Document:

Exhibit
10.7

 

SECURITY
AGREEMENT

 

This
SECURITY AGREEMENT (this “Agreement”), dated as of July 18, 2016 (the “Closing Date”) and
effective as of the Effective Date (as defined below) as by and among Snap Interactive, Inc., a Delaware corporation (the “Company”
or “Debtor”) and the Lender under that certain Subordinated Multiple Advance Term Note (the “Note”)
that is a signatory hereto, its endorsees, transferees and assigns (the “Secured Party”).

 

W
I T N E S S E T H:

 

WHEREAS,
pursuant to the Note, the Secured Party is extending loans to the Company evidenced by the Note;

 

WHEREAS,
in order to induce the Secured Party to continue to extend the loans evidenced by the Note, Debtor has agreed to execute and deliver
to the Secured Party this Agreement on the Closing Date, which Agreement shall be effective as of the Effective Date, and to grant
(as of the Effective Date) the Secured Party (as defined in Section 18 hereof), a security interest in certain property of Debtor
to secure the prompt payment, performance and discharge in full of all of the Debtor’s obligations under the Note;

 

WHEREAS,
this Agreement is being executed as of the Closing Date and this Agreement shall become effective upon the satisfaction of the
Security Agreement Conditions (such date is the “Effective Date”).

 

NOW,
THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

1.Certain
Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1. Terms used but
not otherwise defined in this Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel
paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”,
“fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”,
“investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”)
shall have the respective meanings given such terms in Article 9 of the UCC.

 

(a)“CFC”
means a Person that is a controlled foreign corporation under Section 957 of the Code.

 

(b)“Collateral”
means the collateral in which the Secured Party is granted a security interest by this Agreement, being all assets of the Company,
and which shall include the following personal property of the Debtor, whether presently owned or existing or hereafter acquired
or coming into existence, wherever situated, and all additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the sale or transfer of the
Collateral and of insurance covering the same and of any tort claims in connection therewith, and all dividends, interest, notes,
securities, equity interest or other property at any time and from time to time acquired, receivable or otherwise distributed
in respect of, or in exchange for, any or all of the Pledged Securities (as defined below):

 

(i)All
goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships,
appliances, furniture, special and general tools, fixtures, test and quality control devices and other equipment of every kind
and nature and wherever situated, together with all documents of title and documents representing the same, all additions and
accessions thereto, replacements therefor, all parts therefor, and all substitutes for any of the foregoing and all other items
used and useful in connection with Debtor’s businesses and all improvements thereto; and (B) all inventory;

 

     

     

    

 

(ii)All
contract rights and other general intangibles, including, without limitation, all partnership interests, membership interests,
stock or other securities, rights under any of the Organizational Documents, agreements related to the Pledged Securities, licenses,
distribution and other agreements, computer software (whether “off-the-shelf”, licensed from any third party or developed
by Debtor), computer software development rights, leases, franchises, customer lists, quality control procedures, grants and rights,
goodwill, Intellectual Property and income tax refunds, other than the Excluded Contracts;

 

(iii)All
accounts, together with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising,
goods, equipment, motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties
with respect to each account, including any right of stoppage in transit;

 

(iv)All
documents, letter-of-credit rights, instruments and chattel paper;

 

(v)All
commercial tort claims;

 

(vi)[Reserved];

 

(vii)All
investment property (other than any securities account);

 

(viii)All
supporting obligations;

 

(ix)All
files, records, books of account, business papers, and computer programs; and

 

(x)the
products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(ix) above.

 

Without
limiting the generality of the foregoing, the “Collateral” shall include the shares of capital stock and the
other equity interests listed on Schedule H hereto (as such Schedule shall be delivered on the Effective Date and as the
same may be modified from time to time pursuant to the terms hereof), and any other shares of capital stock and/or other equity
interests of any other direct or indirect subsidiary of Debtor obtained in the future, and, in each case, all certificates representing
such shares and/or equity interests and, in each case, all rights, options, warrants, stock, other securities and/or equity interests
that may hereafter be received, receivable or distributed in respect of, or exchanged for, any of the foregoing and all rights
arising under or in connection with the Pledged Securities, including, but not limited to, all dividends and interest.

 

Notwithstanding
any other term or provision of this Agreement or any Transaction Document, the “Collateral” shall not include
any cash, deposit account or securities account.

 

    -2-

     

    

 

Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any asset which, in the event of an assignment, becomes
void by operation of applicable law or the assignment of which is otherwise prohibited by applicable law (in each case to the
extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable
law); provided, however, that to the extent permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in
the proceeds of such asset.

 

(c)“Excluded
Contracts” means any contract or contractual obligation that prohibits, or requires the consent of any person other
than Debtor which has not been obtained as a condition to, the creation by Debtor of a lien on any right, title or interest in
such contract or contractual obligation and which is set forth on Annex B hereto.

 

(d)“Intellectual
Property” means the collective reference to all rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered
and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all
letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof,
and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part
thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade
dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith,
whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof
or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all
trade secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all
rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all
causes of action for infringement of the foregoing.

 

(e)“Majority
in Interest” means, at any time of determination, the majority in interest (based on then-outstanding principal amount
of Note at the time of such determination) of the Secured Party.

 

(f)“Necessary
Endorsement” means undated stock powers endorsed in blank or other proper instruments of assignment duly executed and
such other instruments or documents as the Secured Party may reasonably request.

 

    -3-

     

    

 

(g)“Obligations”
means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become
due, or that are now or may be hereafter contracted or acquired, or owing to, of Debtor to the Secured Party and its Affiliates,
including, without limitation, all obligations under this Agreement, the Note and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith, in each case, whether now or hereafter existing, voluntary or involuntary,
direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or
not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from
any of the Secured Party as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted,
extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall
include, without limitation: (i) principal of, and interest on the Note and the loans extended pursuant thereto; (ii) any
and all other fees, indemnities, costs, obligations and liabilities of the Debtor from time to time under or in connection with
this Agreement, the Note and any other instruments, agreements or other documents executed and/or delivered in connection herewith
or therewith; and (iii) all amounts (including but not limited to post-petition interest) in respect of the foregoing that
would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving Debtor.

 

(h)“Organizational
Documents” means with respect to Debtor, the documents by which Debtor was organized (such as a certificate of incorporation,
certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation
for preferred stock or other forms of preferred equity) and which relate to the internal governance of Debtor (such as bylaws,
a partnership agreement or an operating, limited liability or members agreement).

 

(i)“Pledged
Interests” shall have the meaning ascribed to such term in Section 4(j).

 

(j)“Pledged
Securities” shall have the meaning ascribed to such term in Section 4(i).

 

(k)“Security
Agreement Conditions” shall have the meaning ascribed to such term in the Note.

 

(l)“UCC”
means the Uniform Commercial Code of the State of New York and or any other applicable law of any state or states which has jurisdiction
with respect to all, or any portion of, the Collateral or this Agreement, from time to time. It is the intent of the parties that
defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed
in its broadest sense. Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones
shall be controlling.

 

2.Grant
of Security Interest in Collateral. As an inducement for the Secured Party to continue to extend the loans as evidenced by
the Note and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations,
Debtor hereby unconditionally and irrevocably pledges, grants and hypothecates to the Secured Party, effective as of the Effective
Date, a security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest
of whatsoever kind and nature in and to, the Collateral (a “Security Interest” and, collectively, the “Security
Interests”).

 

3.Delivery
of Certain Collateral. Contemporaneously or prior to the Effective Date, Debtor shall deliver or cause to be delivered to
the Secured Party (a) any and all certificates and other instruments representing or evidencing the Pledged Securities, and (b)
any and all certificates and other instruments or documents representing any of the other Collateral, in each case, together with
all Necessary Endorsements. The Debtor is, contemporaneously with the execution hereof, delivering to Secured Party, or have previously
delivered to Secured Party, a true and correct copy of each Organizational Document governing any of the Pledged Securities.

