Document:

FORM OF REGISTRATION RIGHTS AGREEMENT

 

EXHIBIT 10.02

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of October ___, 2017, between Social Reality, Inc., a Delaware corporation (the “Company”), and each of the several purchasers signatory hereto (each such purchaser, a “Purchaser” and, collectively, the “Purchasers”).

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and each Purchaser (the “Purchase Agreement”).

The Company and each Purchaser hereby agrees as follows:

1.

Definitions.

Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

“Advice” shall have the meaning set forth in Section 6(d).

“Effectiveness Date” means, with respect to the Initial Registration Statement required to be filed hereunder, the 90th calendar day following the date hereof (or, in the event of a “full review” by the Commission, the 120th calendar day following the date hereof) and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the 90th calendar day following the date on which an additional Registration Statement is required to be filed hereunder (or, in the event of a “full review” by the Commission, the 120th calendar day following the date such additional Registration Statement is required to be filed hereunder); provided, however, that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the next succeeding Trading Day.

“Effectiveness Period” shall have the meaning set forth in Section 2(a).

“Event” shall have the meaning set forth in Section 2(d).

“Event Date” shall have the meaning set forth in Section 2(d).

 

“Filing Date” means, with respect to the Initial Registration Statement required hereunder, the 30th calendar day following the date hereof and, with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

“Indemnified Party” shall have the meaning set forth in Section 5(c).

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

“Initial Registration Statement” means the initial Registration Statement filed pursuant to this Agreement.

“Losses” shall have the meaning set forth in Section 5(a).

“Plan of Distribution” shall have the meaning set forth in Section 2(a). 

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Registrable Securities” means, as of any date of determination, (a) all of the shares of Common Stock then issued and issuable upon conversion in full of the Debentures (assuming on such date the Debentures are converted in full without regard to any conversion limitations therein), (b) all shares of Common Stock issued and issuable as interest or principal on the Debentures assuming all permissible interest and principal payments are made in shares of Common Stock and the Debentures are held until maturity, (c) all Warrant Shares then issued and issuable upon exercise of the Warrants (assuming on such date the Warrants are exercised in full without regard to any exercise limitations therein and including the Warrant Shares underlying the Series B Warrants upon the issuance of the Series B Warrants, although such Series B Warrant shares shall be excluded from the Initial Registration Statement), (d) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the Debentures or the Warrants (in each case, without giving effect to any limitations 

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on conversion set forth in the Debentures or limitations on exercise set forth in the Warrants) and (e) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company, and all Warrants are exercised by “cashless exercise” as provided in Section 2(c) of each of the Warrants), as reasonably determined by the Company, upon the advice of counsel to the Company.

“Registration Statement” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.

 “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

“Selling Stockholder Questionnaire” shall have the meaning set forth in Section 3(a).

“SEC Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.

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2.

Shelf Registration.

(a)

On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415.  Each Registration Statement filed hereunder shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith, subject to the provisions of Section 2(e)) and shall contain (unless otherwise directed by at least 51% in interest of the Holders) substantially the “Plan of Distribution” attached hereto as Annex A and substantially the “Selling Stockholder” section attached hereto as Annex B; provided, however, that no Holder shall be required to be named as an “underwriter” without such Holder’s express prior written consent.  Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the “Effectiveness Period”).  The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. Eastern Time on a Trading Day.  The Company shall immediately notify the Holders via facsimile or by e-mail to the facsimile number or e-mail address set forth in the Purchase Agreement of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement.  The Company shall, by 9:30 a.m. Eastern Time on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424.  Failure to so notify the Holder within one (1) Trading Day of such notification of effectiveness or failure to file a final Prospectus as foresaid shall be deemed an Event under Section 2(d). 

(b)

Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3 or such 

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other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 2(e); with respect to filing on Form S-3 or other appropriate form, and subject to the provisions of Section 2(d) with respect to the payment of liquidated damages; provided, however, that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09. 

(c)

Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows: 

a.

First, the Company shall reduce or eliminate any securities to be included other than Registrable Securities;

b.

Second, the Company shall reduce Registrable Securities represented by Warrant Shares (applied, in the case that some Warrant Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Warrant Shares held by such Holders); and 

c.

Third, the Company shall reduce Registrable Securities represented by Conversion Shares (applied, in the case that some Conversion Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Conversion Shares held by such Holders). 

In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment.  In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its best efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended.

 

(d)

If: (i) the Initial Registration Statement is not filed on or prior to its Filing Date (if the Company files the Initial Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section 3(a) herein, the Company shall be deemed to have not satisfied this clause (i)), or (ii) the Company fails to file with the Commission a 

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request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within ten (10) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i) and (iv), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such ten (10) calendar day period is exceeded, and for purpose of clause (v) the date on which such ten (10) or fifteen (15) calendar day period, as applicable, is exceeded being referred to as “Event Date”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 2.0% multiplied by the aggregate Subscription Amount paid by such Holder pursuant to the Purchase Agreement.  If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.

(e)

If Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.

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(f)

Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name any Holder or affiliate of a Holder as any Underwriter without the prior written consent of such Holder.

3.

Registration Procedures.

In connection with the Company’s registration obligations hereunder, the Company shall:

(a)

Not less than five (5) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of at least 51% of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex B (a “Selling Stockholder Questionnaire”) on a date that is the earlier of (i) not less than two (2) Trading Days prior to the Filing Date or (ii) by the end of the fourth (4th) Trading Day following the date on which such Holder receives draft materials in accordance with this Section.   

(b)

(i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company 

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shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

(c)

If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.  

(d)

Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of 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, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under 

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which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided, however, in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.

(e)

Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

(f)

Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.

(g)

Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).

(h)

 Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that, the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

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(i)

If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.

(j)

Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.  The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period.

(k)

Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Holders are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.

(l)

The Company shall use its best efforts to maintain eligibility for use of Form S-3 (or any successor form thereto) for the registration of the resale of Registrable Securities.

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(m)

The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three (3) Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.

4.

Registration Expenses. All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.  In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

5.

Indemnification.

(a)

Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title 

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or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(d).  The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 6(h).

(b)

Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in 

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any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s information provided in the Selling Stockholder Questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto.  In no event shall the liability of a selling Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Holder upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

(c)

Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that, the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in 

13

 

which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party; provided, that, the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.

(d)

Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation 

14

 

or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  In no event shall the contribution obligation of a Holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

6.

Miscellaneous.

(a)

Remedies.  In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement.  Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.

(b)

No Piggyback on Registrations; Prohibition on Filing Other Registration Statements.  Except as set forth on Schedule 6(b) attached hereto, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in any Registration Statements other than the Registrable Securities.  Except as set forth on Schedule 6(b), the Company shall not file any other registration statements until all Registrable Securities are registered pursuant to a Registration Statement that is declared effective by the Commission, provided that this Section 6(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this Agreement.

(c)

[Reserved]

(d)

Discontinued Disposition.  By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed.  The Company will use its best 

15

 

efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(d).

(e)

Piggy-Back Registrations. If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen (15) days after the date of the delivery of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 6(e) that are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Commission pursuant to the Securities Act or that are the subject of a then effective Registration Statement that is available for resales or other dispositions by such Holder.

(f)

Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of 51% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise or conversion of any Security), provided that, if any amendment, modification or waiver disproportionately and adversely impacts a Holder (or group of Holders), the consent of such disproportionately impacted Holder (or group of Holders) shall be required.  If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence 

16

 

may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(f). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

(g)

Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.  

(h)

Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities.  Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.8 of the Purchase Agreement.

(i)

No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.  Except as set forth on Schedule 6(i), neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.

(j)

Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature 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.

(k)

Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.

(l)

Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

17

 

(m)

Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(n)

Headings. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.

(o)

Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder.  It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders.

********************

(Signature Pages Follow)

18

 

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

	
	SOCIAL REALITY, INC.

 

	By:__________________________________________

     Name:

     Title:

                             

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

[SIGNATURE PAGE OF HOLDERS TO SRAX RRA]

Name of Holder: __________________________

Signature of Authorized Signatory of Holder: __________________________

Name of Authorized Signatory: _________________________

Title of Authorized Signatory: __________________________

[SIGNATURE PAGES CONTINUE]

 

Annex A

Plan of Distribution

Each Selling Stockholder (the “Selling Stockholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal Trading Market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions.  These sales may be at fixed or negotiated prices.  A Selling Stockholder may use any one or more of the following methods when selling securities:

·

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·

block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·

an exchange distribution in accordance with the rules of the applicable exchange;

·

privately negotiated transactions;

·

settlement of short sales; 

·

in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;

·

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

·

a combination of any such methods of sale; or

·

any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as 

 

set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.  

In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume.  The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities.  The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The Selling Stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.  Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities. 

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities.  The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.  

We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect.  The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the Class A common stock for the applicable 

2

 

restricted period, as defined in Regulation M, prior to the commencement of the distribution.  In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholders or any other person.  We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

3

 

SELLING SHAREHOLDERS

The Class A common stock being offered by the selling shareholders are those to the selling shareholders upon the conversion of the debentures and/or the exercise of the warrants.  For additional information regarding the issuances of those debentures and warrants, see "Private Placement of Debentures and Warrants" above.  We are registering the shares of Class A common stock in order to permit the selling shareholders to offer the shares for resale from time to time.  Except for the ownership of the debentures and the warrants, the selling shareholders have not had any material relationship with us within the past three years.

The table below lists the selling shareholders and other information regarding the beneficial ownership of the shares of Class A common stock by each of the selling shareholders.  The second column lists the number of shares of Class A common stock beneficially owned by each selling shareholder, based on its ownership of the debentures and warrants, as of ________, 2017, assuming the conversion of the debentures and the exercise of the warrants held by the selling shareholders on that date, without regard to any limitations on conversion or exercises.

The third column lists the shares of Class A common stock being offered by this prospectus by the selling shareholders.

In accordance with the terms of a registration rights agreement with the selling shareholders, this prospectus generally covers the resale of the sum of (i) the number of shares of common stock issued to the selling shareholders upon the conversion of the debentures and (ii) the maximum number of shares of common stock issuable upon exercise of the related warrants, determined as if the outstanding debentures and warrants were converted or exercised in full as of the trading day immediately preceding the date this registration statement was initially filed with the SEC, each as of the trading day immediately preceding the applicable date of determination and all subject to adjustment as provided in the registration rights agreement, without regard to any limitations on the conversion of the debentures and/or the exercise of the warrants.  The fourth column assumes the sale of all of the shares offered by the selling shareholders pursuant to this prospectus.

Under the terms of the each of the debentures and the warrants, a selling shareholder may not convert the debentures and/or exercise the warrants to the extent such conversion and/or exercise would cause such selling shareholder, together with its affiliates and attribution parties, to beneficially own a number of shares of Class A common stock which would exceed 4.99% of our then outstanding Class A common stock following such conversion or exercise, excluding for purposes of such determination shares of Class A common stock issuable upon conversion of the debentures and/or the exercise of the warrants which have not been converted or exercised. The number of shares in the second column does not reflect this limitation.  The selling shareholders may sell all, some or none of their shares in this offering.  See "Plan of Distribution."

4

 

				
	

Name of Selling Shareholder

	Number of shares of Common Stock Owned Prior to Offering

	Maximum Number of shares of Common Stock to be Sold Pursuant to this Prospectus

	Number of shares of Common Stock Owned After Offering

 

5

 

Annex C

SOCIAL REALITY, INC.

Selling Stockholder Notice and Questionnaire

The undersigned beneficial owner of Class A common stock (the “Registrable Securities”) of Social Reality, Inc., a Delaware corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed.  A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

Certain legal consequences arise from being named as a selling stockholder in the Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling stockholder in the Registration Statement and the related prospectus.

NOTICE

The undersigned beneficial owner (the “Selling Stockholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.

 

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

QUESTIONNAIRE

1.

Name.

(a)

Full Legal Name of Selling Stockholder

		
	 
	 

	 
	 

(b)

Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:

		
	 
	 

	 
	 

(c)

Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire):

		
	 
	 

	 
	 

2.  Address for Notices to Selling Stockholder:

		
	 

	 

	 

	Telephone:

	 

	Fax:

	 

	Contact Person:

	 

3.  Broker-Dealer Status:

(a)

Are you a broker-dealer?

Yes    ̈ 

No    ̈ 

(b)

If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?

Yes    ̈ 

No    ̈ 

Note:

If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

2

 

(c)

Are you an affiliate of a broker-dealer?

Yes    ̈ 

No    ̈ 

(d)

If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

Yes    ̈ 

No    ̈ 

Note:

If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

4.  Beneficial Ownership of Securities of the Company Owned by the Selling Stockholder.

Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreement.

(a)

Type and Amount of other securities beneficially owned by the Selling Stockholder:

		
	 
	 

	 
	 

	 
	 

3

 

5.  Relationships with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

State any exceptions here:

		
	 
	 

	 
	 

	 
	 

The undersigned agrees to promptly notify the Company of any material inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective; provided, that the undersigned shall not be required to notify the Company of any changes to the number of securities held or owned by the undersigned or its affiliates.

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus and any amendments or supplements thereto.

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

						
	Date: 

	 
	 
	Beneficial Owner:

	 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	By:

	 
	 

	 
	 
	 
	 
	Name:

	 

	 
	 
	 
	 
	Title:

	 

PLEASE EMAIL A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO: DENNIS GLUCK, SILVESTRE LAW GROUP, 31200 VIA COLINAS #200, WESTLAKE VILLAGE, CA 91362 EMAIL: DGLUCK@SILVESTRELAW.COM

4

 

Schedule 6(b)

None.

 

Schedule 6(i)

The Company is obligated to register the shares of its Class A common stock underlying the 12.5% Secured Senior Convertible Debentures and accompanying Series A Warrants issued and sold in the April 2017 private placement, as well as the shares of Class A common stock underlying the placement agent warrants.  See Current Reports on Form 8-K as filed on April 21, 2017 and May 4, 2017.

The Company is obligated to register the shares of its Class A common stock underlying the Series A common stock purchase warrants issued and sold to the investors in the January 2017 placement, as well as the shares of its Class A common stock underlying the placement agent warrants.  See Current Report on Form 8-K as filed on January 4, 2017.

The Company is obligated to file a post-effective amendment to its post-effective amendment number 1 to its registration statement on Form S-1, SEC File No. 333-207707, which was declared effective by the Commission on March 29, 2016 with respect to shares issuable upon the exercise of unexpired warrants.

The Company granted holders of warrants to purchase an aggregate of 400,000 shares of Common Stock at an exercise price of $7.50 per share issued as compensation under an advisory agreement dated November 16, 2016 piggy back registration rights.Exhibit 10.8

 

LOAN AND SECURITY AGREEMENT

(“Agreement”)

 

This Agreement
dated May 11, 2017, is an agreement between CRESTMARK BANK (“Crestmark”), and M G CLEANERS, LLC,
a Texas limited liability company (“Borrower”). In this Agreement, Crestmark and Borrower are collectively the “Parties”.
Any person or entity who guarantees the obligations of Borrower (each a “Guarantor”) is required to sign this Agreement.
The Parties have the addresses shown on the schedule (“Schedule”) which is attached to this Agreement. These are the
addresses of the Parties for all purposes and may be changed by one party giving notice to the other party in writing of the new
address.

 

1.          PURPOSE.
The purpose of this Agreement, including the Schedule, is to set forth the terms and conditions of the loans from Crestmark
to Borrower (“Loans”) and the obligations of Borrower. The Schedule is part of this Agreement. Any and all promissory
notes, including for term loans and/or capital expenditures (individually and collectively “Note”) to be signed by
Borrower, any guaranty(s), and any other documents now or hereafter signed by any of the Parties in connection with this Agreement,
the Loans or any document issued by Crestmark or the bank holding the lockbox (“Lockbox Bank”), including subordination
or intercreditor agreements, are also all part of this Agreement. All of the documents together are referred to collectively as
the “Loan Documents”.

 

2.          LOANS;
LOAN ADVANCES.

 

A.           Any
disbursement of money or advance of credit by Crestmark, including but not limited to amounts advanced for the payment of interest,
fees, expenses and amounts necessary to protect, maintain and preserve Crestmark’s Collateral under the Loan Documents (“Protective
Disbursements”), is referred to collectively as an “Advance”. Whether Crestmark makes an Advance is in Crestmark’s
sole discretion. If an Advance is made, it will be made in accordance with the advance formula set forth in the Schedule (“Advance
Formula”); but not at any time to exceed the maximum amount set forth in the Schedule (“Maximum Amount”). Crestmark
may choose to make Protective Disbursements in excess of the Maximum Amount or Advance Formula in its sole discretion. Each time
Crestmark makes an Advance, including a Protective Disbursement, the Advance will be debited against an account in Borrower’s
name on Crestmark’s books (“Loan Account”), and each payment will be credited against the Loan Account in the
manner described in this Agreement.

 

B.           The
total amount Borrower owes to Crestmark will be the aggregate of the Advances made by Crestmark, the expenses and fees set forth
in the Schedule and any and all costs incurred by Crestmark (including reasonable attorney’s fees), and interest at the rate
set forth in the Note on all amounts and all other obligations of Borrower under the Loan Documents (collectively, the “Obligations”
and/or “Indebtedness”).

 

C.           Borrower
must repay all Advances with respect to the Loans with interest, which is due monthly as specified in the Note, along with
all other fees and expenses of Crestmark set forth herein or in the Schedule. Crestmark may in its sole discretion collect
any Obligations due Crestmark by (i) directly applying any funds in the Lockbox Account, as defined in paragraph 5 below, to
the Obligations (ii) directly applying funds from any Reserve Account, as defined in paragraph 3 below, to the Obligations,
(iii) collecting the Obligations directly from Borrower; or (iv) otherwise collecting the Obligations. Borrower understands
that all the Obligations are repayable at any time in full or in part upon demand by Crestmark. Crestmark may make demand for
partial payments and such demand will not preclude Crestmark from demanding payment in full at any time.

 

D.           Borrower
must comply with its representations, promises, covenants and reporting requirements set forth in this Agreement, in the Schedule
and in the other Loan Documents. Borrower’s failure to do any of the foregoing is a default (“Default”). The
demand nature of the Obligations is not modified by reference to a Default in this Agreement or the other Loan Documents and any
reference to a Default is for the purpose of permitting Crestmark to exercise its remedies for Default, including charging interest
at the Extra Rate as defined and provided in the Note.

 

E.           The
aggregate amount of all Advances, plus the expenses and fees set forth in the Schedule, any and all costs incurred by Crestmark
(including reasonable attorney’s fees), and interest at the rate set forth in the Note on all amounts advanced (“Loan
Amount”), may not, at any time, exceed the Maximum Amount or the Advance Formula, and Borrower understands that if at any
time it should owe more to Crestmark than the lesser of the Maximum Amount or the Advance Formula it must repay that amount immediately,
whether or not demand to repay the whole of the Obligations has been made. Protective Disbursements must be immediately repaid
whether or not the lesser of the Maximum Amount or the Advance Formula has been exceeded.

