Exhibit 10.40


 


SECOND AMENDMENT TO SECOND AMENDED AND
RESTATED


 


FACTORING AND SECURITY AGREEMENT


 


 


This Second
Amendment (this “Amendment”) is executed and delivered as of January 27, 2012, to amend that certain
Second Amended and Restated Factoring and Security Agreement, dated as of October 28, 2011, as amended by the First Amendment thereto,
dated as of January 5, 2012 (as may be further 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 One
Hundred Seventy-Five Thousand Dollars and No Cents ($175,000.00) 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. For purposes of the Factoring Agreement, “Factoring Agreement Documents” include
(i) the Factoring Agreement, (ii) the Assigned Documents, (iii) that certain letter agreement, dated as of
October 28, 2011 (the “Side Letter”), by and among the Holders, the Agent and the Seller, and (iv) all
other agreements, instruments and documents executed and delivered from time to time by any of the Zoo Parties in connection with
the transactions contemplated by the Factoring Agreement.


 






    	 



    	 



    
 


 


2.                 
Disbursement and Use of Additional Funding. 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.                 
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 this Amendment, (ii) perform
its obligations under this Amendment and the other Factoring Agreement Documents, and (iii) consummate the transactions
contemplated by this Amendment and the other Factoring Agreement Documents, including, in the case of the Seller, to borrow the
Additional Funding and to repay all Obligations. The execution and delivery of this Amendment, the performance of its obligations
under this Agreement and the other Factoring Agreement Documents, and the consummation of the transactions contemplated by this
Agreement and the other Factoring Agreement Documents, in each case by each Zoo Party, have been duly authorized by all necessary
action on the part of such Zoo Party, including by the board of directors 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 under this Amendment or any
other Factoring Agreement Document, nor the consummation of any transaction contemplated by this Amendment or any other Factoring
Agreement Document, 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 Two Hundred Eighty-Five Thousand Eight Hundred Eighteen Dollars and Ninety-Three Cents ($1,285,818.93).


 






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(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 27, 2012, the aggregate
accrued and unpaid interest under Section 15.3(c) of the Factoring Agreement is no less than One
Hundred Eighteen Thousand Eight Hundred Eight Dollars and Fifty Cents ($118,808.50).


 


(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.



 


(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.


 


(g)              
Attached as Exhibit A hereto is a copy of the duly adopted resolutions of the respective board of directors of each
of the Zoo Parties, duly authorizing the Zoo Parties to execute and deliver this Amendment, perform its obligations under this
Agreement and the other Factoring Agreement Documents, and consummate the transactions contemplated by this Agreement and the other
Factoring Agreement Documents, including, in the case of the Seller, to borrow the Additional Funding and repay all Obligations.
All such resolutions are (and will remain) in full force and effect, and there are (and there will be no) other resolutions or
other actions taken by or on behalf of any of the Zoo Parties or their respective boards of directors that could reasonably be
expected to nullify, revoke, rescind, limit, restrict, or amend or affect in any way adverse to the Agent or any Holder any of
the authorizations set forth in any such resolution or any Zoo Party’s obligations under this Amendment or any other Factoring
Agreement Document.


 


4.                 
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, the Side Letter 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 the Side Letter.


 






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5.                 
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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of this page is intentionally left blank.]


 


 



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In
witness whereof, the undersigned, consisting of all of the parties to the Factoring 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 3, and 4 above):


 


 


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



 






    	 



    	 	



    

 





Exhibit A


 


Board Resolutions


 


 


 


[See attachments.]