 

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4.Representations,
Warranties, Covenants and Agreements of the Debtor. Except as set forth under the corresponding section of the disclosure
schedules delivered to the Secured Party on the Effective Date (the “Disclosure Schedules”), which Disclosure
Schedules shall be deemed a part hereof, Debtor represents and warrants on the Effective Date, and covenants and agrees with,
the Secured Party as follows. The Disclosure Schedules delivered to Secured Party by Debtor on the Closing Date are for informational
purposes only and shall be updated by Debtor as of the Effective Date:

 

(a)Debtor
has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Agreement
and otherwise to carry out its obligations hereunder. The execution, delivery and performance by Debtor of this Agreement and
the filings contemplated therein have been duly authorized by all necessary corporate action on the part of Debtor and no further
action is required by Debtor. This Agreement has been duly executed by Debtor. This Agreement constitutes the legal, valid and
binding obligation of Debtor, enforceable against Debtor in accordance with its terms except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights
and remedies of creditors and by general principles of equity.

 

(b)The
Debtor has no place of business or offices where its books of account and records are kept (other than temporarily at the offices
of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on Schedule A
attached hereto, as such Schedule shall be delivered on the Effective Date (other than Collateral in transit between locations,
out for repair or which consists of laptops or other equipment used by an employee of Debtor in the ordinary course of business).
Except as specifically set forth on Schedule A (as such Schedule shall be delivered on the Effective Date), Debtor
is the record owner of the real property where such Collateral is located, and there exist no mortgages or other liens on any
such real property except for Permitted Liens (as defined in the Note). Except as disclosed on Schedule A (as such Schedule
shall be delivered on the Effective Date), none of such Collateral (other than Collateral in transit between locations, out for
repair or which consists of laptops or other equipment used by an employee of Debtor in the ordinary course of business) is in
the possession of any consignee, bailee, warehouseman, agent or processor.

 

(c)Except
for Permitted Liens (as defined in the Note) and except as set forth on Schedule B attached hereto (as such Schedule
shall be delivered on the Effective Date and as may be updated from time to time), the Debtor is the sole owner of the Collateral
(except for non-exclusive licenses granted by Debtor in the ordinary course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and is fully authorized to grant the Security Interests (other than those liens that
(x) prior to the Effective Date, will be in favor of Senior Lender and (y) on and after the Effective Date, will be in favor of
the Secured Party pursuant to this Agreement). Except as set forth on Schedule C attached hereto (as such Schedule
shall be delivered on the Effective Date and as may be updated from time to time), there is not on file in any governmental or
regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or
any notice of any of the foregoing (other than those that (x) prior to the Effective Date, will be filed in favor of Senior Lender
and (y) on and after the Effective Date, will be filed in favor of the Secured Party pursuant to this Agreement) covering or affecting
any of the Collateral. Except as set forth on Schedule C attached hereto (as such Schedule shall be delivered on the
Effective Date) and except pursuant to this Agreement, as long as this Agreement shall be in effect, the Debtor shall not knowingly
permit to be on file in any such office or agency any other financing statement or other document or instrument (except (i) in
connection with Permitted Liens or (ii) to the extent filed or recorded in favor of (x) prior to the Effective Date, Senior
Lender and (y) on and after the Effective Date, the Secured Party pursuant to the terms of this Agreement).

 

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(d)No
written claim has been received that any Collateral or Debtor’s use of any Collateral violates the rights of any third party.
To the knowledge of the Debtor, there has been no adverse decision to Debtor’s claim of ownership rights in or exclusive
rights to use the Collateral in any jurisdiction or to Debtor’s right to keep and maintain such Collateral in full force
and effect, and there is no proceeding involving said rights pending or, to the best knowledge of Debtor, threatened before any
court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.

 

(e)Debtor
shall at all times maintain its books of account and records relating to the Collateral at its principal place of business and
its Collateral at the locations set forth on Schedule A attached hereto (as such Schedule shall be delivered on the Effective
Date) and may not relocate such books of account and records or tangible Collateral unless it delivers to the Secured Party at
least 30 days prior to such relocation (i) written notice of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the Security Interests to create in favor of the Secured
Party, a valid, perfected and continuing perfected first priority lien in the Collateral, subject to Permitted Liens.

 

(f)Upon
the Effective Date, this Agreement creates in favor of the Secured Party a valid security interest in the Collateral, subject
only to Permitted Liens (as defined in the Note) securing the payment and performance of the Obligations. Upon making the filings
described in the immediately following paragraph, all security interests created hereunder in any Collateral which may be perfected
by filing Uniform Commercial Code financing statements shall have been duly perfected. Except for the filing of the Uniform Commercial
Code financing statements referred to in the immediately following paragraph, the recordation of the Intellectual Property Security
Agreement (as defined in Section 4(p) hereof) with respect to copyrights and copyright applications in the United States Copyright
Office referred to in paragraph (mm), and the delivery of the certificates and other instruments provided in Section 3, no action
is necessary on the Effective Date to create, perfect or protect the security interests created hereunder. Without limiting the
generality of the foregoing, except for the filing of said financing statements, and the recordation of said Intellectual Property
Security Agreement, no consent of any third parties (other than the Senior Lender) and no authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory body is required for (i) the execution, delivery
and performance of this Agreement, (ii) on and after the Effective Date, the creation or perfection of the Security Interests
created hereunder in the Collateral or (iii) on and after the Effective Date, the enforcement of the rights of the Secured
Party hereunder, except for those consents and approvals which have already been obtained.

 

(g)Upon
the Effective Date, Debtor authorizes the Secured Party to file one or more financing statements under the UCC, with respect to
the Security Interests, with the proper filing and recording agencies in any jurisdiction deemed proper by it.

 

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(h)The
execution, delivery and performance of this Agreement by the Debtor does not (i) violate any of the provisions of any Organizational
Documents of Debtor or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable law,
rule or regulation applicable to Debtor or (ii) conflict with, or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any material agreement, credit facility, debt or other instrument (evidencing
Debtor’s debt or otherwise) or other understanding to which Debtor is a party or by which property or asset of Debtor is
bound or affected. If any, all required consents (including, without limitation, from stockholders or creditors of Debtor) necessary
for Debtor to enter into and perform its obligations hereunder have been obtained.

 

(i)The
capital stock and other equity interests listed on Schedule H hereto as such Schedule shall be delivered on the Effective
Date (the “Pledged Securities”) represent all capital stock and other equity interests owned, directly or indirectly,
by the Company, provided that Pledged Securities shall not include any voting stock of any CFC in excess of sixty five percent
(65%) of such voting stock. All of the Pledged Securities are validly issued, fully paid and non-assessable, and the Company is
the legal and beneficial owner of the Pledged Securities, free and clear of any lien, security interest or other encumbrance except
for the security interests created by this Agreement and other Permitted Liens (as defined in the Note).

 

(j)The
ownership and other equity interests in partnerships and limited liability companies (if any) included in the Collateral (the
“Pledged Interests”) by their express terms do not provide that they are securities governed by Article 8 of
the UCC and are not held in a securities account or by any financial intermediary.

 

(k)Except
for Permitted Liens (as defined in the Note), Debtor shall at all times maintain the liens and Security Interests provided for
hereunder as valid and perfected first priority liens and security interests in the Collateral in favor of the Secured Party,
until this Agreement and the Security Interest hereunder shall be terminated pursuant to Section 14 hereof. Debtor agrees to defend
the same against the claims of any and all persons and entities. Debtor shall safeguard and protect all Collateral for the account
of the Secured Party. At the request of the Secured Party on and after the Effective Date, Debtor will pay the cost of filing
one or more financing statements pursuant to the UCC in form reasonably satisfactory to the Secured Party in all public offices
wherever filing is, or is deemed by the Secured Party to be, necessary or desirable to effect the rights and obligations provided
for herein. Without limiting the generality of the foregoing, Debtor shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interests hereunder (other than those fees and taxes that are being contested in good
faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP),
and Debtor shall obtain and furnish to the Secured Party from time to time, upon demand, such releases and/or subordinations of
claims and liens which may be required to maintain the priority of the Security Interests hereunder.

 

(l)On
and after the Effective Date, Debtor will not transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any
of the Collateral (except for non-exclusive licenses granted by Debtor in its ordinary course of business and sales of inventory
or obsolete or worn-out items by Debtor in its ordinary course of business) without the prior written consent of the Secured Party.

 

(m)Debtor
shall keep and preserve its equipment, inventory and other tangible Collateral (other than obsolete or worn-out items) in good
condition, repair and order and shall not operate or locate any such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage.

