoing is due and payable, except for any such



7



assessment, fine or penalty that is currently being contested in good faith and except as set forth in or contemplated in the SEC Documents.


(j)

Assuming the accuracy of the Purchaser’s representations and warranties set forth in this Agreement, no registration under the Securities Act of the Units is required for the offer and sale of the Units to the Purchaser in the manner contemplated herein and in the Memorandum.


(k)

The Company has not engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Units.


(l)

Except as set forth in the SEC Documents, the Company is in material compliance with the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the Company that are effective as of the date hereof and the Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that:


(i)

transactions are executed in accordance with management's general or specific authorizations;


(ii)

transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability;


(iii)

access to assets is permitted only in accordance with management's general or specific authorization; and


(iv)

the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.


The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed period report under the Exchange Act is being prepared.  The Company's certifying officers have evaluated the effectiveness of the Company's controls and procedures as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “ Evaluation Date ”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date and except as set forth in the SEC Documents, including any periodic reports filed with the SEC after the date of the most recently filed periodic report, through the date of Closing, there have been no changes in the Company’s internal controls as such term is defined in Item 308 of Regulation S-K) over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.


(m)

The Class A Common Stock is quoted on the OTC Bulletin Board (the “ OTCBB ”) under the symbol “SCRI.”  The Company has not received notice (written or oral) from the OTCBB to the effect that the Company is not in compliance with the continuing requirements of the OTCBB.  The Company is, and it has no reason to believe that it will not in the foreseeable future, continue to be in compliance with all such maintenance requirements.


(n)

Except as expressly set forth in the SEC Documents, since the date of the Memorandum, there has not been:


(i)

any material adverse change in the financial condition, operations or business of the Company from that shown on the Company Financial Statements, or any material transaction or commitment effected or entered into by the Company outside of the ordinary course of business;


(ii)

any issuance by the Company of any securities, other than grants of options under the Company’s stock option plan(s) made to its officers, directors and employees; or



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(iii)

any incurrence of any material liability by the Company outside of the ordinary course of business.


(o)

The books of account, ledgers, order books, records and documents of the Company accurately and completely reflect all material information relating to the business of the Company, the location and collection of its assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company.


(p)

The Company shall file a Form D with respect to the Units as required under Regulation D. The Company shall legally qualify the Units for sale to the Purchasers in each Closing pursuant to this Offering Materials under applicable securities or “blue sky” laws of the states of the United States (or obtain an exemption from such qualification), and shall pay all fees and expenses of such counsel in connection therewith, including, but not limited to, all state filing fees and such counsel’s legal fees and expenses.


(q)

Except for commissions which may be paid to the Placement Agent as set forth in the Memorandum, the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.


(r)

Other than as set forth in the SEC Documents, the Company has not entered into any transactions (whether orally and/or in writing) with any of its affiliates.


(s)

None of the information set forth in the Memorandum and/or the SEC Documents contains any untrue statement of material fact or omits to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading.


5.

Indemnification .  The Purchaser acknowledges that the Purchaser understands the meaning and legal consequences of the representations, warranties and covenants in Section 3 hereof and that the Company and the Placement Agent have relied upon such representations, warranties and covenants, and the Purchaser hereby agrees to indemnify and hold harmless the Company, the Placement Agent and each of their respective officers, directors, controlling persons, agents and employees, from and against any and all losses, damages or liabilities due to or arising out of a breach of any representation, warranty or covenant made by the Purchaser herein.  Notwithstanding the foregoing, however, no representation, warranty, covenant, acknowledgment or agreement made herein by the Purchaser shall in any manner be deemed to constitute a waiver of any rights granted to the Purchaser under Federal or state securities laws. All representations, warranties and covenants contained in this Agreement and the indemnification contained in this Section 5 shall survive the acceptance of this subscription.


6.

Restrictions on Transfer .  The Purchaser understands and agrees that the Securities shall not be sold, pledged, hypothecated or otherwise transferred unless the Securities are registered under the Securities Act and applicable state securities laws or are exempt therefrom.