 

3.          RESERVES.
If Crestmark believes in its sole discretion that the prospect for repayment of the Obligations is impaired or that its Collateral
margin is insufficient, Crestmark may establish cash reserves and credit balances (collectively “Reserves”) to protect
its interests and the repayment of the Obligations. Reserves may be established by reducing the Advance Formula to achieve the
target reserve level, withholding monies due Borrower from any payments Crestmark receives, from a cash payment from Borrower,
or any other method Crestmark chooses. Crestmark shall hold these Reserves in a “Reserve Account”. Any money in a Reserve
Account, whether or not it is a cash reserve, will not earn interest for Borrower, and Crestmark may apply the funds in the Reserve
Account to reduce the Obligations at any time Crestmark elects.

 

4.          FEES
AND EXPENSES. In connection with the Loans there are several types of fees that may be charged and Borrower may be required
to maintain a minimum loan balance. Such fees and requirements are set forth in the Schedule. In addition, all expenses of every
kind incurred by Crestmark in connection with the Loans, any Advance, collection of the Obligations, inspection, and examination
are to be paid by Borrower.

 

    	 	1	 

     

    

  

5.          LOCKBOX.
Borrower must immediately notify all persons who are obligated on accounts (“Account Debtors”) to direct all Account
Debtors and any other person or party that is liable to Borrower (collectively a “Debtor”) to remit all payments due
Borrower to the lock box address or pursuant to the wire transfer or ACH instructions set forth in the Schedule (“Lockbox
Account”). The remit to address on all documents related to the accounts, including invoices, purchase orders, or contracts
(“Documents”) must be the Lockbox Account. At Crestmark’s request, all Documents must be marked by Borrower to
show assignment to Crestmark, and Borrower must notify each Account Debtor by mail that the Account has been assigned to Crestmark
and that all payments on the Account, whether made by mail or electronically or otherwise must be made payable to Borrower or Crestmark,
at Crestmark’s sole discretion, to the Lockbox Account or other address provided by Crestmark in writing. The language used
in such notices shall be approved by Crestmark in writing. Crestmark may at any time and from time to time, and at its sole discretion,
notify any Debtor or third party payee to make payments payable directly to Crestmark or to notify Debtor of the assignment to
Crestmark. All expenses for notification of each Account Debtor will be paid by Borrower.

 

If notwithstanding the
notice to Debtors, Borrower receives any funds from a Debtor, including any cash, checks, drafts or wire transfers from the collection,
enforcement, sale or other disposition of the Collateral (defined below), whether derived in the ordinary course of business or
not, or if Borrower receives any proceeds of insurance, tax refunds or any and all other funds of any kind, Borrower shall hold
such funds in trust for Crestmark, shall not mix such funds received with any other funds, and shall immediately deposit such funds
in the Lockbox Account in the form received. That means if the funds are received by mail, the Debtor checks will be sent to the
Lockbox Account uncashed, and if the funds are received electronically, the funds will be transferred immediately to the Lockbox
Account electronically. Crestmark will have sole possession and control over the Lockbox Account. The Lockbox Bank will process
all deposits and Borrower has no right to the Lockbox Account, it belongs to Crestmark. Crestmark is the owner of all deposits
in the Lockbox Account, and has no duty as to collection or protection of funds as long as it is not grossly negligent or commits
actual fraud. All expenses plus any applicable administration and servicing fees of the Lockbox Account will be paid by Borrower.

 

6.          LOAN
ACCOUNT. All of the Obligations which are owed by Borrower will be shown in the Loan Account and Borrower will receive
a monthly statement either by mail, electronically or via access to the Crestmark online system at Crestmark’s sole discretion.
The statement is binding on Borrower, unless Borrower provides a written objection to Crestmark that is actually received by Crestmark
within fifteen (15) business days of the time the statement is provided or made available to Borrower.

 

7.          PAYMENTS.
Should a check or other credit instrument not be collected after Borrower has been given credit for such payment, then the
credit will be reversed and a fee charged at Crestmark’s then standard rate. Crestmark, at its sole discretion, may establish
Reserves as set forth above or not apply a payment that it reasonably believes may be returned unpaid for any reason or disgorged
due to a preference claim or garnishment, and in such event interest (as defined in the Note) and Maintenance Fees (as defined
in the Schedule) will still be payable. In the event that any payment received by Crestmark is sought to be recovered by or on
behalf of the payer (including a trustee in bankruptcy or assignee for the benefit of creditors), then Borrower agrees to immediately
reimburse Crestmark on demand for any amount so recovered and all of Crestmark’s expenses in connection with any such proceeding,
including reasonable attorney’s fees. This provision shall survive termination of this Agreement. Any payments received by
Crestmark shall be applied to the Obligations in whatever order Crestmark determines in its reasonable discretion.

 

8.          SECURITY
INTEREST.

 

A.           Borrower
grants to Crestmark a security interest in all of its assets, now existing or hereafter arising, wherever located including all
Accounts, Goods, Inventory, Equipment, Chattel Paper, Instruments, Investment Property, specifically identified Commercial Tort
Claims, Documents, Deposit Accounts, Letter of Credit Rights, General Intangibles, Contract Rights, customer lists, furniture and
fixtures, books and records and supporting obligations for any of the foregoing, and all proceeds of the foregoing (“Collateral”),
to secure repayment of the Obligations (“Security Interest”). The Collateral also includes all monies on deposit with
Crestmark, or on deposit in the Lockbox Account. All capitalized terms used in this Section 8A, which are not otherwise
defined, shall have the meanings assigned to them in the Uniform Commercial Code as adopted in the state of Michigan (“UCC”).
Without limiting the foregoing, “Accounts” will also mean and include any and all other forms of obligations now owed
or hereafter arising or acquired by the Borrower evidencing any obligation for payment for goods of any kind, nature, or description,
sold or leased, or services rendered, and all proceeds of any of the foregoing.

 

B.           Borrower
gives Crestmark all of the rights of a secured party under the UCC. Borrower grants Crestmark the authority to file all appropriate
documentation for Crestmark to perfect its Security Interest in the Collateral, including a UCC-1 financing statement listing the
Collateral as “All assets of the Debtor, now existing and hereafter arising, wherever located,” or similar terms, as
well as UCC-3 amendments as may be required from time to time. All expenses of Crestmark relating to searching, filing or protecting
the Security Interest are part of the Obligations.

 

C.           The
Security Interest gives Crestmark rights with respect to the Collateral and the Security Interest and this Agreement imposes duties
upon Borrower which relate to the Collateral. Some of the rights and duties are: (i) the right of Crestmark at any time to notify
any persons who may hold any part of the Collateral, such as Account Debtors and other debtors, of Crestmark’s Security Interest.
Borrower understands that Crestmark may verify Accounts with the Account Debtors; (ii) Borrower must cooperate with Crestmark in
obtaining control of any Collateral in the possession of third persons, particularly Collateral consisting of Deposit Accounts,
Investment Property, Letter of Credit Rights or other Collateral which is evidenced by electronic entries; (iii) except for the
right of Borrower to sell its Inventory in the ordinary course of business, Borrower shall not sell or transfer any of the Collateral
or grant any other security interest in the Collateral, except as Crestmark may specifically agree to in writing. Borrower remains
liable to perform all of its obligations with respect to the Collateral such as the recognition of any warranties in Inventory
sold and Crestmark is under no responsibility to perform any of the obligations of Borrower; and (iv) Borrower must notify Crestmark
immediately if it knows that any Account Debtor disputes an Account, whether or not such disputes are deemed valid by Borrower.

    	 	2	 

     

    

  

9.          POWER
OF ATTORNEY. Borrower irrevocably appoints Crestmark, or any person(s) designated by Crestmark, as its attorney-in-fact,
which appointment is coupled with an interest and shall remain in full force and effect until all Obligations of Borrower to Crestmark
have been fully satisfied and discharged, with full power, at Borrower’s sole expense, to exercise at any time in Crestmark’s
reasonable discretion all or any of the following powers:

 

A.           Receive,
take, endorse, assign, deliver, accept and deposit, in the name of Crestmark or Borrower, any and all cash, checks, commercial
paper, drafts, remittances and other instruments and documents relating to the Collateral or the proceeds thereof.

 

B.           Change
Borrower’s address on all invoices and statements of Account mailed or to be mailed to Borrower’s customers and to
substitute thereon the address designated by Crestmark, to place legends on all invoices and statements of Account mailed or to
be mailed to Borrower’s customers, and to receive and open all mail addressed to Borrower, or to Borrower’s trade name
at Crestmark’s address, or any other designated address.

 

C.           Upon
and after the occurrence of a Default, to change the address for delivery of Borrower’s mail to Crestmark’s or an address
designated by Crestmark. Borrower specifically authorizes Crestmark to sign any forms on behalf of Borrower to affect this change
with the United States Postal Service or any third party and requests such change to be accepted.

 

D.           Upon
and after the occurrence of a Default, to take or bring, in the name of Crestmark or Borrower, all steps, actions, suits or proceedings
deemed by Crestmark necessary or desirable to effect collection of or other realization upon any Collateral.

 

E.           Execute
on behalf of Borrower any UCC-l and/or UCC-3 Financing Statement(s) and/or any notices or other documents necessary or desirable
to carry out the purpose and intent of this Agreement, and to do any and all things reasonably necessary and proper to carry out
the purpose and intent of this Agreement.

 

F.           To
transfer any lockboxes belonging to Borrower to Crestmark at Crestmark’s sole discretion.

 

G.          To
initiate ACH transfers from Borrower’s depository accounts.

 

H.          To
endorse and take any action with respect to bills of lading covering any Inventory.

 

I.   
        Upon and after a Default, or at any time in the event that Borrower fails
to do so within a reasonable time, execute, file and serve, in its own name or in the name of Borrower, mechanics lien or
similar notices, or claims under any payment or performance bond for the benefit of Borrower.

 

J.           Upon
and after a Default, or at any time in the event that Borrower fails to do so within a reasonable time, pay any sums necessary
to discharge any lien or encumbrance on the Collateral, which sums shall be included as Obligations hereunder, and which sums shall
accrue interest at the Extra Rate until paid in full.

 

10.         REPRESENTATIONS.
Borrower makes the following representations and warranties to Crestmark and such representations and warranties must be true
at all times until the Obligations are paid in full. If Borrower learns that a representation and warranty once made is no longer
true, it has the duty to immediately notify Crestmark in writing:

 

A.           Borrower
is in good standing under the laws of the state of its organization and is authorized to conduct business in any state that it
conducts business. Borrower has the power and authority to enter into this Agreement, and the persons signing this Agreement, and
all persons who sign any documents with Crestmark, have the appropriate authority. Borrower’s organization identification
number, state of organization, and addresses where it conducts business is as shown on the Schedule.

 

B.           Borrower’s
entry into the Loan Documents does not violate any agreement which Borrower has or which binds Borrower.

 

C.           The
Loan Documents are fully enforceable against Borrower and the Collateral.

 

D.           There
are no litigation or criminal charges pending or threatened against Borrower or Guarantor and neither Borrower nor Guarantor are
in default of any order or judgment of any court or any governmental agency of any kind. There are no unsatisfied liens or judgments
pending against Borrower in any jurisdiction except as shown on the Schedule.

    	 	3	 

     

    

  

E.           The
financial information furnished by Borrower to Crestmark has been prepared in accordance with generally accepted accounting principles,
all financial statements are true and correct, and any projections of the business operations of Borrower that have been given
or will be given to Crestmark in the future will be based upon Borrower’s reasonable assumptions and estimates.

 

F.           Borrower
is the owner of all of the Collateral and there are no other liens or claims against the Collateral, except the Security Interest
of Crestmark or as shown on the Schedule.

 

G.           All
of the Collateral is personal property and none of the Collateral will be permanently affixed to real estate.

 

H.           Borrower
has filed and will file all federal, state, local and foreign tax returns that it is required to file and has paid and will pay
all taxes and all other governmental charges as they become due.

 

I.           Borrower is able to pay its debts as they become due and has sufficient capital to carry on its
business. Borrower’s Obligations under this Agreement and the Loan Documents, including the obligation to repay the
Loans and the grant of the Security Interest, do not render Borrower insolvent.

 

J.           Borrower
only uses the fictitious names, d/b/a’s, tradenames and tradestyles set forth on the Schedule (collectively the “Tradenames”),
and Borrower certifies that all sales and any and all business done in the name of the Tradenames are the sales and business of
Borrower. Any and all checks, remittances or other payments received in the name of any of the Tradenames are Borrower’s
sole and exclusive property, and are subject to Crestmark’s Security Interest hereunder. Any and all authority given to Crestmark
by Borrower in this Agreement or elsewhere to endorse Borrower’s name on any checks, negotiable instruments or other remittances
extends with equal and full force and effect to any checks, negotiable instruments, and other remittances received in the name
of any Tradename.

 

K.          All
Accounts assigned to Crestmark by Borrower are and will at all times be bona fide accounts arising from the sale of inventory or
providing services, and are not subject to discounts, deductions, allowances, contra items, offset or counterclaim and are free
and clear of all encumbrances of any kind whatsoever, except as disclosed to Crestmark in writing and approved by Crestmark in
writing.

 

L.           Borrower’s
assignment of any Accounts to Crestmark pursuant to this Agreement will not at any time violate any federal, state and/or local
law, rule or regulation, court or other governmental order or decree or terms of any contract relating to such Accounts.

 

M.          Borrower
possesses all necessary trademarks, trade names, copyrights, patents, patent rights and licenses to conduct its business as now
operated, without any known conflict with any trademarks, trade names, copyrights, patents and license rights of any other person
or entity.

 

N.           Borrower’s
legal name as of the date hereof as it appears in its official filing with its state of organization is as set forth in the opening
paragraph of this Agreement. Borrower has not organized another entity or Tradename using Borrower’s name or Tradename as
set forth herein in any other jurisdiction.

 

O.           As
to all of Borrower’s Inventory and Equipment:

 

i.      The
Inventory and Equipment are currently located only at the locations identified on the Schedule, or such other locations as consented
to by Crestmark in writing;

 

ii.      All
Inventory is now and at all times hereafter shall be of good and merchantable quality, free from defects, except as disclosed to
Crestmark in writing;

 

iii.     The
Inventory and Equipment are and shall remain free from all liens, claims, encumbrances, and security interests (except as held
by Crestmark, and except as identified on the Schedule).

 

iv.    The
Inventory is not now stored with a bailee, warehouseman or similar party unless such party has entered into a waiver letter in
a form satisfactory to Crestmark.

 

11.         BORROWER’S
PROMISES. Borrower makes the following promises to Crestmark and these promises are effective until the Obligations are
fully paid:

 

A.           To
pay all Obligations when due and perform all terms, conditions and obligations of the Loan Documents.

 

B.           To
permit Crestmark, or its representatives, access to the Collateral on Borrower’s premises and to Borrower’s computer
systems, books of account and financial records. Borrower will pay the cost of Field Examinations as specified in the Schedule.

 

C.           To
notify Crestmark promptly of any litigation, administrative or tax proceeding or other action threatened or instituted against
Borrower or Guarantor or its property, or of any other material matter which may adversely affect Borrower’s financial condition.

 

    	 	4	 

     

    

  

D.           To
pay when due all taxes, assessments and governmental charges, provided that Borrower has the right to contest the same as long
as it has a cash reserve with Crestmark in an amount as determined by Crestmark in its sole discretion.

 

E.           To
comply with the Financial Covenants described in the Schedule (if applicable).

 

F.           To
maintain insurance on its business activities in such amount and in such form as Crestmark may from time to time require, and with
respect to such insurance if so designated, Crestmark shall be named as “Lender Loss Payee” under the policy and receive
evidence of the insurance. All insurance which protects Crestmark shall have at least a 30-day notice to Crestmark prior to any
cancellation. With respect to the insurance, Borrower appoints Crestmark as its attorney-in-fact to negotiate any and all claims
under all insurance policies and Crestmark also has the power to negotiate any payments on the insurance policies.

 

G.           To
comply with all laws, ordinances and regulations or other requirements of any governmental authority or agency applicable to Borrower’s
business.

 

H.           To
maintain and preserve all Collateral in good repair, working order and condition, and with respect to Accounts, pursue collections
thereof.

 

I.           To
provide Crestmark with evidence of ownership of any Collateral upon the request of Crestmark.

 

J.           To
maintain a Loan Amount balance which shall not exceed the sum of Eligible Collateral times the corresponding rate in the Advance
Formula.

 

12.         NEGATIVE
COVENANTS. Borrower agrees until the Obligations are paid in full, it will not:

 

A.           Change
its state of organization or its name, or move its executive office or at any time adopt any assumed name without giving Crestmark
at least 30 days prior written notice.

 

B.           Declare
or pay any dividend or make any other distribution with regard to its equity or purchase or retire any of its equity without Crestmark’s
prior written consent, provided if it is taxed as an S Corporation or other “pass through” entity, Borrower may prior
to a Default distribute profits to its equity holders in an amount necessary to enable such holders to pay personal, state and
federal taxes directly attributable to the profits earned by Borrower for such year.

 

C.           Obtain
any loan or guaranty or assume any obligation or liability, whether as borrower, guarantor, surety, indemnitor or otherwise that
would result in or create a Default, without Crestmark’s prior written consent.

 

D.           Enter
into any transaction with its equity holders or any affiliates of Borrower except on terms at least as favorable as would be usual
and customary in similar transactions if the person with whom the transaction is entered into was not related to Borrower.

 

E.           Release,
redeem, purchase, or acquire any of its equity interests without the prior written consent of Crestmark.

 

F.           Default
in the payment of any debt to any other person.

 

G.           Suffer
or permit any judgment, decree or order not fully covered by insurance to be entered against Borrower or a Guarantor, or permit
or suffer any warrant or attachment to be filed against Borrower, any Guarantor, or against any property or asset of Borrower or
Guarantor.

 

H.           Transfer
the ownership of any interest in Borrower without the prior written consent of Crestmark which shall not be unreasonably withheld.

 

I.           Sell
any of the Collateral outside the normal course of its business without the prior written consent of Crestmark.

 

J.           Purchase
the stock or assets of any other entity without the prior written consent of Crestmark.

 

13.         FINANCIAL
REPORTS. Borrower promises that until the Obligations are fully paid and this Agreement is terminated, it will keep its
books and records in a manner satisfactory to Crestmark and Crestmark will have the right at any time to verify any of the Collateral,
documentation or books and records of Borrower in whatever manner and as often as Crestmark deems necessary. Borrower will permit
Crestmark, or its representatives, access to the Collateral and Borrower’s premises and to Borrower’s computer systems,
books of account and financial records. Borrower will furnish to Crestmark the financial reports identified on the Schedule, certified
to by the president or chief financial officer of Borrower and Borrower’s certified public accountant, if applicable. All
financial reports will be prepared in accordance with generally acceptable accounting principles and will be true and accurate.