 

    -7-

     

    

 

(n)Debtor
shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, including Collateral hereafter
acquired, against loss or damage of the kinds and in the amounts customarily insured against by entities of established reputation
having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances by other
such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover the
full replacement cost thereof. On and after the Effective Date, Debtor shall cause each insurance policy issued in connection
herewith to provide, and the insurer issuing such policy to certify to the Secured Party, that (i) the Secured Party will
be named as lender loss payee and additional insured under each such insurance policy; (ii) if such insurance be proposed
to be cancelled or materially changed for any reason whatsoever, such insurer will promptly notify the Secured Party and such
cancellation or change shall not be effective as to the Secured Party for at least thirty (30) days after receipt by the Secured
Party of such notice, unless the effect of such change is to extend or increase coverage under the policy; and (iii) the
Secured Party will have the right (but no obligation) at its election to remedy any default in the payment of premiums within
thirty (30) days of notice from the insurer of such default. On and after the Effective Date, if no Event of Default (as defined
in the Note) exists and if the proceeds arising out of any claim or series of related claims do not exceed $100,000, loss payments
in each instance will be applied by the Debtor to the repair and/or replacement of property with respect to which the loss was
incurred to the extent reasonably feasible, and any loss payments or the balance thereof remaining, to the extent not so applied,
shall be payable to the Debtor; provided, however, that payments received by Debtor after an Event of Default occurs
and is continuing or in excess of $100,000 for any occurrence or series of related occurrences shall be paid to the Secured Party
on behalf of the Secured Party and, if received by Debtor, shall be held in trust for the Secured Party and immediately paid over
to the Secured Party unless otherwise directed in writing by the Secured Party. Copies of such policies or the related certificates,
in each case, naming the Secured Party as lender loss payee and additional insured shall be delivered to the Secured Party at
least annually and at the time any new policy of insurance is issued.

 

(o)Debtor
shall, within ten (10) days of obtaining knowledge thereof, advise the Secured Party promptly, in sufficient detail, of any material
adverse change in the Collateral, and of the occurrence of any event which would have a material adverse effect on the value of
the Collateral or on the Secured Party’s security interest therein.

 

(p)Debtor
shall promptly execute and deliver to the Secured Party such further deeds, mortgages, assignments, security agreements, financing
statements or other instruments, documents, certificates and assurances and take such further action as the Secured Party may
from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce the Secured Party’s
security interest in the Collateral including, without limitation, if applicable, the execution and delivery of a separate security
agreement with respect to Debtor’s Intellectual Property (“Intellectual Property Security Agreement”)
in which the Secured Party has been granted a security interest hereunder, substantially in a form reasonably acceptable to the
Secured Party, which Intellectual Property Security Agreement, other than as stated therein, shall be subject to all of the terms
and conditions hereof.

 

(q)Debtor
shall permit the Secured Party and its representatives and agents to inspect the Collateral during normal business hours and upon
reasonable prior notice, and to make copies of records pertaining to the Collateral as may be reasonably requested by the Secured
Party from time to time.

 

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(r)Debtor
shall take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims, causes
of action (to the extent that Debtor determines in its commercially reasonable discretion that the pursuit of such right, claim
or cause of action is beneficial to Debtor) and accounts receivable in respect of the Collateral.

 

(s)Debtor
shall promptly notify the Secured Party in sufficient detail upon becoming aware of any attachment, garnishment, execution or
other legal process levied against a material portion of the Collateral and of any other information received by Debtor that may
materially affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Party hereunder.

 

(t)All
information heretofore, herein or hereafter supplied to the Secured Party by or on behalf of Debtor with respect to the Collateral
is accurate and complete in all material respects as of the date furnished.

 

(u)The
Debtor shall at all times preserve and keep in full force and effect their respective valid existence and good standing and any
rights and franchises material to its business.

 

(v)Other
than with respect to the Merger (as defined in the Note), Debtor will not change its name, type of organization, jurisdiction
of organization, organizational identification number (if it has one), legal or corporate structure, or identity, or add any new
fictitious name or D/B/A unless it provides at least 30 days prior written notice to the Secured Party of such change.

 

(w)Except
in the ordinary course of business, Debtor may not consign any of its inventory or sell any of its inventory on bill and hold,
sale or return, sale on approval, or other conditional terms of sale without the consent of the Secured Party which shall not
be unreasonably withheld.

 

(x)Debtor
may not relocate its chief executive office to a new location without providing 30 days prior written notification thereof to
the Secured Party and so long as, at the time of such written notification, Debtor provides any financing statements or fixture
filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.

 

(y)Debtor
was organized and remains organized solely under the laws of the state set forth next to such Debtor’s name in Schedule D
(as such Schedule shall be delivered on the Effective Date), which Schedule D sets forth Debtor’s organizational
identification number or, if Debtor does not have one, states that one does not exist.

 

(z)(i)
The actual name of Debtor is the name set forth in Schedule D as such Schedule shall be delivered on the Effective
Date; (ii) Debtor has no trade names except as set forth on Schedule E as such Schedule shall be delivered on the
Effective Date; (iii) Debtor has not used any name other than that stated in the preamble hereto or as set forth on Schedule E
(as such Schedule shall be delivered on the Effective Date) for the preceding five years; and (iv) no entity has merged
into Debtor or been acquired by Debtor within the past five years except as set forth on Schedule E (as such Schedule
shall be delivered on the Effective Date).

 

(aa)At
any time and from time to time that any Collateral consists of instruments, certificated securities or other items that require
or permit possession by the secured party to perfect the security interest created hereby, the Debtor shall deliver such Collateral
to the Secured Party.

 

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(bb)Debtor,
in its capacity as issuer, hereby agrees to comply with any and all orders and instructions of Secured Party regarding the Pledged
Interests consistent with the terms of this Agreement without the further consent of Debtor as contemplated by Section 8-106 (or
any successor section) of the UCC. Further, Debtor agrees that it shall not enter into a similar agreement regarding the Pledged
Interests (or one that would confer “control” within the meaning of Article 8 of the UCC) with any other person or
entity.

 

(cc)Debtor
shall cause all tangible chattel paper constituting Collateral to be delivered to the Secured Party, or, if such delivery is not
possible, then to cause such tangible chattel paper to contain a legend noting that it is subject to the security interest created
by this Agreement. To the extent that any Collateral consists of electronic chattel paper, the Debtor shall cause the underlying
chattel paper to be “marked” within the meaning of Section 9-105 of the UCC (or successor section thereto).

 

(dd)[Reserved].

 

(ee)To
the extent that any Collateral consists of letter-of-credit rights, the Debtor shall cause the issuer of each underlying letter
of credit to consent to an assignment of the proceeds thereof to the Secured Party.

 

(ff)To
the extent that any Collateral is in the possession of any third party, the Debtor shall join with the Secured Party in notifying
such third party of the Secured Party’s security interest in such Collateral and shall use its best efforts to obtain an
acknowledgement and agreement from such third party with respect to the Collateral, in form and substance reasonably satisfactory
to the Secured Party.

 

(gg)If
Debtor shall at any time hold or acquire a commercial tort claim in an amount in excess of $20,000, Debtor shall promptly notify
the Secured Party in a writing signed by Debtor of the particulars thereof and grant to the Secured Party in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance
satisfactory to the Secured Party.

 

(hh)Debtor
shall immediately provide written notice to the Secured Party of any and all accounts which arise out of contracts with any governmental
authority and, to the extent necessary to perfect or continue the perfected status of the Security Interests in such accounts
and proceeds thereof, shall execute and deliver to the Secured Party an assignment of claims for such accounts and cooperate with
the Secured Party in taking any other steps required, in its judgment, under the Federal Assignment of Claims Act or any similar
federal, state or local statute or rule to perfect or continue the perfected status of the Security Interests in such accounts
and proceeds thereof.

 

    -10-

     

    

 

(ii)Following
the Effective Date, Debtor shall cause each new subsidiary of Debtor to become a party hereto (an “Additional Debtor”)
within three (3) Business Days of the acquisition or formation of such new subsidiary by executing and delivering an Additional
Debtor Joinder in substantially the form of Annex A attached hereto and comply with the provisions hereof applicable
to the Debtor. Concurrent therewith, the Additional Debtor shall deliver replacement schedules for, or supplements to all other
Schedules to (or referred to in) this Agreement, as applicable, which replacement schedules shall supersede, or supplements shall
modify, the Schedules then in effect. The Additional Debtor shall also deliver such opinions of counsel, authorizing resolutions,
good standing certificates, incumbency certificates, organizational documents and other information and documentation as the Secured
Party may reasonably request. Upon delivery of the foregoing to the Secured Party, the Additional Debtor shall be and become a
party to this Agreement with the same rights and obligations as the Debtor, for all purposes hereof as fully and to the same extent
as if it were an original signatory hereto and shall be deemed to have made the representations, warranties and covenants set
forth herein as of the date of execution and delivery of such Additional Debtor Joinder, and all references herein to the “Debtor”
shall be deemed to include each Additional Debtor.