7.

Special Anti-dilution Provisions.  The Unit Purchase Price and the exercise of the Warrants, will be subject to a full ratchet anti-dilution adjustment in the event the Company issues additional equity or equity-linked securities at a purchase price that is less than the Unit Purchase Price or the exercise price of the Warrants within one (1) year from the final Closing, provided, however , no adjustment shall be made for the following:


(a)

any shares of Class A Common Stock, including options therefor (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), issued to employees or directors of, or consultants or advisors to, the Company or any of subsidiary pursuant to a plan, agreement or arrangement approved by its Board of Directors, whether issued before or after the final Closing of the Offering, provided that any options for such shares that expire or terminate unexercised or any restricted stock repurchased by the Company at cost shall not be counted toward such maximum number unless and until such shares are regranted as new stock grants (or as new options) pursuant to the terms of any such plan, agreement or arrangement;




9



(b)

the actual issuance of shares of Class A Common Stock upon the exercise or conversion of securities exercisable or convertible into shares of the Class A Common Stock outstanding on the date of the Memorandum, as well as shares of Class A Common Stock, options or other convertible securities issued as a dividend or distribution on the Class A Common Stock, Class B common stock and/or Series 1 Preferred Stock;


(c)

shares of Class A Common Stock issued pursuant to a stock split or similar reorganization;


(d)

securities issued in connection with a secondary public offering;


(e)

securities issued or issuable pursuant to strategic transactions entered into for primarily non-equity financing purposes approved by the Board of Directors;


(f)

securities issued or issuable pursuant to equipment lease financings or bank credit arrangements entered into for primarily non-equity financing purposes approved by the Board of Directors;


(g)

securities issued or issuable pursuant to an acquisition by the Company of the assets or stock of another entity; or


(h)

any securities or warrants issued to Siskey Industries, LLC for advisory services to the Company.


8.

Registration Rights.  


(a)

No later than sixty (60) days following the final Closing (the “ Filing Deadline ”), the Company will file a registration statement with the SEC to register the resale by the Purchaser of shares of Class A Common Stock included in the Units and the shares of Class A Common Stock issuable upon the exercise of the Warrants included in the Units (the “ Warrant Shares ”) so as to permit the public resale thereof (the “ Resale Registration Statement ”).  The Company will use its reasonable efforts to ensure that such Resale Registration Statement is declared effective by the SEC within ninety (90) days of the Filing Deadline.  If (i) the Company should fail to file the Resale Registration Statement by the Filing Deadline, or (ii) it is not declared effective within ninety (90) days of the Filing Deadline, then within five (5) business days of the end of month the Company shall pay the Purchaser an amount in cash, as partial liquidated damages, equal to two percent (2%) of the aggregate purchase price paid by such Purchaser for each 30 days, or portion thereof, until the earlier of the date the deficiency is cured or the expiration of six (6) months from Filing Deadline (the “ Penalty ”).


(b)

No Purchaser shall be entitled to a payment pursuant to this Section 8 if effectiveness of the Resale Registration Statement has been delayed or a prospectus has been unavailable as a result of (i) a failure by such Purchaser to promptly provide on request by the Company the information required under the Agreement or requested by the SEC as a condition to effectiveness of the Resale Registration Statement; (ii) the provision of inaccurate or incomplete information by such Purchaser; or (iii) a statement or determination of the SEC that any provision of the rights of the Purchaser under this Agreement are contrary to the provisions of the Securities Act.  


(c)

Notwithstanding any other provision of this Agreement, if any (i) any publicly-available written guidance, or rule of general applicability of the SEC staff, or (ii) oral or written comments, requirements or requests of the SEC staff to the Company in connection with the review of the Resale Registration Statement sets forth a limitation on the number of Warrant Shares to be registered in the Resale Registration Statement (the “ SEC Guidance ”) (and the Company has used its best efforts to advocate with the SEC for the registration of all or the maximum number of Warrant Shares), the number of Warrant Shares to be registered on such Resale Registration Statement will be reduced on a pro rata basis among the Purchasers based on the total number of Warrant Shares held by such Purchasers.  The Company shall not be liable for a Penalty to any Warrant Shares which are not permitted by the SEC to be included in the Resale Registration Statement due solely to SEC Guidance from time to time. In such case, any Penalty payable under Section 8(a) shall be calculated to apply only to the percentage of Warrant Shares which are permitted in accordance with SEC Guidance to be included in such Resale Registration Statement.