    	 	5	 

     

    

  

14.         CRESTMARK’S
REMEDIES. Crestmark has all the remedies available at law or in equity (including those under the UCC) in the event of
a Default or if Borrower fails to pay the Obligations on demand, including but not limited to the following: to charge the Extra
Rate; to notify Account Debtors to make the payments directly to Crestmark; to settle or compromise any disputed Account, sue on
any Account and make any agreement to deal with the Accounts as if it were the owner; to offset any of Borrower’s or Guarantor’s
funds under the control of Crestmark against the Obligations; and to require Borrower to gather up the Collateral and make it available
to Crestmark for Crestmark to conduct public or private UCC foreclosure sales. Borrower grants to Crestmark a license or other
right to use, without charge, Borrower’s labels, patents, copyrights, trademarks, rights of use of any name, trade secrets,
tradenames and advertising materials, or any property of a similar nature, as it pertains to the Collateral, in completing production
of, advertising for sale and selling any Collateral, and Borrower’s rights under all licenses and franchise agreements shall
inure to Crestmark’s benefit. If Crestmark should proceed against the Collateral and sell any of the Collateral on credit,
Borrower will be credited on the Obligations only with the amount actually received by Crestmark and Borrower waives any and all
provisions as to notice or a particular method of sale of any of the Collateral. Borrower will pay all expenses in connection with
the assembly or sale of the Collateral. Crestmark does not have to incur its own expenses in realizing upon the Collateral, but
all the expenses are for the account of Borrower. Borrower recognizes that at no time is Crestmark its agent in dealing with the
Collateral, but Crestmark acts only in its own interest.

 

15.         CUMULATIVE
RIGHTS. Crestmark’s rights and remedies under this Agreement and all other agreements shall be cumulative. Crestmark
shall have all other rights and remedies not inconsistent herewith as provided under the UCC, by law, or in equity. No exercise
by Crestmark of one right or remedy shall be deemed an election, and no waiver by Crestmark of any Default on Borrower’s
part shall be deemed a continuing waiver. No delay by Crestmark shall constitute a waiver, election or acquiescence by it.

 

16.         LENDER
ACTIONS. To the extent applicable law may impose duties on Crestmark to exercise remedies in a commercially reasonable
manner, Borrower agrees that it is not commercially unreasonable for Crestmark: to fail to exercise remedies against any Collateral
or any particular Account Debtor; to proceed against Account Debtors either directly or through collection agencies; to advertise
disposition of Collateral through publications or media of general circulation; to hire professional auctioneers to dispose of
Collateral; to dispose of Collateral in wholesale or retail markets; to disclaim warranties with respect to Collateral; or to obtain
services of attorneys or other professionals. The foregoing is not an exhaustive list and nothing contained in the foregoing shall
be construed to grant any rights to Borrower or to impose any duties on Crestmark that would not have been granted or imposed by
this Agreement or by applicable law in the absence of this Section 16. Borrower agrees that under no circumstances is Crestmark
the agent or representative of Borrower.

 

17.         APPLICATION
OF PROCEEDS. Once collection efforts are commenced by Crestmark, any proceeds of sale or disposition of Collateral may
be applied by Crestmark first to expenses authorized by this Agreement, including Crestmark’s reasonable attorney’s
fees, which Borrower must pay, and the balance to payment of the Obligations in such manner as Crestmark may elect. Borrower and
Guarantor remain liable for any deficiency.

 

18.         NOTICES.
Any notice is effective by either party if sent in writing or facsimile with confirmation of receipt or by certified mail or
personal delivery or expedited mail services to the addresses shown on the Schedule.

 

19.         MISCELLANEOUS
PROVISIONS.

 

A.           This
Agreement is binding upon and is for the benefit of Borrower and Crestmark, and their respective successors and assigns. However,
under no circumstances may Borrower assign this Agreement or its rights and duties hereunder. Crestmark may assign this Agreement
and its rights under the Loan Documents and Borrower will make payments to any such assignee if so directed.

 

B.           Crestmark
has the right at any time to assign, transfer, negotiate or sell participations in this Agreement or the Obligations or the rights
of Crestmark hereunder. In connection with any assignment, Borrower consents to disclosure of any and all books, records, files,
Loan Documents and all other documents in the possession or under the control of Crestmark.

 

C.           No
delay or failure of Crestmark in exercising any right or remedy will affect such right or remedy. No delay or failure of Crestmark
to demand strict adherence to the terms of this Agreement will be deemed to waive Crestmark’s rights to demand such adherence
at any time in the future.

 

D.           The
term “including” means “including, without limitation”, and the term “includes” means “includes,
without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall.”
The definitions of terms in this Agreement shall apply equally to the singular and plural forms of the terms defined.

 

E.           This
Agreement and the other Loan Documents will be interpreted and determined under the laws of the state of Michigan without any regard
to any conflict of laws provisions.

 

F.           Borrower,
at Crestmark’s request, will make, execute and acknowledge any and all further instruments or agreements necessary to carry
out the intent of this Agreement and the other Loan Documents.

 

G.           This
Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures
were upon the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by facsimile or electronic
mail shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed
counterpart of the signature page to this Agreement by facsimile or electronic mail to any other party shall thereafter also promptly
deliver a manually executed counterpart of this Agreement to such other party, provided that the failure to deliver such
manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement.

 

    	 	6	 

     

    

  

H.           Neither
Crestmark nor its affiliates, directors, officers, agents, attorneys or employees are liable to Borrower or Guarantor or affiliates
for any action taken or omitted by it or any of them under the Loan Documents, except for such liability as may be imposed by law
for gross negligence or actual fraud, and no claim shall be made by Borrower or Guarantor or any of Borrower’s affiliates,
directors, officers, agents, or employees for any special or consequential damages or punitive damages arising out of, or related
to, the Loan Documents or the transactions between the Parties.

 

I.           This
Agreement and the other Loan Documents represent the complete Agreement between the Parties with respect to the subject matter
of this Agreement, and there are no promises, undertakings, representations or warranties by Crestmark relative to the subject
matter of this Agreement not expressly set forth in this Agreement or the other Loan Documents, and this Agreement supersedes all
prior negotiations, agreements and understandings, oral or written. This Agreement and the other Loan Documents may be amended
only in writing.

 

J.           If
any provision of this Agreement is in conflict with any law or statute or is otherwise unenforceable, then the provision will be
deemed null and void only to the extent of such provision and the provision will be deemed severable and the remainder of this
Agreement shall be in full force and effect.

 

K.          Any
payment made to Crestmark by either Borrower or Guarantor which is subsequently invalidated, declared fraudulent or preferential
or otherwise set aside under any bankruptcy, state, federal or equitable law, then to the extent of such invalidity such payment
will be deemed not to have been made and the obligation will continue in full force and effect. This provision shall survive termination
of this Agreement.

 

L.           No
Lien Termination Without Release. In recognition of among other things, Borrower’s indemnification obligations and Crestmark’s
right to have its attorney’s fees and other expenses incurred in connection with this Agreement secured by the Collateral,
notwithstanding payment in full of all Obligations by Borrower, Crestmark shall not be required to record any terminations or satisfactions
of any of its liens on the Collateral unless and until Borrower and all guarantors of its Obligations have executed and delivered
to Crestmark a general release in a form acceptable to Crestmark in its sole discretion. Borrower understands that this provision
constitutes a waiver of its rights Borrower may have under §9-513 of the UCC.

 

M.           Small
Business Jobs Act Certification. Pursuant to Section 4107(d)(2) (the “Section”) of the Small Business Jobs Act
of 2010, certification is required from any business receiving a loan using funds received by the institution under the Small Business
Lending Act. As required by the Section, the Borrower hereby certifies to Crestmark that the principals of Borrower and its affiliates
have not been convicted of, or pleaded nolo contendere to, a sex offense against a minor (as such terms are defined in section
111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911)).

 

The term “principals”
is defined as follows: if a sole proprietorship, the proprietor; if a partnership, each managing partner and each partner who is
a natural person and holds a twenty percent (20%) or more ownership interest in the partnership; and if a corporation, limited
liability company, association or a development company, each director, each of the five (5) most highly compensated executives
or officers of the entity, and each natural person who is a direct or indirect holder of twenty percent (20%) or more of the ownership
stock or stock equivalent of the entity.

 

N.           USA
Patriot Act Notification. The following notification is provided to Borrower pursuant to Section 3265 of the USA Patriot Act
of 2001, 31 U.S.C. Section 5318:

 

IMPORTANT INFORMATION
ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding
of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information
that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan
or other extension of credit. We may ask for the name, address, date of birth, and other information that will allow us to identify
all Borrowers, principals and owners. We may also ask to see your driver’s license or other identifying documents.

 

20.         INDEMNIFICATION.
Borrower hereby agrees to indemnify, defend and hold Crestmark and its executive committees, parent affiliates, subsidiaries,
agents, directors, officers, participants, employees, agents and their successors and assigns (collectively “Indemnified
Parties”) harmless against any and all liabilities of any kind, nature or description and damages whether they are direct,
indirect or consequential, including attorney’s fees and other professionals and experts incurred or suffered directly or
indirectly by Indemnified Parties or asserted against Indemnified Parties by anyone whosoever, including Borrower or Guarantor,
which arise out of the Loan Documents or the relationship and transaction between the Parties. This provision shall survive the
termination of this Agreement.

 

21.         JOINT
AND SEVERAL OBLIGATIONS. If more than one person or entity is named as Borrower in this Agreement, all Obligations, representations,
warranties, covenants and indemnities of Borrower set forth herein and in the other Loan Documents shall be the joint and several
obligations of such persons and/or entities.

    	 	7	 

     

    

  

22.         JURISDICTION.
BORROWER AND GUARANTOR AGREE THAT ANY ACTION TO ENFORCE BORROWER’S OR GUARANTOR’S OBLIGATIONS TO CRESTMARK SHALL
BE PROSECUTED EITHER IN THE CIRCUIT COURT OF OAKLAND COUNTY MICHIGAN OR THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT
OF MICHIGAN (UNLESS CRESTMARK, IN ITS SOLE DISCRETION, ELECTS SOME OTHER JURISDICTION), AND BORROWER AND GUARANTOR SUBMIT TO THE
JURISDICTION OF ANY SUCH COURT SELECTED BY CRESTMARK. BORROWER AND GUARANTOR WAIVE ANY AND ALL RIGHTS TO CONTEST THE JURISDICTION
AND VENUE OF ANY ACTION BROUGHT IN THIS MATTER AND BORROWER AND GUARANTOR MAY BRING ANY ACTION AGAINST CRESTMARK ONLY IN THE CIRCUIT
COURT FOR THE COUNTY OF OAKLAND OR THE FEDERAL COURT OR THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN.

 

23.         WAIVER.
ALL PARTIES, INCLUDING BORROWER AND GUARANTOR, EACH KNOWINGLY AND VOLUNTARILY WAIVE ANY CONSTITUTIONAL RIGHT TO A TRIAL BY
JURY WITH RESPECT TO ANY CLAIM, DISPUTE OR CONFLICT BETWEEN THE PARTIES OR UNDER THE LOAN DOCUMENTS AND AGREE THAT ANY LITIGATION
SHALL BE HEARD BY A COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY. BORROWER AND GUARANTOR ACKNOWLEDGE THAT THEY HAVE HAD
THE OPPORTUNITY TO REVIEW THE EFFECT OF THIS PROVISION WITH COUNSEL OF THEIR CHOICE.

 

24.         RELEASE.
BORROWER AND GUARANTOR RELEASE AND FOREVER DISCHARGE CRESTMARK, ITS AFFILIATES, OFFICERS, AGENTS, EMPLOYEES AND DIRECTORS FROM
ANY AND ALL CLAIMS OF ANY KIND WHATSOEVER FROM THE BEGINNING OF TIME TO DATE OF THIS AGREEMENT.

 

The Parties have executed this Agreement as of the date and year
first written above.

 

	CRESTMARK:	 	BORROWER:
	 	 	 	 	 
	CRESTMARK BANK		M G CLEANERS, LLC
			a Texas limited liability company 
	 	 	 	 	 
					
	By:	/s/ Christy Morgan		By:	/s/ Stephen Christian
		Christy Morgan, 1st Vice President, Legal			Stephen Christian, President

 

	 	GUARANTOR:
	 	 
		
		The undersigned Guarantor by signing this Agreement agrees it has been read and understands the Agreement and Guarantor agrees to all of its terms.
	 	 
		
		
        

        

        /s/ Stephen Christian

		Stephen Christian, Individually

 

    	 	8

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