 

(jj)Debtor
shall vote the Pledged Securities to comply with the covenants and agreements set forth herein and in the Note.

 

(kk)Debtor
shall register the pledge of the applicable Pledged Securities on the books of Debtor. Debtor shall notify each issuer of Pledged
Securities to register the pledge of the applicable Pledged Securities in the name of the Secured Party on the books of such issuer.
Further, except with respect to certificated securities delivered to the Secured Party, the Debtor shall deliver to Secured Party
an acknowledgement of pledge (which, where appropriate, shall comply with the requirements of the relevant UCC with respect to
perfection by registration) signed by the issuer of the applicable Pledged Securities, which acknowledgement shall confirm that:
(a) it has registered the pledge on its books and records; and (b) at any time directed by Secured Party during the
continuation of an Event of Default, such issuer will transfer the record ownership of such Pledged Securities into the name of
any designee of Secured Party, will take such steps as may be necessary to effect the transfer, and will comply with all other
instructions of Secured Party regarding such Pledged Securities without the further consent of the Debtor.

 

(ll)In
the event that, upon an occurrence of an Event of Default, Secured Party shall sell all or any of the Pledged Securities to another
party or parties (herein called the “Transferee”) or shall purchase or retain all or any of the Pledged Securities,
Debtor shall, to the extent applicable: (i) deliver to Secured Party or the Transferee, as the case may be, the articles
of incorporation, bylaws, minute books, stock certificate books, corporate seals, deeds, leases, indentures, agreements, evidences
of indebtedness, books of account, financial records and all other Organizational Documents and records of the Debtor and their
direct and indirect subsidiaries; (ii) use its best efforts to obtain resignations of the persons then serving as officers
and directors of the Debtor and their direct and indirect subsidiaries, if so requested; and (iii) use its best efforts to
obtain any approvals that are required by any governmental or regulatory body in order to permit the sale of the Pledged Securities
to the Transferee or the purchase or retention of the Pledged Securities by Secured Party and allow the Transferee or Secured
Party to continue the business of the Debtor and their direct and indirect subsidiaries.

 

(mm)Without
limiting the generality of the other obligations of the Debtor hereunder, Debtor shall promptly (i) cause to be registered
at the United States Copyright Office all of its material copyrights, (ii) provide any requested documents and information
and carry out any actions in connection with recording of the security interest contemplated hereby with respect to all Intellectual
Property at the United States Copyright Office or United States Patent and Trademark Office, and (iii) give the Secured Party
notice whenever it acquires (whether absolutely or by license) or creates any additional material Intellectual Property.

 

    -11-

     

    

 

(nn)Debtor
will from time to time promptly execute and deliver all such further instruments and documents, and take all such further action
as may be necessary or desirable, or as the Secured Party may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce the rights and remedies
hereunder and with respect to any Collateral or to otherwise carry out the purposes of this Agreement.

 

(oo)Schedule
F as such Schedule shall be delivered on the Effective Date lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by any of the Debtor as of the Effective Date. As of the Effective
Date, Schedule F (as such Schedule shall be delivered on the Effective Date) lists all material licenses in favor
of Debtor for the use of any patents, trademarks, copyrights and domain names as of the Effective Date. All material patents and
trademarks of the Debtor have been duly recorded at the United States Patent and Trademark Office and all material copyrights
of the Debtor have been duly recorded at the United States Copyright Office.

 

(pp)As
of the Effective Date, except as set forth on Schedule G as such Schedule shall be delivered on the Effective Date, none
of the account debtors or other persons or entities obligated on any of the Collateral is a governmental authority covered by
the Federal Assignment of Claims Act or any similar federal, state or local statute or rule in respect of such Collateral.

 

5.Effect
of Pledge on Certain Rights. If any of the Collateral subject to this Agreement consists of nonvoting equity or ownership
interests (regardless of class, designation, preference or rights) that may be converted into voting equity or ownership interests
upon the occurrence of certain events (including, without limitation, upon the transfer of all or any of the other stock or assets
of the issuer), it is agreed that the pledge of such equity or ownership interests pursuant to this Agreement or the enforcement
of any of Secured Party’s rights hereunder shall not be deemed to be the type of event which would trigger such conversion
rights notwithstanding any provisions in the Organizational Documents or agreements to which Debtor is subject or to which Debtor
is party.

 

6.Defaults.
The following events shall be “Events of Default”:

 

(a)The
occurrence of an Event of Default (as defined in the Note) under the Note;

 

(b)Any
representation or warranty of Debtor in this Agreement shall prove to have been incorrect in any material respect when made;

 

(c)The
failure by Debtor to observe or perform any of its obligations hereunder for five (5) Business Days; or

 

(d)If
any provision of this Agreement shall at any time for any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by Debtor, or a proceeding shall be commenced by Debtor, or by any governmental authority having jurisdiction
over Debtor, seeking to establish the invalidity or unenforceability thereof, or Debtor shall deny that Debtor has any liability
or obligation purported to be created under this Agreement.

 

7.Duty
To Hold In Trust.

 

(a)Upon
the occurrence of any Event of Default and at any time during the continuation thereof, Debtor shall, upon receipt of any revenue,
income, dividend, interest or other sums subject to the Security Interests, whether payable pursuant to the Note or otherwise,
or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same
in trust for the benefit of the Secured Party and shall forthwith endorse and transfer any such sums or instruments, or both,
to the Secured Party pro-rata in proportion to their respective then-currently outstanding principal amount of Note for application
to the satisfaction of the Obligations (and if any Note is not outstanding, pro-rata in proportion to the initial purchases of
the remaining Note).

 

    -12-

     

    

 

(b)If
Debtor shall become entitled to receive or shall receive any securities or other property (including, without limitation, shares
of Pledged Securities or instruments representing Pledged Securities acquired after the Effective Date, or any options, warrants,
rights or other similar property or certificates representing a dividend, or any distribution in connection with any recapitalization,
reclassification or increase or reduction of capital, or issued in connection with any reorganization of Debtor or any of its
direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an addition to, in substitution of, or in exchange
for, such Pledged Securities or otherwise), Debtor agrees to (i) accept the same as the agent of the Secured Party; (ii) hold
the same in trust for the benefit of the Secured Party; and (iii) to deliver any and all certificates or instruments evidencing
the same to Secured Party on or before the close of business on the third business day following the receipt thereof by Debtor,
in the exact form received together with the Necessary Endorsements, to be held by Secured Party subject to the terms of this
Agreement as Collateral.

 

8.Rights
and Remedies Upon Default.

 

(a)On
and after the Effective Date, upon the occurrence of any Event of Default and at any time during the continuation thereof, the
Secured Party shall have the right to exercise all of the remedies conferred hereunder and under the Note, and the Secured Party
shall have all the rights and remedies of a secured party under the UCC. Without limitation, the Secured Party shall have the
following rights and powers:

 

(i)The
Secured Party shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance
of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and Debtor shall
assemble the Collateral and make it available to the Secured Party at places which the Secured Party shall reasonably select,
whether at Debtor’s premises or elsewhere, and make available to the Secured Party, without rent, all of Debtor’s
respective premises and facilities for the purpose of the Secured Party taking possession of, removing or putting the Collateral
in saleable or disposable form.

 

(ii)Upon
notice to the Debtor by Secured Party, all rights of Debtor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise and all rights of Debtor to receive the dividends and interest which it would otherwise be authorized
to receive and retain, shall cease. Upon such notice, Secured Party shall have the right to receive any interest, cash dividends
or other payments on the Collateral and, at the option of Secured Party, to exercise in such Secured Party’s discretion
all voting rights pertaining thereto. Without limiting the generality of the foregoing, Secured Party shall have the right (but
not the obligation) to exercise all rights with respect to the Collateral as it were the sole and absolute owner thereof, including,
without limitation, to vote and/or to exchange, at its sole discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment concerning or involving the Collateral or Debtor or any
of its direct or indirect subsidiaries.

 

    -13-

     

    

 

(iii)The
Secured Party shall have the right to operate the business of Debtor using the Collateral and shall have the right to assign,
sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise, either
with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and
at such time or times and at such place or places, and upon such terms and conditions as the Secured Party may deem commercially
reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon
or notice to Debtor or right of redemption of Debtor, which are hereby expressly waived. Upon each such sale, lease, assignment
or other transfer of Collateral, the Secured Party may, unless prohibited by applicable law which cannot be waived, purchase all
or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of
Debtor, which are hereby waived and released.

 

(iv)The
Secured Party shall have the right (but not the obligation) to notify any account debtors and any obligors under instruments or
accounts to make payments directly to the Secured Party and to enforce the Debtor’s rights against such account debtors
and obligors.

 

(v)[Reserved.]

 

(vi)The
Secured Party may (but is not obligated to) transfer any or all Intellectual Property registered in the name of Debtor at the
United States Patent and Trademark Office and/or Copyright Office into the name of the Secured Party or any designee or any purchaser
of any Collateral.

 

(b)The
Secured Party shall comply with any applicable law in connection with a disposition of Collateral and such compliance will not
be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Secured Party may sell the
Collateral without giving any warranties and may specifically disclaim such warranties. If the Secured Party sells any of the
Collateral on credit, the Debtor will only be credited with payments actually made by the purchaser. In addition, Debtor waives
any and all rights that it may have to a judicial hearing in advance of the enforcement of any of the Secured Party’s rights
and remedies hereunder, including, without limitation, its right following an Event of Default to take immediate possession of
the Collateral and to exercise its rights and remedies with respect thereto.

 

(c)For
the purpose of enabling the Secured Party to further exercise rights and remedies under this Section 8 or elsewhere provided by
agreement or applicable law, Debtor hereby grants to the Secured Party an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to Debtor) to use, license or sublicense following an Event of Default, any Intellectual
Property now owned or hereafter acquired by Debtor, and wherever the same may be located, and including in such license access
to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof.

 

9.Applications
of Proceeds. The proceeds of any such sale, lease or other disposition of the Collateral hereunder or from payments made on
account of any insurance policy insuring any portion of the Collateral shall be applied first, to the expenses of retaking, holding,
storing, processing and preparing for sale, selling, and the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable attorneys’ fees and expenses incurred by the Secured
Party in enforcing the Secured Party’s rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations to Secured Party, and to the payment of any other amounts required by
applicable law, after which the Secured Party shall pay to the Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured Party is legally
entitled, the Debtor will be liable for the deficiency, together with interest thereon, at the rate of 18% per annum or the lesser
amount permitted by applicable law (the “Default Rate”), and the reasonable fees of any attorneys employed
by the Secured Party to collect such deficiency. To the extent permitted by applicable law, Debtor waives all claims, damages
and demands against the Secured Party arising out of the repossession, removal, retention or sale of the Collateral, unless due
solely to the gross negligence or willful misconduct of the Secured Party as determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction.

 

    -14-

     

    

 

10.Securities
Law Provision. Debtor recognizes that Secured Party may be limited in its ability to effect a sale to the public of all or
part of the Pledged Securities by reason of certain prohibitions in the Securities Act of 1933, as amended, or other federal or
state securities laws (collectively, the “Securities Laws”), and may be compelled to resort to one or more
sales to a restricted group of purchasers who may be required to agree to acquire the Pledged Securities for their own account,
for investment and not with a view to the distribution or resale thereof. Debtor agrees that sales so made may be at prices and
on terms less favorable than if the Pledged Securities were sold to the public, and that Secured Party has no obligation to delay
the sale of any Pledged Securities for the period of time necessary to register the Pledged Securities for sale to the public
under the Securities Laws. Debtor shall cooperate with Secured Party in its attempt to satisfy any requirements under the Securities
Laws (including, without limitation, registration thereunder if requested by Secured Party) applicable to the sale of the Pledged
Securities by Secured Party.

 

11.Costs
and Expenses. The Debtor shall pay all other claims and charges which in the reasonable opinion of the Secured Party is reasonably
likely to prejudice, imperil or otherwise affect the Collateral or the Security Interests therein. The Debtor will also, upon
demand, pay to the Secured Party the amount of any and all reasonable expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, which the Secured Party may incur in connection with the protection, satisfaction,
foreclosure, collection or enforcement of the Security Interest and the administration, continuance, amendment or enforcement
of this Agreement and pay to the Secured Party the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Secured Party may incur in connection with (i) the enforcement
of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of
the Collateral, or (iii) the exercise or enforcement of any of the rights of the Secured Party under the Note. Until so paid,
any fees payable hereunder shall be added to the principal amount of the Note and shall bear interest at the Default Rate.

 

12.Responsibility
for Collateral. The Debtor assume all liabilities and responsibility in connection with all Collateral, and the Obligations
shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason. Without limiting the generality of the foregoing, (a) the Secured Party does not (i) have any duty
(either before or after an Event of Default) to collect any amounts in respect of the Collateral or to preserve any rights relating
to the Collateral, or (ii) have any obligation to clean-up or otherwise prepare the Collateral for sale, and (b) Debtor shall
remain obligated and liable under each contract or agreement included in the Collateral to be observed or performed by Debtor
thereunder. The Secured Party shall not have any obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Secured Party of any payment relating to any of the Collateral, nor shall
the Secured Party be obligated in any manner to perform any of the obligations of Debtor under or pursuant to any such contract
or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Secured Party in respect of the Collateral
or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to the Secured
Party or to which the Secured Party may be entitled at any time or times.

 

    -15-

     

    

 

13.Security
Interests Absolute. All rights of the Secured Party and all obligations of the Debtor hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement, the Note or any agreement entered into in
connection with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Note or any other agreement entered into in connection with the foregoing; (c) any exchange, release
or non-perfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral
for, or any guarantee, or any other security, for all or any of the Obligations; (d) any action by the Secured Party to obtain,
adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to Debtor, or a discharge
of all or any part of the Security Interests granted hereby. Until the Obligations shall have been paid and performed in full,
the rights of the Secured Party shall continue even if the Obligations are barred for any reason, including, without limitation,
the running of the statute of limitations or bankruptcy. Debtor expressly waives presentment, protest, notice of protest, demand,
notice of nonpayment and demand for performance. In the event that at any time any transfer of any Collateral or any payment received
by the Secured Party hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference
or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due
to any party other than the Secured Party, then, in any such event, Debtor’s obligations hereunder shall survive cancellation
of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement,
but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof. Debtor waives
all right to require the Secured Party to proceed against any other person or entity or to apply any Collateral which the Secured
Party may hold at any time, or to marshal assets, or to pursue any other remedy. Debtor waives any defense arising by reason of
the application of the statute of limitations to any obligation secured hereby.

 

14.Term
of Agreement. This Agreement and the Security Interests shall terminate on the date on which all payments under the Note have
been indefeasibly paid in full and all other Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtor contained in this Agreement shall survive and remain operative and in full force and effect regardless
of the termination of this Agreement.

 

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15.Power
of Attorney; Further Assurances.

 

(a)Debtor
authorizes the Secured Party, and does hereby make, constitute and appoint the Secured Party and its officers, agents, successors
or assigns with full power of substitution, as Debtor’s true and lawful attorney-in-fact, with power, in the name of the
Secured Party or Debtor, to, after the occurrence and during the continuance of an Event of Default, (i) endorse any note,
checks, drafts, money orders or other instruments of payment (including payments payable under or in respect of any policy of
insurance) in respect of the Collateral that may come into possession of the Secured Party; (ii) to sign and endorse any
invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications
and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) to
demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; (v) to transfer any
Intellectual Property or provide licenses respecting any Intellectual Property; and (vi) generally, at the option of the
Secured Party, and at the expense of the Debtor, at any time, or from time to time, to execute and deliver any and all documents
and instruments and to do all acts and things which the Secured Party deems necessary to protect, preserve and realize upon the
Collateral and the Security Interests granted therein in order to effect the intent of this Agreement and the Note all as fully
and effectually as the Debtor might or could do, including, without limitation, the filing, in its sole discretion, of one or
more financing or continuation statements and amendments thereto, relative to any of the Collateral, which financing statements
may (but need not) describe the Collateral as “all assets” or “all personal property” or words of like
import; and Debtor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of
attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of
the Obligations shall be outstanding. The designation set forth herein shall be deemed to amend and supersede any inconsistent
provision in the Organizational Documents or other documents or agreements to which Debtor is subject or to which Debtor is a
party. Without limiting the generality of the foregoing, after the occurrence and during the continuance of an Event of Default,
each Secured Party is specifically authorized to execute and file any applications for or instruments of transfer and assignment
of any patents, trademarks, copyrights or other Intellectual Property with the United States Patent and Trademark Office and the
United States Copyright Office.

 

(b)On
a continuing basis, Debtor will take all such action as may reasonably be deemed necessary or advisable, or as reasonably requested
by the Secured Party, to perfect the Security Interests granted hereunder and otherwise to carry out the intent and purposes of
this Agreement, or for assuring and confirming to the Secured Party the grant or perfection of a perfected security interest in
all the Collateral under the UCC.

 

16.Notices.
All notices, requests, demands and other communications hereunder shall be subject to the notice provision of the Note.

 

17.Other
Security. To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the
guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Secured Party shall have the
right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without
in any way modifying or affecting any of the Secured Party’s rights and remedies hereunder.

 

18.[Reserved].

 

19.Miscellaneous.

 

(a)No
course of dealing between the Debtor and the Secured Party, nor any failure to exercise, nor any delay in exercising, on the part
of the Secured Party, any right, power or privilege hereunder or under the Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

 

(b)All
of the rights and remedies of the Secured Party with respect to the Collateral, whether established hereby or by the Note or by
any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.

 

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(c)This
Agreement, together with the exhibits and schedules hereto, contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which
the parties acknowledge have been merged into this Agreement and the exhibits and schedules hereto. No provision of this Agreement
may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Debtor
and the Secured Party (or, in the event that the Secured Party no longer holds any Note, in a written instrument signed by the
Debtor and the Majority in Interest), or, in the case of a waiver, by the party against whom enforcement of any such waived provision
is sought. Notwithstanding the foregoing, until the Senior Debt (as defined in the Note) shall have been Paid in Full (as defined
in the Note), this Agreement shall not be amended without Senior Lender’s prior written consent.

 

(d)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.

 

(e)No
waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

(f)This
Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company
may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Secured Party (other
than by merger). Any Secured Party may assign any or all of its rights under this Agreement to any Person to whom such Secured
Party assigns or transfers any Obligations, provided such transferee agrees in writing to be bound, with respect to the transferred
Obligations, by the provisions of this Agreement that apply to the “Secured Party.”

 

(g)Each
party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order
to carry out the provisions and purposes of this Agreement.

 

(h)Except
to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, all questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Except to the extent
mandatorily governed by the jurisdiction or situs where the Collateral is located, each party hereto agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and the Note (whether
brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or
Secured agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan.
Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such proceeding is improper. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby.

 

    -18-

     

    

 

(i)This
Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature
is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

 

(j)[Reserved.]

 

(k)Debtor
shall indemnify, reimburse and hold harmless the Secured Party and their respective partners, members, shareholders, officers,
directors, employees and Secured agents (and any other persons with other titles that have similar functions) (collectively, “Indemnitees”)
from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or nature,
(including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted
against such Indemnitee in any way related to or arising from or alleged to arise from this Agreement or the Collateral, except
any such losses, claims, liabilities, damages, penalties, suits, costs and expenses which result solely from the gross negligence
or willful misconduct of the Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction.
This indemnification provision is in addition to, and not in limitation of, any other indemnification provision in the Note or
any other agreement, instrument or other document executed or delivered in connection herewith or therewith.

 

(l)Nothing
in this Agreement shall be construed to subject Secured Party to liability as a partner in Debtor or any if its direct or indirect
subsidiaries that is a partnership or as a member in Debtor or any of its direct or indirect subsidiaries that is a limited liability
company, nor shall Secured Party be deemed to have assumed any obligations under any partnership agreement or limited liability
company agreement, as applicable, of Debtor or any of its direct or indirect subsidiaries or otherwise, unless and until any such
Secured Party exercises its right to be substituted for Debtor as a partner or member, as applicable, pursuant hereto.

 

(m)To
the extent that the grant of the security interest in the Collateral and the enforcement of the terms hereof require the consent,
approval or action of any partner or member, as applicable, of Debtor or any direct or indirect subsidiary of Debtor or compliance
with any provisions of any of the Organizational Documents, the Debtor hereby grants such consent and approval and waive any such
noncompliance with the terms of said documents.

 

(n)The
parties hereto recognize that the Effective Date is subject to the satisfaction of the Security Agreement Conditions.

 

[SIGNATURE
PAGES FOLLOW]

 

    -19-

     

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the day and year first above written and
this Agreement shall be effective as of the Effective Date.

 

SNAP
INTERACTIVE, INC.

 

	By:	/s/
    Alexander Harrington	 
	 	Name:	Alexander
    Harrington	 
	 	Title:	Chief
    Executive Officer and	 
	 	 	Chief
    Financial Officer	 
	 	 	 	 
	A.V.M. SOFTWARE, INC.	 
	 	 	 
	By:	/s/
    Jason Katz	 
	 	Name:	Jason
    Katz	 
	 	Title:	CEOExhibit

Execution Copy

EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”) is made and entered into effective as of April 4, 2016 (the “Effective Date”), by and between Four Oaks Bank & Trust Company (the “Bank”) and Lawrence F. DesPres (“Employee”).
The Bank desires to continue to employ Employee, and Employee desires to accept such continued employment on the terms set forth below.
In consideration of the mutual promises set forth below and other good and valuable consideration, the receipt and sufficiency of which the parties acknowledge, the Bank and Employee enter into the following agreement.  
1.    EMPLOYMENT.  The Bank hereby employs Employee and Employee accepts employment on the terms and conditions set forth in this Agreement.  
2.    NATURE OF EMPLOYMENT/DUTIES.  Employee shall serve as Chief Information Officer of the Bank with such duties, responsibilities and authorities of such office as may be assigned to him by the Bank and as are customarily associated with such office.
2.1    Employee shall perform all duties and exercise all authority in accordance with, and otherwise comply with, all Bank policies, procedures, practices and directions.
2.2    Employee shall devote substantially all working time, best efforts, knowledge and experience to perform successfully his duties and advance the Bank’s interests.  During his employment, Employee shall not engage in any other business activities of any nature whatsoever for which he receives compensation without the Bank’s prior written consent; provided, however, this provision does not prohibit him from personally owning and trading in stocks, bonds, securities, real estate, commodities or other investment properties for his own benefit and which do not create actual or potential conflicts of interest with the Bank.
3.    COMPENSATION.
3.1    Base Salary.  Employee’s annual base salary for all services rendered shall initially be One Hundred Eighty Five Thousand and 00/100 Dollars ($185,000.00) (less applicable taxes and withholdings) payable in accordance with the Bank’s customary payroll practices as they may exist from time to time (“Base Salary”).  The Employee’s Base Salary may be reviewed and increased by the Bank at its sole discretion, in accordance with the Bank’s policies, procedures and practices as they may exist from time to time.
3.2    Bonus.  Employee shall be eligible for a cash bonus of up to thirty-three percent (33%) of his Base Salary (“Annual Bonus”) (less applicable taxes and withholdings).  The Compensation Committee of the Board of Directors (the “Compensation Committee”) of Four Oaks Fincorp, Inc. (the “Company”) shall have the sole discretion to determine the amount of the Annual Bonus.  The Annual Bonus shall be provided to Employee provided that Employee is employed by the Bank on the last day of the year for which the award was earned.  The Annual Bonus shall be paid no later than two and one-half months following the end of the year for which it was earned.
3.3    Benefits.  Employee may participate in all medical, dental, disability, insurance, 401(k), vacation and other employee benefit plans and programs which may be made available from time to time to Bank employees at Employee’s level; provided, however, that Employee’s participation is subject to the applicable terms, conditions and eligibility requirements of these plans and programs as they may exist from time to time.  Nothing in this Agreement shall require the Bank to create, continue or refrain from amending, modifying, revising or revoking any of its group plans, programs or benefits that are offered to employees.  Employee acknowledges that the Bank, in its sole discretion, may amend, modify, revise or revoke any such group plans, programs or benefits and any amendments, modifications, revisions and revocations of these plans, programs and benefits shall apply to Employee.  
3.4    Business Expenses.  Employee shall be reimbursed for reasonable and necessary expenses actually incurred by him in performing services under this Agreement in accordance with and subject to the terms and conditions of the applicable Bank reimbursement policies, procedures and practices as they may exist from time to time.  All such reimbursements shall be made no later than March 15 of the year following the year in which Employee incurred the expense.
3.5    Clawback.  Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to Employee pursuant to this Agreement or any other agreement or arrangement with the Bank which is subject to recovery under any law, government regulation or stock exchange listing requirement, including, but not limited to, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended (the “Act”), and implementing rules and regulations of the Act, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Bank pursuant to any such law, government regulation or stock exchange listing requirement).  Employee shall, upon written demand by the Bank, promptly repay any such incentive-based compensation or other compensation, or take such other action as the Bank may require for compliance with this Section.
4.    TERM OF EMPLOYMENT AND TERMINATION.  The initial term of this Agreement and Employee’s employment hereunder shall be the one-year period commencing on the Effective Date and terminating on the first anniversary of the Effective Date (the “Initial Term”), provided that, on such anniversary of the Effective Date and on each annual anniversary thereafter, this Agreement and Employee’s employment hereunder shall automatically renew for successive one (1) year periods on the same terms and conditions set forth herein unless: (i) earlier terminated or amended as provided herein or (ii) either party gives the other written notice of non-renewal at least sixty (60) days prior to the end of the Initial Term or any renewal term of this Agreement, in which case, this Agreement and Employee’s employment shall terminate at the end of the Initial Term or renewal term, as applicable.  The Initial Term and all applicable renewals thereof are referred to herein as the “Term.” 
4.1    Without Cause, Upon Notice.  Either the Bank or Employee may terminate Employee’s employment and this Agreement without cause at any time upon giving the other party thirty (30) days’ written notice.  
4.2    For Cause.  The Bank may terminate Employee’s employment and this Agreement immediately without notice at any time for “Cause,” which shall mean the following: (i) Employee’s demonstrated gross negligence or willful misconduct in the execution of his duties; (ii) Employee’s refusal to comply with the Bank’s policies, procedures, practices or directions, after notice and opportunity to cure within fifteen (15) days after such notice; (iii) Employee’s commission of an act of dishonesty; (iv) Employee’s being convicted of a felony; or (v) Employee’s breach of this Agreement. 
4.3    By Death or Disability.  Employee’s employment and this Agreement shall terminate upon Employee’s Disability or death.  For purposes of this Agreement, “Disability” shall mean Employee’s physical or mental inability to perform substantially all of Employee’s duties, with or without reasonable accommodation, for a period of ninety (90) days, whether or not consecutive, during any 365-day period, as determined in the Bank’s reasonable discretion and in accordance with any applicable law.  The Bank shall give Employee written notice of termination for Disability, and the termination shall be effective as of the date specified in such notice.
4.4    Following a Change in Control by Employee for Good Reason.  Following a Change in Control, as defined herein, Employee may terminate his employment and this Agreement if he has “Good Reason” to do so.
For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following events or conditions without Employee’s consent: 
(i)a material diminution in Employee’s title, authority, duties, or responsibilities from such immediately prior to the Change in Control 
(ii)a material diminution in Employee’s Base Salary; 
(iii)a material change in the geographic location at which Employee must perform his services under this Agreement; or 
(iv)any other action or inaction that constitutes a material breach by the Bank of this Agreement.
Provided that, in order for Employee to be able to terminate for Good Reason, Employee must first provide notice to the Bank of the condition Employee contends constitutes Good Reason within thirty (30) days of the initial existence of such condition, and the Bank must have thirty (30) days in which to remedy the condition, and provided further, if the condition is not remedied, Employee must terminate his employment within thirty (30) days of the end of the Bank’s thirty (30)-day remedy period. 
For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred on:  
(i)    the date on which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company or any entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Company’s common stock, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of shares representing more than thirty-three percent (33%) of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Company, provided however, it shall not be a Change in Control if such person or group becomes such a beneficial owner by virtue of a transfer of the Company’s common stock by a natural person, single shareholder made for bona fide estate planning purposes, either during his or her lifetime or on death by will or intestacy to his or her spouse, child (natural or adopted), or any other direct lineal descendant of such single shareholder (or his or her spouse) (all of the foregoing collectively referred to as “family members”), or any custodian or trustee of any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by such single shareholder or any such family members; or
(ii)    the date on which (a) the Company merges with any other entity, (b) the Company consummates a statutory share exchange with another entity, or (c) the Company conveys, transfers or leases all or substantially all of its assets to any entity; provided, however, that in the case of subclauses (a) and (b), a Change in Control shall not be deemed to have occurred if the shareholders of the Company immediately before such transaction own, directly or indirectly immediately following such transaction, more than fifty percent (50%) of the combined voting power of the outstanding securities of the corporation resulting from such transaction in substantially the same proportions as their ownership of securities immediately before such transaction. 
 4.5    Following a Redundancy Transaction by Employee.  Following a Redundancy Transaction, as defined herein, Employee may terminate his employment and this Agreement.
For purposes of this Agreement, “Redundancy Transaction” shall mean (a) the Company (i) merges with any bank holding company or bank, (ii) consummates a statutory share exchange with any bank holding company or bank, or (iii) purchases all or substantially all of the stock or assets of any bank holding company or bank, (b) such merger, exchange or purchase is not a Change in Control as defined above, and (c) in connection with such merger, exchange or purchase, a senior executive of another party to such merger, exchange or purchase is hired by the Bank in a role or position and such hiring causes a material diminution in Employee’s title, authority, duties or responsibilities from such immediately prior to the Redundancy Transaction.
Provided that, in order for Employee to be able to terminate his employment pursuant to this Section, Employee must first provide notice to the Bank of the condition Employee contends satisfies clause (c) of the definition of “Redundancy Transaction” within thirty (30) days of the initial existence of such condition, and the Bank must have thirty (30) days in which to remedy the condition, and provided, further, if the condition is not remedied, Employee must terminate his employment within thirty  (30) days of the end of the Bank’s thirty (30)-day remedy period. 
4.6    Survival.  Section 6 (Trade Secrets, Confidential Information, Bank Property and Competitive Business Activities) of this Agreement shall survive the termination of Employee’s employment and/or the termination of this Agreement, regardless of the reasons for such termination.
5.    COMPENSATION AND BENEFITS UPON TERMINATION. Upon termination of his employment and this Agreement for any reason, Employee shall be entitled to receive payment of any earned but unpaid compensation as of the date of such termination (“Accrued Earnings”).
5.1    By the Bank for Cause or by Employee by Notice of Non-Renewal or Upon Notice.  If Employee’s employment and this Agreement are terminated (i) by the Bank for Cause or (ii) by Employee by notice of non-renewal or pursuant to Section 4.1 (Without Cause, Upon Notice), then the Bank’s obligation to compensate Employee ceases on the effective termination date except as to the Accrued Earnings.
5.2    By the Bank without Cause, by Notice of Non-Renewal or for Disability.  If the Bank terminates Employee’s employment and this Agreement without Cause, by notice of non-renewal, or for Disability, then the Bank shall, in addition to the Accrued Earnings, pay Employee a lump sum amount equal to twelve (12) months of his then current Base Salary (less applicable taxes and withholdings).  Said lump sum payment shall be made on the date immediately following the date on which the required release of claims becomes effective but not later than sixty (60) days following the termination of employment.  Said payment is subject to the conditions set forth in Section 5.5 (Required Release) below. 
5.3    Following a Change in Control by the Bank Without Cause or by Notice of Non-Renewal or by Employee for Good Reason.  If the Bank terminates Employee’s employment and this Agreement without Cause or by notice of non-renewal or if Employee terminates his employment and this Agreement for Good Reason during the period (i) commencing with the execution of a definitive agreement providing for a Change in Control and (ii) extending to eighteen (18) months following the date on which a Change in Control occurs, then, in addition to the Accrued Earnings, Employee shall be entitled to receive, subject to Section 5.5 (Required Release):  
5.3.1.    a lump sum payment equal to two (2) times his annual compensation.  For this purpose “annual compensation” means (a) Employee’s Base Salary on the date of the Change in Control or on the date of Employee’s employment termination (at whichever date Employee’s Base Salary is greater), plus (b) any Annual Bonus awarded for the most recent whole calendar year before the year in which the Change in Control occurred or for the most recent whole calendar year before the year in which employment termination occurred (whichever is greater), regardless of whether such bonus is paid in the year earned or in a later calendar year and regardless of whether the bonus is subject to elective deferral or vesting. Such lump sum payment shall be made on the date immediately following the date on which the required release of claims becomes effective but not later than sixty (60) days following termination of employment; and

