Exhibit 10.39

 

FIRST AMENDMENT TO SECOND AMENDED AND RESTATED

 

FACTORING AND SECURITY AGREEMENT

 

 

This First Amendment (this “Amendment”) is executed and delivered as of January
5, 2012, to amend that certain Second Amended and Restated Factoring and
Security Agreement, dated as of October 28, 2011 (as may be amended, modified,
supplemented or restated from time to time, the “Factoring Agreement”), by and
among Zoo Publishing, Inc., a New Jersey corporation (the “Seller”), the Holders
(as defined therein), and MMB Holdings, LLC, a Delaware limited liability
company (in its capacity as agent for the Holders, the “Agent”). Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
them in the Factoring Agreement.

 

Recitals

 

Whereas, the Seller has requested that the Agent, on behalf of one or more of
the Holders, provide the Seller with Two Hundred Fifty Thousand Dollars and No
Cents ($250,000.00) in additional funding under the Factoring Agreement (the
“Additional Funding”), and the Agent, on behalf of one or more of the Holders is
willing to provide the Additional Funding, subject to the terms and conditions
of this Amendment; and

 

Whereas, each of (a) Zoo Entertainment, Inc., a Delaware corporation (“Zoo
Entertainment”), (b) Zoo Games, Inc., a Delaware corporation (“Zoo Games”), and
(c) indiePub, Inc., a Delaware corporation (“indiePub” and, together with
Seller, Zoo Entertainment and Zoo Games, the “Zoo Parties”) is an affiliate of
the Seller and will benefit from the extension of the Additional Funding to the
Seller;

 

Now, therefore, in consideration of the mutual covenants and promises contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

Agreement

 

1.                  Additional Funding. The Agent, on behalf of one or more of
the Holders, hereby lends under the Factoring Agreement to the Seller, and the
Seller hereby borrows and accepts under the Factoring Agreement, the Additional
Funding, effective as of the date hereof. The outstanding principal balance of
the Additional Funding shall bear interest at the rate of fifteen (15%) per
annum (or, if such rate exceeds the maximum rate permitted by applicable law,
then such maximum rate permitted by applicable law), beginning as of the date
hereof, regardless of whether an Event of Default has occurred and is
continuing. The entire outstanding balance of the Additional Funding and all
accrued and unpaid interest thereon (or, in the sole discretion of the Agent,
such portion of such outstanding balance or accrued and unpaid interest as the
Agent may designate from time to time) shall be due and payable upon demand by
the Agent. For the avoidance of doubt, the Seller acknowledges and agrees that
(a) the Additional Funding and all accrued and unpaid interest thereon
constitute Obligations which are secured by the security interest granted in
favor of the Agent, for the benefit of the Holders, under Section 6 of the
Factoring Agreement, and (b) this Amendment constitutes a Factoring Agreement
Document.

 

 

 

 

 

2.                  Disbursement and Use of Additional Funding. The Additional
Funding shall be disbursed as follows:

 

(a)                Seventy-Five Thousand Dollars and No Cents ($75,000.00) shall
be retained by Agent to be applied against legal fees and expenses incurred by
the Agent that are reimbursable by the Seller to the Agent pursuant to Section
25 of the Factoring Agreement, including (i) Forty-Two Thousand Eight Hundred
Eight-Five Dollars and Fifty Cents ($42,885.50) in legal fees and expenses
incurred by the Agent in connection with the negotiation and preparation of the
Factoring Agreement that was required to be reimbursed, but has not yet been
reimbursed, by Seller to the Agent pursuant to Section 25(a) of the Factoring
Agreement and (ii) legal fees anticipated to be incurred by the Agent in
connection with the negotiation and preparation of this Amendment and other
agreements, instruments and documents contemplated by this Amendment; and

 

(b)               the remaining One Hundred Seventy-Five Thousand Dollars and No
Cents ($175,000.00) of the Additional Funding shall be delivered to the Seller
by wire transfer no later than the first business day after the date hereof,
which the Seller shall use solely for general corporate purposes approved by the
Agent.

 

3.                  Conforming Amendment to Section 18.2 of the Factoring
Agreement. Section 18.2 of the Factoring Agreement is hereby amended and
restated as follows:

 

18.2 Termination. This Agreement shall terminate upon the later of (i) the
collection by Agent of all the Purchased Accounts or (ii) the receipt by Agent
of payment in full of all of the Obligations (including, for the avoidance of
doubt, all reimbursements to which Agent is entitled hereunder, the principal
balance of the Additional Funding, all accrued and unpaid interest thereon, the
Deficiency Amount and all other amounts payable by Seller hereunder). Until
termination of this Agreement, Agent shall be entitled to collect and retain for
its own account all proceeds of all Seller’s Accounts from all Account Debtors
under the Purchased Accounts, regardless of whether they are for payment of the
Purchased Accounts, and from any other account debtors arising from the sale of
Physical Products after the date of this Agreement. After the receipt by Agent
of payment in full of all of the Obligations, all proceeds of Seller’s Accounts
from all Account Debtors under the Purchased Accounts received in excess of the
amount necessary for such payment in full shall be divided as follows: 90% paid
to Seller and 10% retained by Agent for the account of Holders. In the event any
payments are received from an Account Debtor that does not designate the invoice
or account being paid, the proceeds will be turned over to Agent in kind and
applied by Agent to the oldest outstanding invoice from such Account Debtor.
Seller shall not be permitted to terminate this Agreement at anytime prior to
the termination events described in the initial sentence of this Section 18.2.
Upon the termination of this Agreement as described in the initial sentence of
this Section 18.2, Agent shall release and discharge any security interest in
all Collateral and waive any and all claims or interest it has or might have in
and with respect to such Collateral.

 

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4.                  Certain Representations and Warranties. The Zoo Parties
hereby jointly and severally represent and warrant to the Agent and the Holders
as follows:

 

(a)                Each Zoo Party has all requisite power and authority to (i)
execute and deliver, (ii) perform its obligations under, and (iii) consummate
the transactions contemplated by, this Amendment, including, in the case of the
Seller, to borrow the Additional Funding. The execution and delivery of this
Amendment and the performance of its obligations hereunder, and the consummation
of the transactions contemplated hereby, in each case by each Zoo Party, have
been duly authorized by all necessary action on the part of such Zoo Party. This
Amendment constitutes the legal, valid and binding obligation of each Zoo Party,
enforceable against such Zoo Party in accordance with its terms.

 

(b)               Neither the execution and delivery of this Amendment, nor the
performance of its obligations hereunder, nor the consummation of any
transaction contemplated hereby, in each case by each Zoo Party, violates,
conflicts with or constitutes a default or breach under, or will violate,
conflict with or constitute a default or breach under (i) any applicable law,
(ii) any contract, indenture, agreement, instrument or mortgage binding on any
Zoo Party or any of its properties, or (iii) the articles of incorporation,
bylaws and other constituent or organizational documents of any Zoo Party.

 

(c)                As of the date hereof, the aggregate Obligations (excluding
(i) accrued and unpaid interest under Section 15.3(c) of the Factoring
Agreement, (ii) Incurred Expenses, and (iii) the Additional Funding) is no less
than One Million Thirty-Five Thousand Eight Hundred Eighteen Dollars and
Ninety-Three Cents ($1,035,818.93).

 

(d)               An Event of Default has occurred and is continuing. The Agent
is entitled to charge interest on all Obligations pursuant to Section 15.3(c) of
the Factoring Agreement during the duration of any Event of Default. As of
January 5, 2012, the aggregate accrued and unpaid interest under Section 15.3(c)
of the Factoring Agreement is no less than One Hundred Seven Thousand Twenty-One
Dollars and Eighty-Two Cents ($$107,021.82).

 

(e)                There is in existence a valid, perfected, first priority
security interest in all of the assets of the Seller in favor of the Agent for
the benefit of the Holders. Such assets include, without limitation:

 

(i)100% of the issued and outstanding stock of indiePub; and

 

(ii)substantially all of the assets of the Zoo Parties, including, without
limitation, the Zoo Parties’ respective rights, title and interest in and to
substantially all of the software, source code and other intellectual property
sold by the Zoo Parties or developed for sale for the benefit of the Zoo
Parties.

 

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(f)                There is no basis or set of facts on which any amount (or any
portion thereof) owed by the Seller or any of its affiliates under any Factoring
Agreement Document could be reduced, offset, waived, or forgiven by rescission
or otherwise. There is no claim, counterclaim, offset, or defense (or other
right, remedy or basis having a similar effect) available to the Seller or any
of its affiliates with regard thereto. There is no basis on which the terms and
conditions of any of the Obligations could be claimed to be other than as stated
on the written instruments which evidence the Obligations.

 

5.                  Effect of Amendment; Reaffirmation. This Amendment amends,
modifies and supplements, and constitutes a part of, the Factoring Agreement.
Except as expressly set forth in this Amendment, all of the provisions of the
Factoring Agreement shall remain unchanged and in full force and effect. The Zoo
Parties hereby ratify, confirm and reaffirm all of the terms and conditions of
the Factoring Agreement Documents. Without limiting the foregoing, the Zoo
Parties acknowledge that all Collateral shall continue to secure the
obligations. Without limiting the foregoing, that certain letter agreement dated
October 28, 2011, by and among the Holders, the Agent and the Seller remains in
full force and effect, and none of the terms thereof are in any way modified or
limited by any of the terms of this Amendment. Each of the parties hereto hereby
ratifies, confirms, and reaffirms all of the terms and conditions of such letter
agreement.

 

6.                  Panta Legal Expenses. On any matter reasonably related to
the Factoring Agreement, if Panta Distribution, LLC, a Delaware limited
liability company (“Panta”), reasonably determines that its interests as a
Holder differs in any material respect from the interests of MMB Holdings, LLC,
a Delaware limited liability company (“MMB”), as a Holder under the Factoring
Agreement, then Panta may consult with counsel separate from counsel to the
Agent with respect to such matter, and the Seller shall reimburse Panta for the
reasonable out-of-pocket attorneys’ fees and expenses incurred by Panta from
such consultation. Panta shall use reasonable efforts to inform the Seller and
the Agent of its belief that its interests as a Holder differs from MMB’s
interests as a Holder with respect to any such matter prior to the incurrence of
any such fees and expenses.

 

7.                  Covenant Against Asset Dispositions. For so long as any of
the Obligations is outstanding, no Zoo Party shall sell, dispose, transfer
(whether for consideration or otherwise), assign, lease as lessor, contribute or
otherwise convey any of its assets to any person, except (a) for the sale of
entertainment software inventory to bona fide consumers, distributors and
retailers in the ordinary course of business consistent with past practice or
(b) with the prior written consent of the Agent.

 

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8.                  Miscellaneous. This Amendment may be executed in one or more
counterparts each of which shall constitute one and the same instrument, binding
on all parties hereto, regardless whether all parties are not signatory to the
original or the same counterpart. The headings in this Amendment are for
convenience of reference only and shall not be deemed to constitute a part of
this Amendment. For the avoidance of doubt, the term “person” includes, without
limitation, individuals and entities.

 

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In witness whereof, the undersigned, consisting of all of the parties to the
Factor Agreement, have duly executed this Amendment as of the date first written
above.

 

 

  AGENT         MMB Holdings LLC           By:  Mojobear Capital LLC, its
managing member                     By:         Name:
Title:                   SELLER           Zoo Publishing, Inc.                  
  By:         Name:
Title:                   HOLDERS           MMB Holdings LLC             By:
Mojobear Capital LLC, its managing member                     By:         Name:
Title:                   Panta Distribution, LLC                     By:        
Name:
Title:        

 

 

 

 

ACKNOWLEDGED AND AGREED (including, without limitation, for purposes of Sections
4, 5 and 7 above):

 

 

  Zoo Entertainment, Inc.                 By:          Name:
Title:                   Zoo Games, Inc.                     By:         Name:
Title:                   indiePub, Inc.                     By:         Name:
Title: