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:


 


18.2Termination. 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: