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 30, 2014


[SCRI_8K001.JPG]

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) 283-8505


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 1.01

Entry into a Material Definitive Agreement.

Item 2.01

Completion of Acquisition or Disposition of Assets.

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.


Acquisition of Steel Media


On October 30, 2014, Social Reality, Inc. (the “ Company ”) acquired 100% of the capital stock of Steel Media, a California corporation (“ Steel Media ”), from Richard Steel pursuant to the terms and conditions of a stock purchase agreement, dated October 30, 2014, by and among the Company, Steel Media and Mr. Steel (the “ Stock Purchase Agreement ”). As consideration for the purchase of Steel Media, the Company agreed to pay Mr. Steel up to $20 million, consisting of: (i) a cash payment at closing of $7.5 million; (ii) a cash payment of $2 million which is being held in escrow pursuant to the Escrow Agreement, dated October 30, 2014, by and among Wells Fargo Bank, National Association, the Company and Mr. Steel (the “ Indemnity Escrow Agreement ”), to satisfy certain indemnification obligations to the extent such arise under the Stock Purchase Agreement; (iii) a one year secured subordinated promissory note in the principal amount of $2.5 million (the “ Note ”) which is secured by 2,386,863 shares of the Company’s Class A common stock (the “ Escrow Shares ”); and (iv) an earnout payment of up to $8 million (the “ Earnout Consideration ”).


The Earnout Consideration is payable upon the attainment of certain earnings before interest, taxes, depreciation and amortization (“ EBITDA ”) targets of Steel Media during the two year period following the closing, 60% of which may be satisfied in shares of the Company’s Class A common stock subject to the satisfaction of certain conditions set forth in the Stock Purchase Agreement. Further, in the event of (i) a change of control of the Company or Steel Media or (ii) Mr. Steel’s termination without “cause” or resignation for “good reason” (each as defined in the Steel Employment Agreement (as hereinafter defined)) during the two year period following the closing, the Company is obligated to pay Mr. Steel 100% of the Earnout Consideration (less any amount previously paid to Mr. Steel). To the extent the Company is prohibited from paying any Earnout Consideration in cash and Mr. Steel is prohibited from receiving same under the terms of the Subordination Agreement (as hereinafter defined) described below, Mr. Steel has the right to request that the Company pay him the prohibited cash earnout payment in shares of the Company’s Class A common stock.


The Stock Purchase Agreement contains certain customary indemnification provisions by both the Company and Mr. Steel.


The Note issued to Mr. Steel at the closing bears interest at the rate of 5% per annum and the principal and accrued interest is due and payable on October 30, 2015. The amounts due under the Note accelerate and become immediately due and payable upon the occurrence of an event of default as described in the Note. Upon an event of default under the Note, the interest rate increases to 10% per annum. The Note may be prepaid upon five days’ notice to Mr. Steel, and the Note must be prepaid upon a change of control of the Company or Steel Media. The Note is also subject to certain mandatory partial prepayments for each of the fiscal quarters ending December 31, 2014, March 31, 2015 and June 30, 2015 in an amount equal to 25% of the “Excess Cash Amount” as defined in the Note.




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The obligations under the Note are subordinated to the Company’s obligations under the Financing Agreement (as hereinafter defined) pursuant to the terms of the Subordination Agreement (as hereinafter described) and are secured by the Escrow Shares. Upon an event of default under the Note, if the Escrow Shares are released to Mr. Steel all amounts due under the Note will be deemed paid and the Note will be satisfied in full provided that (i) all of the Escrow Shares (or at least 90% of the Escrow Shares, in the case of a cut-back required by the SEC as a result of limitations under SEC Rule 415, as defined in the Registration Rights Agreement described below) are subject to a then effective SEC registration statement having a customary plan of distribution for resale, (ii) the Escrow Shares are freely tradable by Mr. Steel, without restriction of any kind or nature (other than insider trading laws), and (iii) the certificates evidencing the Escrow Shares are free of any legend or other restrictive notation. If these conditions are not each satisfied at the time of release of the Escrow Shares to Mr. Steel, then the principal and interest due under the Note remains outstanding except that it will be deemed repaid from time to time, dollar for dollar, from the proceeds realized by Mr. Steel from the sale or other disposition of the Escrow Shares. The Escrow Shares are considered issued but not outstanding and Mr. Steel does not have any voting or other rights as a stockholder to the Escrow Shares during the period they are held in escrow. The Escrow Shares are being held by an escrow agent pursuant to the terms of that certain Escrow Agreement, dated October 30, 2014, by and among Mr. Steel, the Company and Lowenstein Sandler LLP, as escrow agent (the “ Escrow Shares Agreement ”). Subject to the terms and conditions of the Stock Purchase Agreement and the Subordination Agreement, upon a release of the Escrow Shares to Mr. Steel, Mr. Steel has the right to put the Escrow Shares to the Company at a per share price of $1.0474 (the “ Put Right ”).


On October, 30, 2014, in connection with the acquisition of Steel Media, the Company entered into a registration rights agreement (the “ Registration Rights Agreement ”) with Mr. Steel pursuant to which the Company agreed to register any Earnout Shares issued to him or Escrow Shares released to him. The Company granted Mr. Steel demand registration rights over the Escrow Shares and the Earnout Shares which he may exercise 90 days after such shares are issued or released to him. In addition, Mr. Steel has the right to include any Earnout Shares issued to him or Escrow Shares released to him in registration statements for offerings by the Company as well as offerings of the Company’s Class A common stock held by third parties. The terms of the Registration Rights Agreement contain underwriter and Rule 415 cutback provisions in which the number of either Earnout Shares or Escrow Shares, or both, that the Company may include in a subsequent registration statement to be filed with the SEC will be reduced subject to certain allocation provisions as set forth in the Registration Rights Agreement. The Company agreed to pay all costs and expenses with such registration statement, other than Mr. Steel’s selling expenses. The Registration Rights Agreement contains customary indemnification provisions. Under the terms of the Registration Rights Agreement, Mr. Steel agreed to certain restrictions on the amount of Earnout Shares that may be sold by him without the Company’s consent; provided, however, that these restrictions will automatically terminate upon (i) an event of default under the Note, or (ii) the Company’s failure to fully pay the Earnout Consideration if and when due.


The foregoing description of the Stock Purchase Agreement, the Note, the Indemnity Escrow Agreement, the Escrow Shares Agreement and the Registration Rights Agreement are not complete and are qualified in their entirety by reference to the full and complete terms of the Stock Purchase Agreement, the Note, the Indemnity Escrow Agreement, the Escrow Shares Agreement and the Registration Rights Agreement, which are attached to this Form 8-K as Exhibits 2.1, 10.18, 10.19, 10.20 and 10.21, respectively and incorporated herein by reference.




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Financing Agreement with Victory Park Management, LLC as agent for the lenders


On October 30, 2014 (the “ Financing Agreement Closing Date ”), the Company entered into a financing agreement (the “ Financing Agreement ”) with Victory Park Management, LLC, as administrative agent and collateral agent for the lenders and holders of notes and warrants issued thereunder (the “ Agent ”). The Financing Agreement provides for borrowings of up to $20 million to be evidenced by notes issued thereunder, which are secured by a first priority, perfected security interest in substantially all of the assets of the Company and its subsidiaries (including Steel Media) and a pledge of 100% of the equity interests of each domestic subsidiary of the Company pursuant to the terms of a pledge and security agreement (the “ Pledge and Security Agreement ”) entered into by the Company on the Financing Agreement Closing Date (which was joined by Steel Media immediately after the Company’s acquisition of Steel Media). The Financing Agreement contains covenants limiting, among other things, indebtedness, liens, transfers or sales of assets, distributions or dividends, and merger or consolidation activity. The notes (the “ Financing Notes ”) issued pursuant to the Financing Agreement, including the note issued to the lender thereunder in the original aggregate principal amount of $9 million on the Financing Agreement Closing Date (the “ Initial Financing Note ”), bear interest at a rate per annum equal to the sum of (1) cash interest at a rate of 10% per annum and (2) payment-in-kind (PIK) interest at a rate of 4% per annum for the period commencing on the Financing Agreement Closing Date and extending through the last day of the calendar month during which the Company’s financial statements for December 31, 2014 are delivered, and which PIK interest rate thereafter from time to time may be adjusted based on the ratio of the Company’s consolidated indebtedness to its earnings before interest, taxes, depreciation and amortization. If the Company achieves a reduction in the leverage ratio as described in the Financing Agreement, the PIK interest rate declines on a sliding scale from 4% to 2%. The Financing Notes issued under the Financing Agreement are scheduled to mature on October 30, 2017. Proceeds from the Initial Financing Note issued on the Financing Agreement Closing Date were used to finance, in part, the Company’s acquisition of Steel Media as described earlier in this report.


The Financing Agreement provides for subsidiaries of the Company to join the Financing Agreement from time to time as borrowers and cross guarantors thereunder. Immediately after the Company’s acquisition of Steel Media on October 30, 2014, Steel Media executed a joinder agreement under which it became a borrower under the Financing Agreement. The Company and its subsidiary, Steel Media, are cross guarantors of each other’s obligations under the Financing Agreement, all of which guaranties and obligations are secured pursuant to the terms of the Pledge and Security Agreement.


Pursuant to the Financing Agreement, the Company also issued to the lender thereunder, on the Financing Agreement Closing Date, a five year warrant to purchase 2,900,000 shares of its Class A common stock at an exercise price of $1.00 per share (the “ Financing Warrant ”). The warrant holder may not, however, exercise the Financing Warrant for a number of shares of Class A common stock that would cause such holder to beneficially own shares of Class A common stock in excess of 4.99% of the Company’s outstanding shares of Class A common stock following such exercise. The number of shares issuable upon exercise of the Financing Warrant and the exercise price therefor are subject to adjustment in the event of stock splits, stock dividends, recapitalizations and similar corporate events. Pursuant to the Financing Warrant, the warrant holder has the right, at any time after the earlier of April 30, 2016 and the maturity date of the Financing Notes issued pursuant to the Financing Agreement, but prior to the date that is five years after the Financing Agreement Closing Date, to exercise its put right under the terms of the Financing Warrant, pursuant to which the warrant holder may sell to the Company, and the Company will purchase from the warrant holder, all or any portion of the Financing Warrant that has not been previously exercised. In connection with any exercise of this put right, the purchase price will be equal to an amount based upon the percentage of the Financing Warrant for which the put right is being exercised, multiplied by the lesser of (A) 50% of the total revenue for the Company and its subsidiaries, on a consolidated basis, for the trailing 12- month period ending with the Company’s then-most recently completed fiscal quarter, and (B) $1,500,000.




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As contemplated under the Financing Agreement, the Company also entered into a registration rights agreement on the Financing Agreement Closing Date (the “ Financing Registration Rights Agreement ”) with the holder of the Financing Warrant, pursuant to which the Company granted to such holder certain “piggyback” rights to register the shares of the Company’s Class A common stock issuable upon exercise of the Financing Warrant. Specifically, the holder of the Financing Warrant has the right, subject to certain allocation provisions set forth in the Financing Registration Rights Agreement, to include the shares underlying the Financing Warrant in registration statements for offerings by the Company of its Class A common stock, as well as offerings of the Company’s Class A common stock held by third parties.


As part of the arrangements under the Financing Agreement, the Agent, Mr. Steel, and the Company and Steel Media (as borrowers under the Financing Agreement) have also entered into a subordination agreement (the “ Subordination Agreement ”) under which Mr. Steel has agreed, subject to the terms and conditions of the Subordination Agreement, to subordinate to the lenders and holders of Financing Notes and the Financing Warrant issued under the Financing Agreement (i) certain obligations, liabilities, and indebtedness, including, without limitation, payments under the Note and payments of Earnout Consideration, owed to him by the Company and any of its subsidiaries and (ii) Mr. Steel’s right to exercise the Put Right.


The foregoing descriptions of the Financing Agreement, the Initial Financing Note, the Pledge and Security Agreement, the Financing Warrant, the Financing Registration Rights Agreement and the Subordination Agreement are not complete and are qualified in their entirety by reference to the full and complete terms of the Financing Agreement, the Initial Financing Note, the Pledge and Security Agreement, the Financing Warrant, the Financing Registration Rights Agreement and the Subordination Agreement, which are attached to this Form 8-K as Exhibits 10.23, 10.24, 10.25, 4.8 and 10.26, respectively and incorporated herein by reference.


Employment Agreements


In connection with the acquisition of Steel Media, on October 30, 2014, the Company entered into an employment agreement with each of Messrs. Steel, Chad Holsinger and Adam Bigelow. The material terms of the employment agreements with Messrs. Steel and Holsinger are described under Item 5.02 of this report and incorporated herein by reference.


On October 30, 2014, the Company entered into an employment agreement with Adam Bigelow (the “ Bigelow Employment Agreement ”) pursuant to which he was engaged to serve as the Company’s Senior Director, Ad Operations. The initial term of the agreement expires on October 30, 2018, subject to automatic 12 month extensions unless a non-renewal notice is received by either party at least 60 days prior to the expiration of the then current renewal term. Mr. Bigelow’s compensation includes: (i) an annual salary of $100,000, subject to increase at the discretion of the board of directors; (ii) an annual discretionary bonus, payable in cash or equity; (iii) options to purchase 25,000 shares of the Company’s Class A common stock, at an exercise price of $1.50 per share, vesting 25% on each of the first, second, third and fourth annual anniversary of the agreement; and (iv) paid time off of 15 days per calendar year, subject to accrual limitations. Mr. Bigelow is entitled to severance in an amount equal to his annual base salary payable in equal installments over a twelve month period in the event he is terminated without “cause” or resigns for “good reason” each as defined in the Bigelow Employment Agreement. The Bigelow Employment Agreement contains a customary non-solicitation and invention assignments clause and Mr. Bigelow executed separate confidentiality and arbitration agreements with the Company.


The foregoing description of the Bigelow Employment Agreement is not complete and is qualified in its entirety by reference to the full and complete terms of the Bigelow Employment Agreement which is attached to this Form 8-K as Exhibit 10.29 and incorporated herein by reference.




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Item 3.02

Unregistered Sales of Equity Securities.


Note


On October 30, 2014, the Company issued the Note to Mr. Steel as partial consideration for the purchase of Steel Media as described earlier in this report. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933, as amended (the “ Securities Act ”) in reliance on an exemption provided by Section 4(a)(2) of that act.


Financing


On October 30, 2014, the Company issued to the original lender under the Financing Agreement the Initial Financing Note and the Financing Warrant on the Financing Agreement Closing Date. The original lender under the Financing Agreement was an accredited investor on the Financing Agreement Closing Date and the issuance of such securities was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act and Regulation D promulgated thereunder.


Private Placement


On October 30, 2014, the Company sold 4,120,500 units of its securities to 26 accredited investors in a private placement exempt from registration under the Securities Act, in reliance on exemptions provided by Section 4(a)(2) and Rule 506(b) of Regulation D. The units were sold at a purchase price of $1.00 per unit resulting in gross proceeds to the Company of $4,120,500. Each unit consisted of one share of the Company’s Class A common stock and one three year Class A common stock purchase warrant to purchase 0.5 shares of its Class A common stock. Each redeemable three year warrant (the “ Private Placement Warrant ”) entitles the holder to purchase one-half share of the Company’s Class A common stock at an exercise price of $1.50 per share. The Private Placement Warrants must be exercised in such denominations as to require the issuance of a whole number of shares. Providing that there is an effective registration statement registering the shares of the Company’s Class A common stock issuable upon exercise of the Private Placement Warrants, it has the right to redeem all or any portion of the warrants at a price of $0.001 per share of Class A common stock underlying such warrants upon 20 days’ notice at any time that the closing price of the Company’s Class A common stock equals or exceeds $3.75 per share for 20 consecutive trading days and the daily average minimum volume of its Class A common stock during those 20 trading days is at least 100,000 shares. The foregoing summary of the Private Placement Warrants does not purport to be complete and is subject to, and qualified in its entirety by, the full text of warrant which is filed as Exhibit 4.7 to this report and incorporated herein by reference.


In addition to the units sold for cash, the Company also issued T.R. Winston & Company, LLC, a broker dealer and member of FINRA (“ T.R. Winston ”) 800,000 units, valued at $800,000 as compensation for the firm’s investment banking services to it in connection with the acquisition of Steel Media described elsewhere in this report. The units issued to T.R. Winston were identical to the units sold in the private placement.


As a result, the Company issued an aggregate of 4,920,500 shares of its Class A common stock and Private Placement Warrants to purchase an additional 2,460,250 shares of its Class A common stock. T.R. Winston acted as placement agent for the Company in private placement offering. The Company paid the placement agent and a selling agent cash commissions totaling $344,435 and agreed to issue T.R. Winston and the selling agent three year warrants which are identical to the Private Placement Warrant to purchase 295,230 of the Company’s Class A common stock at an exercise price of $1.50 per share. The Company used $2,500,000 of the net proceeds from the offering as part of the cash consideration for the acquisition of Steel Media described elsewhere in this report and approximately $678,000 for fees in this transaction, including $580,000 to T.R. Winston as a loan origination fee for the Financing Agreement. The balance of the net proceeds will be used for general working capital.


The Company agreed to file a registration statement covering the shares underlying the Private Placement Warrants and the placement agent warrants within 90 days from the closing of the Steel Media acquisition. The Company is obligated to pay all costs associated with this registration statement, other than selling expenses of the warrant holders.


The information set forth above under Items 1.01. 2.01 and 2.03 is hereby incorporated by reference into this Item 3.02.




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Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.


Appointment of director and executive officers


On October 30, 2014, in connection with the acquisition of Steel Media, Mr. Richard Steel was appointed to the Company’s board of directors and elected President of the Company, and Mr. Chad Holsinger, an employee of Steel Media, was appointed as the Company’s Chief Revenue Officer. The terms of the Stock Purchase Agreement require that the Company use its commercially reasonable efforts to cause Mr. Steel to be elected as a member of the Company’s board of directors until the later of October 30, 2016 or such time as he no longer owns any shares of the Company’s capital stock. Mr. Kristoffer Nelson, formerly the Company’s President, was appointed the Company’s Chief Operating Officer. Biographical information concerning Messrs. Steel and Holsinger is as follows:


Richard Steel . Mr. Steel, 40, founded Steel Media in 1999 and has served as its Chief Executive Officer since April 2005. He has set the strategic direction of the business and is involved in a few key accounts. Mr. Steel is a founding partner and former president of the Global Strategic Marketing Alliance and serves in a leadership role, advising the White House Business Council. He is a trade association member of the Direct Marketing Association, Mobile Marketing Association, IAB (on both the Legal Affairs and Public Policy Councils), American Marketing Association, eMarketing Association, and the Direct Marketing Club of New York. Mr. Steel also serves as the Chair of the Steel Media Charitable Giving Fund. He holds a B.A. in English from California State University at Long Beach, and has completed an executive MBA course at Harvard Business School.


Chad Holsinger . Mr. Holsinger, 42, has significant experience in global business development, business management, marketing, business strategy and team management within the digital advertising space, wireless and satellite communications industries. Since August 2010 he has served as President of Steel Media. From December 2009 until June 2010, Mr. Holsinger was Vice President U.S. Sales for Adenyo Inc., a Toronto, Ontario-based company where he successfully worked to build a U.S. presence for Adenyo through the acquisition of Movoxx LLC and ultimately the sale of Adenyo to Motrocity Inc. in April 2011. Earlier, Mr. Holsinger was recruited by Cordova Ventures to facilitate the reorganization and restructuring of Axonn, LLC where he served as Vice President Sales and Marketing from November 2006 until November 2009. During his tenure with Axonn, he successfully established product markets and value propositions, developed a global distribution strategy and defined the direction for Axonn products, as well as implementing a sales and operation planning process and hiring the appropriate supporting personnel. Axonn, LLC was successfully sold to Globalstar, Inc. in December 2009. Mr. Holsinger received a B.S. in Finance from California State University at Long Beach State.


Employment agreements


At the closing of the Steel Media acquisition, the Company entered into an employment agreements with each of Messrs. Steel and Holsinger, the material terms and conditions of each of which are described below.


Employment Agreement with Richard Steel . On October 30, 2014, the Company entered into an employment agreement with Richard Steel (the “ Steel Employment Agreement ”) pursuant to which he was engaged to serve as the Company’s President. The initial term of the agreement expires on October 30, 2018, subject to automatic 12 month extensions unless a non-renewal notice is received by either party at least 60 days prior to the expiration of the then current renewal term. Under the terms of the Steel Employment Agreement, Mr. Steel is to be nominated as a member of the Company’s board of directors during the term. Mr. Steel’s compensation includes: (i) an annual salary of $114,000, subject to increase at the discretion of the board of directors; (ii) a guaranteed annual cash bonus of $136,000 payable on January 31 of each year during the initial term of the agreement; (iii) an annual discretionary bonus, payable in cash or equity; (iv) options to purchase 600,000 shares of the Company’s Class A common stock, at an exercise price of $1.50 per share, vesting 50% on the third annual anniversary of the agreement and 50% on the fourth annual anniversary of the agreement; and (v) paid time off of 30 days per calendar year, subject to accrual limitations.


The Steel Employment Agreement provides that if the guaranteed annual cash bonus and the cash portion of any annual discretionary bonus would result in a reduction of the Earnout Consideration which may otherwise be payable to Mr. Steel by an amount greater than the sum of (i) the guaranteed annual cash bonus and (ii) the cash portion of the annual discretionary bonus, then the applicable portion of the guaranteed annual cash bonus and/or cash portion of the annual discretionary bonus resulting in such reduction will not be paid for the applicable period.



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In the event Mr. Steel is terminated without “cause” or as a result of a non-renewal after the initial four year term or resigns for “good reason” he is entitled to, among other things, (i) an amount equal to his base salary for 18 months, plus (ii) an amount equal to the greater of (x) the most recent guaranteed annual cash bonus that would be payable to Mr. Steel, calculated on an annualized basis up to the month he is terminated, and (y) $136,000.


The Steel Employment Agreement contains a customary invention assignments clause and Mr. Steel executed separate confidentiality and arbitration agreements with the Company.


Employment Agreement with Chad Holsinger . On October 30, 2014, the Company entered into an employment agreement with Chad Holsinger (the “ Holsinger Employment Agreement ”) pursuant to which he was engaged to serve as the Company’s Chief Revenue Officer. The initial term of the agreement expires on October 30, 2018, subject to automatic 12 month extensions unless a non-renewal notice is received by either party at least 60 days prior to the expiration of the then current renewal term. Mr. Holsinger’s compensation includes: (i) an annual salary of $114,000, subject to increase at the discretion of the board of directors; (ii) a guaranteed annual cash bonus of $111,000 payable on January 31 of each year during the initial term of the agreement; provided, however , that in the event Steel Media does not achieve the year-one EBITDA target, then the guaranteed annual bonus will not be due Mr. Holsinger for that period; (iii) an annual discretionary bonus, payable in cash or equity; (iv) an individual incentive bonus of up to $200,000 and a team incentive bonus of up to $500,000, subject to the achievement of the achievement of certain quarterly and annual revenue and gross profit margin goals; (v) options to purchase 250,000 shares of the Company’s Class A common stock, at an exercise price of $1.50 per share, vesting 25% on each of the first, second, third and fourth annual anniversary of the agreement; and (vi) paid time off of 22 days per calendar year, subject to accrual limitations.


The agreement provides that if the guaranteed annual cash bonus and the cash portion of any annual discretionary bonus or the incentive bonus would result in a reduction of the Earnout Consideration which may otherwise be payable to Mr. Holsinger by an amount greater than the sum of (i) the guaranteed annual cash bonus and (ii) the cash portion of the annual discretionary bonus, then the applicable portion of the guaranteed annual cash bonus and/or cash portion of the annual discretionary bonus resulting in such reduction will not be paid for the applicable period by the Company but will be paid directly by Mr. Steel.


In the event Mr. Holsinger is terminated without “cause” or resigns for “good reason”, he is entitled to, among other things, (i) an amount equal to his base salary for 12 months, plus (ii) an amount equal to the greater of (x) the most recent guaranteed annual cash bonus that would be payable to Mr. Holsinger, calculated on an annualized basis up to the month he is terminated, and (y) $111,000.


The Holsinger Employment Agreement contains a customary non-solicitation and invention assignments clause and Mr. Holsinger executed separate confidentiality and arbitration agreements with the Company.


The foregoing descriptions of the Steel Employment Agreement and the Holsinger Employment Agreement are not complete and are qualified in their entirety by reference to the full and complete terms of the Steel Employment Agreement and the Holsinger Employment Agreement which are attached to this Form 8-K as Exhibits 10.27 and 10.28 and incorporated herein by reference.


Director indemnification agreements


At the closing of the Steel Media acquisition, the Company entered into an indemnification agreement (the “ Steel Indemnification Agreement ”) with Mr. Steel pursuant to which the Company agreed to indemnify him (in excess of statutory indemnification) and provide for advancement of expenses in connection with any action brought, or threatened to be brought, against him in connection with his service or in his capacity as a director and officer of the Company or its subsidiaries. The Company expects to enter into similar agreements with the Company’s other directors in the near future. The foregoing description of the Steel Indemnification Agreement is not complete and is qualified in its entirety by reference to the full and complete terms of the Steel Indemnification Agreement which is attached to this Form 8-K as Exhibit 10.30 and incorporated herein by reference.


The information set forth above under Items 1.01. 2.01 and 2.03 is hereby incorporated by reference into this Item 5.02.



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Item 9.01

Exhibits.


(a)

Financial statements of business acquired .


The audited financial statements of Steel Media at December 31, 2013 and 2012 and for the years then ended will be filed under an amendment to this report within the time period specified by the rules and regulations of the Securities and Exchange Commission.


(b)

Pro forma financial information .


The unaudited pro forma financial statements giving effect to the acquisition of Steel Media will be filed under an amendment to this report within the time period specified by the rules and regulations of the Securities and Exchange Commission.


(d)

Exhibits .


No.

 

Description

2.1

 

Stock Purchase Agreement, dated October 30, 2014, by and among Richard Steel, Steel Media and Social Reality, Inc. **

4.7

 

Form of Class A common stock purchase warrant issued October 30, 2014

4.8

 

Warrant to Purchase Class A Common Stock issued October 30, 2014

10.18

 

Secured subordinated promissory note in the principal amount of $2,500,000, dated October 30, 2014, issued by Social Reality, Inc. to Richard Steel

10.19

 

Escrow Agreement, dated October 30, 2014, by and among Social Reality, Inc., Richard Steel and Wells Fargo Bank, National Association, as escrow agent.

10.20

 

Escrow Agreement, dated October 30, 2014, by and among Social Reality, Inc., Richard Steel and Lowenstein Sandler LLP, as escrow agent

10.21

 

Registration Rights Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Richard Steel

10.22

 

Subordination Agreement, dated October 30, 2014, by and among Social Reality, Inc., Richard Steel and Victory Park Management, LLC

10.23

 

Financing Agreement, dated as of October 30, 2014, by and among Social Reality, Inc., the Guarantors, the Lenders and Victory Park Management, LLC as Agent

10.24

 

Senior Secured Term Note, dated October 30, 2014, in the principal amount of $9,000,000 issued to the original lender under the Financing Agreement

10.25

 

Pledge and Security Agreement, dated October 30, 2014 by and among Social Reality, Inc., Steel Media and Victory Park Management, LLC

10.26

 

Registration Rights Agreement, dated October 30, 2014, by and among Social Reality, Inc. and the lenders listed on the schedule of Buyers thereto

10.27

 

Employment Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Richard Steel

10.28

 

Employment Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Chad Holsinger

10.29

 

Employment Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Adam Bigelow

10.30

 

Indemnification Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Richard Steel

**

 

Exhibits and schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. Social Reality, Inc. agrees to furnish a supplemental copy of an omitted exhibit or schedule to the SEC upon request.








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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: November 4, 2014

By:

/s/ Chris Miglino

 

 

Chris Miglino, Chief Executive Officer









10




Exhibit Index


No.

 

Description

2.1

 

Stock Purchase Agreement, dated October 30, 2014, by and among Richard Steel, Steel Media and Social Reality, Inc. **

4.7

 

Form of Class A common stock purchase warrant issued October 30, 2014

4.8

 

Warrant to Purchase Class A Common Stock issued October 30, 2014

10.18

 

Secured subordinated promissory note in the principal amount of $2,500,000, dated October 30, 2014, issued by Social Reality, Inc. to Richard Steel

10.19

 

Escrow Agreement, dated October 30, 2014, by and among Social Reality, Inc., Richard Steel and Wells Fargo Bank, National Association, as escrow agent.

10.20

 

Escrow Agreement, dated October 30, 2014, by and among Social Reality, Inc., Richard Steel and Lowenstein Sandler LLP, as escrow agent

10.21

 

Registration Rights Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Richard Steel

10.22

 

Subordination Agreement, dated October 30, 2014, by and among Social Reality, Inc., Richard Steel and Victory Park Management, LLC

10.23

 

Financing Agreement, dated as of October 30, 2014, by and among Social Reality, Inc., the Guarantors, the Lenders and Victory Park Management, LLC as Agent

10.24

 

Senior Secured Term Note, dated October 30, 2014, in the principal amount of $9,000,000 issued to the original lender under the Financing Agreement

10.25

 

Pledge and Security Agreement, dated October 30, 2014 by and among Social Reality, Inc., Steel Media and Victory Park Management, LLC

10.26

 

Registration Rights Agreement, dated October 30, 2014, by and among Social Reality, Inc. and the lenders listed on the schedule of Buyers thereto

10.27

 

Employment Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Richard Steel

10.28

 

Employment Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Chad Holsinger

10.29

 

Employment Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Adam Bigelow

10.30

 

Indemnification Agreement, dated October 30, 2014, by and between Social Reality, Inc. and Richard Steel

**

 

Exhibits and schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. Social Reality, Inc. agrees to furnish a supplemental copy of an omitted exhibit or schedule to the SEC upon request.




Exhibit 2.1

STOCK PURCHASE AGREEMENT

AMONG

RICHARD STEEL,

STEEL MEDIA

AND

SOCIAL REALITY, INC.

dated as of

October 30, 2014





TABLE OF CONTENTS

 

Page

ARTICLE I.  DEFINITIONS; CONSTRUCTION

1

 

 

 

1.1

Definitions

1

1.2

Table of Defined Terms

10

1.3

Construction

12

 

 

 

ARTICLE II.  PURCHASE AND SALE OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES

13

 

 

 

2.1

Purchase and Sale of Shares

13

2.2

Purchase Price

13

2.3

Closing

13

2.4

Working Capital Adjustment

15

2.5

Earnout Payments

18

2.6

Books and Records

24

 

 

 

ARTICLE III.  REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

24

 

 

 

3.1

Organization and Good Standing

25

3.2

Capitalization

25

3.3

Authorization of Agreement

25

3.4

Conflicts; Consents of Third Parties

25

3.5

Subsidiaries

26

3.6

Financial Statements

26

3.7

Taxes

26

3.8

Real Property

27

3.9

Tangible Personal Property

27

3.10

Assets

27

3.11

Intellectual Property

27

3.12

Material Contracts

28

3.13

Employee Matters

28

3.14

Litigation

29

3.15

Compliance with Laws; Permits

29

3.16

Absence of Certain Changes

30

3.17

Related Party Transactions

30

3.18

Financial Advisors

30

3.19

Environmental

30

3.20

No Other Representations or Warranties; Schedules

30

 

 

 




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ARTICLE IV.  REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER

31

 

 

 

4.1

Ownership and Transfer of Shares

31

4.2

Authorization of Agreement

31

4.3

Conflicts; Consents of Third Parties

31

4.4

Financial Advisors

32

4.5

Investment

32

4.6

No Other Representations or Warranties; Schedules

32

 

 

 

ARTICLE V.  REPRESENTATIONS AND WARRANTIES OF THE BUYER

33

 

 

 

5.1

Organization and Good Standing

33

5.2

Authorization of Agreement

33

5.3

Conflicts; Consents of Third Parties

33

5.4

Litigation

34

5.5

Valid Issuance; SEC Filings

34

5.6

Assets

35

5.7

Intellectual Property

35

5.8

Employee Matters

35

5.9

Compliance with Laws

36

5.10

Absence of Certain Changes

36

5.11

Financial Advisors

36

5.12

Financial Capability

36

5.13

No Other Representations or Warranties; Schedules

36

 

 

 

ARTICLE VI.  COVENANTS OF THE PARTIES

37

 

 

 

6.1

Access to Records

37

6.2

Employees; Employee Benefits

37

6.3

Public Announcements

37

6.4

Expenses

38

6.5

Transfer Taxes

38

6.6

Tax Matters

38

6.7

Indemnification of Directors and Officers

40

6.8

Noncompetition; Non-Solicitation

41

6.9

Board Seat

42

6.10

Put Right

42

 

 

ARTICLE VII.  INDEMNIFICATION

43

 

 

 

7.1

Survival of Representations and Warranties

43

7.2

Indemnification by the Seller

43

7.3

Indemnification by the Buyer

44

7.4

Claims Procedures

44



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7.5

Limitations

46

7.6

Calculation and Satisfaction of Losses

47

7.7

Effect on Purchase Price

48

7.8

Sole and Exclusive Remedy

48

 

 

 

ARTICLE VIII.  GENERAL PROVISIONS

48

 

 

 

8.1

Further Assurances

48

8.2

Notices

48

8.3

Amendment; Waiver

49

8.4

Assignment

49

8.5

No Third Party Beneficiaries

50

8.6

Severability

50

8.7

Entire Understanding

50

8.8

Captions

50

8.9

Counterparts; Electronic Signatures

50

8.10

Governing Law; Venue; Wavier of Trial by Jury

51

8.11

Currency

51




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STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”), dated as of October 30, 2014, is by and among Richard Steel (the “ Seller ”), Steel Media, a California corporation (the “ Company ”) and Social Reality, Inc., a Delaware corporation (the “ Buyer ”).

PRELIMINARY STATEMENTS

A.

The Seller is the owner of 100,000 shares of common stock, no par value per share, of the Company (the “ Shares ”), constituting 100% of the issued and outstanding shares of the Company.  

B.

The Seller desires to transfer, assign and sell to the Buyer, and the Buyer desires to acquire and purchase from the Seller, all of the Shares, and thereby purchase and acquire the Business (as defined herein) of the Company on the terms and subject to the conditions contained in this Agreement.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I.
DEFINITIONS; CONSTRUCTION

1.1

Definitions .  

For purposes of this Agreement:

Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

Business ” means the digital advertising business involving the outsourced execution and management of digital advertising campaigns across display, mobile, video and email advertising channels.

Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in New York City.

Business Employee ” means any employee of the Company immediately prior to the Closing.

Buyer Common Stock ” means Class A common stock of the Buyer, $0.001 par value per share.



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Buyer Change of Control ” means any one of the following, whether in one or a series of transactions, directly or indirectly: (i) the consummation of a merger or consolidation of the Buyer or the Company with or into another Person (except a merger or consolidation in which the holders of capital stock of the Buyer or the Company, as applicable, immediately prior to such merger or consolidation collectively continue to hold at least 60% of the earning power, voting power or capital stock of the surviving Person); (ii) the issuance, transfer, sale or disposition to another Person in a single transaction or in a series of closely related transactions of the voting power or capital stock of the Buyer or the Company, as applicable, if after such issuance, sale, transfer or disposition such Person would hold more than 40% of the voting power or capital stock of the Buyer or the Company; (iii) if the Persons who, on the date of this Agreement, constitute a majority of the board of directors of the Buyer or the Company (collectively, the “ Original Directors ”) or Persons nominated and/or appointed as directors by vote of a majority of such Persons, shall for any reason cease to constitute a majority of either such board of directors; (iv) a sale, transfer or disposition of all or substantially all of the assets or earning power of the Buyer, the Company or the Business; or (v) dissolution, liquidation or winding up of the affairs of the Buyer or the Company.

Buyer Intellectual Property ” means the Intellectual Property owned by or licensed to the Buyer and, in the case of registered Buyer Intellectual Property, that which is set forth on Schedule 5.7 of the Buyer Disclosure Schedule.

Cause ” has the meaning set forth in the Seller Employment Agreement.

Claim ” means a Third Party Claim or Interparty Claim, as applicable.

Closing Date Share Price ” $1.0474, subject to proportionate adjustment in the event of a stock split, stock dividend or distribution, recapitalization or similar event.

 “ Closing Price ” means (a) if the Buyer Common Stock is then listed or quoted on the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market or any other national securities exchange, the closing price per share of the Buyer Common Stock for such date (or the nearest preceding date) on such Eligible Market on which the Buyer Common Stock is then listed or quoted; or (b) if clause (a) is not applicable and prices for the Buyer Common Stock are then quoted on the OTC Bulletin Board or any tier of the OTC Markets, the closing bid price per share of the Buyer Common Stock for such date (or the nearest preceding date) so quoted.  

Code ” means the Internal Revenue Code of 1986, as amended.

Company Intellectual Property ” means the Intellectual Property owned by or licensed to the Company and, in the case of registered Company Intellectual Property, that which is set forth on Schedule 3.11 of the Company Disclosure Schedule.

Contract ” means any written or verbal contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, or license in effect on the Closing Date or any offers or solicitations made to any third party to enter into any of the foregoing outstanding on the Closing Date.



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Cumulative EBITDA Amount ” means the sum of the Earnout EBITDA for the First Earnout Period and the Earnout EBITDA for the Second Earnout Period.

Cumulative EBITDA Target ” means Eight Million Nine Hundred Forty-Three  Thousand Dollars ($8,943,000).

Current Assets ” means the current assets of the Company consisting of accounts receivable, unbilled receivables, prepaid expenses, inventory and other current assets as of the Closing Date and including cash and cash equivalents as determined in accordance with GAAP, subject to the principles and adjustments set forth on Schedule 1.1 hereto.

Current Liabilities ” means the current liabilities of the Company consisting of accounts payable, accrued expenses and other current liabilities as of the Closing Date determined in accordance with GAAP, subject to the principles and adjustments set forth on Schedule 1.1 hereto.

Earnout Consideration ” means the Year-One Earnout Consideration and/or the Year-Two Earnout Consideration, as applicable.

Earnout Payment ” means the sum of the (x) the cash amount of any Earnout Consideration actually paid to the Seller, plus (y) the dollar value (based on the applicable Earnout Share Price) of the shares of Buyer Common Stock issued to the Seller as Earnout Consideration.

Earnout Period ” means each of the First Earnout Period and the Second Earnout Period, as applicable.

Earnout Share Price ” means the volume weighted average price (with respect to any Trading Day for which such average is being calculated, the aggregate sales price of all trades of Buyer Common Stock during such Trading Day divided by the total number of shares of Buyer Common Stock traded during such Trading Day) of the Buyer Common Stock for the twenty (20) Trading Days immediately preceding, up to and including, the last day of an Earnout Period as reported by Bloomberg L.P. using the AQR function.

Earnout Shares ” means any shares of Buyer Common Stock issued to the Seller in satisfaction of an Earnout Payment.

EBITDA ” means, with respect to the Company and any now or hereafter existing subsidiaries, earnings before interest, taxes, depreciation and amortization for the twelve month period ending on the last day of the applicable Earnout Period, each of the foregoing calculated in accordance with GAAP, and then adjusted to add back items of expense: that are: (i) personal to the current or former owners of the Company in nature (to the extent it relates to any period prior to the Closing), (ii) non-recurring in the ordinary course, (iii) expenses attributable to Buyer’s ownership and control of the Company, including without limitation, increased staffing costs, increased vendor costs from vendors not previously used by the Company, costs relating to audits, costs relating to compliance with federal and state securities Laws and other increased administrative and operational costs, which are incurred at the request or direction of the Buyer, (iv) any expense incurred in connection with the conduct of the



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Business that is not consistent with past practice and not approved by the Seller, and (v) any expense giving rise to or paid in satisfaction of an indemnification claim under Section 7.3 (collectively, the “ EBITDA Adjustments ”).  

Eligible Market ” means the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the NYSE MKT, any other national securities exchange, the OTCBB, the OTCQX or the OTCQB.

Environmental Laws ” means any federal, state or local law, statute, ordinance, rule, regulation, license, permit, authorization, approval, consent, court order, judgment, decree, injunction, code, requirement or agreement with any Governmental Body (x) relating to pollution (or the cleanup thereof or the filing of information with respect thereto), human health or the protection of air, surface water, ground water, drinking water supply, land (including land surface or subsurface), plant and animal life or other natural resources, or (y) concerning exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production or disposal of Regulated Substances as no in effect.  

Equity Conditions ” means each of the following, which must be satisfied through the applicable date of determination:

(i)

the Buyer shall have complied in all respects with all applicable federal and state securities laws and regulations and all rules and regulations of the Eligible Market(s) on which the Buyer Common Stock shall have been listed for trading in respect of the offer, sale and issuance of the Buyer Common Stock under this Agreement;

(ii)

the Buyer Common Stock (including all shares of Buyer Common Stock to be received by the Seller) shall be listed or designated for quotation (as applicable) on an Eligible Market and no Trading Market Event (or event which with notice or passage of time would be a Trading Market Event) shall have occurred;

(iii)

the Buyer shall be in compliance in all material respects with all of its obligations under this Agreement;

(iv)

all Buyer Common Stock issued pursuant to this Agreement when issued shall be validly issued, fully paid and non-assessable, and, assuming Seller is not an affiliate of Buyer at such time, the Earnout Shares shall be freely tradeable (subject to the Section 2.10 of the Registration Rights Agreement) by the Seller, without restriction of any kind or nature, and the certificates evidencing such Earnout Shares, shall be free of any legend or other restrictive notation;

(v)

the Buyer is, and has been since the date of this Agreement, in full and timely compliance with all of its obligations under the Securities Exchange Act and the regulations promulgated thereunder;

(vi)

neither the Buyer nor any of its Subsidiaries, including the Company, has suffered a Material Adverse Effect since the date of this Agreement; and  



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(vii)

the Seller shall have received a written legal opinion from Buyer’s counsel (who shall be reasonably acceptable to the Seller), dated and effective as of the date of determination, in the form of Exhibit A , annexed hereto and made a part hereof.

Equity Conditions Failure ” means that on any applicable date of determination any of the Equity Conditions have not been satisfied, except for any Equity Condition that is to be satisfied contemporaneously with issuance of the Buyer Common Stock, in which case, such Equity Condition is satisfied at the time of such issuance.

Estimated Closing Balance Sheet ” means an estimated balance sheet of the Company as of 11:59 p.m. on the Business Day immediately preceding the Closing Date  prepared in accordance with GAAP and Section 2.4(a) .

Estimated Closing Working Capital ” means a statement of the amount of Working Capital derived from the Estimated Closing Balance Sheet prepared in accordance with GAAP and Section 2.4(a) .

First Earnout Period ” means the period commencing on the November 1, 2014 and ending on October 31, 2015.

Fundamental Representations ” means Section 3.1 (Organization and Good Standing), Section 3.2 (Capitalization), Section 3.3 (Authorization of Agreement), Section 3.4(a)(i) (Conflicts), Section 3.18 (Financial Advisors), Section 4.1 (Ownership and Transfer of Shares), Section 4.2 (Authorization of Agreement), Section 4.4 (Financial Advisors), Section 4.5 (Investment), Section 5.1 (Organization and Good Standing), Section 5.2 (Authorization of Agreement), Section 5.3(a)(i) (Conflicts) , Section 5.5 (Valid Issuance; SEC Filings), Section 5.11 (Financial Advisors) and Section 5.12 (Financial Capability).

GAAP ” means generally accepted accounting principles in the United States as in effect on the date hereof, using principles consistently applied by the Company.

Good Reason ” has the meaning set forth in the Seller Employment Agreement.

Governmental Body ” means any government or quasi-governmental or regulatory agency or body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency, commission, instrumentality or authority thereof, or any court or arbitrator (public or private), or any self-regulatory organization, including any Eligible Market.

Income Taxes ” means any income, franchise, net profits, excess profits or similar Taxes, measured on the basis of net income.

Income Tax Return ” means any Tax Return related to Income Taxes.

Indebtedness ” of any Person means, without duplication: (i) the principal of and, accreted value and accrued and unpaid interest in respect of (A)  indebtedness of such Person for borrowed money and (B) interest bearing indebtedness evidenced by notes, debentures or bonds for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of



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such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable and other accrued current liabilities); (iii) all obligations of the type referred to in clauses (i) through (ii) of any Persons the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise; (iv) all capitalized lease obligations; and (v) all obligations of the type referred to in clauses (i) through (iii) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person).

Indemnification Escrow Agent ” means Wells Fargo Bank, National Association.

Indemnification Escrow Agreement ” means that certain escrow agreement, dated as of the date of this Agreement, by and among the Seller, the Buyer and the Indemnification Escrow Agent.

Intellectual Property ” means all intellectual property rights used by the Company arising from or in respect of the following: (i) all patents and applications therefor, including continuations, divisionals, continuations-in-part, re-examinations, or reissues of patent applications and patents issuing thereon (collectively, “ Patents ”), (ii) all trademarks, service marks, trade names, service names, brand names, trade dress rights, logos, Internet domain names and corporate names, together with the goodwill associated with any of the foregoing, and all applications, registrations and renewals thereof, (collectively, “ Marks ”), (iii) copyrights and registrations and applications therefor, works of authorship and mask work rights (collectively, “ Copyrights ”) and (iv) all Software and Technology of the Company.

IRS ” means the United States Internal Revenue Service and, to the extent relevant, the United States Department of Treasury.

Knowledge of the Buyer ” means the actual knowledge after reasonable inquiry of Christopher Miglino.

Knowledge of the Company ” means the actual knowledge after reasonable inquiry of Richard Steel or Chad Holsinger.

Law ” means any statute, law, ordinance, regulation, rule, code, injunction, judgment, decree or order of any Governmental Body.

Legal Proceeding ” means any judicial, administrative or arbitral actions, investigations, suits or proceedings (public or private) by or before a Governmental Body.

Liability ” means any debt, liability or obligation (whether direct or indirect, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due) and including all costs and expenses relating thereto.

Lien ” means any lien, encumbrance, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude or transfer restriction.



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Losses ” means losses, liabilities, claims, demands, judgments, damages, fines, payments, penalties, awards, suits, actions, costs and expenses; provided , that ,  “ Losses ” shall not include any special, incidental, punitive, consequential or similar damages (including damages for lost profits, business interruption or diminution of value, whether or not known, unknown, or notice of which has been given before or after the fact) other than special, incidental, punitive, consequential or similar damages (including damages for lost profits, business interruption or diminution of value) that are awarded to a third party pursuant to a Third Party Claim.

Material Adverse Effect ” means with respect to any Person, any event, change, circumstance, effect or state of facts that is materially adverse to the business, financial condition, operations, assets, liabilities or results of operations of such Person;   provided , however , that a Material Adverse Effect shall not include the effect of any event, change, circumstance, effect or state of facts arising out of or attributable to any of the following: (i) the consummation of the transactions contemplated by this Agreement, (ii) matters generally applicable to the industry in which such Person operates, ( iii) the announcement or other disclosure of the transaction contemplated by this Agreement, ( iv) any changes in the United States or global economy or capital or financial markets generally, ( v) any changes in state, federal or foreign laws, including, without limitation, proposed or enacted legislation or regulatory changes or changes in GAAP or regulatory accounting principles applicable to such Person, ( vi) consequences of natural disasters, hostilities, acts of terrorism or war, or any material escalation of any such hostilities, acts of terrorism or war existing as of the date of this Agreement, or ( vii) failure in and of itself (as distinguished from any change or event giving rise or contributing to such failure) by such Person to meet any projected financial performance; provided, that with respect to each of clauses ( ii), ( iv), (v) and ( vi), such effect does not have a disproportionately negative impact on such Person, as compared to other companies in the industries, markets or geographic areas in which such Person operates.

Maximum Target Working Capital ” means the sum of (x) the Target Working Capital plus (y) $200,000.

Minimum Target Working Capital ” means the difference of (x) Target Working Capital minus (y) $200,000.

Order ” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body.

Ordinary Course of Business ” means the ordinary and usual course of normal operations of the Business consistent with past practice.

 “ Permits ” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Body.

Permitted Liens ” means (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance; (ii) statutory liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings; (iii) mechanics’, carriers’,



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workers’, repairers’ and similar Liens arising or incurred in the Ordinary Course of Business;  (iv) title of a lessor under a capital or operating lease; (v) restrictions imposed by federal and state securities laws; and (vi) such other imperfections in title, charges, easements, restrictions and encumbrances which would not, in each case, result in a Material Adverse Effect on such Person.

Person ” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

Pre-Closing Tax Period means any Tax period ending on or before 11:59 p.m. on the day immediately preceding the Closing Date; and, with respect to a Straddle Period, the portion of such Tax period ending on 11:59 p.m. on the day immediately preceding the Closing Date.

Regulated Substances ” means pollutants, contaminants, hazardous or toxic substances, compounds or related materials or chemicals, hazardous materials, hazardous waste, flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products.

Representatives ” means the officers, directors, managers, trustees, employees, agents, counsel, accountants, financial advisors, and other representatives of a party or other Person.

Second Earnout Period ” means the period commencing on November 1, 2015 and ending on October 31, 2016.

Securities Act ” means the Securities Act of 1933, as amended.

Securities Exchange Act ” means the Securities Exchange Act of 1934, as amended.

Seller Employment Agreement ” means the Employment Agreement, dated as of the date hereof, by and among the Seller, the Company and the Buyer and attached hereto as Exhibit D-1 .

Separation Date ” means the date on which the Seller shall cease to be employed by the Company or the Buyer following the occurrence of a Separation Event.

Separation Event ” shall mean the termination of the Seller’s employment under the Seller Employment Agreement by (i) the Buyer or the Company without Cause or (ii) the Seller for Good Reason.

Software ” means any and all computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code.



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Subordination Agreement ” means the subordination agreement, dated as of the date of this Agreement, by and among the Seller, the Buyer and Victory Park Management, LLC.

Target Working Capital ” means an amount equal to One Million Three Hundred Thousand Dollars ($1,300,000).

Tax” or “ Taxes ” means with respect to any Person all federal, state, local, and foreign taxes, assessments or other government charges, including, without limitation, any income, alternative or add on minimum tax, estimated gross income, gross receipts, sales, use, ad valorem , value added, transfer, capital stock franchise, profits, license, registration, recording, documentary, intangibles, gains, withholding, payroll, employment, social security (or similar), unemployment, disability, excise, severance, stamp, occupation, premium, property (real and personal), environmental or windfall profit tax, custom duty or other tax, governmental fee or other like assessment, charge, or tax of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Body.

Taxing Authority ” means the IRS and any other Governmental Body responsible for the administration of any Tax.

Tax Return means all reports, returns, declarations, statements or other information required to be supplied to a Taxing Authority in connection with Taxes and any amendment thereof.

Technology ” means, collectively, all information, designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, research and development, technical data, programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other writings, and other tangible embodiments of the foregoing, in any form whether or not specifically listed herein, and all related technology, that are used in, incorporated in, embodied in, displayed by or relate to, or are used by the Company.

Termination Date ” has the meaning set forth in the Seller Employment Agreement.

Trading Day ” means any day on which the Buyer Common Stock is traded on an Eligible Market.

Trading Market Event ” means any of the following: (x) if the Buyer Common Stock or any shares of Buyer Common Stock issuable pursuant to this Agreement shall cease or fail to be listed for trading or quoted on an Eligible Market; or (y) if the Buyer shall no longer be eligible to have its securities listed or quoted on any Eligible Market or be subject to any disciplinary or other proceeding by or involving any Eligible Market.

Transaction Documents ” means this Agreement, the Note, the Registration Rights Agreement, the Employment Agreements, the Escrow Agreement, the Indemnification Escrow Agreement and all agreements, documents, certificates and instruments executed and delivered by the parties in connection with this Agreement.



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Victory Park Financing ” means the transactions contemplated by the Financing Agreement, dated as of the date hereof, by and among the Buyer, as the borrower, the guarantors from time to time party thereto, the lenders party thereto and Victory Park Management, LLC, as agent.

Working Capital ” means, as of any date, (a) Current Assets minus (b) Current Liabilities, all as determined in accordance GAAP and Section 2.4(a) and in a manner consistent with Schedule 1.1 attached hereto.

Year-One Earnout Consideration ” means up to Four Million Dollars ($4,000,000).

Year-One EBITDA Target ” means Four Million Eighty-Nine Thousand Dollars ($4,089,000).

Year-Two Earnout Consideration ” means up to Four Million Dollars ($4,000,000), subject to reduction as provided in Section 2.4(i) .

Year-Two EBITDA Target ” means Four Million Eight Hundred Fifty-Four Thousand Dollars ($4,854,000).

1.2

Table of Defined Terms .  Terms that are not defined in Section 1.1 have the meanings set forth in the following Sections:

Defined Term

Section

Agreement

Preamble

Buyer

Preamble

Buyer Benefit Plans

5.8(a)

Buyer Disclosure Schedule

Article V

Buyer Indemnified Party(ies)

7.2

Buyer Interim Financial Statements

5.5(b)

Cap

7.5(a)

Closing

2.3(a)

Closing Cash Adjustment Notice

2.4(d)

Closing Cash Payment

2.2

Closing Date

2.3(a)

Closing Date Balance Sheet

2.4(d)(i)

Closing Report Objection Notice

2.4(e)

Closing Reports

2.4(d)(ii)

Closing Statement

2.4(d)(ii)

Closing Working Capital

2.4(d)

Company

Preamble

Company Benefit Plan

3.13(b)

Company Disclosure Schedule

Article III

Competitive Activities

6.8(a)

Competitor

6.8(a)



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Continuing Employees

6.2

Copyrights

Definitions

Deductible

7.5(b)

Downward Closing Cash Adjustment

2.4(i)

Earnout EBITDA

2.5(b)

Earnout Expert

2.5(d)

Earnout Notice

2.5(b)

Earnout Objection Notice

2.5(c)

Earnout Objection Period

2.5(c)

EBITDA Adjustments

Definitions

Employee Transfer

2.5(p)

Employment Agreement

2.3(a)(ii)(E)

ERISA

3.13(b)

Escrow Agent

2.3(a)(ii)(F)

Escrow Agreement

2.3(a)(ii)(F)

Escrow Shares

2.3(a)(iii)

Escrow Shares Election Period

6.10(a)

Estimated Closing Reports

2.4(a)

Estimated Working Capital Excess

2.4(b)

Estimated Working Capital Shortfall

2.4(b)

Excluded Revenue

2.5(p)

Financial Statements

3.6

Fundamental Cap

7.5(a)

Indemnification Escrow Account

2.2

Indemnification Escrow Amount

2.2

Indemnified Party

7.4(a)

Indemnifying Party

7.4(a)

Interim Earnout Payment Amount

2.5(m)

Interparty Claim

7.4(c)

Interparty Claim Notice

7.4(c)

Marks

Definitions

Material Contracts

3.12(a)

Note

2.2

Note Default Notice

6.10(a)

Patents

Definitions

Personal Property Leases

3.9

Purchase Price

2.2

Put Notice

6.10(b)

Put Period

6.10(b)

Put Price

6.10(c)

Put Right

6.10(b)

Put Shares

6.10(b)

Original Directors

Definitions

Qualifying Claims

7.5(b)



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Real Property Lease(s)

3.8

Records

6.1

Registration Rights Agreement

2.3(a)(ii)(D)

Related Person

3.17

Restricted Period

6.8(a)

Shares

Recitals

Seller

Preamble

Seller Disclosure Schedules

Article IV

Seller Indemnified Party(ies)

7.3

Seller Interim Financial Statements

3.6

Straddle Period

6.6(a)

SEC

5.5(b)

SEC Documents

5.5(b)

Stock Payment Notice

2.5(s)

Third Party Claim

7.4(a)

Third Party Claim Notice

7.4(a)

Transfer Taxes

6.5

Upward Closing Cash Adjustment

2.4(i)

WC Expert

2.4(f)

Year End Financial Statements

3.6


1.3

Construction .

(a)

Unless the context otherwise requires, as used in this Agreement: (i) an accounting term not otherwise defined herein has the meaning ascribed to it in accordance with GAAP; (ii) “or” is not exclusive; (iii) “including” and its variants mean “including, without limitation” and its variants; (iv) words defined in the singular have the parallel meaning in the plural and vice versa; (v) words of one gender shall be construed to apply to each gender; (vi) the words “hereof”, “herein”, “hereby”, “hereto” and derivative or similar words refer to this entire Agreement, including the Schedules and Exhibits hereto; (vii) the terms “Article”, “Section”, “Exhibit” and “Schedule” refer to the specified Article, Section, Exhibit or Schedule of or to this Agreement; and (viii) any references to time shall be references to New York, New York time.

(b)

The Schedules and Exhibits to this Agreement are incorporated herein by reference and made a part hereof for all purposes. Disclosure of any item or matter on any Schedule shall not constitute an admission or indication that such item or matter is material or would have a Material Adverse Effect, or that any such item or matter is required to be disclosed thereon.  No disclosure on a Schedule relating to a possible breach or violation of any Contract, Law or Order shall be construed as an admission or indication that breach or violation exists or has actually occurred. Any capitalized terms used in any Schedule or Exhibit, but not otherwise defined therein, shall have the meaning set forth in this Agreement.

(c)

The Buyer, on the one hand, and the Seller, on the other, are each represented by legal counsel and have each participated in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation should arise, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall



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arise favoring or burdening any party by virtue of the authorship of any of the provisions of this Agreement.

(d)

All financial calculations and financial statements required by, or described in this Agreement, including, without limitation, Current Assets, Current Liabilities, Estimated Closing Balance Sheet, EBITDA, Estimated Working Capital, Closing Working Capital, Closing Date Balance Sheet and Financial Statements shall, except as otherwise expressly provided herein, be calculated or prepared, as the case may be, in accordance with GAAP.

ARTICLE II.
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES

2.1

Purchase and Sale of Shares .  On the Closing Date and pursuant to the terms and upon the conditions of this Agreement, the Buyer agrees to purchase and acquire from the Seller, and the Seller agrees to sell and transfer to the Buyer, the Shares, free and clear of all Liens, being all of the issued and outstanding capital stock of the Company.

2.2

Purchase Price .  In consideration of the Seller’s transfer of the Shares to the Buyer pursuant to this Agreement, the Buyer shall pay to the Seller up to an aggregate of Twenty Million Dollars ($20,000,000), consisting of: (i) a cash payment at Closing equal to Seven Million Five Hundred Thousand Dollars ($7,500,000) (the “ Closing Cash Payment ”), subject to adjustment as provided in Section 2.4 hereof; (ii) delivery of cash, by wire transfer of immediately available funds, at Closing in the amount of Two Million Dollars ($2,000,000) (the “ Indemnification Escrow Amount ”) to the Indemnification Escrow Agent, which Indemnification Escrow Amount shall be held in an escrow account (the “ Indemnification Escrow Account ”) and disbursed in the manner set forth in the Indemnification Escrow Agreement; (iii) the issuance by the Buyer to the Seller at the Closing of a 5% secured subordinated promissory note in the principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000), in the form attached hereto as Exhibit B (the “ Note ”); and (iv) the Earnout Payments having an aggregate value of up to Eight Million Dollars ($8,000,000).  For purposes of this Agreement, the “ Purchase Price ” shall mean the sum of: (w) the Closing Cash Payment, as adjusted pursuant to Section 2.4 , plus (x) the Indemnification Escrow Amount, plus (y) the principal amount of the Note, plus (z) the aggregate amount of the Earnout Payments (including the value of any shares of Buyer Common Stock issued in connection therewith).

2.3

Closing .

(a)

The consummation of the transactions contemplated by this Agreement is herein referred to as the “ Closing ”, and the date on which the Closing occurs is herein referred to as the “ Closing Date ”. The Closing shall take place at 10:00 a.m. local time, at the offices of Lowenstein Sandler LLP, 1251 Avenue of the Americas, New York, New York 10020, on the date hereof. Regardless of the actual time of the Closing, except as otherwise expressly provided herein, for tax and accounting purposes, the Closing shall be deemed effective as of 11:59 p.m. on the day immediately preceding the Closing Date. Unless the context indicates otherwise, all references herein to the “ Closing Date ” and the “ Closing ” shall mean the date on which and the time at which the Closing is effective. At the Closing:



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(i)

The Buyer shall (i) pay to the Seller the Closing Cash Payment by wire transfer of immediately available funds to the account or accounts designated in writing by the Seller to the Buyer prior to the Closing Date, and (ii) deliver the Indemnification Escrow Amount, by wire transfer of immediately available funds, to the Indemnification Escrow Agent for deposit in the Indemnification Escrow Account on the Closing Date.

(ii)

The Buyer shall deliver, or cause to be delivered, to the Seller the following documents, instruments and other items:

A.

A certificate, dated within five (5) Business Days of the Closing Date, from the Secretary of State of the State of Delaware, certifying that the Buyer is in good standing in Delaware;

B.

A certificate, dated as of the Closing Date, of the secretary of the Buyer (i) certifying and attaching the resolutions of the board of directions of the Buyer approving the execution, delivery and performance of this Agreement and each of the other Transaction Documents to which it is a party, (ii) certifying and attaching the certificate of incorporation and by-laws of the Buyer, each as in effect on the date hereof, and (iii) certifying the incumbency and signatures of the officers of the Buyer duly authorized to act on its behalf in connection with the transactions contemplated by this Agreement and by the other Transaction Documents to which it is a party;

C.

an original duly executed Note; and

D.

a duly executed registration rights agreement, in the form of Exhibit C , annexed hereto and made a part hereof (the “ Registration Rights Agreement ”);

E.

an Employment Agreement executed by the Buyer, among the Company and the Buyer and each of the individuals listed on Schedule 2.3(a) (the “ Employment Agreements ”), in the form of Exhibits D-1 , D-2 and D-3 , annexed hereto and made a part hereof, providing for the continued employment of the individuals listed on Schedule 2.3 with the Company on the terms and conditions therein;

F.

an escrow agreement executed by the Buyer, among the Buyer, the Seller and Lowenstein Sandler LLP, as escrow agent (the “ Escrow Agent ”), in the form of Exhibit E , annexed hereto and made a part hereof (the “ Escrow Agreement ”);

G.

the Indemnification Escrow Agreement, duly executed by the Buyer;

H.

an indemnification agreement executed by the Buyer, among the Buyer and the Seller in the form of Exhibit F , annexed hereto and made a part hereof; and

I.

evidence satisfactory to the Seller that the Buyer has complied with the provisions of Section 6.9(b) , including delivery to the Seller of the applicable directors’ and officers’ liability insurance policy.



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(iii)

The Buyer shall deliver to the Escrow Agent a stock certificate, registered in the name of the Seller, representing 2,386,863 shares of Buyer Common Stock (the “ Escrow Shares ”).  

(iv)

The Seller shall deliver, or cause to be delivered, to the Buyer the following documents, instruments and other items:

A.

a certificate, dated within five (5) Business Days of the Closing Date, from the Secretary of State of the State of California, certifying that the Company is in good standing in California;

B.

stock certificate(s) evidencing the Shares, free and clear of all Liens, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank, with all required stock transfer tax stamps affixed thereto;

C.

a certificate, dated as of the Closing Date, of the secretary of the Company (i) certifying and attaching the resolutions of the board of directors of the Company approving the execution, delivery and performance of this Agreement and each of the other Transaction Documents to which it is a party, (ii) certifying and attaching the certificate of incorporation and bylaws of the Company, each in effect on the date hereof, and (iii) certifying the incumbency and signatures of the officers of the Company duly authorized to act on its behalf in connection with the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party;

D.

the Estimated Closing Reports;

E.

the Escrow Agreement executed by the Seller;

F.

the Indemnification Escrow Agreement, duly executed by the Seller; and

G.

all other agreements, documents, instruments or certificates required to be delivered by the Seller at or prior to the Closing pursuant to this Agreement.

2.4

Working Capital Adjustment .

(a)

On the Closing Date, the Seller shall have provided the Buyer with a statement of the Estimated Closing Balance Sheet and the Estimated Closing Working Capital (collectively, the “ Estimated Closing Reports ”).  The Estimated Closing Reports shall be prepared by the Seller in accordance with GAAP and using the same accounting methods, practices, principles policies and procedures, with consistent classifications, judgments and valuation and estimation and accrual methodologies that were used by the Company prior to the Closing Date and in accordance with Schedule 1.1 .

(b)

If the Estimated Closing Working Capital is less than the Minimum Target Working Capital (the amount by which the Minimum Target Working Capital exceeds the Estimated Closing Working Capital, the “ Estimated Working Capital Shortfall ”), then the



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amount of such Estimated Working Capital Shortfall shall, dollar for dollar, decrease the amount of the Closing Cash Payment.

(c)

If the Estimated Closing Working Capital is greater than the Maximum Target Working Capital (the amount by which the Estimated Closing Working Capital exceeds the Maximum Target Working Capital, the “ Estimated Working Capital Excess ”), then the amount of such Estimated Working Capital Excess shall, dollar for dollar, increase the amount of the Closing Cash Payment.  If the Estimated Closing Working Capital is greater than the Minimum Target Working Capital and less than the Maximum Target Working Capital, then no adjustment shall be made to the Closing Cash Payment with respect to the Estimated Working Capital.

(d)

Following the Closing, the amount of the Closing Cash Payment shall be adjusted as provided herein to reflect the difference between the Working Capital as derived from the Closing Date Balance Sheet (the “ Closing Working Capital ”) and the Estimated Closing Working Capital, and as finally determined in accordance with this Section 2.4 .  Within sixty (60) days after the Closing Date, the Buyer shall prepare and deliver to the Seller a notice signed by a senior officer of the Buyer setting forth its proposed adjustments, if any, to the Closing Cash Payment, such notice (the “ Closing Cash Adjustment Notice ”) shall include:

(i)

a balance sheet of the Company as of 11:59 p.m. on the Business Day immediately preceding the Closing Date (the “ Closing Date Balance Sheet ”); and

(ii)

a calculation of the Closing Working Capital (the “ Closing Statement ” and, together with the Closing Date Balance Sheet, the “ Closing Reports ”). The Closing Statement shall include a detailed computation of the Closing Working Capital set forth thereon.

The Closing Reports shall be prepared in accordance with GAAP using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation and accrual methodologies that were used in preparation of the Estimated Closing Reports, including Schedule 1.1 .  

(e)

Upon the receipt by the Seller of all of the Closing Reports, the Seller shall have a period of thirty (30) days to review the Closing Reports and may have the same verified by independent accountants (who may be the current auditors of the Seller) and other Representatives selected by it. The Seller and its Representatives shall be entitled to perform all reasonable procedures (including review of all relevant accounting, financial and other records, including work papers and other supporting materials) and to take any other reasonable steps that the Seller and its Representatives deem appropriate to confirm that each of the Closing Reports have been prepared in accordance with the terms of this Agreement. If the Seller shall have any objections to the Closing Reports or the calculation set forth therein, the Seller shall deliver to the Buyer, within thirty (30) days after its receipt of all of the Closing Reports, a written statement (the “ Closing Report Objection Notice ”) setting forth the component or components of the Closing Reports that are in dispute, the basis of such dispute and, if known, the amount proposed as an adjustment.  The failure of the Seller to deliver a Closing Report Objection Notice within the thirty (30) day period hereinabove provided shall constitute the acceptance by



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the Seller of the Closing Reports as submitted by the Buyer whereupon such Closing Reports shall be final, binding and conclusive for all purposes hereunder.  Notwithstanding anything to the contrary contained in this Section 2.4 , in the event any information reasonably requested by the Seller under this Section 2.4(e) has not been provided to the Seller promptly following the Seller’s request thereof and within such thirty (30) day period, then the Closing Reports shall not be deemed final, binding or conclusive hereunder and the Seller may unilaterally (without the Buyer’s consent) extend the period for which the Seller may submit the Closing Report Objection Notice five (5) days for each day beyond the thirty (30) day period that such item remains outstanding by delivering a written notice to the Buyer of such extension.  

(f)

If the Seller delivers a Closing Report Objection Notice, the Buyer and the Seller shall use their good faith efforts to resolve the matters in dispute, but, if the Buyer and the Seller fail to resolve all of the items in dispute within thirty (30) days after the Seller’s delivery of the Closing Report Objection Notice to the Buyer (or such longer period as they may mutually agree in writing), then either party may elect to submit any remaining disputed items to an independent third-party arbitrator mutually acceptable to the Buyer and the Seller who shall be qualified by experience and training to arbitrate commercial disputes (the “ WC Expert ”); provided , however , that if the Buyer and the Seller are unable to mutually agree on an individual to act as the WC Expert within five (5) Business Days after the Buyer or the Seller elect to submit the dispute to arbitration, then each of the Buyer and the Seller shall each designate an independent third-party arbitrator and such designees shall promptly (and in any event within ten (10) days) select an individual to act as the WC Expert.

(g)

If any disputed items are referred to the WC Expert, the parties shall cooperate in good faith with the determination process and the WC Expert’s requests for information, including providing the WC Expert with information as promptly as practicable after its request therefor.  Each party shall be entitled to receive copies of all materials provided by the other to the WC Expert in connection with the determination process. In making its determination on the disputed items, the WC Expert shall make such determinations: (i) only in accordance with the standards set forth in this Agreement; (ii) only with respect to the disputed items submitted to the WC Expert and no other item; (iii) on a disputed item by disputed item basis (i.e., not in the aggregate); and (iv) where the result of the WC Expert’s determination for such disputed item is neither greater than the greatest amount presented by the parties to the WC Expert with respect to the item in dispute, nor less than the lowest amount presented by the parties to the WC Expert with respect to the item in dispute. In connection with his review, the WC Expert shall have the right to engage an independent accounting firm; provided such independent accounting firm does not have, and has not had, a relationship with the Seller, the Buyer or any of their respective Affiliates in the past five (5) years.  The determination of the WC Expert shall be final, conclusive and binding on the parties, absent manifest error. The parties shall instruct the WC Expert to provide its determination in writing to the parties within thirty (30) days of the date it is engaged on such project.  None of the parties shall have any ex parte conversations or meetings with the WC Expert without the prior consent of the other parties.

(h)

The Closing Reports, either as accepted or deemed to have been accepted by the Seller or as adjusted and resolved in the manner herein provided, shall fix the Closing Working Capital and the adjustment to the Closing Cash Payment, if any, resulting therefrom.  



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Subject to the reimbursement provided in the next sentence, each party shall bear its own expenses and the fees and expenses of its own Representatives, including its independent accountants, in connection with the preparation, review, dispute (if any) and final determination of the Closing Cash Payment. The party (either the Buyer or the Seller) whose determination of the amount of Closing Working Capital (as set forth in the Closing Cash Adjustment Notice provided by the Buyer or Closing Report Objection Notice provided by the Seller, as applicable) was farthest from the final determination of Closing Working Capital by the WC Expert, shall bear the fees and expenses of the WC Expert and shall reimburse the other party for all out-of-pocket fees and expenses (including attorneys’ and accountants’ fees) of the party whose determination of the Closing Working Capital was closest to the final determination by the WC Expert.  If the determination by the WC Expert is equidistant between the determination of the parties, or is no more than five percent (5%) more or less than such equidistant amount, the fees and expenses of the WC Expert shall be borne equally by the Buyer and the Seller and each of the Buyer and the Seller shall bear the cost of their own out-of-pocket fees and expenses.  The WC Expert shall determine the allocation of fees and expenses in accordance with this Section 2.4(h) and include such allocation in its award.  

(i)

Upon the Closing Working Capital becoming final as provided in Section 2.4(h) , the Closing Cash Payment shall be recalculated using the finally determined Closing Working Capital instead of the Estimated Closing Working Capital that was used at Closing (giving effect to the Minimum Target Working Capital or Maximum Target Working Capital, as applicable).  If as a result of such recalculation, the Closing Cash Payment (giving effect to the Minimum Target Working Capital or Maximum Target Working Capital, as applicable) is less than the amount paid at Closing (such difference, the “ Downward Closing Cash Adjustment ”), then within three (3) Business Days after the final determination thereof, the Seller shall reduce the principal amount of the Note dollar-for-dollar by an amount equal to the Downward Closing Adjustment.  If as a result of such recalculation the Closing Cash Payment (giving effect to the Minimum Target Working Capital or Maximum Target Working Capital, as applicable) is greater than the amount paid at Closing (such difference, the “ Upward Closing Cash Adjustment ”), then within three (3) Business Days after the final determination thereof, the Buyer shall pay to the Seller an amount equal to the Upward Closing Cash Adjustment by wire transfer of immediately available funds to an account designated by such Seller in writing to the Buyer.  

(j)

  The pendency of a dispute shall not affect the payment obligation of either the Buyer or the Seller to the extent of any undisputed portion of any payment to be made by the parties under this Article II after the Closing.  The payment of any undisputed amount payable under this Section 2.4 , shall be made by wire transfer of immediately available funds to an account designated in writing by the party receiving such payment within three (3) Business Days after the final determination thereof pursuant to this Section 2.4 .  Any payments under this Section 2.4 shall constitute an adjustment to the Purchase Price.  

2.5

Earnout Payments .

(a)

The Seller shall be entitled to, and shall, earn each of the Year-One Earnout Consideration and the Year-Two Earnout Consideration as and to the extent provided in this Section 2.5 .



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(b)

Within sixty (60) days after the expiry of each Earnout Period, the Buyer shall provide the Seller with written notice (the “ Earnout Notice ”) of the Buyer’s reasonably detailed computation of the EBITDA during such Earnout Period (the “ Earnout EBITDA ”), the Earnout Consideration calculated therefrom.  If the Buyer shall fail to timely provide an Earnout Notice, then the Earnout EBITDA shall be finally and conclusively deemed to equal 100% of the Earnout Target for such Earnout Period.

(c)

Upon the receipt by the Seller of an Earnout Notice, the Seller shall have a period of thirty (30) days to review the Earnout Notice and may have the same verified by independent accountants and other Representatives selected by him. The Seller and his Representatives shall be entitled to perform all reasonable procedures (including review of all records of the Buyer and the Company supporting such calculations and other materials as they may reasonably request) and to take any other reasonable steps that the Seller and his Representatives deem appropriate to confirm that the amount of the Earnout EBITDA for the applicable Earnout Period set forth in the Earnout Notice has been prepared in accordance with the terms of this Agreement. If the Seller shall have any objections to the calculation of the Earnout EBITDA set forth in the Earnout Notice, the Seller shall deliver to the Buyer, within thirty (30) days from his receipt of the Earnout Notice (the “ Earnout Objection Period ”), a written statement (the “ Earnout Objection Notice ”) setting forth the component or components of the Earnout Notice that are in dispute, the basis of such dispute and, if known, the amount proposed as an adjustment. The failure of the Seller to deliver an Earnout Objection Notice within the thirty (30) day period hereinabove provided shall constitute the acceptance by the Seller of the Earnout EBITDA and the amount of Earnout Consideration set forth in the Earnout Notice whereupon such amounts shall be final, binding and conclusive for all purposes hereunder.  Notwithstanding anything to the contrary contained in this Section 2.5 , in the event any information reasonably requested by the Seller under this Section 2.5(c) has not been provided to the Seller promptly following the Seller’s request thereof and within such thirty (30) day period, then the Earnout EBITDA and the amount of Earnout Consideration, each as set forth in the Earnout Notice shall not be deemed final, binding or conclusive hereunder, and the Seller may unilaterally (without the Buyer’s consent) extend the period for which the Seller may submit the Earnout Objection Notice five (5) days for each day beyond the thirty (30) day period that such item remains outstanding by delivering a written notice to the Buyer of such extension.

(d)

If the Seller delivers an Earnout Objection Notice, the Seller and the Buyer shall in good faith attempt to resolve any such dispute and, if the parties so resolve all such disputes, then the computation of the Earnout EBITDA and the amount of Earnout Consideration set forth in the Earnout Notice for the applicable Earnout Period as resolved by the parties, shall be conclusive and binding on the parties upon written acknowledgement of such resolution.  If the Seller and the Buyer fail to resolve all of the items in dispute within thirty (30) days after the Seller’s delivery of the Earnout Objection Notice to the Buyer (or such longer period as they may mutually agree in writing), then either party may elect to submit any remaining disputed items to an independent third-party arbitrator mutually acceptable to the Buyer and the Seller who shall be qualified by experience and training to arbitrate commercial disputes (the “ Earnout Expert ”) who shall be retained to review promptly the Earnout EBITDA and the amount of Earnout Consideration set forth in the Earnout Notice and the disputed items or amounts; provided , however , that if the Buyer and the Seller are unable to mutually agree on an individual to act as the Earnout Expert within five (5) Business Days after the Buyer or the



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Seller elect to submit the dispute to arbitration, then each of the Buyer and the Seller shall each designate an independent third-party arbitrator and such designees shall promptly (and in any event within ten (10) days) select an individual to act as the Earnout Expert.

(e)

If any disputed items are referred to the Earnout Expert, the parties shall cooperate in good faith with the determination process and the Earnout Expert’s requests for information, including providing the Earnout Expert with information as promptly as practicable after its request therefor. Each party shall be entitled to receive copies of all materials provided by the other to the Earnout Expert in connection with the determination process. In making its determination on the disputed items, the Earnout Expert shall make such determinations (i) only in accordance with the standards set forth in this Agreement, (ii) only with respect to the disputed items submitted to the Earnout Expert and no other items, (iii) on a disputed item by disputed item basis (i.e., not in the aggregate), and (iv) where the result of the Earnout Expert’s determination for such disputed item is neither greater then nor less than the amounts presented by the parties to the Earnout Expert with respect to the item in dispute. In connection with his review the Earnout Expert shall have the right to engage an independent accounting firm; provided such independent accounting firm does not have, and has not had, a material relationship with the Seller, the Buyer or any of their respective Affiliates in the past five (5) years.  The determination of the Earnout Expert shall be final, conclusive and binding on the parties, absent manifest error. The parties shall instruct the Earnout Expert to provide its determination in writing to the parties within thirty (30) days of the date it is engaged on such project.  Neither party shall have any ex parte conversations or meetings with the Earnout Expert without the prior written consent of the other party.

(f)

The amount of Earnout EBITDA for the applicable Earnout Period and the amount of Earnout Consideration calculated therefrom either as accepted or deemed to have been accepted by the Seller or as adjusted and resolved in the manner herein provided, shall fix the amount of the Earnout EBITDA for the applicable Earnout Period and the amount of Earnout Consideration calculated therefrom. Subject to the reimbursement provided in the next sentence, each party shall bear its own expenses and the fees and expenses of its own Representatives, including its independent accountants, in connection with the preparation, review, dispute (if any) and final determination of the amount of Earnout EBITDA for the applicable Earnout Period and the Earnout Consideration calculated therefrom. The fees and expenses of the Earnout Expert shall be borne by the party (either the Buyer or the Seller) whose determination of the amount of Earnout EBITDA (as set forth in the Earnout Notice or Earnout Objection Notice, as applicable) was farthest from the final determination by the Earnout Expert, and such party shall reimburse the other party for all out-of-pocket fees and expenses (including attorneys’ and accountants’ fees) incurred in connection therewith; provided, that, if the determination by the Earnout Expert is equidistant between the determinations of the parties, or is no more than five percent (5%) more or less than such equidistant amount, the fees of the Earnout Expert shall be borne equally by the Buyer and the Seller and each of the Buyer and the Seller shall bear the cost of their own respective fees and expenses.

(g)

If the Earnout EBITDA set forth in the Earnout Notice for the First Earnout Period is equal to or greater than one hundred percent (100%) of the Year-One EBITDA Target then the Seller shall be entitled to receive one hundred percent (100%) of the Year-One Earnout Consideration.  



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(h)

If the Earnout EBITDA as set forth in the Earnout Notice for the First Earnout Period is equal to or greater than seventy percent (70%) and less than one hundred percent (100%) of the Year-One EBITDA Target, then the Seller shall be entitled to receive a portion of the Year-One Earnout Consideration equal to the product of (A) the Year-One Earnout Consideration multiplied by (B) a fraction, the numerator of which is the Earnout EBITDA for the First Earnout Period, and the denominator of which is the Year-One EBITDA Target.  If the Earnout EBITDA for the First Earnout Period is less than seventy percent (70%) of the Year-One EBITDA Target, then the Seller shall not be entitled to any portion of the Year-One Earnout Consideration.  

(i)

If the Earnout EBITDA set forth in the Earnout Notice for the Second Earnout Period is equal to or greater than one hundred percent (100%) of the Year-Two EBITDA Target then the Seller shall be entitled to receive an amount equal to the Year-Two Earnout Consideration.   

(j)

If the Earnout EBITDA as set forth in the Earnout Notice for the Second Earnout Period is equal to or greater than seventy percent (70%) and less than one hundred percent (100%) of the Year-Two EBITDA Target, then the Seller shall be entitled to receive a portion of the Year-Two Earnout Amount equal to the product of (A) the Year-Two Earnout Amount multiplied by (B) a fraction, the numerator of which is the Earnout EBITDA for the Second Earnout Period, and the denominator of which is the Year-Two EBITDA Target.  If the Earnout EBITDA for the Second Earnout Period is less than seventy percent (70%) of the Year-Two EBITDA Target, then the Seller shall not be entitled to any portion of the Year-Two Earnout Consideration.  

(k)

Except as set forth in Section 2.5(l) , the Earnout Consideration shall be paid by wire transfer of immediately available funds; provided , however , to the extent there shall not be an Equity Conditions Failure, at the Buyer’s discretion, up to sixty percent (60%) of the Earnout Consideration for any Earnout Period may be satisfied with shares of the Buyer Common Stock valued at a price per share equal to the Earnout Share Price.

(l)

If no Earnout Objection Notice is received, within three (3) Business Days of the expiration of the Earnout Objection Period, the Buyer shall either (i) pay to the Seller in immediately available funds the applicable percentage of the Earnout Consideration, or (ii) to the extent there shall not be an Equity Conditions Failure, (x) pay in immediately available funds and (y) issue such number of shares of Buyer Common Stock, which together shall equal in value the applicable percentage of the Earnout Consideration to the Seller; provided, that at least forty percent (40%) of such Earnout Consideration shall be paid in immediately available funds.  If an Earnout Objection Notice is received, within five (5) Business Days of the Earnout EBITDA determination becoming final, conclusive and binding upon the parties in accordance with the terms set forth above, the Buyer shall (i) pay to the Seller in immediately available funds the applicable percentage of the Earnout Consideration or (ii) to the extent the Equity Conditions are then satisfied, (x) pay in immediately available funds and (y) issue such number of shares of Buyer Common Stock, which together shall equal in value the applicable percentage of the Earnout Consideration to the Seller; provided, that at least forty percent (40%) of such Earnout Consideration shall be paid in immediately available funds.



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(m)

Notwithstanding anything contained in this Section 2.5 to the contrary, if (i) the Seller timely delivers an Earnout Objection Notice to the Buyer and (ii) the Buyer’s computation of EBITDA for such Earnout Period is in an amount sufficient for a portion of the Earnout Consideration to be paid (or if applicable, issued) for such Earnout Period, then, within three (3) Business Days of the receipt of the Earnout Objection, the Buyer shall (i) pay to the Seller in immediately available funds the applicable percentage of the Earnout Consideration or (ii) to the extent there shall be no Equity Conditions Failure, (x) pay in immediately available funds and (y) issue such number of shares of Buyer Common Stock, which together shall equal in value the applicable percentage of the Earnout Consideration to the Seller (any such amount so paid or issued, an “ Interim Earnout Payment Amount ”). Upon final determination of the appropriate amount of the Earnout Consideration for such Earnout Period in accordance with this Section 2.5 , the Buyer shall promptly pay and/or issue to Seller the amount of such Earnout Consideration less the Interim Earn-out Payment Amount previously paid and/or issued; provided, that at least forty percent (40%) of the aggregate amount of such Earnout Consideration shall be paid in immediately available funds.

(n)

Any payments under this Section 2.5 shall constitute an adjustment to the Purchase Price.

(o)

From and after the Closing Date until the expiration of the Second Earnout Period, the Buyer shall, and the Buyer shall cause the Company to, own and operate the Company as a separate business and maintain separate financial statements for the Company, to include all business that is originated or generated by the Company, including, without limitation, all revenue generated by employees compensated by the Company (including those individuals set forth on Schedule 2.3(a) ) with or by the use of the Buyer’s products or platforms including SRAX, SRAX MD, SRAX DI, GroupAD, Social Spotlight Media, Facebook ads and advertisements on other social media platforms, as well as any future products, platforms or other sales channels or methodologies developed by the Buyer, which shall be counted toward the determination of the Company’s EBITDA; provided , however , that (i) the related employee compensation costs, (ii) the actual cost of utilizing any such product, platform, sales channel or other methodology which is directly attributable to the revenue generated by such employees which are compensated by the Company (but not the cost of any development or creation of such products, platform, sales channels or other methodologies) and (iii) any project or campaign specific development costs or creative services costs requested by the Seller, in each case shall be counted toward the determination of the Company’s EBITDA and shall not be an EBITDA Adjustment. The Buyer shall act in good faith in the exercise of its power, authority and control of the Company and shall cause the Company to operate the Business in a manner generally consistent with the Company’s operation of the Business in the fiscal year prior to the Closing and in a manner intended to maximize EBITDA during each Earnout Period.  In furtherance of the foregoing covenants in this Section 2.5(o) , from the Closing Date until the expiration of the Second Earnout Period, the Buyer shall not, and the Buyer shall cause the Company not to, without the prior written consent of the Seller:  (i) increase the compensation of any employees, consultants, contractors or other persons providing services to the Business or the Company, which such increase, in the aggregate, would be material to the Company or the Business; (ii) engage in any transaction or incur any expense or obligation to an Affiliate unless such expense or obligation is on terms and conditions which are no more favorable to such Affiliate than the Buyer or the Company would obtain in an arms’ length arrangement negotiated with a third



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party; (iii) increase any reserve or take any charge against earnings except to the extent required by applicable Law or GAAP and, in which case, any such increase or reserve shall be disregarded for purposes of calculating the Company’s EBITDA; (iv) incur any expense inconsistent with the type, amount or timing of expenses incurred by the Company in the conduct of the Business during the fiscal year prior to the Closing, unless the Buyer or the Company reasonably determines such expense is reasonably necessary to generate or protect revenues during such Earnout Period; (v) increase or decrease the book value of any of the Company’s assets except to the extent required by GAAP and, in which case, any such increase or decrease shall be disregarded for purposes of calculating the Company’s EBITDA; (vi) dissolve or liquidate or adopt any plan of dissolution or liquidation; (vii) sell any material assets of the Business; (viii) enter into any transaction involving the consolidation or merger of the Company; or (ix) take any other action which the Seller objects to in writing promptly upon becoming aware thereof which the Seller believes in his reasonable judgment will adversely affect the Company’s EBITDA during any Earnout Period, provided that the Buyer shall have no obligation to comply with any such objection from the Seller pursuant to this clause (ix) if such compliance would adversely effect its stockholders, considered as a whole, and the obligations of the Buyer and the Company to any creditors of the Buyer or the Company in any material respect.

(p)

Following the Closing, the Company may train certain employees of the Buyer as may be mutually selected by the Seller and the Buyer; provided, that such employees, if any, shall continue to be compensated by the Buyer until such time as the Seller, in his sole discretion, shall provide written notice to the Buyer that any such employee be transferred to the Company effective as of date set forth in such notice (an “ Employee Transfer ”).  From and after the effective date of any Employee Transfer, with respect to each such employee of the Buyer so trained, (x) shall be terminated by the Buyer (and any severance and other related termination costs shall be borne by the Buyer), (y) immediately hired by the Company, and (z) any revenue generated by each such employee shall be attributed to the Company and counted toward the Company’s EBITDA; provided , however , that (i) the related employee compensation costs, (ii) the actual cost of utilizing any such product, platform, sales channel or other methodology which is directly attributable to the revenue (other than Excluded Revenue) generated by such employees (but not the cost of any development or creation of such products, platform, sales channels or other methodologies) and (iii) any project or campaign specific development costs or creative services costs requested by the Seller which is directly attributable to the revenue (other than Excluded Revenue) generated by such employees, in each case shall be counted toward the determination of the Company’s EBITDA and shall not be an EBITDA Adjustment; provided , further , that revenue generated by such employees which is attributable to sales to certain existing clients of the Buyer who are forth on Schedule 2.5(p) hereto shall not be counted toward the Company’s EBITDA (“ Excluded Revenue ”).

(q)

The Buyer shall, or shall cause the Company, within thirty (30) days following the end of each three (3) month period during each Earnout Period, to provide the Seller with the Buyer’s computation of the Company’s EBITDA for such three (3) month period and to date from November 1, 2014, provided that the first such reporting period in the First Earnout Period shall be the period commencing on  November 1, 2014 and ending on January 31, 2015, and the last three (3) month report will be for the period beginning August 1, 2016 and ending on October 31, 2016.



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(r)

In the event of (i) the consummation of a Buyer Change of Control (other than as contemplated by this Agreement) or (ii) a Separation Event during (x) the First Earnout Period then, immediately following the consummation of such Buyer Change of Control or on the Separation Date, as applicable, the Buyer shall pay to the Seller one hundred percent (100%) of each of the Year-One Earnout Consideration and Year-Two Earnout Consideration in immediately available funds, or (y) the Second Earnout Period then, immediately following the consummation of the Buyer Change of Control or on the Separation Date, as applicable, the Buyer shall pay to the Seller one hundred (100%) of the Year-Two Earnout Consideration in immediately available funds; provided, that if any Earnout Payment with respect to the First Earnout Period has been earned but not yet been paid, such amount shall be paid by the Buyer to the Seller immediately following the consummation of such Buyer Change of Control or on the Separation Date, as applicable.

(s)

Notwithstanding anything in this Agreement to the contrary, if the Company is prohibited from paying, and the Seller is prohibited from receiving, any Earnout Consideration in cash hereunder, by operation of the Subordination Agreement, then, the Seller may at any time, in its sole discretion, send a written notice to the Company electing to receive such prohibited cash Earnout Consideration in Buyer Common Stock (a “ Stock Payment Notice ”); provided , however , for the avoidance of doubt, the Seller may only give a Stock Payment Notice if the Earnout Consideration is payable pursuant to Section 2.5(g)-(j) or (r) .  If the Company receives a Stock Payment Notice, then, on the 135 th calendar day after the Earnout Consideration is payable under this Agreement, unless such prohibition ceases during such 135-day period (in which case, the Earnout Consideration shall be paid in accordance with the other terms of this Section 2.5 and the Stock Payment Notice shall be deemed rescinded), the Company shall issue to the Seller a number of shares of Buyer Common Stock equal to quotient of (x) the dollar amount of the prohibited cash Earnout Consideration, divided by (y) the Earnout Share Price, which shares shall be considered Earnout Shares.  The issuance of such Earnout Shares shall be fully paid, non-assessable shares of the Company, and shall satisfy the Company’s obligation with respect to the prohibited cash portion of the Earnout Consideration so paid.  

2.6

Books and Records .  Until all adjustments pursuant to Section 2.4 are finally determined and all Earnout Payments have been made pursuant to Section 2.5 , the Buyer shall make available to the Seller and his authorized Representatives, and to the WC Expert and/or the Earnout Expert, as appropriate, all books, records and other information in the Buyer’s or its Affiliates’ possession or control which relate to any unresolved adjustments or the determination of any Earnout Payment.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

Except as set forth in the disclosure schedules delivered by the Company to the Buyer concurrently with the execution and delivery of this Agreement (the “ Company Disclosure Schedule ”), the Company hereby represents and warrants to the Buyer as follows (the disclosures in any section or subsection of the Company Disclosure Schedule shall qualify the corresponding section or subsection of this Article III , provided , however , that any matter set forth in any section of the Company Disclosure Schedule shall be deemed to be referred to and incorporated



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in all other sections of the Company Disclosure Schedule to which such matter’s application or relevance is reasonably apparent on its face):

3.1

Organization and Good Standing .  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now conducted.  The Company is duly qualified or authorized to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its business requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not have a Material Adverse Effect on the Company.

3.2

Capitalization .  The authorized capital stock of the Company consists of 100,000 shares of common stock, no par value, all of which are issued and outstanding and are owned of record by the Seller.  All of the outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and nonassessable and are not subject to preemptive rights.  The Company has no other capital stock, equity securities or securities containing any equity features authorized, issued or outstanding, and there are no agreements, options, warrants or other rights or arrangements existing or outstanding which provide for the sale or issuance of any of the foregoing by the Company.  There are no agreements or other obligations which require the Company to repurchase or otherwise acquire any shares of the Company’s capital stock or other equity securities.  

3.3

Authorization of Agreement .  The Company has full power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party, and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and each other Transaction Document to which the Company is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Company.  This Agreement and each of the other Transaction Documents to which it is a party has been duly and validly executed and delivered by the Company and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes the legal, valid and binding obligations of the Company enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

3.4

Conflicts; Consents of Third Parties .