9.

Irrevocability; Binding Effect .  The Purchaser hereby acknowledges and agrees that the subscription hereunder is irrevocable by the Purchaser, except as required by applicable law, and that this



10



Agreement shall survive the death or disability of the Purchaser and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives, and permitted assigns. If the Purchaser is more than one person, the obligations of the Purchaser hereunder shall be joint and several and the agreements, representations, warranties, and acknowledgments herein shall be deemed to be made by and be binding upon each such person and such person's heirs, executors, administrators, successors, legal representatives, and permitted assigns.


10.

Investor Qualification .  The Purchaser previously or simultaneously herewith has furnished a completed and executed Confidential Purchaser Questionnaire, the information in which is true and correct in all respects and which is hereby incorporated by reference herein.


11.

Modification .  Neither this Agreement nor any provision hereof shall be waived, modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, modification, change, discharge or termination is sought.


12.

Notices .  All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made when delivered, or mailed by registered or certified mail, return receipt requested:


(a)

If to the Purchaser, to the address set forth on the signature page of this Agreement, or at such other address as the Purchaser may hereafter have advised the Company by written notification.


(b)

If to the Company, to the address set forth on the first page of this Agreement, or at such other address as the Company may hereafter have advised the Purchaser by written notification.


13.

Survival of Representations and Warranties .  Each party hereto covenants and agrees that the representations and warranties of such party contained in this Agreement shall survive the Closing.


14.

Entire Agreement .  This Agreement contains the entire agreement of the parties with respect to the matters set forth herein and supersede all prior oral or written agreements and understandings, if any, relating to the subject matter hereof.


15.

Assignability .  This Agreement is not transferable or assignable by the undersigned or any successor thereto.


16.

Confidentiality .


(a)

The Purchaser acknowledges and agrees that any information or data the Purchaser has acquired from or about the Company, not otherwise properly in the public domain, was received in confidence (the “ Confidential Information ”). Any distribution of the Confidential Information to any person other than the Purchaser named above, in whole or in part, or the reproduction of the Confidential Information, or the divulgence of any of its contents (other than to the Purchaser’s tax and financial advisers, attorneys and accountants, who will likewise be required to maintain the confidentiality of the Confidential Information) is unauthorized.  The Purchaser, agrees not to divulge, communicate or disclose, except as may be required by law or for the performance of this Agreement, or use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any Confidential Information of the Company, including any scientific, technical, trade or business secrets of the Company and any scientific, technical, trade or business materials that are treated by the Company as confidential or proprietary, including, but not limited to, ideas, discoveries, inventions, developments and improvements belonging to the Company and Confidential Information obtained by or given to the Company about or belonging to third parties.


(b)

The Company will use its best efforts to keep the information provided in the Confidential Purchaser Questionnaire strictly confidential. The Company may present this Agreement and the information provided in the Confidential Purchaser Questionnaire to such parties as they deem advisable if compelled by law or called upon to establish the availability under any Federal or state securities laws of an exemption from registration



11



of the Offering or if the contents thereof are relevant to any issue in any action, suit, or proceeding to which the Company is a party or by which it is or may be bound.


17.

Governing Law; Venue; Waiver Of Jury Trial, Etc . This Agreement shall be governed by and construed solely and exclusively under and pursuant to the laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware.  Each of the parties hereto expressly and irrevocably (1) agree that any legal suit, action or proceeding arising out of or relating to this Agreement will be instituted exclusively in either the California State Supreme Court, County of Los Angeles, or in the United States District Court for the Central District of California, (2) waive any objection they may have now or hereafter to the venue of any such suit, action or proceeding, and (3) consent to the in personam jurisdiction of either the California State Supreme Court, County of Los Angeles, or the United States District Court for the Central District of California in any such suit, action or proceeding.  Each of the parties hereto further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in either the California State Supreme Court, County of Los Angeles, or in the United States District Court for the Central District of California and agree that service of process upon it mailed by certified mail to its address will be deemed in every respect effective service of process upon it, in any such suit, action or proceeding.  THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.  THE PARTY PREVAILING THEREIN SHALL BE ENTITLED TO PAYMENT FROM THE OTHER PARTY HERETO OF ALL OF ITS REASONABLE COUNSEL FEES AND DISBURSEMENTS.


18.

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


19.

Counterparts .  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which shall constitute one and the same document.  In the event that any signature (including a financing signature page) is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature 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 facsimile or “pdf” signature page were an original thereof.


20.

Use of Pronouns and Defined Terms .  All pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons referred to may require. All terms not otherwise defined herein shall have the same meaning as in the Memorandum.


21.

Severability .  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.


[SIGNATURE PAGE TO FOLLOW]



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IN WITNESS WHEREOF , the undersigned has executed this Agreement on the date his signature has been subscribed and sworn to below.


No. of Units: _____________________

 

Amount of Subscription: $______________

 

 

 

The Units are to be issued in

 

___________________________________

(check one box):

 

Print Name of Investor

 

 

 

o     individual name

 

___________________________________

 

 

Print Name of Joint Investor (if applicable)

o      joint tenants with rights of  survivorship

 

 

 

 

___________________________________

o      tenants in entirety

 

Signature of Investor

 

 

 

o      corporation (an officer must sign)

 

___________________________________

 

 

Signature of Joint Investor

o      partnership (all general partners must sign)

 

 

 

 

___________________________________

 

 

Print Name of Corporation, Partnership or

email address: _______________________

 

other Institutional Investor

 

 

 

fax number: _________________________

 

 

 

 

By:________________________________

Subscriber(s) address:

 

 

__________________________________

 

Title:_______________________________

__________________________________

 

 

 

 

___________________________________

Taxpayer ID No.: _____________________

 

Name of natural person with voting and dispositive control over the Units being subscribed for


Accepted as of this ___________ day of _________________________, 2013


SOCIAL REALITY, INC.


By: __________________________________________

      Christopher Miglino, Chief Executive Officer



13


EXHIBIT 10.13


THIS TRANSACTION FEE AGREEMENT (this “Agreement”) is made as of the 30 th day of September, 2013.


BETWEEN:


SOCIAL REALITY, INC.

456 Seaton Street

Los Angeles, CA 90013

 

(the “Company”)


OF THE FIRST PART


AND:


T.R. WINSTON & COMPANY, LLC

376 Main Street
Bedminster, New Jersey 07921


(the “Broker”)


OF THE SECOND PART


W H E R E A S:


A.

The Company will enter into a Subscription Agreement (the “Subscription Agreement”) with the purchasers to be identified on the signature pages of the Subscription Agreement (collectively, the “Investors”) in connection with the placement of Class A common stock of the Company in the aggregate amount of $2,400,000 million (the “Common Stock”) and warrants to purchase an amount of shares of common stock of the Company equal to fifty percent (50%) of the number of shares that the Investors would own on the initial closing date (the "Investor Warrants") (collectively, the “Offering”);

B.

The Broker is a licensed broker-dealer with the National Association of Securities Dealers;

C.

The Broker introduced the Company to the Investors and assisted the Company in the transactions contemplated by the Subscription Agreement;

D.

If the Company closes the transaction contemplated herein, the Company wishes to reward the Broker for its services in the manner hereinafter set forth.


NOW, THEREFORE, in consideration of the mutual covenants, promises, conditions, warranties and representations hereinafter set forth, the parties hereto agree as follows:


1.