(a)

Except as set forth on Schedule 3.4(a) , neither the execution and delivery by the Company of this Agreement or any other Transaction Document to which it is a party, the consummation of the transactions contemplated hereby or thereby, nor compliance by the Company with any of the provisions hereof or thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under, any provision of (i) the certificate of incorporation of the Company or bylaws of the Company, (ii) any Material Contract to which the Company is a



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party or by which the properties or assets of the Company are bound; (iii) any Order of any Governmental Body applicable to the Company or by which any of its respective properties or assets are bound; or (iv) any applicable Law, other than, in the case of clauses (ii), (iii) and (iv), such conflicts, violations, defaults, terminations or cancellations, that would not have a Material Adverse Effect on the Company.

(b)

Except as set forth on Schedule 3.4(b) , no consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of the Company in connection with the execution and delivery of this Agreement or the other Transaction Documents to which it is a party or the compliance by the Company with any of the provisions hereof or thereof, or the consummation of the transactions contemplated hereby or thereby, except for such other consents, waivers, approvals, Orders, Permits or authorizations the failure of which to obtain would not have a Material Adverse Effect on the Company.

3.5

Subsidiaries .  The Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.

3.6

Financial Statements .  The Company has made available to the Buyer copies of (i) the audited balance sheet of the Company as at December 31, 2012 and December 31, 2013, and the related statements of income of the Company for the respective twelve-month periods then ended (the “ Year End Financial Statements ”) and (ii) the unaudited balance sheet of the Company as at September 30, 2014 and the related statement of income of the Company for the eight month period then ended (the “ Seller Interim Financial Statements ” and, collectively with the Year End Financial Statements, the “ Financial Statements ”).  Each of the Financial Statements has been prepared in accordance with GAAP (except for the absence of footnotes in the case of the Seller Interim Financial Statements) and presents fairly in all material respects the financial position and results of operations of the Company as at the dates and for the periods indicated therein, subject to normal year-end adjustments and the absence of footnotes in the case of the Seller Interim Financial Statements. The Company has no material liabilities or obligations (i) of the nature (whether known or unknown and whether absolute, accrued, contingent or otherwise) that GAAP would require to be set forth in the balance sheet as of September 30, 2014 included in the Seller Interim Financial Statements which are not set forth therein or (ii) other than liabilities or obligations incurred in the ordinary course of the Company’s business since September 30, 2014.

3.7

Taxes .

(a)

Except as set forth on Schedule 3.7 , all material Income Tax Returns of the Company required to be filed with respect to the Business have been timely filed, all such Tax Returns are complete and correct in all material respects, and the Company has paid on a timely basis all Income Taxes that were due and payable as reflected on such Income Tax Returns.  At all times since its formation, the Company has been classified for U.S. federal income tax purposes as an S corporation, and is so classified for U.S. federal income tax purposes at the time of the Closing.  The Company has not waived any statute of limitations in



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respect of Taxes in connection with the Business or agreed to any extension of time with respect to a Tax assessment or deficiency in connection with the Business.  

(b)

The Company is not a party to any Income Tax allocation or sharing agreement.

(c)

The Company is not and has not been a party to any “listed transaction,” as defined in Code Section 6707A(c)(2) and U.S. Treasury Regulation Section 1.6011-4(b)(2).

3.8

Real Property .  The Company does not own any real property.   Schedule 3.8 sets forth a complete list of all leases of real property of the Company (individually, a “ Real Property Lease ” and collectively, the “ Real Property Leases ”).  The Company has not received any written notice of any default or event that with notice or lapse of time, or both, would constitute a default by the Company under any of the Real Property Leases.

3.9

Tangible Personal Property.   Schedule 3.9 sets forth all leases of personal property used by the Company in the Business (the “ Personal Property Leases ”) involving annual payments in excess of $25,000.  The Company has not received any written notice of any default or any event that with notice or lapse of time, or both, would constitute a default, by the Company under any of the Personal Property Leases which would result in a Material Adverse Effect on the Company.

3.10

Assets .  The Company has good and marketable title, free and clear of all Liens to all of the properties and assets, real and personal, tangible or intangible, which are reflected in the balance sheet included in the Seller Interim Financial Statements, except (i) for Permitted Liens, (ii) pledges to secure deposits and other Liens incurred in the ordinary course of business, (iii) such imperfections of title, easements and encumbrances, if any, as do not materially interfere with the use of such property as such property is used on the date of this Agreement, (v) Liens set forth on Schedule 3.10 and (vi) other similar Liens arising in the ordinary course of business and which would not have a Material Adverse Effect on the Company.

3.11

Intellectual Property .   Schedule 3.11 sets forth a true and complete list of each United States registered patent, domain name, trademark, trade name, service mark and application therefor that is used in the Business, the absence of which would have a Material Adverse Effect on the Company. Except as set forth on Schedule 3.11 , the Company owns or has valid licenses to use all Company Intellectual Property, except to the extent the failure to be the owner or the valid licensee would not have a Material Adverse Effect on the Company.  Except as set forth on Schedule 3.11 , (i) the material Company Intellectual Property is not the subject of any challenge received by the Company in writing and (ii) the Company has not received any written notice of any default or any event that with notice or lapse of time, or both, would constitute a default under any Company Intellectual Property license to which the Company is a party and which default would result in a Material Adverse Effect on the Company. The sale of the Shares contemplated hereby will not give rise to any obligations to make any material payments to any Person in respect of software or other Technology under any contract relating to open source software.



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3.12

Material Contracts .

(a)

Schedule 3.12(a) sets forth all of the following Contracts to which the Company is a party or by which it is bound (collectively, the “ Material Contracts ”), which list shall include:

(i)

Contracts governing the employment of any Business Employee whose annual salary is in excess of $125,000 (other than offer letters providing for at-will employment);

(ii)

Contracts with any labor union representing any employee of the Company;

(iii)

Contracts granting a Lien on any of the material assets of the Company;

(iv)

Contracts for the sale of any of the assets of the Company other than in the Ordinary Course of Business, for consideration in excess of $25,000;

(v)

Contracts relating to the incurrence of Indebtedness by the Company, or the making of any loans, in each case involving amounts in excess of $25,000;

(vi)

Contracts which involve the expenditure of more than $50,000 in the aggregate which are not terminable by the Company without penalty on notice of 30 days’ or less; and

(vii)

Any other Contract that is material to the Company.

(b)

Each Material Contract is in full force and effect and is the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.  The Company is not in default under any Material Contract and, to the Knowledge of the Company, no event, condition or occurrence exists which (with or without due notice or lapse of time, or both) would constitute such a default by the Company under any Material Contract, except for defaults that would not have a Material Adverse Effect on the Company.

3.13

Employee Matters .

(a)

Schedule 3.13(a) , contains a true and correct list of all Business Employees, together with each such Business Employee’s (i) job title, (ii) current rate of base pay and annual bonus opportunity, (iii) 2013 annual rate of base pay and annual bonus, (iv) date of hire and (v) any accrued paid time off.

(b)

The only “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) that is maintained by the Company for the benefit of the Business Employees or under which the Company has any liability is a group health plan (the “ Company Benefit Plan ”).  



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(c)

The Company Benefit Plan has been administered in accordance with its terms and complies with all applicable Laws, except for any administrative failure or noncompliance that would not have a Material Adverse Effect on the Company.  No actions, proceedings or claims (other than routine claims for benefits) are pending or, to the Knowledge of the Company, threatened against the Company Benefit Plan.  All contributions and other payments required to be made by the Company to the Company Benefit Plan have been made on a timely basis.  None of the Company Benefit Plans are subject to Title IV of ERISA or Section 412 of the Code and the Company has no liability, contingent or otherwise, under Title IV of ERISA.  The Company has not at any time contributed to (or had an obligation to contribute to) any “multiemployer plan” within the meaning of Section 3(37) of ERISA.

(d)

Except as set forth on Schedule 3.13(d) , neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement (either alone or in conjunction with any other event) will entitle any Business Employee to severance pay or accelerate the time of payment or vesting, or increase the amount of compensation due to any Business Employee or result in any payment to any Business Employee that is not deductible by virtue of Section 280G of the Code.  

(e)

The Company is in compliance, in all material respects, with all applicable Laws respecting employment and employment practices, in each case, with respect to the Business Employees.  There are no Legal Proceedings pending or, to the Knowledge of the Company, threatened with respect to any matters described in the preceding sentence.   The Company is not  presently, nor has it been in the past, a party to or bound by any union contract or agreement, collective bargaining agreement or similar Contract and to the Knowledge of the Company, there are no activities or proceedings of any labor union or works council or other employee representation group to organize any Business Employees.  The Company has not been provided with written notice from any Business Employee that such Business Employee intends to terminate his or her employment following the Closing Date.

3.14

Litigation .  Except as set forth on Schedule 3.14 , there are no Legal Proceedings pending or, to the Knowledge of the Company, threatened against the Company or involving or relating to the Business before any Governmental Body.  The Company is not subject to any Order of any Governmental Body involving or relating to the Business or which is reasonably likely to prohibit or restrain the ability of the Company to enter into this Agreement or any other Transaction Document to which it is a party or to consummate the transactions contemplated hereby or thereby.

3.15

Compliance with Laws; Permits .

(a)

The Company is in compliance in all material respects with all Laws of any Governmental Body applicable to the operation of the Business.

(b)

The Company currently has all Permits which are required for the operation of Business, other than those the failure of which to possess would not have a Material Adverse Effect on the Company.   Schedule 3.15(b) contains a true and complete list of all Permits used by the Company in connection with the operation of the Business.  The Company is not in default or violation (and no event has occurred which, with notice or the lapse of time or



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both, would constitute a default or violation) of any term, condition or provision of any Permit to which it is a party required for the operation of Business, except where such default or violation would not have a Material Adverse Effect on the Company.

3.16

Absence of Certain Changes .  Except as contemplated by this Agreement and as set forth on Schedule 3.16 , since December 31, 2013 the Company has conducted its business in the ordinary course and there has not been a Material Adverse Effect on the Company.  The Company has not received written notice from any of the clients of the Business that any such client intends to discontinue its current relationship with the Company which would have a Material Adverse Effect on the Company nor, to the Knowledge of the Company, is any such notice pending or threatened which would have a Material Adverse Effect on the Company.

3.17

Related Party Transactions .  Except as set forth on Schedule 3.17 , no Affiliate of the Company, and no employee, officer, manager or shareholder of the Company (or any member of his or her immediate family) (a “ Related Person ”) (a) owes any amount to the Company nor does the Company owe any amount to, nor has the Company committed to make any loan or extend or guarantee credit to or for the benefit of any, Related Person, (b) is involved in any business arrangement or other relationship (other than customary employment relationships) with the Company or (c) owns any property or right, tangible or intangible, that is used by the Company (other than raising out of customary employee rights).

3.18

Financial Advisors .  Except as set forth on Schedule 3.18 , no Person is entitled to any investment banking fees, financial advisory fees, brokerage fees, finders’ fees or commissions in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its Affiliates.

3.19

Environmental .  The Company does not own nor has ever owned any real property.  To the Knowledge of the Company, the Company and the Business has at all times been conducted in compliance with all applicable Environmental Laws and, to the Knowledge of the Company, there are no, nor have there ever been any violations of any applicable Environmental Laws at any of their leased locations.

3.20

No Other Representations or Warranties; Schedules .  Except for the representations and warranties contained in this Article III (as modified by the Company Disclosure Schedule hereto), the Company makes no other express or implied representation or warranty with respect to the Company, the Business or the transactions contemplated by this Agreement, and the Company disclaims any other representations or warranties, whether made by the Seller, the Company or any of their respective Affiliates, officers, directors, employees, agents or Representatives.  Except for the representations and warranties contained in this Article III (as modified by the Company Disclosure Schedule hereto), the Company hereby disclaims all liability and responsibility for any representation, warranty, projection, forecast, statement, or information made, communicated, or furnished (orally or in writing) to the Buyer or its Affiliates or Representatives (including any opinion, information, projection, or advice that may have been or may be provided to the Buyer by any director, officer, employee, agent, consultant, or Representative of the Seller, the Company or any of their respective Affiliates) with respect to the Company, the Business or the transactions contemplated by this Agreement.  The Company



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makes no representations or warranties to the Buyer regarding the probable success or profitability of the Company or the Business.

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
REGARDING THE SELLER

Except as set forth in the disclosure schedules delivered by the Seller to the Buyer concurrently with the execution and delivery of this Agreement (the “ Seller Disclosure Schedule ”), the Seller hereby  represents and warrants to the Buyer as to itself (the disclosures in any section or subsection of the Seller Disclosure Schedule shall qualify the corresponding section or subsection of this Article IV , provided , however , that any matter set forth in any section of the Seller Disclosure Schedule shall be deemed to be referred to and incorporated in all other sections of the Seller Disclosure Schedule to which such matter’s application or relevance is readily apparent on its face):

4.1

Ownership and Transfer of Shares .  The Seller is the record and beneficial owner of the Shares free and clear of any and all Liens (other than restrictions on transfer imposed under applicable state and federal securities Laws).  The Seller has full power and authority to sell, transfer, assign and deliver the Shares as provided in this Agreement, and such delivery will convey to the Buyer good and valid title to such Shares, free and clear of any and all Liens (other than restrictions on transfer imposed under applicable state and federal securities Laws).

4.2

Authorization of Agreement .  The Seller has full legal capacity, power and authority to execute and deliver this Agreement and the other Transaction Documents to which he is a party, and to consummate the transactions contemplated hereby and thereby.  This Agreement and each of the Transaction Documents to which he is a party has been duly and validly executed and delivered by the Seller and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement and each other Transaction Document to which he is a party constitutes the legal, valid and binding obligations of the Seller enforceable against him in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

4.3

Conflicts; Consents of Third Parties .

(a)

Neither the execution and delivery by the Seller of this Agreement or any other Transaction Document to which he is a party, the consummation of the transactions contemplated hereby or thereby, nor compliance by the Seller with any of the provisions hereof or thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under, any provision of (i)  any material Contract to which the Seller is a party or by which the properties or assets of the Seller are bound, (ii) any Order of any Governmental Body applicable to the Seller or by which any of his properties or assets are bound or (iii) any applicable Law, other than such conflicts, violations, defaults, terminations or cancellations, that would not have a material



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adverse effect on the ability of the Seller to consummate the transactions contemplated by this Agreement.

(b)

Except as set forth on Schedule 4.3(b) , no consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of the Seller in connection with the execution and delivery of this Agreement or the other Transaction Documents to which he is a party or the compliance by the Seller with any of the provisions hereof or thereof, or the consummation of the transactions contemplated hereby or thereby, except for such other consents, waivers, approvals, Orders, Permits or authorizations the failure of which to obtain would not have a material adverse effect on the ability of the Seller to consummate the transactions contemplated by this Agreement.

4.4

Financial Advisors .  Except as set forth on Schedule 4.4 , no Person is entitled to any investment banking fees, financial advisory fees, brokerage fees, finders’ fees or commissions in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Seller or any of his Affiliates.

4.5

Investment .  The Seller: (i) is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities including, to the extent applicable, the Earnout Shares; (ii) is acquiring, if and when issued, the Earnout Shares for his own account for investment only and with no present intention of distributing any of such shares or any arrangement or understanding with any other persons regarding the distribution of such shares within the meaning of Section 2(11) of the Securities Act; (iii) will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any such shares except in compliance with the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder; and (iv) is, and at the time of issuance of the Earnout Shares, if any, will be, an Accredited Investor.  The Seller understands that his acquisition of the Earnout Shares, as applicable, will not be registered under the Securities Act, or registered or qualified under any state securities laws in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the Seller’s investment intent as expressed herein.

4.6

No Other Representations or Warranties; Schedules .  Except for the representations and warranties contained in this Article IV (as modified by the Seller Disclosure Schedule hereto), the Seller makes no other express or implied representation or warranty.  Except for the representations and warranties contained in Article IV hereof (as modified by the Seller Disclosure Schedule hereto) and except as set forth in Article VII hereof, the Seller hereby disclaims all liability and responsibility for any representation, warranty, projection, forecast, statement, or information made, communicated, or furnished (orally or in writing) to the Buyer or its Affiliates or Representatives (including any opinion, information, projection, or advice that may have been or may be provided to the Buyer by any director, officer, employee, agent, consultant, or Representative of the Seller, the Company or any of their respective Affiliates) with respect to the Company, the Business or the transactions contemplated by this Agreement.  The Seller makes no representations or warranties to the Buyer regarding the probable success or profitability of the Company or the Business.



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ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE BUYER

Except as set forth in the disclosure schedules delivered by the Buyer concurrently with the execution and delivery of this Agreement (the “ Buyer Disclosure Schedule ”), the Buyer represents and warrants to the Seller as follows (the disclosures in any section or subsection of the Buyer Disclosure Schedule shall qualify the corresponding section or subsection of this Article V , provided , however , that any matter set forth in any section of the Buyer Disclosure Schedule shall be deemed to be referred to and incorporated in all other sections of the Buyer Disclosure Schedule to which such matter’s application or relevance is readily apparent on its face):

5.1

Organization and Good Standing .  The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate properties and carry on its business.  The Buyer is duly qualified or authorized to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its business requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not have a Material Adverse Effect on the Buyer.  The Buyer does not own, directly or indirectly, any capital, stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.

5.2

Authorization of Agreement .  The Buyer has full power and authority to execute and deliver this Agreement and each other Transaction Document to which it is a party, and to consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance by the Buyer of this Agreement and each other Transaction Document to which it is a party has been duly authorized by all requisite corporate action on the part of the Buyer.  This Agreement and each of the other Transaction Document to which it is a party has been duly and validly executed and delivered by the Buyer and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement and each other Transaction Document to which it is a party constitutes the legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

5.3

Conflicts; Consents of Third Parties .

(a)

None of the execution and delivery by the Buyer of this Agreement or the other Transaction Documents to which it is a party, the consummation of the transactions contemplated hereby or thereby, or the compliance by the Buyer with any of the provisions hereof or thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under, any provision of (i) the certificate of incorporation and bylaws of the Buyer, as either may be amended from time to time; (ii) any material Contract to which the Buyer is a party or by which the properties or assets of the Buyer are bound; (iii) any Order of any Governmental Body



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applicable to the Buyer or by which any of the properties or assets of the Buyer are bound; or (iv) any applicable Law, other than, in the case of clauses (ii), (iii) and (iv), such conflicts, violations, defaults, terminations or cancellations, that would not have a Material Adverse Effect on the Buyer.

(b)

No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of the Buyer in connection with the execution and delivery of this Agreement or the other Transaction Documents to which it is a party, the compliance by the Buyer with any of the provisions hereof or thereof, the consummation of the transactions contemplated hereby or thereby, except for such other consents, waivers, approvals, Orders, Permits or authorizations the failure of which to obtain would not have a Material Adverse Effect on the Buyer.

5.4

Litigation .

Except as set forth on Schedule 5.4 , there are no Legal Proceedings pending or, to the Knowledge of the Buyer, threatened against the Buyer or involving or relating to the business of the Buyer before any Governmental Body.  The Buyer is not subject to any Order of any Governmental Body involving or relating to its business or which is reasonably likely to prohibit or restrain the ability of the Buyer to enter into this Agreement or any other Transaction Document to which it is a party or to consummate the transactions contemplated hereby or thereby.

5.5

Valid Issuance; SEC Filings .

(a)

The Buyer has duly authorized and reserved for issuance 9,320,388 shares of Buyer Common Stock, which shall be issued in respect of any Earnout Shares issued under this Agreement.  The Earnout Shares, if and when issued in accordance with the terms of this Agreement, will be validly issued, fully paid, non-assessable and free of preemptive rights.

(b)

As of their respective filing dates, none of the Buyer’s periodic reports (the “ SEC Documents ”) filed with the Securities and Exchange Commission (the “ SEC ”) contain any untrue statement of material fact or omitted a statement of material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made, not misleading, and the Buyer’s SEC Documents complied when filed in all material respects with the then applicable requirements of the Securities Act or the Securities Exchange Act, as the case may be, and the rules and regulations promulgated by the SEC thereunder. The Buyer has filed all reports required to be filed under the Securities Exchange Act as of the date hereof. The financial statements of the Buyer included in the Form 10-Q for the fiscal quarter ended June 30, 2014 (the “ Buyer Interim Financial Statements ”) complied when filed in all material respects with the then applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP during the periods involved (except as may have been indicated in the notes thereto) and present fairly the financial position of Buyer as of the dates thereof.   The Buyer has no material liabilities or obligations (i) of the nature (whether known or unknown and whether absolute, accrued, contingent or otherwise) that GAAP would require to be set forth in the balance sheet as of June 30, 2014 included in the Buyer Interim Financial Statements which are not set forth therein or (ii) other than liabilities or obligations incurred in the ordinary course of the Buyer’s business since June 30, 2014.



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5.6

Assets .  The Buyer has good and marketable title, free and clear of all Liens to all of the properties and assets, real and personal, tangible or intangible, which are reflected in the balance sheet included in the Buyer Interim Financial Statements, except (i) for Permitted Liens, (ii) pledges to secure deposits and other Liens incurred in the ordinary course of business, (iii) such imperfections of title, easements and encumbrances, if any, as do not materially interfere with the use of such property as such property is used on the date of this Agreement, (v) Liens set forth on Schedule 5.6 and (vi) other similar Liens arising in the ordinary course of business and which would not have a Material Adverse Effect on the Buyer.

5.7

Intellectual Property .   Schedule 5.7 sets forth a true and complete list of each United States registered patent, domain name, trademark, trade name, service mark and application therefor that is used in the business of the Buyer, the absence of which would have a Material Adverse Effect on the Buyer. Except as set forth on Schedule 5.7 , the Buyer owns or has valid licenses to use all Buyer Intellectual Property, except to the extent the failure to be the owner or the valid licensee would not have a Material Adverse Effect on the Buyer.  Except as set forth on Schedule 5.7 , to the Knowledge of the Buyer, (i) the material Buyer Intellectual Property is not the subject of any challenge received by the Buyer in writing and (ii) the Buyer has not received any written notice of any default or any event that with notice or lapse of time, or both, would constitute a default under any Buyer Intellectual Property license to which the Buyer is a party and which default would result in a Material Adverse Effect on the Buyer.

5.8

Employee Matters .

(a)

Schedule 5.8(a) contains a true and correct list of each “employee benefit plan” (as defined in Section 3(3) of ERISA) and each other incentive, bonus, retirement, deferred compensation, equity, equity-based, phantom, change in control, retention, severance, fringe or other material employee benefit or compensation plan, program or arrangement that is maintained or sponsored by the Buyer for the benefit of the employees of the Buyer or under which the Buyer has any liability (each, a “ Buyer Benefit Plan ”).  

(b)

Each Buyer Benefit Plan has been administered in accordance with its terms and complies with all applicable Laws, except for any administrative failure or noncompliance that would not have a Material Adverse Effect on the Buyer. No actions, proceedings or claims (other than routine claims for benefits) are pending or, to the Knowledge of the Buyer, threatened against any Buyer Benefit Plan.  All contributions and other payments required to be made by the Buyer to any Buyer Benefit Plan have been made on a timely basis.  None of the Buyer Benefit Plans are subject to Title IV of ERISA or Section 412 of the Code and the Buyer has no liability, contingent or otherwise, under Title IV of ERISA.  The Buyer has not at any time contributed to (or had an obligation to contribute to) any “multiemployer plan” within the meaning of Section 3(37) of ERISA.

(c)

Except as set forth on Schedule 5.8(c) , neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement (either alone or in conjunction with any other event) will entitle any employee of the Buyer to severance pay or accelerate the time of payment or vesting, or increase the amount of compensation due to any employee of the Buyer or result in any payment to any employee of the Buyer that is not deductible by virtue of Section 280G of the Code.  



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(d)

The Buyer is in compliance, in all material respects, with all applicable Laws respecting employment and employment practices, in each case, with respect to its employees.  There are no Legal Proceedings pending or, to the Knowledge of the Buyer, threatened with respect to any matters described in the preceding sentence.   The Buyer is not presently, nor has it been in the past, a party to or bound by any union contract or agreement, collective bargaining agreement or similar Contract and to the Knowledge of the Buyer, there are no activities or proceedings of any labor union or works council or other employee representation group to organize any employees of the Buyer.

5.9

Compliance with Laws .  The Buyer is in compliance in all material respects with all Laws of any Governmental Body applicable to the operation of the business of the Buyer.

5.10

Absence of Certain Changes .  Except as contemplated by this Agreement, since December 31, 2013 the Buyer has conducted its business in the ordinary course and there has not been a Material Adverse Effect on the Buyer.

5.11

Financial Advisors .  Other than T.R. Winston & Company, LLC, no Person is entitled to any investment banking fees, financial advisory fees, brokerage fees, finders’ fees or commissions in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Buyer or any of its Affiliates.

5.12

Financial Capability .  The Buyer (i) has, and at the Closing will have, sufficient internal funds (giving effect to the consummation of the Victory Park Financing) available to pay the Closing Cash Payment and any expenses incurred by the Buyer in connection with the transactions contemplated by this Agreement, (ii) has, and at the Closing will have, the resources and capabilities (financial or otherwise) to perform its obligations hereunder and under the other Transaction Documents to which it is a party, (iii) will use its best efforts to have at the expiration of the applicable Earnout Periods, sufficient internal funds (without giving effect to any unfunded financing regardless of whether any such financing is committed) available to pay the applicable Earnout Consideration, and (iv) except for the Victory Park Financing, has not incurred any obligation, commitment, restriction or Liability of any kind, which would impair or adversely affect such resources and capabilities.

5.13

  No Other Representations or Warranties; Schedules .  Except for the representations and warranties contained in this Article V (as modified by the Buyer Disclosure Schedule hereto), the Buyer makes no other express or implied representation or warranty with respect to the Buyer or the transactions contemplated by this Agreement, and the Buyer disclaims any other representations or warranties, whether made by the Buyer or any of its Affiliates, officers, directors, employees, agents or Representatives.  Except for the representations and warranties contained in this Article V (as modified by the Buyer Disclosure Schedule hereto), the Buyer hereby disclaims all liability and responsibility for any representation, warranty, projection, forecast, statement, or information made, communicated, or furnished (orally or in writing) to the Seller, the Company or any of their respective Affiliates or Representatives (including any opinion, information, projection, or advice that may have been or may be provided to the Seller or the Company by any director, officer, employee, agent, consultant, or Representative of the Buyer or its Affiliates) with respect to the Buyer or the



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transactions contemplated by this Agreement.  The Buyer makes no representations or warranties to the Seller or the Company regarding the probable success or profitability of the Buyer.

ARTICLE VI.
COVENANTS OF THE PARTIES

6.1

Access to Records .  The Seller and his respective Representatives shall be entitled, for any lawful purpose (including in connection with any Legal Proceeding or Tax matter in any way relating to such Seller in the Seller’s capacity as the seller of the Shares hereunder, the Company or any of their Affiliates or the Business), after the Closing, upon reasonable notice and during the regular business hours of the Company, to have access to and, at the Seller’s expense, to make copies of the books, records, files, correspondence and other information (whether in written form, electronic form or otherwise) (collectively, “ Records ”) of the Business or the Company related to periods prior to the Closing.  The Buyer shall, or shall cause the Company to, retain such Records for a period of ten (10) years from the Closing Date and shall not destroy or otherwise dispose of such Records without the Seller’s consent and upon the request and at the expense of the Seller, shall deliver to the Seller copies of any such Records.  

6.2

Employees; Employee Benefits . Effective from and after the Closing Date, the Buyer shall: (i) cause the Business Employees whom shall continue to be employed by the Company following the Closing (the “ Continuing Employees ”), to be given credit for all service with the Company and its respective Affiliates and predecessor entities for all purposes (including, but not limited to, eligibility to participate, vesting credit, entitlement to benefits and benefit accrual) under any employment or employee benefit plans, programs or policies providing benefits to the Continuing Employees (including those providing for severance, vacation and other paid time-off) on or after the Closing Date; (ii) waive any pre-existing exclusion requirements or waiting periods under all employee health or other welfare benefit plans continued, established or maintained on or after the Closing Date for the benefit of the Continuing Employees (and their dependents); and (iii) credit the Continuing Employees (and their dependents) for any eligible expenses incurred under all employee health or other welfare benefit plans of the Company for purposes of satisfying all deductible, coinsurance and maximum out of pocket requirements applicable to the Continuing Employees (and their dependents) under the corresponding health and welfare benefit plans of the  Company.  Nothing contained in this Section 6.2 shall (i) be treated as an amendment of any employee benefit plan or compensatory arrangement, (ii) give any Continuing Employee any right to enforce, or make any Continuing Employee a third-party beneficiary of, the provisions of Section 6.2 , or (iii) obligate the Buyer or any of its Affiliates to retain the employment of any particular Continuing Employee for any specified period of time following the Closing Date.  

6.3

Public Announcements .  None of the Seller, the Company or the Buyer will issue or permit any agent or Affiliate to issue any press release or make any other public statement with respect to the transactions contemplated by this Agreement and each of them shall keep the terms and conditions of this Agreement confidential, unless either (x) the text of such release or statement shall have been consented to by the Seller and the Buyer (which consent shall not be unreasonably withheld or delayed), or (y) such other public statement is required by applicable Laws; provided , however , in the case of clause (y), the Seller and the Buyer shall consult with



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each other regarding the content thereof and cooperate in the making of such public statement, and then, such public statement shall be permitted to be made but only to the extent required by such Laws.  No such press releases or other publicity shall state the financial terms of the transactions contemplated by this Agreement except as required by applicable Laws or with the Seller’s and the Buyer’s express prior written consent.

6.4

Expenses .  Except as otherwise specifically provided for in this Agreement, each party shall pay all costs and expenses incident to its negotiation, preparation and execution of this Agreement and the other Transaction Documents and to its performance and compliance with all agreements and conditions contained herein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel, financial advisors, investment bankers and independent public accountants.

6.5

Transfer Taxes .  The Buyer shall (a) be responsible for (and shall indemnify and hold harmless the Seller against) any and all liabilities for any sales, use, stamp, value added, documentary, filing, recording, transfer, stock transfer, gross receipts, registration, duty, securities transactions or similar fees or taxes or governmental charges (together with any interest or penalty, addition to tax or additional amount imposed) as levied by any Governmental Body in connection with the transactions contemplated by this Agreement (collectively, “ Transfer Taxes ”), regardless of the Person liable for such Transfer Taxes under applicable Law and (b) timely file or caused to be filed all necessary documents (including all Tax Returns) with respect to Transfer Taxes.  The Buyer shall provide the Seller with a copy of each such Tax Return no later than ten (10) days prior to filing such Tax Return.

6.6

Tax Matters .

(a)

Without duplication of any indemnification obligations under Section 7.2 or Section 7.3 , all real property Taxes, personal property Taxes, or ad valorem obligations and similar recurring Taxes and fees on the purchased assets of the Business for any Tax period that includes (but does not end on) 11:59 p.m. on the day immediately preceding the Closing Date (each such Tax period hereinafter is referred to as a “ Straddle Period ”) shall be prorated between the Buyer and the Seller based on the number of days in such taxable period up to and including 11:59 p.m. on the day immediately preceding the Closing Date (which shall be for the account of the Seller, except to the extent such Taxes are reflected as a liability on the Closing Statement, to which extent the Buyer shall be liable) and the number of days in such taxable period after 11:59 p.m. on the day immediately preceding the Closing Date (which shall be for the account of the Buyer).  If one party remits to the appropriate Governmental Body payment for Taxes which are subject to proration under this Section 6.6(a) and such payment includes the other party’s share of such Taxes, such other party shall reimburse the remitting party for its share of such Taxes within five (5) Business Days of notice of payment.  

(b)

Without duplication of any indemnification obligations under Section 7.2 or Section 7.3 , all Income Taxes and sales Taxes with respect to the Business for any Straddle Period shall be prorated between the Buyer and the Seller based on an interim closing of the books of the Company as of 11:59 p.m. on the day immediately preceding the Closing Date.  Income Taxes and sales Taxes for the portion of any such Straddle Period ending as of 11:59 p.m. on the day immediately preceding the Closing Date shall be for the account of the Seller,



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except to the extent such Taxes are reflected as a liability on the Closing Statement, to which extent the Buyer shall be liable.   Income and sales Taxes for the portion of any such Straddle Period ending after 11:59 p.m. on the day immediately preceding the Closing Date shall be for the account of the Buyer.  If one party remits to the appropriate Governmental Body payment for Taxes which are subject to proration under this Section 6.6(b) and such payment includes the other party’s share of such Taxes, such other party shall reimburse the remitting party for its share of such Taxes within five (5) Business Days of notice of payment.  

(c)

The Seller shall prepare all Tax Returns for all Pre-Closing Tax Periods (other than any Straddle Periods) and shall timely file all such Tax Returns or, if applicable Law requires that the Buyer or the Company file such Tax Returns, the Seller shall prepare and deliver such Tax Returns to the Buyer or the Company, as the case may be, for filing by no later than the tenth (10 th ) Business Day prior to the due date therefor, taking into account any applicable extensions.  The Seller and the Buyer shall reasonably cooperate in the conduct of all federal, state and local tax examinations and audits relating to the Tax Returns that are required to be prepared or filed by the Seller pursuant to this Section 6.6 . The Seller shall provide the Buyer with a copy of each Tax Return for any Pre-Closing Tax Period that the Seller is required to prepare or file pursuant to this Section 6.6 no later than ten (10) Business Days prior to filing any such Tax Return, and the Buyer shall have the right to review, comment and approve any such Tax Return and the Seller shall make the revisions to any such Tax Return as are reasonably requested by the Buyer.

(d)

The Buyer shall prepare all Tax Returns for any Straddle Periods in a manner consistent with the Company’s prior Tax Returns and shall timely file all such Tax Returns. The Buyer shall provide the Seller with a copy of each Tax Return for any Straddle Period that it is required to file pursuant to this Section 6.6 no later than ten (10) Business Days prior to filing such Tax Return, and the Seller shall have the right to review, comment and approve such Tax Return and the Buyer shall make the revisions to such Tax Return as are reasonably requested by the Seller.

(e)

The Seller and the Buyer agree to cooperate, as and to the extent reasonably requested by the other Party, in connection with (i) the preparation and filing of any Tax Return relating to the Company or the Business, and (ii) any examination, audit or other proceeding by a Governmental Body with respect to any such Tax Return.  In the case of any such examination, audit or other proceeding, such cooperation shall include the provision of records and information which are reasonably relevant to such examination, audit or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  Except as may be required by applicable Law or as may be required by any Governmental Body, the Buyer shall not, and shall not permit any of its Affiliates to, do any of the following without the Seller’s prior written consent: (i) file any amended Tax Return relating to a Pre-Closing Tax Period, (ii) agree to extend any statute of limitations with respect to any Pre-Closing Tax Period, (iii) make any election or (iv) take any other similar administrative action or enter into any agreements or settlements with any Governmental Body that, in each case, would reasonably be expected to materially increase the Seller’s Tax Liabilities for any Pre-Closing Tax Period, including any indemnification obligation of the Seller under Section 7.2(a) (but solely to the extent that such



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indemnification obligation arises from a breach of the representations and warranties set forth in Section 3.7 (Taxes)) or Section 7.2(c) .

(f)

The Buyer agrees (i) to retain all books and records with respect to Tax matters pertinent to the Business or the Company relating to any Taxable period beginning before the Closing Date until the expiration of the applicable statute of limitations, and (ii) to give the Seller reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the Seller so requests, the Buyer shall allow the Seller to take possession of such books and records.

(g)

For the avoidance of doubt, the Seller shall be entitled to any refund of any Taxes from or relating to a Pre-Closing Tax Period.  In the event that the Buyer or, after the Closing Date, the Company, receives any such refund (including by way of any action taken by the Buyer post-Closing), the Buyer shall pay, or cause the Company to pay, the amount of such refund to the Seller within three (3) Business Days of its receipt thereof.

(h)

The Buyer and the Seller agree to treat the Earnout Consideration as purchase price for the Shares except to the extent applicable Tax law requires a portion of the Earnout Consideration to be treated as interest.

6.7

Indemnification of Directors and Officers .

(a)

For a period of six years after the Closing Date, the Company’s certificate of incorporation and bylaws (each as amended and in effect from time to time during such period), shall contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of each present and former director, manager (or other equivalent Person) and officer of the Company than are presently set forth in the Company’s certificate of incorporation and bylaws, which provisions shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of any such individuals.

(b)

For a period of six years after the Closing Date, the Buyer shall cause to be maintained in effect and fully pay for policies of directors’ and officers’ liability insurance covering the current and former officers, directors, managers (or other equivalent Person) and employees of the Company who are currently covered by the existing directors’ and officers’ liability insurance of the Company, from an insurance carrier with the same or better credit rating as the insurance carrier of the Company in place on the date hereof and on terms and conditions no less favorable to such directors, managers (or other equivalent Persons) and officers than those in effect on the date hereof.

(c)

If the Buyer or the Company or any of their respective successor or assigns (i) shall merge or consolidate with or merge into any other Person and shall not be the surviving or continuing Person in such consolidation or merger or (ii) shall transfer all or substantially all of its properties or assets as an entity in one or a series of related transactions to any Person, then in each such case, proper provision shall be made so that the successor or assign of the Buyer or the Company shall assume the obligations set forth in this Section 6.7 .



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6.8

Noncompetition; Non-Solicitation .  In consideration of the transactions contemplated by this Agreement, and in order to protect and preserve the legitimate business interests of the Buyer, the Seller agrees as follows:

(a)

Commencing on the Closing Date and ending on the six (6) year anniversary of the Closing Date (the “ Restricted Period ”), the Seller shall not, anywhere in the United States, directly or indirectly, engage in any Competitive Activities (as defined below).  The Seller shall be deemed to be engaged in Competitive Activities if the Seller serves as a shareholder, officer, director, member, manager, trustee or partner of, or consults with, advises or assists in any way, whether or not for consideration, any Person that engages in any Competitive Activities (a “ Competitor ”).  In the event a court of competent jurisdiction determines that the provisions of this Section 6.8(a) are excessively broad as to duration, geographical scope or activity, it is expressly agreed that this Section 6.8(a ) shall be construed so that the remaining provisions of this Section 6.8(a) shall not be affected, but shall remain in full force and effect, and any such overbroad provisions shall be deemed, without further action on the part of any Person, to be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable in such jurisdiction.  The term “ Competitive Activities ” as used herein shall mean any activity that is directly competitive with the Business; provided , however , the term “ Competitive Activities ” shall not include, the ownership of securities of entities which are listed on a national securities exchange or traded in the national over-the-counter market in an amount which shall not exceed five percent (5%) of the outstanding shares of any such entity or the ownership of the securities of the Persons set forth on Schedule 6.8(a) .

(b)

During the Restricted Period, (i) the Seller or any Affiliate of the Seller shall not, directly or indirectly, solicit or assist any third party in soliciting any Person who is, from the date hereof until the earlier of (x) the expiration of the Restricted Period and (y) the Termination Date, a client or customer of the Business for purpose of reducing the level of business that such Person transacts with the Business, and (ii) the Seller or any Affiliate of the Seller shall not, directly or indirectly, solicit for employment or hire any persons who on the Termination Date are employees of the Company (including, without limitation, any Continuing Employees), unless such employee’s employment has been terminated by the Company other than for cause; provided , however , that this Agreement shall in no way restrict the Seller or any Affiliate of the Seller from hiring any person who first contacts the Seller or any Affiliate of the Seller in response to a general advertisement for employment to the public in a newspaper of general circulation, on recruitment or similar website or by other similar means.

(c)

The parties agree that the provisions and restrictions contained in this Section 6.8 are necessary to protect the legitimate continuing interests of the Buyer, and that any violation or breach of these provisions will result in irreparable injury to the Buyer for which monetary damages or any other remedy at law may be inadequate and that, in addition to any relief at law which may be available to the Buyer for such violation or breach and regardless of any other provision contained in this Agreement, the Buyer may be entitled to seek temporary and permanent injunctive relief (without the necessity of having to prove actual damages therefrom) and such other equitable relief as a court may grant.

(d)

Notwithstanding anything in this Section 6.8 to the contrary, in the event of (i) an Event of Default under the Note or (ii) if the Buyer shall fail to fully satisfy its



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obligations under Section 2.5 of this Agreement when due , which failure shall not have been cured within ninety (90) days following the Buyer ’s receipt of the Seller’s written notice of such failure, in each case, then the Restricted Period and the remaining provisions of this Section 6.8 shall automatically, without any further action, notice or deed terminate and be of no further force and effect.

6.9

Board Seat .  The Buyer shall use its commercially reasonable efforts to take all steps as are necessary to cause the Seller to be elected to the board of directors of the Buyer promptly following the Closing Date, including making all requisite filings with the SEC, and to cause the Seller to continue to be a director of the Buyer (or any successor thereto) until the later of (x) the second anniversary of the Closing Date or (y) such time as the Seller shall cease to hold any capital stock of the Buyer (or any successor to the Buyer).  

6.10

Put Right .

(a)

Upon the occurrence of an Event of Default (as defined in the Note) either the Buyer or the Seller shall provide written notice to the other of the occurrence of such Event of Default, including any known details thereof to the other (a “ Note Default Notice ”).  Within forty-five (45) days of (i) the receipt by the Seller of such Note Default, to the extent delivered by the Buyer or (ii) delivery by the Seller of such Note Default Notice (such period, the “ Escrow Shares Election Period ”) the Seller shall deliver a Default Notice (as defined in the Escrow Agreement) to the Escrow Agent pursuant to which such number of Escrow Shares set forth in such Default Notice shall be transferred to the Seller; provided, however in no event shall the value of such Escrow Shares (based on the Closing Date Share Price) released to the Seller exceed the principal amount plus any accrued but unpaid interest then outstanding under the Note.  Any Escrow Shares which are not released to the Seller pursuant to this Section 6.10(a) shall be delivered to the Buyer promptly following the expiration of the Escrow Shares Election Period.

(b)

Within forty-five (45) days of the receipt of such Escrow Shares from the Escrow Agent (the “ Put Period ”), the Seller shall provide written notice to the Buyer (the “ Put Notice ”) requiring the Buyer, to purchase all or part of the Escrow Shares held by the Seller pursuant Section 6.10(a) , at a purchase price per share equal to the Closing Date Share Price (the “ Put Right ”) which Put Notice shall specify the number of Escrow Shares to be purchased by the Buyer (the “ Put Shares ”). If the Seller does not elect to exercise the Put Right within the Put Period, then Put Right shall expire and be of no further force or effect.

(c)

 Subject to Section 6.10(d) , within five (5) Business Days of the Buyer’s receipt of any Put Notice, the Buyer shall deliver to the Seller by wire transfer of immediately available funds to an account designated by the Seller, an amount (the “ Put Price ”) equal to the product of (x) the Closing Date Share Price multiplied by (y) the number of Put Shares, against simultaneous delivery by the Buyer to the Seller of the Put Shares.  

(d)

The Buyer’s obligation to pay the Put Price to the Seller following the Seller’s election to exercise the Put Right pursuant to this Section 6.10 shall be tolled solely to the extent that the payment of any portion of the Put Price by the Buyer (i) is not permitted under the Subordination Agreement, as in effect on the date hereof or (ii) would render the Buyer



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insolvent under applicable Law.  In the event that the Buyer’s obligation to pay any portion the Put Price to the Seller  is so tolled, the Buyer shall provide written notice thereof to the Seller prior to the expiration of the Put Period, and within three (3) Business Days following the date on which the conditions giving rise to the tolling of the payment of any portion of the Put Price to the Seller are no longer in effect, the Buyer shall provide notice thereof to the Seller, and the Buyer shall then have five (5) Business Days to pay such portion the Put Price to the Seller against delivery of the Put Shares in the manner specified in Section 6.10(c) .  In the event the Buyer’s obligation to pay the Put Price is tolled pursuant to this Section 6.10(d) , then any unpaid portion of the Put Price payable to the Seller shall accrue interest at a rate of 10% per annum.

(e)

The Buyer acknowledges and agrees that any transaction between the Buyer and the Seller pursuant to this Section 6.10 is a non-market transaction and as such, any policies of the Buyer relating to the sale by its Affiliates of its securities shall not apply.

ARTICLE VII.
INDEMNIFICATION

7.1

Survival of Representations and Warranties .  Except as set forth in the immediately succeeding sentences of this Section 7.1 , the representations and warranties provided for in this Agreement shall survive the Closing until twelve (12) months following the Closing Date.  The Fundamental Representations shall survive the Closing Date and remain in full force and effect until the expiration of the applicable statute of limitations and the representations and warranties set forth in Section 3.7 (Taxes) shall survive until sixty (60) days after the expiration of the applicable statute of limitations.  Unless otherwise expressly set forth in this Agreement, the covenants shall survive the Closing until the expiration of the applicable statute of limitations.

7.2

Indemnification by the Seller .  Subject to the limitation set forth in Section 7.5 , the Seller shall defend, indemnify and hold the Buyer and its Affiliates and the directors, officers, managers, members, stockholders and employees of the Buyer and its Affiliates (each, a “ Buyer Indemnified Party ” and collectively, the “ Buyer Indemnified Parties ”), harmless from any and all of the Losses that the Buyer Indemnified Parties may suffer, sustain or incur or become subject to arising out of, based upon or in connection with:

(a)

any breach of a representation or warranty contained in this Agreement or any other Transaction Document (other than the Employment Agreements) made by the Company or the Seller; or

(b)

any violation or breach by the Seller of a covenant or agreement contained in this Agreement or any other Transaction Document (other than the Employment Agreements); or

(c)

any Taxes relating to the Company or the Business in respect of any Pre-Closing Tax Period, except to the extent such Taxes are reflected as a liability on the Closing Statement.  For purposes of this Section 7.2(c) , Taxes for any Straddle Period shall be prorated based on an interim closing of the books of the Company as of 11:59 p.m. on the day immediately preceding the Closing Date.  For the avoidance of doubt, the Seller shall have no



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obligation to defend, indemnify, or hold the Buyer Indemnified Parties harmless from any and all Taxes resulting from a breach of the last sentence of Section 6.6(e) by the Buyer or the Company.

7.3

Indemnification by the Buyer .   Subject to the limitations set forth in Section 7.5 , the Buyer shall defend, indemnify and hold the Seller and his respective Affiliates and the directors, officers, managers, members, stockholders and employees of the Seller and his respective Affiliates (each, a “ Seller Indemnified Party ” and collectively, the “ Seller Indemnified Parties ”) harmless from and against all Losses that they may suffer, sustain or incur or become subject to arising out of, based upon or in connection with:

(a)

any breach of a representation or warranty contained in this Agreement or any other Transaction Document (other than the Employment Agreements) made by the Buyer;

(b)

any violation or breach of a covenant or agreement by the Company (from and after the Closing) or the Buyer contained in this Agreement or any other Transaction Document (other than the Employment Agreements); or

(c)

any Taxes relating to the Company or the Business in respect of any Tax Period beginning on the Closing Date and in the case of a Straddle Period, in respect of Taxes attributable to the portion of such period beginning on the Closing Date (measured by revenue earned and recognized during such portion of that period determined based on an interim closing of the books as of 11:59 p.m. on the day immediately preceding the Closing Date), including, for the avoidance of doubt, any and all Taxes arising out of, based upon, or in connection with any transaction occurring on the Closing Date (other than as expressly contemplated by this Agreement).

7.4

Claims Procedures .

(a)

In the case of any claim for indemnification arising from a claim of a third party (a “ Third Party Claim ”), a Person entitled to indemnification under this Article VII (an “ Indemnified Party ”) shall give prompt written notice to the Person(s) obligated to provide indemnification under Article VII with respect to such Third Party Claim (an “ Indemnifying Party ”) of any claim or demand of which such Indemnified Party has knowledge and as to which it may request indemnification hereunder (a “ Third Party Claim Notice ”). The Third Party Claim Notice shall state in reasonable detail the facts and circumstances of the Third Party Claim, including the nature, basis and amount of such claim and the provisions in this Agreement that entitle the Indemnified Party to indemnification hereunder, and shall be accompanied by a copy of any writings received in respect of such Third Party Claim.  If the Indemnifying Party does not receive a Third Party Claim Notice within thirty (30) days after the date of the receipt by the Indemnified Party or any of its Affiliates of notice of, or of the Indemnified Party or of any of its Affiliates otherwise becoming aware of, any Third Party Claim, the Indemnifying Party shall be relieved of liability hereunder in respect of such Third Party Claim (or the facts and circumstances giving rise thereto) solely to the extent that such Indemnifying Party is actually and materially prejudiced or harmed as a consequence of such failure (and, to such extent, all Losses resulting from such Third Party Claim shall thereafter be disregarded for purposes of determining whether the Deductible has been exceeded), and in any event the Indemnifying



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Party shall not be liable for any expenses incurred during the period in which the Indemnified Party was overdue (i.e. more than thirty (30) days after becoming aware of a Third Party Claim) in giving, and had not given, such Third Party Claim Notice.  

(b)

Each of the Indemnifying Parties shall have the right (and if it elects to exercise such right, to do so within twenty (20) days after receiving the Third Party Claim Notice from the Indemnified Party) to defend and to direct the defense against any such Third Party Claim, in its name or in the name of the Indemnified Party, as the case may be, at the expense of the Indemnifying Party, and with counsel selected by the Indemnifying Party, unless (i) the Indemnifying Party shall not have taken any action to defend such Third Party Claim within such twenty (20) day period, or (ii) the Indemnified Party shall have reasonably concluded that there is a conflict of interest between the Indemnified Party and the Indemnifying Party in the conduct of the defense of such Third Party Claim.  Notwithstanding anything in this Agreement to the contrary, if the Indemnified Party is in control of the defense of such Third Party Claim, it shall, at the expense of the Indemnifying Party, cooperate with the Indemnifying Party, and keep the Indemnifying Party fully informed, in the defense of such Third Party Claim.  The Indemnified Party shall have the right to participate in the defense of any Third Party Claim with counsel employed at its own expense; provided , however , that, in the case of any Third Party Claim described in clause (ii) of the second preceding sentence or as to which the Indemnifying Party shall not in fact have employed counsel to assume the defense of such Third Party Claim within such twenty (20) day period, the reasonable fees and disbursements of such Indemnified Party’s counsel shall be at the expense of the Indemnifying Party.  The Indemnifying Party shall have no indemnification obligations with respect to any Third Party Claim which shall be settled by the Indemnified Party without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld.  The Indemnifying Party shall have the right to settle any Third Party Claim, whether or not in control of the defense thereof, if such settlement (i) involves only the payment of money which the Indemnifying Party pays or satisfies with insurance proceeds or any combination thereof, (ii) includes a full general release of the Indemnified Party from the third party, and (iii) does not contain any admission of fault or culpability or a failure to act by or on behalf of such Indemnified Party.  

(c)

In the event that an Indemnified Party determines that it has a claim for Losses against an Indemnifying Party hereunder (other than as a result of a Third Party Claim) (an “ Interparty Claim ”), the Indemnified Party shall give prompt written notice thereof to the Indemnifying Party, specifying the amount of such claim, the section of this Agreement under which such claim arises and any other relevant facts and circumstances relating thereto (an “ Interparty Claim Notice ”).  The Indemnified Party shall provide the Indemnifying Party with reasonable access to its books and records for the purpose of allowing the Indemnifying Party a reasonable opportunity to verify any such claim for Losses.  The Indemnified Party and the Indemnifying Party shall negotiate in good faith for a thirty (30) day period beginning on the date the Indemnified Party provides an Interparty Claim Notice hereunder regarding the resolution of any disputed claims for Losses.  If no resolution is reached with regard to such disputed Interparty Claim between the Indemnifying Party and the Indemnified Party within such thirty (30) day period, the Indemnified Party shall be entitled to seek appropriate remedies in accordance with the terms hereof.  Notwithstanding anything herein to the contrary, in no event shall any Seller Indemnified Party or Buyer Indemnified Party be entitled to make any Interparty Claim for Losses against any Seller Indemnifying Party or Buyer Indemnifying Party, as



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applicable, related to Losses arising out of the failure to obtain any consent required by a Contract in connection with the transactions contemplated by this Agreement.  If the Indemnifying Party does not receive a Interparty Claim Notice within thirty (30) days after the date the Indemnified Party or any of its Affiliates becomes aware of any Interparty Claim, the Indemnifying Party shall be relieved of liability hereunder in respect of such Interparty Claim (or the facts or circumstances giving rise thereto) solely to the extent that such Indemnifying Party is actually and materially prejudiced or harmed as a consequence of such failure (and, to such extent, all Losses resulting from such Interparty Claim shall thereafter be disregarded for purposes of determining whether the Deductible has been exceeded), and in any event the Indemnifying Party shall not be liable for any expenses incurred during the period in which the Indemnified Party was overdue (i.e., more than thirty (30) days after becoming aware of an Interparty Claim) in giving, and had not given such Interparty Claim Notice.

(d)

Promptly following a final determination of the amount of any Losses claimed by the Indemnified Party by either (i) a final non-appealable decision, judgment or award rendered by a Governmental Body of competent jurisdiction or (ii) the mutual agreement by the Indemnified Party and Indemnifying Party, the Indemnifying Party shall pay such Losses to the Indemnified Party by wire transfer of immediately available funds to an account designated by the Indemnified Party; provided , however , that to the extent the Indemnifying Party is the Seller, the Seller shall be entitled to satisfy its indemnification obligations under this Article VII by reducing, dollar-for-dollar, the amount due to the Seller under the Note in accordance with Section 7.6(b) .

7.5

Limitations .

(a)

Notwithstanding any provision herein to the contrary, the aggregate indemnification obligations of the Seller under Section 7.2(a) , other than the indemnification obligations for breaches of the Fundamental Representations of the Seller or breaches of Section 3.7 (Taxes), shall at Closing not exceed One Million Seventeen Thousand Five Hundred Dollars ($1,017,500) (the “ Cap ”); provided , however , that the Cap shall be increased dollar-for-dollar by an amount equal to 10.7% of any cash indefeasibly paid to (or at the direction of) the Seller under the Note.  The aggregate indemnification obligations of the Seller with respect to any breaches of Fundamental Representations of the Seller or breaches of Section 3.7 (Taxes) or under Section 7.2(b) or Section 7.2(c) shall not exceed in the aggregate $20,000,000; provided , however , that the Seller shall not be obligated to pay any amount in cash under this Article VII in excess of the amount of cash indefeasibly received by (or on behalf of) the Seller pursuant to this Agreement, and any indemnity obligation payable by the Seller under this Article VII in excess of such cash amount shall only be payable by off-set against the Note (including the Escrow Shares) and the Earnout Consideration (the “ Fundamental Cap ”). To the extent an indemnity claim exceeds the amount of cash indefeasibly paid to (together with any amounts paid at the direction of) the Seller, the Buyer Indemnified Parties’ sole recourse, if any, shall be to off-set against the Note (including the Escrow Shares) and the Earnout Consideration, irrespective of whether or not outstanding or earned, as applicable; the Seller shall have no liability for any shortfall.  For the avoidance of doubt, (i) the Seller shall have no obligation to pay an amount in cash more than the cash indefeasibly received by (or on behalf of) the Seller under this Agreement for any indemnity obligation under this Article VII , and (ii) for purposes of this Agreement, the Indemnification Escrow Amount shall be deemed to be cash indefeasibly



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received by (or on behalf of), and cash indefeasibly paid to, the Seller, and shall therefore be available to fund the Seller’s indemnity obligations under this Article VII in accordance with Section 7.6(b) .

(b)

Notwithstanding any provision herein to the contrary, the indemnification obligations of the Seller under Section 7.2(a) , shall not apply to any Loss until the aggregate amount of all Losses for which indemnification claims that have been asserted under Section 7.2(a) exceeds the aggregate amount of One Hundred Seventy-Five Thousand Dollars ($175,000) (the “ Deductible ”) (with the determination of whether the Deductible has been reached to include only individual claims or series of related claims which are greater than Fifteen Thousand Dollars ($15,000), such claims being referred to herein as “ Qualifying Claims ”), and then, such indemnification obligation shall apply to all such Losses (but only including Qualifying Claims) in excess of the Deductible; provided , however , that breaches of the Fundamental Representations of the Seller or breaches Section 3.7 (Taxes) shall not be subject to the Deductible.

(c)

Any claims for Losses under Section 7.2 or Section 7.3 must be submitted before 11:59 p.m., New York, New York time, on or prior to the date the survival period applicable to the representations and warranties or covenants on which such claim is based expires.  In the event a claim for Losses is not given on or prior to the date the survival period for such representation, warranty or covenant expires then such claim for Losses will be irrevocably released and/or waived.

7.6

Calculation and Satisfaction of Losses .

(a)

Payments by the Indemnifying Party pursuant to this Article VII shall be limited to the amount of any Loss that remains after deducting therefrom (i) any insurance proceeds and any indemnity, contribution or other similar payment to which any Indemnified Party is entitled to recover from any third party with respect thereto, net of any reasonable expenses (excluding increases in premiums attributable to such claims) incurred by such Indemnified Parties in collecting such insurance proceeds or any indemnity, contribution or other similar payment, (ii) any Tax benefit to the Indemnified Parties as a result of incurring the Losses whether or not realized in the period in which such Losses arose and (iii) any Liability included in the calculation of Working Capital.  The Indemnifying Party shall be subrogated, to the extent of such payment, to all rights and remedies of the Indemnified Party to any insurance benefits or other claims of the Indemnified Party with respect to any Third Party Claim.

(b)

If the Seller is the Indemnifying Party, the Seller’s indemnification obligations under this Article VII , subject to Section 7.5 hereof, shall be satisfied in the following order: (i) first by reducing, dollar-for-dollar, the amount due to the Seller under the Note for so long as the Note is outstanding, any such reduction shall be applied first to reduce any accrued but unpaid interest then outstanding under the Note and next to reduce the principal amount then outstanding under the Note; (ii) second by release and payment of the Indemnification Escrow Amount, in immediately available funds, to (or for the benefit of) the Buyer, in accordance with the Indemnification Escrow Agreement; (iii) third by payment of cash in immediately available funds up to the amount of cash received by (or on behalf of) the Seller pursuant to this Agreement (without duplication); and (iv) fourth by surrendering to the Buyer



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shares of Buyer Common Stock issued to the Seller, if any, pursuant to the terms of this Agreement, with (A) each Earnout Share so surrendered having a per share value, solely for purposes of this Section 7.6(b) , equal to the Earnout Share Price with respect to such Earnout Share (subject to proportionate adjustment in the event of a stock split, stock dividend or distribution, recapitalization or similar event), and (B) each Escrow Share so surrendered having a per share value, solely for purposes of this Section 7.6(b) , equal to the Closing Date Share Price (subject to proportionate adjustment in the event of a stock split, stock dividend or distribution, recapitalization or similar event).  If the Buyer is the Indemnifying Party, the Buyer shall satisfy its indemnification obligations under this Article VII by the payment of cash in immediately available funds.

7.7

Effect on Purchase Price .  All indemnification, purchase price adjustments, reimbursement payments and other payments made pursuant to this Agreement subsequent to the date of this Agreement, as applicable, will be treated as an adjustment to the Purchase Price unless otherwise required by Law.

7.8

Sole and Exclusive Remedy .  Except for fraud claims or actions in equity, the indemnification and other rights of the parties set forth in this Article VII shall be the sole and exclusive remedies of the parties for any Losses arising out of or relating to this Agreement after the date hereof.  

ARTICLE VIII.
GENERAL PROVISIONS

8.1

Further Assurances .  If at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the parties will take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request, all at the sole cost and expense of the requesting party (unless the requesting party is entitled to indemnification therefor hereunder).  

8.2

Notices .  All notices, requests, demands, waivers, consents and other communications hereunder shall be in writing, shall be delivered either in person, by facsimile (which is confirmed), e-mail or other electronic means, by overnight air courier or by certified or registered mail, and shall be deemed to have been duly given and to have become effective (a) upon receipt if delivered in person or by facsimile, e-mail or other electronic means calculated to arrive on any Business Day prior to 5:00 p.m., New York time, or on the next succeeding Business Day if delivered on a non-Business Day or after 5:00 p.m., New York time, (b) one (1) Business Day after having been delivered to a nationally-recognized courier for overnight delivery (with written confirmation of delivery), or (c) three (3) Business Days after having been deposited in the mails as certified or registered mail, return receipt requested, all fees prepaid, directed to the parties or their assignees at the following addresses (or at such other address as shall be given in writing by a party hereto):

If to the Seller, addressed as follows:

Richard Steel

_______________

_______________



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With a copy (which shall not constitute notice) to:

Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, New York 10020

Attention: Steven E. Siesser, Esq.

Telephone: (212) 204-8688

Facsimile: (973) 597-2507

Email: ssiesser@lowenstein.com


If to the Buyer or the Company (post-Closing), addressed as follows:

Social Reality, Inc.

456 Seaton Street

Los Angeles, CA 90013

Attention:  Christopher Miglino

Telephone:  (323) 283-8505

Facsimile: (323) [___-____]

Email:chris@socialreality.com


With a copy (which shall not constitute notice) to:

Pearlman Schneider LLP

2200 Corporate Boulevard, N.W.

Suite 210

Boca Raton, FL  33431

Attention:  James M. Schneider, Esq.

Telephone: (561) 362-9595

Facsimile: (561) 361-9612

Email: jim@pslawgroup.net


8.3

Amendment; Waiver .  This Agreement may not be amended, supplemented or changed except by an instrument in writing signed by both the Seller and the Buyer.  Any party to this Agreement may waive in writing any obligation owed to it by any other party under this Agreement.  No waiver of any party of any default, misrepresentation, breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence.

8.4

Assignment .  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns.  No party may assign any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other parties hereto; provided, that, such permitted assignment shall not relieve such party of any of its obligations hereunder and such assignee shall agree in writing to assume the obligations of the assignor under this Agreement. Any assignment or attempted assignment shall be null and void.  



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Notwithstanding the foregoing, before expiration of the Second Earnout Period, the Buyer shall not consummate a Buyer Change of Control unless: (a) the Seller has indefeasibly received all principal and accrued interest on the Note; (b) if during the First Earnout Period, each of the Year-One Earnout Consideration and the Year-Two Earnout Consideration has been indefeasibly received by the Seller, whether or not earned, due or payable; and (c) if during the Second Earnout Period, the Year-One Earnout Consideration has been indefeasibly received by the Seller to the extent due and payable under this Agreement and the Year-Two Earnout Consideration has been indefeasibly received by the Seller, whether or not earned, due or payable; provided , however , if the surviving Person in such Buyer Change of Control is reasonably acceptable to the Seller, then such Person may comply with clauses (b) and (c) by agreeing in a writing reasonably acceptable to the Seller to assume the obligations to under Section 2.5 of this Agreement as though the direct party hereto.

8.5

No Third Party Beneficiaries .  Except as set forth in this Section 8.5 , this Agreement does not create, and shall not be construed as creating, any rights enforceable by any Person not a party to this Agreement, except to the extent that such Person is an Indemnified Party in respect of the indemnification provided in Article VII hereof.

8.6

Severability .  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Laws, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Laws in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.  Upon such holding that any term or other provision is invalid, illegal or unenforceable, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible with respect to the purportedly invalid, illegal or unenforceable provision in a mutually acceptable manner so that the transactions contemplated by this Agreement may be consummated as originally contemplated to the greatest extent possible.

8.7

Entire Understanding .  This Agreement (including the Schedules and Exhibits hereto) and the Confidentiality Letter, dated March 12, 2014, between the Company and the Buyer contains the entire understanding between the parties concerning the subject matter of this Agreement and supersedes all prior understandings and agreements, whether oral or written, between them with respect to the subject matter hereof. There are no representations, agreements, arrangements or understandings, oral or written, between or among the parties hereto relating to the subject matter of this Agreement which are not fully expressed herein.

8.8

Captions .  The captions contained in this Agreement are for convenience of reference only and shall not be given any effect whatsoever in the construction or interpretation of this Agreement.

8.9

Counterparts; Electronic Signatures .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be transmitted by facsimile or



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electronically, and it is the intent of the parties that the facsimile copy (or a photocopy or PDF copy) of any signature printed by a receiving facsimile machine or computer printer shall be deemed an original signature and shall have the same force and effect as an original signature.

8.10

Governing Law; Venue; Wavier of Trial by Jury .  This Agreement and all matters arising directly or indirectly herefrom shall be construed and enforced in accordance with the laws of the State of California without giving effect to principles of conflicts of laws.  The parties hereby submit to the exclusive jurisdiction of any state or federal court sitting Los Angeles County, to the extent the Buyer is the defendant and, Contra Costa County, to the extent the Seller is the defendant, over any suit, action or proceeding arising out of or relating to this Agreement or any Transaction Document and waive any claims of lack of personal jurisdiction or forum non conveniens.  The parties agree that a final judgment in any such suit, action or proceeding brought in such court shall be conclusive and binding upon the parties and may be enforced in any other courts to whose jurisdiction other parties are or may be subject, by suit upon such judgment.  THE PARTIES HEREBY WAIVE ALL RIGHT AND ENTITLEMENT TO A TRIAL BY JURY AS TO ANY DISPUTES BETWEEN THEM.

8.11

Currency .  All references to “dollars” or “$” in this Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement.

IN WITNESS WHEREOF , the parties have duly executed this Agreement as of the date first above written.

 

THE BUYER:

 

 

 

 

SOCIAL REALITY, INC.

 

By:

/s/ Christopher Miglino

 

Name:

Christopher Miglino

 

Title:

Chief Executive Officer

 

 

 

 

THE COMPANY:

 

 

 

 

STEEL MEDIA

 

By:

/s/ Richard Steel

 

Name:

Richard Steel

 

Title:

Chief Executive Officer

 

 

 

 

THE SELLER:

 

 

 

 

/s/ Richard Steel

 

Richard Steel





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Exhibit 4.7


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.


[•], 2014

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 September 29, 2014 (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 [•] , 2017 (the “ Expiration Date ”).


1.2

Exercise Price .  The initial purchase price for each of the Shares shall be $1.50 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

Exercise .  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

Holder’s Exercise Limitation .  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 2.1 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 (as that term is defined in the Exchange Act), 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).  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) 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 2.2, 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 2.2 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 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 and shall have no liability for exercises of the Warrant that are not in compliance with the Beneficial Ownership Limitation.  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 and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of the Warrant that are not in compliance with the Beneficial Ownership Limitation.  For purposes of this Section 2.2, 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 Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or its transfer agent setting forth the number of shares of Class A Common outstanding.  Upon the written or oral request of a Holder, the Company shall as promptly as practicable 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 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2.2, 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 2.2



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shall continue to apply.  Any such increase or decrease will not be effective until the 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 2.2 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.

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 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 $3.75 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.


4.

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 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.


5.

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.


6.

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 10 hereof will be rounded up to the nearest whole Share.




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7.

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.


8.

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.


9.

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.


10.

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:


10.1

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.


10.2

Stock Dividend .  If at any time after the date hereof the Company declares a dividend or other distribution on its 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 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).


10.3

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



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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.


10.4

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 10.1 , 10.2 and 10.3 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 10.4 , 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 10.4 shall similarly apply to successive reclassifications, capital reorganizations, changes, mergers and transfers.


11.

Notice of Adjustments; Notices .  Whenever the Exercise Price or number of Shares purchasable hereunder shall be adjusted pursuant to Section 10 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.


12.

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 stockholder 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



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(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.


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 12 .


13.

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.

14.

Disposition of Shares; Transferability .

14.1

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.


14.2

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.


15.

Miscellaneous .


15.1

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.


15.2

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.


15.3

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 underlying the Warrants pursuant to the Purchase Agreement.  Any waiver or amendment effected in accordance with this Section 15.3 shall be binding upon the Holder and the Company.




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15.4

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.


15.5

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


15.6

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.


15.7

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:

 

 

 

Christopher Miglino, Chief Executive Officer

 

 

 




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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 by delivering the sum of $____________, in lawful money of the United States, to the Company 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.

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 4.8


THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.  ANY TRANSFEREE OF THIS WARRANT SHOULD CAREFULLY REVIEW THE TERMS OF THIS WARRANT, INCLUDING SECTION 2(e) HEREOF.  THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE LESS THAN THE NUMBER SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 2(e) HEREOF.  



SOCIAL REALITY, INC.


W ARRANT T O P URCHASE C LASS A C OMMON S TOCK


Warrant No.: SRW – 001

Number of Shares: 2,900,000

Date of Issuance: October 30, 2014


Social Reality, Inc., a Delaware corporation (the “ Company ”), hereby certifies that, for Ten United States Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, VPC SBIC I, LP, a Delaware limited partnership, the registered holder hereof, or its successors or permitted assigns (the “ Holder ”), is entitled, subject to the terms and conditions set forth below, to purchase from the Company, at any time or times on or after the date hereof, but not after 11:59 P.M. New York City time on the Expiration Date (as defined herein) Two Million Nine Hundred Thousand (2,900,000) fully paid nonassessable shares of Common Stock (as defined in Section 1(b) ) of the Company, subject to adjustment as hereinafter provided (the “ Warrant Shares ”), at the Warrant Exercise Price (as defined in Section 1(b) ); provided , however, that in no event shall the Holder be entitled or required to exercise this Warrant for a number of Warrant Shares in excess of that number of Warrant Shares that, upon giving effect to such exercise, would cause the aggregate number of shares of Common Stock beneficially owned by the Holder and its Affiliates and any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (including shares held by any “group” of which the Holder is a member) to exceed 4.99% of the outstanding shares of the Common Stock following such exercise.  For purposes of the foregoing proviso, the aggregate number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such proviso is being made, but shall exclude shares of Common Stock that



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would be issuable upon (i) exercise of the remaining, unexercised Financing Warrants (as defined in Section 1(a) below) beneficially owned by the Holder and its Affiliates and any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act and (ii) exercise, conversion or exchange of the unexercised, unconverted or unexchanged portion of any other securities of the Company beneficially owned by the Holder and its Affiliates and any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act subject to a limitation on conversion, exercise or exchange analogous to the limitation contained herein.  For purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and applicable regulations of the Securities and Exchange Commission, and, except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.  For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent periodic report filed on Form 10-K or Form 10-Q, (2) a more recent public announcement by the Company or (3) any other written (including e-mail) notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written request of the Holder, the Company shall promptly, but in no event later than two Business Days following the receipt of such request, confirm in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion, exercise or exchange of securities of the Company, including this Warrant, by the Holder and its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.


Section 1.

(a)

Financing Agreement .  This Warrant is one of the warrants issued pursuant to that certain Financing Agreement, dated as of October 30, 2014, among the Company, the guarantors party thereto, Holder and the other lenders party thereto and Victory Park Management, LLC, as administrative agent and collateral agent for the lenders party thereto (as such agreement may be amended from time to time as provided therein, the “ Financing Agreement ”), or issued in exchange or substitution therefor or replacement thereof (all such warrants being collectively referred to as the “ Financing Warrants ”).  Each capitalized term used, and not otherwise defined, herein shall have the meaning ascribed thereto in the Financing Agreement.

(b)

Definitions .  The following words and terms used in this Warrant shall have the following meanings:

(i)

Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to remain closed.




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(ii)

Common Stock ” means (A) the Company’s Class A Common Stock, par value $0.001 per share, and (B) any capital stock into which such Class A Common Stock shall have been changed or any capital stock resulting from a reclassification of such Class A Common Stock.

(iii)

Convertible Securities ” means any stock or securities (other than Options) directly or indirectly convertible into or exchangeable or exercisable for Common Stock.

(iv)

dollar ” or “ $ ” means U.S. dollars.

(v)

Enterprise Value ” means (1) the product of (A) the number of issued and outstanding shares of Common Stock on the date the Company delivers the Major Transaction Notice, multiplied by (B) the Weighted Average Price for the Common Stock on such date, plus (2) the amount of the Company’s and its Subsidiary debt as shown on a consolidated basis on the latest balance sheet filed with the SEC prior to the date the Company delivers the Major Transaction Notice (the “ Current Balance Sheet ”), less (3) the amount of cash and cash equivalents of the Company and its Subsidiaries as shown on a consolidated basis on the Current Balance Sheet.

(vi)

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

(vii)

Expiration Date ” means the date that is five years after the Warrant Date (as defined in Section 14 ) or, if such date does not fall on a Business Day, then the next Business Day.

(viii)

Major Transaction ” means each of the following:

(1)

the consolidation, merger or other business combination of the Company with or into another Person (other than a consolidation, merger or other business combination in which holders of the Company’s voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, a majority of the combined voting power of the surviving entity or entities entitled to vote generally for the election of a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities);

(2)

the sale or transfer of (A) all or substantially all of the Company’s assets (including, for the avoidance of doubt, all or substantially all of the assets of the Company and its Subsidiaries in the aggregate) or (B) assets of the Company (including, for the avoidance of doubt, assets of the Company and its Subsidiaries in the aggregate) for a purchase price equal to more than 50% of the Enterprise Value (as defined above) of the Company;

(3)

the consummation of a purchase, tender or exchange offer made to and accepted by the holders of more than the 50% of the outstanding shares of Common Stock;




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(4)

the acquisition by any Person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-five percent (35%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; or

(5)

any change in the composition of the board of directors of the Company such that the individuals who, as of the Warrant Date, constituted the board of directors of the Company cease for any reason to constitute at least a majority of the board of directors of the Company.

(ix)

Options ” means any rights, warrants or options to subscribe for or purchase any Common Stock or Convertible Securities.

(x)

Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization or a government or any department or agency thereof or any other legal entity.

(xi)

Principal Market ” means, with respect to the Common Stock or any other security, the principal securities exchange or trading market for the Common Stock or such other security.  

(xii)

Securities Act ” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated by the Securities and Exchange Commission thereunder.

(xiii)

Trading Day ” means any day on which the Common Stock or other security, as applicable, is traded on its Principal Market; provided that “Trading Day” shall not include any day on which the Principal Market is open for trading for less than 4.5 hours.

(xiv)

Warrant ” means this Warrant and all warrants issued in exchange, transfer or replacement thereof pursuant to the terms of this Warrant.

(xv)

Warrant Exercise Price ” shall be equal to, with respect to any Warrant Share, $1.00, subject to adjustment as hereinafter provided.

(xvi)

Weighted Average Price ” means, for any security as of any date, the dollar volume-weighted average price for such security on its Principal Market during the period beginning at 9:30 a.m. New York City time (or such other time as its Principal Market publicly announces is the official open of trading) and ending at 4:00 p.m. New York City time (or such other time as its Principal Market publicly announces is the official close of trading) as reported by Bloomberg Financial Markets (or any successor thereto) (“ Bloomberg ”) through its “Volume at Price” functions, or if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m. New York City time (or such other time as over-the-counter market publicly announces is the official open of trading), and ending at 4:00 p.m. New York City time (or such other time as such over-the-counter market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume-




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weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group, Inc. (or any successor thereto).  If the Weighted Average Price cannot be calculated for such security on such date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 2(d) below.  All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during any period during which the Weighted Average Price is being determined.

Section 2.

Exercise of Warrant .

(a)

Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder hereof then registered on the books of the Company, in whole or in part, at any time on any Business Day on or after the opening of business on the date hereof and prior to 11:59 P.M. New York City time on the Expiration Date by (i) delivery of a written notice, in the form of the exercise notice attached as Exhibit A hereto (the “ Exercise Notice ”), of such Holder’s election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased and, if such exercise is conditioned upon consummation of a Major Transaction (as defined below) or an Organic Change (as defined below) or any other transaction (such Major Transaction, Organic Change or other transaction, an “ Exercise Trigger Transaction ”), such condition to exercise, (ii) payment to the Company of an amount equal to the product of the Warrant Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (such product, the “ Aggregate Exercise Price ”), by check or wire transfer of funds or through a reduction of an amount of principal outstanding under a Note or Notes held by the Holder in accordance with Section 2.3(e) of the Financing Agreement, and (iii) if required by Section 2(e) , unless the Holder has previously delivered this Warrant to the Company and it or a new replacement Warrant has not yet been delivered to the Holder, the surrender to a common carrier for overnight delivery to the Company as soon as practicable following such date, of this Warrant (or an indemnification undertaking, in customary form, with respect to this Warrant in the case of its loss, theft or destruction pursuant to Section 12 ); provided , that if such Warrant Shares are to be issued in any name other than that of the Holder, such issuance shall be deemed a transfer and the provisions of Section 7 shall be applicable.  Notwithstanding anything to the contrary contained herein, the Holder may elect, in connection with an exercise that is contingent upon an Organic Change, that such exercise be effected contemporaneously with such Organic Change and that the Holder will acquire and receive in lieu of or in addition to (as the case may be) the Warrant Shares immediately theretofore acquirable and receivable upon such exercise of this Warrant, such shares of stock, securities or assets of the Acquiring Entity (as defined below) that would have been issued or payable in such Organic Change with respect to or in exchange for the number of Warrant Shares that would have been acquirable and receivable upon such exercise of this Warrant as of the date of such Organic Change.  In the event of any exercise of the rights represented by this Warrant in compliance with this Section 2(a) , on or before the second Business Day (the “ Warrant Share Delivery Date ”) following the date of its receipt of the Exercise Notice, the Aggregate Exercise Price (including through a reduction in principal outstanding under applicable Notes in accordance with the Financing Agreement) and, if required by Section 2(e) (unless the Holder has previously delivered this Warrant to the




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Company and a new or replacement Warrant has not yet been delivered to the Holder), this Warrant (or an indemnification undertaking, in customary form, with respect to this Warrant in the case of its loss, theft or destruction, pursuant to Section 12 ) (the “ Exercise Delivery Documents ”) (or, if the exercise of this Warrant is conditioned upon the consummation of an Exercise Trigger Transaction, on the date of (and immediately prior to) the consummation of such Exercise Trigger Transaction), the Company shall, at the option of the Holder, (A) issue such aggregate number of shares of Common Stock to which the Holder shall be entitled electronically in the name of the Holder or its designee through the Direct Registration System (DRS) of The Depository Trust Company (“ DTC ”) or, if the Holder or its designee is eligible to receive shares through DTC, credit such aggregate number of shares of Common Stock to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system, or (B) issue and deliver to the address specified in the Exercise Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled.  Upon the latest of (x) the date of delivery of the Exercise Notice, (y) the date of delivery of the Aggregate Exercise Price referred to in clause (ii) above (including through a reduction in principal outstanding under applicable Notes in accordance with the Financing Agreement), and (z) if the exercise of this Warrant is conditioned upon the consummation of an Exercise Trigger Transaction, the date of such consummation, the Holder shall be deemed for all purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised (the date thereof being referred to as the “ Deemed Issuance Date ”), irrespective of the date of delivery of this Warrant as required by clause (iii) above or the certificates evidencing such Warrant Shares.  

(b)

If this Warrant is submitted for exercise, as may be required by Section 2(e) , and unless the rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, as soon as practicable and in no event later than three Business Days after receipt of this Warrant (the “ Warrant Delivery Date ”) and at its own expense, issue a new Warrant identical in all respects to this Warrant, except that it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which such Warrant is exercised.

(c)

No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock issued upon exercise of this Warrant shall be rounded up or down to the nearest whole number (with 0.5 rounded up).

(d)

If the Company shall fail for any reason or for no reason (x) to issue and deliver to the Holder within two Business Days of receipt of the Exercise Delivery Documents a certificate for the number of shares of Common Stock to which the Holder is entitled, or to issue electronically in the name of the Holder or its designee through the Direct Registration System (DRS) of DTC such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant, or to credit the Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant or (y) to issue and deliver to the Holder on the Warrant Delivery Date a new Warrant for the number of shares of Common Stock to which the Holder is entitled pursuant to Section 2(b) , if any, then the Company shall, in addition to any other remedies under this Warrant or the Financing Agreement or otherwise available to the Holder, including any indemnification under Section 13.12 of the Financing Agreement, pay as




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additional damages in cash to the Holder on each day after such second Business Day that such shares of Common Stock are not issued and delivered to the Holder or its designee, in the case of clause (x) above, or such third Business Day that such Warrant is not delivered, in the case of clause (y) above, an amount equal to the sum of (i) two percent (2%) of the product of (A) the number of shares of Common Stock not issued to the Holder or its designee on or prior to the Warrant Share Delivery Date and (B) the Weighted Average Price of the Common Stock on the Warrant Share Delivery Date, in the case of the failure to deliver Common Stock, and (ii) if the Company has failed to deliver a Warrant to the Holder on or prior to the Warrant Delivery Date, two percent (2%) of the product of (X) the number of shares of Common Stock issuable upon exercise of the Warrant as of the Warrant Delivery Date, and (Y) the Weighted Average Price of the Common Stock on the Warrant Delivery Date.  Alternatively, at the election of the Holder made in the Holder’s sole discretion, the Company shall (I) pay to the Holder, in lieu of the additional damages referred to in the preceding sentence (but in addition to all other available remedies that the Holder may pursue hereunder and under the Financing Agreement (including indemnification pursuant to Section   13.12 thereof)), 110% of the amount that (1) the Holder’s total purchase price (including brokerage commissions, if any) for shares of Common Stock purchased to make delivery in satisfaction of a sale by such holder of the shares of Common Stock to which the Holder is entitled but has not received upon an exercise, exceeds (2) the net proceeds received by the Holder from the sale of the shares of Common Stock to which the Holder is entitled but has not received upon such exercise, and (II) in the case of clause (x) above, at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  If the Holder and the Company are unable to agree upon the determination of the Weighted Average Price, within one Business Day of such disputed determination being submitted to the Holder, then the Company shall immediately submit via facsimile the disputed determination of the Weighted Average Price to an independent, reputable investment banking firm agreed to by the Company and the Holder.  The Company shall cause the investment banking firm to perform the determination and notify the Company and the Holder of the results no later than two Business Days after the date it receives the disputed determinations.  Such investment banking firm’s determination shall be deemed conclusive absent manifest error.

(e)

Book-Entry .  Notwithstanding anything to the contrary set forth herein, upon exercise of this Warrant in accordance with the terms hereof, the Holder shall not be required to physically surrender this Warrant to the Company unless it is being exercised for all of the Warrant Shares represented by the Warrant.  The Holder and the Company shall maintain records showing the number of Warrant Shares exercised and issued and the dates of such exercises or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Warrant upon each such exercise.  In the event of any dispute or discrepancy, such records of the Company establishing the number of Warrant Shares to which the Holder is entitled shall be controlling and determinative in the absence of error.  Notwithstanding the foregoing, if this Warrant is exercised as aforesaid, the Holder may not transfer this Warrant unless the Holder first physically surrenders this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant of like tenor, registered as the Holder may request, representing in the aggregate the remaining number of Warrant Shares represented by this Warrant.  The Holder, by




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acceptance of this Warrant, acknowledges and agrees that, by reason of the provisions of this paragraph, following exercise of any portion of this Warrant, the number of Warrant Shares represented by this Warrant may be less than the number stated on the face hereof.  

Section 3.

Covenants as to Common Stock .  The Company hereby covenants and agrees as follows:

(a)

This Warrant is, and any Warrants issued in substitution for or replacement of this Warrant will upon issuance be, duly authorized and validly issued.

(b)

All Warrant Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance and receipt of payment therefor from the Holder (including through a reduction in principal outstanding under applicable Notes in accordance with the Financing Agreement), be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof.

(c)

At all times through (and including) the Expiration Date, the Company will at all times have authorized and reserved at least 100% of the number of shares of Common Stock needed to provide for the exercise of the rights then represented by this Warrant (without regard to any limitations or restrictions on exercise).

(d)

The Company shall promptly secure the quotation or listing of the Warrant Shares on the Principal Market for the Common Stock and each other market or exchange on which the Common Stock is traded or listed and shall maintain, so long as any other shares of Common Stock shall be so traded or listed, such listing of all Warrant Shares from time to time issuable upon the exercise of this Warrant; and the Company shall so list, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant on the Principal Market for such capital stock and each other market or exchange on which such capital stock is traded or listed.

(e)

The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and take all such action as may reasonably be requested by the Holder in order to protect the exercise privilege of the Holder against impairment, consistent with the tenor and purpose of this Warrant.  Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above $0.001 per share, and (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

(f)

This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets.




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Section 4.

Taxes .  The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.

Section 5.

Warrant Holder Not Deemed a Stockholder .  Except as otherwise provided herein, the Holder, as holder of this Warrant, shall not be entitled to vote or be deemed the holder of shares of the Company for any purpose (other than to the extent that the Holder is deemed to be a beneficial owner of Warrant Shares under applicable securities laws after taking into account the limitation set forth in the first paragraph of this Warrant), nor shall anything contained in this Warrant be construed to confer upon the Holder, as holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the Deemed Issuance Date of the Warrant Shares that the Holder is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (except to the extent set forth in an Exercise Notice that has been delivered by the Holder to the Company) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.  Notwithstanding the foregoing, the Company will provide the Holder with copies of the same notices (without duplication if the Holder is also a stockholder of the Company) and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

Section 6.

Representations and Warranties of Holder .  The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant, and upon exercise hereof will acquire the Warrant Shares, for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares in a manner that would not violate the Securities Act, except pursuant to sales registered, or exempted from registration, under the Securities Act; provided , however, that by making the representations herein, the Holder does not agree to hold this Warrant or any of the Warrant Shares for any minimum or other specific term and reserves the right to dispose of this Warrant and the Warrant Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.  The Holder further represents, by acceptance hereof, that, as of the date of its acquisition of this Warrant, the Holder is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act.  The Holder, by acceptance hereof, understands that (a) no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Warrant or the Warrant Shares or the fairness or suitability of the investment in the Warrant or the Warrant Shares, and (b) except as provided in the Registration Rights Agreement, this Warrant and the Warrant Shares issuable upon exercise hereof have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred except pursuant to an effective registration statement or an exemption from registration; provided, however, that the Warrant and the Warrant Shares may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured thereby and such pledge of the Warrant and the Warrant Shares, as applicable, shall not be deemed by the Company to be a transfer, sale or assignment thereof hereunder, and, in such event, the Holder shall not be required to provide the




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Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Warrant or otherwise.  Each delivery of an Exercise Notice (other than in connection with an exercise through a reduction in principal outstanding under applicable Notes in accordance with the Financing Agreement) shall constitute confirmation at such time by the Holder of the representations concerning the Warrant Shares set forth in the first three sentences of this Section 6 , unless contemporaneously with the delivery of such Exercise Notice, the Holder notifies the Company in writing that it is not making such representations (a “ Representation Notice ”).  If the Holder delivers a Representation Notice in connection with an exercise, it shall be a condition to the Holder’s exercise of this Warrant and the Company’s obligations set forth in Section 2 in connection with such exercise, that the Company receive such other representations as the Company considers reasonably necessary to assure the Company that the issuance of its securities upon exercise of this Warrant shall not violate any applicable registration requirements of United States or state securities laws.

Section 7.

Ownership and Transfer .

(a)

The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee.  The Company may treat the person in whose name any Warrant is registered on the register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any transfers made in accordance with the terms of this Warrant.

(b)

Subject to compliance with applicable U.S. federal and state securities laws, this Warrant may be offered, sold, assigned or transferred by the Holder, upon proper surrender of this Warrant, properly endorsed, without the consent of the Company, and in connection therewith the Holder may transfer any rights related thereto under the Financing Agreement pursuant to Section 13.8(c) thereof; provided, however, that the Holder may not offer, sell, assign or transfer this Warrant to any Person that is directly engaged in the same business as the Company and its subsidiaries as conducted on the Warrant Date.

Section 8.

Adjustment of Number of Warrant Shares .  The Warrant Exercise Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted from time to time as follows:

(a)

Adjustment of Warrant Exercise Price upon Subdivision or Combination of Common Stock .  If the Company at any time after the date of issuance of this Warrant subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Warrant Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of shares of Common Stock obtainable upon exercise of this Warrant will be proportionately increased.  If the Company at any time after the date of issuance of this Warrant combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Warrant Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of shares of Common Stock obtainable upon exercise of this Warrant will be proportionately decreased.  Any adjustment under this Section 8(a) shall




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become effective at the close of business on the date the subdivision or combination becomes effective or, if earlier, the record date with respect to the subdivision or combination.

(b)

Distribution of Assets .  If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of this Warrant, then, in each such case:

(i)

the Warrant Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Warrant Exercise Price by a fraction of which (A) the numerator shall be the Weighted Average Price of the Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s board of directors) applicable to one share of Common Stock, and (B) the denominator shall be the Weighted Average Price of the Common Stock on the Trading Day immediately preceding such record date; and

(ii)

at the option of the Holder, in its sole discretion, either (A) the number of Warrant Shares obtainable upon exercise of this Warrant shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i), or (B) in the event that the Distribution is of common stock of a company whose common stock is traded on a national securities exchange or quoted on an over-the-counter market, then the holder of this Warrant shall receive an additional warrant, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable for the number of shares of common stock of such company that would have been payable to the holder of this Warrant pursuant to the Distribution had the holder exercised this Warrant in full immediately prior to such record date (without taking into account any limitations on the exercisability of this Warrant) and with an exercise price equal to the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i).

(c)

Certain Events .  If any event occurs of the type contemplated by the provisions of this Section 8 but not expressly provided for by such provisions, then the Company’s Board of Directors will make an appropriate adjustment in the Warrant Exercise Price and the number of shares of Common Stock obtainable upon exercise of this Warrant so as to protect the rights of the Holder; provided that no such adjustment will increase the Warrant Exercise Price or decrease the number of shares of Common Stock obtainable as otherwise determined pursuant to this Section 8 .




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(d)

Par Value .  Notwithstanding anything to the contrary contained in this Section 8 , if, as a result of an adjustment pursuant to this Section 8 , the par value per share of Common Stock would be greater than the Warrant Exercise Price after such adjustment, then the Warrant Exercise Price shall be an amount equal to the par value per share of the Common Stock but the number of shares the holder of this Warrant shall be entitled to purchase shall be the number of shares of Common Stock as would have resulted from the Warrant Exercise Price that, absent such limitation, would have resulted from such adjustment pursuant to this Section 8 .  The foregoing adjustment shall not constitute a waiver of any claim arising against the Company by reason of any covenant contained in Section 3(e) .

Section 9.

Purchase Rights; Reorganization, Reclassification, Consolidation, Merger or Sale; Dividends/Distributions of Assets .

(a)

Purchase Rights .  In addition to any adjustments pursuant to Section 8 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of its capital stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights that the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(b)

Organic Change .  Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction that is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an “ Organic Change .”  Prior to the consummation of any (i) sale of all or substantially all of the Company’s assets to an acquiring Person or (ii) other Organic Change following which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the successor resulting from such Organic Change (in each case, the “ Acquiring Entity ”) a written agreement (in form and substance satisfactory to holders of Financing Warrants representing at least a majority of the shares of Common Stock obtainable upon exercise of the Financing Warrants then outstanding without regard to any limitation on exercise thereof) to deliver to each holder of Financing Warrants, in exchange for each such Financing Warrant, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to this Warrant and satisfactory to the holders of Financing Warrants (including, an adjusted Warrant Exercise Price equal to the value for the Common Stock reflected by the terms of such consolidation, merger or sale, and exercisable for a corresponding number of shares of Common Stock acquirable and receivable upon exercise of such Financing Warrant (without regard to any limitations on exercises), if the value so reflected is less than the Warrant Exercise Price in effect immediately prior to such consolidation, merger or sale).  Prior to the consummation of any other Organic Change, the Company shall make appropriate provision (in form and substance satisfactory to the holders of such Financing Warrants representing at least a majority of the shares of Common Stock obtainable upon exercise of the Financing Warrants then outstanding, without regard to




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any limitation on exercise thereof) to ensure that each of the holders of the Financing Warrants will thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the exercise of such holders’ Financing Warrants (without regard to any limitations on exercises), such shares of stock, securities or assets that would have been issued or payable in such Organic Change with respect to or in exchange for the number of shares of Common Stock that would have been acquirable and receivable upon the exercise of such holder’s Financing Warrant as of the date of such Organic Change (without taking into account any limitations on the exercisability of any of the Financing Warrants).

(c)

Notices .

(i)

As soon as reasonably practicable, but in no event later than two Business Days, upon any adjustment of the Warrant Exercise Price or number of shares of Common Stock obtainable upon exercise of this Warrant, the Company will give written notice thereof to the Holder, setting forth in reasonable detail, and certifying, the calculation of such adjustment; provided , however , that neither the timing of giving any such notice nor any failure by the Company to give such a notice shall effect any such adjustment or the effective date thereof.

(ii)

The Company will give written notice to the Holder at least 10 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Organic Change, dissolution or liquidation, provided that such information shall be made known to the public prior to or contemporaneously with such notice being provided to the Holder.

(iii)

The Company will also give written notice to the Holder at least 10 days prior to the date on which any Organic Change, dissolution or liquidation will take place, provided that such information shall be made known to the public prior to or contemporaneously with such notice being provided to the Holder.

Section 10.

Put Right .  

(a)

At any time after the earlier of (i) April 30, 2016 and (ii) the Maturity Date (as such term is defined in the Financing Agreement), but on or prior to the Expiration Date (“ Put Period ”), the Holder shall have the right (a “ Put Right ”), but not the obligation, in its sole discretion, to require the Company to purchase from the Holder, from time to time, all or any portion of this Warrant that has not then been previously exercised (without taking into account any limitations on the exercisability of this Warrant) in accordance with the terms hereof.  In order to exercise a Put Right, the Holder shall deliver to the Company a written notice (a “ Put Right Notice ”) setting forth (i) the election by the Holder to exercise a Put Right and (ii) the unexercised portion of this Warrant, by reference to the number of underlying Warrant Shares, for which a Put Right is being exercised (“ Put Right Securities ”).  




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(b)

The purchase price for Put Right Securities at any Put Right Closing shall be an amount equal to the product of (i) a fraction, the numerator of which is the number of Put Right Securities for which the Put Right is then being exercised, and the denominator of which is the total number of Warrant Shares for which this Warrant was originally exercisable as of the Warrant Date (giving effect to any adjustment of the number of Warrant Shares occurring prior to the Put Right Closing, as provided herein, as if such adjustment had been effective when this Warrant was originally issued, and without regard to any limitations or restrictions on exercise), multiplied by the lesser of (A) fifty percent (50%) of the total revenue for the Company and its subsidiaries, on a consolidated basis, for the trailing twelve month period ending with the then-most recently completed fiscal quarter of the Company, as shall be certified in writing by the Company’s Chief Financial Officer and agreed upon in good faith by the Company and the Holder, and (B) One Million Five Hundred Thousand Dollars ($1,500,000), and multiplied by (ii) a fraction, the numerator of which is the total number of Warrant Shares for which this Warrant was originally exercisable as of the Warrant Date, and the denominator of which is the total number of shares of Common Stock for which the Financing Warrants, including this Warrant, were originally exercisable as of the Warrant Date (in each such case without regard to any limitations or restrictions on exercise).

(c)

The consummation of a purchase and sale of Put Right Securities (a “ Put Right Closing ”) shall be as mutually determined by the Company and the Holder, but in any event shall occur no later than 30 days following the delivery of the Put Right Notice.  At a Put Right Closing, the Company shall deliver the purchase price, calculated in accordance with Section 10(b) , by wire transfer of immediately available funds to an account designated by the Holder.  The Holder shall not be required to physically surrender this Warrant in connection with any election by the Holder to exercise a Put Right pursuant to this Section 10 , unless such Put Right is being exercised for all of the remaining Warrant Shares then-represented by this Warrant.  The Company shall be responsible for the expenses (including attorneys’ fees and expenses) of the Holder incurred in connection with any exercise of the Put Right.

Section 11.

Major Transaction Early Termination Right .

(a)

At least 30 days prior to the consummation or occurrence of any Major Transaction prior to the Expiration Date, but, in any event, no later than the first to occur of (i) the date of the public announcement of such Major Transaction if such announcement is made before 4:00 p.m., New York City time, or (ii) the day following the public announcement of such Major Transaction if such announcement is made on and after 4:00 p.m., New York City time, the Company shall deliver written notice thereof to the Holder (a “ Major Transaction Notice ”).  At any time during the period beginning after the Holder’s receipt of a Major Transaction Notice and ending on the later of (x) five Trading Days prior to the consummation of such Major Transaction, and (y) five Trading Days following the Holder’s receipt of such Major Transaction Notice (the “ Early Termination Period ”), the Holder may require the Company to purchase (an “ Early Termination Upon Major Transaction ”) all or any portion of this Warrant (without taking into account any limitations on the exercisability of this Warrant), which shall be conditioned upon the consummation of the Major Transaction, by delivering written notice thereof (“ Major Transaction Early Termination Notice ”) to the Company, which Major Transaction Early Termination Notice shall indicate the portion of the Warrant, calculated with reference to the number of Warrant Shares underlying such portion relative to the total number of Warrant Shares underlying the Warrant, that the Holder is electing to have redeemed upon the



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consummation of the Major Transaction.  The portion of this Warrant subject to purchase pursuant to this Section 11(a) (the “ Redeemable Shares ”) shall be redeemed by the Company at a price (the “ Major Transaction Warrant Early Termination Price ”) payable in cash equal to the “Black Scholes Value” of the Redeemable Shares determined by use of the Black Scholes Option Pricing Model applying the criteria set forth in Schedule I hereto.  The Holder shall not be required to physically surrender this Warrant in connection with any election by the Holder to cause an Early Termination Upon Major Transaction, unless such Early Termination Upon Major Transaction is being exercised for all of the remaining Warrant Shares then-represented by this Warrant.

(b)

Concurrently upon the consummation of such Major Transaction, the Company shall pay the Major Transaction Warrant Early Termination Price, by wire transfer of immediately available funds, to an account designated by the Holder.  Notwithstanding anything to the contrary in this Section 11 , until the Major Transaction Warrant Early Termination Price is paid in full, this Warrant may be exercised, in whole or in part, by the Holder in accordance with the terms hereof.  

(c)

The Company hereby acknowledges and agrees that, in the event the Holder delivers to the Company a Major Transaction Early Termination Notice, the Holder shall have the right to apply for an injunction in any state or federal courts sitting in the City of Chicago to prevent the closing of the Major Transaction unless and until the Company shall have made arrangements (which may include obtaining a written agreement from the Acquiring Entity, as applicable, that payment of the Major Transaction Warrant Early Termination Price shall be made to the Holder upon the consummation of the Major Transaction) satisfactory to the Holder, as determined by the Holder in its sole discretion, that the Major Transaction Warrant Early Termination Price will be paid, in full, to the Holder concurrently with the consummation of such Major Transaction.

Section 12.

Lost, Stolen, Mutilated or Destroyed Warrant .  If this Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt of an indemnification undertaking in customary form (or in the case of a mutilated Warrant, the Warrant), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.

Section 13.

Notice .  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Warrant must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) or e-mail; or (iii) one Business Day after deposit with a nationally recognized overnight courier service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:

If to the Company:


Social Reality, Inc.

456 Seaton Street

Los Angeles, California 90013

Attention:  Christopher Miglino




-15-





If to the Holder, to it at the address, facsimile number and e-mail address set forth on the Schedule of Lenders to the Financing Agreement, with copies to the Holder’s representatives as set forth on the Schedule of Lenders , or, in the case of the Holder or any Person named above, at such other address, facsimile number and/or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to the other party at least five days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.


Section 14.

Date .  The date of this Warrant is October 30, 2014 (the “ Warrant Date ”).  This Warrant, in all events, shall be wholly void and of no effect after 11:59 P.M., New York City time, on the Expiration Date, except to the extent it has been exercised prior thereto and except that any applicable provisions of this Warrant shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant.

Section 15.

Amendment and Waiver .  Except as otherwise provided herein, the provisions of this Warrant and the other Financing Warrants may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of Financing Warrants representing at least a majority of the shares of Common Stock obtainable upon exercise of the Financing Warrants then outstanding; provided that no such action may increase the warrant exercise price of any Financing Warrant or decrease the number of shares or change the class of stock obtainable upon exercise of any Financing Warrant without the written consent of the holder of such Financing Warrant.

Section 16.

Descriptive Headings; Governing Law .  The descriptive headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant.  All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

Section 17.

Rules of Construction .  Unless the context otherwise requires, (a) all references to Articles, Sections, Schedules or Exhibits are to Articles, Sections, Schedules or Exhibits contained in or attached to this Warrant, (b) words in the singular or plural include the singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine, feminine and neuter, and (c) the use of the word “including” in this Warrant shall be by way of example rather than limitation.




-16-




Section 18.

Signatures .

In the event that any signature to this Warrant or any amendment hereto 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.  Notwithstanding the foregoing, the Company shall be obligated to deliver to the Holder an originally executed Warrant.  No party hereto shall raise the use of a facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a signature to this Warrant or any amendment hereto or the fact that such signature was transmitted or communicated through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file as a defense to the formation or enforceability of a contract, and each party hereto forever waives any such defense.

* * * * * *




-17-






IN WITNESS WHEREOF, the Company has caused this Warrant to be executed as of the 30th day of October, 2014.

 

SOCIAL REALITY, INC.

 

 

 

 

By:

/s/ Christopher Miglino

 

Name:

Christopher Miglino

 

Title:

Chief Executive Officer







18





EXHIBIT A TO WARRANT

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

SOCIAL REALITY, INC.

The undersigned holder (the “ Holder ”) hereby exercises the right to purchase _________________ of the shares of Class A Common Stock (“ Warrant Shares ”) of SOCIAL REALITY, INC., a Delaware corporation (the “ Company ”), evidenced by the attached Warrant (the “ Warrant ”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

1.   Form of Warrant Exercise Price .  The holder intends that payment of the Warrant Exercise Price shall be made with respect to ___________________ Warrant Shares.

2.   Payment of Warrant Exercise Price .  In the event that the Holder has elected an exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall

£

pay all or a portion of the Aggregate Exercise Price in the sum of $___________________ to the Company by check or wire transfer of funds; and/or

£

pay all or a portion of the Aggregate Exercise Price in the sum of $__________ through cancellation of such amount of principal outstanding under Notes held by the Holder in accordance with Section 2.3(e) of the Financing Agreement.

3.   Exercise Trigger Transaction .  This exercise of the Warrant is conditioned upon the consummation of the following Exercise Trigger Transaction: __________________________ 1

4.   Delivery of Warrant Shares .  The Company shall issue __________ Warrant Shares in accordance with the terms of the Warrant as follows:

£  Physical Certificate; or

£  Direct Registration System (DRS); or

£  Deposit/Withdrawal At Custodian (DWAC) system

Issue to:_________________________________________________________________

Address (for delivery of physical certificate or DRS statement, as applicable): _________

________________________________________________________________________

Facsimile Number: ________________________________________________________

DTC Participant Number and Name (if through DWAC):  _________________________

Account Number  (if through DWAC): ________________________________________

———————

1

No such condition applies if left blank








5.   Representations .  Other than in connection with an exercise through a reduction in principal outstanding under applicable Notes in accordance with the Financing Agreement, the undersigned hereby confirms the representations concerning the Warrant Shares set forth in the first three sentences of Section 6 of the Warrant (unless the Holder has otherwise notified the Company in writing).

Name of Registered Holder of this Warrant



By:____________________________

Date: ____________________________

Name:

Title:

ACKNOWLEDGMENT


The Company hereby acknowledges this Exercise Notice and hereby directs [TRANSFER AGENT] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated ________, 2014 from the Company and acknowledged and agreed to by [TRANSFER AGENT].


 

SOCIAL REALITY, INC.

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 










Schedule I

Criteria for Calculating Black Scholes Value

Remaining Term

Number of calendar days from the date of public announcement of the Major Transaction until the Expiration Date.

 

Interest Rate

A risk-free interest rate corresponding to the US$ LIBOR/Swap rate for a period equal to the Remaining Term.

 

Volatility

If the first public announcement of the Major Transaction is made at or prior to 4:00 p.m., New York City time, the arithmetic mean of the historical volatility for the 10, 30 and 50 Trading Day periods ending on the date of such first public announcement, obtained from the HVT or similar function on Bloomberg.


If the first public announcement of the Major Transaction is made after 4:00 p.m., New York City time, the arithmetic mean of the historical volatility for the 10, 30 and 50 Trading Day periods ending on the next succeeding Trading Day following the date of such first public announcement, obtained from the HVT or similar function on Bloomberg.

 

Stock Price

The greater of (1) the closing price of the Common Stock on the Principal Market (the “ Closing Market Price ”) on the Trading Day immediately preceding the date on which the Major Transaction is consummated, (2) the first Closing Market Price following the first public announcement of the Major Transaction, or (3) the Closing Market Price on the date immediately preceding the first public announcement of the Major Transaction.

 

Dividends

Zero.

 

Strike Price

Warrant Exercise Price as defined in Section 1(b) .






Exhibit 10.18

THIS SECURED SUBORDINATED PROMISSORY NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THIS NOTE HAS NOT BEEN REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAW, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT OR THOSE LAWS OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.


SECURED SUBORDINATED PROMISSORY NOTE


$2,500,000.00

October 30, 2014


FOR VALUE RECEIVED , Social Reality, Inc. , a Delaware corporation (the “ Payor ”), hereby promises to pay, in lawful money of the United States of America, to Richard Steel or his successors or assigns (the “ Holder ”), the principal sum of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) (the “ Principal Amount ”), together with interest on the unpaid portion of the Principal Amount from time to time outstanding at the rate of 5.00% per annum.

1.

Purchase Agreement; Definitions . This Secured Subordinated Promissory Note (this “ Note ”) is being delivered to the Holder in connection with the execution and delivery of that certain Stock Purchase Agreement, of even date herewith (the “ Purchase Agreement ”), by and among the Payor, the Holder and Steel Media, a California corporation (the “ Company ”).  Capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to them in the Purchase Agreement.  

2.

Principal and Interest; Payment .   Subject to earlier payment pursuant to the terms of Section 5 , the entire unpaid Principal Amount, together with all accrued and unpaid interest thereon, shall be due and payable on October 30, 2015 (the “ Maturity Date ”). Any payment hereunder which would be payable on a day which is not a Business Day shall instead be due and payable on the Business Day prior to such date for payment.  All  payments made hereunder shall be made in lawful tender of the United States of America in immediately available funds on the date on which such payment shall be due.

3.

Default; Remedies .  


(a)

Event of Default .  The Payor shall be in default under this Note upon the occurrence of any of the following events (each, an “ Event of Default ”):

(i)

the Payor shall fail to pay when due any principal or interest or other payment required under the terms of this Note ;



1




(ii)

the Payor shall fail to observe or perform any covenant, obligation, condition, or agreement in any material respect contained in this Note or any other Transaction Document, and such failure shall continue for more than five (5) Business Days after the Payor receives written notice thereof from the Holder;

(iii)

any representation or warranty made by the Payor herein or in any Transaction Document is breached in any material respect, and such breach is not cured within thirty (30) calendar days after the Payor receives written notice thereof from the Holder;

(iv)

a default, breach or “event of default” shall have occurred by or in respect of the Payor, the Company, or any of the Payor’s other subsidiaries, as borrowers under any instruments and agreements executed and delivered by such borrowers pursuant to the Victory Park Financing (the “ Senior Credit Documents ”);

(v)

the acceleration of any amounts due under any of the Senior Credit Documents;

(vi)

the Payor shall (A) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (B) be unable, or admits in writing its inability, to pay its debts generally as they mature, (C) make a general assignment for the benefit of it or any of its creditors, (D) be dissolved, liquidated or wound up; or (E) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it ; or

(vii)

proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Payor or of all or a substantial part of the property thereof, or an involuntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Payor or the debts thereof under any bankruptcy insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of commencement.

(b)

Remedies . Upon the occurrence of an Event of Default specified in Section 3(a)(vi) or (vii) above, the outstanding Principal Amount and all other obligations hereunder shall automatically be and become immediately due and payable without notice or demand.  Upon the occurrence of any other Event of Default hereunder, the Holder may declare this Note and all payments due hereunder to be immediately due and payable. Upon the occurrence of any Event of Default, then, upon acceleration, the Holder shall be entitled to exercise at any time thereafter (to the extent and in such order or combination as the Holder may elect, in its sole and absolute discretion) any or all rights and remedies provided for and under this Note, under the Transaction Documents, at Law (including, without limitation, the Uniform Commercial Code), and in equity.




2




4.

Default Interest Rate .  In the event that any Event of Default shall occur beyond any applicable notice and cure period, the then outstanding Principal Amount shall bear interest at the rate of 10.00% per annum (the “ Default Rate ”).

5.

Prepayment .  

(a)

Voluntary Prepayment .  Upon five (5) calendar days’ prior written notice to the Holder, the Payor may prepay this Note in full or in part, without any penalty, at any time or from time to time prior to the Maturity Date.

(b)

Prepayment upon Change of Control . Notwithstanding anything to the contrary contained in this Note, the entire then outstanding Principal Amount, together with all unpaid accrued interest thereon, shall mature and be due and payable upon the consummation of a Buyer Change of Control.     

(c)

Mandatory Partial Prepayment .  With respect to each of the fiscal quarters ending December 31, 2014, March 31, 2015 and June 30, 2015, upon the earlier to occur of (x) five (5) days after the Payor finalizes its financial statements for such fiscal quarter and (y) the 60 th after the last day of such fiscal quarter, the Payor shall pay to the Holder an amount equal to twenty-five percent (25%) of the Excess Cash Amount (as hereinafter defined) in prepayment of this Note. “ Excess Cash Amount ” shall be computed in accordance with GAAP and shall mean, for any fiscal quarter, (a) EBITDA for such fiscal quarter minus, without duplication, (b) the sum of each of the following to the extent paid in cash: (i) the aggregate amount of scheduled principal repayments (including without limitation, excess cash flow sweeps) on any indebtedness under the Senior Credit Documents (“ Senior Debt ”), (ii) interest on Senior Debt for such period, (iii) income tax expense for such period, (iv) the payment obligations under this Note, (v) the Earnout Consideration (solely to the extent satisfied in cash) and (vi) capital expenditures not financed by Senior Debt and made during such period.

(d)

Treatment of Prepayments .  Prepayments shall be applied (i) first, to any fees, costs or other charges payable hereunder, (ii) next, to accrued but unpaid interest, and (iii) then, to principal.

6.

Subordination .  The Holder and any subsequent holder of this Note, by its acceptance of this Note, agrees that the obligation of the Payor to make any payment hereunder is subject to that certain Subordination Agreement of even date herewith (the “ Subordination Agreement ”) by and among the Holder, the Payor, and Victory Park Management, LLC, as agent for the lenders in the Victory Park Financing (the “ Senior Lenders ”).  Subject to the rights of the Senior Lenders under the Subordination Agreement, nothing contained in this Section 6 or elsewhere in this Note is intended to or shall impair, as between the Payor and the Holder, the obligation of the Payor to pay to the Holder all or a portion of the payment obligations under this Note, including the payment of all principal and interest under this Note, as and when the same shall become due and payable in accordance with the terms hereof and the Purchase Agreement, or is intended to or shall affect the relative rights of the Holder and creditors of the Payor other than the Senior Lender.



3




7.

Security .  This Note is secured, inter alia , by the Escrow Shares pursuant to the Escrow Agreement.  After an Event of Default, if the Escrow Shares are released to the Holder pursuant to the Escrow Agreement, then, upon such delivery of the Escrow Shares to the Holder, all amounts due under this Note, including the principal amount of this Note and all accrued but unpaid interest due hereunder, shall be deemed paid and this Note shall be deemed satisfied in full, if, but only if, (x) 100% of the Escrow Shares (or at least 90% of the Escrow Shares, in the case of a cut-back required by the SEC as a result of limitations under SEC Rule 415, as defined in the Registration Rights Agreement) are subject to a then effective SEC registration statement having a customary plan of distribution for resale, (y) such Escrow Shares shall be freely tradable by the Holder, without restriction of any kind or nature (other than insider trading laws), and (z) the certificates evidencing such Escrow Shares shall be free of any legend or other restrictive notation.  If the conditions in clauses (x), (y) and (z) are not each satisfied at the time of release of the Escrow Shares to the Holder, then this Note, and the principal and accrued interest hereunder, shall remain outstanding except that it shall be deemed repaid from time to time, dollar for dollar, from the proceeds realized by the Holder from the sale or other disposition of the Escrow Shares.  The Holder may sell the Escrow Shares in accordance with the plan of distribution set forth in the aforesaid registration statement or in any other manner permitted by law.

8.

Usury Disclosure .  Regardless of any provision contained in this Note, it is expressly stipulated and agreed by the Payor (and, by the acceptance of this Note, the Holder) that the intent of the Payor and the Holder is to comply at all times with all usury and other applicable Laws relating to this Note.  If applicable Law would now or hereafter render usurious, or are revised, repealed or judicially interpreted so as to render usurious, the indebtedness evidenced by this Note, or if any prepayment by the Payor or results in the Payor’s having paid any interest in excess of that permitted by applicable Law, then it is the Holder’s and the Payor’s express intent that all excess amounts theretofore collected by the Holder be credited to the Principal Amount (or, if this Note has been paid in full, refunded to the Payor), and the provisions of this Note immediately be deemed reformed and the amounts therefor collectible hereunder reduced, without the necessity of execution of any new document, so as to comply with the then-applicable Law, but so as to permit the recovery of the fullest amount otherwise called for hereunder.  

9.

Miscellaneous .

(a)

Cancellation .  After all payment obligations, including payment of the Principal Amount and all interest accrued thereon has been indefeasibly paid in full, the Holder will surrender this Note to the Payor for cancellation and this Note will not be reissued.


(b)

Lost, Stolen, Destroyed or Mutilated Note .  Upon receipt of evidence reasonably satisfactory to the Payor of the loss, theft, destruction or mutilation of this Note and upon surrender or cancellation of this Note if mutilated, the Payor shall make and deliver a new note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note.


(c)

Successors and Assigns .  The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.  The Payor may not assign this Note or delegate any of its obligations hereunder without the prior



4




written consent of the Holder, except that no such consent of the Holder shall be required for any such assignment and delegation by the Payor to any successor to the Payor in connection with a Buyer Change in Control to the extent that simultaneously with the consummation of such Buyer Change of Control all of the principal and interest payable under this Note is indefeasibly paid to the Holder; provided, however, that the Holder shall be permitted to freely assign this Note for estate planning purposes, either during his lifetime or on death by will or intestacy to his spouse, child (natural or adopted), or any other direct lineal descendant of the Holder (or his or her spouse) (all of the foregoing collectively referred to as “ family members ”), or any custodian or trustee of any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by, such Holder or any such family member.


(d)

Waiver and Amendment.  The term “Note” as used herein shall mean this instrument as originally executed or, if later amended, supplemented, modified or restated, then as so amended, supplemented, modified or restated.  Any provision of this Note may be amended, waived or modified only upon the written consent of the Payor and the Holder.  No previous waiver or failure or delay by the Holder in acting with respect to the terms of this Note shall constitute a waiver of any breach or default under this Note.  A waiver of any term of this Note shall be limited to the express terms of such waiver, and shall not constitute a waiver of any subsequent obligation of the Payor.  The acceptance at any time by the Holder of any past-due amount shall not be deemed to be a waiver of the right to require prompt payment when due of any other amounts then or thereafter due and payable.

(e)

Severability.  If any provision of this Note is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect under applicable Law, such provision will be enforced to the maximum extent possible given the intent of the parties hereto.  If such clause or provision cannot be so enforced, such provision shall be stricken from this Note and the remainder of this Note shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Note.


(f)

Titles and Subtitles .  The titles and subtitles used in this Note are used for convenience only and are not to be considered in construing or interpreting this Note.


(g)

Notices.  Any notice, request, instruction or other document to be given hereunder by either party to the other shall be in writing and shall be (i) delivered personally, (ii) mailed by certified mail, postage prepaid, return receipt requested, or (iii) delivered by Fedex or similar overnight courier, in each case to the address set forth below (or to such other address in the United States as the applicable party below may indicate from time to time by notice delivered in accordance with this Section 9(g) :


If to the Payor:  

Social Reality, Inc.

457 Seaton Street

Los Angeles, CA 90013

Email: chris@socialreality.com

Attn:

Christopher Miglino




5




With a copy (which shall not constitute notice) to:


Pearlman Schneider LLP

220 Corporate Boulevard, N.W.

Suite 201

Boca Raton, FL 33431

Email: jim@pslawgroup.net

Attn:

James M. Schneider, Esq.


If to the Holder:

Richard Steel

_______________
_______________

Email: rich@steelmediainc.com


With a copy (which shall not constitute notice) to:

Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, New York 10020

Email: ssiesser@lowenstein.com

Attention:   Steven E. Siesser, Esq.


Notices shall be deemed received (i) upon receipt if delivered personally, (ii) on the third Business Day after the date of mailing if mailed by certified mail, postage prepaid, return receipt requested, or (iii) on the next Business Day if dispatched by Fedex or similar overnight courier.


(h)

Submission to Jurisdiction .  Each of the Payor and the Holder, by its acceptance hereof, hereby irrevocably submits to the non-exclusive jurisdiction of any federal or state court located within Los Angeles County, with respect to any dispute brought against the Payor and Contra Costa County, with respect to any dispute brought against the Holder, over any dispute arising out of or relating to this Note and each of the Payor and the Holder, by its acceptance hereof, hereby irrevocably agrees that all claims in respect of such dispute or any suit, action proceeding related thereto may be heard and determined in such courts.  Each of the Payor and the Holder, by its acceptance hereof, hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute.  Each of the Payor and the Holder, by its acceptance hereof, agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.


(i)

Consent to Services of Process .  Each of the Payor and the Holder, by its acceptance hereof, hereby consents to process being served by the Payor or the Holder, as the case may be, in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 9(g) .




6




(j)

Waiver of Trial by Jury .  EACH OF THE PAYOR AND THE HOLDER, BY ITS ACCEPTANCE HEREOF, HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THIS NOTE, OR ANY ACTS OR OMISSIONS OF ANY PARTY OR ANY OF THEIR RESPECTIVE OFFICERS, EMPLOYEES, DIRECTORS, OR AGENTS IN CONNECTION THEREWITH.  


(k)

Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflicts of laws.


(l)

Time is of the Essence .  Time is of the essence with respect to each and every obligation of the Payor hereunder.

(m)

Cumulative Remedies .  The Holder’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Holder may have under other agreements, at law or in equity.

(n)

No Formalities for Payment; Etc.  This Note and all payment obligations hereunder shall be due and payable without presentment, protest or any other similar formality.  The Payor hereby forever waives presentment, protest or notice of dishonor.  The Payor also waives all defenses based on suretyship, impairment of collateral or otherwise.

(o)

Collection Expenses .  Any payment made or expense incurred by the Holder (including, without limitation, legal fees and expenses) in connection with the exercise of any rights or remedies pursuant to this Note shall be paid by the Payor on demand.

(p)

Set-Off .  Except to the extent expressly set forth in the Purchase Agreement, the Payor shall not, and shall not have the right to, set off any amounts due and owing by it under this Note against any payment or other obligation due and owing to the Payor by the Holder.  The Holder shall have the right to satisfy any of its indemnification obligations under the Purchase Agreement by reducing, dollar-for-dollar, the amount due to the Holder under this Note (any such reduction shall be applied first to reduce any accrued but unpaid interest then outstanding under this Note and next to reduce the Principal Amount then outstanding under this Note) by delivering written notice thereof to the Payor.

IN WITNESS WHEREOF , the Payor has caused this Note to be executed and delivered as of the date first written above.


 

SOCIAL REALITY, INC.

 

 

 

 

By:

/s/ Christopher Miglino

 

Name:

Christopher Miglino

 

Title:

Chief Executive Officer




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Exhibit 10.19

ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this “ Escrow Agreement ”), dated as of October 30, 2014 (the “ Agreement Date ”), is by and among Social Reality, Inc., a Delaware corporation (the “ Buyer ”), Richard Steel (the “ Seller ”), and Wells Fargo Bank, National Association, a national banking association, as escrow agent (the “ Escrow Agent ”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Stock Purchase Agreement (as defined below).

RECITALS

A.

The Buyer, the Seller and Steel Media, a California corporation (the “ Company ”), are parties to that certain Stock Purchase Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, the “ Purchase Agreement ”).

B.

The Purchase Agreement provides that the Buyer shall deposit with the Escrow Agent at Closing an amount of Two Million Dollars ($2,000,000) (the “ Escrow Amount ”), which is intended to serve as recourse for Losses for which the Buyer (or any Buyer Indemnified Party) is entitled to make a claim for indemnification under Article VII of the Purchase Agreement.

C.

The Buyer has entered into a Financing Agreement, dated as of the date hereof, with lenders party thereto and Victory Park Management, LLC (“ Victory Park ”), as administrative agent and collateral agent for the lenders, pursuant to which, among other things, the lenders have agreed, subject to the terms and conditions set forth in such Financing Agreement, to make certain loans and financial accommodations to the Buyer, the Company and other borrowers thereunder.

D.

The Escrow Amount shall be held and disbursed by the Escrow Agent in accordance with the terms and conditions set forth in this Escrow Agreement.

E.

The basis for claims for any indemnification shall be governed by the Purchase Agreement, which, as between the Buyer and the Seller, shall be controlling for all purposes of this Escrow Agreement to the extent inconsistent with any provisions hereof.

AGREEMENT

In consideration of the mutual covenants of the parties hereto set forth in this Escrow Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.

Agent .  The Buyer and the Seller hereby appoint and designate the Escrow Agent as escrow agent for the purposes set forth herein, and the Escrow Agent hereby accepts such appointment and agrees to accept, hold and disburse the Escrow Fund (as defined below) in accordance with the terms hereof.  All references to the “ Escrow Agent ,” as that term is used herein, shall refer to the Escrow Agent solely in its capacity as such, and not in any other capacity whatsoever, whether as individual, agent, fiduciary, trustee or otherwise. The Escrow Agent shall have no obligation to assure or participate in the enforcement or performance of the Purchase Agreement, whether or not the Escrow Agent shall have knowledge or notice of the terms thereof, or any acts or omissions relating thereto.




2.

Deposit of Escrow Amount .  Pursuant to the terms of the Purchase Agreement, on the date hereof, the Buyer hereby deposits with the Escrow Agent, by wire transfer of immediately available funds, and the Escrow Agent hereby acknowledges receipt of, the Escrow Amount, which shall be held and disbursed by the Escrow Agent as set forth herein.  The term “ Escrow Fund ” as used herein refers to the Escrow Amount plus all earnings thereon from the investment thereof in accordance with the terms of this Escrow Agreement, less amounts paid out of the Escrow Fund hereunder.  Subject to the provisions of Section 3 , the Escrow Fund shall be deposited by the Escrow Agent in a segregated account designated by the Escrow Agent solely for the purposes of this Escrow Agreement (the “ Escrow Account ”) at the Escrow Agent and shall be maintained in such Escrow Account until the distribution of the Escrow Fund in accordance with the terms hereof.  The Buyer’s and the Seller’s wire transfer instructions are as set forth on Exhibit A attached hereto.

3.

Investment of Escrow Fund .  Until the termination of this Escrow Agreement in accordance with its terms, the Escrow Agent shall, at any time, and from time to time, invest and reinvest the Escrow Fund: (i) in the investments set forth on Schedule I (collectively, the “ Permitted Investments ”) as directed in writing by the Seller in its sole discretion, including, without limitation, a written direction to sell, liquidate, or dispose of specific Permitted Investments to generate cash for disbursement purposes; or (ii) in such other investment or investments as may be directed by a joint writing executed by the Buyer and the Seller; provided that the Escrow Agent shall have no responsibility to evaluate or monitor the investment grade status of any investments, and further provided that the Escrow Agent will not be required to invest in investments that the Escrow Agent reasonably determines are not consistent with the Escrow Agent’s policies or practices. In the event no written instructions are received from the Seller, the Escrow Agent shall invest the Escrow Fund in the Wells Fargo Bank Money Market Deposit Account (the “MMDA”).  Amounts on deposit in the MMDA are insured up to a total of $250,000 per depositor, per insured bank (including principal and accrued interest) by the Federal Deposit Insurance Corporation (FDIC), subject to the applicable rules and regulations of the FDIC.  The parties understand that deposits in the MMDA are not secured.  The Escrow Agent shall have no authority to invest the Escrow Fund in any other obligations or investments except as provided in this Section 3 .

(a)

The parties hereto recognize and agree that the Escrow Agent will not provide supervision, recommendations or advice relating to either the investment of moneys held in the Escrow Account or the purchase, sale, retention or other disposition of any Permitted Investment.

(b)

Interest and other earnings on Permitted Investments shall be added to the Escrow Account and will be part of the Escrow Fund.  Any loss or expense incurred as a result of an investment will be borne by the Escrow Account.

(c)

All investments, including, without limitation, Permitted Investments, shall be made in the name of the Escrow Agent.  The Escrow Agent is hereby authorized to execute purchases and sales of Permitted Investments through the facilities of its own trading or capital markets operations or those of any affiliated entity.  The Escrow Agent shall have no duty to supervise, monitor, inspect, inquire of, act upon or value the investments in which it is directed to invest.  The Escrow Agent shall have no duty to vote or otherwise respond to any corporate actions related to any Permitted Investment absent written direction from the Seller.

(d)

The Escrow Agent shall (i) send statements to the Seller and the Buyer on a monthly basis reflecting activity and assets in the Escrow Account (including a list of all investments, and for each Permitted Investment, the position name and CUSIP number, cost and fair market value, in each case, as of the last day of the applicable month, and detail for each Permitted Investment transaction during the month, including acquisition, sale or maturity date, number of securities purchased, sold or matured) with



2




respect to the Escrow Fund for the preceding month (each, a “ Monthly Statement ”) no later than ten (10) Business Days after the last day of such preceding month.  Although each of the parties hereto recognizes that it may obtain a broker confirmation or written statement containing comparable information at no additional cost, the parties hereto hereby agree that confirmations of Permitted Investments are not required to be issued by the Escrow Agent for each month in which a monthly statement is rendered. No statement need be rendered for the Escrow Account if no activity occurred for such month.

(e)

The parties hereto acknowledge and agree that the delivery of the Escrow Fund is subject to the sale and final settlement of Permitted Investments.  Proceeds of a sale of Permitted Investments will be delivered on the Business Day on which the appropriate instructions are delivered to the Escrow Agent if received prior to the deadline for same day sale of such Permitted Investments. If such instructions are received after the applicable deadline, proceeds will be delivered on the next succeeding Business Day.

(f)

If any Monthly Statement reflects a decrease in the aggregate value of the Escrow Fund from the aggregate value reported in the previous Monthly Statement other than as a result of a distribution pursuant to this Escrow Agreement (the aggregate amount of such decrease, the “ Shortfall ”), then the Seller shall promptly, but in no event later than three (3) Business Days after receipt of the applicable Monthly Statement, deposit additional funds with Escrow Agent to replenish the Escrow Fund in the amount of the Shortfall.  The Seller shall deliver such payment by wire transfer of immediately available funds and shall provide to the Escrow Agent and the Buyer advance written notice identifying (i) date of payment, (ii) exact dollar amount of wire, and (iii) name of sending bank.  The Escrow Agent shall have no duty or obligation to enforce or pursue the collection of such funds and shall only be responsible for funds actually received by it.

4.

Tax Matters .

(a)

Reporting of Income .  The Buyer and the Seller agree that, for Tax reporting purposes, all Taxable interest on or other income, if any, attributable to the Escrow Fund shall be allocable to the Seller.  All income earned from the cash and investments of the Escrow Funds held in the Escrow Accounts shall be taxable to the Seller and shall be reportable by the Escrow Agent to the IRS or any other taxing authority, on IRS Form 1099, 1042S or other applicable tax form, whether or not such income has been distributed during such year.   The Escrow Agent shall have no responsibility for the preparation and/or filing of any tax or information return with respect to any transactions, whether or not related to this Agreement that occurs outside the Escrow Fund.

(b)

Tax Distributions .  For so long as the Escrow Fund remains held pursuant to this Escrow Agreement, the Escrow Agent shall distribute to the Seller out of the Escrow Fund, no later than ten (10) days following the end of each calendar quarter (or, with respect to any partial calendar year ending on the Escrow Fund Distribution Date or on any subsequent date on which a distribution is made pursuant to Section 5 , prior to any distribution on such date), an amount equal to the product of (x) 45% and (ii) the amount of income earned from the Escrow Account during such calendar quarter (or, with respect to any partial calendar year ending on the Escrow Fund Distribution Date or any subsequent date on which a distribution is made pursuant to Section 5 , in the portion of such quarter ending on such date).

(c)

Taxes on Distributions .  The Escrow Agent shall be entitled to deduct and withhold from any amount otherwise payable to any Person pursuant to this Escrow Agreement such amounts as may be required to be deducted or withheld with respect to the making of such payment under the Code, or any applicable provision of state, local or foreign Tax law.  To the extent that amounts are so deducted or withheld and paid over to the appropriate Governmental Authority by the Escrow Agent, such amounts shall be treated for all purposes of this Escrow Agreement as having been paid to the Person to whom



3




such amounts would otherwise have been paid.  At the Closing, the Buyer and the Seller shall provide the Escrow Agent with IRS Forms W-9 or W-8 as applicable.

5.

Presentation and Payment of Indemnity Claims .

(a)

At any time prior to the Escrow Fund Distribution Date (as defined herein), if the Buyer (or a Buyer Indemnified Party) has incurred Losses for which it is entitled to make a claim for indemnification under the Purchase Agreement, the Buyer shall deliver to the Escrow Agent and the Seller a written notice of the Buyer (each such claim, a “ Demand ”) stating that the Buyer (or a Buyer Indemnified Party) has paid or incurred (or is reasonably likely to pay or incur) Losses and is entitled to indemnification under the Purchase Agreement, describing the Losses, the amount thereof, and the method of computation of such Losses, in each case, to the extent that the amount of Losses is reasonably ascertainable, specifying the applicable section(s) of the Purchase Agreement pursuant to which the Buyer is claiming it is entitled to indemnification (each, a “ Claim ”).

(b)

The Seller may reply to any Demand made under Section 5(a) hereof by written notice given to the Buyer with a copy to the Escrow Agent, which notice shall state whether the Seller agrees or disagrees that the Claim asserted by the Buyer is a valid claim pursuant to the Purchase Agreement and agrees or disagrees with respect to the amount of the Claim or that the Buyer has provided insufficient information with respect to a Claim (a “ Dispute Notice ”). If, within ten (10) Business Days after the date of receipt by the Seller (the “ Claim Response Period ”) and the Escrow Agent of the Demand from the Buyer, and the Escrow Agent and the Buyer have not received a Dispute Notice from the Seller that asserts that a dispute exists, or insufficient information has been provided, with respect to such Claim, then the Seller shall be deemed to have agreed with such Claim, the Escrow Agent shall pay to the Buyer from the Escrow Amount the amount of the Claim, and the Escrow Amount shall be reduced to the extent thereof.  If, within the applicable Claim Response Period, the Seller has provided a Dispute Notice in which the Seller acknowledges that a portion of the Claim is a valid Claim and agrees with the amount attributable to such portion of the Claim, the Escrow Agent shall disburse to the Buyer solely the amount so agreed to by the Seller from the Escrow Amount.

(c)

If a Dispute Notice is given by the Seller in accordance with Section 5(b) hereof, then the amount of the Claim less the amount (if any) acknowledged in the Dispute Notice by the Seller as due to the Buyer and disbursed to the Buyer, shall be treated as a disputed claim (the “ Disputed Claim ”), and the amount of such Disputed Claim shall be held by the Escrow Agent as an undivided portion of the Escrow Amount (which amount shall continue to be available to satisfy other Claims) until the earlier to occur of (i) the Escrow Agent’s receipt of a joint direction executed by the Seller and the Buyer with respect to such Disputed Claim (a “ Joint Written Instruction ”) or (ii) the Escrow Agent’s receipt of a final judgment, order or decree of a court or other judicial body of competent jurisdiction that decided the Disputed Claim, together with a certificate of the presenting party to the effect that such judgment is final and from a court of competent jurisdiction, upon which certificate the Escrow Agent shall be entitled to conclusively rely without further investigation (a “ Final Judgment ”).  The aggregate of all Disputed Claims and all Claims with respect to which the deadline for delivery of a Dispute Notice has not passed is sometimes referred to herein as the “ Reserve .”  Upon Escrow Agent’s receipt of either a Joint Written Instruction or a Final Judgment with respect to any Disputed Claim, (i) if such Joint Written Instruction or a Final Judgment sets forth any amounts that are to be paid in favor of the Buyer (or other Buyer Indemnified Party), the Escrow Agent shall within three (3) Business Days of the date of such receipt disburse such amount to the Buyer and (ii) (A) if the Escrow Fund Distribution Date has not yet occurred, then the Escrow Agent shall reduce the amount of the Reserve to an amount equal to the aggregate of all then-existing Disputed Claims and all Claims with respect to which the deadline for delivery of a Dispute Notice has not passed, or (B) if the Escrow Fund Distribution Date has occurred, then the Escrow Agent



4




shall within three (3) Business Days after the date of such receipt disburse to the Seller (or as directed in writing by the Seller) an amount equal to the excess, if any, of the amount of such Disputed Claim over the amount, if any, paid in favor of the Buyer, but only to the extent that the Reserve as of such date (after giving effect to such disbursement) is equal to the aggregate of all then-existing Disputed Claims and all Claims with respect to which the deadline for delivery of a Dispute Notice has not passed.

6.

Distributions and Payments .

(a)

For so long as the Escrow Fund remains held pursuant to this Escrow Agreement, the Escrow Agent shall make the distributions described in Section 4(b) .

(b)

On October 30, 2017 (the “ Escrow Fund Distribution Date ”), the Escrow Agent shall disburse to the Seller (or as directed in writing by the Seller) all remaining funds in the Escrow Fund then held by the Escrow Agent less the aggregate amount of the Reserve as of the Escrow Fund Distribution Date.  Amounts remaining in the Escrow Fund after the Escrow Fund Distribution Date shall be distributed in accordance with Sections 4(b) and 5(c) hereof.

(c)

Other than pursuant to the terms expressly set forth herein, the Escrow Agent shall make distributions from the Escrow Fund to the Buyer and/or the Seller only as shall be specified in a Joint Written Instruction delivered to the Escrow Agent.  Notwithstanding anything herein to the contrary, any payment or other distribution by the Escrow Agent from the Escrow Fund pursuant to this Escrow Agreement, to the Buyer or the Seller shall be made to such party’s account, and in accordance with such party’s wire transfer instructions, set forth on Exhibit A attached hereto or such other account and wire transfer instructions authorized by such party by delivering not less than two (2) Business Days advance written notice to the Escrow Agent.

(d)

Any distribution required to be made by the Escrow Agent under this Escrow Agreement shall be made by the Escrow Agent promptly upon liquidation of any investment required for such distribution.

7.

Rights, Obligations and Indemnification of the Escrow Agent .

(a)

In performing any of its duties under this Escrow Agreement, or upon the claimed failure to perform its duties hereunder, the Escrow Agent shall not be liable to anyone for any damages, losses, or expenses that such party may incur as a result of the Escrow Agent so acting or failing to act; provided that the Escrow Agent shall be liable for damages arising out of its own gross negligence or willful misconduct. Accordingly, the Escrow Agent shall not incur any such liability with respect to: (i) any action taken or omitted to be taken in good faith and without gross negligence or willful misconduct; or (ii) any action taken or omitted to be taken in reliance (including reliance not only as to a document’s due execution and the validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein) upon any document, including any written notice, request or instruction provided for in this Escrow Agreement, that the Escrow Agent shall in good faith and with exercise of due care believe to be genuine without inquiry and without requiring substantiating evidence of any kind, to have been signed or presented by a proper Person or Persons and to conform with the provisions of this Escrow Agreement.  Concurrent with the execution of this Escrow Agreement, the Buyer and the Seller shall deliver to the Escrow Agent Exhibits C-1 and C-2, which contain an authorized signer designation in Part A thereof.  The Escrow Agent shall have no liability for loss arising from any cause beyond its control, including, but not limited to, the following: (x) the act, failure or neglect of any agent or correspondent selected by the Seller or the Buyer for the remittance of funds; (y) any delay, error, omission or default of any communication by any Person other than the Escrow Agent; or (z) the acts or



5




edicts of any government or governmental agency or other group or entity exercising governmental powers.

(b)

The Seller, on the one hand, and the Buyer, on the other hand, each hereby agrees to indemnify and hold the Escrow Agent and its parent, affiliates, directors, officers, agents and employees (collectively, the “ Escrow Agent Indemnitees ”) harmless from and against one-half (½) of any and all claims, liabilities, losses, damages, fines, penalties and expenses, including out-of-pocket, incidental expenses and reasonable legal fees and expenses (“ Escrow Agent Losses ”) that may be imposed on, incurred by, or asserted against, the Escrow Agent Indemnitees or any of them in connection with or arising out of (i) the Escrow Agent’s performance under this Escrow Agreement (including any action taken by the Escrow Agent in accordance with Section 7(h) ), or (ii) for following any instruction or other direction upon which the Escrow Agent is authorized to rely pursuant to the terms of this Escrow Agreement; provided that the Escrow Agent has not acted with gross negligence or willful misconduct. The provisions of this Section 7(b) shall survive the termination of this Escrow Agreement and the resignation or removal of the Escrow Agent for any reason.

(c)

The Escrow Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall under no circumstance be deemed a fiduciary for any of the parties to this Escrow Agreement. The Escrow Agent shall neither be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument or document between the other parties hereto, in connection herewith, including, but not limited to, the Purchase Agreement. This Escrow Agreement sets forth all matters pertinent to the escrow contemplated hereunder, and no additional obligations of the Escrow Agent shall be inferred from the terms of this Escrow Agreement or any other agreement.  IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES, LOSSES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES, LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY ADJUDICATED TO HAVE DIRECTLY RESULTED FROM THE ESCROW AGENT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR (ii) SPECIAL, INDIRECT OR CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND WHATSOEVER (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF ACTION.

(d)

If any part of the Escrow Fund is at any time attached, garnished or levied upon under any court order, or if the payment or transfer of any such funds shall be stayed or enjoined by any court order, or any order, judgment or decree shall be made or entered by any court affecting such funds or any portion thereof, then in any of such events, the Escrow Agent (i) shall provide the Seller and the Buyer with prompt written notice of any such events; and (ii) is authorized, in its sole discretion, to rely upon and comply with any such order, writ, judgment or decree which it is advised by legal counsel is binding upon it.  If the Escrow Agent complies with the preceding sentence and any such order, writ, judgment or decree, it shall not be liable to the parties hereto or any other Person by reason of such compliance, even though such order, writ, judgment or decree may subsequently be reversed, modified, annulled, set aside or vacated.

(e)

Except as specifically provided in Section 3 of this Escrow Agreement, the Escrow Agent shall have no responsibility for the investment of any funds held hereunder, except as a result of the Escrow Agent’s own gross negligence or willful misconduct. The Escrow Agent shall not be liable to any party hereto and hereby disclaims any responsibility for any losses or penalties incurred with respect to any such investments.



6




(f)

Subject to the terms hereof, the Escrow Agent may resign without obtaining the order of any court, by giving written notice to the Seller and the Buyer of the Escrow Agent’s intent to resign and, upon the taking of all the actions as described in this Section 7(f) by the Escrow Agent, the Escrow Agent shall have no further responsibilities hereunder to the parties hereto or to any other Person in connection with this Escrow Agreement.  Similarly, the Escrow Agent may be removed and replaced following the giving of thirty (30) calendar days’ prior joint written notice to the Escrow Agent by the Seller and the Buyer.  Such resignation or removal shall be effective upon the appointment by the Seller and the Buyer of a successor agent.  Any such successor agent shall be appointed (which appointment shall be made without delay) by a written instrument, mutually satisfactory to, and executed by, the parties hereto and the successor agent, and the Escrow Agent shall execute an assignment by the Escrow Agent of the Escrow Account to the successor agent. Any successor agent appointed under the provisions of this Escrow Agreement shall have all of the same rights, powers, privileges, immunities and authority with respect to the matters contemplated herein as are granted herein to the original Escrow Agent and thereafter such successor escrow agent shall be the Escrow Agent hereunder. If the parties hereto have failed to appoint a successor prior to the expiration of thirty (30) days following receipt of the notice of resignation or removal, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief.  Any such resulting appointment shall be binding upon all of the parties hereto and thereafter such successor escrow agent shall be the Escrow Agent hereunder.

(g)

It is not the intention of the parties hereto to create, nor shall this Escrow Agreement be construed as creating, a partnership or association, or to render the parties hereto liable as partners.

(h)

Notwithstanding any provision herein to the contrary, in the event (i) of any disagreement or controversy arising under this Escrow Agreement, (ii) conflicting demands or notices are made upon the Escrow Agent arising out of or relating to this Escrow Agreement, or (iii) the Escrow Agent in good faith is in doubt as to what action it should take hereunder, the Escrow Agent shall have the right, at its election, to withhold and stop all further proceedings in, and performance of, this Escrow Agreement and all instructions received hereunder and file a suit in interpleader and obtain an order from a court of competent jurisdiction requiring all parties involved to interplead and litigate in such court their claims and rights among themselves and with the Escrow Agent. Should any suit or legal proceeding be instituted arising out of or related to this Escrow Agreement, whether such suit be initiated by the Escrow Agent or others, the Escrow Agent shall have the right, at its option, to stop all further proceedings under and performance of this Escrow Agreement and of all instructions received hereunder until all differences shall have been rectified and all doubts resolved by agreement or until the rights of all parties shall have been fully adjudicated.

(i)

The Escrow Agent shall have the right to perform any of its duties hereunder through agents, attorneys, custodians or nominees.

(j)

The Escrow Agent shall have the right, but not the obligation, to consult with counsel of its choice and shall not be liable for any action taken or omitted to be taken by the Escrow Agent either in accordance with the advice of such counsel or in accordance with any opinion of counsel addressed and delivered to the Escrow Agent.

(k)

The parties hereto shall provide to the Escrow Agent such information as the Escrow Agent may reasonably require to permit the Escrow Agent to comply with its obligations under the federal USA PATRIOT Act (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001).  The Escrow Agent shall not credit any amount of interest or investment proceeds earned on the Escrow Fund, or make any payment of all or a



7




portion of the Escrow Fund, to any person unless and until such person has provided to the Escrow Agent such documents as the Escrow Agent may reasonably require to permit the Escrow Agent to comply with its obligations under the federal USA PATRIOT Act.

8.

Fees .  The Seller, on the one hand, and the Buyer, on the other hand, shall each be liable for one-half (½) of the fees and expenses of the Escrow Agent as described in Exhibit B attached hereto for so long as any portion of the Escrow Fund is held by the Escrow Agent hereunder.  The Escrow Agent shall have, and is hereby granted, a prior lien upon the Escrow Fund with respect to its unpaid fees, non-reimbursed expenses and unsatisfied indemnification rights, superior to the interest of any other persons or entities and is hereby granted the right to set-off and deduct any unpaid fees, non-reimbursed expenses and unsatisfied indemnification rights from amounts on deposit in the Escrow Fund.

9.

Notices and Instructions .  Any notices, account statements, consents or other communication required to be sent or given hereunder by any of the parties hereto shall in every case be in writing and be sent or given to each party referenced below, and shall be deemed properly served if (a) delivered personally, (b) delivered by a recognized overnight courier service, or (c) sent by facsimile transmission with a confirmation copy sent by overnight courier, in each case, to the parties at the addresses and facsimile numbers as set forth on Schedule II or at such other addresses and facsimile numbers as may be furnished in writing in accordance with this Section 9 .  Date of service of such notice shall be (x) the date such notice is personally delivered, (y) one (1) Business Day after the date of delivery to the overnight courier if sent by overnight courier or (z) the next succeeding Business Day after transmission by facsimile.  The Escrow Agent shall be entitled to rely on such original or amended schedule until it is provided with a new schedule.  .

10.

Entire Agreement .  This Escrow Agreement (and among the parties hereto other than the Escrow Agent, the Purchase Agreement) sets forth the entire understanding of the parties hereto, and supersedes and preempts all prior oral or written understandings and agreements with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party hereto in connection with the negotiation of the terms hereof.

11.

Governing Law .  THIS ESCROW AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO HEREUNDER SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ITS RULES OF CONFLICTS OF LAW.

12.

Consent to Jurisdiction; Forum Selection; Waiver of Jury Trial .

(a)

THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS ESCROW AGREEMENT SHALL BE TRIED AND LITIGATED EXCLUSIVELY IN THE FEDERAL COURTS LOCATED IN WILMINGTON, DELAWARE.  THE AFOREMENTIONED CHOICE OF VENUE IS INTENDED BY THE PARTIES TO BE MANDATORY AND NOT PERMISSIVE IN NATURE, THEREBY PRECLUDING THE POSSIBILITY OF LITIGATION BETWEEN THE PARTIES HERETO WITH RESPECT TO OR ARISING OUT OF THIS ESCROW AGREEMENT IN ANY JURISDICTION OTHER THAN THOSE SPECIFIED IN THIS SECTION 12 . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON-CONVENIENS OR SIMILAR DOCTRINE OR TO OBJECT TO VENUE WITH RESPECT TO ANY PROCEEDING BROUGHT IN ACCORDANCE WITH THIS SECTION 12 , AND STIPULATES THAT THE FEDERAL COURTS LOCATED IN WILMINGTON,



8




DELAWARE SHALL HAVE IN PERSONAM JURISDICTION AND VENUE OVER SUCH PARTY FOR THE PURPOSE OF LITIGATING ANY DISPUTE, CONTROVERSY OR PROCEEDING ARISING OUT OF OR RELATED TO THIS ESCROW AGREEMENT.  EACH PARTY HERETO HEREBY AUTHORIZES AND ACCEPTS SERVICE OF PROCESS SUFFICIENT FOR PERSONAL JURISDICTION IN ANY ACTION AGAINST IT AS CONTEMPLATED BY THIS SECTION 12 BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO ITS ADDRESS FOR THE GIVING OF NOTICES AS SET FORTH IN THIS ESCROW AGREEMENT, OR IN THE MANNER SET FORTH IN SECTION 9 OF THIS ESCROW AGREEMENT FOR THE GIVING OF NOTICE. ANY FINAL JUDGMENT RENDERED AGAINST A PARTY HERETO IN ANY ACTION OR PROCEEDING SHALL BE CONCLUSIVE AS TO THE SUBJECT OF SUCH FINAL JUDGMENT AND MAY BE ENFORCED IN OTHER JURISDICTIONS IN ANY MANNER PROVIDED BY LAW.

(b)

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION IN ANY LEGAL PROCEEDING ARISING OUT OF THIS ESCROW AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.  THE PARTIES HERETO EACH AGREE THAT ANY AND ALL SUCH CLAIMS AND CAUSES OF ACTION SHALL BE TRIED BY THE COURT WITHOUT A JURY.  EACH OF THE PARTIES HERETO FURTHER WAIVES ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH LEGAL PROCEEDING IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LEGAL PROCEEDING IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED.

13.

Severability .  The unenforceability or invalidity of any provision of this Escrow Agreement shall not affect the enforceability or validity of any other provision.

14.

Amendment and Waiver .  This Escrow Agreement may be amended, or any provision of this Escrow Agreement may be waived; provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by such party.  The waiver by any provision of this Escrow Agreement shall not operate or be construed as a waiver of any other breach.

15.

Headings .  The subject headings of Sections of this Escrow Agreement are included for purposes of convenience of reference only and shall not affect the construction or interpretation of any of its provisions.

16.

Successors and Assigns .  All covenants and agreements contained in this Escrow Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except as otherwise provided herein, this Escrow Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto; provided , that the Buyer may, without prior consent, assign its rights, but not its obligations, under this Escrow Agreement to Victory Park (or any successor thereto); and provided further , that upon prior written notice to each of the Escrow Agent and the Seller, the Buyer may, without prior written consent of any other party hereto, (i) designate one or more of its Affiliates to perform its obligations hereunder, (ii) assign this Escrow Agreement in connection with any merger, sale of substantially all of its or any of its Affiliate’s assets, or sale of all of its or any of its Affiliate’s outstanding equity interests; and/or (iii) assign its rights, but not its obligations, under this Escrow Agreement to Victory Park, or any successor thereto (in any or all of which cases described in subclause (i), (ii) or (iii), the Buyer shall nonetheless remain responsible for the performance of all of its obligations hereunder).  



9




17.

Successor Escrow Agent by Merger .  Notwithstanding anything contained herein to the contrary, any entity into which the Escrow Agent may be merged or with which it may be consolidated, or any entity resulting from any merger or consolidation to which the Escrow Agent shall be a party, or any entity to which the Escrow Agent may sell or otherwise transfer all or substantially all of its corporate trust business, shall be the successor Escrow Agent hereunder without the execution or filing of any paper or any further act on the part of the parties hereto.

18.

Recitals; Not an Amendment .  The Recitals set forth above are hereby incorporated herein by reference.  This Escrow Agreement is not intended to amend or supersede any provision of the Purchase Agreement.

19.

Counterparts .  This Escrow Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other.

20.

Delivery .  This Escrow Agreement and any amendments hereto, to the extent signed and delivered by means of a facsimile machine or other electronic transmission (including transmission in portable document format by electronic mail), shall be treated in all manner and respects and for all purposes as an original agreement and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto, each other party hereto shall re-execute original forms hereof and deliver them to all other parties hereto.  No party hereto shall raise the use of a facsimile machine or other electronic transmission to deliver a signature, or the fact that any signature was transmitted or communicated through the use of a facsimile machine or other electronic transmission, as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.

21.

Termination .  This Escrow Agreement shall terminate upon final disbursement of the Escrow Fund in accordance with the terms hereof.

22.

Assignment of Interests .  No assignment of the interest of any of the parties hereto shall be binding upon the Escrow Agent unless and until written notice of such assignment shall be filed with and acknowledged by the Escrow Agent.

23.

Force Majeure .  The Escrow Agent shall not be responsible or liable for any failure or delay in the performance of its obligations under this Escrow Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; wars; acts of terrorism; civil or military disturbances; sabotage; epidemic; riots; interruptions, loss or malfunctions of utilities, computer (hardware or software) or communications services; accidents; labor disputes; acts of civil or military authority or governmental action; it being understood that the Escrow Agent shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstance.

24.

Security Procedure for Funds Transfer .

The Escrow Agent shall confirm each funds transfer instruction received in the name of a party by means of the security procedure selected by such party and communicated to the Escrow Agent in the form of Exhibit C-1 and C-2 attached hereto, which upon receipt by the Escrow Agent shall become a part of this Escrow Agreement.  Once delivered to the Escrow Agent, Exhibit C-1 and C-2 may be revised or rescinded only by a writing signed by an authorized representative of the party.  Such revisions or rescissions shall be effective only after actual



10




receipt and following such period of time as may be necessary to afford the Escrow Agent reasonable opportunity to act on it.  If a revised Exhibit C-1 or C-2 or a rescission of an existing Exhibit C-1 or C-2 is delivered to the Escrow Agent by an entity that is a successor-in-interest to a party, such document shall be accompanied by additional documentation satisfactory to the Escrow Agent showing that such entity has succeeded to the rights and responsibilities of the party under this Escrow Agreement.  The parties understand that the Escrow Agent’s inability to receive or confirm funds transfer instructions pursuant to the security procedure selected by such party may result in a delay in accomplishing such funds transfer, and agree that the Escrow Agent shall not be liable for any loss caused by any such delay.

25.

Third Party Beneficiaries .  This Escrow Agreement is for the sole benefit of the parties hereto and their respective successors and assigns and nothing in this Escrow Agreement, express or implied, is intended to or shall confer upon any other Person, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Escrow Agreement, and no such other Person (other than as provided in the immediately preceding sentence) shall be deemed to be a third party beneficiary under or by reason of this Escrow Agreement.

IN WITNESS WHEREOF , this Escrow Agreement has been duly executed as of the date first written above.

 

BUYER :

 

 

SOCIAL REALITY, INC.

 

 

 

 

 

By:

/s/ Christopher Miglino

 

Name:

Christopher Miglino

 

Title:

Chief Executive Officer

 

 

 

 

SELLER :

 

 

 

 

/s/ Richard Steel

 

Name: Richard Steel

 

 

 

 

ESCROW AGENT :

 

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ESCROW AGENT

 

 

 

 

By:

/s/ Timothy P. Martin

 

Name:

Timothy P. Martin

 

Title:

Vice President






11



Exhibit 10.20


ESCROW AGREEMENT


ESCROW AGREEMENT, dated as of October 30, 2014 (the “ Agreement ”), by and among Social Reality, Inc., a Delaware corporation (the “ Company ”), Richard Steel (the “ Seller ”) and Lowenstein Sandler LLP, as escrow agent (the “ Escrow Agent ”).  Capitalized terms used but not defined herein have the meaning afforded to them in the Purchase Agreement (defined below).


WHEREAS , the Company has entered into a Stock Purchase Agreement, of even date herewith (the “ Purchase Agreement ”), pursuant to which, the Seller sold all of the issued and outstanding capital stock of Steel Media, a California corporation (“ SM ”) to the Company;


WHEREAS , in connection with the transactions contemplated by the Purchase Agreement, the Company issued to the Seller a secured subordinated promissory note in the principal amount of $2,500,000 (the “ Note ”);


WHEREAS , the Company has agreed to secure its obligations under the Note by, among other things, depositing 2,386,863 shares of the Company’s Class A common stock, $0.001 par value per share, registered in the name of the Seller (the “ Escrow Shares ”) with the Escrow Agent; and


WHEREAS , the Company and the Seller desire that the Escrow Agent accept the Escrow Shares plus any and all dividends and distributions thereon (the “ Escrow Property ”), in escrow, to be held and disbursed as hereinafter provided.


IT IS AGREED :


1.

Appointment of Escrow Agent . The Company and the Seller hereby appoint the Escrow Agent to act in accordance with and subject to the terms of this Agreement and the Escrow Agent hereby accepts such appointment and agrees to act in accordance with and subject to such terms.


2.

Deposit of Escrow Shares .  On or before the date hereof, the Company shall deliver to the Escrow Agent a certificate representing the Escrow Shares, to be held and disbursed subject to the terms and conditions of this Agreement. The certificate representing the Escrow Shares shall bear the following legend:


“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR PURSUANT TO RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”


3.

Disposition of Escrow .  The Escrow Agent will hold the Escrow Property in escrow until authorized hereunder to release and deliver the Escrow Property as follows:


(a)

Note Repayment Notice .  Upon payment in full to the Seller of the Note, the Seller shall send a written notice to Escrow Agent (with a copy to the Company) certifying to the Escrow Agent that the Note, including all unpaid and accrued interest thereon has been paid in full (the “ Note




Repayment Notice ”).  Upon receipt of the Note Repayment Notice, the Escrow Agent shall promptly, without any further notice, action or deed, release and deliver the Escrow Property to the Company.


(b)

Payment Default Notice .  Upon an Event of Default (as defined in the Note), the Seller shall send a written notice to the Escrow Agent (with a copy to the Company), certifying to the Escrow Agent that an Event of Default has occurred and the number of Escrow Shares or other Escrow Property to be released by the Escrow Agent (a “ Default Notice ”).  Upon receipt of a Default Notice, the Escrow Agent shall, within three (3) business days of receipt of such notice, without any further notice, action or deed, release and deliver the Escrow Property set forth in such Default Notice to the Seller.  To the extent any Escrow Property continues to be held by the Escrow Agent following the release of the Escrow Property set forth in the Default Notice to the Seller, such Escrow Property, if any, shall be delivered to the Company.


(c)

Disposition Dispute .  If either the Seller or the Company believes that the Escrow Property should not be released by the Escrow Agent pursuant to a notice given under this Agreement, then such party shall deliver written notice thereof to the Escrow Agent prior to such release (with the failure to timely deliver such notice waiving any right to challenge the release of the Escrow Property).  Upon receipt of such notice, the Escrow Agent may take one of the following actions, in its sole and absolute discretion: (i) deposit the Escrow Property with the clerk of a court of competent jurisdiction, provided, that upon the deposit by the Escrow Agent of the Escrow Property with such clerk, the Escrow Agent shall be relieved of all further obligations and released from all liability hereunder; (ii) file a suit in interpleader in such court and obtain an order from such court requiring all parties involved to litigate in such court their respective claims arising out of or in connection with the Escrow Property; (iii) continue to hold the Escrow Property until direction to release the Escrow Property by the final, non-appealable judgment of a court of competent jurisdiction or by mutual written agreement of the Seller and the Company; or (iv) deliver the Escrow Property to a successor escrow agent mutually selected by the Seller and the Company, provided that the Seller and the Company release the Escrow Agent from all further liability with respect to the Escrow Property. In the event that any such controversy arises hereunder may take the aforementioned actions and in no event shall the Escrow Agent be required to determine the proper resolution of such controversy or the proper disposition of the Escrow Property.


(d)

No Discretionary Authority .  The Escrow Agent has no discretion with respect to, or duty to make any determination as to, whether a notice is properly given, nor is the Escrow Agent required to review or evaluate, or be subject to, the Purchase Agreement, the Note, any other Transaction Document or any other underlying agreement.  The Escrow Agent shall have no further duties hereunder after the disbursement of the Escrow Property in accordance with this Section 3 .  


4.

Rights of the Seller in Escrow Shares .


4.1

Voting and Other Stockholder Rights .  The Seller shall not have any voting rights or any other rights as a stockholder of the Company with respect to the Escrow Shares until such time as they are delivered to the Seller in accordance with Section 3 .


4.2

No Dividends or Other Distributions in Respect of the Escrow Shares; Adjustments in Number of Escrow Shares . For so long as the Escrow Shares are held by the Escrow Agent (the “ Escrow Period ”), no dividends or distributions payable in cash or non-cash property (including capital stock of the Company) shall be paid with respect to the Escrow Shares. The number of Escrow Shares will be adjusted to reflect any split, reverse split, reclassification or other adjustment to the Class A common stock of the Company in the same manner as the number of issued and outstanding shares of the Class A common stock are adjusted to reflect any such event.  




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4.3

Restrictions on Transfer and Redemption . During the Escrow Period, no sale, transfer or other disposition may be made of any or all of the Escrow Shares by the Company or the Seller.  During the Escrow Period, the Company shall not be permitted to redeem, substitute or replace the Escrow Shares without the Seller’s prior written consent.  During the Escrow Period, the Escrow Shares will be reflected on the books and records of the Company as issued but not outstanding shares.


5.

Concerning the Escrow Agent .


5.1

Good Faith Reliance . The Escrow Agent shall not be liable for any action taken or omitted by it in good faith or for any mistake of fact or law, or for any error of judgment, or for the misconduct of any employee, agent or attorney appointed by it, while acting in good faith.  The Escrow Agent shall be entitled to consult with internal or external counsel of its own selection and the opinion of such counsel shall be full and complete authorization and protection to the Escrow Agent in respect of any action taken or omitted by the Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel.  The Escrow Agent may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel (including internal or external counsel chosen by the Escrow Agent), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which is believed by the Escrow Agent to be genuine and to be signed or presented by the proper person or persons. The Escrow Agent shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this Agreement unless evidenced by a writing delivered to the Escrow Agent signed by the proper party or parties and, if the duties or rights of the Escrow Agent are affected, unless it shall have given its prior written consent thereto.  It is understood and acknowledged that certain notices given by the Seller hereunder may be prepared by the Escrow Agent when acting in its capacity as counsel to the Seller, and that fact shall not undermine the validity of any such notice or the Escrow Agent’s ability to rely thereon.


5.2

Duties Limited .  The Escrow Agent: (i) is not responsible for the performance by the Company or the Seller of this Agreement or any of the other Transaction Documents or for determining or compelling compliance therewith; (ii) is only responsible for holding the Escrow Property in escrow pending release thereof in accordance with Section 3 ; and (iii) shall not be obligated to take any legal or other action hereunder which might in its judgment involve or cause it to incur any expense or liability unless it shall have been furnished with indemnification acceptable to it, in its sole and absolute discretion.  The duties and obligations of the Escrow Agent shall be limited to and determined solely by the express provisions of this Escrow Agreement and no implied duties or obligations shall be read into this Escrow Agreement against the Escrow Agent.  The Escrow Agent’s duties hereunder are purely ministerial and the Escrow Agent is not acting as a fiduciary to the Seller or the Company.  The Escrow Agent is not bound by and is under no duty to inquire into the terms or validity of any other agreements or documents, including any agreements which may be related to, referred to in or deposited with the Escrow Agent in connection with this Escrow Agreement, notwithstanding that the Escrow Agent has acted as counsel to the Seller in connection with the subject matter thereof.


5.3

Indemnification .  The Escrow Agent shall be indemnified and held harmless jointly and severally by the Company and the Seller from and against any expenses, including counsel fees and disbursements, or loss suffered by the Escrow Agent in connection with any action, suit or other proceeding involving any claim which in any way, directly or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent hereunder, or the Escrow Property held by it hereunder.  In no event shall Escrow Agent be liable for special, indirect, consequential, or punitive damages, or damages for lost profits.  In the event of the receipt of notice of any demand or claim or the commencement of any action, suit or proceeding, the Escrow Agent, in its sole and absolute discretion, may take the actions set forth in Section 3(c) hereof with respect to the Escrow Property. The provisions of this Section 5.3 shall survive in the event the Escrow Agent resigns or is discharged pursuant to



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Sections 5.6 or 5.7 below. The Escrow Agent shall not incur any liability for not performing or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence beyond the control of the Escrow Agent (including but not limited to any act or provision of any present or future Law or Governmental Body or any act of God or war).


5.4

Fees and Expenses .  The Company shall be liable for and shall pay 100% of the Escrow Agent’s out of pocket expenses incurred by Escrow Agent in the performance of its duties hereunder.  The out of pocket expenses shall be paid to the Escrow Agent from time to time at its request.


5.5

Further Assurances .  From time to time on and after the date hereof, the Company and the Seller shall deliver or cause to be delivered to the Escrow Agent such further documents and instruments and shall do or cause to be done such further acts as the Escrow Agent shall reasonably request to carry out more effectively the provisions and purposes of this Agreement, to evidence compliance herewith or to assure itself that it is protected in acting hereunder.


5.6

Resignation .  The Escrow Agent shall have the right at any time to resign for any reason or no reason at all and be discharged of its duties as Escrow Agent hereunder by giving written notice of its resignation to the parties hereto at least ten (10) calendar days prior to the date specified for such resignation to take effect.  All obligations of the Escrow Agent hereunder shall cease and terminate on the effective date of its resignation and its sole responsibility thereafter shall be to hold the Escrow Property, for a period of ten (10) calendar days following the effective date of resignation, at which time:


(i)

if a successor escrow agent shall have been appointed and written notice thereof shall have been given to the resigning Escrow Agent by parties hereto and the successor escrow agent, then the resigning Escrow Agent shall deliver the Escrow Property to the successor escrow agent; or


(ii)

if a successor escrow agent shall not have been appointed, for any reason whatsoever, the resigning Escrow Agent shall deliver the Escrow Property to a court of competent jurisdiction in the county in which the Escrow Property is then being held, and take all necessary steps to do so, and give written notice of the same to the parties hereto.


5.7

Discharge of Escrow Agent .  The Escrow Agent shall resign and be discharged from its duties as escrow agent hereunder if so requested in writing at any time jointly by the Company and the Seller; provided, that any notice of discharge must (i) direct the disposition of the Escrow Property by Escrow Agent and (ii) include a full release of the Escrow Agent of all liability hereunder.


5.8

Conflicting Demands .  In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions with respect to the Escrow Property which, in its sole and absolute discretion, are in conflict either with other instructions received by it or with any provision of this Escrow Agreement, the Escrow Agent shall have the absolute right to suspend all further performance or that portion of further performance subject to such uncertainty under this Escrow Agreement (except for the safekeeping of the Escrow Property) until such uncertainty or conflicting instructions have been resolved to the Escrow Agent’s sole and absolute satisfaction in accordance with Section 3(c) hereof; provided that if the Escrow Agent so suspends all or some portion of further performance under this Escrow Agreement because of any such uncertainty, then the Escrow Agent shall use its commercially reasonable efforts to resolve such uncertainty as soon as reasonably practicable so as to be able to resume such performance.  




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6.

Miscellaneous .


6.1

Governing Law . This Agreement shall for all purposes be deemed to be made under and shall be construed in accordance with the laws of the State of New York, without regard to the conflicts of laws principles thereof.


6.2

Entire Agreement .  This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof and, except as expressly provided herein, may not be changed or modified except by an instrument in writing signed by the Seller, the Company and the Escrow Agent.


6.3

Headings .  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation thereof.


6.4

Binding Effect .  This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their legal representatives, successors and assigns.


6.5

Notices . Any notice or other communication required or which may be given hereunder shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, or sent by facsimile or other electronic transmission (with confirmation of receipt), addressed as follows:


If to the Company, to:


Social Reality, Inc.

456 Seaton Street
Los Angeles, CA 90013

Attention: Christopher Miglino

Telephone: (323) 283-8505

Facsimile:  

Email: chris@socialreality.com

 

With a  copy (which shall not constitute notice), to:


Pearlman Schneider LLP

2200 Corporate Boulevard, N.W., Suite 201

Boca Raton, FL 33431

Attention:  James M. Schneider, Esq.

Telephone: (561) 362-9595

Facsimile: (561) 361-9612

Email: jim@pslawgroup.net


If to the Seller, to:


Richard Steel

_______________

_______________

Telephone: _______________

Facsimile:

Email: rich@steelmediainc.com




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With a copy (which shall not constitute notice), to:


Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, New York 10020

Attention:  Steven E. Siesser, Esq.

Telephone: (212) 204-8688

Facsimile: (973) 597-2507

Email: ssiesser@lowenstein.com


If to the Escrow Agent, to:


Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, New York 10020

Attention:  Steven E. Siesser, Esq.

Telephone: (212) 204-8688

Facsimile: (973) 597-2507

Email: ssiesser@lowenstein.com


The parties may change the persons and addresses to which the notices or other communications are to be sent by giving written notice to any such change in the manner provided herein for giving notice.


6. 6

Counterparts .  This Agreement may be executed in several counterparts, each one of which shall constitute an original and may be delivered by facsimile transmission, and together shall constitute one instrument.


6.7

No Conflict of Interest .  The Company and the Seller (i) (A) acknowledge and agree that the Escrow Agent’s serving as escrow agent hereunder shall not constitute a conflict of interest despite the Escrow Agent’s contemporaneously serving as counsel to the Seller in connection with the Purchase Agreement, the Note, this Agreement and the other Transaction Documents and any other matters, and shall not constitute a conflict of interest in connection with Escrow Agent’s representation of the Seller in the future in any matter, (B) waives any conflict of interest resulting from the Escrow Agent’s contemporaneously serving as counsel to the Company in connection with the Purchase Agreement, Note, this Agreement and the other Transaction Documents, and (ii) covenants and agrees not to assert a conflict of interest as a result of the Escrow Agent serving in such roles.  The parties agree that the Escrow Agent may serve as counsel to the Seller in connection with a dispute involving this Agreement or the Escrow Property, provided that the Escrow Agent shall promptly resign from its duties as Escrow Agent as provided for in Section 5.6 .  The Seller acknowledges that the provisions of this Section 6.7 constitute a material inducement for the Escrow Agent to serve as escrow agent hereunder.  The Seller and the Company further acknowledge and agree that they have selected the Escrow Agent in order to facilitate the consummation of the transactions contemplated by the Purchase Agreement and the retention of the Escrow Property in order to avoid the time, cost and expense of a third party serving as the escrow agent hereunder.




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WITNESS the execution of this Agreement as of the date first above written.


 

COMPANY:

 

 

SOCIAL REALITY, INC.

 

 

 

 

 

By:

/s/ Christopher Miglino

 

Title:

Chief Executive Officer

 

 

 

 

SELLER:

 

 

 

 

/s/ Richard Steel

 

Richard Steel

 

 

 

 

ESCROW AGENT:

 

 

 

 

LOWENSTEIN SANDLER LLP

 

 

 

 

By:

/s/ Steven Siesser

 

Name:

Steven E. Siesser

 

Title:

Partner




-7-




Exhibit 10.21


REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of October 30, 2014 (the “ Effective Date ”), by and between Social Reality, Inc., a Delaware corporation (the “ Company ”) and Richard Steel (the “ Investor ”). Capitalized terms used by not defined herein have the meaning set forth in the Purchase Agreement (defined below).

RECITALS

WHEREAS , the Company and the Investor are parties to the Stock Purchase Agreement, dated as of October 30, 2014 (the “ Purchase Agreement ”); and

WHEREAS , in connection with the transactions contemplated by the Purchase Agreement, the Investor and the Company desire to enter into this Agreement, which shall, among other things, govern the rights of the Investor to cause the Company to register shares of Common Stock issued or issuable to the Investor under the terms of the Purchase Agreement.

NOW, THEREFORE , the parties hereby agree as follows:

1.

Definitions .   For purposes of this Agreement:

1.1

Affiliate ” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

1.2

Common Stock ” means shares of the Company’s Class A common stock, $0.001 par value.

1.3

 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

1.4

Excluded Registration ” means (i) a registration on Form S-8 (or similar successor form) relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction or (ii) a registration on Form S-4 (or similar successor form).

1.5

 “ Form S-1 ” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.



1






1.6

Form S-3 ” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.

1.7

  Immediate Family Member ” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, life partners or others covered under the applicable domestic relationship statute, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including, adoptive relationships, of a natural person referred to herein.

1.8

“Permitted Registrable Shares ” means with respect to registration statements for resales pursuant to SEC Rule 415 a number of Registrable Securities equal to the least of (i) the number of Registrable Securities not then covered by an effective registration statement that is available for resales pursuant to Rule 415, (ii) the number of Registrable Securities requested to be included in the registration statement for a proposed registration, and (iii) the maximum number of Registrable Securities the Company is permitted to include in such registration statement by the SEC in accordance with applicable SEC rules and regulations.

1.9

Person ” means any individual, corporation, partnership, trust, limited liability company, association or other entity .

1.10

Private Placement Securities ” means the shares of Common Stock issued and issuable upon the exercise of Class A Common Stock purchase warrants, (excluding, for the avoidance of doubt, the Victory Park Securities) which warrants were issued by the Company on October 30, 2014 pursuant to the private placement consummated on October 30, 2014; provided, however, that any such securities shall cease to be Private Placement Securities for purposes of this Agreement when (i) a Form S-1 registration statement or Form S-3 registration statement covering such securities has been declared effective by the SEC and has not been withdrawn or suspended, or (ii) such securities shall have ceased to be outstanding or have been sold.

1.11

 “ Registrable Securities ” means (a) any Earnout Shares which may be issued to the Investor, (b) any Escrow Shares which may be released to the Investor pursuant to the terms of the Escrow Agreement, and (c) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the Earnout Shares and/or the Escrow Shares. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a Form S-1 registration statement or Form S-3 registration statement covering such securities has been declared effective by the SEC and such securities have been disposed of pursuant to such effective Form S-1 registration statement or Form S-3 registration statement, or (ii) such securities shall have ceased to be outstanding.  

1.12

Registrable Securities then outstanding ” means the number of shares of outstanding Common Stock that are Registrable Securities.

1.13

 “ SEC ” means the Securities and Exchange Commission.



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1.14

SEC Rule 144 ” means Rule 144 promulgated by the SEC under the Securities Act.

1.15

SEC Rule 145 ” means Rule 145 promulgated by the SEC under the Securities Act.  

1.16

SEC Rule 415 ” means Rule 415 promulgated by the SEC under the Securities Act.

1.17

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

1.18

Selling Expenses ” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for the Investor .

1.19

Victory Park Financing ” shall have the same meaning as in the Purchase Agreement.

1.20

Victory Park Securities ” shall mean the Victory Park Warrant and the Victory Park Warrant Shares.

1.21

Victory Park Warrant ” shall mean common stock purchase warrant or warrants, as applicable, issued pursuant to the terms of the Victory Park Financing.

1.22

Victory Park Warrant Shares ” shall mean the shares of Common Stock issued and issuable upon the exercise of the Victory Park Warrant.

1.23

Year-One Earnout Shares ” means any Earnout Shares issued by the Company as Year-One Earnout Consideration.

1.24

Year-Two Earnout Shares ” means any Earnout Shares issued by the Company as Year-Two Earnout Consideration.

2.

Registration Rights .  The Company covenants and agrees as follows:

2.1

Demand Registration .

(a)

Form S-1 Demand .  If at any time beginning one hundred eighty (180) days after the issuance of Registrable Securities to the Investor, the Company receives a request from the Investor that the Company file a Form S-1 registration statement with respect to Registrable Securities then outstanding, then the Company shall as soon as practicable, and in any event within seventy-five (75) days after the date such request is given by the Investor, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Investor requested to be registered, and in each case, subject to the limitations of Sections 2.1(c) and 2.3 .



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(b)

Form S-3 Demand .  If at any time beginning one hundred eighty (180) days after the issuance of Registrable Securities to the Investor when the Company is eligible to use a Form S-3 registration statement, the Company receives a request from the Investor that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of the Investor, then the Company shall as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Investor, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by the Investor, subject to the limitations of Sections 2.1(c) and 2.3 .

(c)

Notwithstanding the foregoing obligations, if the Company furnishes to the Investor a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors there exists material nonpublic information relating to the Company that is not otherwise required to be disclosed and that such disclosure would be materially detrimental to the Company and its stockholders, then the Company shall have the right to defer taking action with respect to such filing, for a period of not more than sixty (60) days after the request of the Investor is given; provided , however , that the Company may not invoke this right more than once in any twelve (12) month period ; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such sixty (60) day period other than an Excluded Registration and the Investor may withdraw its request for such registration.

(d)

The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith its best efforts to cause such registration statement to become effective; (ii) after the Company has effected two (2) registrations pursuant to Section 2.1(a) ; or (iii) if the Investor proposes to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b) .  The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b) (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith its best efforts to cause such registration statement to become effective; or (ii) if the Company has effected two registrations pursuant to Section 2.1(b) within the twelve (12) month period immediately preceding the date of such request.  In addition to Section 2.3(c) , a registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC.

2.2

Company Registration .  If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Investor) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give the Investor notice of such registration.  Upon the request of the Investor given within thirty (30) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities



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that the Investor has requested to be included in such registration.  The Investor shall have the right to withdraw the Investor’s request for inclusion of the Investor’s Registrable Securities in any registration statement pursuant to this Section 2.1 by giving written notice to the Company of such withdrawal. The Company shall not have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, if the Investor has elected to include Registrable Securities in such registration.

2.3

Underwriting Requirements .

(a)

If, pursuant to Section 2.1 , the Investor intends to distribute the Registrable Securities covered by his request by means of an underwriting, he shall so advise the Company as a part of his request made pursuant to Section 2.1 .  The underwriter(s) will be selected by the Investor. In such event, the right of the Investor to include his Registrable Securities in such registration shall be conditioned upon his participation in such underwriting and the inclusion of the Investor’s Registrable Securities in the underwriting to the extent provided herein.  The Investor shall (together with the Company as provided in Section 2.4(f) ) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting.  Notwithstanding any other provision of this Section 2.3 , if the managing underwriter advises the Investor in writing that marketing factors require a limitation on the number of shares to be underwritten, then the number of securities that may be included in the underwriting shall be allocated (i) first , to the Registrable Securities requested to be included in such underwriting by the Investor, the Private Placement Securities requested to be included therein, and Victory Park Securities requested to be included therein, pro rata among the Investor, the holders of the Private Placement Securities and the holder or holders of the Victory Park Securities on the basis of the number of shares of Registrable Securities owned by the Investor, the number of Private Placement Securities  and the number of shares of Common Stock underlying the Victory Park Securities, with further successive pro rata allocations among the Investor, the holder or holders of the Private Placement Securities and the holder or holders of the Victory Park Securities if the Investor has requested the underwriting of less than all of the Registrable Securities the Investor is entitled to register, and (ii) second , to any other securities requested to be included in such underwriting.

(b)

In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2 , the Company shall not be required to include any of the Investor’s Registrable Securities in such underwriting unless the Investor accepts the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company.  If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the managing underwriter in its reasonable discretion determines is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering.  If the managing underwriter determines that less than all of the Registrable Securities requested to be registered can be included in such offering, then the number of securities that are included in such offering shall be allocated (i) first , to the securities that the Company proposes to sell, (ii) second , to the



5






Registrable Securities requested to be included in such registration by the Investor, the Private Placement Securities requested to be included therein and the Victory Park Securities requested to be included therein, pro rata among the Investor, the holders of the Private Placement Securities and the holder or holders of the Victory Park Securities on the basis of the number of shares of Registrable Securities owned by the Investor, the number of Private Placement Securities and the number of shares of Common Stock underlying the Victory Park Securities, with further successive pro rata allocations among the Investor, the holder or holders of the Private Placement Securities and the holder or holders of the Victory Park Securities if the Investor has requested the registration of less than all of the Registrable Securities the Investor is entitled to register, and (iii) third , to any other securities requested to be included in such registration.  

(c)

If the proposed registration statement to be filed by the Company is for an offering pursuant to SEC Rule 415 and the number of Registrable Securities requested by the Investor to be included therein exceeds the number of Permitted Registrable Shares, the initial number of Registrable Securities included in any registration statement in respect of such proposed registration and each increase in the number of Registrable Securities included therein shall be allocated pro rata among the Investor on the basis of the number of shares of Registrable Securities owned by the Investor, with further successive pro rata allocations among the Investor if the Investor has requested the registration of less than all of the Registrable Securities the Investor is entitled to register. In the event that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining number of Registrable Securities included in such registration statement for such transferor.  Notwithstanding anything to the contrary contained in this Section 2(c), if the proposed registration statement to be filed by the Company is the first registration statement filed with the SEC that includes any Private Placement Securities for an offering pursuant to SEC Rule 415, and the total number of securities proposed to be included therein exceeds the maximum number of securities of the Company that the Company is permitted to include in such registration statement by the SEC in accordance with applicable SEC rules and regulations, the initial number of securities included in any registration statement in respect of such proposed registration and each increase in the number of securities included therein shall be allocated (i) first, to such Private Placement Securities which have not been previously included in a registration statement, and (ii) second, pro rata among the Investor and the holder or holders of the Victory Park Securities on the basis of the number of Escrow Shares owned by the Investor and the shares of Common Stock underlying the Victory Park Securities, with further successive pro rata allocations among the Investor and the holder or holders of the Victory Park Securities if the Investor has requested the registration of less than all of the Escrow Shares the Investor is entitled to register.  Notwithstanding anything to the contrary contained herein, if for any reason the SEC asserts or proposes a limitation on the securities to be included in any registration statement filed pursuant to this Section 2.3(c) in which the Registrable Securities are to be included, the Company shall use diligent efforts to advocate with the SEC for the registration of all of the securities required or requested to be included in such registration statement, in accordance with applicable SEC guidance.



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(d)

The Investor may not participate in any registration hereunder which is underwritten unless the Investor (i) agrees to sell such Investor’s Registrable Securities on the basis provided in any underwriting arrangements, and (ii) completes and executes all questionnaires, powers of attorney, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements; provided , however , that the Investor shall not be required to make any representations or warranties to the Company or the underwriters solely as a result of the inclusion of the Registrable Securities in the registration statement for an underwritten offering (other than representations and warranties made on a several and not joint basis and which solely relate to the Investor, the Investor’s ownership of his shares of Common Stock to be sold in the offering and the Investor’s intended method of distribution) or to undertake any indemnification obligations to the Company or the underwriters with respect thereto, except as otherwise provided in Section 2.8 hereof and on a several and not joint basis.

(e)

For purposes of Section 2.1 , a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a) or Section 2.3(b) or the SEC Rule 415 cutback provision in Section 2.3(c) , fewer than the total number of Registrable Securities that Investor has requested to be included in such registration statement are actually included.

2.4

Obligations of the Company .  Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a)

prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective and, upon the request of the Investor, keep such registration statement effective for a period of up to (x) the earlier of (i) three (3) years or (ii) the maximum period permitted by applicable law or, if earlier, (y) until the distribution contemplated in the registration statement has been completed; provided, however, that such period shall be extended for a period of time equal to the period the Investor refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;

(b)

prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

(c)

provide to the Investor and the Investor’s counsel for review each registration statement and all amendments and supplements thereto no fewer than ten (10) Business Days prior to their filing with the SEC and not file any document to which such counsel reasonably objects within ten (10) Business Days following receipt by the Investor and the Investor’s counsel of such registration statement and or amendment/supplements thereto;



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(d)

furnish to the Investor such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Investor may reasonably request in order to facilitate his disposition of his Registrable Securities;

(e)

use its best efforts to register and qualify the Registrable Securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the Investor; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(f)

in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

(g)

use its best efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed or quoted;

(h)

provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

(i)

promptly make available for inspection by the Investor, any underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the Investor, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by the Investor, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(j)

notify the Investor, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

(k)

after such registration statement becomes effective, provide written notice to the Investor (a “ Suspension Notice ”) of the occurrence of any of the following events, as promptly as practicable after becoming aware of such event: (i) any request by the SEC or any other federal or state governmental authority, during the period of effectiveness of the registration statement, for amendments or supplements to such registration statement or related prospectus or for additional information; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose; (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from



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qualification of any of the Registrable Securities for sale in any jurisdiction from a state governmental authority or the initiation of any proceeding for such purpose by a state governmental authority; or (iv) any event or circumstance which necessitates the making of any changes to the registration statement or related prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the registration statement, it will not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein not misleading and, in the case of the prospectus, it will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  The Company shall promptly prepare a supplement or amendment to such registration statement to correct such untrue statement or omission, and deliver a copy of such supplement or amendment to the Investor. The Company shall also promptly notify the Investor in writing (x) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a registration statement or any post-effective amendment has become effective and (y) of the Company’s reasonable determination that a post-effective amendment to a registration statement would be appropriate.

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.

2.5

Suspension of Registration Statement . The Investor agrees that upon its receipt of any Suspension Notice from the Company, the Investor will discontinue the disposition of Registrable Securities pursuant to any registration statement covering such Registrable Securities to the extent required by the SEC or such other federal or state governmental authority until the earlier of the Investor’s receipt of (i) copies of the supplemented or amended prospectus contemplated by Section 2.4(k) , (ii) written notice from the Company that no supplement or amendment is required, (iii) written notice from the Company that the any suspension of the effectiveness such registration statement or initiation of any related proceeding has ceased or (iv) written notice from the Company that any suspension of the qualification or exemption from qualification or initiation of any proceeding related thereto has ceased; in each case, which shall be promptly and within two (2) Business Days delivered by the Company to the Investor.

2.6

Furnish Information .  It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2 with respect to the Registrable Securities of the Investor that the Investor shall furnish to the Company such information regarding himself, the Registrable Securities held by him, and the intended method of disposition of such securities as is reasonably required to effect the registration of the Investor’s Registrable Securities.  

2.7

Expenses of Registration .  All expenses (excluding Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2 , including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company.



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2.8

Indemnification .  If any Registrable Securities are included in a registration statement under this Section 2 :

(a)

To the extent permitted by law, the Company will indemnify and hold harmless the Investor, and the partners, members, officers, directors and stockholders of the Investor; legal counsel and accountants; any underwriter (as defined in the Securities Act) for the Investor; and each Person, if any, who controls the Investor or underwriter within the meaning of the Securities Act or the Exchange Act, against any loss, damage, claim or liability (joint or several) to which such aforementioned Person may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company or its officers, directors, employees, agents or Affiliates of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law, and the Company will pay to the Investor, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any such loss, claim, liability or action, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Section 2.8(a) shall not apply if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission made in conformity with written information furnished by or on behalf of the Investor, underwriter, controlling Person, or other aforementioned Person specifically for use in connection with such registration.

(b)

To the extent permitted by law, the Investor, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other stockholder selling securities in such registration statement, and any controlling Person of any such underwriter or other stockholder, against any loss, damage, claim or liability, in each case only to the extent that such loss, claim, damage or liability arises out of or are based upon (i) any untrue statement or omission made in conformity with written information furnished by or on behalf of the Investor specifically for use in connection with such registration; or (ii) the use by the Investor of an outdated or defective prospectus after the Company has notified the Investor, through the Company’s delivery of a Suspension Notice, that the prospectus is outdated or defective; and the Investor will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which any loss, claim, damage or liability may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Section 2.8 shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Investor, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by the Investor by way of indemnity or contribution under Sections



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2.8(b) and 2.8(d) exceed the proceeds from the offering received by the Investor (net of any Selling Expenses paid by the Investor), except in the case of fraud by the Investor.

(c)

Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8 , give the indemnifying party notice of the commencement thereof.  The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided , however , that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action.  The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8 , to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action.  The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8 .

(d)

To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8 , then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided , however , that, in any such case (x) the Investor will not be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by the Investor pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such



11






fraudulent misrepresentation; and provided further that in no event shall the Investor’s liability pursuant to this Section 2.8(d) , when combined with the amounts paid or payable by the Investor pursuant to Section 2.8(b) , exceed the proceeds from the offering received by the Investor (net of any Selling Expenses paid by the Investor), except in the case of fraud by the Investor.

(e)

Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f)

Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and the Investor under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2 , and otherwise shall survive the termination of this Agreement.

2.9

Reports Under Exchange Act .  The Company shall:

(a)

make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144;

(b)

use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(c)

furnish to the Investor, so long as the Investor owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act, and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); and (ii) such other information as may be reasonably requested in availing the Investor of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

2.10

Market Stand-off Agreement .  

(a)

The Investor agrees that, without the prior written consent of the Company, he will not:

(i)

sell any shares of the Year-One Earnout Shares (regardless of when issued) during the period commencing on the date of the expiration of the First Earnout Period and ending sixty (60) days thereafter (the “ First Y1 Lockup Period ”);

(ii)

sell more than one-third (1/3) of the Year-One Earnout Shares then outstanding during the period commencing on the expiration of the First Y1 Lockup Period and ending  sixty (60) day thereafter (the “ Second Y1 Lockup Period ”); and



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(iii)

sell more than two-thirds (2/3) of the Year-One Earnout Shares then outstanding during the period commencing on the expiration of the Second Y1 Lockup Period and ending sixty (60) days thereafter (the “ Third Y1 Lockup Period ”).

(b)

The Investor agrees that, without the prior written consent of the Company, he will not:

(i)

sell any shares of the Year-Two Earnout Shares (regardless of when issued) during the period commencing on the date of the expiration of the Second Earnout Period and ending sixty (60) days thereafter (the “ First Y2 Lockup Period ”);

(ii)

sell more than one-third (1/3) of the Year-Two Earnout Shares then outstanding during the period commencing on the expiration of the First Y2 Lockup Period and ending  sixty (60) day thereafter (the “ Second Y2 Lockup Period ”); and

(iii)

sell more than two-thirds (2/3) of the Year-Two Earnout Shares then outstanding during the period commencing on the expiration of the Second Y2 Lockup Period and ending sixty (60) days thereafter (the “ Third Y2 Lockup Period ”).

(c)

At any time after the expiration of (i) the Third Y1 Lockup Period, the Investor shall not be subject to any restrictions with respect to the sale of Year-One Earnout Shares or (ii) the Third Y2 Lockup Period, the Investor shall not be subject to any restrictions with respect to the sale of the Year-Two Earnout Shares,  in each case, except to the extent required by applicable law; provided, however, that the restrictions in this Section 2.10 shall automatically, without any further action, deed or notice, terminate upon (i) an Event of Default (as defined in the Note) under the Note or (ii) the Buyer’s failure to fully satisfy its obligations in Section 2.5 of the Purchase Agreement.  Notwithstanding anything to the contrary contained in this Agreement, the Investor shall not be subject to any restrictions with respect to the disposition of any shares of Common Stock purchased in an open market transaction except to the extent required by applicable law.

3.

Miscellaneous .

3.1

Successors and Assigns .  The rights under this Agreement may be assigned (but only with all related obligations) by the Investor to a transferee of Registrable Securities that (i) is an Affiliate of the Investor; or (ii) is a member of the Investor’s Immediate Family Member or trust for the benefit of the Investor or one or more of the Investor’s Immediate Family Members; provided , however , that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement.  For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate of the Investor; (2) who is the Investor’s Immediate Family Member; or (3) that is a trust for the benefit of the Investor or the Investor’s Immediate Family Member shall be aggregated together and with those of the Investor; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the



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purpose of exercising any rights, receiving notices, or taking any action under this Agreement.  The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

3.2

Counterparts .   This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be transmitted by facsimile or electronically, and it is the intent of the parties that the facsimile copy (or a photocopy or PDF copy) of any signature printed by a receiving facsimile machine or computer printer shall be deemed an original signature and shall have the same force and effect as an original signature .  

3.3

Titles and Subtitles .  The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

3.4

Notices .  All notices, requests, demands, waivers, consents and other communications hereunder shall be in writing, shall be delivered either in person, by facsimile (which is confirmed) or other electronic means, by overnight air courier or by certified or registered mail, and shall be deemed to have been duly given and to have become effective (a) upon receipt if delivered in person or by facsimile, e-mail or other electronic means calculated to arrive on any Business Day prior to 5:00 p.m., New York time, or on the next succeeding Business Day if delivered on a non-Business Day or after 5:00 p.m., New York time, (b) one (1) Business Day after having been delivered to a nationally-recognized courier for overnight delivery (with written confirmation of delivery), or (c) three (3) Business Days after having been deposited in the mails as certified or registered mail, return receipt requested, all fees prepaid, directed to the parties or their assignees at the following addresses (or at such other address as shall be given in writing by a party hereto):

If to the Investor, addressed as follows:

Richard Steel

_______________

_______________

Telephone:

Facsimile:

Email:


With a copy (which shall not constitute notice) to:

Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, New York 10020

Attention: Steven E. Siesser, Esq.
Telephone: (212) 204-8688

Facsimile: (973) 597-2507

Email: ssiesser@lowenstein.com



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If to the Company, addressed as follows:

Social Reality, Inc.

456 Seaton Street

Los Angeles, CA 90013

Attention:  Christopher Miglino
Telephone:  (323) 283-8505

Facsimile: (323) ___________

Email:chris@socialreality.com


With a copy (which shall not constitute notice) to:

Pearlman Schneider LLP

2200 Corporate Boulevard, N.W.

Suite 210

Boca Raton, FL  33431

Attention:  James M. Schneider, Esq.
Telephone: (561) 362-9595

Facsimile: (561) 361-9612

Email: jim@pslawgroup.net


3.5

Amendments and Waivers .  This Agreement may not be amended, supplement or changed except by an instrument in writing signed by both the Investor and the Company.  Any party to this Agreement may waive in writing any obligation owed to it by any other party under this Agreement.  No waiver of any party of any default, misrepresentation, breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence.

3.6

Severability .  In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

3.7

Aggregation of Stock .  All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

3.8

Entire Agreement .  This Agreement constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.  



15






3.9

Governing Law; Wavier of Trial by Jury .  This Agreement and all matters arising directly or indirectly herefrom shall be construed and enforced in accordance with the laws of the State of Delaware without giving effect to principles of conflicts of laws.  The parties agree that a final judgment in any such suit, action or proceeding brought in such court shall be conclusive and binding upon the parties and may be enforced in any other courts to whose jurisdiction other parties are or may be subject, by suit upon such judgment.  THE PARTIES HEREBY WAIVE ALL RIGHT AND ENTITLEMENT TO A TRIAL BY JURY AS TO ANY DISPUTES BETWEEN THEM.

3.10

Delays or Omissions .  No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


 

COMPANY:

 

 

 

 

SOCIAL REALITY, INC.

 

 

 

By:

/s/ Christoper Miglino

 

Name:

Chris Miglino

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

INVESTOR:

 

 

 

 

/s/ Richard Steel

 

Richard Steel




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Exhibit 10.22

SUBORDINATION AGREEMENT

THIS SUBORDINATION AGREEMENT (this “Agreement”) is entered into as of this 30th day of October, 2014, by and among RICHARD STEEL , an individual (the “Subordinated Creditor”), SOCIAL REALITY, INC. , a Delaware corporation (the “Borrower”; the Borrower and each other Person who executes a joinder to this Agreement and becomes an obligor hereunder, including, without limitation, Steel Media, a California corporation (“Steel Media”), from and after the consummation of the Closing Date Acquisition (as defined in the Senior Loan Agreement described below), from time to time, each a “Company” and collectively, the “Companies”) and VICTORY PARK MANAGEMENT, LLC, as administrative agent and collateral agent for the Lenders (as defined in the Senior Loan Agreement described below) or such then present holder or holders of the “Senior Debt” (as hereinafter defined) as may from time to time exist (“Senior Agent”; the Senior Agent, the Lenders and such other present holders of “Senior Debt” from time to time are referred to herein each individually as a “Senior Lender Party” and collectively as the “Senior Lender Parties”).

RECITALS

A.

The Borrower and the Senior Lender Parties have entered into a Financing Agreement dated as of even date herewith (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Senior Loan Agreement”) pursuant to which, among other things, the Senior Lender Parties have agreed, subject to the terms and conditions set forth in the Senior Loan Agreement, to make certain loans and financial accommodations to the Companies. All of the Companies’ obligations to the Senior Lender Parties under the Senior Loan Agreement and the other Senior Debt Documents (as hereinafter defined) are secured by first priority Liens on substantially all of the now existing and hereafter acquired personal property of the Companies.

B.

The Borrower, Steel Media and the Subordinated Creditor are parties to that certain Stock Purchase Agreement dated as of even date herewith (as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof, the “Stock Purchase Agreement”), pursuant to which, among other things, (i) the Borrower has acquired all of the outstanding stock of Steel Media, (ii) the Subordinated Creditor has extended credit to the Borrower as seller financing for such purchase, as evidenced by a Secured Subordinated Promissory Note of even date herewith made by the Borrower in favor of the Subordinated Creditor in the original principal amount of $2,500,000 (together with all promissory notes and other instruments issued in replacement thereof or substitution therefor, and in each case as amended, supplemented, restated, substituted or otherwise modified and in effect, the “Seller Subordinated Note”) and (iii) the Subordinated Creditor may from time to time become entitled to the Earnout Payments.  The Borrower is also obligated to indemnify the Subordinated Creditor under Section 7.3 of the Stock Purchase Agreement (the “SPA Indemnification Obligations”), and the Borrower has also undertaken to indemnify the Subordinated Creditor for certain errors or omissions in the Subordinated Creditor’s capacity as an officer and director of the Borrower, pursuant to its certificate of incorporation, by-laws, and the Indemnification Agreement, of even date herewith, by and between the Borrower and the Subordinated Creditor (the “Indemnification Agreement”), which indemnification obligations (the “D&O Indemnification Obligations”) are supported by “D&O” insurance maintained by  the Borrower (“D&O Insurance”).  Further, the Borrower is obligated to the Subordinated Creditor under a certain employment agreement, of even date herewith, between the Borrower and the Subordinated Creditor (the “Employment Agreement”). Further, the Borrower has granted to the Subordinated Creditor certain options to purchase shares of the Borrower pursuant to the terms of the Stock Purchase Agreement (the “Stock Options”).  The obligations under the Seller Subordinated Note are secured by the Subordinated Creditor’s interests in the Escrow Shares



1




pursuant to the terms of Section 7 of the Seller Subordinated Note and the related Put Right set forth in Section 6.10 of the Stock Purchase Agreement (collectively, the “Subordinated Debt Security”).  The obligations of the Companies under the Earnout Payments, the SPA Indemnification Obligations, the D&O Indemnification Obligations, the Stock Options and the Employment Agreement are unsecured.

NOW, THEREFORE, for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby covenant and agree as follows:

1.

Definitions .  Capitalized terms used but not otherwise defined in this Agreement shall have the meanings assigned to such terms in the Senior Loan Agreement. As used in this Agreement, the following terms have the following meanings:

Bankruptcy Code ” shall mean Chapter 11 of Title 11 of the United States Code, as amended from time to time and any successor statute and all rules and regulations promulgated thereunder.

Catch-Up Payment ” shall mean any Permitted Subordinated Debt Payment by the Borrower to the Subordinated Creditor that was not permitted to be paid as a result of the restrictions contained in Subsection 2.2 of this Agreement.

 “ Distribution ” shall mean, with respect to any indebtedness, (a) any payment or distribution by any Person of cash, securities or other property, by set-off or otherwise, on account of such indebtedness or obligation, (b) any redemption, purchase or other acquisition of such indebtedness or obligation by any Person or (c) the granting of any Lien on or for the benefit of the holders of such indebtedness or obligation in or upon any property of any Person; provided that, notwithstanding anything set forth in this definition, no Transaction-Related Payment shall be deemed a “Distribution” under this Agreement.

Earnout Payments ” has the meaning ascribed to such term in the Stock Purchase Agreement, as in effect on the date hereof.

Enforcement Action ” shall mean (a) to take from or for the account of any Company or any Subsidiary of any Company, by set-off or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by any Company or any Subsidiary of any Company with respect to the Subordinated Debt, (b) to sue for payment of, or to initiate or participate with others in any suit, action or proceeding against any Company or any Subsidiary of any Company to (i) enforce payment of or to collect the whole or any part of the Subordinated Debt or (ii) commence judicial enforcement of any of the rights and remedies under the Subordinated Debt Documents or applicable law with respect to the Subordinated Debt or any of the Companies’ property or assets, including the commencement of any Proceeding, (c) to accelerate the Subordinated Debt (other than pursuant to Section 2.6(r) of the Stock Purchase Agreement, (d) to exercise the Put Right or any other put option or to cause any Company or any Subsidiary of any Company to honor any redemption or mandatory prepayment obligation under any Subordinated Debt Document, (e) to notify account debtors or directly collect accounts receivable or other payment rights of any Company or any Subsidiary of any Company, (f) to take control or possession of or sell or otherwise realize upon, or to exercise any other rights or remedies with respect to the Subordinated Debt Security, or (g) to take any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce, foreclose upon, take possession of or sell any property or assets of any Company or any Subsidiary of any Company; provided that, notwithstanding anything set forth in this definition, no action to enforce the Subordinated Creditor’s right to a Transaction-Related Payment shall be deemed to be an “Enforcement Action” under this Agreement.

Escrow Shares ” has the meaning ascribed to such term in the Stock Purchase Agreement.



2



Lender” or “Lenders ” shall mean any “Lender” or the “Lenders,” respectively, as such terms are defined in the Senior Loan Agreement.

Lien ” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory or otherwise), security interest or other security arrangement and any other preference, priority or preferential arrangement of any kind or nature whatsoever, including any conditional sale contract or other title retention arrangement, the interest of a lessor under a capital lease and any synthetic or other financing lease having substantially the same economic effect as any of the foregoing.  

Permitted Subordinated Debt Payments ” shall mean (a) payments required to be made pursuant to Section 2 and 5(c) of the Seller Subordinated Note, (b) Earnout Payments required to be made pursuant to Section 2.5 of the Stock Purchase Agreement, in each case, due and payable on a non-accelerated basis in accordance with the terms of the Subordinated Debt Documents, as in effect on the date hereof and (c) Earnout Payments accelerated pursuant to Section 2.5(r) of the Stock Purchase Agreement in accordance with the terms of the Subordinated Debt Documents, as in effect on the date hereof; provided, that the payment of Earnout Payments pursuant to Section 2.5(s) of the Stock Purchase Agreement shall be excluded from a Permitted Subordinated Debt Payment.

Person ” shall mean any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

Put Right ” has the meaning ascribed to such term in the Stock Purchase Agreement.

Senior Debt ” shall mean all “Obligations” (as defined in the Senior Loan Agreement), including, without limitation, all interest, fees, expenses, indemnities and reimbursement obligations, in each case, whether now existing or hereafter created, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with (a) any amendments, modifications, renewals or extensions thereof and (b) any interest accruing thereon after the commencement of a Proceeding, without regard to whether or not such interest is an allowed claim.

Senior Debt Documents ” shall mean the Senior Loan Agreement, all promissory notes or other instruments evidencing the Senior Debt or the obligation to pay the Senior Debt, any guaranty with respect to the Senior Debt, any security agreement or other collateral document securing the Senior Debt and all other documents, agreements and instruments now existing or hereafter entered into evidencing or pertaining to all or any portion of the Senior Debt.

Senior Default Notice ” means a written notice from Senior Agent to the Subordinated Creditor pursuant to which the Subordinated Creditor is notified of the existence of a Senior Covenant Default which notice shall reference this Agreement and which includes a reasonably detailed description of such Senior Covenant Default.

Senior Covenant Default ” means any “Default” or “Event of Default” under the Senior Loan Agreement, other than a Senior Payment Default.

Senior Payment Default ” means (a) an Event of Default resulting from the failure of any Company to pay, on a timely basis, any principal or interest required to be paid under the Senior Loan Agreement, including, without limitation, in each case, any default in payment of Senior Debt after



3



acceleration thereof or (b) an Event of Default resulting from the failure of any Company to pay, on a timely basis, any fee or other amount required to be paid pursuant to the terms of the Senior Loan Agreement in an aggregate amount (individually or together with all other such unpaid amounts) in excess of $500,000, including, without limitation, in each case, any default in payment of Senior Debt after acceleration thereof.

 “ Subordinated Debt ” shall mean all obligations, liabilities and indebtedness of every nature of any Company or any Subsidiary of any Company, if any, from time to time owed to the Subordinated Creditor in respect of the Seller Subordinated Note, the Put Right and the Earnout Payments, whether now existing or hereafter created, including, without limitation, the principal amount thereof; claims and indebtedness thereon, accrued and unpaid interest thereon and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, on account thereof, whether before or after the filing of a proceeding under the Bankruptcy Code together with any amendments, modifications, renewals or extensions thereof. Subordinated Debt specifically excludes any obligation of any Company or any Subsidiary of any Company to make a Transaction-Related Payment.

Subordinated Debt Documents ” shall mean the Stock Purchase Agreement, the Seller Subordinated Note, any other instrument evidencing the Subordinated Debt or the obligation to pay the Subordinated Debt, any guaranty with respect to the Subordinated Debt and any other security agreement or other collateral document securing the Subordinated Debt and all other documents, agreements and instruments now existing or hereafter entered into evidencing or pertaining to all or any portion of the Subordinated Debt; provided that the Escrow Shares, the Employment Agreement, the Indemnification Agreement, the D&O Insurance, the Registration Rights Agreement (as defined in the Stock Purchase Agreement), the Escrow Agreement (as defined in the Stock Purchase Agreement), and the Indemnification Escrow Agreement (as defined in the Stock Purchase Agreement),  shall not constitute Subordinated Debt Documents.

Subordinated Default ” means a default in the payment of the Subordinated Debt, or performance of any term, covenant or condition contained in the Subordinated Debt Documents or the occurrence of any other event or condition constituting an event of default under the Subordinated Debt Documents, in each case in respect of which all applicable grace and cure periods under the Subordinated Debt Documents have lapsed.

Subordinated Default Notice ” means a written notice to Senior Agent pursuant to which Senior Agent is notified of the existence of a Subordinated Default, which notice shall reference this Agreement and which includes a reasonably detailed description of such Subordinated  Default.

Transaction-Related Payment ” shall mean any or all of the following: (i) a distribution to, or sale or other disposition by, the Subordinated Creditor of the Escrow Shares in accordance with the terms of the Stock Purchase Agreement and Escrow Agreement to or for the benefit of the Subordinated Creditor (but excluding any exercise of the Put Right with respect to such Escrow Shares); (ii) a payment of any SPA Indemnification Obligation; (iii) a payment of any D&O Indemnification Obligation; (iv) a payment under the Employment Agreement; (v) the exercise of any Stock Option; (vi) the release of all or any portion of the Indemnification Escrow Amount (as defined in the Stock Purchase Agreement); and (viii) the payment of Earnout Payments pursuant to Section 2.5(s) of the Stock Purchase Agreement.

2.

Subordination .

2.1

Subordination of Subordinated Debt to Senior Debt .  Each Company covenants and agrees, and the Subordinated Creditor likewise covenants and agrees, notwithstanding anything to the



4



contrary contained in any of the Subordinated Debt Documents, that the payment of any and all of the Subordinated Debt shall be subordinate and subject in right and time of payment, to the extent and in the manner hereinafter set forth, to the prior indefeasible payment in full in cash of all Senior Debt.  Each holder of Senior Debt (including, without limitation, each Senior Lender Party), whether now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Senior Debt in reliance upon the provisions contained in this Agreement. Except as otherwise permitted under Subsection 2.2 below, all Senior Debt shall first be indefeasibly paid in full in cash and all commitments to lend under the Senior Debt Documents shall be terminated before any Distribution, whether in cash, securities or other property, shall be made to the Subordinated Creditor on account of any Subordinated Debt.

2.2

Subordinated Debt Payment Restrictions .  (a) Notwithstanding the provisions of subsection 2.1 hereinabove, Permitted Subordinated Debt Payments shall be permitted to be made by the Companies to the Subordinated Creditor and accepted by the Subordinated Creditor; provided , that, the Companies shall not make and the Subordinated Creditor shall not accept or receive from the Companies or otherwise, directly or indirectly, in cash or other property or by set-off or in any other manner (including, without limitation, from or by way of the exercise of the Put Right, but excluding each of the distribution of the Escrow Shares to the Subordinated Creditor in accordance with the terms of the Stock Purchase Agreement and the Escrow Agreement and the sale or other disposition thereof by the Subordinated Creditor), payment of all or any part of the Subordinated Debt that otherwise would have been permitted to be made if, at the time of such payment or immediately after giving effect thereto:

(i)

Subject to Subsection 2.2(b)(i) below, a Senior Payment Default exists; or

(ii)

Subject to Subsection 2.2(b)(ii) below, the Subordinated Creditor shall have received a Senior Default Notice from Senior Agent stating that a Senior Covenant Default exists or would be created by the making of such payment.

(b)

The Companies may resume making Permitted Subordinated Debt Payments in respect of the Subordinated Debt:

(i)

in the case of a Senior Payment Default:

(x) with respect to any Permitted Subordinated Debt Payment to be made pursuant to clauses (a) and/or (b) of the definition thereof, upon the earlier to occur of (A) the cure or waiver (as evidenced by a written waiver from Senior Agent to Borrower) of such Senior Payment Default in accordance with the terms of the Senior Loan Agreement or (B) the date on which the Senior Debt is paid in full and all commitments to lend under the Senior Debt Documents have terminated or (C) the date upon which the Senior Agent, in its sole discretion, consents in writing to the resumption of Permitted Subordinated Debt Payments; and

(y) with respect to any Permitted Subordinated Debt Payment to be made pursuant to clause (c) of the definition thereof, upon the earliest to occur of (A) the cure or waiver (as evidenced by a written waiver from Senior Agent to Borrower) of such Senior Payment Default in accordance with the terms of the Senior Loan Agreement, (B) the date on which the Senior Debt is paid in full and all commitments to lend under the Senior Debt Documents have terminated or (C) the expiration of two hundred seventy (270) days from the date of the occurrence of such Senior Payment Default or (D) the date upon which the Senior Agent, in its sole discretion, consents in writing to the resumption of Permitted Subordinated Debt Payments; and



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(ii)

in the case of a Senior Covenant Default, upon the earliest to occur of (x) the cure or waiver (as evidenced by a written waiver from Senior Agent to Borrower) of such Senior Covenant Default in accordance with the terms of the Senior Loan Agreement, (y) the date on which the Senior Debt is paid in full and all commitments to lend under the Senior Debt Documents have terminated, and (z) the expiration of one hundred thirty-five (135) days from the date on which the Senior Default Notice with respect thereto was received.

(c)

Promptly following the date on which the Companies are permitted to resume making Permitted Subordinated Debt Payments in accordance with Subsection 2.2(b) above (and in no event later than three (3) Business Days) the Companies may make a Catch-Up Payment to the Subordinated Creditor and resume making Permitted Subordinated Debt Payments, and Subordinated Creditor shall be entitled to accept such payments from the Companies.  

(d)

In the event the Companies do not make a Permitted Subordinated Debt Payment otherwise required to be made by them under the Subordinated Debt Documents as a result of the restrictions set forth in this Agreement, any such non-payment, in and of itself, shall not (x) result in or be deemed to constitute a default or an event of default under, or a violation or breach of, the Subordinated Debt Documents or (y) limit or affect the Subordinated Creditor’s obligations under the Subordinated Debt Documents; it being agreed that such other agreements are independent of any provisions hereof and the existence of any claim or cause of action hereunder shall not constitute a defense to the enforcement by the Companies of such other agreements.  Nothing contained in this Section 2.2 shall be construed to waive, limit or otherwise impair the Subordinated Creditor’s rights or remedies or entitlement to pursue or obtain (x) any Transaction-Related Payment (or any sale or other disposition thereof) and (y) the Escrow Shares (or any sale or other disposition of the Escrow Shares) in accordance with the terms of the Stock Purchase Agreement and the Escrow Agreement; provided that the exercise of the Put Right with respect to the Escrow Shares shall be limited and subordinated to the Senior Debt in accordance with the terms of this Agreement.

(e)

No more than two (2) Senior Default Notices may be sent pursuant to Subsection 2.2(a)(ii) during any consecutive three hundred sixty-five (365) day period and no more than three (3) Senior Default Notices may be sent pursuant to Subsection 2.2(a)(ii) in the aggregate during the term of this Agreement.

2.3

Subordinated Debt Standstill Provisions .  Until the Senior Debt has been indefeasibly paid in full and all commitments to lend under the Senior Debt Documents have terminated, the Subordinated Creditor shall not, without the prior written consent of the Senior Agent, take any Enforcement Action, except as provided in the following sentence.  Upon the earliest to occur of:

(a)

the passage of one-hundred thirty-five (135) days from the date of Senior Agent’s receipt of a Subordinated Default Notice from the Subordinated Creditor if the Subordinated Default described therein shall not have been cured or waived in accordance with the relevant Subordinated Debt Document within such period;

(b)

 acceleration of the Senior Debt ( provided , however , that if, following any such acceleration of the Senior Debt, such acceleration in respect of the Senior Debt is rescinded, then all Enforcement Actions taken by the Subordinated Creditor shall likewise be rescinded if (i) such Enforcement Actions are based on this clause (b) and (ii) the Subordinated Creditor shall have no right under any other clause of this Subsection 2.3 to take any Enforcement Action);

(c)

the occurrence of a Proceeding ( provided , however , that if such Proceeding is dismissed, the corresponding prohibition against the Subordinated Creditor taking any Enforcement



6



Action shall automatically be reinstated as of the date of dismissal as if such Proceeding had not been initiated, unless the Subordinated Creditor shall have the right to take any Enforcement Action under another clause of this subsection 2.3; provided , further , that such reinstatement shall not affect the running of the one-hundred thirty-five (135)-day period under clause (a) above to the extent the Subordinated Default giving rise thereto is not based on an acceleration of the Senior Debt or the initiation of such Proceeding);

(d)

 the institution or commencement by Senior Agent of any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to, with respect to the Senior Debt, enforce, foreclose upon, take possession of or sell any material portion of the collateral securing Senior Debt  (other than any action by Senior Agent to take “control” of any deposit account or securities account of any Company);

(e)

the date on which the Senior Debt is paid in full and all commitments to lend under the Senior Debt Documents have terminated;

the Subordinated Creditor may, upon not less than five (5) Business Days’ prior written notice to Senior Agent, which in respect of Enforcement Actions taken pursuant to clause (a) above, which notice may be given during such one hundred thirty-five (135) day period, take Enforcement Actions, but subject in all events to the restrictions and limitations of this Agreement.

Notwithstanding the foregoing or any other terms of this Agreement, the Subordinated Creditor may (i) file proofs of claim against the Borrower or any Company in any Proceeding (defined below) involving such party, (ii) subject to this Agreement, take such actions as are reasonably necessary in such Proceeding to establish and preserve such claim, and (iii) commence any legal action against the Borrower or any Company to the extent (but only to the extent) that the commencement of such legal action is necessary to toll the running of any applicable statute of limitations (but not earlier than ninety (90) days before the expiration thereof).  

2.4

Incorrect Payments .  If any Distribution on account of the Subordinated Debt not permitted to be made by any Company or any Subsidiary of any Company or accepted by the Subordinated Creditor under this Agreement is made and received by the Subordinated Creditor, such Distribution shall not be commingled with any of the assets of the Subordinated Creditor, shall be held in trust by the Subordinated Creditor for the benefit of the Senior Agent and the other Senior Lender Parties and shall be promptly paid over to Senior Agent for application (in accordance with the Senior Debt Documents) to the payment of the Senior Debt then remaining unpaid, until the earlier of all of the Senior Debt is paid in full or otherwise permitted in writing by the Senior Agent.

2.5

[Reserved] .

2.6

[Reserved] .  

2.7

Liquidation, Dissolution, Bankruptcy . Upon any dissolution, winding up, liquidation or reorganization of any Company or any other Credit Party (or any of their respective assets) or similar distribution of assets, whether in any bankruptcy, insolvency, reorganization or receivership proceeding or upon an assignment for the benefit of creditors or any other marshaling of the assets and liabilities of any Company or any other Credit Party (each, a “ Proceeding ”):

(a)

the Senior Lender Parties shall be entitled to receive indefeasible payment in full in cash of all Senior Debt (including interest, fees and charges accruing thereon after the commencement of any such Proceedings whether or not such interest, fees and charges are allowed claims) before the



7



Subordinated Creditor is entitled to receive any payment upon the Subordinated Debt (provided the foregoing shall not be deemed to restrict Permitted Subordinated Debt Payments permitted to be made pursuant to the terms hereof prior to the commencement of any such Proceeding), and the holders of Senior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash, property or securities or by set-off or otherwise, which may be payable or deliverable in any such Proceedings in respect of the Subordinated Debt;

(b)

any payment or distribution of assets of Company or such other Credit Party of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the holders of the Subordinated Debt would be entitled pursuant to the Subordinated Debt Documents following the commencement of any such Proceeding but for the provisions hereof shall be paid by the liquidating trustee or agent or other person or entity making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to Senior Agent, for the benefit of the Senior Lender Parties, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt held or represented by each such holder (or in such other proportions otherwise agreed to among the holders of Senior Debt in writing), to the extent necessary to make payment in full in cash of all Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution to the Senior Lender Parties and the Subordinated Creditor acknowledges and agrees that such a payment or distribution may, particularly with respect to interest, fees and charges on Senior Debt after the commencement of such Proceeding, result in the Subordinated Creditor receiving less than they would otherwise;

(c)

the Subordinated Creditor hereby irrevocably (x) authorizes, empowers and directs all receivers, trustees, debtors-in-possession, liquidators, custodians, conservators and others having authority in the premises to effect all such payments and deliveries, and the Subordinated Creditor also irrevocably authorizes, empowers and directs Senior Agent (or its agent, designee or nominee) to demand, sue for, collect and receive every such payment or distribution, and (y) agrees to execute and deliver to Senior Agent (or its agent, nominee or designee) all such further instruments confirming the authorization referred to in the foregoing clause (x);

(d)

the Subordinated Creditor agrees to execute, verify, deliver and file any proofs of claim in respect of the Subordinated Debt requested by Senior Agent (or its agent, designee or nominee) in connection with any such Proceedings and hereby irrevocably authorizes, empowers and appoints Senior Agent (or its agent, designee or nominee) its agent and attorney-in-fact to (x) execute, verify, deliver and file such proofs of claim and (y) vote such proofs of claim or related claims in any such Proceedings; provided that no Senior Lender Party shall have any obligation to execute, verify, deliver, file and/or vote any such proof of claim or claim.  In the event that Senior Agent (or any agent, designee or nominee thereof) votes any claim in accordance with the authority granted hereby, the Subordinated Creditor shall not be entitled to change or withdraw such vote;

(e)

until the payment in full in cash of the Senior Debt and the termination of the Senior Debt Documents and commitments to loan money thereunder, the Subordinated Creditor agrees that it shall not without each Senior Loan Party’s written consent to the contrary: (1) take, join, support or consent to any action or vote in connection with any plan of reorganization or otherwise in any way so as to directly or indirectly challenge or contest: (A) the validity or the enforceability of the Senior Debt Documents, or (B) the validity or enforceability of this Agreement, or (2) propose, join, support or consent to, or vote in favor of or otherwise approve a plan of reorganization, arrangement or liquidation, or file, join, or consent to any motion or pleading in support of any plan of reorganization, arrangement or liquidation, unless the plan provides for the payment in full cash of the Senior Debt on the effective date of such plan;



8



(f)

this Agreement shall constitute a subordination agreement within the meaning of Section 510(a) of the Bankruptcy Code.  This Agreement shall be applicable both before and after the filing of any petition by or against any Person under the Bankruptcy Code and shall be applicable both before and after the commencement of any other Proceeding.  The relative rights of the parties hereto, and the rights of such parties in or to distributions shall continue after the filing of such petition, or the commencement of any other Proceeding, on the same basis as prior thereto; and

(g)

nothing contained in this Subsection 2.7 shall be construed to waive, limit or otherwise impair the Subordinated Creditor’s rights or remedies or entitlement to pursue or obtain the Escrow Shares in accordance with the terms of the Stock Purchase Agreement and the Escrow Agreement; provided that the exercise of the Put Right with respect to the Escrow Shares shall be limited and subordinated to the Senior Debt in accordance with the terms of this Agreement.

3.

Modifications .

3.1

Modifications to Senior Debt Documents .  Senior Agent and the other Senior Lender Parties may at any time and from time to time without the consent of or notice to the Subordinated Creditor, without incurring liability to the Subordinated Creditor and without impairing or releasing the obligations of the Subordinated Creditor under this Agreement, change the manner or place of payment or extend the time of payment of or renew or alter any of the terms of the Senior Debt, or amend in any manner any agreement, note, guaranty or other instrument evidencing or securing at otherwise relating to the Senior Debt in accordance with the terms set forth in the Senior Debt Documents; provided that without the prior written consent of the Subordinated Creditor, the Senior Debt Documents shall not be amended so as to:

(a)

contravene the provisions of this Agreement; or

(b)

modify any provision of the Senior Debt Documents to further restrict the Borrower or any Company from making any payments under the Subordinated Debt Documents in addition to those in existence on the date hereof.

3.2

Modifications to Subordinated Debt Documents .  Until the Senior Debt has been indefeasibly paid in full in cash and all lending commitments under the Senior Debt Documents have terminated, and notwithstanding anything to the contrary contained in the Subordinated Debt Documents, the Subordinated Creditor shall not, without the prior written consent of Senior Agent, agree to any amendment, modification or supplement to the Subordinated Debt Documents.

4.

Waiver of Certain Rights by the Subordinated Creditor .

4.1

Marshaling .  The Subordinated Creditor hereby waives any rights it may have under applicable law to assert the doctrine of marshaling or to otherwise require Senior Agent and the other Senior Lender Parties to marshal any property of any Company or any Subsidiary of any Company or any guarantor of the Senior Debt for the benefit of the Subordinated Creditor.

4.2

Rights Relating to Senior Agent’s Actions with respect to the Collateral . The Subordinated Creditor hereby waives, to the extent permitted by applicable law, any rights which it may have to enjoin or otherwise obtain a judicial or administrative order preventing Senior Agent or the other Senior Lender Parties from taking, or refraining from taking, any action with respect to all or any part of the collateral subject to the Senior Lender Parties’ Liens. Without limitation of the foregoing, the Subordinated Creditor hereby agrees that it has no right to direct or object to the manner in which Senior



9



Agent applies the proceeds of such collateral to the Senior Debt resulting from the exercise by Senior Agent and the other Senior Lender Parties of rights and remedies under the Senior Debt Documents.

4.3

Rights Relating to Disclosures .  The Subordinated Creditor hereby agrees that Senior Agent has not assumed any obligation or duty to disclose information regarding any Company or any Subsidiary of any Company or the Senior Debt to the Subordinated Creditor and Senior Agent shall have no special or fiduciary relationship to the Subordinated Creditor. The Subordinated Creditor hereby fully waives and releases Senior Agent from any affirmative disclosures which may be required of Senior Agent under applicable law.

5.

No Additional Liens or Guarantees; Turnover .  The Subordinated Creditor agrees that it shall not seek to obtain and shall not take, accept, obtain or have (i) any guarantee of all or any part of the Subordinated Debt by any Credit Party (other than the Borrower) or (ii) any lien or security interest in any assets of, or equity interests in, the Companies or any other Credit Party as security for all or any part of the Subordinated Debt, other than the Subordinated Debt Security, and, in the event that the Subordinated Creditor obtains any guarantees, liens or security interests, other than the Subordinated Debt Security, the Subordinated Creditor shall (or shall cause its agent to) promptly execute and deliver to Senior Agent such documents, agreements and instruments, and take such other actions, as Senior Agent shall request to release such guarantees, liens or security interests.  Without limiting any of the foregoing, the Subordinated Creditor agrees and acknowledges that, in the event the Subordinated Creditor takes any action to realize on any collateral securing the Subordinated Debt (excluding any action to pursue or obtain the Escrow Shares in accordance with the terms of the Stock Purchase Agreement and the Escrow Agreement, but excluding any action taken to  exercise of the Put Right with respect to the Escrow shares) (in violation of the foregoing), if any (including as a result of any judgment lien), all proceeds therefrom shall be received in trust for the benefit of the Senior Lender Parties and shall be paid over upon demand to Senior Agent, for the benefit of the Senior Lender Parties, in the same form as so received (with all necessary endorsements) to be applied to the payment of the Senior Debt until the Senior Debt shall have been paid in full in cash.

6.

Construction .  The terms of this Agreement were negotiated among business persons sophisticated in the area of business finance, and accordingly, in construing the terms of this Agreement, no rule or law which would require that this instrument be construed against the party who drafted this instrument shall be given any force or effect.

7.

Modification .  Any modification or waiver of any provision of this Agreement, or any consent to any departure by any party from the terms hereof, shall not be effective in any event unless the same is in writing and signed by Senior Agent and the Subordinated Creditor, and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given. Any notice to or demand on any party hereto in any event not specifically required hereunder shall not entitle the party receiving such notice or demand to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.

8.

Further Assurances .  Each party to this Agreement promptly will execute and deliver such further instruments and agreements and do such further acts and things as may be reasonably requested in writing by any other party hereto that may be necessary or desirable in order to effect fully the purposes of this Agreement.

9.

Notices .  Any notice or other communication required or permitted under this Agreement shall be in writing and personally delivered, mailed by registered or certified mail (return receipt requested and postage prepaid), sent by telecopier (with a confirming copy sent by regular mail), or sent by prepaid



10



overnight courier service, and addressed to the relevant party at its address set forth below, or at such other address as such party may, by written notice, designate as its address for purposes of notice under this Agreement:

(a)

If to Senior Agent or any other Senior Lender Party, at:


Victory Park Management, LLC

227 W. Monroe Street, Suite 3900

Chicago, Illinois 60606

Telephone:

(312) 705-2786

Facsimile:

(312) 701-0794

Attention:  

Scott Zemnick, Esq.

E-mail:

szemnick@vpcadvisors.com


with a copy to:

Katten Muchin Rosenman LLP

525 West Monroe Street

Chicago, Illinois 60661

Telephone:

(312) 902-5297 and (312) 902-5495

Facsimile:

(312) 577-8964 and (312) 577-8854

Attention:

Mark R. Grossmann, Esq. and Scott E. Lyons, Esq.

E-mail:

mg@kattenlaw.com and scott.lyons@kattenlaw.com


(b)

If to any Company, at:


Social Reality, Inc.

456 Seaton Street

Los Angeles, CA  90013

Telephone:

(323) 283-8505

Attention:

Christopher Miglino

Email:

chris@socialreality.com


with a copy to:

c/o Sidley Austin LLP

787 Seventh Avenue

New York, New York  10019

Telephone:

(212) 339-5480

Attention:

Alan Jakimo, Esq.

Email:

ajakimo@sidley.com


(c)

If to the Subordinated Creditor, at:


Richard Steel

_______________

_______________



11



Attention: Laura Juarez, President

Facsimile: (419) 636-8129


with a copy to:


Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, NY 10020

Attention Steven E. Siesser, Esq.

Telephone: (212) 204-8688

Fascimile: (973) 597-2507

Email:  ssiesser@lowenstein.com


If mailed, notice shall be deemed to be given five (5) days after being sent, and if sent by personal delivery, telecopier or prepaid courier, notice shall be deemed to be given when delivered.

10.

Successors and Assigns .   This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and permitted assigns of Senior Agent, the other Senior Lender Parties, the Subordinated Creditor and the Companies.  Senior Agent and the other Senior Lender Parties may, from time to time, without notice to the Subordinated Creditor, assign or transfer any or all of the Senior Debt or any interest therein to any Person in accordance with the terms of the Senior Loan Agreement and, notwithstanding any such assignment or transfer, or any subsequent assignment or transfer, the Senior Debt shall, subject to the terms hereof, be and remain Senior Debt for purposes of this Agreement, and every permitted assignee or transferee of any of the Senior Debt or of any interest therein shall, to the extent of the interest of such permitted assignee or transferee in the Senior Debt, be entitled to rely upon and be the third party beneficiary of the subordination provided under this Agreement and shall be entitled to enforce the terms and provisions hereof to the same extent as if such assignee or transferee were initially a party hereto.

11.

Relative Rights .  This Agreement shall define the relative rights of Senior Agent, the other Senior Lender Parties and the Subordinated Creditor.  Nothing in this Agreement shall (a) impair, as among the Companies, the other Senior Lender Parties and Senior Agent, the obligation of the Companies with respect to the payment of the Senior Debt and the Subordinated Debt in accordance with their respective terms or (b) affect the relative rights of Senior Agent, the other Senior Lender Parties or the Subordinated Creditor with respect to any other creditors of the Companies.

12.

Miscellaneous .  In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any of the Subordinated Debt Documents, the provisions of this Agreement shall control and govern.  The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument, but in making proof hereof, it shall only be necessary to produce one such counterpart containing signature pages signed by each party. In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement. This Agreement shall be governed by and shall be construed and enforced in accordance with the internal laws of the State of Illinois, without regard to conflicts of law principles.    



12



13.

Continuation of Subordination; Termination of Agreement .  This Agreement shall remain in full force and effect until the indefeasible payment in full in cash of the Senior Debt and the termination of all lending commitments under the Senior Debt Documents after which this Agreement shall terminate without further action on the part of the parties hereto.

14.

CONSENT TO JURISDICTION .   ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS LOCATED IN THE CITY OF CHICAGO, COUNTY OF COOK, OR OF THE UNITED STATES OF AMERICA FOR THE FOR THE NORTHERN DISTRICT OF ILLINOIS AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE SUBORDINATED CREDITOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH JURISDICTIONS.   EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH PERSON AT THEIR RESPECTIVE ADDRESSES SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

15.

WAIVER OP JURY TRIAL .   THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS AGREEMENT AND ANY OTHER TRANSACTION CONTEMPLATED HEREBY AND THEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.  EACH OF SUBORDINATED CREDITOR, EACH COMPANY AND SENIOR AGENT WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

IN WITNESS WHEREOF , intending to be legally bound, and intending that this Agreement constitute an instrument executed and delivered under seal, the parties have caused this Agreement to be executed under seal as of the date first written above.

 

SUBORDINATED CREDITOR:

 

 

 

 

RICHARD STEEL , an individual

 

 

 

 

/s/ Richard Steel

 

 

 

 

COMPANIES:

 

 

 

 

SOCIAL REALITY, INC. , a Delaware corporation

 

 

 

 

By:

/s/ Christopher Miglino

 

Name:

Christopher Miglino

 

Title:

Chief Executive Officer



13




 

 

 

 

SENIOR AGENT:

 

 

 

 

VICTORY PARK MANAGEMENT, LLC, a Delaware limited liability company

 

 

 

 

By:

/s/ Scott Zemnick

 

Name:

Scott Zemnick

 

Title:

Authorized Signatory





14




Exhibit 10.23

FINANCING AGREEMENT

Dated as of October 30, 2014

by and among

SOCIAL REALITY, INC., a Delaware corporation (“Social”),

as the Borrower,


the Guarantors from time to time party hereto,


THE LENDERS PARTY HERETO

and

VICTORY PARK MANAGEMENT, LLC
as Agent

______________________________________________________________________________

UP TO $20,000,000 SENIOR SECURED NOTES

 AND

WARRANTS TO PURCHASE SHARES OF

COMMON STOCK

______________________________________________________________________________





TABLE OF CONTENTS


 

 

Page

                          

                                                                                                                 

        

Article I DEFINITIONS; CERTAIN TERMS

2

 

 

 

Section 1.1

Definitions

2

Section 1.2

Terms Generally

19

Section 1.3

Accounting and Other Terms

20

Section 1.4

Borrower Representative

20

 

 

 

Article II AUTHORIZATION OF ISSUE

20

 

 

 

Section 2.1

Senior Secured Notes

20

Section 2.2

Interest

22

Section 2.3

Redemptions, Payments

23

Section 2.4

Payments

26

Section 2.5

Dispute Resolution

27

Section 2.6

Taxes

27

Section 2.7

Reissuance

28

Section 2.8

Register

29

Section 2.9

Maintenance of Register

30

Section 2.10

Consideration for Notes

30

Section 2.11

Transfer Agent Instructions

30

Section 2.12

Compensation for Increased Costs and Taxes

30

Section 2.13

Capital Adequacy Adjustment

31

 

 

 

Article III PURCHASE AND SALE OF CLOSING DATE NOTES

32

 

 

 

Section 3.1

Closing

32

 

 

 

Article IV INTENTIONALLY OMITTED

32

 

 

 

Article V CONDITIONS TO EACH LENDER’S OBLIGATION  TO PURCHASE

32

 

 

 

Section 5.1

Closing

32

Section 5.2

Additional Notes

36

 

 

 

Article VI LENDER’S REPRESENTATIONS AND WARRANTIES

37

 

 

 

Section 6.1

No Public Sale or Distribution

37

Section 6.2

Investor Status

37

Section 6.3

No Governmental Review

37

Section 6.4

Transfer or Resale

37

Section 6.5

Legends

38

Section 6.6

Residency

38



i




Article VII CREDIT PARTIES’ REPRESENTATIONS AND WARRANTIES

38

                          

                                                                                                                 

        

Section 7.1

Organization and Qualification

38

Section 7.2

Authorization; Enforcement; Validity

39

Section 7.3

Issuance of Securities

39

Section 7.4

No Conflicts

40

Section 7.5

Consents

40

Section 7.6

Subsidiary Rights

41

Section 7.7

Equity Capitalization

41

Section 7.8

Indebtedness and Other Contracts

42

Section 7.9

Off Balance Sheet Arrangements

42

Section 7.10

Ranking of Notes

42

Section 7.11

Title

42

Section 7.12

Intellectual Property Rights

42

Section 7.13

Creation, Perfection, and Priority of Liens

43

Section 7.14

Absence of Certain Changes

43

Section 7.15

Absence of Litigation

44

Section 7.16

No Undisclosed Events, Liabilities, Developments or Circumstances

44

Section 7.17

No Disagreements with Accountants and Lawyers

44

Section 7.18

No General Solicitation; Placement Agent’s Fees

44

Section 7.19

No Integrated Offering

45

Section 7.20

Tax Status

45

Section 7.21

Transfer Taxes

45

Section 7.22

Conduct of Business; Compliance with Laws; Regulatory Permits

45

Section 7.23

Foreign Corrupt Practices

46

Section 7.24

Sarbanes-Oxley Act

46

Section 7.25

Environmental Laws

46

Section 7.26

Margin Stock

47

Section 7.27

ERISA

47

Section 7.28

Investment Company

48

Section 7.29

U.S. Real Property Holding Corporation

48

Section 7.30

Internal Accounting and Disclosure Controls

48

Section 7.31

SEC Documents; Financial Statements

48

Section 7.32

Transactions With Affiliates

49

Section 7.33

Acknowledgment Regarding Lenders’ Purchase of Securities

50

Section 7.34

Acknowledgement Regarding Lender’s Trading Activity

50

Section 7.35

Insurance

50

Section 7.36

Closing Date Acquisition Documents

50

Section 7.37

Employee Relations

50

Section 7.38

Disclosure

51

Section 7.39

Patriot Act

51

Section 7.40

Material Contracts

52

Section 7.41

Manipulation of Prices; Securities

52

Section 7.42

Application of Takeover Protections; Rights Agreement

52

Section 7.43

Absence of Securities-Related Litigation

52



ii




Section 7.44

No Disqualification Events

52

                          

                                                                                                                 

        

Article VIII COVENANTS

53

 

 

 

Section 8.1

Financial Covenants

53

Section 8.2

Deliveries

55

Section 8.3

Notices

57

Section 8.4

Rank

59

Section 8.5

Incurrence of Indebtedness

59

Section 8.6

Existence of Liens

59

Section 8.7

Restricted Payments

59

Section 8.8

Mergers; Acquisitions; Asset Sales

60

Section 8.9

No Further Negative Pledges

60

Section 8.10

Affiliate Transactions

60

Section 8.11

Insurance

61

Section 8.12

Corporate Existence and Maintenance of Properties

62

Section 8.13

Non-circumvention

62

Section 8.14

Conduct of Business

62

Section 8.15

U.S. Real Property Holding Corporation

63

Section 8.16

Compliance with Laws

63

Section 8.17

Additional Collateral

63

Section 8.18

Audit Rights; Field Exams; Appraisals; Meetings

63

Section 8.19

Pledge of Securities

64

Section 8.20

Additional Issuances of Debt or Equity

64

Section 8.21

Right to Participate in Future Offering

64

Section 8.22

Use of Proceeds

66

Section 8.23

Costs, Expenses and Other Amounts

66

Section 8.24

Modification of Organizational Documents and Certain Documents

67

Section 8.25

Joinder

67

Section 8.26

Investments

68

Section 8.27

Further Assurances

68

Section 8.28

Board Observation Rights

68

Section 8.29

Form D and Blue Sky

69

Section 8.30

Reporting Status

69

Section 8.31

Listing; DTC Eligibility

69

Section 8.32

Removal of Legends

69

Section 8.33

Disclosure of Transactions and Other Material Information

70

Section 8.34

Material Non-public Information

71

Section 8.35

Reservation of Shares

72

Section 8.36

Internal Accounting Controls

72

Section 8.37

Regulation M

72

Section 8.38

Disqualification Events

73

Section 8.39

Hiring of Chief Financial Officer

73

Section 8.40

Segregated Accounts.

73

Section 8.41

Operating Losses.

73



iii




Article IX CROSS GUARANTY

73

                          

                                                                                                                 

        

Section 9.1

Cross-Guaranty

73

Section 9.2

Waivers by Guarantors

74

Section 9.3

Benefit of Guaranty

74

Section 9.4

Waiver of Subrogation, Etc

74

Section 9.5

Election of Remedies

74

Section 9.6

Limitation

75

Section 9.7

Contribution with Respect to Guaranty Obligations

75

Section 9.8

Liability Cumulative

76

Section 9.9

Stay of Acceleration

76

Section 9.10

Benefit to Borrowers

76

 

 

 

Article X RIGHTS UPON EVENT OF DEFAULT

76

 

 

 

Section 10.1

Event of Default

76

Section 10.2

Acceleration Right

80

Section 10.3

Consultation Rights

80

Section 10.4

Other Remedies

80

 

 

 

Article XI INTENTIONALLY OMITTED

81

 

 

 

Article XII AGENCY PROVISIONS

81

 

 

 

Section 12.1

Appointment

81

Section 12.2

Binding Effect

82

Section 12.3

Use of Discretion

82

Section 12.4

Delegation of Duties

83

Section 12.5

Exculpatory Provisions

83

Section 12.6

Reliance by Agent

83

Section 12.7

Notices of Default

84

Section 12.8

Non Reliance on the Agent and Other Holders

85

Section 12.9

Indemnification

85

Section 12.10

The Agent in Its Individual Capacity

85

Section 12.11

Resignation of the Agent; Successor Agent

86

Section 12.12

Reimbursement by Holders and Lenders

86

Section 12.13

Withholding

86

Section 12.14

Release of Collateral or Guarantors

87

 

 

 

Article XIII MISCELLANEOUS

87

 

 

 

Section 13.1

Payment of Expenses

87

Section 13.2

Governing Law; Jurisdiction; Jury Trial

88

Section 13.3

Counterparts

89

Section 13.4

Headings

89



iv




Section 13.5

Severability

89

Section 13.6

Entire Agreement; Amendments

89

Section 13.7

Notices

90

Section 13.8

Successors and Assigns

91

Section 13.9

No Third Party Beneficiaries

93

Section 13.10

Survival

93

Section 13.11

Further Assurances

93

Section 13.12

Indemnification

93

Section 13.13

No Strict Construction

94

Section 13.14

Waiver

94

Section 13.15

Payment Set Aside

94

Section 13.16

Independent Nature of Lenders’ Obligations and Rights

94

Section 13.17

Set-off; Sharing of Payments

95

                          

                                                                                                                 

        




v



EXHIBITS

Exhibit A

Note

Exhibit B

Warrant

Exhibit C

Security Agreement

Exhibit D

Registration Rights Agreement

Exhibit E

Compliance Certificate

Exhibit F

Funds Flow Letter

Exhibit G

Irrevocable Transfer Agent Instructions

Exhibit H

Secretary’s Certificate

Exhibit I

Officer’s Certificate

Exhibit J

Reserved

Exhibit K

Reserved

Exhibit L

Joinder Agreement


SCHEDULES

Schedule of Lenders


Schedule 1.1

EBITDA; Fixed Charge Coverage Ratio; Interest Coverage Ratio

Schedule 7.1

Subsidiaries

Schedule 7.4

No Conflicts

Schedule 7.5

Consents

Schedule 7.6

Subsidiary Rights

Schedule 7.7

Equity Capitalization

Schedule 7.8

Indebtedness and Other Contracts

Schedule 7.9

Off Balance Sheet

Schedule 7.11

Title

Schedule 7.12

Intellectual Property Rights

Schedule 7.14

Absence of Certain Changes

Schedule 7.15

Absence of Litigation

Schedule 7.16

Disclosure

Schedule 7.18

Placement Agent’s Fees

Schedule 7.22

Conduct of Business; Regulatory Permits

Schedule 7.25

Environmental Laws

Schedule 7.27

ERISA

Schedule 7.32

Transactions with Affiliates

Schedule 7.34

Acknowledgement Regarding Lender’s Trading Activity

Schedule 7.40

Material Contracts

Schedule 8.6

Existing Liens

Schedule 8.7

Restricted Payments

Schedule 8.25

Existing Investments




vi



FINANCING AGREEMENT


This FINANCING AGREEMENT (as modified, amended, extended, restated, amended and restated and/or supplemented from time to time, this " Agreement "), dated as of October 30, 2014, is being entered into by and among Social Reality, Inc., a Delaware corporation (" Social "; Social and each other Person who executes a Joinder Agreement and becomes a New Borrower hereunder, including, without limitation, Steel Media, a California corporation (" Steel Media "), from and after the consummation of the Closing Date Acquisition, from time to time, each a " Borrower " and collectively, the " Borrowers "), Social, as the Borrower Representative, the entities party hereto from time to time as Guarantors, the lenders from time to time listed on the Schedule of Lenders attached hereto (each individually, a " Lender " and collectively, the " Lenders ") and Victory Park Management, LLC, as administrative agent and collateral agent (the " Agent ") for the Lenders and the Holders (as defined herein).


RECITALS


WHEREAS , the Borrowers have authorized a new series of senior secured notes to be issued by the Borrowers;


WHEREAS , each Lender wishes to purchase, and the Borrowers wish to sell, upon the terms and conditions stated in this Agreement, from time to time that principal amount of Senior Secured Notes, in substantially the form attached hereto as Exhibit A , as set forth opposite such Lender's name in column three (3) on the Schedule of Lenders attached hereto;


WHEREAS , in connection with the initial sale of Notes at the Closing, and as an inducement to the Lenders to purchase such Notes, Social wishes to issue to the Lenders at the Closing, upon the terms and conditions stated in this Agreement and in the Warrants (as defined below), warrants to purchase an aggregate of 2,900,000 shares of Class A common stock, par value $0.001 per share, of Social (or any capital stock issued in substitution or exchange for, or otherwise in respect of, such common stock) (the " Common Stock "), in substantially the form attached hereto as Exhibit B , and in the respective denominations as set forth opposite each Lender's name in column four (4) on the Schedule of Lenders attached hereto (the " Warrants ");


WHEREAS , Social and the Lenders are executing and delivering this Agreement in reliance upon the exemption from securities registration with respect to the Notes (as defined below), the Warrants and the Warrant Shares (as defined below) afforded by the Securities Act of 1933, as amended (the " 1933 Act "), and Regulation D (" Regulation D ") promulgated by the United States Securities and Exchange Commission (the " SEC ") under the 1933 Act;


WHEREAS , contemporaneously with the execution and delivery of this Agreement, the Borrowers, as applicable, the Guarantors, as applicable, and the Agent, on behalf of the Holders and the Lenders, are executing and delivering a Pledge and Security Agreement, substantially in the form attached hereto as Exhibit C (the " Security Agreement "), pursuant to which substantially all of the assets of the Borrowers and the Guarantors will be pledged as Collateral to secure the Obligations; and


WHEREAS , contemporaneously with the execution and delivery of this Agreement, Social and the Lenders are executing and delivering a Registration Rights Agreement, in substantially the form attached hereto as Exhibit D (the " Registration Rights Agreement "),


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pursuant to which Social has agreed to provide the Holder(s) of the Warrants and Warrant Shares certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.


NOW, THEREFORE , in consideration of the premises and the covenants and agreements contained herein, the Borrowers, the Guarantors, the Agent and each Lender hereby agree as follows:


ARTICLE I

DEFINITIONS; CERTAIN TERMS


Section 1.1

Definitions .  As used in this Agreement, the following terms have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:


" 1933 Act " has the meaning set forth in the Recitals.


" 1933 Act Legend " has the meaning set forth in Section 6.5.


" 1934 Act " means the Securities Exchange Act of 1934, as amended.


" Acquisition " means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business line, unit or division of a Person, (b) the acquisition of in excess of 50% of the Equity Interests of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person.


" Additional Notes " has the meaning set for in Section 2.1(b).


" Agent " has the meaning set forth in the introductory paragraph hereto.


" Affiliate " means, with respect to a specified Person, another Person that (i) is a director or officer (or, in the case of a Borrower, a Responsible Officer), of such specified Person, or (ii) directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified.


" Approved Stock Plan " means the Social Reality, Inc. 2012 Equity Compensation Plan, as in effect as of the Closing Date, without amendment or modification thereafter.


" Asset Sale " means (i) the sale, lease, license, conveyance or other disposition of any assets or rights of any Credit Party or any Subsidiary of any Credit Party, and (ii) the sale of Equity Interests in any Credit Party or any Subsidiary of any Credit Party.


" Assignee " has the meaning set forth in Section 13.8.


" Bankruptcy Law " has the meaning set forth in Section 10.1(c).



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" Business Day " means any day other than Saturday or Sunday or any day that banks in Chicago, Illinois are required or permitted to close.


"Capital Expenditures" means any expenditure or obligation which should be capitalized in accordance with GAAP.


" Capital Stock " means (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests, respectively; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into, or exchangeable for, Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.


" Cash Equivalent Investment " means, at any time, (a) any evidence of debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any agency thereof, (b) commercial paper, maturing not more than one year from the date of issue, or corporate demand notes, in each case rated at least A-l by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or P-l by Moody's Investors Service, Inc., (c) any certificate of deposit, time deposit or banker's acceptance, maturing not more than one year after such time, or any overnight Federal Funds transaction that is issued or sold by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, (d) any repurchase agreement entered into with any commercial banking institution of the nature referred to in clause (c) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such commercial banking institution thereunder, (e) money market accounts or mutual funds which invest exclusively in assets satisfying the foregoing requirements, and (f) other short term liquid investments approved in writing by Agent.


" Cash Interest Rate " means a rate per annum equal to ten percent (10.0%).


" Change of Control " means the occurrence of any of the following:


(A)

any Credit Party or any Subsidiary of any Credit Party shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not a Credit Party or any such Subsidiary is the surviving corporation) another Person which results in such Person or any other Person (other than the then current holders) owning more than 50% of the outstanding common shares of or otherwise having voting control over any Credit Party, (ii) sell, assign, transfer, lease, license, convey or otherwise dispose of all or substantially all of the properties or assets of such Credit Party or such Subsidiary to another Person, (iii) reorganize, recapitalize or reclassify the Capital Stock of such Credit Party or such Subsidiary, or (iv) consummate a stock purchase agreement or other business combination (including a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock; or


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(B)

with respect to any Credit Party or any Subsidiary of any Credit Party, any Person shall make a purchase, tender or exchange offer that is accepted by the holders of more than fifty percent (50%) of the outstanding shares of Capital Stock or other voting securities of such Credit Party or Subsidiary thereof (not including any shares of Capital Stock or other voting securities of such entity held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer); or


(C)

with respect to Social, any "person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the 1934 Act), other than the Lenders, is or becomes the beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act), directly or indirectly, or record owner, of issued and outstanding voting securities having thirty-five percent (35%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors;


(D)

any change in the composition of the board of directors of Social such that the individuals who, as of the Closing Date, constituted the board of directors of Social cease for any reason to constitute at least a majority of the board of directors of Social; or


(E)

Social or any other Borrower at any time for any reason fails to own beneficially and of record, directly or indirectly, 100% of the issued and outstanding Capital Stock and other Equity Interests of any of its Subsidiaries.


" Closing " has the meaning set forth in Section 3.1.


" Closing Date " has the meaning set forth in Section 3.1.


" Closing Date Acquisition " means the acquisition of 100% of the stock of Steel Media by Social and the related transactions contemplated by the Closing Date Acquisition Documents, which shall close on the Closing Date in accordance with the terms of the Closing Date Acquisition Documents and applicable law.  Steel Media is a company based in the United States which has all of its employees, assets and operations in the United States.


" Closing Date Acquisition Agreement " means that certain Stock Purchase Agreement, dated as of the Closing Date, by and among Social, Steel Media and the Closing Date Sellers.


" Closing Date Acquisition Documents " means the Closing Date Acquisition Agreement, Employment Agreements, Steel Media Seller Note, Escrow Agreement, the Indemnification Escrow Agreement and all related agreements, documents and instruments executed and/or delivered in connection therewith.


" Closing Date Notes " has the meaning set for in Section 2.1(a).


" Closing Date Sellers " means Richard Steel.


" Code " means the Internal Revenue Code of 1986, as amended.


" Collateral " means the "Collateral" as defined in the Security Agreement and as defined in any Mortgage, along with any and all other Property and interests in Property and proceeds


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thereof now owned or hereafter acquired by any Credit Party, any of their respective Subsidiaries and any other Person who has granted a Lien to Agent, in or upon which a Lien is granted, purported to be granted, or now or hereafter exists in favor of any Lender, any Holder or the Agent for the benefit of the Agent, the Lenders and the Holders whether under this Agreement or under any other documents executed by any such Persons and delivered to the Agent.


" Collateral Assignment " has the meaning set forth in Section 8.11(d).


" Common Stock " has the meaning set forth in the Recitals.


" Compliance Certificate " means a certificate signed by a responsible officer of the Borrower Representative, in substantially the form attached hereto as Exhibit E and reasonably satisfactory to the Agent.


" Contingent Obligation " means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.


" Control " means the possession, directly or indirectly, of the power (i) to vote 10% or more of the Capital Stock having ordinary voting power for the election of directors of a Person or (ii) to direct or cause the direction of management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. " Controlling " and " Controlled " have meanings correlative thereto.


" Credit Party " means each Borrower and each Guarantor.


" Current Assets " means, with respect to any Person, all current assets of such Person as of any date of determination calculated in accordance with GAAP, but excluding cash, cash equivalents and debts due from Affiliates.


" Current Interest Rate " means a rate per annum equal to the sum of (a) the Cash Interest Rate plus (b) the PIK Interest Rate.


" Current Liabilities " means, with respect to any Person, all liabilities that should, in accordance with GAAP, be classified as current liabilities, and in any event shall include all Indebtedness payable on demand or within one year from any date of determination without any option on the part of the obligor to extend or renew beyond such year, all accruals for federal or other taxes based on or measured by income and payable within such year, but excluding the current portion of long-term debt required to be paid within one year.


" Current Ratio " means, with respect to any Person as of any date of determination, the ratio of (a) Current Assets to (b) Current Liabilities.


 " Custodian " has the meaning set forth in Section 10.1(c).



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" Default " means an event which, with notice or lapse of time or both, would become an Event of Default.


" Default Rate " means a rate equal to the lesser of (i) Current Interest Rate plus three percent (3.0%) per annum and (ii) the maximum rate of interest allowed under applicable law.


" Destruction " means any and all damage to, or loss or destruction of, or loss of title to, all or any portion of the Collateral (i) in excess of $100,000 in the aggregate for any Fiscal Year or (ii) that results, individually or in the aggregate, in a Material Adverse Effect.


" Diligence Date " has the meaning set forth in Section 7.14.


" DTC " has the meaning set forth in Section 2.11.


"EBITDA" means, as of any date of determination, for a specified period ending on such date of determination, an amount equal to (a) Net Income (or Loss), plus (b) in each instance to the extent deducted in the computation of Net Income and without duplication, (i) depreciation, amortization and other non-cash charges (including, but not limited to, imputed interest and deferred compensation but excluding non-cash charges that are an accrual or reserve for a cash expenditure or payment to be made in a future period) for such period, plus (ii) interest expense  for such period, plus (iii) fees paid during such period to Lenders pursuant to this Agreement, plus (iv) income taxes for such period, plus (v) non-recurring costs and expenses approved by Agent in its sole discretion; provided that, notwithstanding anything to the contrary set forth in this Agreement, for purposes of determining the EBITDA of Social and its Subsidiaries for any purpose under this Agreement, if and only to the extent that the EBITDA of Social on a standalone basis is negative for the respective period for which EBITDA is being calculated, the EBITDA of Social and its Subsidiaries for such period shall equal the sum of (i) the EBITDA of Steel Media on a standalone basis and (ii) the EBITDA of each other Subsidiary of Social with positive EBITDA for such period being measured; provided , further, the foregoing notwithstanding, EBITDA for the calendar months ended January 1, 2014 through September 30, 2014 and for the period from October 1, 2014 through the Closing Date shall be deemed as set forth on Schedule 1.1 hereto.


" Employee Benefit Plan " means any "employee benefit plan" as defined in Section 3(3) of ERISA (a) which is or was sponsored, maintained or contributed to by, or required to be contributed to by, any Credit Party or any Subsidiary of any Credit Party or ERISA Affiliates, or (b) with respect to which, any Credit Party or any Subsidiary of any Credit Party may have liability (contingent or otherwise).


"Employment Agreements" means those certain employment agreements between Social and each of Christopher Miglino, Erin De Ruggerio, Richard Steel, Chad Holsinger, and Adam Bigelow.


" Environmental Laws " means all applicable federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, " Hazardous Materials ") into the environment, the exposure of humans thereto, or otherwise relating to the


6



manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all regulatory authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices of violation or similar notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.


" Equity Interests " means Capital Stock and all warrants, options and other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock, whether or not such debt security includes the right of participation with Capital Stock).


" ERISA " means the Employee Retirement Income Security Act of 1974, as amended from time to time.


" ERISA Affiliate " means, as to any Credit Party or any Subsidiary of any Credit Party, any trade or business (whether or not incorporated) that is a member of a group which includes such Credit Party or Subsidiary and which is treated as a single employer under Section 414 of the Code.


" ERISA Event " means (a) the occurrence of a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30 day notice to the PBGC has been waived by regulation) with respect to an ERISA Affiliate; (b) the failure to meet the minimum funding standards of Sections 412 and 430 of the Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(c) of the Code) or the failure to make by its due date a required installment under Section 430(j) of the Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (d) the withdrawal by any Credit Party, any Subsidiary of any Credit Party or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability to any Credit Party, any Subsidiary of any Credit Party or any of their respective Affiliates pursuant to Section 4063 or 4064 of ERISA; (e) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (f) the imposition of liability on any Credit Party, any Subsidiary of any Credit Party or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (g) the withdrawal of any Credit Party, any Subsidiary of any Credit Party or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by any Credit Party, any Subsidiary of any Credit Party or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (h) the occurrence of an act or omission which could give rise to the imposition on any Credit Party, any Subsidiary of any Credit Party or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Sections 4975 or 4971 of the Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (i) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other


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than a Multiemployer Plan or the assets thereof, or against any Credit Party, any Subsidiary of any Credit Party or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (j) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Code) to qualify under Section 401(a) of the Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Code; or (k) the imposition of a Lien pursuant to Section 401(a)(29) or 430(k) of the Code or pursuant to ERISA with respect to any Pension Plan.


" Escrow Agreement " means that certain Escrow Agreement, dated the Closing Date by and between Social, the Closing Date Sellers and Lowenstein Sandler LLP, as the escrow agent.


" Event of Default " has the meaning set forth in Section 10.1.


" Event of Default Notice " has the meaning set forth in Section 10.2(a).


" Event of Default Redemption " has the meaning set forth in Section 10.2(a).


" Event of Default Redemption Notice " has the meaning set forth in Section 10.2(a).


" Event of Loss " means any Destruction to, or any Taking of, any asset or property of any Credit Party or any Subsidiary of any Credit Party.


" Excess Cash Flow " means, with respect to any Fiscal Quarter of the Borrowers, (a) EBITDA for such period, less, without duplication: (b)(i) scheduled principal payments with respect to Indebtedness of Social and its Subsidiaries actually paid in cash during such period, (ii) cash interest payments made by Social and its Subsidiaries during such period, (iii) Capital Expenditures made in cash during such period not financed under capital leases or other Indebtedness or with the proceeds of equity issuances, (iv) payments made in cash in respect of the Steel Media Earnout or the Steel Media Seller Note (but excluding payments made pursuant to Section 5(c) of the Steel Media Seller Note) during such period in accordance with and as permitted by the terms of this Agreement and the Seller Note and Earnout Subordination Agreement, in each case, to the extent not financed with the proceeds of Indebtedness or equity issuances and (v) cash payments for income taxes made by Social and its Subsidiaries during such period; provided that, with respect to the calculation of Excess Cash Flow for the fourth Fiscal Quarter of each Fiscal Year, EBITDA for purposes of this definition shall be increased (or decreased) by the aggregate amount, as evidenced by the audited financial statements delivered pursuant to Section 8.1(b) for such Fiscal Year, that EBITDA was understated (or overstated) in the three previous quarterly Excess Cash Flow calculations for such Fiscal Year.


" Excluded Taxes " has the meaning given such term in Section 2.6(a).


" Exempt Offering " means any of the following offerings by Social: (a) an offering of Equity Interests in Social, consummated at or before the Closing Date, to existing and prospective stockholders of Social such that the gross proceeds to Social from such offering will be between $4,000,000 and $7,000,000; (b) an offering of Equity Interests in Social to one or both of the strategic investors the identity of each of which has been disclosed to the Agent prior to the Closing Date; and (c) any offering of Equity Interests in Social or debt securities of any Credit Party the net proceeds of which are used to repay, in whole or in part, the Obligations.


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" Extraordinary Receipts " means any cash received by any Credit Party or any Subsidiary of any Credit Party outside the ordinary course of business (and not consisting of proceeds described in Sections 2.3(b)(i), (b)(ii), (b)(iii), (b)(iv) or (b)(vi)), including, without limitation, (a) foreign, United States, state or local tax refunds, (b) pension plan reversions, (c) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action, (d) proceeds of business interruption insurance, and (e) any purchase price adjustment, escrow proceeds or indemnification payments received in connection with any Acquisition (including, without limitation, the Closing Date Acquisition).


" Fee Letter " means that certain fee letter agreement, dated as of the Closing Date, made by Social to and in favor of Agent.


" Fiscal Quarter " means a fiscal quarter of any Fiscal Year of the Borrowers.


" Fiscal Year " means a fiscal year of the Borrowers ending December 31 of each year.


"Fixed Charge Coverage Ratio" means the ratio, as of any date of determination, of (a) EBITDA of Social and its Subsidiaries, less (i) Capital Expenditures of Social and its Subsidiaries made in cash during such period not financed under capital leases or other Indebtedness or with the proceeds of equity issuances, and (ii) cash payments made, or required to be made, by Social and its Subsidiaries for income taxes, to (b) the sum of cash payments made, or required to be made, during such period by Social and its Subsidiaries for (i) interest expense, (ii) cash dividends and distributions or Equity Interest redemptions, (iii) any portion of the Steel Media Earnout other than any portion of such payments of the Steel Media Earnout financed with the proceeds of Indebtedness or equity issuances, and (iv) scheduled principal payments on debt (including the Steel Media Seller Note other than such payments on the Steel Media Note financed with the proceeds of Indebtedness or equity issuances, but excluding mandatory prepayments of the Notes pursuant to Section 2.3(b)), in each instance, for the twelve (12) month period ending on such date; provided that for any measurement period ending prior to December 31, 2015, (i) unfinanced capital expenditures pursuant to clause (a)(i) above, (ii) cash payment required to be made for scheduled principal payment of the Obligations pursuant to clause (b)(iv) above, and (iii) cash payments for (x) income taxes pursuant to clause (a)(ii) above and (y) interest expense as set forth in clause (b)(i) above shall be calculated as set forth in Schedule1.1 hereto.


" Funds Flow Letter " means that certain letter agreement, in the form of Exhibit F attached hereto, by and between Social and the Agent.


" GAAP " means United States generally accepted accounting principles, consistently applied.


" Governmental Authority " means the government of the United States of America, any other nation or any political subdivision of any of the foregoing, whether state or local, and any agency, authority, commission (including, without limitation, the SBA), instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.



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" Guarantor " means each Person (including each Borrower with respect to the obligations of each other Borrower) which guarantees all or any part of the Obligations.


 " Hedging Obligations " means, with respect to any specified Person, the obligations of such Person under: (i) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements; (ii) other agreements or arrangements designed to manage interest rates or interest rate risk; and (iii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.


" Holder " means a holder of a Security.


" Indebtedness " of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, "capital leases" in accordance with GAAP) (other than trade payables entered into in the ordinary course of business), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, notes or similar instruments whether convertible or not, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all indebtedness referred to in clauses (i) through (v) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, (vii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vi) above, (viii) banker's acceptances, (ix) the balance deferred and unpaid of the purchase price of any property or services due more than three months after such property is acquired or such services are completed, (x) Hedging Obligations, (xi) obligations under convertible securities of such Person, and (xii) obligations, whether or not contingent, to purchase, redeem, retire, defease or otherwise acquire for value any of its own Capital Stock prior to the date that is 180 days after the final scheduled Maturity Date of the Notes, valued at, in the case of redeemable preferred Capital Stock, the greater of the voluntary liquidation preference and the involuntary liquidation preference of such Capital Stock plus accrued and unpaid dividends (for the avoidance of doubt, for purposes of this definition, no such obligations pursuant to the Put Right shall be included to the extent duplicative of any obligations under the Steel Media Seller Note otherwise included in this definition that are secured by the Put Right).  In addition, the term "Indebtedness" of any Credit Party or any Subsidiary of any Credit Party, as applicable, includes (a) all Indebtedness of others secured by a Lien on any assets of such Credit Party or such Subsidiary (whether or not such Indebtedness is assumed by such Credit Party or such Subsidiary), and (b) to the extent not otherwise included, the guarantee by any Credit Party or any Subsidiary of any Credit Party of any Indebtedness of any other Person.



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" Indemnification Escrow Agreement " means that certain Escrow Agreement, dated the Closing Date by and between Social, the Closing Date Sellers and Wells Fargo Bank, as the escrow agent.


" Insolvent " means, with respect to any Credit Party or any Subsidiary of any Credit Party, (i) the present fair saleable value in a non-liquidation context of such Credit Party's or such Subsidiary's assets is less than the amount required to pay such Credit Party's or such Subsidiary's total Indebtedness as applicable, (ii) such Credit Party or such Subsidiary is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) such Credit Party or such Subsidiary intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature or (iv) such Credit Party or such Subsidiary has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.


" Intellectual Property Rights " has the meaning provided in Section 7.12.


" Intellectual Property Security Agreements " means each trademark security agreement, each patent security agreement and each copyright security agreement, each in form and substance reasonably acceptable to the Agent, entered into from time to time, by and among the applicable Credit Party and the Agent.


"Interest Coverage Ratio" means the ratio, as of any date of determination, of (a) EBITDA of Social and its Subsidiaries, to (b) the sum of cash payments made, or required to be made, by Social and its Subsidiaries for interest expense, in each instance, for the twelve (12) month period ending on such date; provided that for any measurement period ending prior to December 31, 2015, cash payments for interest expense pursuant to clause (b) above shall be calculated as set forth in Schedule1.1 hereto.


" Interest Date " has the meaning provided in Section 2.2(a).


" Inventory " has the meaning provided in the UCC.


" Investment " means, with respect to any Person, any investment in another Person, whether by acquisition of any debt security or Equity Interest, by making any loan or advance, by becoming contingently liable in respect of obligations of such other Person or by making an Acquisition.


" Investors " has the meaning provided in the Registration Rights Agreement.


" Irrevocable Transfer Agent Instructions " has the meaning provided in Section 2.11.


" Issuance Date " has the meaning provided in Section 2.2(a).


" Key-Man Life Insurance " means key-man life insurance on the life of each of (i) Christopher Miglino and (ii) Richard Steel in the face amount of not less than $4,500,000 each.


" Late Charge " has the meaning provided in Section 2.4.



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" Lender " and " Lenders " has the meaning set forth in the introduction.


"Leverage Ratio" means, as of any date of determination, the ratio of (a) total Indebtedness of Social and its Subsidiaries on a consolidated basis as of such date of determination, to (b) EBITDA of Social and its Subsidiaries for the twelve (12)  month period then ended.


" Lien " means any mortgage, lien, pledge, security interest, conditional sale or other title retention agreement, charge or other security interest or encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement or any lease or license in the nature thereof, any option or other agreement to sell or give a security interest in.


" Material Adverse Effect " means any material adverse effect on the business, properties, assets, operations, the Collateral, results of operations, condition (financial or otherwise) of any Borrower or the Credit Parties and their Subsidiaries, taken as whole, or on the transactions contemplated hereby and by the other Transaction Documents, or on the authority or ability of any Credit Party or any Subsidiary of any Credit Party to fully and timely perform its obligations under any Transaction Document.


" Material Contract " means (i) the Closing Date Acquisition Documents, (ii) the Employment Agreements, and (iii) any other contract or other arrangement to which any Borrower or any of its Subsidiaries is a party (other than the Transaction Documents) for which breach, nonperformance, cancellation, termination or failure to renew could reasonably be expected to have a Material Adverse Effect.


" Maturity Date " means the earlier of (a) October 30, 2017, and (b) such earlier date as the unpaid principal balance of all outstanding Notes becomes due and payable pursuant to the terms of this Agreement and the Notes.


" Maximum Commitment " means $20,000,000.


" Mortgage " means a mortgage or deed of trust, in form and substance reasonably satisfactory to the Agent, as it may be amended, supplemented or otherwise modified from time to time.


" Multiemployer Plan " means any Employee Benefit Plan which is a "multiemployer plan" as defined in Section 3(37) of ERISA.


" National Exchange " means any of The New York Stock Exchange, the NASDAQ Global Market, the NASDAQ Global Select Market or the NASDAQ Capital Market.


" Net Income (Loss) " means, as of any date of determination, as determined in accordance with GAAP, when calculated for a specified period ending on such date of determination, the aggregate of the net income (loss) of Social and its Subsidiaries for such period (but excluding to the extent included therein any extraordinary gains or losses), provided , that , the effect of any change in accounting principles adopted by any Borrower after the date hereof shall be excluded.  For the purpose of this definition, net income excludes any gain or loss, together with any related provision for taxes for such gain or loss, realized upon the sale or


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other disposition of any assets that are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any Equity Interests of any Borrower, and any net income realized as a result of changes in accounting principles or the application thereof to any Borrower.


" New Borrower " has the meaning set forth in Section 8.24.


" New Guarantor " has the meaning set forth in Section 8.24.


" Notes " has the meaning set forth in Section 2.1(b).


" Obligations " means any and all obligations, liabilities and indebtedness, including without limitation, principal, interest (including, but not limited to, interest calculated at the Default Rate and post-petition interest in any proceeding under any Bankruptcy Law), Late Charges, Prepayment Premium, Yield Maintenance Premium, and other fees, costs, expenses and other charges and other obligations under the Warrant Documents and other Transaction Documents, of the Credit Parties to the Agent, the Holders and the Lenders or to any parent, affiliate or subsidiary of such Holders of any and every kind and nature, howsoever created, arising or evidenced and howsoever owned, held or acquired, whether now or hereafter existing, whether now due or to become due, whether primary, secondary, direct, indirect, absolute, contingent or otherwise (including, without limitation, obligations of performance), whether several, joint or joint and several, and whether arising or existing under written or oral agreement or by operation of law.


" Other Taxes " has the meaning set forth in Section 2.6(b).


" Outside Legal Counsel " means Sidley Austin LLP.


" PBGC " means the Pension Benefit Guaranty Corporation or any successor thereto.


" Participant Register " has the meaning set forth in Section 13.8.


" Pension Plan " means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Sections 412 and 430 of the Code or Section 302 of ERISA.


" Permitted Dispositions " means (i) sales of Inventory in the ordinary course of business, (ii) disposals of obsolete, worn out or surplus equipment in the ordinary course of business, (iii) the granting of Permitted Liens, (iv) the licensing of patents, trademarks, copyrights and other Intellectual Property Rights in the ordinary course of business consistent with past practice; and (v) Exempt Offerings.


" Permitted Indebtedness " means (i) Indebtedness outstanding under the Notes and the other Transaction Documents, (ii) Indebtedness outstanding as of the Closing Date as set forth on Schedule 7.8 , (iii) unsecured guaranties of the Credit Parties and their Subsidiaries in the ordinary course of business of the obligations of suppliers, customers and licensees of the Credit Parties and their Subsidiaries, (iv) Indebtedness of the Credit Parties and their Subsidiaries which may be deemed to exist pursuant to any unsecured guaranties with respect to surety and appeal bonds, performance bonds, bid bonds and similar obligations incurred in the ordinary course of business, (v) Indebtedness of the Credit Parties and their Subsidiaries in respect of netting


13



services, overdraft protections and otherwise in connection with deposit accounts in the ordinary course of business, (vi) Indebtedness of the Credit Parties consisting of the Steel Media Earnout and Steel Media Seller Note, in each case, to the extent subject to the terms and conditions of the Seller Note and Earnout Subordination Agreement, (vii) unsecured Indebtedness of the Credit Parties and their Subsidiaries in an aggregate amount not to exceed $100,000 at any time outstanding, and (viii) purchase money Indebtedness and Indebtedness incurred in connection with any capital lease transaction of any Credit Party or any Subsidiary of a Credit Party, provided the aggregate principal amount of all such Indebtedness at any time outstanding shall not exceed $100,000.


" Permitted Liens " means (i) Liens in favor of the Agent for the benefit of the Lenders and the Holders granted pursuant to any Security Document, (ii) Liens for unpaid taxes, assessments, or other governmental charges or levies that either (A) are not yet delinquent or (B) do not have priority over Agent's Liens, so long as in each case the underlying taxes, assessments, charges or levies are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, (iii) Liens securing judgments for the payment of money not constituting a Default or an Event of Default, (iv) Liens outstanding as of the Closing Date as set forth on Schedule 8.6 , provided that any such Lien only secures the Indebtedness that it secures on the Closing Date, (v) the interests of lessors under operating leases and licensors under license agreements in each case entered into in the ordinary course of business of the Credit Parties and their Subsidiaries, (vi) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers or suppliers, in each case incurred in the ordinary course of business and not in connection with the borrowing of money and either (A) for amounts that are not yet delinquent or (B) for amounts that are no more than 30 days overdue that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserves or appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, (vii) Liens incurred in the ordinary course of business in connection with workers' compensation and other unemployment insurance, or to secure the performance of tenders, surety and appeal bonds, bids, leases, government contracts, trade contracts and other similar obligations (exclusive of obligations for the payment of borrowed money), in each case so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof, (viii) rights of setoff or bankers' liens upon deposits of cash in favor of banks or other depository institutions, solely to the extent incurred in connection with the maintenance of such deposit accounts in the ordinary course of business, (ix) easements, reservations, rights of way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances affecting real property in a manner not materially or adversely affecting the value or use of such property, (x) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods, and (xi) Liens securing Permitted Indebtedness described in clause (viii) of the definition of "Permitted Indebtedness" so long as such Liens encumber only those assets acquired with the proceeds of such Indebtedness.


" Permitted Redemption " means the redemption of Notes permitted pursuant to Section 2.3(a).


" Permitted Redemption Amount " has the meaning set forth in Section 2.3(a)(i).



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" Permitted Redemption Date " means the date on which the Borrowers have elected to redeem the Notes in accordance with Section 2.3(a).


" Permitted Redemption Notice " has the meaning set forth in Section 2.3(a)(i).


" Person " means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.


" PIK Amount " has the meaning set forth in Section 2.2(b).


" PIK Interest Rate " means for the period commencing on the Closing Date through the last day of the calendar month during which financial statements for December 31, 2014 are delivered, four percent (4.00%) per annum; and


(b)

thereafter, the PIK Interest Rate shall equal the applicable PIK Interest Rate in effect from time to time determined as set forth below based upon the applicable Leverage Ratio then in effect pursuant to the appropriate column under the table below:


Leverage Ratio

PIK Interest Rate

3.00

< 3.00 and 2.50

< 2.50

4.00%

3.00%

2.00%


The PIK Interest Rate shall be adjusted from time to time upon delivery to Agent of the monthly financial statements for the last fiscal month of each Fiscal Quarter required to be delivered pursuant to Section 8.2 hereof accompanied by a written calculation of the Leverage Ratio certified on behalf of the Borrowers by a Responsible Officer of the Borrower Representative as of the end of the fiscal month for which such financial statements are delivered.  If such calculation indicates that the PIK Interest Rate shall increase or decrease, then on the first day of the calendar month following the date of delivery of such financial statements and written calculation, the PIK Interest Rate shall be adjusted in accordance therewith; provided, however, that if an Event of Default shall have occurred, then, at Agent's election, effective as of the date on which such Event of Default occurs and continuing through the date as of which such Event of Default is waived, if any, the PIK Interest Rate shall equal the highest PIK Interest Rate specified in the pricing table set forth above.


In the event that any financial statement or Compliance Certificate delivered pursuant to Section 8.2 is inaccurate, and such inaccuracy, if corrected, would have led to the imposition of a higher PIK Interest Rate for any period than the PIK Interest Rate applied for that period, then (i) the Borrower Representative shall immediately deliver to Agent a corrected financial statement and a corrected Compliance Certificate for that period, (ii) the PIK Interest Rate shall be determined based on the corrected Compliance Certificate for that period, and (iii) the accrued additional interest owing as a result of such increased PIK Interest Rate for that period shall be immediately capitalized and added to the outstanding principal balance of the Notes. This paragraph shall not limit the rights of Agent or the Lenders with respect to Section 2.2 and


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Article X hereof, and shall survive the termination of this Agreement until the payment in full in cash of the aggregate outstanding principal balance of the Notes.


" Plan " means any Multiemployer Plan or Pension Plan.


"Prepayment Premium" means the premium to be paid in connection with prepayments of the Notes pursuant to Sections 2.3(a), 2.3(b)(i), 2.3(b)(iii), 2.3(b)(iv) or 2.3(b)(vii) (solely with respect to such prepayments pursuant to Section 2.3(b)(iv), to the extent such excess required to be applied as a prepayment relates to a prepayment under Sections 2.3(b)(i), 2.3(b)(iii) or 2.3(b)(iv)).  Such prepayment premium shall be equal to, with respect to such prepayment to be made or made during any period set forth in the table below, the percentage set forth beside such period in such table of the aggregate outstanding amount of the Obligations then being prepaid:


Period

 

Prepayment Premium

Closing Date through and including first anniversary of Closing Date

 

4.0%

After first anniversary of Closing Date through and including second anniversary of Closing Date

 

3.0%

Thereafter

 

None


" Principal Market " means both of the OTC Bulletin Board and the OTC Markets — OTCQB tier, or if the Common Stock becomes listed on a National Exchange, then from and after such date, such National Exchange.


" Principal Only Assignment " has the meaning set forth in Section 13.8.


" Proceeding " has the meaning set forth in Section 7.15.


" Property " means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock.


" Proposed Borrowing " has the meaning set forth in Section 2.1(b).


" Purchase Price " has the meaning set forth in Section 3.1.


" Put Right " has the meaning ascribed to such term in the Closing Date Acquisition Agreement.


" Registrable Securities " has the meaning set forth in the Registration Rights Agreement.


" Registration Rights Agreement " has the meaning set forth in the Recitals.


" Regulation D " has the meaning set forth in the Recitals.



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" Related Parties " of any Person means such Person's Affiliates or any of its respective partners, directors, agents, employees and controlling persons.


" Required Holders " means at any time the Holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding.


" Responsible Officer " means the chairman of the board of managers, the chief executive officer or the president of the applicable Borrower, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants or delivery of financial information, the chief financial officer or the treasurer of the applicable Borrower, or any other officer having substantially the same authority and responsibility.


" Sarbanes-Oxley " has the meaning set forth in Section 7.24.


" SBA " means the Small Business Administration.


" SBA Side Letter " means that certain letter agreement, dated as of the Closing Date, by and among the Borrowers, and VPC SBIC I, LP, a Delaware limited partnership.


" SBIC " means a small business investment company licensed under the SBIC Act.


" SBIC Act " means the Small Business Investment Act of 1958, as amended.


" SBIC Holder " means VPC SBIC I, LP, a Delaware limited partnership, and any other holder of Notes that is an SBIC.


" SBIC Regulations " means the SBIC Act, and the regulations issued by the SBA thereunder, codified at Title 13 of the Code of Federal Regulations ("13 C.F.R."), 107 and 121, as amended.


" Schedules " has the meaning set forth in ARTICLE 7.


" SEC " has the meaning set forth in the Recitals.


" SEC Documents " has the meaning set forth in Section 7.31.


"Securities" means the Notes, the Warrants, the guarantees by each of the Guarantors of all or any part of the Obligations and, to the extent issued, the Warrant Shares.


" Security Agreement " has the meaning set forth in the Recitals.


" Security Documents " means the Security Agreement, the Intellectual Property Security Agreements, the Mortgages (if any), the Collateral Assignment, and all other instruments, documents and agreements delivered by any Credit Party or any equityholder of any Credit Party in order to grant to Agent a Lien on any real, personal or mixed Property of any Credit Party or such other equityholder as security for the Obligations.



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" Seller Note and Earnout Subordination Agreement " means, that certain Subordination Agreement, dated as of the Closing Date, by and among the Credit Parties, the Agent and the Closing Date Sellers.


" Senior Leverage Ratio " means, as of any date of determination, the ratio of (a) total Indebtedness of Social and its Subsidiaries on a consolidated basis as of such date of determination less Indebtedness that has been subordinated to the Obligations on terms and conditions acceptable to the Agent to (b) EBITDA of Social and its Subsidiaries for the twelve (12) month period then ended.


" Steel Media " has the meaning set forth in the preamble.


" Steel Media Earnout " means the contingent deferred consideration payable by the Credit Parties to the Closing Date Sellers as an "earnout" pursuant to the provisions of Section 2.5 of the Closing Date Acquisition Agreement, as in effect on the date hereof.


" Steel Media Seller Note " means that certain promissory note, dated the Closing Date, made by Social payable to the Closing Date Sellers in the original principal amount of $2,500,000, issued pursuant to the Closing Date Purchase Agreement.


" Subsidiaries " has the meaning set forth in Section 7.1.


" Taking " means any taking of any property of any Credit Party or any of its Subsidiaries or any portion thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use of such assets or any portion thereof, by any Governmental Authority, civil or military (i) in excess of $100,000 in the aggregate for any Fiscal Year or (ii) that results, either individually or in the aggregated,  in a Material Adverse Effect.


" Taxes " means any and all current or future (a) foreign, federal, state or local income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, parking, unclaimed property/escheatment, natural resources, severance, stamp, occupation, occupancy, ad valorem, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax of any kind whatsoever, (b) any liability for the payment of amounts of the type described in clause (a) hereof as a result of being at any time a transferee of, or a successor in interest to, any person, and (c) any interest, penalties or additions to tax or additional amounts (whether disputed or not) in respect of the foregoing.


" Tax Return " means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.


" Trading Day " means any day on which the Common Stock is traded on the Principal Market; provided that "Trading Day" shall not include any day on which the Principal Market is open for trading for less than 4.5 hours.


" Transaction Documents " has the meaning set forth in Section 7.2.


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" UCC " has the meaning set forth in Section 7.13.


" Warrants " has the meaning set forth in the Recitals.


" Warrant Documents " means, collectively, the Warrants, the certificates representing the Warrant Shares, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions and any other agreement, document or certificate relating to any of the foregoing.


" Warrant Shares " means those shares of Common Stock or other securities for which the Warrants, and any accrued and unpaid dividends thereon, may be exercised pursuant to the terms of the Warrants.


" Yield Maintenance Premium " shall be an amount, calculated immediately prior to the applicable redemption or prepayment of the Notes, equal to the sum of all scheduled interest (determined with reference to the interest rate then in effect) in respect of the unredeemed Notes immediately prior to the applicable redemption or prepayment for the period from the date of such redemption to the date set forth in clause (a) of the definition of the Maturity Date.  The foregoing amount shall be calculated by Agent and shall be conclusive and binding on the Borrowers (absent manifest error).


Section 1.2

Terms Generally .  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words " include ", " includes " and " including " shall be deemed to be followed by the phrase " without limitation ".  The word " will " shall be construed to have the same meaning and effect as the word " shall ".  Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words " herein ", " hereof " and " hereunder ", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words " asset " and " property " shall be construed to have the same meaning and effect and to refer to any right or interest in or to assets and properties of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.  References in this Agreement to " determination " by the Agent include good faith estimates by the Agent (in the case of quantitative determinations) and good faith beliefs by the Agent (in the case of qualitative determinations).



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Section 1.3

Accounting and Other Terms .  Unless otherwise expressly provided herein, each accounting term used herein shall have the meaning given it under GAAP applied on a basis consistent with those used in preparing the financial statements delivered to Agent pursuant to Section 8.2.  Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Accounting Standards Codification 825-10 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Credit Party or any Subsidiary of any Credit Party at "fair value".


Section 1.4

Borrower Representative .  Each Borrower hereby designates and appoints Social as its representative and agent on its behalf (in such capacity, the " Borrower Representative ") for the purposes of delivering certificates, including Compliance Certificates, and other instructions with respect to the disbursement of the proceeds of the Notes, giving and receiving all other notices and consents hereunder or under any of the other Transaction Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Transaction Documents.  Borrower Representative hereby accepts such appointment.  Agent, each Lender and each Holder may regard any notice or other communication pursuant to any Transaction Document from Borrower Representative as a notice or communication from all Borrowers.  Each warranty, covenant, agreement and undertaking made on behalf of a Borrower by Borrower Representative shall be deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as if the same had been made directly by such Borrower.


ARTICLE II

AUTHORIZATION OF ISSUE


Section 2.1

Senior Secured Notes .


(a)

The Borrowers have authorized the issuance to the Lenders of senior secured notes in the aggregate initial principal amount of $9,000,000 on the Closing Date, to be dated the date of issue thereof, to mature on the Maturity Date, to bear interest as provided in Section 2.2 below and to be in the form of Exhibit A hereto (together with any notes issued in substitution therefor or replacement thereof, in each case as amended, restated, supplemented or otherwise modified from time to time, the " Closing Date Notes ").


(b)

The Borrowers have authorized the issuance to the Lenders and/or one or more other Persons designated by the Agent of additional senior secured notes in an aggregate principal amount not to exceed $11,000,000 to be issued from time to time subsequent to the Closing Date, to mature on the Maturity Date, to bear interest as provided in Section 2.2 below and to be in the form of Exhibit A hereto (each such note, together with any note issued in substitution therefor or replacement thereof, in each case as amended, restated, supplemented or otherwise modified from time to time, the " Additional Notes "; the Additional Notes and Closing Date Notes are referred to herein, collectively, as the " Notes ").  The Borrower Representative shall deliver to Agent a written request setting forth the request for a borrowing pursuant to the issuance of an Additional Note or Additional Notes (each, a " Proposed Borrowing ") not later than noon, Chicago time, on the twentieth (20 th ) day prior to the proposed borrowing date, which


20



the Agent on behalf of itself and the Lenders may accept or reject in its sole discretion, provided that acceptance of such request shall not be unreasonably withheld.  Each such request shall (i) be irrevocable by the Borrower Representative, (ii) specify the amount of the Proposed Borrowing (which shall be in increments of not less than $1,000,000), (iii) specify the proposed borrowing date for such Proposed Borrowing and (iv) specify wire transfer instructions in accordance with such Proposed Borrowing shall be funded.  Upon receipt of any such request, the Agent shall promptly notify the Borrower Representative of its acceptance or rejection of such borrowing request and, if accepted, designate a Lender or Lenders, in Agent's sole discretion (but subject to such Lender or Lenders agreement to fund all or its respective portion of such Proposed Borrowing), to fund the Proposed Borrowing on the proposed borrowing date in accordance with the terms of such borrowing request; provided that if Agent designates a Person to fund the Proposed Borrowing that is not then a Lender under this Agreement, such Person shall, prior to the funding of such Proposed Borrowing, enter into an agreement, in form and substance acceptable to the Agent, to be joined as a Lender under this Agreement and to be bound by the terms and conditions hereof.  The funding of any such Proposed Borrowing shall be subject to the satisfaction of the funding conditions set forth in Section 5.2 .


(c)

Social has authorized the issuance to the Lenders on the Closing Date of the Warrants to purchase an aggregate of 2,900,000 shares of Common Stock, to be in the form of Exhibit B hereto.  The term "Warrants" as used herein shall include each such warrant delivered pursuant to any provision of this Agreement and each such warrant delivered in substitution or exchange for, or otherwise in respect of, any other Warrant pursuant to any such provision.


(d)

The Borrowers shall repay the outstanding principal balance of the Notes in installments on the dates and in the respective percentages shown below of the then outstanding aggregate principal balance of the Notes:


Date of Payment

Percentage

December 31, 2014

2.5%

March 31, 2015

2.5%

June 30, 2015

2.5%

September 30, 2015

2.5%

December 31, 2015

5.0%

March 31, 2016

5.0%

June 30, 2016

5.0%

September 30, 2016

5.0%

December 31, 2016

10.0%

March 31, 2017

10.0%

June 30, 2017

10.0%

September 30, 2017

10.0%

October 30, 2017

100.0%

 


The final scheduled installment of principal of the Notes (which shall include all PIK Amounts) shall, in any event, be in an amount equal to the entire remaining principal balance of the Notes, which shall be paid in full in cash on the Maturity Date (unless accelerated in accordance with Section 10.2 or redeemed or prepaid in accordance with Section 2.3).


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Section 2.2

Interest .  The Borrowers shall pay interest on the unpaid principal amount of the Notes at the rates, time and manner set forth below:


(a)

Rate of Interest.   Each Note shall bear interest on the unpaid principal amount thereof from the date issued through the date such Note is paid in full in cash (whether upon final maturity, by redemption, prepayment, acceleration or otherwise) at the Current Interest Rate (subject to the conditions to application of the PIK Amount set forth in clause (b) below).  Interest on each Note shall be computed on the basis of a 360-day year and actual days elapsed and, subject to Section 2.2(b), shall be payable monthly, in arrears, on the first day of each calendar month (each, an " Interest Date ") during the period beginning on the date such Note is issued (the " Issuance Date ") and ending on, and including, the date on which the Obligations under such Note are paid in full.  Each Interest Date shall be considered the last day of an accrual period for U.S. federal income tax purposes.


(b)

Interest Payments.   On each Interest Date, the Borrowers shall (i) pay to the Agent, for the account of the Holders of the Notes, in cash, monthly installments of interest (in arrears) at the Cash Interest Rate on the then outstanding principal under the Notes (and interest on each Note shall also be payable in cash at any such other time the Notes become due and payable (whether by acceleration, redemption or otherwise)) and (ii) accrue and capitalize interest accruing at the PIK Interest Rate to the outstanding principal of the Notes (the " PIK Amount "), which increase shall be made to all outstanding Notes on a ratable basis.  Any payment of interest that accrues at the Cash Interest Rate due and owing on any Note shall be made by cash only by wire transfer of immediately available funds to the Agent, for the account of the record Holders of such Notes on the applicable Interest Date.


(c)

Default Rate.   Upon the occurrence of any Event of Default, the Notes shall bear interest (including post-petition interest in any proceeding under any Bankruptcy Law) on the unpaid principal amount thereof at the Default Rate from the date of such Event of Default through and including the date such Event of Default is cured or waived.  In the event that such Event of Default is subsequently cured or waived, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure or waiver; provided that interest as calculated and unpaid at the Default Rate during the continuance of such Event of Default shall continue to be due to the extent relating to the days after the occurrence of such Event of Default through and including the date on which such Event of Default is cured or waived. Interest at the Default Rate shall be due and payable, in cash, upon demand or, at the election of the Agent (which election may be made in the Agent's sole discretion), (i) in cash on each Interest Date in accordance with Section 2.2(b) with respect to the portion thereof at the Cash Interest Rate or (ii) as additional PIK Amount to increase the then outstanding principal on the Notes with respect to the difference between (x) interest accruing at the Default Rate and (y) interest accruing at the Cash Interest Rate, which increase shall be made to all outstanding Notes on a ratable basis.


(d)

Savings Clause.   In no contingency or event shall the interest rate charged pursuant to the terms of this Agreement or the Notes exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such a court determines that the Holders of the Notes have received interest hereunder in excess of the highest applicable rate, the amount of such excess interest shall be applied against the principal amount then outstanding under the Notes to the extent


22



permitted by applicable law, and any excess interest remaining after such application shall be refunded promptly to the Borrowers.  For the avoidance of doubt, the Default Rate interest shall only be charged as allowed under SBA Regulation §107.855(g).


Section 2.3

Redemptions, Payments and Warrant Exercise Payments .


(a)

Permitted Redemption.


(i)

Borrowers may, at their option, elect to pay to the Holders of the Notes the Permitted Redemption Amount (as defined below), on the Permitted Redemption Date, by redeeming the aggregate unpaid principal amount of all Notes, in whole or in part (a " Permitted Redemption "), including in connection with a refinancing, in full, of the Obligations. On or prior to the date which is the sixtieth (60 th ) calendar day prior to the proposed Permitted Redemption Date, the Borrower Representative shall deliver written notice (the " Permitted Redemption Notice ") to the Holders of the Notes stating (i) that Borrowers elect to redeem pursuant to a Permitted Redemption and (ii) the proposed Permitted Redemption Date.  The " Permitted Redemption Amount " shall be equal to (A) the aggregate principal amount of the Notes being redeemed, (B) all accrued and unpaid interest with respect to such principal amount and all accrued and unpaid fees, (C) accrued and unpaid Late Charges with respect to such Permitted Redemption Amount, (D) the Prepayment Premium and (E) all other amounts due under the Transaction Documents. The Credit Parties acknowledge and agree that the Prepayment Premium represents bargained for consideration in exchange for the right and privilege to redeem the Notes.


(ii)

A Permitted Redemption Notice delivered pursuant to this subsection shall be irrevocable (provided, that, if such Permitted Redemption is to occur in connection with a refinancing in full in cash of the Notes and all other Obligations or a Change of Control or sale of the company that will result in the payment in full in cash of the Notes and all other Obligations, then such Permitted Redemption Notice may provide that the Permitted Redemption is conditioned upon the closing of such transaction).  If the Borrowers elect to redeem pursuant to a Permitted Redemption under Section 2.3(a), then the Permitted Redemption Amount which is to be paid to the Holders of the Notes on the Permitted Redemption Date shall be redeemed by the Borrowers on the Permitted Redemption Date, and the Borrowers shall pay to the Holders of the Notes on the Permitted Redemption Date, by wire transfer of immediately available funds, an amount in cash equal to the Permitted Redemption Amount.


(b)

Mandatory Prepayments.


(i)

On the date of receipt by any Credit Party of any net cash proceeds in excess of $100,000 in the aggregate in any Fiscal Year from any Asset Sales (other than any Permitted Dispositions), the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 100% of such net cash proceeds plus the amount of any Prepayment Premium, as applicable.


(ii)

(x) On the date of receipt by any Credit Party or any of its Subsidiaries, or the Agent as loss payee, of any net cash proceeds from any Destruction or Taking (without giving regard to clauses (i) or (ii) of each such definition), including insurance proceeds, the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 100% of such net cash proceeds (except to the extent any Credit Party, (A)


23



within ninety (90) days after such Destruction or Taking uses such proceeds to restore the property that is the subject of a Destruction or acquires new property to replace any property that is the subject of a Taking or (B) within such ninety (90) day period, enters into a binding commitment to so restore or replace such property that is the subject of a Destruction or Taking and subsequently completes such restoration or replacement within ninety (90) days of entering into such binding commitment); and (y) on the date of receipt by any Borrower or any of its Subsidiaries, or the Agent as assignee or beneficiary, of any proceeds from the Key-Man Life Insurance, Borrowers shall prepay (and direct Agent to cause the prepayment of) the Notes as set forth in Section 2.3(d) in an aggregate amount equal to the lesser of (A) the outstanding Obligations, and (B) 100% of such proceeds.


(iii)

On the date of receipt by any Borrower or any of its Subsidiaries of any net cash proceeds from a capital contribution to, or the issuance of any Equity Interests of, any Credit Party or any of its Subsidiaries (other than pursuant to any employee stock or stock option compensation plan and Exempt Offerings described in clauses (a) and (b) of the definition thereof), the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 100% of such net cash proceeds, plus the amount of any Prepayment Premium.


(iv)

On the date of receipt by any Borrower or any of its Subsidiaries of any net cash proceeds from the incurrence of any Indebtedness of any Borrower or any of its Subsidiaries (other than with respect to Permitted Indebtedness), the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 100% of such net cash proceeds, plus the amount of any Prepayment Premium.


(v)

No later than the third Business Day following the date of receipt by any Borrower or any of its Subsidiaries of any Extraordinary Receipts, the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 100% of such Extraordinary Receipts, provided that no payment shall be required pursuant to this Section 2.3(b)(v) unless the amount of Extraordinary Receipts received exceeds $100,000 in the aggregate.


(vi)

No later than (i) sixty (60) days after the last day of each of the first three Fiscal Quarters of each Fiscal Year of the Borrowers (but in any event, if earlier, on or before the fifteenth (15 th ) day after the date on which Borrowers' unaudited financial statements have been finalized for such Fiscal Quarter) and (ii) ninety (90) days after the last day of the fourth Fiscal Quarter of each Fiscal Year of the Borrowers (but in any event, if earlier, on or before the fifteenth (15 th ) day after the date on which Borrowers' audited financial statements have been finalized for such Fiscal Quarter), commencing with the Fiscal Quarter ending December 31, 2014, the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 50% of the Excess Cash Flow for such Fiscal Quarter; provided, the foregoing notwithstanding, the aggregate amount of such prepayments in respect of the twelve months ending on the first anniversary of the Closing Date shall not exceed the  amount as may be necessary to ensure compliance with SBA Regulation §107.845.


(vii)

Concurrently with any prepayment of the Notes pursuant to this Section 2.3(b), the Borrower Representative shall deliver to the Agent a certificate of an authorized officer thereof demonstrating the calculation of the amount of the applicable proceeds or, as applicable, Excess Cash Flow and Prepayment Premium.  In the event that Borrowers shall subsequently determine that the actual amount of such proceeds or Excess Cash Flow exceeded


24



the amount set forth in such certificate (including as a result of the conversion of non-cash proceeds into cash), the Borrowers shall promptly make an additional prepayment of the Notes in an amount equal to such excess (or applicable percentage thereof), and the Borrower Representative shall concurrently therewith deliver to the Agent a certificate of an authorized officer thereof demonstrating the derivation of such excess.


(c)

Waiver of Mandatory Prepayments.   Anything contained in Section 2.3(b) to the contrary notwithstanding, in the event the Borrowers are required to make any mandatory prepayment (a " Waivable Mandatory Prepayment ") of the Notes, not less than three (3) Business Days prior to the date (the " Required Prepayment Date ") on which the Borrowers are required to make such Waivable Mandatory Prepayment, the Borrower Representative shall notify the Agent of the amount of such prepayment, and the Agent shall promptly thereafter notify each Holder holding an outstanding Note of the amount of such Holder's pro rata share of such Waivable Mandatory Prepayment and such Holder's option to refuse such amount.  Each such Holder may exercise such option by giving written notice to the Borrower Representative and the Agent of its election to do so on or before the first Business Day prior to the Required Prepayment Date (it being understood that any Holder which does not notify the Borrower Representative and the Agent of its election to exercise such option on or before the first Business Day prior to the Required Prepayment Date shall be deemed to have elected, as of such date, not to exercise such option).  On the Required Prepayment Date, Borrowers shall pay to the Agent the amount of the Waivable Mandatory Prepayment, which amount shall be applied in an amount equal to that portion of the Waivable Mandatory Prepayment payable to those Holders that have elected not to exercise such option, to prepay the Notes of such Holders.


(d)

Application of Mandatory Prepayments; Prepayment Premium. All mandatory prepayments made pursuant to Section 2.3(b) and not waived pursuant to Section 2.3(c) shall be made to the Holders on a pro rata basis with respect to the outstanding Notes and shall be accompanied by the Prepayment Premium, if applicable.  All such prepayments of principal shall be applied to the Notes to the then remaining principal installments under the Notes in inverse order of maturities.


(e)

Warrant Exercise Payment. The Notes shall be deemed prepaid (which such payment shall be applied as set forth in Section 2.3(d)) in the amount of the Aggregate Exercise Price (as such term is defined in the Warrants), or applicable portion thereof, to the extent a Holder exercises a Warrant and pays the Aggregate Exercise Price, or a portion thereof, through a reduction of the principal amount outstanding under the Notes in accordance with Section 2(a)(ii) of the Warrants.



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Section 2.4

Payments .  Whenever any payment of cash is to be made by any Borrower to any Person pursuant to the Notes or other Transaction Document, such payment shall be made in lawful money of the United States of America by a check drawn on the account or accounts of such Borrower and sent via overnight courier service to such Person at such address as previously provided to the Borrower Representative in writing (which address, in the case of each of the Lenders, shall initially be as set forth on the Schedule of Lenders attached hereto); provided that (i) any Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Borrower Representative with prior written notice setting out such request and such Holder's wire transfer instructions and (ii) the Borrowers may elect to make a payment of cash via wire transfer of immediately available funds in accordance with wire transfer instructions provided by each Holder upon request therefor.  Whenever any amount expressed to be due by the terms of any Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full in cash, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.  Any amount due under the Transaction Documents (other than principal and interest, if the same are already accruing interest at the Default Rate), which is not paid when due shall result in a late charge being incurred and payable by the Borrowers in an amount equal to the Default Rate from the date such amount was due until the same is paid in full in cash (" Late Charge ").  Such Late Charge shall continue to accrue post-petition in any proceeding under any Bankruptcy Law.


Section 2.5

Dispute Resolution .  Except as otherwise provided herein, in the case of a dispute as to the determination of any amounts due and owing pursuant to a redemption under Section 2.3 or otherwise or any other similar or related amount, the Borrower Representative shall submit the disputed determinations or arithmetic calculations via facsimile within ten (10) Business Days of receipt, or deemed receipt, of the applicable notice of dispute to the Agent.  If the Agent and the Holders and the Borrower Representative are unable to agree upon such determination or calculation within ten (10) Business Days of such disputed determination or arithmetic calculation being submitted to the Agent, then the Borrower Representative shall submit via facsimile the disputed determinations or arithmetic calculations to an independent outside national accounting firm specified by Agent within ten (10) Business Days after the Borrower Representative's receipt of written notice from Agent indicating the name and address of the accounting firm selected by Agent for such determination.  The Borrowers, at the Borrowers' sole expense, shall cause such accounting firm to perform the determinations or calculations and notify the Borrowers and the Agent of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations.  Such accounting firm's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.



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Section 2.6

Taxes .


(a)

Any and all payments by or on behalf of the Credit Parties hereunder and under any Transaction Document shall be made, free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings that are or would be applicable to the Agent, the Holders or the Lenders, and all liabilities with respect thereto, excluding (x) income taxes imposed on the net income of the Agent, a Holder or a Lender and (y) franchise taxes imposed on the net income of the Agent, a Holder or a Lender, in each case by the jurisdiction under the laws of which the Agent, such Holder or such Lender is organized or qualified to do business or a jurisdiction or any political subdivision thereof in which the Agent, such Holder or such Lender engages in business activity other than activity arising from the Agent, such Holder or such Lender having executed this Agreement and having enjoyed its rights and performed its obligations under this Agreement or any Transaction Document (the taxes described in the foregoing clauses (x) and (y), " Excluded Taxes ").  If any Credit Party (or the Agent under Section 12.13 hereof) must deduct any Taxes from or in respect of any sum payable hereunder or under any other Transaction Document to the Agent, a Holder or a Lender, (x) the sum payable by such Credit Party to the Agent, a Holder or a Lender shall be increased by the amount (an " additional amount ") necessary so that, after making all required deductions (including deductions applicable to additional sums payable under this Section 2.6) by such Credit Party and/or the Agent, the Agent, such Holder and such Lender shall receive an amount equal to the sum it would have received had no such deductions been made except for Excluded Taxes, (y) such Credit Party shall make such deductions and (z) such Credit Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law and, within thirty (30) days after such payment is made, such Credit Party shall deliver to the Agent an original or certified copy of a receipt evidencing such payment or other evidence of such payment reasonably satisfactory to Agent.


(b)

The Borrowers will pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp, stamp duty, registration, court, intangible, documentary, recording, filing or similar Taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under any Transaction Document, or from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to or in connection, this Agreement or any Transaction Document that are or would be applicable to the Holders, the Agent or the Lenders (" Other Taxes ").


(c)

The Borrowers agree to indemnify the Agent, each Holder and the Lenders for the full amount of Taxes (other than Excluded Taxes) and Other Taxes paid by the Agent, such Holder or such Lender and any liability (including penalties, interest and expenses (including reasonable attorney's fees and expenses)) arising therefrom or with respect thereto in respect of or in connection with any payment or amount payable to the Agent, any Holder or any Lenders under this Agreement or any Transaction Document, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability prepared by the Agent, such Holder or such Lender, absent manifest error, shall be final conclusive and binding for all purposes.  Such indemnification shall be made within thirty (30) days after the date the Agent, such Holder or such Lender makes written demand therefor.  The Borrowers shall have the right to receive that portion of any refund of any Taxes (other than Excluded Taxes) and Other Taxes received by the Agent, a Holder or a Lender for which any Borrower has previously paid any additional amount


27



or indemnified the Agent, such Holder or such Lender and which leaves the Agent, the Holder or the Lender, after the Borrowers' receipt thereof, as determined by the Agent, such Holder or such Lender in its reasonable discretion, in no better or worse financial position than if no such Taxes or Other Taxes had been imposed or additional amounts or indemnification paid to the Holder; provided , that the Borrowers agree, upon the request of such Agent, Lender or Holder, to repay the amount paid over to the Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Agent, Lender or Holder to the extent such Agent, Lender or Holder is required to repay any such refund to such Governmental Authority. This subsection shall not be construed to require the Agent, any Lender or any Holder to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Borrower or any other Person.


Section 2.7

Reissuance .


(a)

Transfer.   If any Note is to be transferred, the Holder shall surrender such Note to the Borrower Representative, whereupon the Borrowers will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with this Section 2.7), registered as the Holder may request, representing the outstanding principal being transferred by the Holder and, if less than the entire outstanding principal is being transferred, a new Note (in accordance with this Section 2.7) to the Holder representing the outstanding principal not being transferred.


(b)

Lost, Stolen or Mutilated Note.   Upon receipt by the Borrower Representative of evidence reasonably satisfactory to the Borrower Representative of the loss, theft, destruction or mutilation of any Note and (i) in the case of loss, theft or destruction, upon delivery of an unsecured indemnity agreement reasonably satisfactory to the Borrower Representative ( provided, however, that if the Holder is an institutional investor, the affidavit of an authorized partner or officer of such Holder setting forth the circumstances with respect to such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no indemnity agreement or other security shall be required), and (ii) in the case of mutilation, upon surrender and cancellation of the mutilated Note, the Borrowers shall execute and deliver to the Holder a new Note (in accordance with this Section 2.7) representing the outstanding principal.


(c)

Note Exchangeable for Different Denominations.   The Notes are exchangeable, upon the surrender thereof by the Holder at the principal office of the Borrower Representative, for a new Note or Notes (in accordance with this Section 2.7) in principal amounts of at least $250,000) representing in the aggregate the outstanding principal of the surrendered Note, and each such new Note will represent such portion of such outstanding principal as is designated by the Holder at the time of such surrender.


(d)

Issuance of New Notes.   Whenever the Borrowers are required to issue a new Note pursuant to the terms of this Agreement, such new Note (i) shall be of like tenor with the Note being replaced, (ii) shall represent, as indicated on the face of such new Note, the principal remaining outstanding (or, in the case of a new Note being issued pursuant to paragraph (a) or (b) of this Section 2.7, the principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the principal remaining outstanding under the Note being replaced immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of the Note being replaced, (iv) shall have the


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same rights and conditions as the Note being replaced, and (v) shall represent accrued interest on the principal and Late Charges of the Note being replaced, from the Issuance Date.


Section 2.8

Register .  The Borrower Representative shall maintain at its principal executive office (or such other office or agency of the Borrower Representative as it may designate by notice to each holder of Notes), a register for the Notes in which the Borrower Representative shall record the name and address of the Person in whose name the Notes have been issued (including the name and address of each transferee) and the principal amount of Notes held by such Person.  The Borrower Representative shall keep the register open and available at all times during business hours for inspection of any Holder or its legal representatives.  Social shall maintain a register for the Warrants, and shall cause the transfer agent for the Common Stock to maintain a register for the Warrant Shares, in each case which shall record the name and address of the Person in whose name the Warrants or Warrant Shares, as applicable, have been issued (including the name and address of each transferee) and the number of Warrants and/or Warrant Shares, as applicable, held by such Person.  Social shall, or shall cause the transfer agent for the Common Stock to, as applicable, keep the register open and available for inspection by any Lender or its legal representatives on the same terms that it makes such information available to any other holder of shares of Common Stock.


Section 2.9

Maintenance of Register .  Notwithstanding anything to the contrary contained herein, the Notes are registered obligations and the right, title, and interest of each Lender and its assignees in and to such Notes shall be transferable only upon notation of such transfer in the Register.  The Notes shall only evidence a Lender's or its assignee's right, title and interest in and to the related Notes, and in no event is any such Note to be considered a bearer instrument or obligation.  This Section 2.9 shall be construed so that the Notes are at all times maintained in "registered form" within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations promulgated thereunder.


Section 2.10

Consideration for Notes and Warrants .  The Lenders, Holders and the Borrowers acknowledge and agree that the fair market value of, and the consideration paid for, the Notes issued hereunder on the Closing Date is $9,000,000, which shall be allocated (i) $1,500,000 with respect to the Warrants and (ii) $7,500,000 with respect to the Closing Date Notes.  The Lenders, Holders and the Borrowers shall file their respective federal, state and local tax returns in a manner which is consistent with such valuation and allocation and shall not take any action or position (whether in preparation of tax returns, financial statements or otherwise) which is inconsistent with any of the above.



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Section 2.11

Transfer Agent Instructions .  Social shall issue irrevocable instructions to the transfer agent for the Common Stock in the form attached hereto as Exhibit G (the " Irrevocable Transfer Agent Instructions "), and any subsequent transfer agent, to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (" DTC "), registered in the name of each Holder of Warrants or its respective nominee(s), for the Warrant Shares in such amounts as specified from time to time by each such Holder to Social upon exercise of the Warrants, and shall cause its counsel to promptly deliver to the transfer agent for the Common Stock one or more blanket opinions to the effect that the removal of the 1933 Act Legend from the certificates or other instruments representing Warrant Shares (and the issuance of Warrant Shares not subject to the 1933 Act Legend) under the circumstances set forth in the Irrevocable Transfer Agent Instructions may be effected under the 1933 Act.  Social warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 2.11 and stop transfer instructions to give effect to the provisions of Section 6.4 hereof will be given by Social to the transfer agent for the Common Stock and that the Warrant Shares shall otherwise be freely transferable on the books and records of Social as and to the extent provided in this Agreement.  Social acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders of the Warrants by vitiating the intent and purpose of the transactions contemplated hereby.  Accordingly, Social acknowledges that the remedy at law for a breach of its obligations under this Section 2.11 will be inadequate and agrees, in the event of a breach or threatened breach by Social of the provisions of this Section 2.11, that the Holders of the Warrants shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.


Section 2.12

Compensation for Increased Costs and Taxes .  In the event that any Holder shall reasonably determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Holder with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Holder (or its applicable lending office) to any additional Taxes with respect to this Agreement or any of the other Transaction Documents or any of its obligations hereunder or thereunder or any payments to such Holder (or its applicable lending office) of principal, interest, Late Charges, Prepayment Premium, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Holder; or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Holder or its obligations hereunder; and the result of any of the foregoing is to increase the cost to such Holder of holding Notes hereunder or to reduce any amount received or receivable by such Holder with respect thereto; then, in any such case, the Borrowers shall promptly pay to such Holder, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Holder in its reasonable discretion shall determine) as may be necessary to


30



compensate such Holder for any such increased cost or reduction in amounts received or receivable hereunder.  Such Holder shall deliver to the Borrower Representative (with a copy to the Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Holder under this Section 2.12, which statement shall be conclusive and binding upon all parties hereto absent manifest error.


Section 2.13

Capital Adequacy Adjustment .  In the event that any Holder shall have determined that the adoption, effectiveness, phase-in or applicability after the Closing Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, reserve requirements, or similar requirements, or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Holder with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Holder or any corporation controlling such Holder as a consequence of, or with reference to, such Holder's Notes or other obligations hereunder with respect to the Notes to a level below that which such Holder or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Holder or such controlling corporation with regard to capital adequacy), then from time to time, within five (5) Business Days after receipt by the Borrower Representative from such Holder of the statement referred to in the next sentence, the Borrowers shall pay to such Holder such additional amount or amounts as will compensate such Holder or such controlling corporation on an after-tax basis for such reduction.  Any such Holder shall deliver to the Borrower Representative (with a copy to the Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Holder under this Section 2.13, which statement shall be conclusive and binding upon all parties hereto absent manifest error.


ARTICLE III

PURCHASE AND SALE OF CLOSING DATE NOTES


Section 3.1

Closing .  In consideration for each Lender's payment of its pro rata share of the Purchase Price (as defined below), which is set forth opposite such Lender's name in column five (5) of the Schedule of Lenders attached hereto, (i) the Borrowers shall issue and sell to each Lender, and each Lender severally, but not jointly, agrees to purchase from the Borrowers on the Closing Date (as defined below), a principal amount of Closing Date Notes as is set forth opposite such Lender's name in column three (3) on the Schedule of Lenders attached hereto and (ii) Social shall issue to each Lender on the Closing Date, a Warrant to purchase that number of shares of Common Stock set forth opposite such Lender's name in column (4) of Section 1 (Closing Date Notes) of the Schedule of Lenders attached hereto.  The closing (the " Closing ") of the purchase of the Closing Date Notes and Warrants by the Lenders shall occur at the offices of Katten Muchin Rosenman LLP, 525 West Monroe Street, Suite 1900, Chicago, Illinois 60661.  The date and time of the Closing (the " Closing Date ") shall be 10:00 a.m., Chicago time, on the date hereof, subject to notification of satisfaction (or waiver) of the conditions to the Closing set forth in Section 5.1 below (or such later date as is mutually agreed to by the Borrowers and the Agent). The purchase price of the Closing Date Notes to be purchased by the Lenders at the Closing shall be equal to $9,000,000 (the " Purchase Price "). On the Closing Date, (i) each Lender shall pay its pro rata share of the Purchase Price (less the


31



amounts withheld by it pursuant to Section 8.22) to the Borrowers for the Closing Date Notes and Warrants to be issued and sold to such Lender at the Closing, by wire transfer of immediately available funds in accordance with the Funds Flow Letter, and (ii) the Borrowers shall deliver to each Lender (A) the Closing Date Notes (in the denominations as such Lender shall have requested prior to the Closing) which such Lender is then purchasing, duly executed on behalf of the Borrowers and registered in the name of such Lender or its designee and (B) the Warrants (in the denominations as such Lender shall have requested prior to the Closing) which such Lender is then purchasing, duly executed on behalf of Social and registered in the name of such Lender or its designee.


ARTICLE IV

INTENTIONALLY OMITTED


ARTICLE V

CONDITIONS TO EACH LENDER'S OBLIGATION
TO PURCHASE


Section 5.1

Closing .  The obligation of each Lender hereunder to purchase the Closing Date Notes and the Warrants at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions:


(a)

(i) The Borrowers shall have executed and delivered to each Lender (x) the Closing Date Notes (in such denominations as such Lender shall have requested prior to the Closing) being purchased by such Lender at the Closing pursuant to this Agreement and (y) the Warrants being purchased by such Lender at the Closing pursuant to this Agreement, and (ii) the Credit Parties shall have executed and delivered to the Agent each of the other Transaction Documents to which it is a party (other than the Transaction Documents contemplated to be executed and delivered to the Agent pursuant to the other subsections of this Section 5.1).


(b)

The Borrowers shall have executed and delivered, or caused to be delivered, to the Agent:


(i)

evidence satisfactory to the Agent that the Borrowers shall pay to the Agent on the Closing Date all fees, costs, expenses and other amounts due and owing thereon under this Agreement and the other Transaction Documents, including, without limitation, the fees set forth in the Fee Letter that are due and payable on the Closing Date and all costs and expenses of the Agent (including attorneys' fees); and


(ii)

the Funds Flow Letter.


(c)

The Borrowers shall have executed (to the extent applicable) and/or delivered, or caused to be delivered, to the Agent:


(i)

deposit account control agreements and securities account control agreements, in form and substance satisfactory to the Agent, executed by the applicable banks, in each case as the Agent may request;



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(ii)

certificates evidencing any Pledged Equity (as defined in the Security Agreement) pledged to the Agent pursuant to the Security Agreement, together with duly executed in blank, undated stock or unit powers attached thereto; and


(iii)

such other documents relating to the transactions contemplated by this Agreement as the Agent or its counsel may reasonably request.


(d)

[Reserved.]


(e)

Each Credit Party shall have executed and/or delivered, or caused to be delivered, to the Agent:


(i)

a certificate evidencing its incorporation, formation or organization and good standing in its jurisdiction of incorporation, formation or organization issued by the Secretary of State of such jurisdiction, as of a date reasonably proximate to the Closing Date;


(ii)

a certificate evidencing its foreign qualification and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which such Person is qualified to conduct business and failure to so qualify would cause a Material Adverse Effect, as of a date reasonably proximate to the Closing Date;


(iii)

a certificate as to the fact that no action has been taken with respect to any merger, consolidation, liquidation or dissolution of such Person, or with respect to the sale of substantially all of its assets, nor is any such action pending or contemplated;


(iv)

a certified copy of such Person's certificate or articles of incorporation, formation or organization, as certified by the Secretary of State of its jurisdiction of incorporation, formation or organization, as of a date reasonably proximate to the Closing Date; and


(v)

a certificate, executed by the secretary of such Person and dated the Closing Date, as to (A) the resolutions consistent with Section 7.2 as adopted by such Person's board of directors (or similar governing body) in a form reasonably acceptable to the Agent, (B) such Person's articles or certificate of incorporation (or similar document), each as in effect at the Closing, (C) such Person's bylaws (or similar document), each as in effect at the Closing, and (D) no action having been taken by such Person or its stockholders, members, directors, managers or officers in contemplation of any amendments to items (A), (B), or (C) listed in this Section 5.1(e), as certified in the form attached hereto as Exhibit H .


(f)

The Borrowers shall have obtained and delivered to Agent:


(i)

the opinions of Outside Legal Counsel, dated the Closing Date.


(ii)

all governmental, regulatory and third party consents and approvals, if any, necessary for the sale and issuance of the Closing Date Notes and the Warrants at the Closing;


(iii)

searches of UCC filings in the jurisdictions of formation or incorporation of each Credit Party, the jurisdiction of the chief executive offices of each Credit


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Party and each jurisdiction where any Collateral is located or where a filing would need to be made in order to perfect the Agent's security interest in the Collateral, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens;


(iv)

such information in form, scope and substance reasonably satisfactory to the Agent regarding environmental matters relating to all real property owned, leased, operated or used by the Credit Parties as of the Closing Date;


(v)

a certificate from a Responsible Officer of the Borrower Representative in form and substance satisfactory to the Agent, supporting the conclusions that, after giving effect to the transactions contemplated by the Transaction Documents, the Credit Parties and their Subsidiaries are not Insolvent;


(vi)

certificates from Borrowers' insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to this Agreement is in full force and effect, together with endorsements naming the Agent, for the benefit of the Holders, as additional insured and lender's loss payee thereunder;


(vii)

unaudited consolidated and consolidating financial statements of Social and its Subsidiaries as of, and for the seven (7) months ended, July 31, 2014, which financial statements shall be certified by a Responsible Officer of the Borrower Representative as being true and correct and fairly presenting in accordance with GAAP, the financial position and results of operations of Social and its Subsidiaries, subject to normal year-end adjustments and absence of footnote disclosure; and


(viii)

a duly completed and executed Size Status Declaration on SBA Form 480 and a Non-Discrimination Certificate on SBA Form 652 and the information concerning the Borrowers required to permit each SBIC Holder to complete the Portfolio Financing Report on SBA Form 1031; (b) a written certification from the Borrowers regarding their intended use of proceeds from the sale and issuance of the Closing Date Notes; and (c) a list after giving effect to the transactions contemplated by the Transaction Documents of the name and title of each officer of each Borrower;


(g)

Each Credit Party shall have authorized the filing of UCC financing statements for each appropriate jurisdiction as is necessary, in the Agent's sole discretion, to perfect the Agent's security interest in the Collateral and the filing of the Intellectual Property Security Agreements in the U.S. Patent and Trademark Office and the U.S. Copyright Office, as applicable.


(h)

Each Credit Party shall have executed and delivered, or caused to be delivered, to the Agent, with respect to each leasehold interest in real property owned by such Person as of the Closing Date, such agreements and documents relating to such leasehold interests as the Agent or its counsel may reasonably request.


(i)

[Reserved.]


(j)

After giving effect to the purchase of the Notes and Warrants, the consummation of the Closing Date Acquisition and the payment of all fees, costs and expenses in


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connection therewith, there shall not be less than $2,000,000 of cash on the balance sheet of Social.


(k)

Social shall have delivered to such Lender a letter (or other evidence acceptable to Agent) from the transfer agent for the Common Stock certifying as to the number of shares of Common Stock outstanding as of a date within five (5) days of the Closing Date.


(l)

Social shall have delivered to the Agent a copy of the Irrevocable Transfer Agent Instructions, which instructions shall have been delivered to and acknowledged in writing by the transfer agent for the Common Stock.


(m)

The Common Stock (i) shall be designated for quotation or listed on the Principal Market and (ii) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market, if any.


(n)

Social shall have reserved a number of authorized, unissued and unreserved shares of Common Stock equal to the maximum number of Warrant Shares issuable upon the exercise of the Warrants (without regard to any limitations or restrictions on the exercise thereof) solely for the purpose of effecting the exercise of the Warrants.


(o)

Since December 31, 2013, there shall have been no change which has had or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.


(p)

The representations and warranties of the Credit Parties shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date), and the Credit Parties shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Credit Parties at or prior to the Closing Date.  The Agent shall have received certificates, executed by a Responsible Officer of the Borrower Representative, dated the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Agent, in the form attached hereto as Exhibit I .


(q)

No Default or Event of Default shall have occurred and be continuing or would result from the issuance of the Closing Date Notes or Warrants at the Closing.



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Section 5.2

Additional Notes .  The obligation of any Lender (or any other Person designated by the Agent) hereunder to purchase any Additional Notes subsequent to the Closing Date is subject to the satisfaction, at on or before the closing date for the purchase thereof, of each of the following conditions:


(a)

The Borrowers shall have executed and delivered to such Person an Additional Note (in such denominations as such Person shall have requested prior to the purchase) in the principal amount being purchased by such Person on such date pursuant to this Agreement.


(b)

Each representation and warranty by any Credit Party contained herein and in each other Transaction Document shall be true and correct in all material respects (without duplication of any materiality qualifiers) as of such date (subject to such updates to the Schedules, if any, as are approved by the Agent in its reasonable discretion), except to the extent that such representation or warranty expressly relates to an earlier date, including the Closing Date (in which event such representations and warranties shall be true and correct in all material respects (without duplication of any materiality qualifiers) as of such earlier date).


(c)

No Default or Event of Default shall have occurred and be continuing or would result after giving effect to such purchase.


(d)

After giving effect to such purchase, the aggregate outstanding principal amount of the Notes would not exceed the Maximum Note Balance.


(e)

The Borrower Representative shall have furnished to the Agent a certificate of the chief financial officer of the Borrower Representative demonstrating on a pro forma basis compliance with the covenants set forth in Section 8.1 hereof after giving effect to such purchase.


(f)

The Credit Parties shall have paid or reimbursed the Agent and the Lenders for all costs and expenses required to be paid or reimbursed by them in accordance with Section 8.22 hereof.


The request by the Borrower Representative and acceptance by the Borrowers of the proceeds of any Proposed Borrowing under the Additional Notes made after the Closing Date shall be deemed to constitute, as of the date thereof, (i) a representation and warranty by the Borrowers that the conditions in this Section 5.2 have been satisfied and (ii) a reaffirmation by each Credit Party of the granting and continuance of Agent's Liens, on behalf of the Lenders and the Holders, pursuant to the Transaction Documents.



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ARTICLE VI

LENDER'S REPRESENTATIONS AND WARRANTIES


Each Lender represents and warrants (severally and not jointly) with respect to only itself that:


Section 6.1

No Public Sale or Distribution .  Such Lender is acquiring the Notes, the Warrants and any Warrant Shares for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in a manner that would violate the 1933 Act, except pursuant to sales registered or exempted under the 1933 Act; provided, however , that by making the representations herein, such Lender does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of any of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.  Such Lender does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.


Section 6.2

Investor Status .  Such Lender is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D.


Section 6.3

No Governmental Review .  Such Lender understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities, nor have such authorities passed upon or endorsed the merits of the offering of the Securities.


Section 6.4

Transfer or Resale .  Such Lender understands that, except as provided in the Registration Rights Agreement, the Notes, the Warrants and any Warrant Shares issued pursuant thereto have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred except pursuant to an effective registration statement or an exemption from registration; provided , however , that the Securities may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Securities and such pledge of Securities shall not be deemed by Social to be a transfer, sale or assignment of the Securities hereunder, and no Lender effecting such a pledge of Securities shall be required to provide the Borrowers with any notice thereof or otherwise make any delivery to the Borrowers pursuant to this Agreement or any other Transaction Document, including this Section 6.4.


Section 6.5

Legends .  Such Lender understands that the certificates or other instruments representing the Notes, the Warrants and the certificates or other instruments representing Warrant Shares, except as set forth below, shall bear a restrictive legend in substantially the following form (the " 1933 Act Legend "):


THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION


37



STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES, SUBJECT TO COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.


Section 6.6

Residency .  Each Lender is a resident of that jurisdiction specified below its address on the Schedule of Lenders attached hereto.


ARTICLE VII

CREDIT PARTIES' REPRESENTATIONS AND WARRANTIES


As an inducement to the Agent and the Lenders to enter into this Agreement and to consummate the transactions contemplated hereby, each of the Credit Parties jointly and severally represents and warrants to each of the Agent and the Lenders that each and all of the following representations and warranties (as supplemented by the disclosure schedules delivered to the Agent and the Lenders contemporaneously with the execution and delivery of this Agreement (the " Schedules ")) are true and correct as of the Closing Date.  The Schedules shall be arranged by the Borrowers in paragraphs corresponding to the sections and subsections contained in this ARTICLE 7.


Section 7.1

Organization and Qualification .  Each Credit Party and each of their respective subsidiaries (which, for purposes of this Agreement, means any entity in which a Credit Party, directly or indirectly, owns at least 50% of the Capital Stock or other Equity Interests) (" Subsidiaries ") are entities duly incorporated or organized and validly existing in good standing under the laws of the jurisdiction in which they are formed or incorporated, and have the requisite power and authorization to own their properties, carry on their business as now being conducted, enter into the Transaction Documents to which they are party and carry out the transactions contemplated thereby.  Each of the Credit Parties and their respective Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have, either individually or in the aggregate, a Material Adverse Effect.  Except as set forth on Schedule 7.1, (i) Social has no Subsidiaries and (ii) all Capital Stock or other equity or similar interests of the Subsidiaries is directly or indirectly owned by Social.



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Section 7.2

Authorization; Enforcement; Validity .  Each of the Credit Parties has the requisite power and authority to enter into and perform its obligations under this Agreement, the Notes, the SBA Side Letter, the Fee Letter, the Security Agreement, the Mortgages (if any), the Intellectual Property Security Agreements, the other Security Documents, the Subordination Agreements, the Warrant Documents and each of the other agreements, documents and certificates entered into by the parties hereto, or delivered by any Credit Party, from time to time in connection with the transactions contemplated by this Agreement (collectively, the " Transaction Documents ") and to issue the Securities in accordance with the terms hereof and thereof.  The execution and delivery of the Transaction Documents by the Credit Parties have been duly authorized by each of the Credit Parties' respective board of directors (or other governing body) and the consummation by the Credit Parties of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Securities by the Borrowers, have been duly authorized by the respective Credit Party's board of directors (or other governing body), and (other than the filing with the SEC of a Form D and one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement and other than filings with "Blue Sky" authorities as required thereby) no further filing, consent, approval or authorization is required by any Credit Party, its board of directors (or other governing body) or its stockholders or other equityholders.  This Agreement and the other Transaction Documents have been duly executed and delivered by each of the Credit Parties thereto, and constitute the legal, valid and binding obligations of each of the Credit Parties party thereto, enforceable against each of such Credit Parties in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.


Section 7.3

Issuance of Securities .  The Notes are duly authorized and, upon issuance in accordance with the terms hereof, shall be validly issued and free from all taxes, liens and charges with respect to the issue thereof.  The Warrants are duly authorized and, upon issuance in accordance with the terms hereof, shall be free from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof with the holders being entitled to all rights accorded to a holder of Common Stock to the extent provided for in the Warrants. Upon the issuance of the Warrant Shares pursuant to the terms of the Warrants, the Warrant Shares will be duly authorized, validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof, with each holder thereof being entitled to all rights accorded to a holder of Common Stock.  Assuming the truth and accuracy of the representations and warranties of each Lender set forth in ARTICLE 6 of this Agreement, the issuance by the Borrowers, as applicable, of the Notes and the Warrants to the Lenders is, and any issuance of the Warrant Shares upon exercise of the Warrants will be, exempt from registration under the 1933 Act.


Section 7.4

No Conflicts .  Except as set forth in Schedule 7.4, the execution, delivery and performance of the Transaction Documents by the Credit Parties party thereto and the consummation by the Credit Parties of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes, the Warrants and the Warrant Shares by the Borrowers) will not (i) result in a violation of any Credit Party's certificate or articles of incorporation or bylaws or other governing documents, or the terms of any Capital Stock or other Equity Interests of any of the Credit Parties or their respective Subsidiaries; (ii) conflict with, or constitute a breach or default (or an event which, with notice or lapse of time or both, would become a breach or default) under, or give to others any rights of termination, amendment,


39



acceleration or cancellation of, any material agreement, indenture or instrument to which any Credit Party or any Subsidiary of any Credit Party is party; (iii) result in any "price reset" or other material change in or other modification to the terms of any Indebtedness, Equity Interests or other securities of any Credit Party or any Subsidiary of any Credit Party; or (iv) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, (A) to the knowledge of such Credit Party, without independent investigation, any Environmental Laws applicable to the real property it occupies under any lease, (B) federal and state securities laws or (C) the rules and regulations of the Principal Market applicable to any Credit Party or any Subsidiary of any Credit Party or by which any property or asset of any Credit Party or any Subsidiary of any Credit Party is bound or affected).


Section 7.5

Consents .  No Credit Party is required to obtain any consent, authorization, approval, order, license, franchise, permit, certificate or accreditation of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or authority or any other Person (including, without limitation, any holder of any Equity Interest in Social) in order for such Person to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case in accordance with the terms hereof or thereof (other than (w) the filing with the SEC of (i) a Form D and one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement and (ii) any filings on Form 8-K required pursuant to the 1934 Act, (x) filings with "Blue Sky" authorities as required thereby, (x) filings required pursuant to the 1933 Act or the 1934 Act, (y) filings required by the Security Documents and (z) as set forth on Schedule 7.5).  All consents, authorizations, approvals, orders, licenses, franchises, permits, certificates or accreditations of, filings and registrations which the Credit Parties are required to make or obtain pursuant to the preceding sentence have been obtained or effected on or prior to the Closing Date, and each Credit Party is unaware of any facts or circumstances which might prevent any of the Credit Parties from making, obtaining or effecting any of the registration, application or filings pursuant to the preceding sentence.  Except as set forth in Schedule 7.5, Social is not in violation of any requirements for trading on the Principal Market and has no knowledge of the occurrence of any facts which would reasonably lead to the suspension of the Common Stock by the Principal Market in the foreseeable future.


Section 7.6

Subsidiary Rights .  Except as set forth on Schedule 7.6 and as otherwise permitted in any Transaction Document, each Credit Party has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital and other equity securities of its Subsidiaries as owned by such Credit Party.


Section 7.7

Equity Capitalization .  As of the Closing Date, the authorized Capital Stock and the issued and outstanding Equity Interests of each Credit Party and each Subsidiary of each Credit Party is as set forth on Schedule 7.7.  All of such outstanding shares of Capital Stock or other Equity Interests of each Credit Party and each Subsidiary of each Credit Party have been duly authorized, validly issued and are fully paid and nonassessable and are owned by the Persons and in the amounts set forth on Schedule 7.7.  Except as set forth on Schedule 7.7: (i) none of the Capital Stock or other Equity Interest in any Credit Party or any Subsidiary of any Credit Party is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by such Credit Party or such Subsidiary; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any Capital Stock or other Equity Interest in any Credit Party or any Subsidiary of any Credit


40



Party, or contracts, commitments, understandings or arrangements by which any Credit Party or any Subsidiary of any Credit Party is or may become bound to issue additional Capital Stock or other Equity Interest in any Credit Party or any Subsidiary of any Credit Party or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any Capital Stock or other Equity Interest in any Credit Party or any Subsidiary of any Credit Party; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of any Credit Party or any Subsidiary of any Credit Party or by which any Credit Party or any Subsidiary of any Credit Party is or may become bound; (iv) there are no financing statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with any Credit Party or any Subsidiary of any Credit Party; (v) there are no agreements or arrangements under which any Credit Party or any Subsidiary of any Credit Party is obligated to register the sale of any of its securities under the 1933 Act; (vi) there are no outstanding securities or instruments of any Credit Party or any Subsidiary of any Credit Party which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which any Credit Party or any Subsidiary of any Credit Party is or may become bound to redeem a security of any Credit Party or any Subsidiary of any Credit Party; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Notes; (viii) none of the Credit Party or their Subsidiaries has any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement and (ix) none of the Credit Parties or their Subsidiaries has any liabilities or obligations required to be disclosed in its financial statements (including the footnotes thereto).  Prior to the Closing, the Credit Parties have provided to the Agent true, correct and complete copies of (i) each Credit Parties' and Subsidiary's certificate or articles of incorporation (or other applicable governing document), as amended and as in effect on the Closing Date, and (ii) each Credit Party's and each of its Subsidiary's bylaws, as amended and as in effect on the Closing Date (or other applicable governing document).  Schedule 7.7 identifies all outstanding securities convertible into, or exercisable or exchangeable for, shares of Capital Stock or other Equity Interests in any Credit Party or any Subsidiary of any Credit Party and the material rights of the holders thereof in respect thereto.


Section 7.8

Indebtedness and Other Contracts .  Except as disclosed on Schedule 7.8, no Credit Party and no Subsidiary of any Credit Party (i) has any outstanding Indebtedness, (ii) is a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, or (iii) is in violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness or any contract, agreement or instrument entered into in connection therewith that could reasonably be expected to result in, either individually or in the aggregate,  a Material Adverse Effect.


Section 7.9

Off Balance Sheet Arrangements .  Except as set forth in Schedule 7.9, there is no transaction, arrangement, or other relationship between any of the Borrowers or any of their Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by Social in its 1934 Act filings and is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.



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Section 7.10

Ranking of Notes .  No Indebtedness of any of the Credit Parties or any of their Subsidiaries will rank senior to or pari passu with the Notes in right of payment or collectability, whether with respect to payment of redemptions, interest, damages or upon liquidation or dissolution or otherwise (other than Permitted Indebtedness, which Permitted Indebtedness may be pari passu with the Notes in right of payment).


Section 7.11

Title .  Except as described on Schedule 7.11, each of the Credit Parties and their Subsidiaries has (i) good and marketable title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), (iii) valid licensed rights in (in the case of licensed interests in Intellectual Property Rights), and (iv) good and marketable title to (in the case of all other personal property) all of its real property and other properties and assets owned by it which are material to the business of such Credit Party or such Subsidiary, in each case free and clear of all liens, encumbrances and defects, other than Permitted Liens.  Any real property and facilities held under lease by any Credit Party or any Subsidiary of any Credit Party are held by it under valid, subsisting and enforceable leases.


Section 7.12

Intellectual Property Rights .  Each of the Credit Parties and their Subsidiaries owns or possesses adequate and valid rights to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (" Intellectual Property Rights ") that are necessary to conduct its respective businesses as now conducted, and (i) with respect to Intellectual Property owned by any Credit Party and the right, title and interest of such Credit Party in any license or other right to use any Intellectual Property, such Intellectual Property Rights are free and clear of all liens, encumbrances and defects other than Permitted Liens, and (ii) with respect to underlying intellectual property licensed by any Credit Party ("Licensed Intellectual Property"), to the knowledge of such Credit Party, the Licensed Intellectual Property is free and clear of all liens, encumbrances and defects other than Permitted Liens.  No Intellectual Property Rights of any Credit Party or any Subsidiary of any Credit Party have expired or terminated, or are expected to expire or terminate within five (5) years from the Closing Date, except with respect to Licensed Intellectual Property under licenses that have expected expiration dates within such five-year period and that the applicable Credit Party expects to be able to renew following such expiration date in order to have the benefit of use of such Licensed Intellectual Property for the duration of such five-year period or that the applicable Credit Party believes it can replace with other intellectual property either owned or available to be licensed for such duration by such Credit Party.  Except as described on Schedule 7.12, (i) none of the Credit Parties or their Subsidiaries has any knowledge of any infringement, misappropriation, dilution or other violation by any Credit Party or any Subsidiary of any Credit Party of Intellectual Property Rights of other Persons; (ii) none of the Credit Parties or their Subsidiaries has any knowledge of any infringement, misappropriation, dilution or other violation by any other Persons of the Intellectual Property Rights of any Credit Party or any Subsidiary of any Credit Party; (iii) there is no claim, action or proceeding pending or, to the knowledge of each of the Credit Party, threatened in writing, against any Credit Party or any Subsidiary of any Credit Party regarding its Intellectual Property Rights or the Intellectual Property Rights of other Persons; and (iv) none of the Credit Parties or their Subsidiaries is aware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings.  Each of the Credit Parties and their Subsidiaries has taken and is taking commercially reasonable security measures, consistent with industry standards, to maintain and protect the secrecy and confidentiality of its


42



Intellectual Property Rights in underlying intellectual property that such Credit Party or Subsidiary owns and regards as secret and confidential or licenses and is contractually obligated to treat as secret and confidential.  For the sake of clarity, the Credit Parties and their Subsidiaries do not regard as being secret or confidential any intellectual property underlying any open source licenses or otherwise available in the public domain through no breach by any of them of any obligations to protect the secrecy and confidentiality thereof.


Section 7.13

Creation, Perfection, and Priority of Liens .  The Security Documents are effective to create in favor of the Agent, for the benefit of the Holders and the Lenders a legal, valid, binding, and (upon the filing of the appropriate UCC financing statements and Intellectual Property Security Agreement and the recording of the Mortgages, if any) enforceable perfected and, subject to Permitted Liens, as applicable, first priority security interest and Lien in the Collateral described therein as security for the obligations under the Notes and other Transaction Documents to the extent that a legal, valid, binding, and enforceable security interest and Lien in such Collateral may be created under applicable law, including without limitation, with respect to personal property, the Uniform Commercial Code as in effect in any applicable jurisdiction (" UCC ") and any other applicable governmental agencies.


Section 7.14

Absence of Certain Changes .  Except as disclosed in Schedule 7.14, since December 31, 2013 (the " Diligence Date "), no event has occurred that, along or together with other events, has had or could reasonably be expected to have a Material Adverse Effect.  Except as disclosed in Schedule 7.14, since the Diligence Date, the Credit Parties and each of their Subsidiaries have not (i) declared or paid any dividends, (ii) sold any assets (other than the sale of Inventory in the ordinary course of business) or (iii) made capital expenditures, individually or in the aggregate, in excess of $100,000.  None of the Credit Parties or their Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy law nor does any Credit Party or any Subsidiary of any Credit Party have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.  None of the Credit Parties or their Subsidiaries intends to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).  None of the Credit Parties or their Subsidiaries has any knowledge of any facts or circumstances which leads it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within three (3) years from the Closing Date.  None of the Credit Parties or their Subsidiaries is, as of the Closing Date, and after giving effect to the transactions contemplated hereby to occur at the Closing, will be, Insolvent.


Section 7.15

Absence of Litigation .  Except as set forth in Schedule 7.15, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency (including, without limitation, the SEC, self-regulatory organization or other governmental body) (in each case, a " Proceeding ") pending or, to the knowledge of any Credit Party, threatened in writing against or affecting any Credit Party, any Subsidiary of any Credit Party or any of the Credit Parties' or their Subsidiaries' officers or directors which (i) could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect or (ii) questions the validity of this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto.



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Section 7.16

No Undisclosed Events, Liabilities, Developments or Circumstances .  Except for the transactions contemplated by the Transaction Documents and as set forth on Schedule 7.16, since January 1, 2013, there has been no Material Adverse Effect and no circumstances exist that could reasonably be expected to be, cause or have, either individually or in the aggregate, a Material Adverse Effect.  Other than (i) the liabilities assumed or created pursuant to this Agreement and the other Transaction Documents, (ii) liabilities accrued for in the latest balance sheet included in Social's most recent periodic report (on Form 10-Q or Form 10-K) filed at least five (5) Business Days prior to the date this representation is made (the date of such latest balance sheet, the " Latest Balance Sheet Date ") and (iii) liabilities incurred in the ordinary course of business consistent with past practices since the Latest Balance Sheet Date, Social and its Subsidiaries do not have any other liabilities (whether fixed or unfixed, known or unknown, absolute or contingent, asserted or unasserted, choate or inchoate, liquidated or unliquidated, or secured or unsecured, and regardless of when any action, claim, suit or proceeding with respect thereto is instituted).


Section 7.17

No Disagreements with Accountants and Lawyers .  There are no disagreements of any kind presently existing, or reasonably anticipated by any Credit Party or any Subsidiary of any Credit Party to arise, between any Credit Party or any Subsidiary of any Credit Party and the accountants and lawyers formerly or presently employed by the Credit Parties and their Subsidiaries which could affect the ability of the Credit Parties to perform any of their obligations under any of the Transaction Documents.


Section 7.18

No General Solicitation; Placement Agent's Fees .  None of the Credit Parties, any of the Affiliates of any Credit Party, or any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities.  Except as described on Schedule 7.18, no Credit Party has engaged any placement agent or other agent in connection with the sale of the Securities.  The Credit Parties shall be responsible for the payment of any placement agent's fees, financial advisory fees, or brokers' commissions relating to or arising out of the transactions contemplated hereby.  The Credit Parties shall pay, and hold each Lender and Holder harmless against, any liability, loss or expense (including, without limitation, attorney's fees and out-of-pocket expenses) arising in connection with any claim for any such payment.


Section 7.19

No Integrated Offering .  None of the Credit Parties, any of its Affiliates, or any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Securities under the 1933 Act or cause this offering of the Securities to be integrated with prior offerings by any Credit Party for purposes of the 1933 Act or any applicable stockholder or equityholder approval provisions.  None of the Credit Parties, their Affiliates or any Person acting on their behalf will take any action or steps referred to in the preceding sentence that would require registration of any of the Securities under the 1933 Act (except as set forth in the Registration Rights Agreement) or cause the offering of the Securities to be integrated with other offerings.  No Credit Party has a registration statement pending before the SEC or currently under the SEC's review.



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Section 7.20

Tax Status .  Each Credit Party and each Subsidiary of each Credit Party (i) has made or filed all foreign, federal and state income and all other material Tax Returns, reports and declarations required by any jurisdiction to which it is subject, except prior to the Closing Date where any failure to do so has not resulted, and would not reasonably be expected to result, in any material penalties to any Credit Party or any Subsidiary of any Credit Party, (ii) has paid all Taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, and (iii) has set aside on its books adequate reserves in accordance with GAAP for the payment of all Taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid Taxes in any material amount claimed to be delinquent by the Taxing authority of any jurisdiction (other than those being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and subject to adequate reserves taken by the applicable Credit Party or Subsidiary as shall be required in conformity with GAAP), and the officers of each of Credit Party and their Subsidiaries know of no basis for any such claim.


Section 7.21

Transfer Taxes .  On the Closing Date, all transfer or other Taxes (other than income or similar taxes) which are required to be paid in connection with the sale and transfer of the Securities to be sold to each Lender hereunder will be, or will have been, fully paid or provided for by the Credit Parties, and all laws imposing such Taxes will be or will have been complied with.


Section 7.22

Conduct of Business; Compliance with Laws; Regulatory Permits .  No Credit Party and no Subsidiary of any Credit Party is in violation of any term of or in default under its certificate or articles of incorporation or bylaws or other governing documents.  No Credit Party and no Subsidiary of any Credit Party is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Credit Parties or their Subsidiaries in any material respect.  Without limiting the generality of the foregoing, except as set forth on Schedule 7.22, Social is not in material violation of any of the rules, regulations or requirements of the Principal Market and has no knowledge of the occurrence of any facts or circumstances that would reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future.  Except as set forth on Schedule 7.22, during the one (1) year period prior to the Closing Date, (i) the Common Stock has been designated for quotation or listed on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) Social has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market.  Except as set forth on Schedule 7.22, each Credit Party and each Subsidiary of each Credit Party possesses all material consents, authorizations, approvals, orders, licenses, franchises, permits, certificates, accreditations and permits and all other appropriate regulatory authorities necessary to conduct their respective businesses, and no Credit Party or Subsidiary of any Credit Party has received any notice of proceedings relating to the revocation or modification of any such consents, authorizations, approvals, orders, licenses, franchises, permits, certificates, accreditations or permits.  The Common Stock is eligible for clearing through DTC, through its Deposit/Withdrawal At Custodian (DWAC) system, and Social is eligible and participating in the Direct Registration System (DRS) of DTC with respect to the Common Stock.  The Common Stock is not, and has not been at any time prior to the Closing Date, subject to any DTC "chill," "freeze" or similar restriction with respect to any DTC services, including the clearing of shares of Common Stock through DTC.



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Section 7.23

Foreign Corrupt Practices .  No Credit Party and no Subsidiary of any Credit Party, nor any director, officer, agent, employee or other Person acting on behalf of any Credit Party or any Subsidiary of any Credit Party has, in the course of its actions for, or on behalf of, any Credit Party or any Subsidiary of any Credit Party (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.


Section 7.24

Sarbanes-Oxley Act .  Social is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended (" Sarbanes-Oxley "), that are applicable to Social as of the date this representation is made and as of the Closing Date, and any and all applicable rules and regulations promulgated by the SEC thereunder that are applicable to Social as of the date this representation is made and as of the Closing Date, except where the failure to be in compliance would not have a Material Adverse Effect.  Since January 24, 2012, no attorney representing Social, whether or not employed by Social, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Social or any of the Borrowers or any of their respective officers, directors, employees or agents to their respective boards of directors or any committee thereof pursuant to Section 307 of Sarbanes-Oxley.


Section 7.25

Environmental Laws .  Except as set forth on Schedule 7.25, each Credit Party and each Subsidiary of each Credit Party (a) (i) is in compliance with any and all Environmental Laws applicable to its respective businesses, (ii) has received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct its respective businesses, (iii) is in compliance with all terms and conditions of any such permit, license or approval, and (iv) has no outstanding Liability under any Environmental Laws and is not aware of any facts that could reasonably result in Liability under any Environmental Laws, in each of the foregoing clauses of this clause (a), except to the extent, either individually or in the aggregate, a Material Adverse Effect could not reasonably be expected to occur, and (b) with respect to the issuance of any Additional Notes, will have then provided Agent and Lenders with copies of all environmental reports, assessments and other documents in any way related to any actual or potential Liability under any Environmental Laws that it has then received.


Section 7.26

Margin Stock .  No Credit Party and no Subsidiary of any Credit Party is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds from the issuance of any Note will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock, or for any purpose that violates, or is inconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.



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Section 7.27

ERISA .  Except as set forth on Schedule 7.27, no Credit Party, Subsidiary of any Credit Party or, for purposes of determinations of compliance with this Section 7.27 at any issuance of Additional Notes, any then existing ERISA Affiliate (a) maintains or has maintained any Pension Plan, (b) contributes or has contributed to any Multiemployer Plan or (c) provides or has provided post-retirement medical or insurance benefits with respect to employees or former employees (other than benefits required under Section 601 of ERISA, Section 4980B of the Code or applicable state law).  Except as set forth on Schedule 7.27, no Credit Party, Subsidiary of any Credit Party or, for purposes of determinations of compliance with this Section 7.27 at any issuance of Additional Notes, any then existing ERISA Affiliate has received any notice or has any knowledge to the effect that it is not in full compliance with any of the requirements of ERISA, the Code or applicable state law with respect to any Employee Benefit Plan.  No ERISA Event exists.  For purposes of determinations of compliance with this Section 7.27 at any issuance of Additional Notes, each then existing Employee Benefit Plan which is intended to qualify under the Code has received a favorable determination letter (or opinion letter in the case of a prototype Employee Benefit Plan) to the effect that such Employee Benefit Plan is so qualified and to each Credit Party's knowledge, there exists no reasonable basis for the revocation of such determination or opinion letter.  No Credit Party, Subsidiary of any Credit Party or, for purposes of determinations of compliance with this Section 7.27 at any issuance of Additional Notes, any then-existing ERISA Affiliate has (i) any unpaid minimum required contributions under any Plan, whether or not waived, (ii) any liability under Section 4201 or 4243 of ERISA for any withdrawal, or partial withdrawal, from any Multiemployer Plan, (iii) a Pension Plan that is "at risk" within the meaning of Section 430 of the Code, (iv) received notice from any Multiemployer Plan that it is either in endangered or critical status within the meaning of Section 432 of the Code  or (v) any liability or knowledge of any facts or circumstances which could result in any liability to the PBGC, the Internal Revenue Service, the Department of Labor or any participant in connection with any Employee Benefit Plan (other than routine claims for benefits under such Employee Benefit Plan).  As of the Closing Date, none of the Credit Parties maintains or has maintained any Employee Benefit Plan.


Section 7.28

Investment Company .  No Credit Party and no Subsidiary of any Credit Party is a "registered investment company" or a company "controlled" by a "registered investment company" or a "principal underwriter" of a "registered investment company" as such terms are defined in the Investment Company Act of 1940, as amended.


Section 7.29

U.S. Real Property Holding Corporation .  No Credit Party and no Subsidiary of any Credit Party is, nor has it ever been, a U.S. real property holding corporation within the meaning of Section 897 of the Code, as amended, and each Credit Party will so certify upon the request of any Lender.


Section 7.30

Internal Accounting and Disclosure Controls .  Social 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 and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference.  Social maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under the 1934 Act) that are effective in ensuring that information required to be


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disclosed by Social in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including controls and procedures designed to ensure that information required to be disclosed by Social in the reports that it files or submits under the 1934 Act is accumulated and communicated to Social's management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure.  During the twelve (12) months prior to the date this representation is made, no Credit Party and no Subsidiary of any Credit Party has received any notice or correspondence from any accountant relating to any potential material weakness in any part of the system of internal accounting controls of any Credit Party or any Subsidiary of any Credit Party.  The Borrowers and their Subsidiaries maintain internal control over financial reporting (as such term is defined in Rule 13a-15 under the 1934 Act), and such internal control is effective, does not have any material weaknesses and does not have any significant deficiencies that are reasonably likely to adversely affect Social's ability to accurately and completely record, process, summarize and report financial information.  Since August 2, 2011, no Borrower, any Subsidiary thereof nor any of their respective directors or officers has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of any Borrower or any Subsidiary thereof or its internal accounting controls, including any complaint, allegation, assertion or claim that any Borrower or any Subsidiary thereof has engaged in any improper accounting or auditing practices.


Section 7.31

SEC Documents; Financial Statements . The Common Stock is registered under Section 12(g) of the 1934 Act.  Except as set forth on Schedule 7.31, Social has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date this representation is made and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the " SEC Documents ").  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 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 the light of the circumstances under which they were made, not misleading.  Except as set forth on Schedule 7.31, as of their respective dates, the financial statements of Social included in the SEC Documents complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with GAAP, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of Social 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).  Since the filing of each of the SEC Documents, no event has occurred that would require an amendment or supplement to any such SEC Document and as to which such an amendment or supplement has not been filed and made publicly available on the SEC's EDGAR system no less than five Business Days prior to the date this representation is made.  Social has not received any written comments from the SEC staff that have not been resolved to the satisfaction of the SEC staff.  Except as required pursuant to


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Section 8.33, Social is not required to file any agreement, note, lease, mortgage, deed or other instrument entered into prior to the date this representation is made and in effect on the date this representation is made and to which any Borrower is a party or by which Social is bound that has not been previously filed as an exhibit (including by way of incorporation by reference) to its reports filed or made with the SEC under the 1934 Act.  There is no material transaction, arrangement or other relationship between Social and an unconsolidated or other off-balance-sheet entity that is required to be disclosed by Social in its reports pursuant to the 1934 Act that has not been so disclosed in the SEC Documents at least five Business Days prior to the date of this Agreement.  Since June 22, 2012, there have been no internal or SEC inquiries or investigations (formal or informal) regarding accounting or revenue recognition discussed with, reviewed by or initiated at the direction of any executive officer of Social or the board of directors of Social or any committee thereof.


Section 7.32

Transactions With Affiliates .  Except (i) as set forth on Schedule 7.32 and (ii) for transactions that have been entered into on terms no less favorable to such Credit Party or Subsidiary than those that might be obtained at the time from a Person who is not an officer, director or employee of any Credit Party or Subsidiary of any Credit Party, none of the officers, directors or employees of any Credit Party or any Subsidiary of any Credit Party is presently a party to any transaction with any Credit Party or any such Subsidiary (other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the knowledge of the Credit Parties, any corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner.


Section 7.33

Acknowledgment Regarding Lenders' Purchase of Securities .  Each of the Credit Parties acknowledges and agrees that each Lender is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that no Lender (i) has any Affiliate, officer, director or employee that is an officer or director of any Credit Party or any Subsidiary of any Credit Party, (ii) an Affiliate of any Credit Party or any Subsidiary of any Credit Party or (iii) to the knowledge of the Credit Parties, a "beneficial owner" (as defined for purposes of Rule 13d-3 of the 1934 Act) of more than 10% of the Capital Stock of any Credit Party or any Subsidiary of any Credit Party.  Each of the Credit Parties further acknowledges that no Lender is acting as a financial advisor or fiduciary of any Credit Party or any Subsidiary of any Credit Party (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by a Lender or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Lender's purchase of the Securities.  Each of the Credit Parties further represents to each Lender that each Credit Party's decision to enter into the Transaction Documents to which it is a party have been based solely on the independent evaluation by such Person and its respective representatives.



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Section 7.34

Acknowledgement Regarding Lender's Trading Activity . Except as described on Schedule 7.34 or in the Registration Rights Agreement, it is understood and acknowledged by Social that none of the Lenders has been asked by Social to agree, nor has any Lender agreed, to desist from purchasing or selling, long and/or short, securities of Social, or "derivative" securities based on securities issued by Social or to hold any of the Securities for any specified term.  Social acknowledges that such aforementioned activities do not constitute a breach of any of the Transaction Documents.


Section 7.35

Insurance .  Each of the Credit Parties and their Subsidiaries is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Credit Parties and their Subsidiaries are engaged.  None of the Credit Parties or their Subsidiaries has been refused any insurance coverage sought or applied for and none of the Credit Parties or their Subsidiaries believes that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.


Section 7.36

Closing Date Acquisition Documents .  As of the Closing Date, each of the representations and warranties in the Closing Date Acquisition Documents is true and correct in all material respects (without duplication of any materiality qualifiers), all conditions precedent to the consummation of the Closing Date Acquisition have occurred (or simultaneously with the Closing hereunder shall occur) thereunder, and no default, breach, violation or non-compliance thereunder has occurred.


Section 7.37

Employee Relations .  None of the Credit Parties or their Subsidiaries is a party to any collective bargaining agreement or employs any member of a union in such person's capacity as a union member or to perform union labor work.  Except as disclosed to Agent in writing on or prior to the Closing Date, as of the Closing Date, no executive officer of any Credit Party or any Subsidiary of any Credit Party has notified any Credit Party or any Subsidiary of any Credit Party that such officer intends to leave such Credit Party or such Subsidiary or otherwise terminate such officer's employment with such Credit Party or such Subsidiary.  As of the Closing Date, no executive officer of any Credit Party or any Subsidiary of any Credit Party, to the knowledge of the Credit Parties, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant.  Each of the Credit Parties and their Subsidiaries is in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.


Section 7.38

Disclosure .  Notwithstanding any other provision of this Agreement, all disclosures provided to the Lenders regarding the Credit Parties and their Subsidiaries, their respective business and properties, and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of each Credit Party, are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, taken as a whole and in the light of the circumstances under which they were made, not materially misleading.  Each press release issued by the any Credit Party or any Subsidiary of any Credit Party during the


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twelve (12) months preceding the Closing Date did not at the time of release contain any untrue statement 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 the light of the circumstances under which they are made, not misleading.  No event or circumstance has occurred or information exists with respect to any Credit Party or any Subsidiary of any Credit Party or any of their business, properties, prospects, operations or condition (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure or announcement by the any Credit Party or any Subsidiary of any Credit Party but which has not been so publicly announced or disclosed.  None of the representations or warranties made by any Credit Party or any Subsidiary of any Credit Party in the Transaction Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in each exhibit, report, statement or certificate furnished by or on behalf of any Credit Party or any Subsidiary of any Credit Party in connection with the Transaction Documents, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.  During the twelve (12) months immediately preceding the Closing Date, no event or circumstance has occurred or information exists with respect to the Credit Parties or any of their Subsidiaries or any of their business, properties, prospects, operations or condition (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure or announcement by Social but which has not been so publicly announced or disclosed.


Section 7.39

Patriot Act .  To the extent applicable, each of the Credit Parties and their Subsidiaries is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department and any other enabling legislation or executive order relating thereto, and (ii) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).


Section 7.40

Material Contracts .  Schedule 7.40 contains a true, correct and complete list of all the Closing Date Acquisition Documents and all Material Contracts of each Credit Party and each Subsidiary of each Credit Party, and all such Material Contracts are in full force and effect and no defaults currently exist thereunder. 


Section 7.41

Manipulation of Prices; Securities .


(a)

None of the Credit Parties or any of their Subsidiaries, or any officer, director or Affiliate of any of the Credit Parties or any of their Subsidiaries, and to each such Person's knowledge, no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of a Credit Party or any Subsidiary to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities (except for customary placement fees payable in connection with this transaction), or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of such Credit Party or such Subsidiary (except for customary placement fees payable in connection with this transaction).



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(b)

Since the Diligence Date, none of any officer, director or Affiliate of any of the Credit Parties or any of their Subsidiaries, any Affiliate of any of the foregoing, or anyone acting on their behalf has sold, bid, purchased or traded in the Common Stock.


Section 7.42

Application of Takeover Protections; Rights Agreement .  Each of the Credit Parties and its board of directors (or other governing body) has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under its certificate or articles of incorporation (or other governing documents) or the laws of the jurisdiction of its incorporation or formation which is or could become applicable to any Lender as a result of the transactions contemplated by this Agreement, including Social's issuance of the Notes, the Warrants and the Warrant Shares and any Lender's ownership of the Securities.  Social has not adopted a stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of Social.


Section 7.43

Absence of Securities-Related Litigation .  To the knowledge of each Credit Party, no director or officer of any Credit Party has been involved in securities-related litigation since January 1, 2009.


Section 7.44

No Disqualification Events .  None of Social, any of its predecessors, any director, executive officer, other officer of Social participating in the offering contemplated hereby, any beneficial owner (as that term is defined in Rule 13d-3 under the 1934 Act) of 20% or more of Social's outstanding voting equity securities, calculated on the basis of voting power, any "promoter" (as that term is defined in Rule 405 under the 1933 Act) connected with Social in any capacity at the time of the Closing or any issuance of Additional Notes pursuant to the terms hereof, any placement agent or dealer participating in the offering of the Securities and any of such agents' or dealer's directors, executive officers, other officers participating in the offering of the Securities (each, a " Covered Person " and, together, " Covered Persons ") is subject to any of the "Bad Actor" disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a " Disqualification Event "). Social has exercised reasonable care to determine (a) the identity of each person that is an Covered Person; and (b) whether any Covered Person is subject to a Disqualification Event.  Social has complied, to the extent applicable, with its disclosure obligations under Rule 506(e) of Regulation D.  With respect to each Covered Person, Social has established procedures reasonably designed to ensure that Social receives notice from each such Covered Person of (i) any Disqualification Event relating to that Covered Person, and (ii) any event that would, with the passage of time, become a Disqualification Event relating to that Covered Person; in each case occurring up to and including the Closing Date and any issuance of Additional Notes pursuant to the terms hereof.  Social is not for any other reason disqualified from reliance upon Rule 506 of Regulation D for purposes of the offer and sale of the Securities.



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ARTICLE VIII

COVENANTS


Section 8.1

Financial Covenants .  The Credit Parties shall, and shall cause their Subsidiaries to, comply with the following financial covenants:


(a)

Leverage Ratio.   The Credit Parties shall not permit the Leverage Ratio as of the last day of any Fiscal Quarter set forth in the table below to be greater than the maximum ratio set forth opposite such month in the table below:


Fiscal Quarter Ending

Maximum Ratio

December 31, 2014

9.00 to 1.00

 

 

March 31, 2015

7.00 to 1.00

June 30, 2015

6.00 to 1.00

September 30, 2015

5.00 to 1.00

December 31, 2015

4.00 to 1.00

 

 

March 31, 2016

3.50 to 1.00

June 30, 2016

3.00 to 1.00

September 30, 2016

3.00 to 1.00

December 31, 2016

3.00 to 1.00

 

 

March 31, 2017 and the last day of each calendar quarter thereafter

2.50 to 1.00


(b)

Senior Leverage Ratio.   The Credit Parties shall not permit the Senior Leverage Ratio as of the last day of any Fiscal Quarter set forth in the table below to be greater than the maximum ratio set forth opposite such month in the table below:


Fiscal Quarter Ending

Maximum Ratio

December 31, 2014

3.50 to 1.00

 

 

March 31, 2015

3.00 to 1.00

June 30, 2015

3.00 to 1.00

September 30, 2015

2.50 to 1.00

December 31, 2015

2.50 to 1.00

 

 

March 31, 2016

2.50 to 1.00

June 30, 2016

2.00 to 1.00

September 30, 2016

2.00 to 1.00

December 31, 2016

2.00 to 1.00

 

 

March 31, 2017 and the last day of each calendar quarter thereafter

1.50 to 1.00



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(c)

Fixed Charge Coverage Ratio.   The Credit Parties shall not permit the Fixed Charge Coverage Ratio as of the last day of any Fiscal Quarter set forth in the table below to be less than the minimum ratio set forth opposite such month in the table below:


Fiscal Quarter Ending

Minimum Ratio

December 31, 2014

1.25 to 1.00

 

 

March 31, 2015

1.25 to 1.00

June 30, 2015

1.25 to 1.00

September 30, 2015

1.25 to 1.00

December 31, 2015

1.25 to 1.00

 

 

March 31, 2016

1.25 to 1.00

June 30, 2016

1.25 to 1.00

September 30, 2016

1.50 to 1.00

December 31, 2016

2.00 to 1.00

 

 

March 31, 2017 and the last day of each calendar quarter thereafter

2.00 to 1.00


(d)

Interest Coverage Ratio .   The Credit Parties shall not permit the Interest Coverage Ratio as of the last day of any calendar quarter set forth in the table below to be less than the minimum ratio set forth opposite such quarter in the table below:


Fiscal Quarter Ending

Minimum Ratio

December 31, 2014

2.50 to 1.00

 

 

March 31, 2015

3.00 to 1.00

June 30, 2015

3.25 to 1.00

September 30, 2015

3.50 to 1.00

December 31, 2015 and the last day of each calendar quarter thereafter

4.00 to 1.00


(e)

Minimum Current Ratio .  The Credit Parties shall not permit the Current Ratio as of the last day of any calendar month to be less than 1.50 to 1.00.


(f)

Capital Expenditures .  The Credit Parties shall not permit Capital Expenditures in any Fiscal Year (commencing with the Fiscal Year ending December 31, 2014) to exceed $50,000.



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Section 8.2

Deliveries .  Each Credit Party agrees to deliver the following to the Agent and each Holder:


(a)

Monthly Financial Statements.   As soon as available and in any event within thirty (30) days (increased to forty-five (45) days in the case of each fiscal month ending a Fiscal Quarter) after the end of each month (including December) commencing with the month ending October 31, 2014, all financial information for such month or period ending at the end of such month as Agent may reasonably request and in form and substance reasonably acceptable to the Agent, including, without limitation, the consolidated and consolidating balance sheets of Social and its Subsidiaries as at the end of such month and the related consolidated and consolidating statements of operations, members' equity and cash flows of Social and its Subsidiaries for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, setting forth in each case in comparative form the corresponding figures for such month and for such period during the previous Fiscal Year, all in reasonable detail, and certified by a Responsible Officer of the Borrower Representative as being true and correct and fairly presenting in accordance with GAAP, the financial position and results of operations of Social and its Subsidiaries, subject to normal year-end adjustments and absence of footnote disclosure;


(b)

Annual Financial Statements.   As soon as available, and in any event within ninety (90) days after the end of each Fiscal Year, (i) the audited consolidated and consolidating balance sheets of Social and its Subsidiaries as at the end of such Fiscal Year and the related consolidated and consolidating statements of operations, members' equity and cash flows of Social and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, in reasonable detail and certified by a Responsible Officer of the Borrower Representative as being true and correct and fairly presenting in accordance with GAAP, the financial position and results of operations of Social and its Subsidiaries, accompanied by an unqualified opinion of an independent accounting firm acceptable to Agent;


(c)

Compliance Certificate.    On the dates that the financial statements under clause (a) above are delivered, a duly completed Compliance Certificate, with appropriate insertions, dated the date of the applicable monthly financial statements, and signed on behalf of the Borrowers by a Responsible Officer of the Borrower Representative, containing a computation of each of the covenants set forth in Section 8.1 hereof for each monthly financial statement delivered for the last month of a Fiscal Quarter (provided that a computation for the covenant set forth in Section 8.1(e) shall be delivered with each set of financials delivered pursuant to Section 8.2(a) above, and to the effect that such officer has not become aware of any Event of Default or Default that has occurred and is continuing or, if there is any such Event of Default or Default, describing it and the steps, if any, being taken to cure it.


(d)

Monthly Compliance Checklist.   On the dates that the financial statements under clause (a) above are delivered, a duly completed compliance checklist, in form and substance satisfactory to the Agent, dated the date of the applicable monthly financial statements, and signed on behalf of the Borrowers by a Responsible Officer of the Borrower Representative, indicating whether or not the Credit Parties are in compliance with each covenant set forth in ARTICLE 8 of the Agreement (other than Section 8.1(a), (b), (c), (d) and (f) in the case of any such financial statements not delivered for the last month of a Fiscal Quarter) and whether each representation and warranty contained in ARTICLE 7 of the


55



Agreement is true and correct as though made on such date (except for representations and warranties that speak as of a specific date).


(e)

Projections and Budget.  As soon as available and in any event no later than December 1 st of each year, (i) an operating budget and (ii) projections of the Credit Parties (and their Subsidiaries) consolidated and consolidating financial performance for the forthcoming Fiscal Year on a month by month basis;


(f)

SBA Side Letter.  On the dates and otherwise in accordance with the terms of the SBA Side Letter, such other financial, business and other certificates, items and deliveries as may be required from time to time under the terms of the SBA Side Letter.


Section 8.3

Notices .  Each Credit Party agrees to deliver the following to the Agent and each Holder:


(a)

Collateral Information.   Upon the request of Agent, a certificate of one of its duly authorized officers on behalf of such Credit Party (i) either confirming that there has been no change in the information set forth in the perfection certificate executed and delivered to the Agent on the Closing Date since such date or the date of the most recent certificate delivered pursuant to this Section and/or identifying such changes, and (ii) certifying that all UCC financing statements (including fixtures filings, as applicable) and other appropriate filings, recordings and registrations have been filed of record in each governmental, municipal and other appropriate office in each jurisdiction identified pursuant to clause (i) above (or in such certificate) to the extent necessary to effect, protect and perfect the security interests under the Security Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period);


(b)

Auditor Reports.   Promptly upon receipt thereof, copies of any reports submitted by the Borrowers' independent public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or internal control systems of any Credit Party or any of their Subsidiaries made by such accountants, including any comment letters submitted by such accountants to management of any Credit Party or any of their Subsidiaries in connection with their services;


(c)

Notice of Default.   Promptly upon any officer of any Credit Party obtaining knowledge (i) of any condition or event that constitutes a Default or an Event of Default or that notice has been given to any Credit Party with respect thereto; (ii) that any Person has given any notice to any Credit Party or taken any other action with respect to any event or condition set forth in ARTICLE 10; or (iii) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, a certificate of its chief executive officer or chief financial officer specifying the nature and period of existence of such condition, event or change, or specifying the notice given and action taken by any such Person and the nature of such claimed Event of Default, Default, event or condition, and the action(s) the Borrowers have taken, are taking and propose to take with respect thereto;



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(d)

Notice of Litigation.   Promptly upon any officer of any Credit Party obtaining knowledge of (i) the institution of, or non-frivolous threat of, any adverse Proceeding not previously disclosed in writing by the Borrower Representative to the Agent and the Lenders, or (ii) any material development in any adverse Proceeding that, in the case of either clause (i) or (ii) if adversely determined, could be reasonably expected to have a Material Adverse Effect, or seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, written notice thereof together with such other information as may be reasonably available to the Credit Parties to enable the Agent and the Lenders and their counsel to evaluate such matters;


(e)

ERISA.   (i) Promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, the action(s) any Credit Party, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; and (ii) with reasonable promptness, copies of (1) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any Credit Party, any of its Subsidiaries or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (2) all notices received by any Credit Party, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (3) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as any Lender shall reasonably request;


(f)

Insurance Report.   As soon as practicable following receipt thereof and in any event by the last day of each Fiscal Year, a report by the Credit Parties' insurance broker(s) in form and substance satisfactory to the Agent outlining all material insurance coverage maintained as of the date of such report by the Credit Parties and all material insurance coverage planned to be maintained by the Credit Parties in the immediately succeeding Fiscal Year;


(g)

Environmental Reports and Audits.   As soon as practicable following receipt thereof, copies of all environmental audits and reports with respect to environmental matters at any facility or property used by any Credit Party or any Subsidiary of any Credit Party or which relate to any environmental liabilities of any Credit Party or any Subsidiary of any Credit Party which, in any such case, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;


(h)

Corporate Information.   Thirty (30) days' prior written notice of any change (i) in any Credit Party's corporate name, (ii) in any Credit Party's identity or organizational structure, (iii) in any Credit Party's jurisdiction of organization, or (iv) in any Credit Party's Federal Taxpayer Identification Number or state organizational identification number.  The Credit Parties agree not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the UCC or otherwise and all other actions that are required in order for the Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral as contemplated in the Security Agreement, the other Security Documents and other Transaction Documents;



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(i)

Tax Returns.   Within ten (10) days following request by the Agent or any Lender, copies of each federal income Tax Return filed by or on behalf of any Credit Party and requested by such Lender;


(j)

Event of Loss.   Promptly (and in any event within three (3) Business Days) upon notice of (i) any claim with respect to any liability against any Credit Party or any Subsidiary of any Credit Party that (A) is in excess of $100,000 and (B) could reasonably be expected to result in a Material Adverse Effect or (ii) any event which, with or without the passage of time, could reasonably be expected to constitute an Event of Loss.


(k)

Dispositions .  Promptly (and in any event within three (3) Business Days) notice of any asset sales, transfers or other dispositions (other than the sale of Inventory in the ordinary course of business) that are in excess of $100,000 in the aggregate in any Fiscal Year.


(l)

Indemnification Escrow Agreement .  Simultaneously, with respect to any such notice delivered by Social and promptly (and in any event within one (1) Business Day) with respect to any such notice received by Social, the Borrower Representative shall deliver to Agent copies of all notices (or any other written communication reasonably requested by the Agent) delivered or received by Social or any other Credit Party in connection with the Indemnification Escrow Agreement.


(m)

Other Information.   Promptly upon their becoming available, deliver copies of (i) all financial statements, reports, notices and proxy statements sent or made available generally by the Borrowers to their security holders acting in such capacity or by any of its Subsidiaries to its security holders other than to a Borrower or another Subsidiary, (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Credit Party or any Subsidiary of any Credit Party with any securities exchange or with the SEC or any governmental or private regulatory authority, (iii) all press releases and other statements made available generally by any Credit Party or any Subsidiary of any Credit Party to the public concerning material developments in the business of any Credit Party or any Subsidiary of any Credit Party, and (iv) such other information and data with respect to any Credit Party or any Subsidiary of any Credit Party as from time to time may be reasonably requested by the Agent or any Lender.


Section 8.4

Rank .  All Indebtedness due under the Notes shall be senior in right of payment, whether with respect to payment of redemptions, interest, damages or upon liquidation or dissolution or otherwise, to all other current and future Indebtedness of the Credit Parties and their Subsidiaries (other than Permitted Indebtedness, which Permitted Indebtedness may be pari passu with the Notes in right of payment).


Section 8.5

Incurrence of Indebtedness .  The Credit Parties shall not, and none of the Credit Parties shall permit any of its Subsidiaries to, directly or indirectly, create, incur or guarantee, assume, or suffer to exist any Indebtedness or engage in any sale and leaseback, synthetic lease or similar transaction, other than (i) the Obligations and (ii) Permitted Indebtedness.



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Section 8.6

Existence of Liens .  The Credit Parties shall not, and none of the Credit Parties shall permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any Liens, other than Permitted Liens.


Section 8.7

Restricted Payments .  Except as set forth on Schedule 8.7, the Credit Parties shall not, and none of the Credit Parties shall permit any of its Subsidiaries to,  directly or indirectly,


(a)

declare or pay any dividend or make any other payment or distribution on account of its Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving any Credit Party or any Subsidiary of any Credit Party) or to the direct or indirect holders of any Credit Party's or any Subsidiaries' Equity Interests in their capacity as such, other than dividends or distributions by a Subsidiary of a Borrower to a Borrower or a wholly-owned Subsidiary of a Borrower which is a Credit Party;


(b)

purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving any Credit Party or any Subsidiary of any Credit Party) any Equity Interests of any Credit Party or any Subsidiary of any Credit Party or any direct or indirect parent of Social or any Subsidiary, provided that Social may redeem Equity Interests from officers, directors and employees  provided all of the following conditions are satisfied: (i) no Default or Event of Default has occurred and is continuing or would arise as a result of such restricted payment, (ii) after giving effect to such restricted payment, the Credit Parties are in compliance on a pro forma basis with the covenants set forth in 8.1, recomputed for the most recent Fiscal Quarter for which financial statements have been delivered and (iii) such restricted payments shall not exceed $250,000 in any Fiscal Year; or


(c)

make any payment (including by setoff) on or with respect to, accelerate the maturity of, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of any Credit Party or any Subsidiary of any Credit Party (or set aside or escrow any funds for any such purpose), except for: (A) payments of principal, interest and other amounts under the Notes; (B) subject to the applicable subordination terms, if any, regularly scheduled non-accelerated payments of Permitted Indebtedness (other than Indebtedness evidenced by the Steel Media Seller Note and the Steel Media Earnout); and (C) regularly scheduled payments under the Steel Media Seller Note and the Steel Media Earnout, in each case, as and when due and payable in accordance with the terms thereof and subject to the terms of the Seller Note and Earnout Subordination Agreement.


Section 8.8

Mergers; Acquisitions; Asset Sales .  The Credit Parties shall not, and none of the Credit Parties shall permit any of its Subsidiaries to, directly or indirectly, (a) be a party to any merger or consolidation, or Acquisition (other than the Closing Date Acquisition), or (b) consummate any Asset Sale other than Permitted Dispositions.


Section 8.9

No Further Negative Pledges .  The Credit Parties shall not, and none of the Credit Parties shall permit any of its Subsidiaries to, enter into, assume or become subject to any agreement prohibiting or otherwise restricting the existence of any Lien upon any of their properties or assets in favor of Agent or the Holders as set forth under the Transaction Documents, whether now owned or hereafter acquired, or requiring the grant of any security for any obligation if such property or asset is given as security under the Transaction Documents,


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except in connection with any Permitted Liens or any document or instrument governing any Permitted Liens, provided that any such restriction contained therein relates only to the property or asset subject to such Permitted Liens (or proceeds thereof).


Section 8.10

Affiliate Transactions .  The Credit Parties shall not, and none of the Credit Parties shall permit any of its Subsidiaries to, directly or indirectly, (i) enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate, unless such transaction is on terms that are no less favorable to such Credit Party or such Subsidiary, as the case may be, than those that might be obtained at the time from a Person who is not an Affiliate and are fully disclosed in writing to Agent prior to consummation thereof; or (ii) pay management fees, directors' fees or other similar fees or amounts to any Person or make any payments to any Affiliate.



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Section 8.11

Insurance .


(a)

The Credit Parties shall keep the Collateral properly housed and insured against loss or damage by fire, theft, explosion, sprinklers, collision (in the case of motor vehicles) and such other risks as are customarily insured against by Persons engaged in businesses similar to that of the Credit Parties, with such companies, in such amounts, with such deductibles and under policies in such form as shall be reasonably satisfactory to the Agent.  Within ninety (90) days after the Closing Date the Credit Parties shall procure, and at all times thereafter the Credit Parties shall maintain, business interruption insurance with such companies, in such amounts, with such deductibles and under policies in such form as shall be reasonably satisfactory to the Agent, the amount of which shall not be less than the greater of (i) six (6) months of EBITDA of the Borrowers (after giving pro forma effect to the Related Transactions) and (ii) the coverage amount under Social's business interruption insurance policy in effect on the Closing Date.  Certificates of insurance or, if requested by the Agent, original (or certified) copies of such policies of insurance have been or shall be, no later than the Closing Date, delivered to the Agent, and shall contain an endorsement, in form and substance reasonably acceptable to Agent, showing loss under such insurance policies payable to the Agent, for the benefit of the Holders.  Such endorsement, or an independent instrument furnished to the Agent, shall provide that the insurance company shall give the Agent at least thirty (30) days' written notice before any such policy of insurance is altered or canceled and that no act, whether willful or negligent, or default of any Credit Party or any other Person shall affect the right of the Agent to recover under such policy of insurance in case of loss or damage.  In addition, the Credit Parties shall cause to be executed and delivered to the Agent no later than the Closing Date an assignment of proceeds of its business interruption insurance policies.  Each Credit Party hereby directs all insurers under all policies of insurance to pay all proceeds payable thereunder directly to the Agent.  Each Credit Party irrevocably makes, constitutes and appoints the Agent (and all officers, employees or agents designated by the Agent) as such Person's true and lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of such Person on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and making all determinations and decisions with respect to such policies of insurance, provided however, that if no Event of Default shall have occurred and be continuing, such Credit Party may make, settle and adjust claims involving less than $100,000 in the aggregate without the Agent's consent.


(b)

The Credit Parties shall maintain, at their expense, such public liability and third-party property damage insurance as is customary for Persons engaged in businesses similar to that of the Credit Parties with such companies and in such amounts with such deductibles and under policies in such form as shall be reasonably satisfactory to the Agent and certificates of insurance or, if requested by the Agent, original (or certified) copies of such policies of insurance have been or shall be, no later than the Closing Date, delivered to the Agent; each such policy shall contain an endorsement showing the Agent as additional insured thereunder and providing that the insurance company shall give the Agent at least thirty (30) days' written notice before any such policy shall be altered or canceled.


(c)

If any Credit Party at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium relating thereto, then the Agent, without waiving or releasing any obligation or default by the Credit Parties hereunder, may (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premiums and take such other actions with respect thereto as the Agent


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reasonably deems advisable.  Such insurance, if obtained by the Agent, may, but need not, protect each Credit Parties' interests or pay any claim made by or against any Credit Party with respect to the Collateral.  Such insurance may be more expensive than the cost of insurance the Credit Parties may be able to obtain on their own and may be cancelled only upon the Credit Parties providing evidence that they have obtained the insurance as required above.  All sums disbursed by the Agent in connection with any such actions, including, without limitation, court costs, expenses, other charges relating thereto and reasonable attorneys' fees, shall constitute part of the obligations due and owing hereunder, shall be payable on demand by the Credit Parties to the Agent and, until paid, shall bear interest at the highest rate applicable to Notes hereunder.


(d)

Within ninety (90) days after the date of Closing, Borrowers shall have obtained the Key-Man Life Insurance policy, and so long as any Notes or other Obligations remain outstanding, maintain the Key-Man Life Insurance policy.  Such insurance policy shall name the Agent, for the benefit of the Holders, as beneficiary and shall provide that such insurance policies may not be canceled unless the insurance carrier gives at least thirty (30) days' prior written notice of such cancellation to the Agent.  At the time of obtaining of the Key-Man Life Insurance policy, Borrowers shall have entered into, and the insurance company shall have acknowledged, an assignment of such Key-Man Policy in favor of the Agent in form and substance satisfactory to the Agent (as amended, modified and supplemented from time to time, the " Collateral Assignment ").


Section 8.12

Corporate Existence and Maintenance of Properties .  Each Credit Party shall, and shall cause each of its Subsidiaries to, maintain and preserve (a) its existence and good standing in the jurisdiction of its organization and (b) its qualification to do business and good standing in each jurisdiction where the nature of its business makes such qualification necessary (other than such jurisdictions in which the failure to be so qualified or in good standing could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect).  Each Credit Party shall, and shall cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of such Credit Party and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof.


Section 8.13

Non-circumvention .  Each Credit Party hereby covenants and agrees that none of the Credit Parties or any of their Subsidiaries will, by amendment of its articles or certificate of incorporation, bylaws, or other governing documents, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement or the other Transaction Documents, and will at all times in good faith carry out all of the provisions of this Agreement and the other Transaction Documents and take all action as may be reasonably necessary to protect the rights of the Holders and the Lenders.


Section 8.14

Conduct of Business .  The Credit Parties shall not conduct their businesses in violation of any law, ordinance or regulation of any Governmental Authority, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.  The Credit Parties shall not engage in any line of business other than the businesses engaged in on the Closing Date and businesses incidental thereto.



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Section 8.15

U.S. Real Property Holding Corporation .  None of the Credit Parties shall become a U.S. real property holding corporation or permit or cause its shares to be U.S. real property interests, within the meaning of Section 897 of the Code.


Section 8.16

Compliance with Laws .  Each Credit Party shall, and shall cause its Subsidiaries to, (i) comply in all material respects with federal, state and other applicable securities laws, and (ii) comply in all material respects with the requirements of all other applicable laws, rules, regulations and orders of any Governmental Authority (including all Environmental Laws).


Section 8.17

Additional Collateral .  With respect to any Property acquired after the Closing Date by any Credit Party as to which the Agent, for the benefit of the Lenders and the Holders, does not have a perfected Lien, such Credit Party shall promptly (i) execute and deliver to the Agent, for the benefit of the Lenders and the Holders, or its agent such amendments to the Security Documents or such other documents as the Agent, for the benefit of the Lenders, deems reasonably necessary or advisable to grant to the Agent, for the benefit of the Lenders, a security interest in such Property and (ii) take all other actions necessary or advisable to grant to the Agent, for the benefit of the Lenders and the Holders, a perfected and (subject to Permitted Liens) first priority security interest in such Property, including, without limitation, the filing of Mortgages and UCC financing statements in such jurisdictions as may be required by the Security Documents or by law or as may be requested by the Agent.


Section 8.18

Audit Rights; Field Exams; Appraisals; Meetings .


(a)

The Credit Parties shall, upon reasonable notice (except during the continuance of an Event of Default when notice shall not be required), subject to reasonable safety and security procedures, and at the Credit Parties' sole cost and expense, permit the Agent and each Lender or Holder (or any of their respective designated representatives) to visit and inspect any of the properties of the Credit Parties and their Subsidiaries, to examine the books of account of the Credit Parties and their Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of the Credit Parties and their Subsidiaries, and to be advised as to the same by their respective officers, and to conduct examinations and verifications (whether by internal commercial finance examiners or independent auditors), all at such reasonable times and intervals as the Agent and the Holders may reasonably request; provided that Agent and the Lenders shall not be permitted to exercise such audit rights more than once per Fiscal Year per Credit Party, unless an Event of Default shall have occurred and be continuing, in which case there shall be no limit on such audit rights.  .


(b)

The Credit Parties shall, upon reasonable notice, subject to reasonable safety and security procedures, and at the Credit Parties' sole cost and expense, permit the Agent and each Lender or Holder (or any of their respective designated representatives) to conduct field exams of the Collateral, all at such reasonable times and intervals as the Agent and the Lenders and Holders may reasonably request; provided that Agent and the Lenders shall not be permitted to exercise such field examination rights more than once per Fiscal Year per Credit Party, unless an Event of Default shall have occurred and be continuing, in which case there shall be no limit on such field examination rights.



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(c)

The Credit Parties shall, at Agent's request and upon reasonable notice, and at the Credit Parties' sole cost and expense, obtain an appraisal of the Collateral from an independent appraisal firm satisfactory to Agent; provided that in the absence of an Event of Default, the Credit Parties shall not be required to obtain more than one (1) appraisals per year.


(d)

The Credit Parties will, upon the request of the Agent, participate in a meeting of the Agent and the Lenders and Holders twice during each Fiscal Year to be held at the Borrower Representative's corporate offices (or at such other location as may be agreed to by the Borrower Representative and the Agent) at such time as may be agreed to by the Borrower Representative and the Agent.


Section 8.19

Pledge of Securities .  Each of the Credit Parties acknowledges and agrees that the Securities may be pledged by a Lender or Holder in connection with a bona fide margin account or other loan or financing arrangement that is secured by the Securities; provided such pledge is made in compliance with applicable federal and state securities laws.  Such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Lender or Holder effecting such pledge of Securities shall be required to provide any Credit Party with any notice thereof or otherwise make any delivery to any Credit Party pursuant to this Agreement or any other Transaction Document unless required in connection with registration of the Securities or by applicable law.  Each of the Credit Parties hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by Lender or Holder.


Section 8.20

Additional Issuances of Debt or Equity .  Except as set forth on Schedule 8.20, none of the Credit Parties or any of their Subsidiaries shall, directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its debt securities or Equity Interests, including without limitation any debt, preferred stock or other instrument or security that may be, at any time during its life, and under any circumstance, convertible into or exchangeable or exercisable for shares of Equity Interests, convertible securities or debt securities without the prior written consent of the Agent; provided , that notwithstanding the foregoing, Social may (x) issue Equity Interests pursuant to (i) the Approved Stock Plan, and (ii) Exempt Offerings and (y) incur Permitted Indebtedness.


Section 8.21

Right to Participate in Future Offering .


(a)

Without limiting anything set forth in Section 8.20, subject to the exceptions described below, during the period beginning on the date of this Agreement and ending on the Expiration Date (as such term is defined in the Warrants), Social shall not, and shall cause each of its Subsidiaries not to, (x) contract with any party for any debt financing with an equity component or equity financing, or (y) issue any equity securities of Social or any Subsidiary or securities convertible, exchangeable or exercisable into or for equity securities of Social or any of its Subsidiaries (including debt securities with an equity component) (a " Future Offering "), unless it shall have first delivered to each Holder of Warrants (or its designee appointed by such Holder) written notice (the " Future Offering Notice ") describing generally the proposed Future Offering and providing each Holder an option (any such Holder's " Holder Purchase Option ") to purchase up to its Aggregate Percentage (as defined below) of 9.70% of the total amount of securities to be issued in such Future Offering (the limitations referred to in this and the preceding sentence are collectively referred to as the " Capital Raising


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Limitations ").  For purposes of this Section 8.21, a Holder's " Aggregate Percentage " shall mean the percentage obtained by dividing (i) the aggregate Warrant Shares originally issuable upon exercise of the Warrants originally issued to such Holder on the Closing Date (or the applicable portion of such Warrants assigned to a Holder, in accordance with the terms hereof and the Warrants, that were originally issued to the assignor of such Warrants, as applicable), by (ii) the aggregate Warrant Shares originally issuable upon exercise of all of the Warrants issued on the Closing Date (in the case of each of clauses (i) and (ii), without regard to any limitations or other restrictions on exercise).


(b)

Upon the written request of any Holder of Warrants made within five (5) Business Days after its receipt of a Future Offering Notice (an " Additional Information Request "), Social shall provide such Holder, and each other Holder of Warrants, with such additional information regarding the proposed Future Offering, including the name of the purchaser, terms and conditions and use of proceeds thereof, as such Holder shall reasonably request.  A Holder of Warrants may exercise its Holder Purchase Option by delivering written notice (the " Holder Purchase Notice Date ") to Social within five (5) Business Days after the later of (i) the Holder's receipt of a Future Offering Notice or (ii) the date on which all Holders of Warrants have received all of the information reasonably requested in the Additional Information Requests, which notice shall state the quantity of securities being offered in the Future Offering that such Holder of Warrants will purchase, up to its Aggregate Percentage, and that quantity of securities it is willing to purchase in excess of its Aggregate Percentage.  In the event that one or more Holders of Warrants fail to elect to purchase up to each such Holder's Aggregate Percentage, then each Holder that has indicated that it is willing to purchase a number of securities in such Future Offering in excess of its Aggregate Percentage shall be entitled to purchase its pro rata portion (based upon the aggregate Warrant Shares issuable upon exercise of the Warrants held by the Holders that have elected to participate in the Future Offering, without regard to any limitations or other restrictions on exercise) of the securities to be issued in the Future Offering that one or more of the Holders of Warrants have not elected to purchase.


(c)

Social shall have thirty (30) days following the Holder Purchase Notice Date to sell the securities in the Future Offering (other than the securities to be purchased by Holders pursuant to this Section 8.21), upon terms and conditions no more favorable to the purchasers thereof than specified in the Future Offering Notice.  The exercise of a Holder Purchase Option shall be contingent upon, and contemporaneous with, the consummation of such Future Offering; provided, that notwithstanding a Holder's exercise of the Holder Purchase Option with respect to a particular Future Offering, the determination to complete any such Future Offering shall be within Social's sole discretion.  In connection with such consummation, each Holder of Warrants (if it exercises its Holder Purchase Option) shall deliver to Social duly and properly executed originals of any documents reasonably required by Social to effectuate such Future Offering together with payment of the purchase price for the securities being purchased by such Holder in such Future Offering, and Social or its Subsidiary, as appropriate, shall promptly issue to such Holder the securities purchased thereby.


(d)

In the event Social or its Subsidiary, as appropriate, has not sold such securities of the Future Offering within such thirty (30) day period described above, Social and the Subsidiaries shall not thereafter issue or sell such securities or any other securities subject to this Section 8.21 without first offering such securities to the Holders of Warrants in the manner provided in this Section 8.21.  The Capital Raising Limitations shall not apply to (i) any transaction involving Social's issuances of securities (A) as consideration in a merger or


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consolidation (the primary purpose or material result of which is not to raise or obtain equity capital or cash), (B) in connection with any strategic partnership or joint venture (the primary purpose or material result of which is not to raise or obtain equity capital or cash), or (C) as consideration for the acquisition of a business, product, license or other assets by Social (the primary purpose or material result of which is not to raise or obtain equity capital or cash); or (ii) any issuances of (W) shares of Common Stock pursuant to an offering expressly described in clause (a) and (b) of the definition of Exempt Offering set forth in Section 1.1 hereof; (X) shares of Common Stock pursuant to, and in accordance with the terms of, the Approved Stock Plan; (Y) shares of Common Stock issued or deemed to be issued by Social upon the conversion, exchange or exercise of any option, obligation or security outstanding on the date prior to the Closing Date and set forth in Schedule 7.7 to this Agreement, provided that the terms of such option, obligation or security are not amended or otherwise modified on or after the Closing Date, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of shares of Common Stock issued or issuable thereunder is not increased (whether by operation of, or in accordance with, the relevant governing documents or otherwise) on or after the Closing Date; or (Z) shares of Common Stock issued or deemed to be issued by Social upon exercise of the Warrants.


Section 8.22

Use of Proceeds .  The Credit Parties will use the proceeds from the sale of the (a) Closing Date Notes for the following purposes: (i) to pay a portion of the purchase price in connection with the consummation of the Closing Date Acquisition; (ii) to pay costs, fees and expenses incurred in connection with the transactions contemplated by the Transaction Documents; and (iii) for general working capital purposes limited solely to the Credit Parties' U.S. operations, and (b) Additional Notes for the following purposes: (i) to pay costs, fees and expenses incurred in connection with issuance of such Additional Notes and (ii) for general working capital purposes limited solely to the Credit Parties' U.S. operations.


Section 8.23

Costs, Expenses and Other Amounts .  The Borrowers, on behalf of itself and the other Credit Parties, shall (a) reimburse the Agent and the Lenders or their designee(s) for of the amount of reasonable and documented costs and expenses incurred in connection with the transactions contemplated by the Transaction Documents (including reasonable legal fees and disbursements in connection therewith, documentation and implementation of the transactions contemplated by the Transaction Documents and due diligence in connection therewith), which amounts, less any amounts paid in advance by the Borrowers, shall be withheld by each Lender from the Purchase Price paid by such Lender on the Closing Date as set forth in the Funds Flow Letter, (b) pay to Victory Park Management, LLC, (i) on the Closing Date, for its own account or for the account of such Persons as shall be determined by Victory Park Management, LLC in its sole discretion, a closing additional amount in an amount equal to $450,000 on the Closing Date, which amount shall be fully earned and due and payable on the Closing Date and shall not be refundable in whole or in part under any circumstances.  In addition, the Borrowers shall, within five (5) Business Days of receiving a request from the Agent therefor, reimburse Agent for any additional reasonable legal fees incurred post-closing in connection with perfecting the Agent's security interests and any additional filing or recording fees in connection therewith.  The Borrowers shall be responsible for the payment of, and shall pay, any placement agent's fees, financial advisory fees, or broker's commissions relating to or arising out of the transactions contemplated hereby, and shall hold Agent, each Holder and each Lender harmless against, any liability, loss or expense (including, without limitation, reasonable attorney's fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment.


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Section 8.24

Modification of Organizational Documents and Certain Documents .  The Credit Parties shall not, without the prior written consent of the Agent, (i) permit the charter, by-laws or other organizational documents of any Credit Party, or any Material Contract, to be amended or modified in any material respect or, in any event, in any manner materially adverse to the interests of the Agent, Lenders or Holders, or (ii) amend, supplement or otherwise modify, or waive any rights under, the Closing Date Acquisition Documents in any material respect or, in any case, in any manner materially adverse to the interests of the Agent, Lenders or Holders; provided, that the Credit Parties hereby acknowledge and agree that any (x) amendment or other modification to the Indemnity Escrow Agreement that changes Social's account or wiring instruction set forth on Exhibit A thereto on the Closing Date or (y) or any other notice or modification delivered or otherwise agreed to under the Indemnification Escrow Agreement that designates any Social account or wiring instructions other than as set forth on Exhibit A thereto on the Closing Date, in each case, is materially adverse to the interest of the Agent, Lenders and Holders.


Section 8.25

Joinder .  The Credit Parties shall notify the Holders prior to the formation or acquisition of any Subsidiaries.  For any Subsidiaries formed or acquired after the Closing Date, the Credit Parties shall at their own expense, upon formation or acquisition of such Subsidiary, cause each such Subsidiary to execute an instrument of joinder in the form attached hereto as Exhibit L (a " Joinder Agreement ") in form and substance reasonably satisfactory to the Agent obligating such Subsidiary to any or all of the Transaction Documents deemed necessary or appropriate by the Agent and cause the applicable Person that owns the Equity Interests of such Subsidiary to pledge to the Holders 100% of the Equity Interests owned by it of each such Subsidiary formed or acquired after the Closing Date and execute and deliver all documents or instruments required thereunder or appropriate to perfect the security interest created thereby.  In the event a Person becomes a Borrower (a " New Borrower ") and/or Guarantor (a " New Guarantor ") pursuant to the Joinder Agreement, upon such execution the New Borrower and/or New Guarantor shall be bound by all the terms and conditions hereof and the other Transaction Documents to the same extent as though such New Borrower and/or New Guarantor had originally executed the Transaction Documents.  The addition of a New Borrower and/or New Guarantor shall not in any manner affect the obligations of the other Credit Parties hereunder or thereunder.  Each Credit Party and Lender and the Agent hereto acknowledges that the schedules and exhibits hereto or thereto may be amended or modified in connection with the addition of any New Borrower and/or New Guarantor to reflect information relating to such New Borrower and/or New Guarantor, as applicable.  Compliance with this Section 8.24 shall not excuse any violation of Section 8.8.



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Section 8.26

Investments .  The Credit Parties shall not, and none of the Credit Parties shall permit any of its Subsidiaries to, make or permit to exist any Investment in any other Person, except the following:


(a)

Cash Equivalent Investments;


(b)

bank deposits in the ordinary course of business;


(c)

Investments in securities of account debtors received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such account debtors;


(d)

advances made in connection with purchases of goods or services in the ordinary course of business;


(e)

Investments owned by any Credit Party and any Subsidiary of any Credit Party on the Closing Date as set forth on Schedule 8.25;


(f)

deposits of cash in the ordinary course of business to secure performance of operating leases; and


(g)

guaranties by the Credit Parties and their Subsidiaries of Indebtedness of Credit Parties and Subsidiaries of Credit Parties that constitute Permitted Indebtedness, provided, that if the underlying Indebtedness is subordinated to the Obligations, then the guarantees of such Indebtedness shall be subordinated to the Obligations to at least the same extent.


Section 8.27

Further Assurances .  At any time or from time to time upon the request of the Agent, each Credit Party will, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as the Agent may reasonably request in order to effect fully the purposes of the Transaction Documents.  In furtherance and not in limitation of the foregoing, each Credit Party shall take such actions as the Agent may reasonably request from time to time to ensure that the Obligations are guaranteed by all Credit Parties and secured by substantially all of the assets of the Credit Parties.


Section 8.28

Board Observation Rights .  Each of the Credit Parties agrees that the Agent and/or one of its designated Affiliates, as the case may be, shall be entitled to (i) have two (2) observers attend, in a non-voting capacity, whether in person or telephonically, meetings of the board of directors (or other similar body) of such Credit Party (which, in the case of Social, shall be held no less frequently than once per Fiscal Quarter) and (ii) invite members of the management team of such entity to participate in such meeting.  (For the sake of clarification, the aggregate number of such observers that may be designated by the Agent and its designated Affiliates, taken together, is two (2)).  Each of the Credit Parties shall provide such designated observers copies of notices, minutes, consents and other materials provided to the members of its board of directors (or other similar body) and shall reimburse such observer for all costs and expenses reasonably incurred in connection with attending any of such meetings.  Each of the Credit Parties agrees that no such meeting, whether in person or telephonically, shall be held unless each such designated observers shall have reasonable prior notice thereof.



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Section 8.29

Form D and Blue Sky .  The Credit Parties agree to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Lender promptly after such filing.  Each of the Credit Parties shall, on or before the Closing Date, take such action as is necessary in order to obtain an exemption for or to qualify the Securities for sale to the Lenders at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Lenders on or prior to the Closing Date.  Social shall make all filings and reports relating to the offer and sale of the Securities required under applicable securities or "Blue Sky" laws of the states of the United States on a timely basis.


Section 8.30

Reporting Status .  During the period beginning with the Closing Date and ending on the first date on which no Warrants are outstanding and no Investor holds any Registrable Securities (the " Reporting Period "), Social shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and Social shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination.


Section 8.31

Listing; DTC Eligibility .  Social shall take all actions necessary to remain eligible for quotation of its securities on the Principal Market.  Social shall use its commercially reasonable efforts to (a) secure the listing of all of the Registrable Securities on a National Exchange as promptly as practicable following such time as Social meets all of the financial and other quantitative listing requirements for a National Exchange, and (b) following such listing, maintain such listing of all Registrable Securities from time to time issuable under the terms of the Transaction Documents.  Following such listing, neither Social nor any other Borrower shall take any action that would reasonably be expected to result in the delisting or suspension of the Common Stock from the National Exchange.  Social shall pay all fees and expenses in connection with satisfying its obligations under this Section 8.31.  At all times during the Reporting Period, (i) the Common Stock shall be eligible for clearing through DTC, through its Deposit/Withdrawal At Custodian (DWAC) system, (ii) Social shall be eligible and participating in the Direct Registration System (DRS) of DTC with respect to the Common Stock, and (iii) the Common Stock shall not be subject to any DTC "chill," "freeze" or similar restriction with respect to any DTC services, including the clearing of shares of Common Stock through DTC.


Section 8.32

Removal of Legends .  Upon the written request to Social of a holder of a certificate or other instrument representing any Securities, the 1933 Act Legend shall be removed and Social shall issue a certificate without the 1933 Act Legend to the holder of the Securities upon which it is stamped (or, in the case of any Warrant Shares being acquired upon exercise of any Warrant, Social shall issue the Warrant Shares without being subject to the 1933 Act Legend), if (i) such Securities are registered for resale under the 1933 Act, (ii) in connection with a sale transaction, such holder provides Social with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the 1933 Act, (iii) such holder provides Social with reasonable assurances that the Securities can be sold pursuant to Rule 144 without compliance with Rule 144(e) or Rule 144(f) (or successors thereto), (iv) such holder provides Social reasonable assurances that the Securities have been or are being sold pursuant to Rule 144, or (v) such holder certifies, on or after the date that is six (6) months after the date on which such holder acquired the Securities (or is deemed to have acquired the Securities under Rule 144, which, in the case of Warrant Shares issued upon exercise of Warrants through a reduction in principal


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amount of a Note in accordance with Section 2(a) of the Warrants and Section 2.3(e) of this Agreement, shall be the original date of issuance of such Note pursuant to this Agreement, regardless of any exchange or replacement hereof), that such holder is not an "affiliate" of Social (as defined in Rule 144).  Social shall be responsible for the fees of its transfer agent and all of the DTC fees associated with such issuance.  Social acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holders of the Securities.  Accordingly, Social acknowledges that the remedy at law for a breach of its obligations under this Section 8.32 will be inadequate and agrees that, in the event of a breach or threatened breach of this Section 8.32, such holder shall be entitled, in addition to all other available remedies, to an injunctive order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.


Section 8.33

Disclosure of Transactions and Other Material Information .  On or before 8:30 a.m., New York City time, on the second (2nd) Business Day following the Closing Date, Social shall file a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents and including as exhibits to such Form 8-K this Agreement, the form of Note, the form of Warrant and the Registration Rights Agreement (such filing, including all attachments, the " 8-K Filing ").  Social shall provide the Agent, the Lenders and the Holders a reasonable opportunity to review the 8-K Filing prior to the filing thereof, subject to Section 8.34 of this Agreement.  Any material non-public information provided by any Borrower to any Lender in connection with the transactions contemplated hereby shall be included by Social within the aforementioned 8-K Filing.  None of the Credit Parties or any of their respective Subsidiaries, on the one hand, or the Lenders, Holders or the Agent, on the other hand, shall issue any press releases or any other public statements with respect to the transactions contemplated hereby or disclosing the name of any Lender, Holder or the Agent without the prior written consent of (a) the Lenders, Holders or the Agent, with respect to any proposed issuance by the Credit Parties or any of their respective Subsidiaries, or (b) the Credit Parties, with respect to any proposed issuance by any Lender, Holder or the Agent, in any such case, which consent shall not be unreasonably withheld; provided, however, that Social shall be entitled, without the prior approval of any Lender or Holder or the Agent, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided, that in the case of clause (ii), each Lender, Holder and the Agent shall be consulted by Social in connection with any such press release or other public disclosure prior to its release).  Notwithstanding anything to the contrary contained herein, Social and each of the other Credit Parties acknowledges and agrees that each Holder and/or its Affiliates may file a Schedule 13G or Schedule 13D (or amendment thereto) and other filings required under the 1934 Act relating to the transactions contemplated hereby and any amendments thereto, and include in such Schedule 13G or Schedule 13D (and amendments thereto) and any such other filings under the 1934 Act such information regarding the transactions contemplated hereby and other matters relating to Social and the other Credit Parties as such Holder or Affiliate thereof determines after consultation with its legal counsel should be included therein, and Social and each of the other Credit Parties agrees that no such filing (nor the inclusion of any such information therein) will constitute a violation of the provisions of this Agreement, any other Transaction Document or any other agreement to which any Credit Party is a party or otherwise bound; provided, however, that each Lender shall use its reasonable efforts to limit any such disclosure to the requirements of Schedule 13G or Schedule 13D (and amendment thereto) or such other applicable form or schedule as determined by such Lender in consultation with its legal counsel.


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Section 8.34

Material Non-public Information .  Each Holder shall have the right, but not the obligation, to deliver a written notice (a " MNPI Stop Notice ") to Social requesting that none of the Credit Parties or any of their respective Affiliates, agents or other representatives provide any material non-public information regarding Social or any other Credit Party to such Holder.  Following Social's receipt of any such MNPI Stop Notice from a Holder and until such time as such Holder elects to again receive material non-public information by delivering a written notice to that effect to Social (a " MNPI Initiation Notice "; and the period beginning with a Holder's delivery of an MNPI Stop Notice and ending on Social's receipt of a MNPI Initiation Notice from such Holder is referred to as a " MNPI Restriction Period "), except to the extent otherwise required to be included in any communication to such Lender pursuant to this Agreement or any other Transaction Document (other than pursuant to clauses (a) or (b) of Section 8.2), Social and the other Credit Parties shall not, and shall cause each of their respective Affiliates, agents and other representatives not to, provide to such Holder any material non-public information (and, for the avoidance of doubt, during any MNPI Restriction Period with respect to any Holder, (i) Social shall not be obligated to deliver to such Holder the documents or information contemplated by clauses (a) or (b) of Section 8.2 until such documents or information have been publicly disclosed, and (ii) the board observation rights of the Agent and any designated Affiliate pursuant to Section 8.28 shall be deemed to be temporarily suspended and waived).  Notwithstanding anything to the contrary herein, during an MNPI Restriction Period with respect to any Holder, in the event that Social believes that a notice or communication to any such Holder contains material non-public information relating to Social or any other Credit Party, Social shall so indicate to such Holder contemporaneously with delivery of such notice or communication; and in the absence of any such indication, such Holder shall be allowed to presume that all matters relating to such notice or communication do not constitute material non-public information relating to Social or any other Credit Party.  During an MNPI Restriction Period, unless Social has in good faith determined that the matters relating to such notice do not constitute material non-public information relating to Social or any other Credit Party, Social shall contemporaneously with delivery of such notice or communication publicly disclose such material non-public information.  In the event of a breach by Social of the covenants set forth in this Section 8.34, any of the other Credit Parties, or any of its or their respective Affiliates, agents or other representatives, in addition to, and without limiting, any other remedy provided herein or in the other Transaction Documents, a Holder shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of material non-public information disclosed to such Holder in violation of this Section 8.34 without the prior approval of any of the Credit Parties, or any of its or their respective Affiliates, agents or representatives; provided that, in the event of a breach of this Section 8.34 by any Credit Party, such Holder shall provide Social with an opportunity to make immediate public disclosure of such information in lieu of such Holder making public disclosure of such information in accordance with this Section 8.34.  No such Holder shall have any liability to any Credit Party or any of their respective Affiliates, officers, directors, employees, stockholders or agents for any such disclosure made in accordance with this Section 8.34 provided that such disclosure is reasonably consistent with the information disclosed to such Holder by Social or the other Credit Parties pursuant to this Section 8.34.



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Section 8.35

Reservation of Shares .  Social shall take all action necessary to reserve and keep available for exercise under the Warrants as of and at all times after the Closing Date a number of authorized and unissued shares of Common Stock equal to at least one hundred percent (100%) of the number of Warrant Shares issuable upon the exercise of all of the Warrants then outstanding (without regard to any limitations or restrictions on the exercise thereof).  The number of shares of Common Stock reserved for exercise of the Warrants shall be deemed to be allocated pro rata among the Holders of the Warrants based on the Warrant Shares issuable upon exercise of the Warrants held by each Holder at the time of issuance of the Warrants (without regard to any limitations or restrictions on the exercise thereof).  In the event any Holder of Warrants shall sell or otherwise transfer any portion of its Warrants, each transferee shall be allocated a pro rata portion of the number of shares of Common Stock reserved for such transferor.  Any shares of Common Stock reserved and deemed to be allocated to any Person that ceases to hold any Warrants shall be allocated to the remaining holders of the Warrants, pro rata based on the Warrant Shares issuable upon exercise of the Warrants then held by such holders (without regard to any limitations or restrictions on the exercise thereof).


Section 8.36

Internal Accounting Controls .  During the Reporting Period, Social shall, and shall cause each of the other Borrowers to:


(a)

at all times keep books, records and accounts with respect to all of such Person's business activities, in accordance with sound accounting practices and GAAP;


(b)

maintain 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 and liability accountability, (iii) access to assets or incurrence of liability is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any differences; and


(c)

timely file and make publicly available on the SEC's EDGAR system, all certifications and statements required by (A) Rule 13a-14 or Rule 15d-14 under the 1934 Act and (B) Section 906 of Sarbanes Oxley with respect to any periodic reports filed pursuant to the 1934 Act.


Section 8.37

Regulation M .  Neither Social nor any of the other Borrowers or any of their respective Affiliates will take any action prohibited by Regulation M under the 1934 Act in connection with the offer, sale and delivery of the Notes, the Warrants and the Warrant Shares contemplated hereby.



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Section 8.38

Disqualification Events .  During the Reporting Period, Social will notify the Holders in writing of (a) any Disqualification Event relating to any Covered Person and (b) any event that would, with the passage of time, become a Disqualification Event relating to any Covered Person.


Section 8.39

Hiring of Chief Financial Officer .  Social, its board of directors and all applicable committees thereof shall use their reasonable best efforts to identify, interview and negotiate with candidates for Chief Financial Officer of Social and, subject to the approval of the board of directors of Social, hire and appoint a Chief Financial Officer as soon as reasonably practicable after the Closing Date, but in no event later than twelve (12) months following the Closing Date.


Section 8.40

Segregated Accounts .  Social and each of its Subsidiaries shall maintain separate bank accounts for each such entity and the cash of any such Person shall not be commingled with the cash of any other such Person.


Section 8.41

Operating Losses .  The operating losses of Social or any of its Subsidiaries shall be funded using any combination of (i) the available cash of such Person and (ii) the net issuance proceeds from the issuance of the Equity Interests of Social, which, to the extent the operating losses being funded are the losses of a Subsidiary of Social, are contributed to the equity of such Subsidiary.


ARTICLE IX

CROSS GUARANTY


Section 9.1

Cross-Guaranty .  Each Guarantor (including, for the avoidance of doubt, each Borrower with respect to the Obligations of each other Borrower), jointly and severally, hereby absolutely and unconditionally guarantees to the Agent, the Lenders, the Holders and their respective successors and assigns the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of, all Obligations.  Each Guarantor agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, that its obligations under this ARTICLE 9 shall not be discharged until payment and performance, in full, of the Obligations under the Transaction Documents has occurred and all commitments (if any) to lend hereunder have been terminated, and that its obligations under this ARTICLE 9 shall be primary, absolute and unconditional, irrespective of, and to the extent permitted by law, unaffected by:


(a)

the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Transaction Document or any other agreement, document or instrument to which  any Credit Party is or may become a party;


(b)

the absence of any action to enforce this Agreement (including this ARTICLE 9) or any other Transaction Document or the waiver or consent by the Agent, the Lenders or the Holders with respect to any of the provisions thereof;


(c)

the Insolvency of any Credit Party or Subsidiary of a Credit Party; or



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(d)

any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor.


Each Guarantor shall be regarded, and shall be in the same position, as principal debtor with respect to the obligations guaranteed hereunder.


Section 9.2

Waivers by Guarantors .  To the extent permitted by applicable law, each Guarantor expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel the Agent, the Lenders or the Holders to marshal assets or to proceed in respect of the obligations guaranteed hereunder against any other Credit Party or Subsidiary, any other party or against any security for the payment and performance of the obligations under the Transaction Documents before proceeding against, or as a condition to proceeding against, such Guarantor.  It is agreed among each Guarantor that the foregoing waivers are of the essence of the transaction contemplated by this Agreement and the other Transaction Documents and that, but for the provisions of this ARTICLE 9 and such waivers, the Agent, the Lenders and the Holders would decline to enter into this Agreement.


Section 9.3

Benefit of Guaranty .  Each Guarantor agrees that the provisions of this ARTICLE 9 are for the benefit of the Agent, the Lenders the Holders and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Credit Party and the Agent, the Lenders and the Holders, the obligations of such other Credit Party under the Transaction Documents.


Section 9.4

Waiver of Subrogation, Etc .  Notwithstanding anything to the contrary in this Agreement or in any other Transaction Document, and except as set forth in Section 9.7, each Guarantor hereby expressly and irrevocably waives any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor until the Obligations (other than unasserted contingent indemnification Obligations) have been paid in full or otherwise satisfied.  Each Guarantor acknowledges and agrees that this waiver is intended to benefit the Agent, the Lenders and the Holders and shall not limit or otherwise affect such Guarantor's liability hereunder or the enforceability of this ARTICLE 9, and that the Agent, the Lenders and the Holders and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 9.4.


Section 9.5

Election of Remedies .  If the Agent, the Lenders or the Holders may, under applicable law, proceed to realize their benefits under any of the Transaction Documents, the Agent, any of the Lenders or any of the Holders may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this ARTICLE 9.  If, in the exercise of any of its rights and remedies, the Agent, the Lenders or any of the Holders shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Credit Party or any other Person, whether because of any applicable laws pertaining to "election of remedies" or the like, each Credit Party hereby consents, to the extent permitted by applicable law, to such action by the Agent, such Lenders or such Holders and waives any claim based upon such action, even if such action by the Agent, such Lenders or such Holders shall result in a full or partial loss of any rights of subrogation that any Credit Party might otherwise have had but for such action by the Agent, such Lenders or such Holders.  Unless otherwise required by applicable law, any election of remedies that results in the denial or


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impairment of the right of the Agent, the Lenders or the Holders to seek a deficiency judgment against any Credit Party shall not impair any other Credit Party's obligation to pay the full amount of the obligations under the Transaction Documents.


Section 9.6

Limitation .  Notwithstanding any provision herein contained to the contrary, each Guarantor's liability under this ARTICLE 9 (which liability is in any event in addition to amounts for which the Borrowers are primarily liable under the Transaction Documents) shall be limited to an amount not to exceed as of any date of determination the greater of:


(a)

the net amount of all amounts advanced to such Guarantor under this Agreement or otherwise transferred to, or for the benefit of, such Guarantor (including any interest and fees and other charges); and


(b)

the amount that could be claimed by the Agent, the Lenders or the Holders from such Guarantor under this ARTICLE 9 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into account, among other things, such Guarantor's right of contribution and indemnification from each other Credit Party under Section 9.7.


Section 9.7

Contribution with Respect to Guaranty Obligations .


(a)

To the extent that any Guarantor shall make a payment under this ARTICLE 9 of all or any of the obligations under the Transaction Documents (other than financial accommodations made to that Guarantor for which it is primarily liable) (a " Guarantor Payment ") that, taking into account all other Guarantor Payments then previously or concurrently made by any other Guarantor, exceeds the amount that such Guarantor would otherwise have paid if each Guarantor had paid the aggregate obligations under the Transaction Documents satisfied by such Guarantor Payment in the same proportion that such Guarantor's "Allocable Amount" (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Guarantor as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Obligations under the Transaction Documents and termination of the Transaction Documents (including all commitments (if any) to lend hereunder), such Guarantor shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Guarantor for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.


(b)

As of any date of determination, the "Allocable Amount" of any Guarantor shall be equal to the maximum amount of the claim that could then be recovered from such Guarantor under this ARTICLE 9 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.



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(c)

This Section 9.7 is intended only to define the relative rights of Guarantor and nothing set forth in this Section 9.7 is intended to or shall impair the obligations of Credit Parties, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement, including Section 9.1.  Nothing contained in this Section 9.7 shall limit the liability of any Credit Party to pay the financial accommodations made directly or indirectly to that Credit Party and accrued interest, fees and expenses with respect thereto for which such Credit Party shall be primarily liable.


(d)

The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Guarantor to which such contribution and indemnification is owing.


(e)

The rights of the indemnifying Guarantor against other Guarantor under this Section 9.7 shall be exercisable upon the full and indefeasible payment in full in cash of the Obligations under the Transaction Documents and the termination of the Transaction Documents.


Section 9.8

Liability Cumulative .  The liability of each Guarantor under this ARTICLE 9 is in addition to and shall be cumulative with all liabilities of each other Credit Party to the Agent, the Lenders and the Holders under this Agreement and the other Transaction Documents to which such Credit Party is a party or in respect of any obligations under the Transaction Documents or obligation of the other Credit Party, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.


Section 9.9

Stay of Acceleration .  If acceleration of the time for payment of any amount payable by the Credit Parties under this Agreement is stayed upon the insolvency, bankruptcy or reorganization of any of the Credit Parties, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable jointly and severally by the Credit Parties hereunder forthwith on demand by the Agent.


Section 9.10

Benefit to Borrowers .  All of the Credit Parties and their Subsidiaries are engaged in related businesses and integrated to such an extent that the financial strength and flexibility of each such Person has a direct impact on the success of each other Person.  Each Credit Party and each Subsidiary will derive substantial direct and indirect benefit from the purchase and sale of the Notes hereunder.


ARTICLE X

RIGHTS UPON EVENT OF DEFAULT


Section 10.1

Event of Default .  Each of the following events shall constitute an "Event of Default":


(a)

any Credit Parties' failure to pay to the Agent and/or Holders and/or Lenders any amount of (i) principal or (ii) within three (3) Business Days after the same shall become due, interest (including interest calculated at the Default Rate), Late Charges, Prepayment Premium, Yield Maintenance Premium, redemptions or any other amount when and as due under this Agreement, the Notes and the Warrant (including, without limitation, the


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Borrowers' failure to pay any redemption payments or amounts hereunder, under the Notes or under the Warrant) or any other Transaction Document, or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby;


(b)

any default occurs and is continuing under, or any redemption of or acceleration prior to maturity of, any Indebtedness of any Credit Party or any Subsidiary of any Credit Party in excess of $100,000;


(c)

(i) any Credit Party or any Subsidiary of any Credit Party, pursuant to or within the meaning of Title 11, U.S. Code, or any similar federal, foreign or state law for the relief of debtors (collectively, " Bankruptcy Law "), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, or to the conversion of an involuntary case to a voluntary case, (C) consents to the appointment of or taking of possession by a receiver, trustee, assignee, liquidator or similar official (a " Custodian ") for all or a substantial part of its property, (D) makes a general assignment for the benefit of its creditors, or (E) is Insolvent or is otherwise generally unable to pay its debts as they become due; or (ii) the board of directors (or similar governing body) of any Credit Party or any Subsidiary of any Credit Party (or any committee thereof) adopts any resolution or otherwise authorizes any action to approve any of the actions referred to in this Section 10.1(c) or Section 10.1(d);


(d)

a court of competent jurisdiction (i) enters an order or decree under any Bankruptcy Law, which order or decree (A) (1) is not stayed or (2) is not rescinded, vacated, overturned, or otherwise withdrawn within thirty (30) days after the entry thereof, and (B) is for relief against any Credit Party or any Subsidiary of any Credit Party in an involuntary case, (ii) appoints a Custodian over all or a substantial part of the property of any Credit Party or any Subsidiary of any Credit Party and such appointment continues for thirty (30) days, (iii) orders the liquidation of any Credit Party or any Subsidiary of any Credit Party, or (iv) issues a warrant of attachment, execution or similar process against any substantial part of the property of any Credit Party or any Subsidiary of any Credit Party;


(e)

a final judgment or judgments for the payment of money in excess of $100,000 or that otherwise could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect are rendered against any Credit Party or any Subsidiary of any Credit Party and which judgments are not, within thirty (30) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within thirty (30) days after the expiration of such stay, unless (in the case of a monetary judgment) such judgment is covered by third-party insurance, so long as the applicable Credit Party or Subsidiary provides the Agent a written statement from such insurer (which written statement shall be reasonably satisfactory to the Agent) to the effect that such judgment is covered by insurance and such Credit Party or Subsidiary will receive the proceeds of such insurance within thirty (30) days following the issuance of such judgment;


(f)

any Credit Party breaches any covenant, or other term or condition of any Transaction Document, except (i) in the case of a breach of a covenant or other term or condition of any Transaction Document (other than Sections 8.1, 8.2, 8.3(c), (h) or (l), 8.4 through 8.11, 8.13, 8.18, 8.20, 8.21, 8.23, 8.24, 8.25 and 8.27, 8.29, 8.30 and 8.31 of this Agreement and the covenants, terms and conditions of the SBA Side Letter) which is curable, only if such breach


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continues for a period of five (5) Business Days, or such longer period agreed to by Agent in writing in its sole discretion, and (ii) a breach addressed by the other provisions of this Section 10.1;


(g)

a Change of Control occurs;


(h)

any representation or warranty made by any Credit Party herein or any other Transaction Document is breached or is false or misleading, each in any material respect when made;


(i)

[Reserved.];


(j)

the repudiation by any Credit Party of any of its obligations under any Transaction Document, or any Security Document or any term thereof shall cease to be, or is asserted by any Credit Party not to be, a legal, valid and binding obligation of any Credit Party enforceable in accordance with its terms;


(k)

any Lien against the Collateral intended to be created by any Security Document shall at any time be invalidated, subordinated or otherwise cease to be in full force and effect, for whatever reason other than as a result of any direct action or inaction by the Collateral Agent, or any security interest purported to be created by any Security Document shall cease to be, or shall be asserted by any Credit Party not to be, a valid, first priority perfected Lien (to the extent that any Transaction Document obligates the parties to provide such a perfected first priority Lien, and except to the extent Permitted Liens are permitted by the terms of the Transaction Documents to have priority) in the Collateral (except as expressly otherwise provided under and in accordance with the terms of such Transaction Document);


(l)

any material provision of any Transaction Document shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by any Credit Party, or a proceeding shall be commenced by any Credit Party, or by any Governmental Authority having jurisdiction over such Credit Party, seeking to establish the invalidity or unenforceability thereof, or any Credit Party shall deny that it has any liability or obligation purported to be created under any Transaction Document;


(m)

the material breach by any Credit Party or any of its Subsidiaries of an agreement or agreements (in each case, other than a Transaction Document) to which it is a party that involves the payment to or by such Credit Party or Subsidiary, individually or in the aggregate, of more than $100,000 (whether by set-off or otherwise) in any six (6) month period;


(n)

the occurrence of any event that will have, based on the reasonable belief of Agent and Lenders, a Material Adverse Effect;


(o)

any Credit Party or Subsidiary liquidates, dissolves, terminates or suspends its business operations or otherwise fails to operate its business in the ordinary course;


(p)

if either of Christopher Miglino or Richard Steel shall, at any time for any reason (other than his death or disability), cease to be employed by the Credit Parties in the same position and with duties substantially similar to those held as of the Closing Date and, with


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respect to Richard Steel only, the Credit Parties fail to hire a replacement reasonably acceptable to the Agent within ninety (90) days of Richard Steel ceasing to be so employed.


(q)

(i) there occurs one or more ERISA Events which individually or in the aggregate result(s) in or could reasonably be expected to result in liability of the Credit Parties or any of their Subsidiaries in excess of $100,000 during the term hereof; or (ii) there exists any fact or circumstance that could reasonably be expected to result in the imposition of a Lien pursuant to Section 430(k) of the Code or ERISA or a violation of Section 436 of the Code;


(r)

any event or circumstance which causes the Agent to reasonably believe that the Obligations are inadequately secured and that the likelihood for repayment of the Obligations is or will soon be impaired, time being of the essence;


(s)

any default or event of default (monetary or otherwise) shall occur with respect to any Material Contract (and such default or event of default continues beyond any applicable cure or grace period);


(t)

the subordination provisions of, or any consent, acknowledgment or agreement under, the Seller Note and Earnout Subordination Agreement or any other subordination agreement shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or any Person party or subject thereto shall contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations, for any reason shall not have the priority contemplated by this Agreement or the Seller Note and Earnout Subordination Agreement;


(u)

the failure of the Common Stock to be quoted or listed on the Principal Market;


(v)

a Holder of a Warrant has not received all of the Warrant Shares prior to the tenth (10th) Business Day after the Warrant Share Delivery Date (as defined in the Warrants) with respect to an exercise of such Warrant, other than due to the pendency of a dispute being resolved in accordance with Section 2(d) of the Warrants;


(w)

Social or the transfer agent for the Common Stock provides notice to any holder of the Warrants, including by way of public announcement, at any time of its intention not to comply with an Exercise Notice (as defined in the Warrants) delivered in accordance with the terms of the respective Warrants (excluding, however, a notice that relates solely to a bona fide dispute that is subject to and being resolved pursuant to, and in compliance with the time periods and other provisions of, the dispute resolution provisions of the Warrants);


(x)

the shares of Common Stock cease to be registered under Section 12 of the 1934 Act; or


(y)

Social fails to timely make any filing with the SEC required under the 1934 Act or any rules or regulations promulgated thereunder (other than a Current Report on Form 8-K that is required solely pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a) or 5.02(e) of Form 8-K), provided that any filing made within the time period permitted by Rule 12b-25 under the 1934 Act and pursuant to a timely filed Form 12b-25 shall, for purposes of this clause (y), be deemed to be timely filed.


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Section 10.2

Acceleration Right .


(a)

Promptly after the occurrence of an Event of Default, the Borrower Representative shall deliver written notice thereof via email, facsimile and overnight courier (an " Event of Default Notice ") to the Agent.  At any time after the earlier of the Agent's and the Holders' receipt of an Event of Default Notice and the Agent becoming aware of an Event of Default which has not been cured or waived, the Agent, at the Request of the Required Holders, may require the Borrowers to redeem all or any portion of the Notes (an " Event of Default Redemption ") by delivering written notice thereof (the " Event of Default Redemption Notice ") to the Borrower Representative, which Event of Default Redemption Notice shall indicate the portion of the Notes that the Agent, at the request of the Required Holders, is requiring the Borrowers to redeem; provided , that upon the occurrence of any Event of Default described in Section 10.1(c) or Section 10.1(d), the Notes, in whole, shall automatically, and without any action on behalf of the Agent, be redeemed by the Borrowers.  All Notes subject to redemption by the Borrowers pursuant to this Section 10.2 shall be redeemed by the Borrowers at a price equal to the outstanding principal amount of the Notes, plus accrued and unpaid interest, Yield Maintenance Premium, and accrued and unpaid Late Charges and all other amounts due under the Transaction Documents (the " Event of Default Redemption Price ").


(b)

In the case of an Event of Default Redemption, the Borrowers shall deliver the applicable Event of Default Redemption Price to the Agent within three (3) Business Days after the Borrower Representative's receipt of the Event of Default Redemption Notice. In the case of an Event of Default Redemption of less than all of the principal of the Notes, the Borrowers shall promptly cause to be issued and delivered to the Holders new Notes (in accordance with Section 2.7) representing the outstanding principal which has not been redeemed.


Section 10.3

Consultation Rights .  Without in any way limiting any remedy that the Holders may have, at law or in equity, under any Transaction Document (including under the foregoing provisions of this ARTICLE 10) or otherwise, upon the occurrence and during the continuance of any Event of Default, upon the request of the Agent, the Credit Parties shall hire or otherwise retain a consultant, advisor or similar Person acceptable to the Agent to advise the Credit Parties with respect to their business and operations.


Section 10.4

Other Remedies .  The remedies provided herein and in the Notes shall be cumulative and in addition to all other remedies available under any of the other Transaction Documents, at law (including, without limitation, under the UCC) or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Agent's, any Lender's or any Holder's right to pursue actual and consequential damages for any failure by the Credit Parties to comply with the terms of this Agreement, the Notes and the other Transaction Documents.  Amounts set forth or provided for herein and in the Notes with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Holders and shall not, except as expressly provided herein, be subject to any other obligation of the Credit Parties (or the performance thereof).  Each of the Credit Parties acknowledges that a breach by it of its obligations hereunder and under the Notes and the other Transaction Documents will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate.  The Credit Parties therefore agree that, in the event of any such breach or threatened breach, the Agent, the Lenders and the Holders shall be entitled, unless


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prohibited by applicable law, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.


ARTICLE XI

INTENTIONALLY OMITTED


ARTICLE XII

AGENCY PROVISIONS


Section 12.1

Appointment .  Each of the Holders and Lenders hereby irrevocably designates and appoints Agent as the administrative agent and collateral agent of such Holder or such Lender (or the Holders or Lenders represented by it) under this Agreement and the other Transaction Documents for the term hereof (and Agent hereby accepts such appointment), and each such Holder and Lender irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and the other Transaction Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Transaction Documents, together with such other powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary elsewhere in this Agreement or the other Transaction Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Transaction Documents or otherwise exist against the Agent.  Without limiting the generality of the foregoing, Agent shall have the sole and exclusive right and authority (to the exclusion of the Lenders and Holders), and is hereby authorized, to (a) act as the disbursing and collecting agent for the Lenders and Holders with respect to all payments and collections arising in connection with the Transaction Documents (including in any proceeding described in Sections 10.1(c) or 10.1(d) or any other bankruptcy, insolvency or similar proceeding), and each Person making any payment in connection with any Transaction Document to any Lender or Holder is hereby authorized to make such payment to Agent, (b) file and prove claims and file other documents necessary or desirable to allow the claims of the Agent, Lenders and Holders with respect to any Obligation in any proceeding described in Sections 10.1(c) or 10.1(d) or any other bankruptcy, insolvency or similar proceeding (but not to vote, consent or otherwise act on behalf of such Person), (c) act as collateral agent for itself and each Lender and Holder for purposes of the perfection of all Liens created by such agreements and all other purposes stated therein, (d) manage, supervise and otherwise deal with the Collateral, (e) take such other action as is necessary or desirable to maintain the perfection and priority of the Liens created or purported to be created by the Transaction Documents, (f) except as may be otherwise specified in any Transaction Document, exercise all remedies given to Agent, the Lenders and the Holders with respect to the Credit Parties and/or the Collateral, whether under the Transaction Documents, applicable Requirements or otherwise and (g) execute any amendment, consent or waiver under the Transaction Documents on behalf of any Lender that has consented in writing to such amendment, consent or waiver; provided , however , that Agent hereby appoints, authorizes and directs each Lender and Holder to act as collateral sub-agent for Agent, the Lenders and the Holders for purposes of the perfection of all Liens with respect to the Collateral, including any deposit account maintained by a Credit Party with, and cash and Cash Equivalent Investments held by, such Lender or Holder, and may further authorize and direct the Lenders


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and the Holders to take further actions as collateral sub-agents for purposes of enforcing such Liens or otherwise to transfer the Collateral subject thereto to Agent, and each Lender and Holder hereby agrees to take such further actions to the extent, and only to the extent, so authorized and directed.  Any reference to the Agent in this Agreement or the other Transaction Documents shall be deemed to refer to the Agent solely in its capacity as Agent and not in its capacity, if any, as a Holder or a Lender.  Under the Transaction Documents, Agent (a) is acting solely on behalf of the Agent, Lenders and Holders (except to the limited extent provided in Section 2.8 with respect to the Register), with duties that are entirely administrative in nature, notwithstanding the use of the defined term "Agent", the terms "agent", "Agent" and "collateral agent" and similar terms in any Transaction Document to refer to Agent, which terms are used for title purposes only, (b) is not assuming any obligation under any Transaction Document other than as expressly set forth therein or any role as agent, fiduciary or trustee of or for any Lender, Holder or any other Person and (c) shall have no implied functions, responsibilities, duties, obligations or other liabilities under any Transaction Document, and each Lender and Holder, by accepting the benefits of the Transaction Documents, hereby waives and agrees not to assert any claim against Agent based on the roles, duties and legal relationships expressly disclaimed in clauses (a) through (c) of this sentence.


Section 12.2

Binding Effect .  Each Lender and Holder, by accepting the benefits of the Transaction Documents, agrees that (a) any action taken by Agent (or, when expressly required hereby, all the Holders) in accordance with the provisions of the Transaction Documents, (b) any action taken by Agent in reliance upon the instructions of Required Holders (or, when expressly required hereby, all the Holders) and (c) the exercise by Agent (or, when expressly required hereby, all the Holders) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders and Holders.


Section 12.3

Use of Discretion .  Agent shall not be required to exercise any discretion or take, or to omit to take, any action, including with respect to enforcement or collection, except any action it is required to take or omit to take (a) under any Transaction Document or (b) pursuant to instructions from all the Holders, when expressly required hereby.  Notwithstanding the foregoing, Agent shall not be required to take, or to omit to take, any action (a) unless, upon demand, Agent receives an indemnification satisfactory to it from the Lenders and/or Holders (or, to the extent applicable and acceptable to Agent, any other Person) against all liabilities that, by reason of such action or omission, may be imposed on, incurred by or asserted against Agent or any of its Related Parties or (b) that is, in the opinion of Agent or its counsel, contrary to any Transaction Document or applicable Requirement.  Notwithstanding anything to the contrary contained herein or in any other Transaction Document, the authority to enforce rights and remedies hereunder and under the other Transaction Documents against the Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, Agent in accordance with the Transaction Documents for the benefit of all the Lenders and the Holders; provided , that the foregoing shall not prohibit (a) Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Transaction Documents, (b) any Lender or Holder from exercising setoff rights in accordance with Section 13.17(a) or (c) any Lender or Holder from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Credit Party under any bankruptcy or other debtor relief law; and provided , further that if at any time there is no Person acting as Agent hereunder and under the other Transaction Documents, then


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(A) the Required Holders shall have the rights otherwise ascribed to Agent pursuant to Article 10 and (B) in addition to the matters set forth in clauses (b) and (c) of the preceding proviso and subject to Section 13.17(a), any Lender or Holder may, with the consent of the Required Holders, enforce any rights and remedies available to it and as authorized by the Required Holders.


Section 12.4

Delegation of Duties .  The Agent may execute any of its respective duties under this Agreement or the other Transaction Documents by or through agents or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in fact selected by the Agent with reasonable care.


Section 12.5

Exculpatory Provisions .  Neither the Agent nor any of its Related Parties shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for actions occasioned by its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Holders or Lenders for any recitals, statements, representations or warranties made by any Credit Party or any of its Subsidiaries or any officer thereof contained in this Agreement, the other Transaction Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or the other Transaction Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Transaction Document or for any failure of any Credit Party or any of its Subsidiaries to perform its obligations hereunder or thereunder.  The Agent shall not be under any obligation to any Holder or any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or of any other Transaction Document, or to inspect the properties, books or records of Social or any of its Subsidiaries.


Section 12.6

Reliance by Agent .  The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrowers), independent accountants and other experts selected by the Agent.  The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless the Agent shall have actual notice of any transferee.  The Agent shall be fully justified in failing or refusing to take any action under this Agreement and the other Transaction Documents unless it shall first receive such advice or concurrence of the Required Holders (or, when expressly required hereby, all the Holders) as it deems appropriate, if any, or it shall first be indemnified to its satisfaction by the Holders and Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct (each as determined in a final, non-appealable judgment by a court of competent jurisdiction).  The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Transaction Documents in accordance with a request of the Required Holders (or, when expressly required hereby, all the Holders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Holders and Lenders and all future Holders and Lenders.  Without limiting the foregoing, Agent:



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(a)

shall not be responsible or otherwise incur liability for any action or omission taken in reliance upon the instructions of the Required Holders or for the actions or omissions of any of its Related Parties selected with reasonable care (other than employees, officers and directors of Agent, when acting on behalf of Agent);


(b)

shall not be responsible to any Lender, Holder or other Person for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, any Transaction Document; and


(c)

makes no warranty or representation, and shall not be responsible, to any Lender, Holder or other Person for any statement, document, information, representation or warranty made or furnished by or on behalf of any Credit Party or any Related Party of any Credit Party in connection with any Transaction Document or any transaction contemplated therein or any other document or information with respect to any Credit Party, whether or not transmitted or omitted to be transmitted by Agent, including as to completeness, accuracy, scope or adequacy thereof, or for the scope, nature or results of any due diligence performed by Agent in connection with the Transaction Documents;


and, for each of the items set forth in clauses (a) through (c) above, each Lender, Holder and Credit Party hereby waives and agrees not to assert any right, claim or cause of action it might have against Agent based thereon.


Section 12.7

Notices of Default .  The Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default hereunder or under any other Transaction Document unless it has received notice of such Event of Default in accordance with the terms hereof or thereof or notice from a Holder, a Lender or the Borrower Representative referring to this Agreement or the other Transaction Documents describing such Event of Default and stating that such notice is a "notice of default."  In the event that the Agent receives such a notice, it shall promptly give notice thereof to the Holders and Lenders.  The Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable in the best interests of the Holders and Lenders, except to the extent that other provisions of this Agreement or the other Transaction Documents expressly require that any such action be taken or not be taken only with the consent and authorization or upon the request of all the Holders.



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Section 12.8

Non Reliance on the Agent and Other Holders .  Each of the Holders and Lenders expressly acknowledges that neither the Agent nor any of its respective officers, directors, employees, agents, attorneys in fact, Subsidiaries or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the any Credit Party or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Holder or Lender.  Each of the Holders and Lenders represents that it has made and will continue to make, independently and without reliance upon the Agent or any other Holder or Lender, and based on such documents and information as it shall deem appropriate at the time, its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Transaction Documents, and such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of any Credit Party and its Subsidiaries.  Except for notices, reports and other documents expressly required to be furnished to the Holders and Lenders by the Agent hereunder or under the other Transaction Documents, the Agent shall not have any duty or responsibility to provide any Holder or Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of any Credit Party or any of its Subsidiaries which may come into the possession of the Agent or any of its respective officers, directors, employees, agents, attorneys in fact, Subsidiaries or Affiliates.


Section 12.9

Indemnification .  Each of the Holders and Lenders hereby agrees to indemnify the Agent in its capacity as such (to the extent not reimbursed by the Credit Parties and without limiting the obligation of the Credit Parties to do so), ratably according to the respective amounts of their Notes, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement, the other Transaction Documents, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Holder or Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent they result from the Agent's gross negligence or willful misconduct, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.  The agreements in this Section 12.9 shall survive the payment of the Notes and all other amounts payable hereunder and the termination of this Agreement and the other Transaction Documents.


Section 12.10

The Agent in Its Individual Capacity .  The Agent and its Subsidiaries and Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Credit Parties or any of their Subsidiaries as though the Agent were not an Agent hereunder.  With respect to any Note issued to it, the Agent shall have the same rights and powers under this Agreement and the other Transaction Documents as any Holder or Lender and may exercise the same as though it were not an Agent, and the terms "Holders" and "Lenders" shall include the Agent in its individual capacity.



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Section 12.11

Resignation of the Agent; Successor Agent .  The Agent may resign as Agent at any time by giving thirty (30) days advance notice thereof to the Holders and Lenders and the Borrower Representative and, thereafter, the retiring Agent shall be discharged from its duties and obligations hereunder.  Upon any such resignation, the Required Holders shall have the right to appoint a successor Agent with concurrent notice to the Borrower Representative.  If no successor Agent shall have been so appointed by the Required Holders, then the Agent may, on behalf of the Holders and Lenders, appoint a successor Agent reasonably acceptable to the Borrower Representative (so long as no Event of Default has occurred and is continuing).  Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent.  After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 12.11 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent.  If no successor has accepted appointment as Agent by the date which is thirty (30) days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Required Holders shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Holders appoint a successor agent as provided for above.


Section 12.12

Reimbursement by Holders and Lenders .  To the extent that the Borrowers for any reason fail to indefeasibly pay any amount required under Section 13.1 or Section 13.12 to be paid by it to the Agent (or any sub-agent thereof), or any Related Party of any of the foregoing, each Holder and Lender severally agrees to pay to the Agent (or any such sub agent) or such Related Party, as the case may be, such Holder's or Lender's applicable percentage thereof (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent (or any such sub agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Agent (or any such sub-agent) in connection with such capacity.  For the purposes of this Section 12.12, the "applicable percentage" of a Holder or a Lender shall be the percentage of the total aggregate principal amount of the Notes represented by the Notes held by such Holder or Lender at such time.


Section 12.13

Withholding . To the extent required by any Requirement, Agent may withhold from any payment to any Lender or Holder under a Transaction Document an amount equal to any applicable withholding Tax (including withholding Taxes imposed under Chapters 3 and 4 of Subtitle A of the Code).  If the IRS or any other Governmental Authority asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender or Holder (because the appropriate certification form was not delivered, was not properly executed, or fails to establish an exemption from, or reduction of, withholding tax with respect to a particular type of payment, or because such Lender or Holder failed to notify Agent or any other Person of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, failed to maintain a Participant Register or for any other reason), or Agent reasonably determines that it was required to withhold taxes from a prior payment but failed to do so, such Lender or Holder shall promptly indemnify Agent fully for all amounts paid, directly or indirectly, by Agent as tax or otherwise, including penalties and interest, and together with all expenses incurred by Agent, including legal expenses, allocated internal costs and out-of-pocket expenses.  Agent may offset against any payment to any Lender or Holder under a Transaction Document, any applicable withholding tax that was required to be withheld from any prior payment to such Lender or Holder but which was not so withheld, as well as any other


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amounts for which Agent is entitled to indemnification from such Lender or Holder under this Section 12.13.


Section 12.14

Release of Collateral or Guarantors .  Each Lender and Holder hereby consents to the release and hereby directs Agent to release (or, in the case of clause (b)(ii) below, release or subordinate) the following :


(a)

any Subsidiary of any Borrower from its guaranty of any Obligation if all of the Equity Interests of such Subsidiary owned by any Credit Party are sold or transferred in a transaction permitted under the Transaction Documents (including pursuant to a waiver or consent), to the extent that, after giving effect to such transaction, such Subsidiary would not be required to guaranty any Obligations; and


(b)

any Lien held by Agent for the benefit of the Lenders and Holders against (i) any Collateral that is sold, transferred, conveyed or otherwise disposed of by a Credit Party in a transaction permitted by the Transaction Documents (including pursuant to a valid waiver or consent), to the extent all Liens required to be granted in such Collateral pursuant to this Agreement after giving effect to such transaction have been granted, (ii) any property subject to a Lien permitted hereunder in reliance upon clause (xiii) of the definition of Permitted Liens and (iii) all of the Collateral and all Credit Parties, upon (A) indefeasible payment in full in cash of the Obligations under the Transaction Documents and termination of the Transaction Documents (including all commitments (if any) to lend hereunder and (B) to the extent requested by Agent, receipt by Agent and the Lenders and Holders of liability releases from the Credit Parties each in form and substance acceptable to Agent.


ARTICLE XIII

MISCELLANEOUS


Section 13.1

Payment of Expenses .  Each Credit Party shall reimburse Agent and the Holders on demand for all reasonable costs and expenses, including, without limitation, legal expenses and reasonable attorneys' fees (whether for internal or outside counsel), incurred by Agent and the Holders in connection with the (i) investigation, development, preparation, negotiation, syndication, execution, interpretation or administration of, any modification of any term of or termination of, this Agreement and any other Transaction Document, any commitment or proposal letter therefor, any other document prepared in connection therewith or the consummation and administration of any transaction contemplated therein, and any other transactions between the Credit Parties (or any of them) and Agent and the Holders, including, without limitation, UCC and other public record searches and filings, overnight courier or other express or messenger delivery, appraisal costs, surveys, title insurance and environmental audit or review (including due diligence review) costs; (ii) collection, protection or enforcement of any rights in or to the Collateral; (iii) collection of any Obligations; (iv) administration and enforcement of Agent's and any Holder's rights under this Agreement or any other Transaction Document (including, without limitation, any costs and expenses of any third party provider engaged by Agent or the Holders for such purposes, and any costs and expenses incurred in connection with the forbearance of any of the rights and remedies of the Agent and any Holders hereunder and the fees and expenses incurred by each such Person in any filing with any governmental agency (including the SBA) with respect to its investment in the Credit Parties or in any other filing with any governmental agency with respect to the Credit Parties which


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mentions such Person); (v) costs associated with any refinancing or restructuring of the Notes whether in the nature of a "work-out," in any insolvency or bankruptcy proceeding or otherwise, and whether or not consummated; and (vi) from and against all liability for any intangibles, documentary, stamp or other similar taxes, fees and excises, if any, including any interest and penalties, and any finder's or brokerage fees, commissions and expenses (other than any fees, commissions or expenses of finders or brokers engaged by the Holders), that may be payable in connection with the Notes contemplated by this Agreement and the other Transaction Documents.  The Borrowers shall also pay all normal service charges with respect to all accounts maintained by the Credit Parties with the Holders or any additional service requested by the Credit Parties from the Holders.  All such costs, expenses and charges shall constitute Obligations hereunder, shall be payable by the Credit Parties to the Holders on demand, and, until paid, shall bear interest at the highest rate then applicable to Notes hereunder.  Without limiting the foregoing, if (a) any Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or any Holder otherwise takes action to collect amounts due under such Note or to enforce the provisions of such Note or (b) there occurs any bankruptcy, reorganization, receivership of any Credit Party or other proceedings affecting creditors' rights and involving a claim under such Note, then the Credit Parties shall pay the costs incurred by such Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, reasonable attorneys' fees and disbursements (including such fees and disbursements related to seeking relief from any stay, automatic or otherwise, in effect under any Bankruptcy Law).  The obligations of the Credit Parties under this Section 13.1 are joint and several.


Section 13.2

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



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Section 13.3

Counterparts .  This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party; provided that a facsimile signature or other electronic signature (including . pdf ) shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or electronic signature.


Section 13.4

Headings .  The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.


Section 13.5

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


Section 13.6

Entire Agreement; Amendments .  This Agreement and the other Transaction Documents supersede all other prior oral or written agreements between the Agent, the Holders, the Lenders, the Credit Parties, their Affiliates and Persons acting on their behalf with respect to the matters discussed herein and therein, and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, none of the Credit Parties or the Agent, any Holder or any Lender makes any representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement, the Notes or any of the other Transaction Documents may be amended or waived other than by an instrument in writing signed by the Credit Parties and the Agent ( provided , that no amendment or waiver hereof shall (a) extend the due date of any payment hereunder or under the Notes (it being agreed that mandatory redemptions pursuant to Section 2.3(b) may be postponed, delayed, reduced, waived or modified in accordance with Section 2.3(c) or otherwise with the consent of the Agent), (b) decrease the amount or rate of interest (it being agreed that waiver of the Default Rate shall only require the consent of the Agent), premium, principal or other amounts payable hereunder or under the Notes or forgive or waive any such payment (it being agreed that mandatory redemptions pursuant to Section 2.3(b) may be postponed, delayed, reduced, waived or modified in accordance with Section 2.3(c) or otherwise with the consent of the Agent), (c) amend Section 2.3(d) or Section 13.17 or any provision regarding the pro rata nature of payments hereunder or under the Notes, (d) amend or modify this Section 13.6, the definition of the term "Required Holders" or any other provision providing for the consent or other action by all Lenders or Holders, (e) discharge any Credit Party from its respective Obligations under the Transaction Documents or release substantially all of the Collateral, except as otherwise may be provided in this Agreement or the other Transaction Documents, (f) increase or extend the any Lender's or Holder's obligations hereunder or reinstate any such obligations terminated pursuant to the terms of this Agreement, or (g) disproportionately and adversely affect any Lender or Holder as compared to other Lenders or Holders, in each case, without the consent of all Holders), and any amendment or waiver to this Agreement made in conformity with the provisions of this Section 13.6 shall be binding on all Lenders and all Holders, as applicable.  No such amendment or waiver shall be effective to the extent that it applies to less than all of the Holders or Lenders.  None of the Credit Parties has, directly or indirectly, made any agreements with the Agent, any Lenders or any Holders relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents.  Without limiting the foregoing, each of the Credit


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Parties confirms that, except as set forth in this Agreement, none of Agent, any Lender or any Holder has made any commitment or promise or has any other obligation to provide any financing to the Credit Parties or otherwise.


Section 13.7

Notices .  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile ( provided , confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) or e-mail; or (iii) one Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:


If to any of the Credit Parties:


c/o Social Reality, Inc.

456 Seaton Street

Los Angeles, CA  9013

Telephone:

(323) 283-805

Attention:

Christopher Miglino

Email:

chris@socialreality.com


With a copy (for informational purposes only) to:


c/o Sidley Austin LLP

787 Seventh Avenue

New York, New York  10019

Telephone:

(212) 339-5480

Attention:

Alan Jakimo, Esq.

Email:

ajakimo@sidley.com


If to the Agent:


Victory Park Management, LLC

227 W. Monroe Street, Suite 3900

Chicago, Illinois 60606

Telephone:

(312) 705-2786

Facsimile:

(312) 701-0794

Attention:  

Scott Zemnick, Esq.

E-mail:

szemnick@vpcadvisors.com



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with a copy (for informational purposes only) to:


Katten Muchin Rosenman LLP

525 West Monroe Street

Chicago, Illinois 60661

Telephone:

(312) 902-5297 and (312) 902-5495

Facsimile:

(312) 577-8964 and (312) 577-8854

Attention:

Mark R. Grossmann, Esq. and Scott E. Lyons, Esq.

E-mail:

mg@kattenlaw.com and scott.lyons@kattenlaw.com


If to a Lender, to its address, facsimile number and e-mail address set forth on the Schedule of Lenders , with copies to such Lender's representatives as set forth on the Schedule of Lenders ,


or to such other address, facsimile number and/or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clauses (i), (ii) or (iii) above, respectively.


Section 13.8

Successors and Assigns .


(a)

This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns, including any purchasers of the Notes or the Warrants.  None of the Credit Parties shall assign this Agreement or any rights or obligations hereunder without the prior written consent of Agent, including by way of a Change of Control. 


(b)

Subject to the provisions of Section 2.7, 2.8 and 2.9 hereof, a Lender may assign some or all of its rights and obligations hereunder in connection with the transfer of any of its Notes to any Person (an " Assignee "), with the prior written consent of the Agent and, so long as no Event of Default exists, the Borrower Representative (which consent of the Borrower Representative shall not be unreasonably withheld, conditioned or delayed and shall not be required for an assignment by a Lender to an Assignee that is an Affiliate of a Lender); provided , however , that the Borrowers shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Agent within ten (10) Business Days after having received notice thereof.  Such permitted Assignee shall be deemed to be the Lender hereunder with respect to such assigned rights and obligations, and the Credit Parties shall use their best efforts to ensure that such transferee is registered as a Holder and that any Liens on the Collateral shall be for the benefit of such Holder (as well as the other Holders of Notes).  For purposes of clarification, a Lender may assign all or a portion of such Lender's outstanding Notes with or without an assignment of all or a portion of such Lender's portion of the Maximum Commitment.  Any Assignee of all or a portion of a Lender's outstanding Notes who shall not have also been assigned all or a portion of such Lender's Maximum Commitment (such assignment, a " Principal Only Assignment "), shall be deemed a "Holder" and not a "Lender" hereunder, and all or such portion of the Notes held by such Lender that shall have been assigned to such Holder pursuant to the Principal Only Assignment shall be evidenced by this Agreement


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and, if requested by such Holder, a Note payable to such Holder in an amount equal to the principal amount of outstanding Notes as shall have been assigned to such Holder pursuant to such Principal Only Assignment.  For the avoidance of doubt, any Assignee of a Principal Only Assignment shall have no obligation to fund or advance any draws under this Agreement or any Note.  For purposes of determining whether the Borrowers have reached the Maximum Commitment hereunder, any principal amount of Notes outstanding with respect to a Principal Only Assignment shall be included in such determination.  In connection with any permitted assignment by a Holder of some or all of its rights and obligations hereunder, upon the request of such Holder, the Borrower Representative shall cause to be delivered to the Assignee thereof an opinion from legal counsel reasonably acceptable to the Assignee to the effect of such opinion letter, in either case dated on or before the effective date of such assignment.  In addition to the other rights provided in this Section 13.8, each Lender may, without notice to or consent from Agent or the Borrower Representative, sell participations to one or more Persons in or to all or a portion of its rights and obligations under the Transaction Documents (including all its rights and obligations with respect to the Notes); provided, however, that, whether as a result of any term of any Transaction Document or of such participation, (i) no such participant shall have a commitment, or be deemed to have made an offer to commit, to fund draws under the Notes hereunder, and, except as provided in the applicable participation agreement, none shall be liable for any obligation of such Lender hereunder, (ii) such Lender's rights and obligations, and the rights and obligations of the Credit Parties and the Agent and other Lenders towards such Lender, under any Transaction Document shall remain unchanged and each other party hereto shall continue to deal solely with such Lender, which shall remain the holder of the Obligations in the Register, except that each such participant shall be entitled to the benefit of Section 2.6; provided , however , that in no case shall a participant have the right to enforce any of the terms of any Transaction Document, and (iii) the consent of such participant shall not be required (either directly, as a restraint on such Lender's ability to consent hereunder or otherwise) for any amendments, waivers or consents with respect to any Transaction Document or to exercise or refrain from exercising any powers or rights such Lender may have under or in respect of the Transaction Documents (including the right to enforce or direct enforcement of the Obligations).  Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant's interest in the Notes or other obligations under the Transaction Documents (the " Participant Register "); provided , that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant's interest in any commitments, loans, letters of credit or its other obligations under any Transaction Document) to any Person other than Agent except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.  For the avoidance of doubt, Agent shall have no responsibility for maintaining a Participant Register.



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(c)

A Lender or Holder may assign some or all of its rights and obligations hereunder in connection with the transfer of any of its Warrants to any Person without the prior consent of the Agent, the Borrowers or the Borrower Representative; provided, however, that any such assignment shall not release such Lender or Holder from its obligations hereunder unless (i) such obligations are assumed by such assignee and Social has consented to such assignment and assumption, which consent shall not be unreasonably withheld, or (ii) such obligations hereunder relate solely to the Warrants being assigned.


Section 13.9

No Third Party Beneficiaries .  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.


Section 13.10

Survival .  The representations, warranties, agreements and covenants of the Credit Parties contained in the Transaction Documents shall survive the Closing.  For the avoidance of doubt, Social and each of the other Credit Parties hereby covenant, acknowledge and agree that, notwithstanding the passage of the Maturity Date or the date on which no Obligations relating to the Notes remain outstanding, the respective covenants, agreements and obligations of Social and the other Credit Parties set forth herein or in any of the other Transaction Documents shall survive with respect to the Warrants, the Warrant Shares and the other Warrant Documents.


Section 13.11

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


Section 13.12

Indemnification .  In consideration of each Lender's execution and delivery of the Transaction Documents and acquiring the Notes and the Warrants hereunder and in addition to all of the Credit Parties' other obligations under the Transaction Documents, the Credit Parties shall jointly and severally defend, protect, indemnify and hold harmless each Lender and each other Holder of any Notes or Warrants and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons' agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the " Indemnitees ") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the " Indemnified Liabilities "), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by any Credit Party in this Agreement or any other Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of any Credit Party contained in this Agreement or any other Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (c) the present or former status of any Credit Party as a U.S. real property holding corporation for federal income tax purposes within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, if applicable, (d) any claim for placement agent's fees, financial advisory fees, or brokers' commissions (other than for Persons engaged by the Lenders or their investment advisors)


93



relating to or arising out of the transactions contemplated hereby or (e) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of any Credit Party) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of this Agreement or any other Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Notes and Warrants, or (iii) the status of such Lender or Holder of the Notes as a lender to the Borrowers pursuant to the transactions contemplated by the Transaction Documents. To the extent that the foregoing undertakings by the Credit Parties may be unenforceable for any reason, the Credit Parties shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. No Credit Party shall assert, and each waives, any claim against the Indemnitees on any theory of liability for special, indirect, consequential or punitive damages arising out of, in connection with or as a result of, this Agreement of any of the other Transaction Documents or the transactions contemplated hereby or thereby.  The agreements in this Section 13.12 shall survive the payment of the Notes, exercise of the Warrants and all other amounts payable hereunder and the termination of this Agreement and the other Transaction Documents.


Section 13.13

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


Section 13.14

Waiver .  No failure or delay on the part of any Holder in the exercise of any power, right or privilege hereunder or any of the other Transaction Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.


Section 13.15

Payment Set Aside .  To the extent that any of the Credit Parties makes a payment or payments to the Lenders hereunder or pursuant to any of the other Transaction Documents or the Agent, the Lenders or the Holders enforce or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to any of the Credit Parties, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.


Section 13.16

Independent Nature of Lenders' Obligations and Rights .  The obligations of each Lender under any Transaction Document are several and not joint with the obligations of any other Lender, and no Lender shall be responsible in any way for the performance of the obligations of any other Lender under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Lender pursuant hereto or thereto, shall be deemed to constitute the Lenders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Lenders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents and each of the Credit Parties acknowledges that the Lenders are not acting in concert or as a group with respect to such obligations or the


94



transactions contemplated by the Transaction Documents.  Each Lender confirms that it has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors.  Each Lender shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.


Section 13.17

Set-off; Sharing of Payments .


(a)

Each of Agent, each Lender, each Holder and each Affiliate (including each branch office thereof) of any of them is hereby authorized, without notice or demand (each of which is hereby waived by each Credit Party), at any time and from time to time during the continuance of any Event of Default and to the fullest extent permitted by applicable Requirements, to set off and apply any and all deposits (whether general or special, time or demand, provisional or final) at any time held and other Indebtedness, claims or other obligations at any time owing by Agent, such Lender, such Holder or any of their respective Affiliates to or for the credit or the account of any Borrower or any other Credit Party against any Obligation of any Credit Party now or hereafter existing, whether or not any demand was made under any Transaction Document with respect to such Obligation and even though such Obligation may be unmatured.  No Lender or Holder shall exercise any such right of setoff without the prior consent of Agent.  Each of Agent, each Lender and each Holder agrees promptly to notify the Borrower Representative and Agent after any such setoff and application made by such Lender, Holder or its Affiliates; provided , however , that the failure to give such notice shall not affect the validity of such setoff and application.  The rights under this Section 13.7(a) are in addition to any other rights and remedies (including other rights of setoff) that Agent, the Lenders, the Holders or their Affiliates, may have.


(b)

If any Lender or Holder, directly or through an Affiliate or branch office thereof, obtains any payment of any Obligation of any Credit Party (whether voluntary, involuntary or through the exercise of any right of setoff or the receipt of any Collateral or "proceeds" (as defined under the applicable UCC) of Collateral) other than pursuant to Sections 2.6 or 13.8 and such payment exceeds the amount such Lender or Holder would have been entitled to receive if all payments had gone to, and been distributed by, Agent in accordance with the provisions of the Transaction Documents, such Lender or Holder shall purchase for cash from other Lenders or Holders such participations in their Obligations as necessary for such Lender or Holder to share such excess payment with such Lenders or Holders to ensure such payment is applied as though it had been received by Agent and applied in accordance with this Agreement (or, if such application would then be at the discretion of the Borrower Representative, applied to repay the Obligations in accordance herewith); provided , however , that (i) if such payment is rescinded or otherwise recovered from such Lender or Holder in whole or in part, such purchase shall be rescinded and the purchase price therefor shall be returned to such Lender or Holder without interest and (ii) such Lender or Holder shall, to the fullest extent permitted by applicable Requirements, be able to exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender or Holder were the direct creditor of the applicable Credit Party in the amount of such participation.


[Signature Pages Follow]



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IN WITNESS WHEREOF, each party has caused its signature page to this Financing Agreement to be duly executed as of the date first written above.


 

BORROWERS:

 

 

 

 

SOCIAL REALITY, INC.,

 

a Delaware corporation

 

 

 

 

By:

/s/ Christopher Miglino

 

Name:

Christopher Miglino

 

Its:

Chief Executive Officer

 

 

 

 

AGENT:

 

 

 

 

VICTORY PARK MANAGEMENT, LLC

 

 

 

 

By:

/s/ Scott Zemnick

 

Name:

Scott Zemnick

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

LENDERS:

 

 

 

 

VPC SBIC I, LP

 

 

 

 

By:

Victory Park Capital Advisors, LLC, its investment manager

 

 

 

 

 

 

By:

/s/ Scott Zemnick

 

 

Name:

Scott Zemnick

 

 

Title:

General Counsel






Signature Page to Financing Agreement



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SCHEDULE OF LENDERS


(1)

(2)

(3)

(4)

(5)

(6)

Closing   Lender

Address and Facsimile Number

Aggregate Principal Amount of Notes at Closing

Aggregate Number of

Shares of

Common Stock into which Warrants are Exercisable at Closing

Closing  Purchase Price in aggregate

Legal Representative’s
Address and Facsimile Number

 

 

 

 

 

 

VPC SBIC I, LP

227 W. Monroe Street Suite 3900

Chicago, IL 60606 Telephone: 312.705.2786 Facsimile: 312.701.0794 Attention: Scott Zemnick, Esq.

E-mail: szemnick@vpcadvisors.com

Residence: Delaware

$9,000,000

2,900,000

$9,000,000

Katten Muchin Rosenman LLP

525 West Monroe Street

Chicago, IL 60661

Telephone:  (312) 902-5694 Facsimile:  (312) 577-8680 Attention:  Mark R. Grossmann, Esq. and Scott E. Lyons, Esq.

E-mail: mg@kattenlaw.com

scott.lyons@kattenlaw.com

 

 

 

 

 

 

 

 

Total principal amount of Notes to be issued at Closing: $9,000,000.00

 

Aggregate Number of Shares of Common Stock into which  Warrants are Exercisable at Closing:

2,900,000

Closing  Purchase Price in aggregate:

$9,000,000.00

 




Schedule - 1






SCHEDULE 1.1



EBITDA:


For any calculation period ending prior to December 31, 2015, EBITDA for any period set forth below and included in such calculation period shall be deemed to equal the amount set forth opposite such period below:

     Social

Steel


Month of January 2014

$   (52,000)

$ 129,000

Month of February 2014

$ (196,000)

   

$  (51,000)

Month of March 2014

$ (193,000)

   

$ 293,000

Month of April 2014

$ (209,000)          

$   30,000

Month of May 2014

$ (213,000)           

$ 288,000

Month of June 2014

$ (221,000)           

$ 126,000

Month of July 2014

$ (194,000)           

$ 151,000

Month of August 2014

$ (174,000)

$ 292,000

Month of September 2014

$ (154,000)

$ 250,000

Period from October 1

through the Closing Date

For each of Social and Steel, an amount determined by the Borrowers and consented to by Agent using actual historical EBITDA of the Credit Parties for such applicable period, adjusted in a manner consistent with the methodology for calculating the numbers set forth above



FIXED CHARGE COVERAGE RATIO:


For purposes of calculating Fixed Charge Coverage Ratio as of any date prior to December 31, 2015, cash payments for interest expense and income taxes shall be calculated as follows:


(a)     Interest expense shall be calculated as set forth under the heading “Interest Coverage Ratio”.


(b)   Unfinanced capital expenditures for any such calculation period shall equal for any period set forth below and included in such calculation period shall be deemed to equal the amount set forth opposite such period below:


Month of January 2014

$ 8,278

Month of February 2014

$    267

Month of March 2014

$        0

Month of April 2014

$ 1,873

Month of May 2014

$        0

Month of June 2014

$    939

Month of July 2014

$        0

Month of August 2014

$        0

Month of September 2014

$        0



Schedule - 1



Period from October 1

Through the Closing Date

Unfinanced capital expenditures calculated in a manner consistent with the calculation of unfinanced capital expenditures for preceding periods.


(c)  Scheduled principal payments on the Notes for such measurement period shall be deemed to be the sum of (i) $900,000 plus (ii) the actual amount of principal payments required to be made with respect to the repayment of the Additional Notes, if any, during such period.


(d)  Scheduled principal payments of the Steel Media Seller Note (a) for the measurement period ending on December 31, 2014, shall equal the actual amount of the Steel Media Seller Note required to be paid in cash during the period from November 1, 2014 through December 31, 2014 multiplied by 6, (b) for the measurement period ending on March 31, 2015, shall equal the actual amount of the Steel Media Seller Note required to be paid in cash during the period from November 1, 2014 through March 31, 2015 multiplied by 12/5, (c) for the measurement period ending on June 30, 2015, shall equal the actual amount of the Steel Media Seller Note required to be paid in cash during the period from November 1, 2014 through June 30, 2015 multiplied by 1.5, and (d) for the measurement period ending on September 30, 2015, shall equal the actual amount of the Steel Media Seller Note required to be paid in cash during the period from November 1, 2014 through September 30, 2015 multiplied by 12/11.


(e)  Taxes on or measured by income paid or required to be paid in cash (“Cash Taxes”) (a) for the measurement period ending on December 31, 2014, shall equal Cash Taxes during the period from November 1, 2014 through December 31, 2014 multiplied by 6, (b) for the measurement period ending on March 31, 2015, shall equal Cash Taxes during the period from November 1, 2014 through March 31, 2015 multiplied by 12/5, (c) for the measurement period ending on June 30, 2015, shall equal Cash Taxes during the period from November 1, 2014 through June 30, 2015 multiplied by 1.5, and (d) for the measurement period ending on September 30, 2015, shall equal Cash Taxes during the period from November 1, 2014 through September 30, 2015 multiplied by 12/11.



INTEREST COVERAGE RATIO:


For purposes of calculating the Interest Coverage Ratio and Fixed Charge Coverage Ratio as of any date prior to December 31, 2015, interest expense shall be calculated as follows:


(a) For the measurement period ending on December 31, 2014, shall equal Net Interest Expense during the period from November 1, 2014 through December 31, 2014 multiplied by 6, (b) for the measurement period ending on March 31, 2015, shall equal Net Interest Expense during the period from November 1, 2014 through March 31, 2015 multiplied by 12/5, (c) for the measurement period ending on June 30, 2015, shall equal Net Interest Expense during the period from November 1, 2014 through June 30, 2015 multiplied by 1.5, and (d) for the measurement period ending on September 30, 2015, shall equal Net Interest Expense during the period from November 1, 2014 through September 30, 2015 multiplied by 12/11.



Schedule - 2


Exhibit 10.24

SENIOR SECURED TERM NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES, SUBJECT TO COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

October 30, 2014

Principal:  U.S.$9,000,000


FOR VALUE RECEIVED , SOCIAL REALITY, INC., a Delaware corporation (“ Social ”, Social, together with each other Person that becomes a Borrower under the Financing Agreement (as defined below), collectively, the “ Borrowers ”) hereby promise to pay to VPC SBIC I, LP or its registered assigns (the “ Holder ”) the amount set out above as the Principal pursuant to the terms of that certain Financing Agreement dated as of October 30, 2014, by and among the Borrowers, the Guarantors from time to time party thereto, Social, as the Borrower Representative, Victory Park Management, LLC, as administrative agent and collateral agent (in such capacity, the Agent ), and the Lenders party thereto (together with all exhibits and schedules thereto and as may be amended, restated, modified and supplemented from time to time the Financing Agreement ) .  The Borrowers hereby, jointly and severally, promise to pay accrued and unpaid interest and premium, if any, on the Principal on the dates, rates and in the manner provided for in the Financing Agreement.  This Senior Secured Term Note (including all Senior Secured Term Notes issued in exchange, transfer, or replacement hereof, this “ Note ”) is one of the senior secured notes issued pursuant to the Financing Agreement (collectively, the “ Notes ”).  Capitalized terms used and not defined herein are defined in the Financing Agreement.

This Note is subject to optional redemption and mandatory prepayment on the terms specified in the Financing Agreement, but not otherwise.  At any time an Event of Default exists and is continuing, the Principal of this Note, together with all accrued and unpaid interest and any applicable premium due, if any, may be declared or otherwise become due and payable in the manner, at the price and with the effect, all as provided in the Financing Agreement.

All payments in respect of this Note are to be made in lawful money of the United States of America at the Agent’s office in Chicago, Illinois or at such other place as the Agent or the Holder shall have designated by written notice to the Borrower Representative as provided in the Financing Agreement.




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This Note may be offered, sold, assigned or transferred by the Holder in accordance with the terms of the Financing Agreement.

This Note is a registered Note and, as provided in the Financing Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered Holder hereof or such Holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee.  Prior to due presentment for registration of transfer, the Borrowers may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Borrowers will not be affected by any notice to the contrary.

This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note and all disputes arising hereunder shall be governed by, the laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois.  The parties hereto (a) agree that any legal action or proceeding with respect to this Note or any other agreement, document, or other instrument executed in connection herewith, shall be brought in any state or federal court located within Chicago, Illinois, (b) irrevocably waive any objections which either may now or hereafter have to the venue of any suit, action or proceeding arising out of or relating to this Note, or any other agreement, document, or other instrument executed in connection herewith, brought in the aforementioned courts, and (c) further irrevocably waive any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum.

THE HOLDER AND THE BORROWERS IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS NOTE OR ANY OTHER TRANSACTION DOCUMENT.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]




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IN WITNESS WHEREOF, the Borrowers have caused this Note to be duly executed as of the date set out above.


 

BORROWER:

 

 

 

 

SOCIAL REALITY, INC.,

 

a Delaware corporation

 

 

 

 

By:

/s/ Christopher Miglino

 

Name:

Christopher Miglino

 

Its:  

Chief Executive Officer





3


Exhibit 10.25

PLEDGE AND SECURITY AGREEMENT

This PLEDGE AND SECURITY AGREEMENT , dated as of October 30, 2014 (as amended, restated, supplemented or otherwise modified from time to time, this “ Agreement ”), is entered into by and among Social Reality, Inc., a Delaware corporation (“ Social ”, Social and each other Person who executes a Joinder Agreement and becomes a New Borrower under the “Financing Agreement” (as defined below), including, without limitation, Steel Media, a California corporation (“Steel Media” ), from and after the consummation of the Closing Date Acquisition, from time to time, each a “Borrower” and collectively, the “Borrowers” ), the Guarantors (as defined in the Financing Agreement defined below) from time to time party hereto, Victory Park Management, LLC (“ Victory Park ”), as the collateral agent (in such capacity, the “ Collateral Agent ”) for the benefit of the “Secured Parties” (as defined below), and each Person which becomes a party hereto pursuant to the joinder provisions of Section 20 hereof (Social, the Guarantors and such other Persons are collectively referred to as the “ Obligors ” or individually referred to as an “ Obligor ”).

WHEREAS:

A.

Pursuant to that certain Financing Agreement entered into by and among the Obligors, the Lenders and Holders identified therein and the Collateral Agent (such Lenders, Holders and the Collateral Agent hereinafter collectively referred to as the “ Secured Parties ”) dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “ Financing Agreement ”) the Lenders have agreed to purchase those certain Senior Secured Term Notes issued by the Borrowers to the Lenders in the original aggregate principal amount of $10,000,000 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Notes ”) and those certain Warrants to purchase shares of common stock issued by Social to the Holders (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Warrants ”).

B.

Pursuant to the Financing Agreement, the Guarantors have agreed to guaranty all Obligations of the Borrowers to the Secured Parties under the Notes, the Warrants, the Financing Agreement and the other Transaction Documents.

C.

In order to secure the Obligations and as an inducement to the Lenders to purchase the Notes and the Warrants under the Financing Agreement, each Obligor has agreed to enter into this Agreement for the benefit of the Secured Parties.

NOW, THEREFORE , in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.

CERTAIN DEFINITIONS . As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.  Terms used but not otherwise defined in this Agreement that are defined in the UCC shall have the respective meanings given such terms in the UCC (and if such terms are defined in more than one article of the UCC, such terms shall



1




have the meaning given in Article 9 thereof), and capitalized terms not otherwise defined herein shall have the meaning given to them in the Financing Agreement.

(a)

Collateral ” means the following property of the Obligors, whether presently owned or existing or hereafter acquired or coming into existence and wherever located, and all additions and accessions thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the sale or transfer thereof and of insurance covering the same and of any tort claims in connection therewith:

(i)

all Accounts, Deposit Accounts, Instruments, Documents, Chattel Paper (whether Tangible Chattel Paper or Electronic Chattel Paper), Goods (including Inventory, Equipment, Fixtures and Motor Vehicles), Money, Payment Intangibles, General Intangibles and all Letter of Credit Rights;

(ii)

the shares of common stock and preferred stock, or partnership, membership and other ownership interests, now or hereafter owned by the Obligors (collectively, the “ Pledged Equity ”), and all certificates evidencing the same, together with, in each case, all shares, securities, monies or property representing a dividend on any of the Pledged Equity, or representing a distribution or return of capital upon or in respect of the Pledged Equity, or resulting from a split up, revision, reclassification or other like change of the Pledged Equity or otherwise received in exchange therefor, and any subscription warrants, rights or options issued to the holders of, or otherwise in respect of, the Pledged Equity (the Pledged Equity, together with all other certificates, shares, securities, properties, ownership interests, or moneys, dividends, distributions, returns of capital subscription, warrants, rights or options as may from time to time be pledged hereunder pursuant to this clause being herein collectively called the “ Equity Collateral ”);

(iii)

all Investment Property, Financial Assets and Securities Accounts not covered by the foregoing clauses (i) and (ii);

(iv)

all Intellectual Property;

(v)

all commercial tort claims now or hereafter described on Schedule C attached hereto;

(vi)

all other tangible and intangible personal property of the Obligors, including all books, correspondence, credit files, records, invoices, tapes, cards, computer runs and other papers and documents owned by the Obligors (including any held for the Obligors by any computer bureau or service company from time to time acting for the Obligors); and

(vii)

all Proceeds and products in whatever form of all or any part of the other Collateral, including all rents, profits, income and benefits and all proceeds of insurance and all condemnation awards and all other compensation for any event of loss with respect to all or any part of the other Collateral (together with



2




all rights to recover and proceed with respect to the same), and all accessions to, substitutions for and replacements of all or any part of the other Collateral, provided, that the Collateral shall not include any Excluded Property.

(b)

Controlled Account ” means the bank accounts (including, without limitation, all Deposit Accounts and Securities Accounts) of the Obligors, including without limitation those set forth on Schedule F hereto, but excluding any accounts used exclusively to fund payroll.

(c)

 “ Copyright Licenses ” shall mean any and all agreements and licenses to which an Obligor is a party providing for the granting of any right in or to Copyrights (whether such Obligor is licensee or licensor thereunder).

(d)

Copyrights ” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to copyrights and all mask work, database and design rights, whether or not registered or published, all registrations and recordations thereof and all applications in connection therewith.

(e)

Excluded Equity ” shall means any voting stock of any direct Subsidiary of any Obligor that is a controlled foreign corporation (as defined in Section 957 of the Internal Revenue Code (a “ CFC ”)) in excess of 65% of the total combined voting power of all classes of stock of such CFC that are entitled to vote (within the meaning of Section 1.956-2(c)(2) of the Treasury Regulations.

(f)

Excluded Property ” shall means collectively:

(i) all Excluded Equity;

(ii)  any lease, license or other agreement or contract or any property subject to a purchase money security interest, Lien securing a capital lease obligation or similar arrangement, in each case permitted to be incurred under the Financing Agreement, to the extent that a grant of a security interest or Lien therein would require a consent not obtained or violate or invalidate such lease, license or agreement or contract or purchase money arrangement, capital lease obligation or similar arrangement or create a right of termination in favor of any other party thereto (other than an Obligor), in each case after giving effect to the applicable anti-assignment provisions of the UCC and other applicable law and other than Proceeds and receivables thereof, the assignment of which is expressly deemed effective under the UCC or other applicable law notwithstanding such prohibition;

(iii) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant, attachment or enforcement of a security interest therein would, under applicable federal law, impair the registrability of such applications or the validity or enforceability of registrations issuing from such applications;



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(iv) motor vehicles and other assets subject to certificates of title (other than to the extent a Lien thereon can be perfected by the filing of a financing statement under the UCC);

(v) those assets as to which the Collateral Agent and the Borrower Representative shall reasonably determine, in writing, that the cost or other consequence of obtaining a Lien thereon or perfection thereof are excessive in relation to the benefit to the Secured Parties of the security to be afforded thereby; and

(vi) any asset or property to the extent that the grant of a security interest is prohibited by applicable law, rule or regulation or requires a consent not obtained of any Governmental Authority pursuant to such applicable law, rule or regulation, in each case after giving effect to the applicable anti-assignment provisions of the UCC and other applicable law and other than proceeds and receivables thereof, the assignment of which is expressly deemed effective under the UCC or other applicable law notwithstanding such prohibition.

(g)

Event of Default ” shall have the meaning ascribed in the Financing Agreement.

(h)

IP Ancillary Rights ” means, with respect to any Intellectual Property, as applicable, all foreign counterparts to, and all divisionals, reversions, continuations, continuations in part, reissues, reexaminations, renewals and extensions of, such Intellectual Property and all income, royalties, proceeds and liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect to such Intellectual Property, including all rights to sue or recover at law or in equity for any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, in each case, all rights to obtain any other IP Ancillary Right.

(i)

Intellectual Property ” means all rights, title and interests in or relating to intellectual property arising under any Requirement of Law and all IP Ancillary Rights relating thereto, including all Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trade Secrets, the Trade Secret Licenses, the Trademarks and the Trademark Licenses.

(j)

Material Intellectual Property ” means Intellectual Property that is owned by or licensed to an Obligor and material to the conduct of any Obligor’s business.

(k)

Obligations ” shall have the meaning ascribed in the Financing Agreement.

(l)

Patent Licenses ” means all agreements and licenses to which an Obligor is a party providing for the granting of any right in Patents (whether such Obligor is licensee or licensor thereunder).



4




(m)

Patents ” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to letters patent and applications therefor.

(n)

Permitted Liens ” shall have the meaning ascribed in the Financing Agreement.

(o)

Requirements of Laws ” means any U.S. federal, state and local, and any non-U.S. laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Authority and applicable to an Obligor.

(p)

Trade Secret Licenses ” shall mean any and all agreements to which an Obligor is a party providing for the granting of any right in or to Trade Secrets (whether such Obligor is licensee or licensor thereunder).

(q)

Trade Secrets ” means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to trade secrets and all other confidential or proprietary information and know-how owned by an Obligor, including all documents and things embodying, incorporating, or referring in any way to such Trade Secret.

(r)

Trademark Licenses ” means any and all agreements and licenses to which an Obligor is a party providing for the granting of any right in or to Trademarks (whether such Obligor is licensee or licensor thereunder).

(s)

Trademarks ” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to trademarks, trade names, corporate names, company names, business names, fictitious business names, Internet domain names, trade styles, service marks, logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith, except for any “intent to use” Trademark applications for which a statement of use or amendment to allege use has not been filed and accepted (but only until such statement or amendment is filed and accepted by the United States Patent and Trademark Office).

(t)

Transaction Documents ” shall have the meaning ascribed in the Financing Agreement.

(u)

Unasserted Contingent Obligations ” means Obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities (excluding Obligations in respect of the principal of, and interest and premium (if any) on, and fees and expenses relating to, any Obligation) in respect of which no assertion of liability (whether oral or written) and no claim or demand for payment (whether oral or written) has been made (and, in the case of Obligations for indemnification, no notice for indemnification has been issued by the indemnitee) at such time.

2.

GRANT OF SECURITY INTEREST .  As an inducement for the Lenders to purchase the Notes and Warrants, and to secure the complete and timely payment, performance



5




and discharge in full, as the case may be, of all of the Obligations, each Obligor hereby unconditionally and irrevocably pledges, grants and hypothecates to the Collateral Agent for the benefit of the Secured Parties a continuing security interest (the “ Security Interest ”) in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and nature in and to the Collateral.

3.

REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE OBLIGOR .  Each Obligor represents and warrants with respect to Sections (a) through (d), (f), (h), (x) through (z) to, and covenants and agrees with respect to Section (e), (g) and (i) through (w) and (aa) with, the Collateral Agent for the benefit of the Secured Parties as follows:

(a)

Such Obligor has the requisite corporate or limited liability company power and authority to enter into this Agreement and otherwise to carry out its obligations hereunder.  The execution, delivery and performance by such Obligor of this Agreement and the filings contemplated therein have been duly authorized by all necessary corporate or limited liability company action on the part of such Obligor and no further action is required by such Obligor.

(b)

Such Obligor has no place of business or offices where its books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on Schedule A attached hereto.

(c)

Such Obligor is the sole owner of, or possesses adequate rights in, the Collateral (except for non-exclusive licenses granted by such Obligor in the ordinary course of business), and, except for the Permitted Liens and liens in favor of the Secured Parties, such Collateral is free and clear of any liens, security interests, encumbrances, rights or claims, and such Obligor is fully authorized to grant the Security Interest in and to pledge the Collateral.  There is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or any notice of any of the foregoing covering or affecting any of the Collateral except for the Permitted Liens and liens in favor of the Secured Parties.  So long as this Agreement shall be in effect, such Obligor shall not execute and shall not knowingly permit to be on file in any such office or agency any such financing statement or other document or instrument (except to the extent filed or recorded in favor of the Secured Parties pursuant to the terms of this Agreement and except those arising from the Permitted Liens).

(d)

No Material Intellectual Property owned by such Obligor has been judged invalid or unenforceable, and to the knowledge of such Obligor, no part of the Material Intellectual Property licensed by such Obligor has been judged invalid or unenforceable.  Except as disclosed in the Schedules to the Financing Agreement, to the knowledge of such Obligor no written claim has been received by such Obligor that any Intellectual Property or such Obligor’s use of any Intellectual Property violates the intellectual property rights of any third party.  There has been no adverse decision to such Obligor’s claim of ownership rights in or rights to use the Material Intellectual Property owned by such Obligor in any jurisdiction or to such Obligor’s right to keep and maintain the



6




registered Material Intellectual Property it owns in full force and effect, and to the knowledge of such Obligor, there has been no adverse decision to such Obligor’s claim of rights to use the Material Intellectual Property licensed by such Obligor in any jurisdiction.  Except as disclosed in the Schedules to the Financing Agreement, there is no proceeding pending before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority or, to the knowledge of such Obligor, threatened in writing against such Obligor contesting or challenging the validity, scope or enforceability of, or an Obligor’s ownership of or right to use such Intellectual Property.

(e)

Such Obligor shall at all times maintain its books of account and records relating to the Collateral at its principal place of business and its Collateral at the locations set forth on Schedule A attached hereto and may not relocate such books of account and records or tangible Collateral unless it delivers to the Collateral Agent at least 20 days prior to such relocation (i) written notice of such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate financing statements under the UCC and other necessary documents have been filed and recorded and other necessary steps have been taken to create in favor of Collateral Agent, for the benefit of itself and the Secured Parties, a valid, perfected and continuing perfected first priority (except for the Permitted Liens) Lien in the Collateral.

(f)

This Agreement creates in favor of the Collateral Agent, for itself and on behalf of the Secured Parties, a valid security interest in the Collateral securing the payment and performance of the Obligations and, upon making the filings described in clause (g) below with respect to Collateral that may be perfected by such filing and upon the timely effecting of actions required by applicable law to perfect security interests in other Collateral which actions shall be taken by such Obligor at the request of a Secured Party (including, without limitation, the transfer of possession of original certificated securities, together with appropriate transfer instruments and the delivery of deposit account control agreements), a perfected first priority (except for the Permitted Liens) Lien in such Collateral.

(g)

Such Obligor hereby authorizes the Collateral Agent, for itself and on behalf of the Secured Parties, to file one or more financing statements under the UCC, with respect to the Security Interest with the filing and recording agencies in any jurisdiction deemed necessary or desirable in the sole and absolute discretion of the Collateral Agent, and to file the Intellectual Property Security Agreements with the U.S. Patent and Trademark Office or the U.S. Copyright Office as appropriate.  Without limiting the foregoing, each Obligor authorizes the Collateral Agent to file the UCC financing statement naming such Obligor as debtor set forth on Exhibit B hereto.  Each Obligor irrevocably authorizes the Collateral Agent, for and on behalf of the Secured Parties, at any time and from time to time, to file in any filing office in any jurisdiction, any initial financing statement or amendment thereto that indicates the collateral as “all assets” or “all personal property” of such Obligor or words of similar effect.  Such Obligor will pay the cost of filing the same in all public offices wherever the filing is, or is deemed by the Collateral Agent to be, necessary or desirable to effect the rights and obligations provided for herein.  Without limiting the generality of the foregoing, but subject to the terms of the Financing Agreement and this Agreement, such Obligor shall



7




pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security Interest hereunder, and such Obligor shall obtain and furnish to the Collateral Agent from time to time, upon demand, such releases and/or subordinations of claims and liens which may be required to maintain the priority of the Security Interest hereunder.

(h)

The execution, delivery and performance of this Agreement by such Obligor does not conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement, credit facility, debt, indenture or other instrument (evidencing such Obligor’s debt or otherwise) to which such Obligor is a party or by which any property or asset of such Obligor is bound or affected.  No material consent (including, without limitation, any consent from any holder of stock or other type of ownership interest, any creditors, or any Governmental Authority that currently regulates the business of such Obligor) is required for such Obligor to enter into and perform its obligations hereunder, other than such consents as shall have previously been obtained.

(i)

Such Obligor shall at all times maintain the Liens and Security Interest provided for hereunder as valid and perfected first priority (except for Permitted Liens) Liens and Security Interests in the Collateral in favor of the Collateral Agent until this Agreement and the Security Interest hereunder shall be terminated pursuant to Section 13 hereof.  Such Obligor hereby agrees to defend the Liens in favor of the Collateral Agent from and against any and all persons except for the Secured Parties and holders of Permitted Liens.  Such Obligor shall use commercially reasonable efforts to safeguard and protect all Collateral for the account of the Secured Parties, subject to ordinary wear and tear, casualty or condemnation.

(j)

Except for the Permitted Liens and as expressly permitted under the Financing Agreement, such Obligor will not transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral except as provided in the Financing Agreement.

(k)

Such Obligor shall keep and preserve its Equipment, Inventory and other tangible Collateral in good condition, repair and order, subject to ordinary wear and tear, casualty or condemnation, and shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage or otherwise prohibited by any applicable Requirement of Law, to the extent a failure to do so would not materially impair the value of such Collateral.

(l)

Such Obligor shall, promptly upon obtaining knowledge thereof, advise the Collateral Agent of any substantial change in the Collateral, and of the occurrence of any event with respect to the Collateral which would have a material adverse effect on the value of the Collateral or on the Secured Parties’ Lien thereon.

(m)

Such Obligor shall promptly execute and deliver to the Secured Parties such further deeds, mortgages, fixture filings, assignments, security agreements,



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financing statements or other instruments, documents, certificates and assurances and take such further action as any Secured Party may from time to time reasonably request and may reasonably deem necessary to perfect, protect or enforce its security interest in the Collateral or any additional collateral, including, without limitation, the execution and delivery of separate mortgages and fixture filings, which shall be satisfactory to the Collateral Agent in its sole discretion for real or personal property interest.

(n)

Such Obligor shall permit the Secured Parties and their representatives and agents to inspect the Collateral and to make copies of records pertaining to the Collateral in accordance with the terms of the Financing Agreement.

(o)

Such Obligor shall take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect any material rights, claims, causes of action and accounts receivable in respect of the Collateral.

(p)

Such Obligor shall within three (3) Business Days notify the Collateral Agent in sufficient detail upon becoming aware of any attachment, garnishment, execution or other legal process levied against any Collateral and of any other information received by such Obligor that may materially adversely affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder.

(q)

All information heretofore, herein or hereafter supplied to the Secured Parties by or on behalf of such Obligor with respect to the Collateral is accurate and complete in all material respects as of the date furnished.

(r)

Such Obligor shall, and shall cause its Subsidiaries to, at all times preserve and keep in full force and effect their respective valid existence and good standing and any rights, permits, licenses and franchises material to their businesses.

(s)

Such Obligor will not change its name, corporate structure, or identity, or add any fictitious name unless it provides at least twenty (20) days prior written notice to the Collateral Agent of such change and, at the time of such written notification, such Obligor provides any financing statements or fixture filings necessary to perfect and continue perfected the perfected first priority (except for Permitted Liens) Security Interest granted and evidenced by the Security Documents.

(t)

Such Obligor may not consign any of its Inventory or sell any of its Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale without the consent of the Collateral Agent, which shall not be unreasonably withheld.

(u)

Such Obligor may not relocate its chief executive office to a new location without providing twenty (20) days prior written notification thereof to the Collateral Agent and so long as, at the time of such written notification, such Obligor provides any financing statements or fixture filings necessary to perfect and continue perfected the perfected first priority (except for Permitted Liens) Security Interest granted and evidenced by the Security Documents.



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(v)

Such Obligor’s exact legal name and jurisdiction of organization is set forth in the introduction paragraph of this Agreement.

(w)

With respect to the Pledged Companies (as set forth in Schedule D ):

(i)

the Obligors shall deliver, or cause to be delivered, all certificates or instruments representing or evidencing the Pledged Equity of the Pledged Companies to the Collateral Agent, which shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Collateral Agent, and each Obligor agrees to execute and deliver, or cause to be executed and delivered, to the Collateral Agent with respect to each Pledged Company a Consent, in the form attached hereto as Exhibit A-1 , and a Pledge Instruction, in the form attached hereto as Exhibit A-2 and by this reference each made a part hereof.

(ii)

the Collateral Agent shall have the right, at any time in its discretion and without notice to any Obligor, after the occurrence and during the continuance of and during the continuation of an Event of Default, to transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of such Pledged Equity with respect to such Pledged Companies.  The Collateral Agent shall also have the right at any time after the occurrence and during the continuation of an Event of Default, in connection with exercising its rights hereunder, to exchange certificates or instruments, if any, representing or evidencing such Pledged Equity for certificates or instruments of smaller or larger denominations provided that the aggregate number of interests on such certificates or instruments issued in exchange thereof shall not exceed the number of interests pledged by the Obligors in the Pledged Companies;

(iii)

in addition, all other steps necessary under any applicable law to be taken in order to perfect the first priority (except for Permitted Liens) Security Interest granted to Collateral Agent free from adverse claims hereunder shall be taken by or on behalf of each Obligor, including without limitation, any notation on any certificate or instrument representing the Pledged Equity of the Pledged Companies and any notation on any share register or similar document or Instrument;

(iv)

upon the proper filing of UCC financing statements by the Collateral Agent, and/or upon delivery to the Collateral Agent of any issued certificates representing the Pledged Equity of the Pledged Companies and the taking of any other steps that may be required in accordance with this Section 3(w) or otherwise, the pledge of Pledged Equity of the Pledged Companies pursuant to this Agreement creates a valid and perfected first priority (subject only to Permitted Liens) Security Interest free from adverse claims in the Equity Collateral in respect of the Pledged Companies securing the payment of the Obligations for the benefit of the Collateral Agent and the other Secured Parties;



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(v)

Schedule D and Schedule E to this Agreement with respect to the Pledged Companies are true and correct and complete; and without limiting the generality of the foregoing, the Pledged Equity set forth opposite such Obligor’s name on Schedule E hereto, constitutes, as of the date hereof, the number of the issued and outstanding equity interests of each Pledged Company indicated on Schedule D hereto, the percentage of each Pledged Company indicated on Schedule E hereto and the Pledged Equity constitutes all of the Equity Interests of any such Pledged Company owned by such Obligor; and

(vi)

Notwithstanding anything to the contrary contained herein, no interest in any limited liability company or limited partnership owned or controlled by any Obligor that constitutes Pledged Equity shall be represented by a certificate unless (i) the limited liability company agreement or partnership agreement expressly provides that such interests shall be a “security” within the meaning of Article 8 of the UCC of the applicable jurisdiction, and (ii) such certificate shall be delivered to the Collateral Agent in accordance with the terms hereof.

(x)

i)

So long as no Event of Default shall have occurred and be continuing, each applicable Obligor shall be entitled to exercise any and all voting and other rights pertaining to the Pledged Companies, as applicable, or any part thereof for any purpose not inconsistent with the terms of this Agreement and the other Transaction Documents; provided , however , that such Obligor shall not exercise and shall refrain from exercising any such right if such action or inaction could reasonably be expected to have a Material Adverse Effect on the value of the Pledged Companies or any part thereof or be inconsistent with or violate any provisions of this Agreement and the other Transaction Documents.

(ii)

So long as no Event of Default shall have occurred and be continuing, each applicable Obligor shall be entitled to receive all dividends, distributions and payments paid from time to time in respect of the Collateral, Equity Collateral and Pledged Companies to the extent permitted by the Transaction Documents.

(iii)

At any time while an Event of Default has occurred and is continuing, any and all (A) dividends and other distributions paid or payable in cash in respect of any Equity Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (B) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Equity Collateral, shall be in each case forthwith delivered to the Collateral Agent, to hold and shall, if received by an Obligor, be received in trust for the benefit of the Collateral Agent and the Secured Parties, be segregated from the other property or funds of such Obligor, and be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement).



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(iv)

All dividends or other distributions which are received by an Obligor contrary to the provisions of this Section 3(x) shall be received in trust for the benefit of the Collateral Agent and the Secured Parties, shall be segregated from other funds of such Obligor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary endorsement).

(v)

Subject to the provisions of Section 4 hereof, upon the occurrence and during the continuance of an Event of Default, (A) all voting and other rights of an Obligor which it would otherwise be entitled to exercise pursuant to Section 3(x)(i) shall cease, and all such rights shall automatically thereupon (unless expressly waived in writing by the Collateral Agent) become vested in the Collateral Agent for the benefit of itself and the Secured Parties, which shall (unless expressly waived in writing by the Collateral Agent) thereupon have the sole right to exercise such rights in accordance with Article 5 hereof, and (B) all cash dividends or other distributions payable in respect of the Pledged Companies shall be paid to the Collateral Agent, for the benefit of itself and the Secured Parties and such Obligor’s right to receive such cash payments pursuant to Sections 3(x)(ii) and 3(x)(iii) hereof shall immediately and automatically cease.

(y)

Schedule F attached hereto correctly sets forth all Controlled Accounts of each Obligor as of the date hereof.  Each Obligor agrees that (i) it shall not create any new Controlled Account, unless prior to (or concurrently therewith) it has entered into an account control agreement for such Controlled Account in form and substance reasonably satisfactory to the Collateral Agent, and (ii) no proceeds of any Accounts will be deposited in or at any time transferred to any Controlled Account other than a Controlled Account governed by an account control agreement in form and substance reasonably satisfactory to the Collateral Agent.

(z)

Except as set forth on Schedule G attached hereto, Obligor owns no motor vehicles for which a certificate of title has been issued or for which a certificate of title is required by law and upon acquiring any such motor vehicle each Obligor shall, at the request of the Collateral Agent, cause the Collateral Agent to be noted as the first lienholder on the certificate of title.

(aa)

With respect to any Material Intellectual Property hereafter owned or acquired which is registered or for which registration is sought, such Obligor shall provide Collateral Agent notification thereof in the next Compliance Certificate required to be delivered under Section 8.2 of the Financing Agreement and an Intellectual Property Security Agreement covering such Intellectual Property to be filed by Collateral Agent with the U.S. Patent and Trademark Office or the U.S. Copyright Office, as applicable.

(bb)

(i)

If any amount payable under or in connection with any Collateral owned by such Obligor shall be or become evidenced by an instrument or Tangible chattel paper, such Obligor shall mark all such instruments and Tangible



12




Chattel Paper with the following legend:  “This writing and the obligations evidenced or secured hereby are subject to the security interest of Victory Park Management, LLC, as Collateral Agent” and, at the request of the Collateral Agent, shall immediately deliver such instrument or Tangible Chattel Paper to the Collateral Agent, duly indorsed in a manner reasonably satisfactory to the Collateral Agent.  Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, such Obligor may retain for collection in the ordinary course of business any instrument received for payment in the ordinary course of business, and the Collateral Agent shall, within reasonable time upon request of the Obligor, make appropriate arrangements for making any instrument or Tangible Chattel Paper delivered by Obligor available to Obligor for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate by Collateral Agent, against trust receipts or like document).

(ii)

Such Obligor shall not grant “control” (within the meaning of such term under Article 9-106 of the UCC) over any investment property to any Person other than the Collateral Agent, a securities intermediary or a commodity intermediary.

(iii)

If any amount payable under or in connection with any Collateral owned by such Obligor shall be or become evidenced by Electronic Chattel Paper, such Obligor shall take all steps reasonably requested by Collateral Agent after notification by Obligor of ownership of such Collateral, to grant the Collateral Agent control of all such Electronic Chattel Paper for the purposes of Section 9-105 of the UCC (or any similar section under any equivalent UCC) and all “transferable records” as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act.

(cc)

Any default in the observance or performance by such Obligor of any covenant, condition or agreement contained herein, subject to applicable cure periods, if any, shall constitute an Event of Default to the extent provided in the Financing Agreement.

4.

DUTY TO HOLD IN TRUST .  Upon the occurrence and during the continuance of any Event of Default, the Obligors shall, upon receipt of any revenue, income or other sums subject to the Security Interest, whether payable pursuant to the Financing Agreement, the Notes or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any sum subject to the Security Interest, hold the same in trust for the Collateral Agent on behalf of the Secured Parties and shall forthwith endorse and transfer any such sums or instruments, or both, to the Collateral Agent on behalf of the Secured Parties for application to the satisfaction of the Obligations.

5.

RIGHTS AND REMEDIES UPON DEFAULT .  Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent, for itself and on behalf of each Secured Party, shall have the right to exercise all of the remedies conferred hereunder and under



13




the Financing Agreement and the Notes, at law and in equity, and the Collateral Agent, for itself and on behalf of each Secured Party, shall have all the rights and remedies of a secured party under the UCC.  Without limitation, the Collateral Agent shall also have the following rights and powers:

(a)

The Collateral Agent shall have the right to take possession of the Collateral and, for that purpose, enter (with respect to leased premises, to the extent permitted by the owner thereof), with the aid and assistance of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and the Obligors shall assemble the tangible Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at the Obligors’ premises or elsewhere, and make available to the Collateral Agent, without rent paid by the Collateral Agent, all of the Obligors’ respective premises and facilities for the purpose of the Collateral Agent taking possession of, removing or putting the Collateral in saleable or disposable form.

(b)

The Collateral Agent shall have the right to operate the business of the Obligors using the Collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the Collateral Agent may deem commercially reasonable and in accordance with all applicable laws, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon or notice to the Obligors or right of redemption of the Obligors, which are hereby expressly waived.  Upon each such sale, lease, assignment or other transfer of Collateral, the Collateral Agent may, unless prohibited by applicable law which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of the Obligors, which are hereby waived and released.

(c)

Each of the Obligors agrees that, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the absolute right to seek the immediate appointment of a receiver for all or any portion of the Collateral and/or any other real or personal property of the Obligors given as security for the payment and performance of the Obligors’ obligations under this Agreement, the Notes, the Financing Agreement and the other Transaction Documents.  Such right to the appointment of a receiver for the assets of the Obligors shall exist regardless of the value of the security for the amounts due under the Notes or secured hereby or of the solvency of any party bound for the payment of such indebtedness.  Obligors hereby irrevocably consent to such appointment and, upon the occurrence of an Event of Default under Section 10.1(c) or Section 10.1(d) of the Financing Agreement, waive notice of any application thereof, and agree that such appointment may be made by Collateral Agent on an ex parte basis.

6.

PLEDGED EQUITY .  Each Obligor recognizes that, by reason of certain prohibitions contained in the 1933 Act and applicable state securities laws, the Collateral Agent may be compelled, with respect to any sale of all or any part of the Equity Collateral conducted



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without prior registration or qualification of such Equity Collateral under the 1933 Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Equity Collateral for their own account, for investment and not with a view to the distribution or resale thereof.  Each Obligor acknowledges that any such private sale may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the 1933 Act) and, notwithstanding such circumstances, each Obligor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Equity Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the 1933 Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it.  If the Collateral Agent determines to exercise its right to sell any or all of the Equity Collateral, upon written request, each Obligor shall and shall cause each issuer of any Equity Collateral to be sold hereunder, each partnership and each limited liability company from time to time to furnish to the Collateral Agent all such information as the Collateral Agent may reasonably request in order to determine the number and nature of interest, shares or other instruments included in the Equity Collateral which may be sold by the Collateral Agent in exempt transactions under the 1933 Act and the rules and regulations of the SEC thereunder, as the same are from time to time in effect.

7.

GRANT OF INTELLECTUAL PROPERTY LICENSE .  For the purpose of enabling the Collateral Agent, during the continuance of an Event of Default, to exercise rights and remedies under Sections 5 and 8 hereof at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, each Obligor hereby (a) grants to the Collateral Agent, to the extent not prohibited under any applicable third party agreements or any applicable law, a non-exclusive license (exercisable without payment of royalty or other compensation to such Obligor) to such rights as each Obligor has to use, license or sublicense any of the Intellectual Property now owned or hereafter acquired by such Obligor, wherever the same may be located, and including in such license access to all media in which any of such Intellectual Property may be recorded or stored and to all computer programs used for the compilation or printout hereof, subject, in the case of Trademarks, to sufficient rights to quality control and inspection in favor of such Obligor to avoid the risk of invalidation of said Trademarks, and (b) irrevocably agrees that the Collateral Agent may sell any of such Obligor’s Inventory directly to any person, including without limitation persons who have previously purchased such Obligor’s Inventory from such Obligor and in connection with any such sale or other enforcement of the Collateral owned by or licensed to such Obligor and any Inventory that is covered by any Copyright owned by or licensed to such Obligor, the Collateral Agent may finish any work in process and affix any Trademark owned by or licensed to such Obligor and sell such Inventory as provided herein.



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8.

INTELLECTUAL PROPERTY .

(a)

Anything contained herein to the contrary notwithstanding, in addition to the other rights and remedies provided herein, upon the occurrence and during the continuation of an Event of Default:

(i)

the Collateral Agent shall have the right (but not the obligation) to bring suit or otherwise commence any action or proceeding in the name of any Obligor, the Collateral Agent or otherwise, in the Collateral Agent’s sole discretion, to enforce any Intellectual Property, in which event such Obligor shall, at the request of the Collateral Agent, do any and all lawful acts and execute any and all documents reasonably requested by the Collateral Agent in aid of such enforcement and such Obligor shall promptly, upon demand, reimburse and indemnify the Collateral Agent as provided in Section 10 hereof in connection with the exercise of its rights under this Section, and, to the extent that the Collateral Agent shall elect not to bring suit to enforce any Intellectual Property as provided in this Section, each Obligor agrees to use commercially reasonable measures, whether by action, suit, proceeding or otherwise, to prevent the infringement or other violation of any of such Obligor’s rights in the Material Intellectual Property by others and for that purpose agrees to use commercially reasonable efforts to maintain any action, suit or proceeding against any Person so infringing as shall be necessary to prevent such infringement or violation;

(ii)

upon written demand from the Collateral Agent, each Obligor shall grant, assign, convey or otherwise transfer to the Collateral Agent or such Collateral Agent’s designee all of such Obligor’s right, title and interest in and to the Intellectual Property to the extent such grant, conveyance, assignment or other transfer is not prohibited under the terms of any applicable third party agreements or any applicable law, and shall execute and deliver to the Collateral Agent such documents as are reasonably necessary or appropriate to carry out the intent and purposes of this clause (ii);

(iii)

each Obligor agrees that such an assignment and/or recording shall be applied to reduce the Obligations outstanding only to the extent that the Collateral Agent (or any Secured Party) receives cash proceeds in respect of the sale of, or other realization upon (including any license proceeds under), the Intellectual Property;

(iv)

within five (5) Business Days after written notice from the Collateral Agent, each Obligor shall make available to the Collateral Agent, to the extent within such Obligor’s power and authority, such personnel in such Obligor’s employ on the date of such Event of Default as the Collateral Agent may reasonably designate, by name, title or job responsibility, to permit such Obligor to continue, directly or indirectly, to produce, advertise and sell the products and services sold or delivered by such Obligor under or in connection with the Trademarks and Trademark Licenses, such persons to be available to perform their prior functions on the Collateral Agent’s behalf and to be



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compensated by the Collateral Agent at such Obligor’s actual cost, consistent with the salary and benefit structure applicable to each as of the date of such Event of Default; and

(v)

the Collateral Agent shall have the right to notify, or upon its written request require each Obligor to notify, any obligors of an Obligor with respect to amounts due or to become due to such Obligor in respect of the Intellectual Property, of the existence of the security interest created herein, to direct such obligors to make payment of all such amounts directly to the Collateral Agent, and, upon such notification and at the expense of such Obligor, to enforce collection of any such amounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Obligor might have done; provided that:

(1)

all amounts and proceeds (including checks and other instruments) received by Obligor in respect of amounts due to such Obligor in respect of the Intellectual Property or any portion thereof shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from other funds of such Obligor, and shall be forthwith paid over or delivered to the Collateral Agent in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 9 hereof; and

(2)

Obligor shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon.

(b)

If (i) an Event of Default shall have occurred and, by reason of a waiver, modification, or amendment provided by the Secured Parties or otherwise cured pursuant to the terms of the Financing Agreement, no longer be continuing, (ii) no other Event of Default shall have occurred and be continuing, (iii) an assignment or other transfer to the Collateral Agent of any rights, title and interests in and to the Intellectual Property shall have been previously made and shall have become absolute and effective, and (iv) the Obligations shall not have become immediately due and payable, then upon the written request of any Obligor, the Collateral Agent shall promptly execute and deliver to such Obligor, at such Obligor’s sole cost and expense, such assignments or other documents as may be reasonably necessary to reassign to such Obligor any such rights, title and interests as may have been assigned or granted to the Collateral Agent as aforesaid, subject to any disposition thereof that may have been made by the Collateral Agent; provided, after giving effect to such reassignment, the Collateral Agent’s security interest granted pursuant hereto, as well as all other rights and remedies of the Collateral Agent granted hereunder, shall continue to be in full force and effect; and provided further, the rights, title and interests so reassigned shall be free and clear of any other Liens granted by or on behalf of the Collateral Agent and the Secured Parties.



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9.

APPLICATIONS OF PROCEEDS .  The proceeds of any sale, lease or other disposition of the Collateral hereunder shall be applied first, to the expenses of retaking, holding, storing, processing and preparing for sale, selling, and the like (including, without limitation, any taxes, fees and other costs incurred in connection therewith) of the Collateral, second, to attorneys’ fees and expenses incurred by the Collateral Agent in enforcing its rights hereunder and in connection with collecting, storing and disposing of the Collateral, and then to satisfaction of the Obligations to each Secured Party, and to the payment of any other amounts required by applicable law, after which the Secured Parties shall pay to the Obligor any surplus proceeds.  If, upon the sale, license or other disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured Parties are legally entitled, the Obligors will be liable for the deficiency, together with interest thereon, at the Default Rate, and the reasonable fees of any attorneys employed by the Collateral Agent to collect such deficiency.  To the extent permitted by applicable law, each Obligor waives all claims, damages and demands against the Secured Parties arising out of the repossession, removal, retention or sale of the Collateral, unless due to the gross negligence or willful misconduct of any Secured Party.  All proceeds hereof or payments under any of the Transaction Documents shall apply to the Secured Parties on a pro-rata basis, in accordance with the principal amount of the Notes outstanding at the time of such payment.

10.

COSTS AND EXPENSES .  The Obligors agree to pay all reasonable out-of-pocket fees, costs and expenses incurred in connection with any filing required hereunder, including without limitation, any financing statements pursuant to the UCC, continuation statements, partial releases and/or termination statements related thereto or any expenses of any searches reasonably required by any Secured Party.  The Obligors will also, upon demand, pay to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Collateral Agent may incur in connection with (i) the enforcement of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral in accordance with this Agreement or (iii) the exercise or enforcement of any of the rights of the Secured Parties under the Transaction Documents.  Until so paid, any fees payable hereunder shall be added to the principal amount of the Notes and shall bear interest at the Current Interest Rate.

11.

RESPONSIBILITY FOR COLLATERAL .  The Obligors assume all liabilities and responsibility in connection with all Collateral, and the Obligations shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for any reason.

12.

SECURITY INTEREST ABSOLUTE .  All rights of each Secured Party and all Obligations of the Obligors hereunder shall be absolute and unconditional, irrespective of:  (a) any lack of validity or enforceability of this Agreement, the Notes, the other Transaction Documents or any other agreement entered into in connection with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from this Agreement, the Notes, the other Transaction Documents or any other agreement entered into in connection with the foregoing; (c) any exchange, release or nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any guaranty, or any other security, for all or any of



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the Obligations; (d) any action by the Collateral Agent to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to the Obligors, or a discharge of all or any part of the Security Interest granted hereby.  Until the Obligations (other than Unasserted Contingent Obligations) shall have been paid and performed in full, the rights of each Secured Party shall continue even if the Obligations are barred for any reason, including, without limitation, the running of the statute of limitations or bankruptcy.  Each Obligor expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand for performance, except any notice required under the Transaction Documents.  In the event that at any time any transfer of any Collateral or any payment received by any Secured Party hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than any Secured Party, then, in any such event, the Obligors’ obligations hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof.  Each Obligor waives all right to require a Secured Party to proceed against any other person or to apply any Collateral which such Secured Party may hold at any time, or to marshal assets, or to pursue any other remedy. Each Obligor waives any defense arising by reason of the application of the statute of limitations to any obligation secured hereby.

13.

TERM OF AGREEMENT .  This Agreement and the Security Interest shall terminate on the date on which all Obligations have been paid in full or have been satisfied or discharged in full (except for Unasserted Contingent Obligations) without any further action on the part of any party hereto.  Upon such termination, the Collateral Agent, at the expense of the Obligors, will join in executing any termination statement with respect to any financing statement or other security document executed and filed pursuant to this Agreement.

14.

POWER OF ATTORNEY, FURTHER ASSURANCES .

(a)

Each Obligor authorizes the Collateral Agent, and does hereby make, constitute and appoint the Collateral Agent and its respective officers, agents, successors or assigns with full power of substitution, as such Obligor’s true and lawful attorney-in-fact, with power, in the name of the Collateral Agent or such Obligor, after the occurrence and during the continuance of an Event of Default, (i) to endorse any note, checks, drafts, money orders or other instruments of payment (including payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Secured Party, (ii) to sign and endorse any financing statement pursuant to the UCC or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against Obligors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral, (iii) to pay or discharge taxes, liens, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral, (iv) to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral and (v) generally, to do, at the option of the Collateral Agent, and at the expense of such Obligor, at any time, or from time to time, all acts and things, including without



19




limitation, to sell, transfer, lease, license, pledge, make any agreement with respect to or otherwise deal with the Collateral, which the Collateral Agent reasonably determines to be necessary to protect, preserve and realize upon the Collateral and the Security Interest granted herein in order to effect the intent of this Agreement, the Financing Agreement and the Notes all as fully and effectually as such Obligor might or could do; and such Obligor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof.  This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding (except for Unasserted Contingent Obligations).

(b)

On a continuing basis, each Obligor will make, execute, acknowledge, deliver, file and record, as the case may be, with the proper filing and recording agencies in any jurisdiction, including, without limitation, the jurisdictions indicated on Schedule B attached hereto, all such instruments, and take all such action as may reasonably be deemed necessary or advisable, or as reasonably requested by the Collateral Agent, to perfect the Security Interest granted hereunder and otherwise to carry out the intent and purposes of this Agreement, or for assuring and confirming to the Collateral Agent the grant or perfection of a perfected first priority security interest in all the Collateral under the UCC (subject to Permitted Liens).

(c)

Each Obligor hereby irrevocably appoints the Collateral Agent as such Obligor’s attorney-in-fact, with full authority in the place and stead of such Obligor and in the name of such Obligor, from time to time in the Collateral Agent’s discretion, to file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of such Obligor where permitted by law.

15.

NOTICES .  All notices, requests, demands and other communications hereunder shall be subject to the notice provision of the Financing Agreement.

16.

OTHER SECURITY .  To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Collateral Agent shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any Secured Party’s rights and remedies hereunder.

17.

LICENSED COLLATERAL .  Notwithstanding any other provision contained herein or any of the other Transaction Documents, after the occurrence and during the continuance of an Event of Default, each Obligor hereby agrees that with respect to any part of the Collateral which may require the consent of any third party or third parties in order for such Obligor to transfer and/or convey its interest in and to such Collateral to the Collateral Agent, as may be required in accordance herewith, such Obligor agrees to and shall use commercially reasonable efforts to obtain such consents or approvals in as expedient manner as practicable.



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18.

AGENCY .

(a)

Appointment .   The Secured Parties by their acceptance of the benefits of this Agreement, hereby designate Victory Park as the Collateral Agent to act as specified herein.  Each Secured Party shall be deemed irrevocably to authorize the Collateral Agent to take such action on its behalf under the provisions of the Agreement and any other Transaction Document and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto.  The Collateral Agent may perform any of its duties hereunder by or through its agents or employees.

(b)

Nature of Duties .  The Collateral Agent shall have no duties or responsibilities except those expressly set forth herein.  Neither the Collateral Agent nor any of its partners, members, shareholders, officers, directors, employees or agents shall be liable for any action taken or omitted by it as such hereunder or in connection herewith or be responsible for the consequence of any oversight or error of judgment or answerable for any loss, unless caused solely by its or their gross negligence or willful misconduct as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction.  The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have by reason of this Agreement or any other Transaction Document a fiduciary relationship in respect of any Obligor or any Secured Party; and nothing in this Agreement or any other Transaction Document, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement or any other Transaction Document except as expressly set forth herein and therein.

(c)

Lack of Reliance on the Collateral Agent .  Independently and without reliance upon the Collateral Agent, each Secured Party, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Obligors in connection with such Secured Party’s investment in the Borrowers, the creation and continuance of the Obligations, the transactions contemplated by the Transaction Documents, and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Obligors and their subsidiaries, and of the value of the Collateral from time to time, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Party with any credit, market or other information with respect thereto, whether coming into its possession before any Obligations are incurred or at any time or times thereafter.  The Collateral Agent shall not be responsible to any Obligor or any Secured Party for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith other than representations made by the Collateral Agent related to its status as an accredited investor under federal and state securities laws, or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of the Agreement or any other Transaction Document, or for the financial condition of any Obligor or the value of any of the Collateral, or be required to make any inquiry concerning either the performance or



21




observance of any of the terms, provisions or conditions of the Agreement or any other Transaction Document, or the financial condition of the Obligors, or the value of any of the Collateral, or the existence or possible existence of any default or Event of Default under this Agreement, the Financing Agreement, the Notes or any of the other Transaction Documents.

(d)

Certain Rights of the Collateral Agent .  Subject to this Agreement, the Collateral Agent shall have the right to take any action with respect to the Collateral, on behalf of all of the Secured Parties.  The Collateral Agent may, but shall not be obligated, to request instructions from the Secured Parties with respect to any material act or action (including failure to act) in connection with the Agreement or any other Transaction Document, and shall be entitled to act or refrain from acting in accordance with the instructions of Secured Parties that are the Required Holders; if such instructions are not provided despite the Collateral Agent’s request therefor, the Collateral Agent shall be entitled to refrain from such act or taking such action, and if such action is taken, shall be entitled to appropriate indemnification from the Secured Parties in respect of actions to be taken by the Collateral Agent; and the Collateral Agent shall not incur liability to any person or entity by reason of so refraining.  Without limiting the foregoing, (i) no Secured Party shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the terms of the Agreement or any other Transaction Document, and absent manifest error, the Obligors shall have no right to question or challenge the authority of, or the instructions given to, the Collateral Agent pursuant to the foregoing and (ii) the Collateral Agent shall not be required to take any action which the Collateral Agent believes (A) could reasonably be expected to expose it to personal liability or (B) is contrary to this Agreement, the Transaction Documents or applicable law.

(e)

Reliance .  The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to the Agreement and the other Transaction Documents and its duties thereunder, upon advice of counsel selected by it and upon all other matters pertaining to this Agreement and the other Transaction Documents and its duties thereunder, upon advice of other experts selected by it.  Anything to the contrary notwithstanding, the Collateral Agent shall have no obligation whatsoever to any Secured Party to assure that the Collateral exists or is owned by the Obligors or is cared for, protected or insured or that the liens granted pursuant to the Agreement have been properly or sufficiently or lawfully created, perfected, or enforced or are entitled to any particular priority.

(f)

Indemnification .  To the extent that the Collateral Agent is not reimbursed and indemnified by the Obligors, the Secured Parties will jointly and severally reimburse and indemnify the Collateral Agent, in proportion to principal outstanding amounts of the Notes held at such time, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the



22




Collateral Agent in performing its duties hereunder or under the Agreement or any other Transaction Document, or in any way relating to or arising out of the Agreement or any other Transaction Document except for those determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction to have resulted solely from the Collateral Agent’s own gross negligence or willful misconduct.  Prior to taking any action hereunder as Collateral Agent, the Collateral Agent may require each Secured Party to deposit with it sufficient sums as it determines in good faith is necessary to protect the Collateral Agent for costs and expenses associated with taking such action.

(g)

Resignation by the Collateral Agent .

(i)

The Collateral Agent may resign from the performance of all its functions and duties under the Agreement and the other Transaction Documents at any time by giving thirty (30) days’ prior written notice (as provided in this Agreement) to the Obligors and the Secured Parties.  Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clauses (ii) and (iii) below.

(ii)

Upon any such notice of resignation, the Secured Parties, acting by the Required Holders, with notice to the Borrower Representative, shall appoint a successor Collateral Agent hereunder.

(iii)

If a successor Collateral Agent shall not have been so appointed within said thirty (30) day notice period, the Collateral Agent shall then appoint a successor Collateral Agent with notice to the Borrower Representative who shall serve as Collateral Agent until such time, if any, as the Secured Parties appoint a successor Collateral Agent as provided above.  If a successor Collateral Agent has not been appointed within such thirty (30) day notice period, the Collateral Agent may petition any court of competent jurisdiction or may interplead the Secured Parties in a proceeding for the appointment of a successor Collateral Agent, and all fees, including, but not limited to, extraordinary fees associated with the filing of interpleader and expenses associated therewith, shall be payable by the Secured Parties on demand and shall not be part of the Obligations or otherwise be reimbursable by the Obligors hereunder or under the Transaction Documents.

(iv)

Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent and the retiring Collateral Agent shall be discharged from its duties and obligations under the Agreement.  After any retiring Collateral Agent’s resignation or removal hereunder as Collateral Agent, the provisions of the Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent.

(h)

Rights with Respect to Collateral .  Each Secured Party agrees with all other Secured Parties and the Collateral Agent (i) that it shall not, and shall not attempt to, exercise any rights with respect to its Security Interest in the Collateral, whether



23




pursuant to any other agreement or otherwise (other than pursuant to this Agreement), or take or institute any action against the Collateral Agent or any of the other Secured Parties in respect of the Collateral or its rights hereunder (other than any such action arising from the breach of this Agreement) and (ii) that such Secured Party has no other rights with respect to the Collateral other than as set forth in this Agreement and the other Transaction Documents.

(i)

The Collateral Agent in its Individual Capacity .  The Collateral Agent and its Affiliates may purchase notes from, make loans to, issue letters of credit for the account of, accept deposits from and generally engage in any kind of lending or other business with any party and its Affiliates as though the Collateral Agent was not the Collateral Agent hereunder.  With respect to any loans, purchases of notes or issuances of credit, if any, made by the Collateral Agent in its capacity as a Holder, the Collateral Agent in its capacity as a Secured Party shall have the same rights and powers under this Agreement and the other Security Documents as any other Secured Parties and may exercise the same as though it were not the Collateral Agent, and the terms “Secured Party” or “Secured Parties” shall include the Collateral Agent in its capacity as a Secured Party.

19.

MISCELLANEOUS .

(a)

No course of dealing between the Obligors and any Secured Party, nor any failure to exercise, nor any delay in exercising, on the part of any Secured Party, any right, power or privilege hereunder, under the Financing Agreement, the Notes or the other Transaction Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

(b)

All of the rights and remedies of each Secured Party with respect to the Collateral, whether established hereby, under the Financing Agreement, the Notes or the other Transaction Documents or by any other agreements, instruments or documents entered into in connection therewith or by law shall be cumulative and may be exercised singly or concurrently.

(c)

This Agreement, along with the other Transaction Documents, constitutes the entire agreement of the parties with respect to the subject matter hereof and is intended to supersede all prior negotiations, understandings and agreements with respect thereto.  Except as specifically set forth in this Agreement, no provision of this Agreement may be modified or amended except by a written agreement specifically referring to this Agreement and signed by the parties hereto.

(d)

In the event any provision of this Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction for any reason, unless such provision is narrowed by judicial construction, this Agreement shall, as to such jurisdiction, be construed as if such invalid, prohibited or unenforceable provision had been more narrowly drawn so as not to be invalid, prohibited or unenforceable.  If, notwithstanding the foregoing, any provision of this Agreement is held to be invalid, prohibited or



24




unenforceable in any jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent of such invalidity, prohibition or unenforceability without invalidating the remaining portion of such provision or the other provisions of this Agreement and without affecting the validity or enforceability of such provision or the other provisions of this Agreement in any other jurisdiction.

(e)

No waiver of any breach or default or any right under this Agreement shall be considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or default or right, whether of the same or similar nature or otherwise.

(f)

This Agreement shall be binding upon and inure to the benefit of each party hereto and its successors and assigns.

(g)

Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.

(h)

This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement and all disputes arising hereunder shall be governed by, the laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois.  The parties hereto (a) agree that any legal action or proceeding with respect to this Agreement or any other agreement, document, or other instrument executed in connection herewith or therewith, shall be brought in any state or federal court located within Chicago, Illinois, (b) irrevocably waive any objections which either may now or hereafter have to the venue of any suit, action or proceeding arising out of or relating to the Security Documents, or any other agreement, document, or other instrument executed in connection herewith or therewith, brought in the aforementioned courts, and (c) further irrevocably waive any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum.

(i)

OBLIGORS AND SECURED PARTIES IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS AGREEMENT, THE FINANCING AGREEMENT, THE NOTES, OR ANY OTHER TRANSACTION DOCUMENT.

(j)

This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.



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20.

JOINDER . In the event a party becomes an Obligor (the “ New Obligor ”) pursuant to the Joinder Agreement, upon such execution the New Obligor shall be bound by all the terms and conditions hereof to the same extent as though such New Obligor had originally executed this Agreement.  The addition of the New Obligor shall not in any manner affect the obligations of the other Obligors hereunder.  Each Obligor and Secured Party acknowledges that the schedules and exhibits hereto may be amended or modified in connection with the addition of any New Obligor to reflect information relating to such New Obligor.

IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed on the day and year first above written.


 

OBLIGORS:

 

 

 

 

SOCIAL REALITY, INC.,

 

a Delaware corporation

 

 

 

 

By:

/s/ Christopher Miglino

 

Name:

Christopher Miglino

 

Its:

Chief Executive Officer


COLLATERAL AGENT:

 

 

 

 

VICTORY PARK MANAGEMENT, LLC , as Collateral Agent

 

 

 

 

By:

/s/ Scott Zemnick

 

Name:

Scott Zemnick

 

Title:

Authorized Signatory

 






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Exhibit 10.26

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (as same may be amended, restated, supplemented or otherwise modified from time to time, this “ Agreement ”), dated as of October 30, 2014, is entered into by and among Social Reality, Inc., a Delaware corporation (the “ Company ”), and the lender(s) listed on the Schedule of Buyers attached hereto (each, a “ Buyer ” and, collectively, the “ Buyers ”).

WHEREAS:

A.

In connection with the Financing Agreement, by and among the Company, the Buyers and the other parties thereto, dated of even date herewith (the “ Financing Agreement ”), the Company has agreed, upon the terms and subject to the conditions of the Financing Agreement, to issue and sell at the Closing (as defined in the Financing Agreement) to the Buyers warrants to purchase shares of the Company’s Class A Common Stock, par value $0.001 per share (the “ Common Stock ”) (such warrants, together with any warrants issued in exchange or substitution therefor or replacement thereof, and as the same may be amended, restated or modified and in effect from time to time, the “ Warrants ”; and the shares of Common Stock issuable upon exercise of the Warrants being referred to as the “ Warrant Shares ”); and

B.

To induce the Buyers to execute and deliver the Financing Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “ 1933 Act ”), and applicable state securities laws.

NOW, THEREFORE , in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:

1.

DEFINITIONS .

As used in this Agreement, the following terms shall have the following meanings:

(a)

Escrow Shares ” means 2,386,863 shares of Common Stock held in escrow pursuant to the terms of that certain Escrow Agreement, dated October 30, 2014, by and among the Company, Richard Steel and Lowenstein Sandler LLP, as escrow agent.

(b)

Investor ” means a Buyer, any permitted transferee or assignee of Registrable Securities to whom a Buyer assigns its rights under this Agreement in accordance with the provisions of this Agreement (including Section 9 ) and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any permitted transferee thereof to whom a transferee or assignee of Registrable Securities assigns its rights under this Agreement in accordance with the provisions of this Agreement (including Section 9 ) and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 .



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(c)

Permitted Registrable Shares ” means with respect to Registration Statements for resales pursuant to Rule 415 a number of Registrable Securities equal to the least of (i) the number of Registrable Securities not then covered by an effective Registration Statement that is available for resales pursuant to Rule 415, (ii) the number of Registrable Securities requested to be included in the Registration Statement for a Proposed Registration, and (iii) the maximum number of Registrable Securities the Company is permitted to include in such Registration Statement by the SEC, provided that the Company shall have used diligent efforts to advocate with the SEC for the registration of all of the Registrable Securities required or requested to be included in the Registration Statement (considering in good faith the input of the Investors and Legal Counsel (as defined below)), in accordance with applicable SEC guidance.

(d)

Private Placement Securities ” means the shares of Common Stock issued and issuable upon the exercise of Class A Common Stock purchase warrants (excluding, for the avoidance of doubt, the Warrants and any Registrable Securities), which warrants were issued by the Company on October 30, 2014 pursuant to the private placement consummated on October 30, 2014; provided, however, that any such securities shall cease to be Private Placement Securities for purposes of this Agreement when (i) a Form S-1 registration statement or Form S-3 registration statement covering such securities has been declared effective by the SEC and has not been withdrawn or suspended, or (ii) such securities shall have ceased to be outstanding or have been sold.

(e)

register ,” “ registered ” and “ registration ” refer to a registration effected by preparing and filing one or more Registration Statements in compliance with the 1933 Act, and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

(f)

Registrable Securities ” means (i) any Warrant Shares issued or issuable upon exercise of the Warrants; and (ii) any shares of capital stock of the Company (including any shares of Common Stock) issued or issuable in exchange for or with respect to the Warrant Shares or the Warrants as a result of any stock split, stock dividend, recapitalization, exchange, adjustment or similar event or otherwise; provided , however , that any Registrable Securities shall cease to be Registrable Securities when (A) a Registration Statement with respect to the sale of such securities becomes effective under the 1933 Act and such securities are disposed of in accordance with such Registration Statement, (B) such securities are sold in accordance with Rule 144 or (C) (x) all of such securities are eligible to be sold by the holder thereof pursuant to Rule 144 without limitation, restriction or condition thereunder, assuming, for the avoidance of doubt, that, with respect to any Warrants that have not been exercised, such Warrants will be exercised on a cash basis, and (y) none of such securities are covered by, or subject to, any restrictive legend or any other restriction or limitation on transfer of any kind imposed by or on behalf of the Company or the transfer agent for the securities of the class of such Registrable Securities.

(g)

Registration Statement ” means a registration statement or registration statements of the Company filed under the 1933 Act covering Registrable Securities.



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(h)

Required Holders ” means the holders of at least a majority of the Registrable Securities.

(i)

Rule 144 ” means Rule 144 under the 1933 Act or any successor rule.

(j)

Rule 415 ” means Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous or delayed basis.

(k)

SEC ” means the United States Securities and Exchange Commission.

(l)

Steel Shares ” means the then outstanding shares of Common Stock held by Richard Steel that were originally issued to Richard Steel pursuant to that certain Stock Purchase Agreement, dated as of the date of this Agreement, by and among Richard Steel, Steel Media and the Company, as in effect on the date of this Agreement without amendment or other modification.

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Financing Agreement.

2.

PIGGYBACK REGISTRATIONS .

(a)

Each time that the Company proposes for any reason to register any of its Common Stock under the 1933 Act (a “ Proposed Registration ”) pursuant to a registration statement filed or proposed to be filed during the period beginning with the date of this Agreement and ending on the Expiration Date (as such term is defined in the Warrants) (the “ Piggyback Registration Period ”), other than pursuant to a registration statement on Form S-4 or Form S-8 (or similar or successor forms), unless a registration statement has been previously filed (and not withdrawn) covering the resale of all of the Registrable Securities and is then effective and, other than during a Grace Period, available for resale of all of the Registrable Securities, the Company shall promptly give written notice (the “ Piggyback Notice ”) of such Proposed Registration to each of the Investors (which notice shall be given not less than thirty (30) days prior to the expected effective date of the Company’s registration statement, and in any event within five (5) Business Days after its receipt of notice of any exercise of demand registration rights) and shall offer the Investors the right to include any of their Registrable Securities in the Proposed Registration; provided, however, that if the Proposed Registration is for an offering pursuant to Rule 415, the Company shall only be required to include the Permitted Registrable Shares.  

(b)

Each Investor shall have twenty (20) days from the date of receipt of the Piggyback Notice to deliver to the Company a written request specifying the number of Registrable Securities such Investor intends to sell and such Investor’s intended method of disposition. Any Investor shall have the right to withdraw such Investor’s request for inclusion of such Investor’s Registrable Securities in any registration statement pursuant to this Section 2 by giving written notice to the Company of such withdrawal.  Subject to Section 2(c) and Section 2(d) below, the Company shall include in such registration statement all such Registrable Securities so requested to be included therein.



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(c)

If the Proposed Registration includes an underwritten primary public offering on behalf of the Company and the managing underwriter or underwriters of the Proposed Registration advises the Company that the total number of shares of Common Stock (including Registrable Securities) that the Investors and any other Persons intend to include in the offering exceeds the number that can be sold in such offering without being likely to have a material adverse effect on the price, timing or distribution of the Common Stock offered or the market for the Common Stock, then the Common Stock to be included in such underwritten primary public offering shall include the number of securities of the Company that such managing underwriter or underwriters advises the Company in writing can be sold without having such material adverse effect, with such number to be allocated (i) first , to the securities that the Company proposes to sell, (ii) second , to the Registrable Securities requested to be included in such registration by the Investors, the Private Placement Securities requested to be included therein by the holder or holders thereof, and the Steel Shares requested to be included therein by the holder thereof, pro rata among the Investors, the holder or holders of such Private Placement Securities, and the holder of such Steel Shares on the basis of the number of shares of Registrable Securities owned by the Investors, the number of Private Placement Securities owned by such holder or holders and the number of Steel Shares owned by such holder, with further successive pro rata allocations among the Investors, the holder or holders of such Private Placement Securities and the holder of such Steel Shares if any such Investor or any such holder has requested the registration of less than all of the Registrable Securities, Private Placement Securities or Steel Shares that such Investor or such holder, as applicable, is entitled to register, and (iii) third , to any other securities requested to be included in such registration.

(d)

If the Proposed Registration is an underwritten public offering on behalf of holders of the Company’s securities and the managing underwriter or underwriters of the Proposed Registration advises the Company that the total number of shares of Common Stock (including Registrable Securities) that the Investors and any other Persons intend to include in the offering exceeds the number that can be sold in such offering without being likely to have a material adverse effect on the price, timing or distribution of the Common Stock offered or the market for the Common Stock, then the Common Stock to be included in such underwritten public offering shall include the number of securities of the Company that such managing underwriter or underwriters advises the Company in writing can be sold without having such material adverse effect, with such number to be allocated (i) first , to the securities requested to be included therein by the holders requesting such registration, to the Registrable Securities requested to be included in such registration by the Investors, to the Private Placement Securities requested to be included therein by the holder or holders thereof, and to the Steel Shares requested to be included therein by the holder thereof, pro rata among the holders of such securities, the Investors, the holder or holders of such Private Placement Securities and the holder of such Steel Shares on the basis of the number of shares of Common Stock owned by such holders, the number of Registrable Securities owned by the Investors, the number of Private Placement Securities owned by such holder or holders and the number of Steel Shares owned by such holder, with further successive pro rata allocations among such holders, the Investors, the holder or holders of such Private Placement Securities and the holder of such Steel Shares if any such holder, Investor, holder of such Private



4



Placement Securities or holder of such Steel Shares has requested the registration of less than all of the shares of Common Stock, Registrable Securities, Private Placement Securities or Steel Shares that such holder or Investor, as applicable, is entitled to register, and (ii) second , to any other securities requested to be included in such registration.

(e)

If the Proposed Registration is for an offering pursuant to Rule 415 and the number of Registrable Securities requested by the Investors to be included therein exceeds the number of Permitted Registrable Shares, the initial number of Registrable Securities included in any Registration Statement in respect of such Proposed Registration and each increase in the number of Registrable Securities included therein shall be allocated pro rata among the Investors holding Registrable Securities on the basis of the number of Registrable Securities owned by such Investors, with further successive pro rata allocations among the Investors if any such Investor has requested the registration of less than all of the Registrable Securities such Investor is entitled to register. In the event that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining number of Registrable Securities included in such Registration Statement for such transferor. Any shares of Common Stock included in such Registration Statement that remain allocated to any Person that ceases to hold any Registrable Securities covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then held by such Investors that are covered by such Registration Statement.  Notwithstanding anything to the contrary contained in this Section 2(e), if the Proposed Registration to be filed by the Company is the first registration statement filed with the SEC that includes any Private Placement Securities for an offering pursuant to Rule 415, and the total number of securities proposed to be included therein exceeds the maximum number of securities of the Company that the Company is permitted to include in such registration statement by the SEC in accordance with applicable SEC rules and regulations, the initial number of securities included in any registration statement in respect of such Proposed Registration and each increase in the number of securities included therein shall be allocated (i) first , to such Private Placement Securities which have not been previously included in a registration statement, and (ii) second , pro rata among the Investors and the holder of the Steel Shares on the basis of the number of the Registrable Securities and the Escrow Shares owned by the holder of the Steel Shares, with further successive pro rata allocations among the Investors and the holder of the Steel Shares if the Investor or such holder, as applicable, has requested the registration of less than all of the Registrable Securities or Escrow Shares, as applicable, that the Investor or such holder of Steel Shares is entitled to register.  

(f)

If any Proposed Registration is in the form of an underwritten public offering, the Company shall select and obtain a recognized investment bank or investment bankers and manager or managers that will administer the offering; provided , that such investment banker(s) and manager(s) must be approved (which approval shall not be unreasonably withheld) by the Investors holding at least a majority of the Registrable Securities requested to be registered.  



5



(g)

At any time during the Piggyback Registration Period that a Shelf Registration Statement covering Registrable Securities is effective and the Company, on behalf of itself or holders of securities of the Company, intends to effect an underwritten offering of any securities of the Company of the type included on such Shelf Registration Statement (a “ Shelf Underwritten Offering ”), the Company shall promptly deliver to each of the Investors a notice (a “ Take-Down Notice ”) stating such intention.  In connection with any such Shelf Underwritten Offering, the Company shall permit each Investor to include its Registrable Securities in the Shelf Underwritten Offering if such Investor notifies the Company within five (5) Business Days after its receipt of the Take-Down Notice.  In connection with the Company’s delivery of a Take-Down Notice pursuant to this Section 2(f) and a Shelf Underwritten Offering, the Company shall amend or supplement the Shelf Registration Statement as may be necessary in order to enable the Registrable Securities to be distributed pursuant to the Shelf Underwritten Offering.  In connection with any such Shelf Underwritten Offering, in the event that the managing underwriter or underwriters determines that marketing factors (including an adverse effect on the per share offering price) require a limitation on the number of shares which would otherwise be included in the Shelf Underwritten Offering, the managing underwriter or underwriters may limit the number of shares which would otherwise be included in such Shelf Underwritten Offering in the same manner as is described in Section 2(c) and Section 2(d) , as applicable, with respect to a limitation of shares to be included in an underwritten public offering.

(h)

Notwithstanding anything to the contrary contained herein, if for any reason the SEC asserts or proposes a limitation on the securities to be included in any Registration Statement filed pursuant to this Section 2 in which the Registrable Securities are to be included, the Company shall use diligent efforts to advocate with the SEC for the registration of all of the securities required or requested to be included in such Registration Statement (considering in good faith the input of the Investors and Legal Counsel), in accordance with applicable SEC guidance.

3.

RELATED OBLIGATIONS .

Whenever during the Piggyback Registration Period holders of Registrable Securities request that any Registrable Securities be registered pursuant to this Agreement, the Company shall use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

(a)

The Company shall use its reasonable best efforts to respond to written comments received from the SEC upon a review of the Registration Statement within ten (10) Business Days. The Company shall submit to the SEC, within three (3) Business Days after the Company learns that no review of a particular Registration Statement will be made by the staff of the SEC or that the staff of the SEC has no further comments on a particular Registration Statement, as the case may be, a request for acceleration of effectiveness of such Registration Statement to a time and date not later than two (2) Business Days after the submission of such request.  By 9:30 a.m. (New York City time) on the second (2nd) Business Day after such Registration Statement becomes effective,



6



the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Registration Statement.  The Company shall keep each Registration Statement effective at all times until the earlier of (i) the date as of which (x) all of the Investors may sell all of the Registrable Securities covered by such Registration Statement pursuant to Rule 144 without restriction or condition thereunder (assuming, for the avoidance of doubt, that, with respect to any Warrants held thereby that have not been exercised, such Warrants will be exercised on a cash basis), and (y) none of such Registrable Securities are covered by, or subject to, any restrictive legend or any other restriction or limitation on transfer of any kind imposed by or on behalf of the Company or the transfer agent for the securities of the class of such Registrable Securities, or (ii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “ Registration Period ”).  Each Investor shall provide notice to the Company of the occurrence of either of the events described in clauses (i) and (ii) of the immediately preceding sentence with respect to such Investor’s Registrable Securities promptly after the occurrence of such event.  The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement 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 the light of the circumstances under which they were made, not misleading.

(b)

The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus supplements shall be filed pursuant to Rule 424 (or successor thereto) promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period (except as provided in Section 3(g) ), and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement.  In the case of any amendment or supplement to a Registration Statement or prospectus that is required to be filed pursuant to this Agreement (including pursuant to this Section 3(b) ) by reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any similar successor statute (the “ 1934 Act ”), the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendment or supplement with the SEC as expeditiously as practicable on or following the date on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

(c)

Subject to Section 5 hereof, the holders of at least a majority of the Registrable Securities to be registered under a Registration Statement pursuant to this Agreement shall have the right to select one legal counsel to review and oversee any registration pursuant to Section 2 (“ Legal Counsel ”), which shall be Katten Muchin Rosenman LLP or such other counsel as thereafter designated by the holders of at least a



7



majority of the Registrable Securities to be registered under such Registration Statement. The Company and Legal Counsel shall reasonably cooperate with each other in performing the Company’s and the Investors’ respective obligations under this Agreement.

(d)

The Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel reasonably objects; provided, that the failure of any Investor or Legal Counsel to respond to such proposed documents within five (5) Business Days after receipt thereof shall be deemed confirmation of no objection to same. The Company shall promptly furnish to Legal Counsel, without charge, copies of any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to any Registration Statement, shall permit Legal Counsel to review and comment upon the Company’s responses to any such correspondence and shall not submit any such responses in a form to which Legal Counsel reasonably objects; provided, that the failure of any Investor or Legal Counsel to respond to such proposed documents within three (3) Business Days after receipt thereof shall be deemed confirmation of no objection to same.  The Company shall reasonably cooperate with Legal Counsel in performing the Company’s obligations pursuant to this Section 3 .

(e)

The Company shall furnish to Legal Counsel and each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) promptly after the same is prepared and filed with the SEC, if requested by an Investor and not otherwise available on the EDGAR (or any successor) system, at least one copy of such Registration Statement and any amendments or supplement thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Registration Statement, a copy of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents, including copies of any prospectus (preliminary, final, summary or free writing), as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.

(f)

The Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications



8



in effect at all times during the Registration Period and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions or obtain exemptions from the registration and qualification requirements of such jurisdictions; provided , however , that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f) , (y) subject itself to general taxation in any jurisdiction or (z) file a general consent to service of process in any jurisdiction in which it is not currently so qualified or subject to general taxation or has not currently so consented.  The Company shall promptly notify Legal Counsel and each Investor that holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

(g)

The Company shall notify Legal Counsel, any underwriter of such registered offering and each Investor in writing (each such notice to Legal Counsel and the Investors, a “ Suspension Notice ”) of the happening of any of the following events, as promptly as practicable after becoming aware of such event: (i) any request by the SEC or any other federal or state governmental authority, during the period of effectiveness of the Registration Statement, for amendments or supplements to such Registration Statement or related prospectus or for additional information; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv) any event or circumstance which necessitates the making of any changes to the Registration Statement or related prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein not misleading and, in the case of the prospectus, it will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and, subject to Section 3(r) , promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver a copy of such supplement or amendment to Legal Counsel, any underwriter of such registered offering and each Investor (or such other number of copies as Legal Counsel, such underwriter or such Investor may reasonably request). The Company shall also promptly notify Legal Counsel, any underwriter of such registered offering and each Investor in writing (x) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel and each Investor by facsimile on the same day of such effectiveness and by overnight mail) and (y) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.



9



(h)

The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of the Registration Statement (other than during an Allowable Grace Period, as defined below), or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension as soon as reasonably practicable consistent with the provisions of Section 3(g) and to notify Legal Counsel and each Investor who holds Registrable Securities being sold of the issuance of such order or suspension and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

(i)

At the reasonable request of any Investor with respect to a Registration Statement in which such Investor is required under applicable securities law or as determined by the SEC to be described in the Registration Statement as an underwriter, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as such Investor may reasonably request (i) a “comfort letter”, dated such date, from the Company’s independent registered certified public accountants in form and substance as is customarily given by independent registered certified public accountants to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.

(j)

At the reasonable written request (in the context of the securities laws) of any Investor or, in the case of an underwritten offering, upon the request of any underwriter, in connection with such Investor’s due diligence requirements if any, the Company shall make available for inspection by (i) any Investor, (ii) Legal Counsel, (iii) any underwriter participating in any disposition pursuant to the Registration Statement, (iv) legal counsel representing any such underwriter with respect to any disposition pursuant to the Registration Statement and (v) one firm of accountants or other agents retained by the Investors (collectively, the “ Inspectors ”) all pertinent financial, corporate and other records (collectively, the “ Records ”) as shall be reasonably deemed necessary by each Inspector to fulfill due diligence obligation of such Investor and cause the Company’s chief executive officer, chief financial officer, executive vice presidents and secretary to be reasonably available to the Inspectors for questions regarding the Records and to supply all information which any Inspector may reasonably request; provided , however , that each Inspector shall agree in writing to hold in strict confidence and shall not make any disclosure (except to any other Inspector that is subject to its own confidentiality agreement) or use of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (x) the release of such Records is ordered pursuant to a subpoena or a final, non-appealable order from a court or government body of competent jurisdiction or (y) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other Transaction Document. Nothing herein (or in any other confidentiality agreement between the Company and any Investor) shall be deemed to limit the Investors’ ability to sell Registrable Securities in a manner that is



10



otherwise consistent with this Agreement and the other Transaction Documents, applicable laws and regulations.

(k)

The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or final, non-appealable order from a court or government body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or government body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

(l)

The Company shall use its reasonable best efforts to (i) cause all the Registrable Securities covered by the Registration Statement to be listed or quoted on each securities exchange or trading market on which securities of the same class or series issued by the Company are listed or quoted, and (ii) without limiting the generality of the foregoing, arrange for at least three market makers to register with the Financial Industry Regulatory Authority, Inc. (“ FINRA ”) as such with respect to such Registrable Securities, with each such market maker posting quotations with respect to the Registrable Securities on each of the OTC Bulletin Board and the OTC Markets.  The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(l) .

(m)

The Company shall cooperate with the Investors that hold Registrable Securities being offered and the underwriters, if any, and, to the extent applicable pursuant to the Transaction Documents, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such names and denominations or amounts, as the case may be, and/or the timely issuance of the Registrable Securities to be offered pursuant to a Registration Statement through the Direct Registration System (DRS) of DTC or crediting of the Registrable Securities to be offered pursuant to a Registration Statement to the applicable account (or accounts) with DTC through its Deposit/Withdrawal At Custodian (DWAC) system, in any such case as the Investors may reasonably request.

(n)

If requested by an Investor, and if Company’s counsel reasonably deems such inclusion not inconsistent with the 1933 Act or the 1934 Act or other applicable law, the Company shall (i) as soon as practicable incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including information with respect to such Investor, the number of Registrable Securities being offered or sold by such Investor, the purchase price being paid therefor and any other



11



terms of the offering of the Registrable Securities to be sold in such offering; (ii) as soon as practicable make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) as soon as practicable supplement or make amendments to any Registration Statement if reasonably requested by an Investor holding any such Registrable Securities.

(o)

The Company shall make generally available to its security holders as soon as practicable, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve (12) month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of a Registration Statement.

(p)

The Company shall otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

(q)

Within two (2) Business Day after the Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, or shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A , provided , that if the Company changes its transfer agent, it shall timely deliver any previously delivered notices under this Section 3(q) and any subsequent notices to such new transfer agent.

(r)

Notwithstanding anything to the contrary in Section 3(g) , at any time after the effective date of the applicable Registration Statement, the Company may delay the disclosure of material non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company and its counsel, in the best interest of the Company and not, in the opinion of counsel to the Company, otherwise required (a “ Grace Period ”); provided, that the Company shall (i) promptly notify the Investors in writing of the existence of material non-public information giving rise to a Grace Period (provided that, during an MNPI Restriction Period with respect to an Investor, in any notice to such Investor the Company shall not disclose the content of such material non-public information to such Investor) and the date on which the Grace Period will begin, and (ii) as soon as such date may be determined, promptly notify the Investors in writing of the date on which the Grace Period ends; and, provided , further , that (A) no Grace Period shall exceed twenty-five (25) consecutive days, (B) during any three hundred sixty five (365) day period, such Grace Periods shall not exceed an aggregate of seventy five (75) days, and (C) the first day of any Grace Period must be at least ten (10) trading days after the last day of any prior Grace Period (each Grace Period that satisfies all of the requirements of this Section 3(r) being referred to as an “ Allowable Grace Period ”).  For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the



12



Investors receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date referred to in such notice.  The provisions of Section 3(h) hereof shall not be applicable during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 3(g) with respect to the information giving rise thereto unless such material non-public information is no longer applicable.  Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Financing Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale, and delivered a copy of the prospectus included as part of the applicable Registration Statement, in each case prior to the Investor’s receipt of the Suspension Notice related to the Grace Period and for which the Investor has not yet settled.

(s)

The Company shall engage and maintain a transfer agent and registrar of all such Registrable Securities not later than the effective date of the applicable Registration Statement.

(t)

The Company shall use its reasonable best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities in the United States as may be necessary to consummate the disposition of such Registrable Securities.

(u)

To the extent not made by the underwriters in the case of an underwritten offering, the Company shall make such filings with FINRA, pursuant to FINRA Rule 5110 or otherwise (including providing all required information and paying required fees thereto), as and when requested by any Investor, or in the case of an underwritten offering, by any underwriter, and make all other filings and take all other actions reasonably necessary to expedite and facilitate the disposition by the Investors of Registrable Securities pursuant to a Registration Statement, including promptly responding to any comments received from FINRA.

(v)

The Company shall not register any of its securities for sale for its own account (other than for issuance to employees, directors and consultants, of the Company under an employee benefit plan or for issuance in a business combination transaction), except pursuant to a firm commitment underwritten public offering.  

(w)

The Company shall enter into such customary agreements (including, in the case of underwritten offering, an underwriting agreement) and take such other actions as any of the Investors or underwriters, if any, may reasonably request in order to expedite and facilitate the disposition of the Registrable Securities covered by a Registration Statement.

4.

OBLIGATIONS AND COVENANTS OF THE INVESTORS .

(a)

Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in



13



connection with the preparation and filing of any Registration Statement hereunder, unless such Investor has not elected to include any of such Investor’s Registrable Securities in such Registration Statement pursuant to Section 2 hereof.  It shall be a condition precedent to the obligations of the Company to complete any registration pursuant to this Agreement with respect to Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities.

(b)

Each Investor agrees that, upon receipt of any Suspension Notice from the Company, such Investor will discontinue disposition of Registrable Securities pursuant to any Registration Statement covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(g) or receipt of notice from the Company in writing that no supplement or amendment is required.

(c)

Upon a request by the Company, each Investor will, as soon as practicable, but in no event later than two (2) Business Days after such request, notify the Company whether such Investor continues to hold Registrable Securities.

(d)

No Investor may participate in any registration hereunder which is underwritten unless such Investor (i) agrees to sell such Investor’s Registrable Securities on the basis provided in any underwriting arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; provided, that no holder of Registrable Securities included in any underwritten registration shall be required to make any representations or warranties to the Company or the underwriters (other than representations and warranties regarding such holder, such holder's ownership of its shares of Common Stock to be sold in the offering and such holder's intended method of distribution) or to undertake any indemnification obligations to the Company or the underwriters with respect thereto, except as otherwise provided in Section 6 .

5.

EXPENSES OF REGISTRATION .

All expenses, other than underwriting discounts and commissions or other charges of any broker-dealer acting on behalf of the Investors, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3 , including all registration, listing and qualifications fees, printers and accounting fees and fees and disbursements of counsel for the Company shall be paid by the Company. The Company shall also reimburse the Investors for the reasonable fees and disbursements of Legal Counsel in connection with registrations, filings or qualifications pursuant to Sections 2 and 3 of this Agreement, up to an aggregate of $50,000 per registration.

6.

INDEMNIFICATION .

In the event any Registrable Securities are included in a Registration Statement ( provided , that for the purpose of this Section 6 , the term “Registration Statement” shall include



14



any preliminary prospectus, final prospectus, free writing prospectus, exhibit, supplement or amendment included in or relating to, and any document incorporated or deemed to be incorporated by reference in, the Registration Statement, as defined in Section 1(e):

(a)

The Company agrees to indemnify, hold harmless and defend each Investor, the directors, officers, partners, managers, members, investment managers, employees, affiliates, agents and representatives of, and each Person, if any, who controls, any Investor within the meaning of the 1933 Act or the 1934 Act (each, an “ Indemnified Person ”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement (if such settlement is effected with the written consent of the party from which indemnification is sought, which consent shall not be unreasonably withheld, conditioned or delayed) or expenses, joint or several (collectively, “ Claims ”), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened (“ Indemnified Damages ”), to which any of them may become subject insofar as such Claim (or actions or proceedings, whether commenced or threatened, in respect thereof) or Indemnified Damages arise out of, or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“ Blue Sky Filing ”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements made therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any prospectus, including any preliminary prospectus, free writing prospectus or final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC, and including all information incorporated by reference therein), or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including any state securities law, or any rule or regulation thereunder relating to the offer or sale of Registrable Securities pursuant to a Registration Statement or (iv) any breach of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “ Violations ”).  Subject to Section 6(c) , the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a) : (x) shall not apply to a Claim or Indemnified Damages sought by an Indemnified Person to the extent arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; and (y) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed. Such indemnity shall



15



remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9 .

(b)

In connection with any Registration Statement in which an Investor’s Registrable Securities are included, such Investor agrees to severally and not jointly indemnify, hold harmless and defend the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act (each, an “ Indemnified Party ”), to the same extent and in the same manner as is set forth in Section 6(a) with respect to the Indemnified Persons, against any Claim or Indemnified Damages to which any of them may become subject insofar as such Claim or Indemnified Damages arise out of or are based upon (i) any Violation, to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with the preparation of the Registration Statement or any amendment thereof or supplement thereto; or (ii) the use by such Investor of an outdated or defective prospectus after the Company has notified such Investor, through the Company’s delivery of a Suspension Notice, that the prospectus is outdated or defective; and, subject to Section 3(c) , such Investor will reimburse any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Claim; provided , however , that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim or Indemnified Damages if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld, conditioned or delayed; provided , further , that an Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to the Registration Statement giving rise to such indemnification obligation. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9 .

(c)

Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of the written threat of or notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim or Indemnified Damages, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6 , promptly deliver to the indemnifying party a written notice of the written threat of or notice of the commencement of such action or proceeding. In case any such action or proceeding is brought against any Indemnified Party or Indemnified Person and such Indemnified Party or Indemnified Person seeks or intends to seek indemnity from an indemnifying party, the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided , however , that an Indemnified Party or Indemnified



16



Person shall have the right to retain its own counsel with the fees and expenses of such counsel for such Indemnified Party or Indemnified Person (as applicable) to be paid by the indemnifying party if the defendants in any such action or proceeding include both the Indemnified Party or Indemnified Person, on the one hand, and the indemnifying party, on the other hand, and, the Indemnified Party or Indemnified Person (as applicable) shall have concluded, based on an opinion of counsel reasonably satisfactory to the indemnifying party, that the representation by such counsel of the Indemnified Person or Indemnified Party (as applicable) and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding and/or that there may be legal defenses available to it and/or any other Indemnified Party or Indemnified Person which are different from or additional to those available to the indemnifying party; provided , further , that the indemnifying party shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for all such Indemnified Persons or Indemnified Parties. In the case of an Indemnified Person, legal counsel referred to in the immediately preceding sentence shall be selected by the Investors holding at least a majority of the Registrable Securities included in the Registration Statement to which the Claim or Indemnified Damages relate. The Indemnified Party or Indemnified Person shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or proceeding or Claim or Indemnified Damages by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or proceeding or Claim or Indemnified Damages. The indemnifying party shall keep the Indemnified Party or Indemnified Person reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action or proceeding effected without its prior written consent; provided , however , that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, as the case may be, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person (as applicable) of a full release from all liability with respect to such Claim or Indemnified Damages or which includes any admission as to fault or culpability on the part of such Indemnified Party or Indemnified Person.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action or proceeding shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6 , except to the extent that the indemnifying party is materially prejudiced in its ability to defend such action or proceeding as a result of such failure.

(d)

No Person involved in the sale of Registrable Securities who is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to indemnification from any Person who is not guilty of such fraudulent misrepresentation.



17



(e)

The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

(f)

The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.  Notwithstanding the foregoing, in the event that any of the provisions of Section 13.12 of the Financing Agreement and this Section 6 may be deemed to both be applicable to any of the same losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, the provisions of this Section 6 shall control and such provisions of Section 13.12 of the Financing Agreement shall be inoperative.

7.

CONTRIBUTION .

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to, in lieu of indemnifying such Indemnified Person or Indemnified Party, as applicable, make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided , however , that: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6 of this Agreement; (ii) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement, less the amount of any damages that such Investor has otherwise been required to pay in connection with such sale.

8.

REPORTS UNDER THE 1934 ACT ; FILINGS

(a)

With a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“ Rule 144 ”), at all times during which there are shares of Registrable Securities outstanding (or issuable upon exercise of outstanding Warrants or other securities, without giving effect to any limitations on exercise of the Warrants or other securities) that have not been previously (i) sold to or through a broker or dealer or underwriter in a public distribution or (ii) sold in a transaction exempt from the registration and prospectus delivery requirements of the 1933 Act under Section 4(a)(1) thereof, in the case of either clause (i) or clause (ii) in such a manner that, upon the consummation of such sale, all transfer restrictions and restrictive legends with respect to such shares are removed upon the consummation of such sale, the Company agrees to:



18



(i)

make and keep public information available, as those terms are understood and defined in Rule 144;

(ii)

file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act, so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

(iii)

furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144 and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

(b)

For so long as the Principal Market is not a National Exchange, the Company shall use its reasonable best efforts to facilitate trading of the Common Stock on the Principal Market and, without limiting the foregoing, the Company shall file all necessary reports, at its expense, to publish all information so as to have available “current public information” in Standard & Poor’s Corporation Records or Mergent’s Manual for state “blue sky” exemption purposes.

9.

ASSIGNMENT OF REGISTRATION RIGHTS .

The rights under this Agreement shall be automatically assignable by the Investors to any transferee or assignee of all or any portion of such Investor’s Registrable Securities (or of any Warrants or other securities upon exercise, conversion or exchange of which Registrable Securities are issuable) if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the applicable provisions contained herein; and (v) such transfer or assignment shall have been made in accordance with the applicable requirements of the Financing Agreement and the Transaction Documents, as applicable.

10.

AMENDMENT OF REGISTRATION RIGHTS .

Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either, retroactively or prospectively) only with the written consent of the Company and the Required Holders. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the



19



Company. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration also is offered to all of the Investors.

11.

MISCELLANEOUS .

(a)

A Person is deemed to be a holder of Registrable Securities (or a transferee or assignee of Registrable Securities, as applicable) whenever such Person owns or is deemed to own of record such Registrable Securities (or the Warrants or other securities upon exercise, conversion or exchange of which such Registrable Securities are issuable, without giving effect to any limitations on exercise of the Warrants or other securities).  If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the record owner of such Registrable Securities (or the Warrants or other securities upon exercise, conversion or exchange of which such Registrable Securities are issuable).

(b)

Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile ( provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Company:

 

 

 

Social Reality, Inc.

456 Seaton Street

Los Angeles, CA 90013

Attention:  Christopher Miglino

Telephone:  (323) 283-8505

Email:chris@socialreality.com

 

 

 

with a copy (for informational purposes only) to:

 

 

 

Sidley Austin LLP

787 Seventh Avenue

New York, NY 10019
Telephone: (212) 839-5480
Attention:  Alan Jakimo

 




20




If to Legal Counsel:

 

 

 

Katten Muchin Rosenman LLP

525 West Monroe Street

Chicago, Illinois 60661

Telephone:

(312) 902-5297 and (312) 902-5612

Facsimile:

(312) 577-4408 and (312) 577-4423

Attention:

Mark R. Grossmann, Esq. and

Mark J. Reyes, Esq.

 

 

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers attached hereto, with copies to such Buyer’s representatives as set forth on such Schedule of Buyers , or in any case to such other address and/or facsimile number and/or to the attention of such other individual as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile deposit with a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.  Notwithstanding the foregoing, the Company or its counsel may transmit versions of any Registration Statement (or any amendments or supplements thereto) to Legal Counsel in satisfaction of its obligations under Sections 3(c) and (d) to permit Legal Counsel to review such Registration Statement prior to filing (and solely for such purpose) by email to mg@kattenlaw.com and mark.reyes@kattenlaw.com (or such other e-mail address as has been provided for such purpose by Legal Counsel) and provided that delivery and receipt of such transmission shall be confirmed by electronic, telephonic or other means.

(c)

Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(d)

All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdiction other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of Chicago for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal



21



service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(e)

This Agreement, the other Transaction Documents and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the other Transaction Documents and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

(f)

Subject to the requirements of Section 9 , this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.

(g)

The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(h)

This Agreement and any amendments hereto may be executed and delivered in two or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when counterparts have been signed by each party hereto and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.  In the event that any signature to this Agreement or any amendment hereto 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.  No party hereto shall raise the use of a facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a signature to this Agreement or any amendment hereto or the fact that such signature was transmitted or communicated through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file as a defense to the formation or enforceability of a contract and each party hereto forever waives any such defense.  



22



(i)

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

(j)

All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders.

(k)

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

(l)

Each Buyer and each holder of the Securities shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies that such Buyers and holders have been granted at any time under any other agreement or contract and all of the rights that such Buyers and holders have under any law.  Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security or proving actual damages), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or in equity.

(m)

This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and, to the extent provided in Sections 6(a) and (b) , each Indemnified Person and Indemnified Party, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

(n)

The Company shall not grant any Person any registration rights with respect to shares of Common Stock or any other securities of the Company other than registration rights that will not adversely affect the rights of the Investors hereunder (including by limiting in any way the number of Registrable Securities that could be included in any Registration Statement pursuant to Rule 415), and shall not otherwise enter into any agreement that is inconsistent with the rights granted to the Investors hereunder.

(o)

The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision of this Agreement is intended to confer any obligations on any Investor vis- à -vis any other Investor. Nothing contained herein, and no action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated herein.

(p)

Unless the context otherwise requires, (i) all references to Sections, Exhibits or Annexes are to Sections, Exhibits or Annexes contained in or attached to this Agreement, (ii) words in the singular or plural include the singular and plural and



23



pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine, feminine and neuter and (iii) the use of the word “including” in this Agreement shall be by way of example rather than limitation.

IN WITNESS WHEREOF , each Buyer and the Company has caused its signature page to this Agreement to be duly executed as of the date first written above.

 

COMPANY:

 

 

 

SOCIAL REALITY, INC.

 

 

 

By:

/s/ Christopher Miglino

 

Name:  

Christopher Miglino

 

Title:

 Chief Executive Officer

 

 

 

BUYERS:

 

 

 

VPC SBIC I, LP

 

 

 

By:

Victory Park Capital Advisors, LLC,

 

 

its investment manager

 

 

 

 

 

 

By:

/s/ Scott Zemnick

 

 

Name:

Scott Zemnick

 

 

Title:

General Counsel





24




SCHEDULE OF BUYERS

Buyer

Buyer’s Address
and Facsimile Number

Buyer’s Representative’s Address
and Facsimile Number

 

 

 

VPC SBIC I, LP

227 W. Monroe Street, Suite 3900
Chicago, IL 60606
Attention: Scott Zemnick, Esq.
Facsimile: 312.701.0794
Telephone: 312.705.2786

Katten Muchin Rosenman LLP

525 West Monroe Street, Suite 1900

Chicago, Illinois 60661

Telephone:

312.902.5297 and

312.902.5612

Facsimile:

312.577.4408 and

312.577.4423

Attention:

Mark R. Grossmann, Esq.

and Mark J. Reyes, Esq.




A-1





Exhibit 10.27

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (“ Agreement ”), dated as of October 30, 2014, by and between Social Reality, Inc., a Delaware corporation (the “ Employer ”) and Richard Steel, an individual residing at _______________ (the “ Executive ”).

RECITALS

WHEREAS , the Employer owns and operates an Internet-based advertising agency operating on a worldwide basis;

WHEREAS , the Employer wishes to employ the Executive as its President; and

WHEREAS , the Employer and the Executive desire to set forth the terms pursuant to which the Executive will be employed by the Employer as its President.

NOW, THEREFORE , the Employer and the Executive hereby agree as follows:

Section 1.

Employment .

(a)

The Employer shall employ the Executive, and the Executive agrees to be employed by the Employer, upon the terms and conditions hereinafter provided, for a term (the “ Initial Term ”) commencing October 30, 2014 (the “ Effective Date ”) and expiring October 30, 2018.  The Initial Term shall be automatically extended for additional successive periods of twelve (12) month renewal terms (each a “ Renewal Term ”) unless either the Employer or the Executive provides notice to the other of its (or his) intent not to renew the Initial Term or the then current Renewal Term (as applicable) at least sixty (60) days prior to the expiration of the Initial Term or the then current Renewal Term (as applicable).  The Initial Term and any Renewal Terms are referred to herein as the “ Term ”.

(b)

The Executive hereby represents and warrants that the Executive has the legal capacity to execute and perform this Agreement, that this Agreement is a valid and binding agreement enforceable against the Executive according to its terms, and that the execution and performance of this Agreement by the Executive does not violate the terms of any existing agreement or understanding to which the Executive is a party.

Section 2.

Duties .  