The Company agrees to compensate the Broker as follows: (i) ten percent (10%) of the gross proceeds of the Offering, payable at the Closing (as defined in the Subscription Agreement), (ii) a Warrant (the "Broker Warrant") issued at the Closing to purchase a number of shares of Common Stock equal to ten percent (10%) of the aggregate number of shares of Common Stock sold to the Investors in the same form as the Investor Warrants with a strike price of $1.00 per share. The Broker Warrant shall






1




vest immediately upon issuance, and (iii) two percent (2%) of the gross proceeds of the Offering, payable at the Closing, for a non-accountable expense allowance.  Fees and Warrants shall be paid to Broker in the manner and in the name designated by Broker.  

2.

The parties hereto, and each of them, covenant and agree that each of them shall and will upon reasonable request by the other party, make, do, execute or cause to be made, done or executed all such further and other lawful acts, deeds, things, devices and assurances whatsoever for the better or more perfect and absolute performance of the terms and conditions of this Agreement.

3.

By execution hereof, the Company acknowledges that the Broker does not provide investment advice or financial planning services.  In that regard, the Broker is not registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and cannot therefore provide any advice regarding the desirability or value of purchasing, selling, transacting in, investing in, or holding any security.  Rather, the Broker’s services will be limited to those properly provided by a licensed broker-dealer (T.R. Winston & Company, LLC is registered with the NASD as an “Introducing Broker/Dealer” or “K” broker/ dealer in accordance with Section 15 of the Securities and Exchange Act of 1934, as amended.)

4.

The Company hereby agrees to indemnify and hold harmless the Broker, its managers, members, agents and employees (collectively referred to as the Broker for purposes of this Section 4) from and against any and all claims, actions, suits, proceedings (including those of shareholders), damages, liabilities and expenses as incurred by any of them (including the fees and expenses of counsel) which are related to or arise out of any actions taken or omitted to be taken (including any untrue statements made or omitted to be made) by the Company or any actions taken or omitted to be taken by the Broker (except in the case of gross negligence or willful misconduct on the part of such Broker) in connection with the transactions contemplated by the Subscription Agreement or otherwise related to or arising out of the Broker’s activities on behalf of the Company.  The Company shall reimburse Broker for all expenses (including the fees and expenses of counsel) incurred by such Broker in connection with investigating, preparing or defending any such claim, action, suit or proceeding, including in connection with pending or threatened litigation to which Broker is a party,  except in the case of gross negligence or willful misconduct on the part of such Broker.

5.

The Broker represents and warrants that neither it, nor any of its directors, executive officers, general partners, managing members or other officers participating in the Offering is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act of 1933, as amended (a “Disqualification Event”) except for a Disqualification Event (i) contemplated by Rule 506(d)(2) of the Securities Act of 1933, as amended, and (ii) a description of which has been furnished to the Company prior to the date hereof.   


6.

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, administrators, successors and assigns.

7.

This Agreement shall be enforced, governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such State.  In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.  The parties hereto hereby submit to the exclusive jurisdiction of the state courts or the United States Federal Courts located in California with respect to any






2




dispute arising under this Agreement or the transactions contemplated hereby.  The party which does not prevail in any dispute arising under this Agreement shall be responsible for all fees and expenses, including attorneys’ fees, incurred by the prevailing party in connection with such dispute.

8.

This Agreement consists of a total of three (3) pages.  This Agreement may be signed in any number of counterparts and the combination of the same shall constitute a binding agreement.  A signed copy of this Agreement received via facsimile shall be deemed an original signature of a party for purposes of making this Agreement a binding agreement.

IN WITNESS WHEREOF the parties hereto have hereunto executed this Agreement as of and from the day first above written.


 

SOCIAL REALITY, INC.

 

 

 

 

 

 

 

By:

/s/ Chris Miglino

     

 

Name: Chris Miglino

     

 

Title:    Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

T.R. WINSTON & COMPANY, LLC

 

 

 

 

 

 

 

By:

/s/ G. Tyler Runnels

 

 

Name: G. Tyler Runnels

 

 

Title:   Chairman & Chief Executive Officer







3