The Executive shall report to the Chief Executive Officer of the Employer and have the title of President of the Employer.  The Executive or a designee of the Executive (selected in the Executive’s sole discretion) shall be nominated for election as a member of the Employer’s board of directors (the “ Board ”) at each annual meeting of shareholders of the Employer occurring during the Term.  The Executive shall have such duties as are consistent with the Executive’s experience, expertise and position as shall be






assigned to the Executive from time to time by the Chief Executive Officer.  During the Term, and except for vacation in accordance with the Employer’s standard paid time off policies or due to illness or incapacity, the Executive shall devote substantially all of the Executive’s business time, attention, skill and efforts to the business and affairs of the Employer and its parents, subsidiaries and affiliates.  Notwithstanding the foregoing, the Executive may (1) make personal investments in such form or manner as will neither require the Executive’s services in the operation or affairs of the business in which such investments are made, and (2) serve as a director on the board of directors of other non-competing companies with prior written notice to the Board.  The Executive agrees not to engage in any outside business activities that materially interfere with or materially delay the performance of the Executive’s duties hereunder (which duties shall be performed on a first-priority basis); provided , that , it is understood and agreed that service on a board of a non-competing company, in and of itself, shall not be deemed to so delay or interfere with the Executive’s duties hereunder, unless the Board shall have determined in good faith that such other company is directly competitive with the Employer.

Section 3.

Compensation .  

For all services rendered by the Executive in any capacity required hereunder during the Term, including, without limitation, services as an officer, director, or member of any committee of the Employer or any parent, subsidiary, affiliate or division thereof, the Executive shall be compensated as follows:

(a)

Salary .  The Employer shall pay the Executive a fixed salary (“ Base Salary ”) at a rate of $114,000.00 per annum.  The Board may from time to time further increase, but not decrease, the Base Salary, in its sole discretion. The Base Salary shall be payable in accordance with the customary payroll practices of the Employer.  

(b)

Bonus .  Subject to Section 3(g) , the Executive shall receive a guaranteed annual bonus of $136,000 payable on January 31st of each year (the “ Annual Bonus ”); provided, with respect to the period ending on the expiration of the Initial Term (October 30, 2018), the bonus for such period shall be payable on January 31, 2019.

(c)

Discretionary Bonus .  Subject to Section 3(g), at the sole discretion of the Board, the Executive shall be eligible to receive an annual discretionary bonus (the “ Discretionary Bonus ”) during the prior year.  Any awarded Discretionary Bonus shall be paid within sixty (60) days of being granted. Executive acknowledges that the Discretionary Bonus may be comprised of cash or non-cash compensation as determined at the sole discretion of the Board or its designee. The provisions of this Section 3(c) in no way guarantee or entitle the Executive to any discretionary bonus whatsoever, the award of which is entirely discretionary.

(d)

Equity Incentives . On the Effective Date, the Executive shall receive an option to purchase 600,000 shares of the Employer’s Class A common stock,



-2-





$0.001 par value per share at an exercise price of $1.50 per share (in each case subject to adjustment in the event of a stock split, stock dividend, recapitalization or similar event) (the “ Option ”).  The Option shall be granted under the Employer’s 2012 Equity Compensation Plan and, except as otherwise provided in Section 5 hereof, shall vest and become exercisable with respect to 50% of the shares subject thereto on the third (3) anniversary of the Effective Date and as to 50% of the shares subject thereto on the fourth anniversary of the Effective Date.  

(e)

Benefits . Except as set forth in this Agreement, the Executive shall be entitled to participate in all employee benefit plans or programs, and to receive all benefits, perquisites and emoluments, which are approved by the Board and are generally made available by the Employer to salaried employees of the Employer, to the extent permissible under the general terms and provisions of such plans or programs and in accordance with the provisions thereof.  In addition, the Executive shall be entitled to obtain from the Employer’s PEO (at Employer’s sole cost and expense) an insurance policy on the Executive’s life for the benefit of the Executive and his designated beneficiaries in an amount equal to not less than two (2) times the sum of the Executive’s Base Salary (the “ Life Insurance Policy ”).  The Employer shall, on a monthly basis, promptly reimburse the Executive for the costs and expense (including the payment of any premium) related to such Life Insurance Policy.   Notwithstanding the foregoing and except with respect to the Life Insurance Policy, nothing in this Agreement shall require any particular plan or program to be continued nor preclude the amendment or termination of any such plan or program, provided that such amendment or termination is applicable generally to the employees of the Employer.  

(f)

Paid Time Off .  The Executive shall be entitled to thirty (30) days of paid time off (“ PTO ”) per calendar year during the Term.  The Executive will not forfeit accrued PTO that is not used by the end of the calendar year; provided, however , once the Executive has forty-five (45) days of accrued, but unused, PTO days (the “ PTO Accrual Cap ”), the Executive will not accrue any additional PTO time until he reduces the balance of his accrued PTO days below the PTO Accrual Cap.  

(g)

Earnout Consideration .  To the extent the payment of the Annual Bonus and the cash portion of any Discretionary Bonus would result in a reduction in the Earnout Consideration (as defined in the Stock Purchase Agreement, dated October 30, 2014, by and among the Employer, the Executive and Steel Media, Inc. (the “ SPA ”)) otherwise payable to the Executive thereunder by an amount greater than the sum of (x) the Annual Bonus and (y) the cash portion of any Discretionary Bonus, then the applicable portion of such Annual Bonus and/or Discretionary Bonus resulting in such reduction shall not be paid for the applicable period.



-3-





Section 4.

Business Expenses .  

The Employer shall pay or promptly reimburse the Executive for all necessary expenses reasonably incurred by the Executive in connection with the performance of the Executive’s duties and obligations under this Agreement, subject to the Executive’s presentation of appropriate vouchers in accordance with such expense account policies and approval procedures as the Employer may from time to time reasonably establish for employees (including but not limited to prior approval of extraordinary expenses).  The With the exception of travel expenses, Executive agrees to obtain prior written approval from the Employer before incurring any single out-of-pocket expense in connection with the Executive’s performance of his duties and obligations under this Agreement in excess of $2,500.00 (or such higher limit as permitted by the Board or the Employer’s CEO).

Section 5.

Effect of Termination of Employment .  

(a)

Termination Generally; Accrued Obligations .

The date specified in any notice of termination as the Executive’s final day of employment shall be referred to herein as the “ Termination Date .” Except as set forth in this Section 5 , in the event that the Executive’s employment hereunder is terminated for any reason, then the Executive shall be entitled to no compensation or other benefits of any kind whatsoever, other than: (i) payment of the Executive’s unpaid Base Salary under Section 3(a) through the Termination Date, payable on the Employer’s next regular pay date following the Termination Date (or such earlier date as may be required by applicable law); (ii) payment of any unpaid bonus under Sections 3(b) and 3(c) for the preceding year, payable on the date that such bonus is due and payable (but not later than March 15 th of the calendar year in which the Termination Date occurs); (iii) payment of any unused PTO that accrued through the Termination Date, payable on the Employer’s next regular pay date following the Termination Date (or such earlier date as may be required by applicable law); (iv) expenses reimbursable under Section 4 incurred on or prior to the Termination Date, but not yet reimbursed, which reimbursable (but not yet reimbursed) expenses, if any, shall be paid on the next regular payroll date of the Employer that occurs after the Termination Date (or as soon thereafter as administratively practicable); (v) payment of any other unpaid amounts due and owing under any benefit, fringe or equity plans, programs, policies and/or practices, in accordance with such plan, program, policy or practice; and (vi) the opportunity to continue health coverage under the Employer’s group health plan in accordance with “COBRA” (“ COBRA Coverage ”) (the foregoing payments and benefits collectively referred to herein as “ Accrued Obligations ”).

(b)

Termination Without Cause; Resignation for Good Reason .  

In the event that the Employer terminates the Executive’s employment hereunder during the Term without “Cause” or the Executive resigns for “Good Reason”, then the Executive shall be entitled to no compensation or other benefits of any kind whatsoever, other than: (i) the Accrued Obligations; (ii) the Severance



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Amount (defined below), which Severance Amount shall be payable, subject to Section 16 , in equal installments over the Severance Period (defined below) in accordance with the Employer’s normal payroll practices, commencing on the first regular pay date of the Employer that occurs after the Termination Date; (iii) the Executive's stock options and/or restricted shares granted to the Executive during the Term (to the extent not fully vested as of the Termination Date), shall become fully vested as of the Termination Date, and the Executive shall be permitted to exercise such options for up to twelve months following the Termination Date (unless otherwise agreed to by the Executive and the Employer in the case of any stock options or restricted shares granted after the Effective Date); and (iv) if the Executive elects COBRA Coverage following the Termination Date, the Employer shall waive the cost of such coverage (for the Executive and his eligible dependents) during the Severance Period (or such earlier date that COBRA coverage expires).  For the avoidance of doubt, nothing in clause (iii) of this Section 5(b) shall apply to the Earnout Shares or the Escrow Shares (each as defined in the SPA).  

If the Executive resigns for Good Reason prior to the expiration of the Second Earnout Period (as defined in the SPA), then, notwithstanding anything in the SPA to the contrary, the Employer’s obligation to pay the Earnout Consideration on the Separation Date (as each such term is defined in the SPA) pursuant to Section 2.5(r) of the SPA shall be suspended if the Employer disputes in good faith the existence of Good Reason, by delivering a detailed written notice of the basis of such dispute to the Executive within five (5) days after the Termination Date.  The suspension shall, without further action, notice or deed, be lifted and the Earnout Consideration, together with accrued and unpaid interest thereon, shall be due and payable immediately upon the earliest to occur of (x) mutual written agreement of the Employer and the Executive, (y) a court of competent jurisdiction shall determine that the Executive’s resignation was for Good Reason, or (z) a Default or an Event of Default (as each of those terms is defined in that certain Financing Agreement, of even date herewith, by and among the Employer, as borrower, the guarantors from time to time party thereto, the lenders party thereto and Victory Park Management, LLC, as agent, as in effect on the date hereof) shall have occurred (whether or not waived, cured or otherwise resolved).  Interest shall accrue on the Earnout Consideration from and after the Termination Date, at the rate of 10% per annum, until the date of its indefeasible payment in full.

(c)

Death or Disability .  

The Executive’s employment with the Employer shall terminate upon Executive’s death or “Disability” (defined below), in which case the Executive (or his estate and heirs) shall be entitled to no compensation or other benefits of any kind whatsoever for any period after the Executive’s date of termination other than: (i) the Accrued Obligations; and (ii) if the Executive and/or his eligible dependents elect COBRA coverage, the Employer shall waive the cost of such coverage (for the Executive and his eligible dependents) during the Severance Period (or such



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earlier date that COBRA coverage expires).  In addition, the Executive (or his estate and heirs) shall be permitted to exercise the Executive’s stock options granted to the Executive during the Term (to the extent vested as of the Termination Date) for up to six months following the Termination Date.

(d)

Termination Due to Non-Renewal .  

If the Executive’s employment with the Employer terminates due to the Employer’s notice of non-renewal of the Term in accordance with Section 1(a) , then the Executive shall be entitled to no compensation or other benefits of any kind whatsoever, other than: (i) the Accrued Obligations; (ii) the Severance Amount, which Severance Amount shall be payable, subject to Section 16 , in equal installments over the Severance Period in accordance with the Employer’s normal payroll practices, commencing on the first regular pay date of the Employer that occurs after the Termination Date; and (iii) if the Executive elects COBRA coverage, the Employer shall waive the cost of such coverage (for the Executive and his eligible dependents) during the Severance Period (or such earlier date that COBRA coverage expires).  In addition, the Executive shall be permitted to exercise the Executive’s stock options granted to the Executive during the Term (to the extent vested as of the Termination Date) for up to six (6) months following the Termination Date.

(e)

Termination With Cause .  

The Employer may terminate this Agreement immediately for “Cause” by giving written notice to the Executive. In the event that this Agreement is terminated pursuant to this Section 5(e) , the Executive shall be entitled to no compensation or other benefits of any kind whatsoever for any period after the Termination Date set forth in the notice given by the Employer to the Executive, except for the Accrued Obligations.  Further, if the Executive’s employment is terminated for Cause pursuant to this Section 5(e) , the stock options granted to the Executive during the Term, to the extent vested, but not exercised, as of the Termination Date, shall be forfeited.

(f)

Definitions .  For purposes of this Agreement:

(i)

During the Earnout Payment Period, “ Cause ” shall mean: (1) the Executive’s gross negligence in the performance of the material responsibilities of his office or position; (2) the Executive’s intentional failure to perform the material responsibilities of his office or position, including, but not limited to, following the lawful directives of the Board; (3) any conviction by a court of law of, or entry of a pleading of guilty by the Executive with respect to a felony; (4) the Executive’s embezzlement or intentional misappropriation of any property of the Employer (other than good faith expense account disputes); (5) fraud by the Executive resulting in harm to the Employer; or (6) the Executive’s material breach of this Agreement.  The Executive shall be given prior written notice of



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the termination of his employment for Cause.  If the Executive shall be terminated pursuant to clause (1), (2) or (6) above, the Executive shall be given a reasonable period of time, not to exceed 30 days, to cure the matter (if curable).  In all other cases, including if the Executive shall be terminated pursuant to clause (3), (4) or (5) above, termination shall be effective as of the date notice is given.

(ii)

After the expiration of the Earnout Payment Period, “ Cause ” shall mean: (1) the Executive’s negligence in the performance of the material responsibilities of his office or position; (2) the Executive’s failure to perform the material responsibilities of his office or position, including, but not limited to, following the lawful directives of the Board; (3) any conviction by a court of law of, or entry of a pleading of guilty by the Executive with respect to a felony; (4) the Executive’s embezzlement or intentional misappropriation of any property of the Employer (other than good faith expense account disputes); (5) fraud by the Executive resulting in harm to the Employer; or (6) the Executive’s breach of this Agreement.  The Executive shall be given prior written notice of the termination of his employment for Cause.  If the Executive shall be terminated pursuant to clause (1), (2) or (6) above, the Executive shall be given a reasonable period of time, not to exceed 30 days, to cure the matter (if curable).  In all other cases, including if the Executive shall be terminated pursuant to clause (3), (4) or (5) above, termination shall be effective as of the date notice is given.

(iii)

Disability ” shall mean that the Executive is incapable of performing his principal duties due to physical or mental incapacity or impairment for 180 consecutive days, or for 240 non-consecutive days, during any twelve (12) month period.

(iv)

During the Earnout Payment Period, “ Good Reason ” shall mean the occurrence of any of the following: (a) a reduction of the Executive’s authority, functions, duties or responsibilities, which would cause his position with the Employer to become of materially less responsibility, importance or scope than his position on the date of this Agreement (other than during any period of illness or disability); (b) the failure of the shareholders to appoint the Executive to the Board within sixty (60) days following the Effective Date, or the Executive’s removal as a director of the Board, in each case, without his consent; (c) a breach by the Employer of a material term of the Agreement; (d) the relocation of the Executive’s principal office location, without the Executive’s consent, to a location that is at least ten (10) miles from the prior location with the Executive’s consent; (e) any reduction, without the Executive’s consent, of the Executive’s Base Salary, except to the extent the compensation of the Employer’s chief executive officer is similarly and proportionately reduced; or (f) any failure of the Board to nominate the Executive or his designee for election to the Board at an annual meeting of shareholders or



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failure of the shareholders of the Employer to elect the Executive or his designee to the Board at any annual meeting occurring during the Term (unless the Executive or any designee of the Executive is prohibited by law from serving as a director of the Board); provided, however, that the Executive must notify the Employer within ninety (90) days of the occurrence of any of the foregoing conditions that he considers it to be a “Good Reason” condition and provide the Employer with at least thirty (30) days in which to cure the condition.  If the Executive fails to provide this notice and cure period prior to his resignation, or resigns more than six (6) months after the initial existence of the condition, his resignation will not be deemed to be for “Good Reason.”

(v)

After the expiration of the Earnout Payment Period, “ Good Reason ” shall mean the occurrence of any of the following: (a) the failure of the shareholders to appoint the Executive to the Board within sixty (60) days following the Effective Date, or the Executive’s removal as a director of the Board, in each case, without his consent; (b) the relocation of the Executive’s principal office location, without the Executive’s consent, to a location that is at least ten (10) miles from the prior location with the Executive’s consent; (c) any reduction, without the Executive’s consent, of the Executive’s Base Salary, except to the extent the compensation of the Employer’s chief executive officer is similarly and proportionately reduced; (d) a breach by the Employer of a material term of the Agreement; or (e) any failure of the Board to nominate the Executive or his designee for election to the Board at an annual meeting of shareholders or failure of the shareholders of the Employer to elect the Executive or his designee to the Board at any annual meeting occurring during the Term (unless the Executive or any designee of the Executive is prohibited by law from serving as a director of the Board); provided, however, that the Executive must notify the Employer within ninety (90) days of the occurrence of any of the foregoing conditions that he considers it to be a “Good Reason” condition and provide the Employer with at least thirty (30) days in which to cure the condition.  If the Executive fails to provide this notice and cure period prior to his resignation, or resigns more than six (6) months after the initial existence of the condition, his resignation will not be deemed to be for “Good Reason.”

(vi)

Earnout Payment Period ” means the period commencing on the Effective Date and ending on the earlier of (x) the date 100% of the Earnout Consideration (as defined in the SPA) is paid in full to the Executive pursuant to the SPA or (y) the date, following the expiration of the Second Earnout Period, on which the amount of the Earnout Consideration has been finally determined in accordance with Section 2.5 of the SPA and, to the extent determined due and payable, such Earnout Consideration has been indefeasibly paid in full to the Executive.



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(vii)

Severance Amount ,” for purposes of Sections 5(b) and 5(d) , shall equal the sum of: (a) an amount equal to eighteen (18) months of the Executive’s Base Salary at the rate in effect as of the Executive’s Termination Date (or, in the case of a termination for Good Reason due to the reduction in the Executive’s Base Salary, the Base Salary rate in effect immediately prior to such reduction); plus (b) an amount equal to the greater of (x) the most recent Bonus that would be payable to the Executive by the Employer, calculated on an annualized basis up to the month the Executive is terminated and (y) $136,000 (or, if the Termination Date occurs prior to January 1, 2015, then $136,000).

(viii)

Severance Period ,” for purposes of Sections 5(b) , 5(c) and 5(d) , shall mean a period of eighteen (18) months following the Termination Date.

(g)

No Mitigation .  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of subsequent employment.

Section 6.

Confidentiality .  

The Executive shall execute, and abide by the terms of, the confidentiality/non-disclosure agreement in the form annexed hereto as Exhibit A (the “ Confidentiality Agreement ”), the terms of which are incorporated herein.

Section 7.

Assignment of Developments; Works for Hire .  

If at any time or times during Executive’s employment with the Employer, the Executive shall (either alone or with others) make, conceive, discover or reduce to practice any invention, modification, discovery, design, development, improvement, process, software program, work-of-authorship, documentation, formula, data, technique, know-how, secret or intellectual property right whatsoever or any interest therein (whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection) (herein called “ Developments ”) that (a) relates to the business of the Employer (or any subsidiary of the Employer) or any customer of or supplier to the Employer (or any of its subsidiaries) or any of the products or services being developed, manufactured, sold or provided by the Employer or which may be used in relation therewith or (b) results from tasks assigned to the Executive by the Employer, such Developments and the benefits thereof shall immediately become and/or be considered as the sole and absolute property of the Employer and its assigns as a work for hire, and the Executive shall promptly disclose to the Employer (or any persons designated by it) each such Development and hereby assigns any rights the Executive may have or acquire in the Developments and benefits and/or rights resulting therefrom to the Employer and its assigns without further compensation and shall communicate, without cost or delay, and without publishing the



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same, all available information relating thereto (with all necessary documentation, plans and models) to the Employer.  Upon disclosure of each Development to the Employer, the Executive will, during the Term and at any time thereafter, at the request and cost of the Employer, sign, execute, make and do all such deeds, documents, acts and things as the Employer and its duly authorized agents may reasonably require:

(a)

to apply for, obtain and vest in the name of the Employer alone (unless the Employer otherwise directs) letters patent, copyrights, trademarks, service marks or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and

(b)

to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyrights, trademarks, service marks or other analogous protection.

In the event the Employer is unable, after reasonable effort, to secure the Executive’s signature on any letters patent, copyrights, trademarks, service marks or other analogous protection relating to a Development, whether because of the Executive’s physical or mental incapacity or for any other reason whatsoever, the Executive hereby irrevocably designates and appoints the Employer and its duly authorized officers and agents as the Executive’s agent and attorney-in-fact, to act for and on his behalf and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of any such letters patent, copyrights, trademarks, service marks and other analogous protection thereon with the same legal force and effect as if executed by the Executive.

Section 8.

Withholding Taxes .  

The Employer may directly or indirectly withhold from any payments to be made under this Agreement all federal, state, city or other taxes and all other deductions as shall be required pursuant to any law or governmental regulation or ruling or pursuant to any contributory benefit plan maintained by the Employer.

Section 9.

Notices .  

All notices, requests, demands and other communications required or permitted hereunder shall be given in writing, and shall be deemed effective upon (a) personal delivery, if delivered by hand, (b) three days after the date of deposit in the mails, postage prepaid, if mailed by certified or registered United States mail, or (c) the next business day, if sent by a prepaid overnight courier service, and in each case addressed as follows:

(a)

To the Employer:

Social Reality, Inc.
456 Seaton Street

Los Angeles, CA 90013

Attention: Christopher Miglino



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with a copy (which shall not be deemed notice) to:

Pearlman Schneider LLP
2200 Corporate Blvd., Suite 210
Boca Raton, FL 33431

Attention:  Jim Schneider, Esq.

(b)

To the Executive:

to the Executive at the Executive’s
address listed above.

with a copy (which shall not be deemed notice) to:

Lowenstein Sandler LLP
1251 Avenue of the Americas
New York, New York 10020

Attention:  Steven E. Siesser, Esq.


or to such other address as either party shall have previously specified in writing to the other.

Section 10.

Binding Agreement; No Assignment .  

This Agreement shall be binding upon, and shall inure to the benefit of, the Executive, the Employer and their respective permitted successors, assigns, heirs, beneficiaries and representatives.  This Agreement is personal to the Executive and may not be assigned by the Executive without the prior written consent of the Board, as evidenced by a resolution of the Board.  Any attempted assignment in violation of this Section 10 shall be null and void.

Section 11.

Governing Law; Consent to Jurisdiction; Arbitration.

This Agreement, and all matters arising directly or indirectly from this Agreement, shall be governed by, and construed and interpreted in accordance with, the laws of the State of California, without giving effect to the choice of law provisions thereof.  During the Earnout Payment Period, any and all actions arising out of this Agreement or the Executive’s employment by the Employer or termination therefrom shall be brought and heard in the state and federal courts of the State of California and the parties hereto hereby irrevocably submit to the exclusive jurisdiction of any such courts. After the expiration of the Earnout Payment Period, any unresolved controversy or claim arising out of or relating to this Agreement, shall be submitted to arbitration pursuant to the terms set forth in Exhibit B .

Section 12.

Entire Agreement .

This Agreement, including all Exhibits hereto, but with the exception of the SPA, shall constitute the entire agreement between the parties with respect to the matters covered hereby and supersedes all previous written, oral or implied understandings between them



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with respect to such matters, including without limitation, any “employment” or similar agreements (whether written, oral or implied) between the Employer and the Executive.  Notwithstanding anything in this Agreement to the contrary, the Executive shall have no liability to the Employer or any other person or entity (and all such liability is hereby irrevocably waived, discharged and released, which such waiver, discharge and release are a material inducement to the Executive for entering into this Agreement) whatsoever of any kind with respect to any termination of his employment for any consequential, special, punitive or other similar damages, whether foreseeable, known to Executive, or even if Executive was advised thereof.

Section 13.

Amendments .  

This Agreement may only be amended or otherwise modified by a writing executed by each of the parties hereto.

Section 14.

Survivorship .  

The provisions of Sections 5 through 17 , as well as Exhibits A and B hereto, shall survive the termination of this Agreement.

Section 15 .

Indemnification/D&O Insurance .

The Employer shall indemnify, defend and hold the Executive harmless from and against all claims, suits, actions and/or proceeding arising by reason of the Executive’s status as an officer, director, employee and/or agent of the Employer to the fullest extent provided (a) by Employer’s Certificate of Incorporation and/or Bylaws, (b) under Employer’s Directors and Officers Liability and general insurance policies, and (c) under the Delaware General Corporation Law, as each may be amended from time to time.  Employer agrees (i) that the Executive shall be covered by Directors and Officers insurance coverage on the same basis as the Employer maintains such coverage for other officers and directors, (ii) Executive shall be covered by such policies in accordance with their terms to the maximum extent of the coverage available under such policies, and (iii) Executive shall continue to be covered by such policies both during the Term and following the termination of the Executive’s employment with Employer so long as Executive shall be or may be subject to any claims, suits, actions and/or proceedings by reason of the Executive’s status as (or former status as) an officer, director, employee and/or agent of Employer.  For the avoidance of doubt, nothing in this Section 15 shall entitle the Executive to indemnification for actions or omissions with respect to which the Employer is prohibited from providing indemnification pursuant to the Delaware General Corporation Law.

Section 16.

409A Compliance .  

All payments under this Agreement are intended to comply with or be exempt from the requirements of Section 409A of the Code and regulations promulgated thereunder (“ Section 409A ”).  As used in this Agreement, the “ Code ” means the Internal Revenue Code of 1986, as amended.  To the extent permitted under applicable regulations and/or



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other guidance of general applicability issued pursuant to Section 409A, the Employer reserves the right to modify this Agreement to conform with any or all relevant provisions regarding compensation and/or benefits so that such compensation and benefits are exempt from the provisions of 409A and/or otherwise comply with such provisions so as to avoid the tax consequences set forth in Section 409A and to assure that no payment or benefit shall be subject to an “additional tax” under Section 409A.  To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A, or to the extent any provision in this Agreement must be modified to comply with Section 409A, such provision shall be read in such a manner so that no payment due to the Executive shall be subject to an “additional tax” within the meaning of Section 409A(a)(1)(B) of the Code.  If necessary to comply with the restriction in Section 409A(a)(2)(B) of the Code concerning payments to “specified employees,” any payment on account of the Executive’s separation from service that would otherwise be due hereunder within six (6) months after such separation shall be delayed until the first business day of the seventh month following the Termination Date and the first such payment shall include the cumulative amount of any payments (without interest) that would have been paid prior to such date if not for such restriction.  Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of payment. All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.  Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Employer for purposes of Section 5(b) , 5(c) or 5(d) unless the Executive would be considered to have incurred a “termination of employment” from the Employer within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).  

Section 17

Section 280G Limitation .

If any payment(s) or benefit(s) the Executive would receive pursuant to this Agreement and/or pursuant to any other agreement or arrangement would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (b) but for this Section 17 , be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then such payment(s) or benefit(s) (collectively, “ Payments ”) shall be reduced to the Reduced Amount.  The “ Reduced Amount ” shall be the largest portion of the Payments that can be paid or provided without causing any portion of the Payments being subject to the Excise Tax.  If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payments equal the Reduced Amount, reduction shall occur in the following order: (i) first, the Severance Payment under this Agreement, (ii) second, any other cash payments due under any other agreement between the Employer and the



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Executive; (iii) third, cancellation of the acceleration of vesting of any stock options, and (iv) lastly, other non-cash forms of benefits.  Calculations of the foregoing will be performed at the expense of the Employer by an accounting firm selected by the Employer.  The determinations of such accounting firm shall be final, binding and conclusive upon the Employer and the Executive.

Section 18 .

Key Man Life Insurance .  

The Executive agrees to cooperate with the Employer in obtaining any key man life insurance coverage insuring the Executive’s life and to submit to such physical examinations as may be needed to secure such coverage.

Section 19.

Counterparts .  

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

IN WITNESS WHEREOF , the Employer has caused this Agreement to be executed and delivered by its duly authorized officer and the Executive has signed this Agreement, all as of the first date written above.

 

SOCIAL REALITY, INC.

 

 

 

 

By:

/s/ Chris Miglino

 

 

Chris Miglino,

 

 

Authorized representative for Social Reality, Inc.

 

 

 

 

EXECUTIVE:

 

 

 

 

/s/ Richard Steel

 

Richard Steel




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Exhibit 10.28

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (“ Agreement ”), dated as of October 30, 2014, by and between Social Reality, Inc., a Delaware corporation (the “ Employer ”) and Chad Holsinger, an individual residing at ________________ (the “ Executive ”).

RECITALS

WHEREAS , the Employer owns and operates an Internet-based advertising agency operating on a worldwide basis;

WHEREAS , the Employer wishes to employ the Executive as its Chief Revenue Officer; and

WHEREAS , the Employer and the Executive desire to set forth the terms pursuant to which the Executive will be employed by the Employer as its Chief Revenue Officer.

NOW, THEREFORE , the Employer and the Executive hereby agree as follows:

Section 1.

Employment .

(a)

The Employer shall employ the Executive, and the Executive agrees to be employed by the Employer, upon the terms and conditions hereinafter provided, for a term (the “ Initial Term ”) commencing October 30, 2014 (the “ Effective Date ”) and expiring October 30, 2018.  The Initial Term shall be automatically extended for additional successive periods of twelve (12) month renewal terms (each a “ Renewal Term ”) unless either the Employer or the Executive provides notice to the other of its (or his) intent not to renew the Initial Term or the then current Renewal Term (as applicable) at least sixty (60) days prior to the expiration of the Initial Term or the then current Renewal Term (as applicable).  The Initial Term and any Renewal Terms are referred to herein as the “ Term ”.

(b)

The Executive hereby represents and warrants that the Executive has the legal capacity to execute and perform this Agreement, that this Agreement is a valid and binding agreement enforceable against the Executive according to its terms, and that the execution and performance of this Agreement by the Executive does not violate the terms of any existing agreement or understanding to which the Executive is a party.

Section 2.

Duties .  

The Executive shall report to the President of the Employer and have the title of Chief Revenue Officer of the Employer.  The Executive shall have such duties as are consistent with the Executive’s experience, expertise and position as shall be assigned to the Executive from time to time by the President.  During the Term, and except for vacation in accordance with the Employer’s standard paid time off policies or due to illness or






incapacity, the Executive shall devote substantially all of the Executive’s business time, attention, skill and efforts to the business and affairs of the Employer and its parents, subsidiaries and affiliates.  Notwithstanding the foregoing, the Executive may (1) make personal investments in such form or manner as will neither require the Executive’s services in the operation or affairs of the business in which such investments are made, and (2) serve as a director on the board of directors of other non-competing companies with prior written notice to the Board.  The Executive agrees not to engage in any outside business activities that materially interfere with or materially delay the performance of the Executive’s duties hereunder (which duties shall be performed on a first-priority basis); provided , that , it is understood and agreed that service on a board of a non-competing company, in and of itself, shall not be deemed to so delay or interfere with the Executive’s duties hereunder, unless the Employer’s Board of Directors (the “ Board ”) shall have determined in good faith that such other company is directly competitive with the Employer.

Section 3.

Compensation .  

For all services rendered by the Executive in any capacity required hereunder during the Term, including, without limitation, services as an officer, director, or member of any committee of the Employer or any parent, subsidiary, affiliate or division thereof, the Executive shall be compensated as follows:

(a)

Salary .  The Employer shall pay the Executive a fixed salary (“ Base Salary ”) at a rate of $114,000.00 per annum.  The Board may from time to time further increase, but not decrease, the Base Salary, in its sole discretion. The Base Salary shall be payable in accordance with the customary payroll practices of the Employer.  

(b)

Bonus .  Subject to Section 3(h) and Section 3(i) , the Executive shall receive an annual bonus of $111,000 payable on January 31st of each year (the “ Annual Bonus ”); provided, with respect to the period ending on the expiration of the Initial Term (October 30, 2018), the bonus for such period shall be payable on January 31, 2019.

(c)

Discretionary Bonus .  Subject to Section 3(h) , at the sole discretion of the Board, the Executive shall be eligible to receive an annual discretionary bonus (the “ Discretionary Bonus ”) during the prior year.  Any awarded Discretionary Bonus shall be paid within sixty (60) days of being granted. Executive acknowledges that the Discretionary Bonus may be comprised of cash or non-cash compensation as determined at the sole discretion of the Board or its designee. The provisions of this Section 3(c) in no way guarantee or entitle the Executive to any discretionary bonus whatsoever, the award of which is entirely discretionary.

(d)

Incentive Bonus .  Subject to Section 3(h) , the Executive shall be eligible to earn an annual incentive bonus pursuant to Exhibit A to this Agreement (the “ Incentive Bonus ”).



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(e)

Equity Incentives . On the Effective Date, the Executive shall receive an option to purchase 250,000 shares of the Employer’s Class A common stock, $0.001 par value per share at an exercise price of $1.50 per share (in each case subject to adjustment in the event of a stock split, stock dividend, recapitalization or similar event) (the “ Option ”).  The Option shall be granted under the Employer’s 2012 Equity Compensation Plan and, except as otherwise provided in Section 5 hereof, shall vest and become exercisable with respect to 25% of the shares subject thereto on the first anniversary of the Effective Date, 25% of the shares subject thereto on the second anniversary of the Effective Date, 25% of the shares subject thereto on the third anniversary of the Effective Date and as to 25% of the shares subject thereto on the fourth anniversary of the Effective Date.

(f)

Benefits . Except as set forth in this Agreement, the Executive shall be entitled to participate in all employee benefit plans or programs, and to receive all benefits, perquisites and emoluments, which are approved by the Board and are generally made available by the Employer to salaried employees of the Employer, to the extent permissible under the general terms and provisions of such plans or programs and in accordance with the provisions thereof.  Notwithstanding the foregoing, nothing in this Agreement shall require any particular plan or program to be continued nor preclude the amendment or termination of any such plan or program, provided that such amendment or termination is applicable generally to the employees of the Employer.  

(g)

Paid Time Off .  The Executive shall be entitled to twenty-two (22) days of paid time off (“ PTO ”) per calendar year during the Term.  The Executive will not forfeit accrued PTO that is not used by the end of the calendar year; provided, however , once the Executive has thirty (30) days of accrued, but unused, PTO days (the “ PTO Accrual Cap ”), the Executive will not accrue any additional PTO time until he reduces the balance of his accrued PTO days below the PTO Accrual Cap.

(h)

Earnout Consideration .  To the extent the payment of the Annual Bonus and the cash portion of any Incentive Bonus or Discretionary Bonus would result in a reduction in the Earnout Consideration (as defined in the Stock Purchase Agreement, dated October 30, 2014, by and among the Employer, Richard Steel and Steel Media (the “ SPA ”)) otherwise payable to Richard Steel thereunder by an amount greater than the sum of (x) the Annual Bonus and (y) the cash portion of any Incentive Bonus or Discretionary Bonus, then the applicable portion of such Annual Bonus, Discretionary Bonus and/or Incentive Bonus resulting in such reduction shall not be paid for the applicable period.

(i)

EBITDA Targets .  Notwithstanding anything herein to the contrary, to the extent Steel Media does not achieve the Year-One EBITDA Target (as defined in the SPA) and the Year-Two EBITDA Target (as defined in the SPA), then the Annual Bonus shall not be paid to the Executive for the applicable period.



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Section 4.

Business Expenses .  

The Employer shall pay or promptly reimburse the Executive for all necessary expenses reasonably incurred by the Executive in connection with the performance of the Executive’s duties and obligations under this Agreement, subject to the Executive’s presentation of appropriate vouchers in accordance with such expense account policies and approval procedures as the Employer may from time to time reasonably establish for employees (including but not limited to prior approval of extraordinary expenses).  The With the exception of travel expenses, Executive agrees to obtain prior written approval from the Employer before incurring any single out-of-pocket expense in connection with the Executive’s performance of his duties and obligations under this Agreement in excess of $1,000.00 (or such higher limit as permitted by the Employer’s President).

Section 5.

Effect of Termination of Employment .  

(a)

Termination Generally; Accrued Obligations .

The date specified in any notice of termination as the Executive’s final day of employment shall be referred to herein as the “ Termination Date .” Except as set forth in this Section 5 , in the event that the Executive’s employment hereunder is terminated for any reason, then the Executive shall be entitled to no compensation or other benefits of any kind whatsoever, other than: (i) payment of the Executive’s unpaid Base Salary under Section 3(a) through the Termination Date, payable on the Employer’s next regular pay date following the Termination Date (or such earlier date as may be required by applicable law); (ii) payment of any unpaid bonus under Sections 3(b) and 3(c) for the preceding year, payable on the date that such bonus is due and payable (but not later than March 15 th of the calendar year in which the Termination Date occurs); (iii) payment of any unused PTO that accrued through the Termination Date, payable on the Employer’s next regular pay date following the Termination Date (or such earlier date as may be required by applicable law); (iv) expenses reimbursable under Section 4 incurred on or prior to the Termination Date, but not yet reimbursed, which reimbursable (but not yet reimbursed) expenses, if any, shall be paid on the next regular payroll date of the Employer that occurs after the Termination Date (or as soon thereafter as administratively practicable); (v) payment of any other unpaid amounts due and owing under any benefit, fringe or equity plans, programs, policies and/or practices, in accordance with such plan, program, policy or practice; and (vi) the opportunity to continue health coverage under the Employer’s group health plan in accordance with “COBRA” (“ COBRA Coverage ”) (the foregoing payments and benefits collectively referred to herein as “ Accrued Obligations ”).

(b)

Termination Without Cause; Resignation for Good Reason .  

In the event that the Employer terminates the Executive’s employment hereunder during the Term without “Cause” or the Executive resigns for “Good Reason”, then the Executive shall be entitled to no compensation or other benefits of any kind whatsoever, other than: (i) the Accrued Obligations; (ii) the Severance



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Amount (defined below), which Severance Amount shall be payable, subject to Section 16 , in equal installments over the Severance Period (defined below) in accordance with the Employer’s normal payroll practices, commencing on the first regular pay date of the Employer that occurs after the date that is sixty (60) days following the Termination Date; provided, however, the first payment shall include the cumulative amount of payments that would have been paid to the Executive during the period of time between the Termination Date and the date such payments commence had such payments commenced immediately following the Termination Date; and provided, further, that the such payments shall immediately cease, and the Employer shall have no further obligation, if the Executive materially breaches any provision of this Agreement, including, but not limited to Section 6 of this Agreement; (iii) the Executive’s stock options and/or restricted shares granted to the Executive during the Term (to the extent not fully vested as of the Termination Date), shall become fully vested as of the Termination Date, and the Executive shall be permitted to exercise such options for up to twelve months following the Termination Date (unless otherwise agreed to by the Executive and the Employer in the case of any stock options or restricted shares granted after the Effective Date); and (iv) if the Executive elects COBRA Coverage following the Termination Date, the Employer shall waive the cost of such coverage (for the Executive and his eligible dependents) during the Severance Period (or such earlier date that COBRA coverage expires).

(c)

Death or Disability .  

The Executive’s employment with the Employer shall terminate upon Executive’s death or “Disability” (defined below), in which case the Executive (or his estate and heirs) shall be entitled to no compensation or other benefits of any kind whatsoever for any period after the Executive’s date of termination other than: (i) the Accrued Obligations; and (ii) if the Executive and/or his eligible dependents elect COBRA coverage, the Employer shall waive the cost of such coverage (for the Executive and his eligible dependents) during the Severance Period (or such earlier date that COBRA coverage expires).  In addition, the Executive (or his estate and heirs) shall be permitted to exercise the Executive’s stock options granted to the Executive during the Term (to the extent vested as of the Termination Date) for up to six (6) months following the Termination Date.

(d)

Termination Due to Non-Renewal .  

If the Executive’s employment with the Employer terminates due to the Employer’s notice of non-renewal of the Term in accordance with Section 1(a) , then the Executive shall be entitled to no compensation or other benefits of any kind whatsoever, other than the Accrued Obligations.

(e)

Release .  

Payment of any amounts under this Section 5 (other than the Accrued Obligations) shall be contingent upon the Executive executing a general release of



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all claims in favor of the Employer in a form acceptable to the Employer, which release shall be provided to the Executive within five (5) business days following the Termination Date, and which must be executed by the Executive and become effective (and no longer subject to revocation) within sixty (60) days following the Termination Date.

(f)

Termination With Cause .  

The Employer may terminate this Agreement immediately for “Cause” by giving written notice to the Executive. In the event that this Agreement is terminated pursuant to this Section 5(f) , the Executive shall be entitled to no compensation or other benefits of any kind whatsoever for any period after the Termination Date set forth in the notice given by the Employer to the Executive, except for the Accrued Obligations.  Further, if the Executive’s employment is terminated for Cause pursuant to this Section 5(f) , the stock options granted to the Executive during the Term, to the extent vested, but not exercised, as of the Termination Date, shall be forfeited.

(g)

Definitions .  For purposes of this Agreement:

(i)

 “ Cause ” shall mean: (1) the Executive’s negligence in the performance of the material responsibilities of his office or position; (2) the Executive’s failure to perform the material responsibilities of his office or position, including, but not limited to, following the lawful directives of the Board; (3) any conviction by a court of law of, or entry of a pleading of guilty by the Executive with respect to a felony; (4) the Executive’s embezzlement or intentional misappropriation of any property of the Employer (other than good faith expense account disputes); (5) fraud by the Executive resulting in harm to the Employer; or (6) the Executive’s breach of this Agreement.  The Executive shall be given prior written notice of the termination of his employment for Cause.  If the Executive shall be terminated pursuant to clause (1), (2) or (6) above, the Executive shall be given a reasonable period of time, not to exceed 30 days, to cure the matter (if curable).  In all other cases, including if the Executive shall be terminated pursuant to clause (3), (4) or (5) above, termination shall be effective as of the date notice is given.

(iii)

Disability ” shall mean that the Executive is incapable of performing his principal duties due to physical or mental incapacity or impairment for 180 consecutive days, or for 240 non-consecutive days, during any twelve (12) month period.

(v)

 “ Good Reason ” shall mean the occurrence of any of the following: (a) the relocation of the Executive’s principal office location, without the Executive’s consent, to a location that is at least ten (10) miles from the prior location with the Executive’s consent; (b) any reduction, without the Executive’s consent, of the Executive’s Base Salary, except to the extent



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the compensation of the Employer’s president is similarly and proportionately reduced; or (c) a breach by the Employer of a material term of the Agreement; provided, however, that the Executive must notify the Employer within ninety (90) days of the occurrence of any of the foregoing conditions that he considers it to be a “Good Reason” condition and provide the Employer with at least thirty (30) days in which to cure the condition.  If the Executive fails to provide this notice and cure period prior to his resignation, or resigns more than six (6) months after the initial existence of the condition, his resignation will not be deemed to be for “Good Reason.”

(vii)

Severance Amount ,” for purposes of Section 5(b) , shall equal the sum of: (a) an amount equal to twelve (12) months of the Executive’s Base Salary at the rate in effect as of the Executive’s Termination Date; plus (b) an amount equal to the greater of (x) the most recent Bonus that would be payable to the Executive by the Employer, calculated on an annualized basis up to the month the Executive is terminated and (y) $111,000 (or, if the Termination Date occurs prior to January 1, 2015, then $111,000).

(viii)

Severance Period ,” for purposes of Sections 5(b) and 5(c) , shall mean a period of twelve (12) months following the Termination Date.

Section 6.

Covenants Regarding Confidentiality and Non-Solicitation .  

(a)

Confidentiality .

The Executive shall execute, and abide by the terms of, the confidentiality/non-disclosure agreement in the form annexed hereto as Exhibit B (the “ Confidentiality Agreement ”), the terms of which are incorporated herein.

(b)

Non-Solicitation .

To the fullest extent permitted by law, for a period of two years after termination of the Executive’s employment, the Executive shall not, directly or indirectly, employ, solicit for employment, or advise or recommend to any other person that such other person employ or solicit for employment, any person employed or under contract  (whether as a consultant, employee or otherwise) by or to the Employer or any of its subsidiaries during the period of such person’s association with  Employer or any of its subsidiaries and two years thereafter.  

To the fullest extent permitted by law, for a period of two years after termination of the Executive’s employment, the Executive shall not, directly or indirectly, solicit any clients, customers or vendors of the Employer or any of its subsidiaries.  The Executive agrees that such solicitation would necessarily involve disclosure or use of Confidential Information (as defined in the Confidentiality Agreement) in breach of this Agreement or the Confidentiality Agreement.



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Section 7.

Assignment of Developments; Works for Hire .  

If at any time or times during Executive’s employment with the Employer, the Executive shall (either alone or with others) make, conceive, discover or reduce to practice any invention, modification, discovery, design, development, improvement, process, software program, work-of-authorship, documentation, formula, data, technique, know-how, secret or intellectual property right whatsoever or any interest therein (whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection) (herein called “ Developments ”) that (a) relates to the business of the Employer (or any subsidiary of the Employer) or any customer of or supplier to the Employer (or any of its subsidiaries) or any of the products or services being developed, manufactured, sold or provided by the Employer or which may be used in relation therewith or (b) results from tasks assigned to the Executive by the Employer, such Developments and the benefits thereof shall immediately become and/or be considered as the sole and absolute property of the Employer and its assigns as a work for hire, and the Executive shall promptly disclose to the Employer (or any persons designated by it) each such Development and hereby assigns any rights the Executive may have or acquire in the Developments and benefits and/or rights resulting therefrom to the Employer and its assigns without further compensation and shall communicate, without cost or delay, and without publishing the same, all available information relating thereto (with all necessary documentation, plans and models) to the Employer.  Upon disclosure of each Development to the Employer, the Executive will, during the Term and at any time thereafter, at the request and cost of the Employer, sign, execute, make and do all such deeds, documents, acts and things as the Employer and its duly authorized agents may reasonably require:

(a)

to apply for, obtain and vest in the name of the Employer alone (unless the Employer otherwise directs) letters patent, copyrights, trademarks, service marks or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and

(b)

to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyrights, trademarks, service marks or other analogous protection.

In the event the Employer is unable, after reasonable effort, to secure the Executive’s signature on any letters patent, copyrights, trademarks, service marks or other analogous protection relating to a Development, whether because of the Executive’s physical or mental incapacity or for any other reason whatsoever, the Executive hereby irrevocably designates and appoints the Employer and its duly authorized officers and agents as the Executive’s agent and attorney-in-fact, to act for and on his behalf and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of any such letters patent, copyrights, trademarks, service marks and other analogous protection thereon with the same legal force and effect as if executed by the Executive.



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Section 8.

Withholding Taxes .  

The Employer may directly or indirectly withhold from any payments to be made under this Agreement all federal, state, city or other taxes and all other deductions as shall be required pursuant to any law or governmental regulation or ruling or pursuant to any contributory benefit plan maintained by the Employer.

Section 9.

Notices .  

All notices, requests, demands and other communications required or permitted hereunder shall be given in writing, and shall be deemed effective upon (a) personal delivery, if delivered by hand, (b) three days after the date of deposit in the mails, postage prepaid, if mailed by certified or registered United States mail, or (c) the next business day, if sent by a prepaid overnight courier service, and in each case addressed as follows:

(a)

To the Employer:

Social Reality, Inc.
456 Seaton Street

Los Angeles, CA 90013

Attention: Christopher Miglino


with a copy (which shall not be deemed notice) to:

Pearlman Schneider LLP
2200 Corporate Blvd., Suite 210
Boca Raton, FL 33431

Attention:  Jim Schneider, Esq.

(b)

To the Executive:

to the Executive at the Executive’s
address listed above.

with a copy (which shall not be deemed notice) to:

Lowenstein Sandler LLP
1251 Avenue of the Americas
New York, New York 10020

Attention:  Steven E. Siesser, Esq.


or to such other address as either party shall have previously specified in writing to the other.

Section 10.

Binding Agreement; No Assignment .  

This Agreement shall be binding upon, and shall inure to the benefit of, the Executive, the Employer and their respective permitted successors, assigns, heirs, beneficiaries and representatives.  This Agreement is personal to the Executive and may not be assigned by



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the Executive without the prior written consent of the Board, as evidenced by a resolution of the Board.  Any attempted assignment in violation of this Section 10 shall be null and void.

Section 11.

Governing Law; Consent to Jurisdiction; Arbitration.

This Agreement, and all matters arising directly or indirectly from this Agreement, shall be governed by, and construed and interpreted in accordance with, the laws of the State of Ohio, without giving effect to the choice of law provisions thereof.  Any and all actions arising out of this Agreement or the Executive’s employment by the Employer or termination therefrom shall be submitted to arbitration pursuant to the terms set forth in Exhibit C .

Section 12.

Entire Agreement .

This Agreement, including all Exhibits hereto, shall constitute the entire agreement between the parties with respect to the matters covered hereby and supersedes all previous written, oral or implied understandings between them with respect to such matters, including without limitation, any “employment” or similar agreements (whether written, oral or implied) between the Employer and the Executive.  Notwithstanding anything in this Agreement to the contrary, the Executive shall have no liability to the Employer or any other person or entity (and all such liability is hereby irrevocably waived, discharged and released, which such waiver, discharge and release are a material inducement to the Executive for entering into this Agreement) whatsoever of any kind with respect to any termination of his employment for any consequential, special, punitive or other similar damages, whether foreseeable, known to Executive, or even if Executive was advised thereof.

Section 13.

Amendments .  

This Agreement may only be amended or otherwise modified by a writing executed by each of the parties hereto.

Section 14.

Survivorship .  

The provisions of Sections 5 through 17 , as well as Exhibits A , B and C hereto, shall survive the termination of this Agreement.

Section 15.

Indemnification/D&O Insurance .

The Employer shall indemnify, defend and hold the Executive harmless from and against all claims, suits, actions and/or proceeding arising by reason of the Executive’s status as an officer, director, employee and/or agent of the Employer to the fullest extent provided (a) by Employer’s Certificate of Incorporation and/or Bylaws, (b) under Employer’s Directors and Officers Liability and general insurance policies, and (c) under the Delaware General Corporation Law, as each may be amended from time to time.  Employer agrees (i) that the Executive shall be covered by Directors and Officers insurance coverage on the same basis as the Employer maintains such coverage for other officers and directors, (ii) Executive shall be covered by such policies in accordance with their terms to the maximum extent of the coverage available under such policies, and (iii)


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Executive shall continue to be covered by such policies both during the Term and following the termination of the Executive’s employment with Employer so long as Executive shall be or may be subject to any claims, suits, actions and/or proceedings by reason of the Executive’s status as (or former status as) an officer, director, employee and/or agent of the Employer.  For the avoidance of doubt, nothing in this Section 15 shall entitle the Executive to indemnification for actions or omissions with respect to which the Employer is prohibited from providing indemnification pursuant to the Delaware General Corporation Law.

Section 16.

409A Compliance .  

All payments under this Agreement are intended to comply with or be exempt from the requirements of Section 409A of the Code and regulations promulgated thereunder (“ Section 409A ”).  As used in this Agreement, the “ Code ” means the Internal Revenue Code of 1986, as amended.  To the extent permitted under applicable regulations and/or other guidance of general applicability issued pursuant to Section 409A, the Employer reserves the right to modify this Agreement to conform with any or all relevant provisions regarding compensation and/or benefits so that such compensation and benefits are exempt from the provisions of 409A and/or otherwise comply with such provisions so as to avoid the tax consequences set forth in Section 409A and to assure that no payment or benefit shall be subject to an “additional tax” under Section 409A.  To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A, or to the extent any provision in this Agreement must be modified to comply with Section 409A, such provision shall be read in such a manner so that no payment due to the Executive shall be subject to an “additional tax” within the meaning of Section 409A(a)(1)(B) of the Code.  If necessary to comply with the restriction in Section 409A(a)(2)(B) of the Code concerning payments to “specified employees,” any payment on account of the Executive’s separation from service that would otherwise be due hereunder within six (6) months after such separation shall be delayed until the first business day of the seventh month following the Termination Date and the first such payment shall include the cumulative amount of any payments (without interest) that would have been paid prior to such date if not for such restriction.  Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of payment. All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.  Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Employer for purposes of Section 5(b) or 5(c) unless the Executive would be considered to have incurred a “termination of employment” from the Employer within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).  


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Section 17

Section 280G Limitation .

If any payment(s) or benefit(s) the Executive would receive pursuant to this Agreement and/or pursuant to any other agreement or arrangement would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (b) but for this Section 17 , be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then such payment(s) or benefit(s) (collectively, “ Payments ”) shall be reduced to the Reduced Amount.  The “ Reduced Amount ” shall be the largest portion of the Payments that can be paid or provided without causing any portion of the Payments being subject to the Excise Tax.  If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payments equal the Reduced Amount, reduction shall occur in the following order: (i) first, the Severance Payment under this Agreement, (ii) second, any other cash payments due under any other agreement between the Employer and the Executive; (iii) third, cancellation of the acceleration of vesting of any stock options, and (iv) lastly, other non-cash forms of benefits.  Calculations of the foregoing will be performed at the expense of the Employer by an accounting firm selected by the Employer.  The determinations of such accounting firm shall be final, binding and conclusive upon the Employer and the Executive.

Section 18 .

Key Man Life Insurance .  

The Executive agrees to cooperate with the Employer in obtaining any key man life insurance coverage insuring the Executive’s life and to submit to such physical examinations as may be needed to secure such coverage.

Section 19.

Counterparts .  

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

IN WITNESS WHEREOF , the Employer has caused this Agreement to be executed and delivered by its duly authorized officer and the Executive has signed this Agreement, all as of the first date written above.

 

SOCIAL REALITY, INC.

 

 

 

 

By:

/s/ Chris Miglino

 

 

Chris Miglino,

 

 

Authorized representative for Social Reality, Inc.

 

 

 

 

EXECUTIVE:

 

 

 

 

/s/ Chad Holsinger

 

Chad Holsinger




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Exhibit A


Individual Incentive Bonus: $200,000.00


Individual Goal: $3,500,000 per calendar year (1/1 through 12/31), on an accrual basis. Bonus paid 50% on Jan 10th and 50% on February 28th(this is to allow time to account, claw back, and adjust the bonus for any write-downs, cancellations, etc.).


Individual Bonus awarded only if all the following terms are met:

·

$3,500,000 in individual sales on an accrual basis: 1/1 through 12/31.

·

55% or greater profit margin maintained (after paying out commission and media cost, the profit must remain at least 55%. Example, $100K deal, $25k paid in media cost and 20k paid in commission = $55k in profit).


Note-Revenue Goal:  If 80% (2.8 MM) or more of the Individual goal is reached (within stated profit % parameters) a proportionate amount of the Individual Bonus will be paid up to 125% of bonus.

Example: $3,000,000 in revenue would pay out 85.7% of the team bonus: $171k.

Example, $5,000,000 is beyond 125% of revenue goal but would still only pay 125% of the Individual Bonus or $250k.



Team Incentive Bonus: $500,000.00


Team Goal: $9,000,000 per calendar year (1/1 through 12/31), on an accrual basis. Bonus paid 50% on Jan 10th and 50% on February 28th (this is to allow time to account, claw back, and adjust the bonus for any write-downs, cancellations, etc.).


Team Bonus awarded only if all the following terms are met:

·

$9,000,000 in team sales on an accrual basis: 1/1 through 12/31.

·

55% or greater profit margin maintained (after paying out commission and media cost, the profit must remain at least 55% of each deal. Example, $100K deal, $25k paid in media cost and 20k paid in commission = $55k in profit).


Note-Revenue Goal:  If 80% ($7.2 MM) or more of the team goal is reached (within stated profit % parameters) a proportionate amount of the team bonus will be paid up to 125% of bonus.


Example: $8,000,000 in revenue would pay out 88% of the team bonus: $444k.

Example: $13,000,000 is beyond 125% of revenue goal but would still only pay

125% of the team bonus or $625k.


* If Team’s annual accrual revenue reaches $15MM team bonus will increase to $800k.

* Team goal includes Andy and his AE Team only. It does not include Executive’s revenue.  




Exhibit 10.29

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (“ Agreement ”), dated as of October 30, 2014, by and between Social Reality, Inc., a Delaware corporation (the “ Employer ”) and Adam Bigelow, an individual residing at _________________ (the “ Executive ”).

RECITALS

WHEREAS , the Employer owns and operates an Internet-based advertising agency operating on a worldwide basis;

WHEREAS , the Employer wishes to employ the Executive as its Senior Director, Ad Operations; and

WHEREAS , the Employer and the Executive desire to set forth the terms pursuant to which the Executive will be employed by the Employer as its Senior Director, Ad Operations.

NOW, THEREFORE , the Employer and the Executive hereby agree as follows:

Section 1.

Employment .

(a)

The Employer shall employ the Executive, and the Executive agrees to be employed by the Employer, upon the terms and conditions hereinafter provided, for a term (the “ Initial Term ”) commencing October 30, 2014 (the “ Effective Date ”) and expiring October 30, 2018.  The Initial Term shall be automatically extended for additional successive periods of twelve (12) month renewal terms (each a “ Renewal Term ”) unless either the Employer or the Executive provides notice to the other of its (or his) intent not to renew the Initial Term or the then current Renewal Term (as applicable) at least sixty (60) days prior to the expiration of the Initial Term or the then current Renewal Term (as applicable).  The Initial Term and any Renewal Terms are referred to herein as the “ Term ”.

(b)

The Executive hereby represents and warrants that the Executive has the legal capacity to execute and perform this Agreement, that this Agreement is a valid and binding agreement enforceable against the Executive according to its terms, and that the execution and performance of this Agreement by the Executive does not violate the terms of any existing agreement or understanding to which the Executive is a party.

Section 2.

Duties .  

The Executive shall report to the Chief Revenue Officer of the Employer and have the title of Senior Director, Ad Operations of the Employer.  The Executive shall have such duties as are consistent with the Executive’s experience, expertise and position as shall be assigned to the Executive from time to time by the Chief Revenue Officer.  During the Term, and except for vacation in accordance with the Employer’s standard paid time off






policies or due to illness or incapacity, the Executive shall devote substantially all of the Executive’s business time, attention, skill and efforts to the business and affairs of the Employer and its parents, subsidiaries and affiliates.  Notwithstanding the foregoing, the Executive may (1) make personal investments in such form or manner as will neither require the Executive’s services in the operation or affairs of the business in which such investments are made, and (2) serve as a director on the board of directors of other non-competing companies with prior written notice to the Board.  The Executive agrees not to engage in any outside business activities that materially interfere with or materially delay the performance of the Executive’s duties hereunder (which duties shall be performed on a first-priority basis); provided , that , it is understood and agreed that service on a board of a non-competing company, in and of itself, shall not be deemed to so delay or interfere with the Executive’s duties hereunder, unless the Employer’s Board of Directors (the “ Board ”) shall have determined in good faith that such other company is directly competitive with the Employer.

Section 3.

Compensation .  

For all services rendered by the Executive in any capacity required hereunder during the Term, including, without limitation, services as an officer, director, or member of any committee of the Employer or any parent, subsidiary, affiliate or division thereof, the Executive shall be compensated as follows:

(a)

Salary .  The Employer shall pay the Executive a fixed salary (“ Base Salary ”) at a rate of $100,000.00 per annum.  The Board may from time to time further increase, but not decrease, the Base Salary, in its sole discretion. The Base Salary shall be payable in accordance with the customary payroll practices of the Employer.  

(b)

Discretionary Bonus .  At the sole discretion of the Employer’s president, the Executive shall be eligible to receive an annual discretionary bonus (the “ Discretionary Bonus ”) during the prior year.  Any awarded Discretionary Bonus shall be paid within sixty (60) days of being granted. Executive acknowledges that the Discretionary Bonus may be comprised of cash or non-cash compensation as determined at the sole discretion of the Board or its designee. The provisions of this Section 3(b) in no way guarantee or entitle the Executive to any discretionary bonus whatsoever, the award of which is entirely discretionary.

(c)

Equity Incentives . On the Effective Date, the Executive shall receive an option to purchase 25,000 shares of the Employer’s Class A common stock, $0.001 par value per share at an exercise price of $1.50 per share (in each case subject to adjustment in the event of a stock split, stock dividend, recapitalization or similar event) (the “ Option ”).  The Option shall be granted under the Employer’s 2012 Equity Compensation Plan and, except as otherwise provided in Section 5 hereof, shall vest and become exercisable with respect to 25% of the shares subject thereto on the first anniversary of the Effective Date, 25% of the shares subject thereto on the second anniversary of the Effective Date, 25% of the



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shares subject thereto on the third anniversary of the Effective Date and as to 25% of the shares subject thereto on the fourth anniversary of the Effective Date.  

(d)

Benefits . Except as set forth in this Agreement, the Executive shall be entitled to participate in all employee benefit plans or programs, and to receive all benefits, perquisites and emoluments, which are approved by the Board and are generally made available by the Employer to salaried employees of the Employer, to the extent permissible under the general terms and provisions of such plans or programs and in accordance with the provisions thereof.  Notwithstanding the foregoing, nothing in this Agreement shall require any particular plan or program to be continued nor preclude the amendment or termination of any such plan or program, provided that such amendment or termination is applicable generally to the employees of the Employer.  

(e)

Paid Time Off .  The Executive shall be entitled to fifteen (15) days of paid time off (“ PTO ”) per calendar year during the Term.  The Executive will not forfeit accrued PTO that is not used by the end of the calendar year; provided, however , once the Executive has thirty (30) days of accrued, but unused, PTO days (the “ PTO Accrual Cap ”), the Executive will not accrue any additional PTO time until he reduces the balance of his accrued PTO days below the PTO Accrual Cap.  

Section 4.

Business Expenses .  

The Employer shall pay or promptly reimburse the Executive for all necessary expenses reasonably incurred by the Executive in connection with the performance of the Executive’s duties and obligations under this Agreement, subject to the Executive’s presentation of appropriate vouchers in accordance with such expense account policies and approval procedures as the Employer may from time to time reasonably establish for employees (including but not limited to prior approval of extraordinary expenses).  The With the exception of travel expenses, Executive agrees to obtain prior written approval from the Employer before incurring any single out-of-pocket expense in connection with the Executive’s performance of his duties and obligations under this Agreement in excess of $1,000.00 (or such higher limit as permitted by the Employer’s president).

Section 5.

Effect of Termination of Employment .  

(a)

Termination Generally; Accrued Obligations .

The date specified in any notice of termination as the Executive’s final day of employment shall be referred to herein as the “ Termination Date .” Except as set forth in this Section 5 , in the event that the Executive’s employment hereunder is terminated for any reason, then the Executive shall be entitled to no compensation or other benefits of any kind whatsoever, other than: (i) payment of the Executive’s unpaid Base Salary under Section 3(a) through the Termination Date, payable on the Employer’s next regular pay date following the Termination Date (or such earlier date as may be required by applicable law); (ii) payment of any



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unpaid bonus under Sections 3(b) for the preceding year, payable on the date that such bonus is due and payable (but not later than March 15 th of the calendar year in which the Termination Date occurs); (iii) payment of any unused PTO that accrued through the Termination Date, payable on the Employer’s next regular pay date following the Termination Date (or such earlier date as may be required by applicable law); (iv) expenses reimbursable under Section 4 incurred on or prior to the Termination Date, but not yet reimbursed, which reimbursable (but not yet reimbursed) expenses, if any, shall be paid on the next regular payroll date of the Employer that occurs after the Termination Date (or as soon thereafter as administratively practicable); (v) payment of any other unpaid amounts due and owing under any benefit, fringe or equity plans, programs, policies and/or practices, in accordance with such plan, program, policy or practice; and (vi) the opportunity to continue health coverage under the Employer’s group health plan in accordance with “COBRA” (“ COBRA Coverage ”) (the foregoing payments and benefits collectively referred to herein as “ Accrued Obligations ”).

(b)

Termination Without Cause; Resignation for Good Reason .  

In the event that the Employer terminates the Executive’s employment hereunder during the Term without “Cause” or the Executive resigns for “Good Reason”, then the Executive shall be entitled to no compensation or other benefits of any kind whatsoever, other than: (i) the Accrued Obligations; (ii) the Severance Amount (defined below), which Severance Amount shall be payable, subject to Section 15 , in equal installments over the Severance Period (defined below) in accordance with the Employer’s normal payroll practices, commencing on the first regular pay date of the Employer that occurs after the date that is sixty (60) days following the Termination Date; provided, however, the first payment shall include the cumulative amount of payments that would have been paid to the Executive during the period of time between the Termination Date and the date such payments commence had such payments commenced immediately following the Termination Date; and provided, further, that the such payments shall immediately cease, and the Employer shall have no further obligation, if the Executive materially breaches any provision of this Agreement, including, but not limited to Section 6 of this Agreement; (iii) the Executive’s stock options and/or restricted shares granted to the Executive during the Term (to the extent not fully vested as of the Termination Date), shall become fully vested as of the Termination Date, and the Executive shall be permitted to exercise such options for up to twelve months following the Termination Date (unless otherwise agreed to by the Executive and the Employer in the case of any stock options or restricted shares granted after the Effective Date); and (iv) if the Executive elects COBRA Coverage following the Termination Date, the Employer shall waive the cost of such coverage (for the Executive and his eligible dependents) during the Severance Period (or such earlier date that COBRA coverage expires).   



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(c)

Death or Disability .  

The Executive’s employment with the Employer shall terminate upon Executive’s death or “Disability” (defined below), in which case the Executive (or his estate and heirs) shall be entitled to no compensation or other benefits of any kind whatsoever for any period after the Executive’s date of termination other than: (i) the Accrued Obligations; and (ii) if the Executive and/or his eligible dependents elect COBRA coverage, the Employer shall waive the cost of such coverage (for the Executive and his eligible dependents) during the Severance Period (or such earlier date that COBRA coverage expires).  In addition, the Executive (or his estate and heirs) shall be permitted to exercise the Executive’s stock options granted to the Executive during the Term (to the extent vested as of the Termination Date) for up to six (6) months following the Termination Date.

(d)

Termination Due to Non-Renewal .  

If the Executive’s employment with the Employer terminates due to the Employer’s notice of non-renewal of the Term in accordance with Section 1(a) , then the Executive shall be entitled to no compensation or other benefits of any kind whatsoever, other than the Accrued Obligations.

(e)

Release .  

Payment of any amounts under this Section 5 (other than the Accrued Obligations) shall be contingent upon the Executive executing a general release of all claims in favor of the Employer in a form acceptable to the Employer, which release shall be provided to the Executive within five (5) business days following the Termination Date, and which must be executed by the Executive and become effective (and no longer subject to revocation) within sixty (60) days following the Termination Date.

(f)

Termination With Cause .  

The Employer may terminate this Agreement immediately for “Cause” by giving written notice to the Executive. In the event that this Agreement is terminated pursuant to this Section 5(f) , the Executive shall be entitled to no compensation or other benefits of any kind whatsoever for any period after the Termination Date set forth in the notice given by the Employer to the Executive, except for the Accrued Obligations.  Further, if the Executive’s employment is terminated for Cause pursuant to this Section 5(f) , the stock options granted to the Executive during the Term, to the extent vested, but not exercised, as of the Termination Date, shall be forfeited.

(g)

Definitions .  For purposes of this Agreement:

(i)

 “ Cause ” shall mean: (1) the Executive’s negligence in the performance of the material responsibilities of his office or position; (2) the Executive’s failure to perform the material responsibilities of his office



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or position, including, but not limited to, following the lawful directives of the Board; (3) any conviction by a court of law of, or entry of a pleading of guilty by the Executive with respect to a felony; (4) the Executive’s embezzlement or intentional misappropriation of any property of the Employer (other than good faith expense account disputes); (5) fraud by the Executive resulting in harm to the Employer; or (6) the Executive’s breach of this Agreement.  The Executive shall be given prior written notice of the termination of his employment for Cause.  If the Executive shall be terminated pursuant to clause (1), (2) or (6) above, the Executive shall be given a reasonable period of time, not to exceed 30 days, to cure the matter (if curable).  In all other cases, including if the Executive shall be terminated pursuant to clause (3), (4) or (5) above, termination shall be effective as of the date notice is given.

(iii)

Disability ” shall mean that the Executive is incapable of performing his principal duties due to physical or mental incapacity or impairment for 180 consecutive days, or for 240 non-consecutive days, during any twelve (12) month period.

(v)

 “ Good Reason ” shall mean the occurrence of any of the following: (a) the relocation of the Executive’s principal office location, without the Executive’s consent, to a location that is at least ten (10) miles from the prior location with the Executive’s consent; (b) any reduction, without the Executive’s consent, of the Executive’s Base Salary, except to the extent the compensation of the Employer’s chief revenue officer is similarly and proportionately reduced; or (c) a breach by the Employer of a material term of the Agreement; provided, however, that the Executive must notify the Employer within ninety (90) days of the occurrence of any of the foregoing conditions that he considers it to be a “Good Reason” condition and provide the Employer with at least thirty (30) days in which to cure the condition.  If the Executive fails to provide this notice and cure period prior to his resignation, or resigns more than six (6) months after the initial existence of the condition, his resignation will not be deemed to be for “Good Reason.”

(vii)

Severance Amount ,” for purposes of Section 5(b) , shall equal an amount equal to twelve (12) months of the Executive’s Base Salary at the rate in effect as of the Executive’s Termination Date.

(viii)

Severance Period ,” for purposes of Sections 5(b) , and 5(c) , shall mean a period of twelve (12) months following the Termination Date.



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Section 6.

Covenants Regarding Confidentiality and Non-Solicitation .  

(a)

Confidentiality .

The Executive shall execute, and abide by the terms of, the confidentiality/non-disclosure agreement in the form annexed hereto as Exhibit A (the “ Confidentiality Agreement ”), the terms of which are incorporated herein.

(b)

Non-Solicitation .

To the fullest extent permitted by law, for a period of two years after termination of the Executive’s employment, the Executive shall not, directly or indirectly, employ, solicit for employment, or advise or recommend to any other person that such other person employ or solicit for employment, any person employed or under contract  (whether as a consultant, employee or otherwise) by or to the Employer or any of its subsidiaries during the period of such person’s association with  Employer or any of its subsidiaries and two years thereafter.  

To the fullest extent permitted by law, for a period of two years after termination of the Executive’s employment, the Executive shall not, directly or indirectly, solicit any clients, customers or vendors of the Employer or any of its subsidiaries.  The Executive agrees that such solicitation would necessarily involve disclosure or use of Confidential Information (as defined in the Confidentiality Agreement) in breach of this Agreement or the Confidentiality Agreement.

Section 7.

Assignment of Developments; Works for Hire .  

If at any time or times during Executive’s employment with the Employer, the Executive shall (either alone or with others) make, conceive, discover or reduce to practice any invention, modification, discovery, design, development, improvement, process, software program, work-of-authorship, documentation, formula, data, technique, know-how, secret or intellectual property right whatsoever or any interest therein (whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection) (herein called “ Developments ”) that (a) relates to the business of the Employer (or any subsidiary of the Employer) or any customer of or supplier to the Employer (or any of its subsidiaries) or any of the products or services being developed, manufactured, sold or provided by the Employer or which may be used in relation therewith or (b) results from tasks assigned to the Executive by the Employer, such Developments and the benefits thereof shall immediately become and/or be considered as the sole and absolute property of the Employer and its assigns as a work for hire, and the Executive shall promptly disclose to the Employer (or any persons designated by it) each such Development and hereby assigns any rights the Executive may have or acquire in the Developments and benefits and/or rights resulting therefrom to the Employer and its assigns without further compensation and shall communicate, without cost or delay, and without publishing the same, all available information relating thereto (with all necessary documentation, plans and models) to the Employer.  Upon disclosure of each Development to the Employer,



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the Executive will, during the Term and at any time thereafter, at the request and cost of the Employer, sign, execute, make and do all such deeds, documents, acts and things as the Employer and its duly authorized agents may reasonably require:

(a)

to apply for, obtain and vest in the name of the Employer alone (unless the Employer otherwise directs) letters patent, copyrights, trademarks, service marks or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and

(b)

to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyrights, trademarks, service marks or other analogous protection.

In the event the Employer is unable, after reasonable effort, to secure the Executive’s signature on any letters patent, copyrights, trademarks, service marks or other analogous protection relating to a Development, whether because of the Executive’s physical or mental incapacity or for any other reason whatsoever, the Executive hereby irrevocably designates and appoints the Employer and its duly authorized officers and agents as the Executive’s agent and attorney-in-fact, to act for and on his behalf and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of any such letters patent, copyrights, trademarks, service marks and other analogous protection thereon with the same legal force and effect as if executed by the Executive.

Section 8.

Withholding Taxes .  

The Employer may directly or indirectly withhold from any payments to be made under this Agreement all federal, state, city or other taxes and all other deductions as shall be required pursuant to any law or governmental regulation or ruling or pursuant to any contributory benefit plan maintained by the Employer.

Section 9.

Notices .  

All notices, requests, demands and other communications required or permitted hereunder shall be given in writing, and shall be deemed effective upon (a) personal delivery, if delivered by hand, (b) three days after the date of deposit in the mails, postage prepaid, if mailed by certified or registered United States mail, or (c) the next business day, if sent by a prepaid overnight courier service, and in each case addressed as follows:

(a)

To the Employer:

Social Reality, Inc.
456 Seaton Street

Los Angeles, CA 90013

Attention: Christopher Miglino




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with a copy (which shall not be deemed notice) to:

Pearlman Schneider LLP
2200 Corporate Blvd., Suite 210
Boca Raton, FL 33431

Attention:  Jim Schneider, Esq.

(b)

To the Executive:

to the Executive at the Executive’s
address listed above.

with a copy (which shall not be deemed notice) to:

Lowenstein Sandler LLP
1251 Avenue of the Americas
New York, New York 10020

Attention:  Steven E. Siesser, Esq.


or to such other address as either party shall have previously specified in writing to the other.

Section 10.

Binding Agreement; No Assignment .  

This Agreement shall be binding upon, and shall inure to the benefit of, the Executive, the Employer and their respective permitted successors, assigns, heirs, beneficiaries and representatives.  This Agreement is personal to the Executive and may not be assigned by the Executive without the prior written consent of the Board, as evidenced by a resolution of the Board.  Any attempted assignment in violation of this Section 10 shall be null and void.

Section 11.

Governing Law; Consent to Jurisdiction; Arbitration.

This Agreement, and all matters arising directly or indirectly from this Agreement, shall be governed by, and construed and interpreted in accordance with, the laws of the State of New Jersey, without giving effect to the choice of law provisions thereof.  Any and all actions arising out of this Agreement or the Executive’s employment by the Employer or termination therefrom shall be submitted to arbitration pursuant to the terms set forth in Exhibit B .

Section 12.

Entire Agreement .

This Agreement, including all Exhibits hereto, shall constitute the entire agreement between the parties with respect to the matters covered hereby and supersedes all previous written, oral or implied understandings between them with respect to such matters, including without limitation, any “employment” or similar agreements (whether written, oral or implied) between the Employer and the Executive.  Notwithstanding anything in this Agreement to the contrary, the Executive shall have no liability to the Employer or any other person or entity (and all such liability is hereby irrevocably



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waived, discharged and released, which such waiver, discharge and release are a material inducement to the Executive for entering into this Agreement) whatsoever of any kind with respect to any termination of his employment for any consequential, special, punitive or other similar damages, whether foreseeable, known to Executive, or even if Executive was advised thereof.

Section 13.

Amendments .  

This Agreement may only be amended or otherwise modified by a writing executed by each of the parties hereto.

Section 14.

Survivorship .  

The provisions of Sections 5 through 16 , as well as Exhibits A and B hereto, shall survive the termination of this Agreement.

Section 15.

409A Compliance .  

All payments under this Agreement are intended to comply with or be exempt from the requirements of Section 409A of the Code and regulations promulgated thereunder (“ Section 409A ”).  As used in this Agreement, the “ Code ” means the Internal Revenue Code of 1986, as amended.  To the extent permitted under applicable regulations and/or other guidance of general applicability issued pursuant to Section 409A, the Employer reserves the right to modify this Agreement to conform with any or all relevant provisions regarding compensation and/or benefits so that such compensation and benefits are exempt from the provisions of 409A and/or otherwise comply with such provisions so as to avoid the tax consequences set forth in Section 409A and to assure that no payment or benefit shall be subject to an “additional tax” under Section 409A.  To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A, or to the extent any provision in this Agreement must be modified to comply with Section 409A, such provision shall be read in such a manner so that no payment due to the Executive shall be subject to an “additional tax” within the meaning of Section 409A(a)(1)(B) of the Code.  If necessary to comply with the restriction in Section 409A(a)(2)(B) of the Code concerning payments to “specified employees,” any payment on account of the Executive’s separation from service that would otherwise be due hereunder within six (6) months after such separation shall be delayed until the first business day of the seventh month following the Termination Date and the first such payment shall include the cumulative amount of any payments (without interest) that would have been paid prior to such date if not for such restriction.  Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of payment. All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to



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reimbursement is not subject to liquidation or exchange for another benefit.  Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Employer for purposes of Section 5(b) or 5(c) unless the Executive would be considered to have incurred a “termination of employment” from the Employer within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).  

Section 16.

Section 280G Limitation .

If any payment(s) or benefit(s) the Executive would receive pursuant to this Agreement and/or pursuant to any other agreement or arrangement would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (b) but for this Section 16 , be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then such payment(s) or benefit(s) (collectively, “ Payments ”) shall be reduced to the Reduced Amount.  The “ Reduced Amount ” shall be the largest portion of the Payments that can be paid or provided without causing any portion of the Payments being subject to the Excise Tax.  If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payments equal the Reduced Amount, reduction shall occur in the following order: (i) first, the Severance Payment under this Agreement, (ii) second, any other cash payments due under any other agreement between the Employer and the Executive; (iii) third, cancellation of the acceleration of vesting of any stock options, and (iv) lastly, other non-cash forms of benefits.  Calculations of the foregoing will be performed at the expense of the Employer by an accounting firm selected by the Employer.  The determinations of such accounting firm shall be final, binding and conclusive upon the Employer and the Executive.

Section 17.

Counterparts .  

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

IN WITNESS WHEREOF , the Employer has caused this Agreement to be executed and delivered by its duly authorized officer and the Executive has signed this Agreement, all as of the first date written above.

 

SOCIAL REALITY, INC.

 

 

 

 

By:  

/s/ Chris Miglino

 

 

Chris Miglino,

 

 

Authorized representative for Social Reality, Inc.

 

 

 

 

EXECUTIVE:

 

 

 

 

/s/ Adam Bigelow

 

Adam Bigelow




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Exhibit 10.30


INDEMNIFICATION AGREEMENT

 

THIS AGREEMENT is entered into, effective as of October 30, 2014, by and between Social Reality, Inc., a Delaware corporation (the “ Company ”), and Richard Steel (“ Indemnitee ”).

 

WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available;

 

WHEREAS, Indemnitee is a director and/or officer of the Company;

 

WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims currently being asserted against directors and officers of corporations;

 

WHEREAS, the Certificate of Incorporation and Bylaws of the Company require the Company to indemnify its directors and officers to the fullest extent permitted under Delaware law; and

 

WHEREAS, in recognition of Indemnitee’s need for: (i) substantial protection against personal liability based on Indemnitee’s reliance on the aforesaid Certificate of Incorporation and Bylaws; (ii) specific contractual assurance that the protection promised by the Certificate of Incorporation and Bylaws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of the Certificate of Incorporation and Bylaws or any change in the composition of the Company’s Board of Directors or acquisition transaction relating to the Company); and (iii) an inducement to provide effective services to the Company as a director and/or officer, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted under Delaware law and as set forth in this Agreement, and, to the extent insurance is maintained, to provide for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

 

NOW, THEREFORE, in consideration of the above premises and of Indemnitee continuing to serve the Company directly or, at its request, with another enterprise, and intending to be legally bound hereby, the parties agree as follows:

 

1.

Certain Definitions :

 

(a)

Board : shall mean the Board of Directors of the Company.

 

(b)

Affiliate : shall mean any corporation or other person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified, including, without limitation, with respect to the Company, any direct or indirect subsidiary of the Company.

 

(c)

Change in Control : shall be deemed to have occurred if: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, and other than any person holding shares of the Company on the date that the Company first registers under the Act or any transferee of such individual if such transferee is a spouse or lineal descendant of the transferee or a trust for the benefit of the individual, his spouse or lineal descendants), is or becomes the “beneficial owner”




(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the total voting power represented by the Company’s then outstanding Voting Securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other entity, other than a merger or consolidation that would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.

 

(d)

Expenses : shall mean any expense, liability, or loss, including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties, amounts paid or to be paid in settlement, any interest, assessments, or other charges imposed thereon, any federal, state, local, or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement, and all other costs and obligations, paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding relating to any Indemnifiable Event.

 

(e)

Indemnifiable Event : shall mean any event or occurrence that takes place either prior to or after the execution of this Agreement, related to the fact that Indemnitee is or was a director or officer of the Company or an Affiliate of the Company, or while a director or officer is or was serving at the request of the Company or an Affiliate of the Company as a director, officer, employee, trustee, agent, or fiduciary of another foreign or domestic corporation, partnership, joint venture, employee benefit plan, trust, or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation that was a predecessor corporation of the Company or of another enterprise at the request of such predecessor corporation, or related to anything done or not done by Indemnitee in any such capacity, whether or not the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent of the Company or an Affiliate of the Company, as described above.

 

(f)

Independent Counsel : shall mean the person or body appointed in connection with Section 3 .


(g)

Proceeding : shall mean any threatened, pending, or completed action, suit, or proceeding or any alternative dispute resolution mechanism (including an action by or in the right of the Company or an Affiliate of the Company), or any inquiry, hearing, or investigation, whether conducted by the Company or an Affiliate of the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit, or proceeding, whether civil, criminal, administrative, investigative, or other.

 

(h)

Reviewing Party : shall mean the person or body appointed in accordance with Section 3 .

 

(i)

Voting Securities : shall mean any securities of the Company that vote generally in the election of directors.

 



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2.

Agreement to Indemnify .

 

(a)

General Agreement .  In the event Indemnitee was, is, or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee from and against any and all Expenses to the fullest extent permitted by law, as the same exists or may hereafter be amended or interpreted (but in the case of any such amendment or interpretation, only to the extent that such amendment or interpretation permits the Company to provide broader indemnification rights than were permitted prior thereto). The parties hereto intend that this Agreement shall provide for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Company’s Certificate of Incorporation, its Bylaws, vote of its stockholders or disinterested directors, or applicable law.

 

(b)

Initiation of Proceeding .  Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Proceeding initiated by Indemnitee against the Company or any director or officer of the Company unless (i) the Company has joined in or the Board has consented to the initiation of such Proceeding; (ii) the Proceeding is one to enforce Indemnitee’s rights under this Agreement, or any other agreement or insurance policy or the Company’s Certificate of Incorporation or Bylaws to indemnification or advancement of expenses; (iii) as otherwise required under Section 145 of the Delaware General Corporation Law or (iv) the Proceeding is instituted after a Change in Control (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control) and Independent Counsel has approved its initiation.

 

(c)

Expense Advances .  If so requested by Indemnitee, the Company shall advance (within ten business days of such request) any and all Expenses to Indemnitee (an “ Expense Advance ”). The Indemnitee shall qualify for such Expense Advances upon the execution and delivery to the Company of this Agreement which shall constitute an undertaking providing that the Indemnitee undertakes to repay such Expense Advances if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.   This Section 2(c) shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 2(b) or Section 2(f) .


(d)

Mandatory Indemnification .  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any Proceeding relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

 

(e)

Partial Indemnification .  If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

 

(f)

Prohibited Indemnification .  No indemnification pursuant to this Agreement shall be paid by the Company on account of any Proceeding in which judgment is rendered against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Exchange Act, or similar provisions of any federal, state, or local laws or for which payment is prohibited by law.

 



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3.

Reviewing Party .  Prior to any Change in Control, the Reviewing Party shall be any appropriate person or body consisting of a member or members of the Board or any other person or body appointed by the Board who is not a party to the particular Proceeding with respect to which Indemnitee is seeking indemnification; provided that if all members of the Board are parties to the particular Proceeding with respect to which Indemnitee is seeking indemnification, the Independent Counsel refereed to below shall become the Reviewing Party; after a Change in Control, the Independent Counsel referred to below shall become the Reviewing Party. With respect to all matters arising before a Change of Control for which Independent Counsel shall become be the Reviewing Party and all matters arising after a Change in Control (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control) concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or under applicable law or the Company’s Certificate of Incorporation or Bylaws now or hereafter in effect relating to indemnification for Indemnifiable Events, the Company shall seek legal advice only from Independent Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or Indemnitee (other than in connection with indemnification matters) within the last five years. The Independent Counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee should be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Independent Counsel and to indemnify fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities, loss, and damages arising out of or relating to this Agreement or the engagement of Independent Counsel pursuant hereto.

 

4. Indemnification Process and Appeal .

 

(a)

Indemnification Payment .  Indemnitee shall be entitled to indemnification of Expenses, and shall receive payment thereof, from the Company in accordance with this Agreement as soon as practicable after Indemnitee has made written demand on the Company for indemnification, unless the Reviewing Party has given a written opinion to the Company that Indemnitee is not entitled to indemnification under applicable law.

 

(b)

Suit to Enforce Rights .  Regardless of any action by the Reviewing Party, if Indemnitee has not received full indemnification within thirty (30) days after making a demand in accordance with Section 4(a) , Indemnitee shall have the right to enforce its indemnification rights under this Agreement by commencing litigation in any court in the State of Delaware having subject matter jurisdiction thereof seeking an initial determination by the court or challenging any determination by the Reviewing Party or any aspect thereof. The Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party not challenged by Indemnitee shall be binding on the Company and Indemnitee. The remedy provided for in this Section 4 shall be in addition to any other remedies available to Indemnitee at law or in equity.

 

(c)

Defense to Indemnification, Burden of Proof, and Presumptions .  It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Expenses incurred in defending a Proceeding in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such action or any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proving such a defense or determination shall be on the Company. Neither the failure of the Reviewing Party or the Company (including its Board, independent legal counsel, or its stockholders) to have made a



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determination prior to the commencement of such action by Indemnitee that indemnification of the claimant is proper under the circumstances because Indemnitee has met the standard of conduct set forth in applicable law, nor an actual determination by the Reviewing Party or Company (including its Board, independent legal counsel, or its stockholders) that Indemnitee had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. For purposes of this Agreement, the termination of any claim, action, suit, or proceeding, by judgment, order, settlement (whether with or without court approval), conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

 

5.

Indemnification for Expenses Incurred in Enforcing Rights .  The Company shall indemnify Indemnitee against any and all Expenses that are incurred by Indemnitee in connection with any action brought by Indemnitee for:

 

(i)

indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or under applicable law or the Company’s Certificate of Incorporation or Bylaws now or hereafter in effect relating to indemnification for Indemnifiable Events; and/or

 

(ii)

recovery under directors’ and officers’ liability insurance policies maintained by the Company, but only in the event that Indemnitee ultimately is determined to be entitled to such indemnification or insurance recovery, as the case may be.


In addition, the Company shall, if so requested by Indemnitee, advance the foregoing Expenses to Indemnitee, subject to and in accordance with Section 2(c) .

 

6.

Notification and Defense of Proceeding .

 

(a)

Notice .  Promptly after receipt by Indemnitee of notice of the commencement of any Proceeding, Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company will not relieve the Company from any liability that it may have to Indemnitee, except as provided in Section 6(c) .

 

(b)

Defense .  With respect to any Proceeding as to which Indemnitee notifies the Company of the commencement thereof, the Company will be entitled to participate in the Proceeding at its own expense and except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense of any Proceeding, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently incurred by Indemnitee in connection with the defense of such Proceeding other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ legal counsel in such Proceeding, but all Expenses related thereto incurred after notice from the Company of its assumption of the defense shall be at Indemnitee’s expense unless: (i) the employment of legal counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of the Proceeding, (iii) after a Change in Control (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control), the employment of counsel by Indemnitee has been approved by the Independent Counsel, or (iv) the Company shall not in fact have employed counsel to assume the defense of such Proceeding or shall not continue to retain counsel to defend such Proceeding, in each of which cases all Expenses of the Proceeding shall be borne by the Company. The



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Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which Indemnitee shall have made the determination provided for in (ii), (iii) and (iv) above.

 

(c)

Settlement of Claims .  The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Company’s written consent, such consent not to be unreasonably withheld; provided, however, that if a Change in Control has occurred (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control), the Company shall be liable for indemnification of Indemnitee for amounts paid in settlement if the Independent Counsel has approved the settlement. The Company shall not settle any Proceeding in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee’s prior written consent. The Company shall not be liable to indemnify Indemnitee under this Agreement with regard to any judicial award if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action; the Company’s liability hereunder shall not be excused if participation in the Proceeding by the Company was barred by this Agreement.


7.

Establishment of Trust .  In the event of a Change in Control (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control) the Company shall, upon written request by Indemnitee, create a Trust for the benefit of Indemnitee and from time to time upon written request of Indemnitee shall fund the Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for, participating in, and/or defending any Proceeding relating to an Indemnifiable Event. The amount or amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by the Independent Counsel. The terms of the Trust shall provide that (i) the Trust shall not be revoked or the principal thereof invaded without the written consent of Indemnitee, (ii) the Trustee shall advance, within ten business days of a request by Indemnitee, any and all Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the Trust under the same circumstances for which Indemnitee would be required to reimburse the Company under Section 2(c) of this Agreement), (iii) the Trust shall continue to be funded by the Company in accordance with the funding obligation set forth above, (iv) the Trustee shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in the Trust shall revert to the Company upon a final determination by the Independent Counsel or a court of competent jurisdiction, as the case may be, that Indemnitee has been fully indemnified under the terms of this Agreement. The Trustee shall be chosen by Indemnitee. Nothing in this Section 7 shall relieve the Company of any of its obligations under this Agreement. All income earned on the assets held in the Trust shall be reported as income by the Company for federal, state, local, and foreign tax purposes. The Company shall pay all costs of establishing and maintaining the Trust and shall indemnify the Trustee against any and all expenses (including attorneys’ fees), claims, liabilities, loss, and damages arising out of or relating to this Agreement or the establishment and maintenance of the Trust.

 

8.

Non-Exclusivity .  The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company’s Certificate of Incorporation, Bylaws, any agreement, any vote of stockholders or directors, applicable law, or otherwise. To the extent that a change in applicable law (whether by statute or judicial decision) permits greater indemnification than would be afforded currently under the Company’s Certificate of Incorporation, Bylaws, applicable law, or this Agreement, it is the intent of the parties that Indemnitee enjoy by this Agreement the greater benefits so afforded by such change.

 



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9.

Liability Insurance .  To the extent the Company maintains an insurance policy or policies providing general and/or directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer.  

 

10. Period of Limitations .  No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Company or any Affiliate of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors, or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, or such longer period as may be required by state law under the circumstances. Any claim or cause of action of the Company or its Affiliate shall be extinguished and deemed released unless asserted by the timely filing and notice of a legal action within such period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, the shorter period shall govern.

 

11. Amendment of this Agreement .  No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

 

12. Subrogation .  In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

 

13. No Duplication of Payments .  The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable hereunder.

 

14.   Duration of Agreement .  This Agreement shall continue and terminate upon the later of (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company or (b) one (1) year after the final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder an or any proceeding commenced by Indemnitee pursuant to Section 4(b) of this Agreement relating thereto.


15.   Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation, or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity pertaining to an Indemnifiable Event even though Indemnitee may have ceased to serve in such capacity at the time of any Proceeding.



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16. Severability .  If any provision (or portion thereof) of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, (a) the remaining provisions shall remain enforceable to the fullest extent permitted by law, (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void, or otherwise unenforceable, that is not itself invalid, void, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, void, or unenforceable.

 

17. Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such State without giving effect to its principles of conflicts of laws.  The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement may be brought in the Delaware Court of Chancery, (ii) consent to submit to the jurisdiction of the Delaware Court of Chancery for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue or any such action or proceeding in the Delaware Court of Chancery and (iv) waive, and agree not to please or to make, any claim that any such action or proceeding brought in the Delaware Court of Chancery had been brought in an improper or inconvenient forum.

 

18. Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day but only if sent concurrently in the manner set forth in clause (d) below, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt.  All communications shall be sent:  

 

(a) To Indemnitee at the address set forth below Indemnitee’s signature hereto.


with a copy (which shall not constitute notice to):


Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, New York 10020

Attention:  Steven E. Siesser, Esq.

Telephone: (212) 204-8688

Facsimile: (973) 597-2507

Email: ssiesser@lowenstein.com


(b) To the Company at:


Social Reality, Inc.

456 Seaton Street
Los Angeles, CA 90013

Attention: Christopher Miglino

Telephone: (323) 283-8505

Facsimile:  

Email: chris@socialreality.com



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with a copy (which shall not constitute notice to):


Pearlman Schneider LLP

2200 Corporate Boulevard, N.W., Suite 201

Boca Raton, FL 33431

Attention:  James M. Schneider, Esq.

Telephone: (561) 362-9595

Facsimile: (561) 361-9612

Email: jim@pslawgroup.net


Notice of change of address shall be effective only when given in accordance with this Section 18 .


19. Counterparts .  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.


IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the day specified above.

 

 

SOCIAL REALITY, INC.

 

 

 

 

By:

/s/ Christopher Miglino

 

Name:

Christopher Miglino

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

INDEMNITEE

 

 

 

 

/s/ Richard Steel

 

Richard Steel


 

Address:

 

 

 

 






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