5.3.2.    reimbursement for the additional costs Employee incurs for continuing coverage under the Bank’s group health insurance policy under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), for a period of eighteen months, or if sooner, until comparable coverage is available to Employee in connection with subsequent employment. Employee shall bear full responsibility for applying for COBRA coverage and nothing herein shall constitute a guarantee of COBRA continuation coverage or benefits or a guarantee of eligibility for health insurance coverage. All reimbursements required by this Section 5.3.2 shall be paid as soon as practicable following Employee's submission of proof of timely premium payments to the Bank; provided, however, that all such reimbursements shall be made on or before the last day of the taxable year following the taxable year in which the expenses were incurred. Under no circumstances will Employee be entitled to a cash payment or other benefit in lieu of reimbursement for the actual costs of premiums for health coverage hereunder. The amount of expenses eligible for reimbursement during any calendar year shall not be affected by the amount of expenses eligible for reimbursement in any other calendar year and Employee's right to reimbursement shall not be subject to liquidation or exchange for any other benefit.  Employee shall provide the Bank with notice of subsequent employment and comparable coverage within thirty (30) days of commencement of such comparable coverage.

5.4    Following a Redundancy Transaction. If, within twelve (12) months following the date on which a Redundancy Transaction occurs, the Bank terminates Employee’s employment and this Agreement without Cause or by notice of non-renewal or Employee terminates his employment and this Agreement in accordance with Section 4.5 (Redundancy Transaction), then, in addition to the Accrued Earnings, Employee shall be entitled to receive, subject to Section 5.5 (Required Release) the pay and benefits described in Sections 5.3.1 and 5.3.2. above.

5.5    Required Release.  The Bank’s obligation to provide any payment in addition to Accrued Earnings or reimbursement under Sections 5.2, 5.3 or 5.4 is conditioned upon Employee’s execution of an enforceable release of all claims and his compliance with Section 6 of this Agreement.  If Employee chooses not to execute such a release or fails to comply with that Section, then the Bank’s obligation to compensate him ceases on the effective termination date except as to amounts due at that time.  The release of claims shall be provided to Employee within seven (7) days of his separation from service, and Employee must execute it within the time period specified in the release (which shall not be longer than forty-five (45) days from the date of receipt).  Such release shall not be effective until any applicable revocation period has expired.  
5.6    Benefits in lieu of Other Severance.  Employee is not entitled to receive any compensation or benefits upon his termination except as: (i) set forth in this Agreement; (ii) otherwise required by law; or (iii) otherwise required by any employee benefit plan in which he participates with the following exception:  the benefits afforded Employee under this Agreement are in lieu of any severance benefits to which he otherwise might be entitled pursuant to a severance plan, policy and practice.  Nothing in this Agreement, however, is intended to waive or supplant any death, disability, retirement, 401(k) pension benefits, or group health continuation rights, if any, to which he may be entitled under employee benefit plans in which he participates. 
5.7    Internal Revenue Code Section 280G. Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if all or any portion of the payments or benefits payable to Employee under this Agreement or otherwise (“Covered Payments”) constitute “excess parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and would, but for this Section 5.7, be subject to the excise tax imposed by Code Section 4999 (the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise  Tax.  Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax.  For this purpose, “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.  Any reduction in the Covered Payments shall be made in a manner that maximizes Employee’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. If reduction of the Covered Payments is not sufficient to avoid application of Code Sections 280G and 4999, Employee acknowledges and agrees that benefits under this Agreement may be eliminated altogether. The amount of the benefit reduction under this Section 5.7 shall be determined by the Bank, whose determination shall be conclusive and binding on the Bank and Employee.
6.    TRADE SECRETS, CONFIDENTIAL INFORMATION, BANK PROPERTY AND COMPETITIVE BUSINESS ACTIVITIES.  Employee acknowledges that:  (i) by virtue of his senior management and key leadership position with the Bank, Employee has had and will continue to have access to Trade Secrets and Confidential Information, as defined below; (ii) the Bank is engaged in the business of providing financial services and products in retail, commercial, and corporate banking (the “Business”); and (iii) the provisions set forth in this Trade Secrets, Confidential Information, Bank Property and Competitive Business Activities Section are reasonably necessary to protect the Bank’s legitimate business interests, are reasonable as to time, territory and scope of activities which are restricted, do not interfere with public policy or public interest and are described with sufficient accuracy and definiteness to enable him to understand the scope of the restrictions imposed upon him.  
6.1    Trade Secrets and Confidential Information.  Employee acknowledges that: (i) the Bank will disclose to him certain Trade Secrets and Confidential Information; (ii) Trade Secrets and Confidential Information are the sole and exclusive property of the Bank (or a third party providing such information to the Bank) and the Bank or such third party owns all worldwide rights therein under patent, copyright, trade secret, confidential information, or other property right; and (iii) the disclosure of Trade Secrets and Confidential Information to Employee does not confer upon him any license, interest or rights of any kind in or to the Trade Secrets or Confidential Information.
6.1.1    Employee may use the Trade Secrets and Confidential Information only in accordance with applicable Company policies and procedures and solely for the Bank’s benefit while he is employed or otherwise retained by the Bank.  Except as authorized in the performance of services for the Bank, Employee will hold in confidence and not directly or indirectly, in any form, by any means, or for any purpose, disclose, reproduce, distribute, transmit, or transfer Trade Secrets or Confidential Information or any portion thereof.  Upon the Bank’s request, Employee shall return Trade Secrets and Confidential Information and all related materials.
6.1.2    If Employee is required to disclose Trade Secrets or Confidential Information pursuant to a court order or other government process or such disclosure is necessary to comply with applicable law or defend against claims, he shall: (i) notify the Bank promptly before any such disclosure is made; (ii) at the Bank’s request and expense take all reasonably necessary steps to defend against such disclosure, including defending against the enforcement of the court order, other government process or claims; and (iii) permit the Bank to participate with counsel of its choice in any proceeding relating to any such court order, other government process or claims.
6.1.3    Employee’s obligations with regard to Trade Secrets shall remain in effect for as long as such information shall remain a trade secret under applicable law. 
6.1.4    Employee’s obligations with regard to Confidential Information shall remain in effect while he is employed or otherwise retained by the Bank and for so long as the information retains its status as Confidential Information.
6.1.5    As used in this Agreement, “Trade Secrets” means information of the Bank, suppliers, customers, or prospective or former customers, including, but not limited to, data, formulas, patterns, compilations, programs, devices, methods, techniques, processes, financial data, financial plans, product plans, or lists of current, potential, or former customers or suppliers, which: (i) derives independent actual or potential commercial value, from not being generally known to or readily ascertainable through independent development by persons or entities who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
6.1.6    As used in this Agreement, “Confidential Information” means information other than Trade Secrets, that is of value to its owner and is treated as confidential, including, but not limited to, future business plans, marketing campaigns, and information regarding employees, provided, however, Confidential Information shall not include information which is in the public domain or becomes public knowledge through no fault of Employee.
6.2    Bank Property.  Upon the termination of his employment or upon Bank’s earlier request, Employee shall:  (i) deliver to the Bank all records, memoranda, data, documents and other property of any description which refer or relate in any way to Trade Secrets or Confidential Information, including all copies thereof, which are in his possession, custody or control; (ii) deliver to the Bank all Bank property (including, but not limited to, keys, credit cards, customer files, contracts, proposals, work in process, manuals, forms, computer-stored work in process and other computer data, research materials, other items of business information concerning any Bank customer (current, former, or prospective), or Bank business or business operations, including all copies thereof) which is in his possession, custody or control; (iii) bring all such records, files and other materials up to date before returning them; and (iv) fully cooperate with the Bank in winding up his work and transferring that work to other individuals designated by the Bank.
6.3    Competitive Business Activities.   Employee agrees that during the Term of this Agreement and for a period of time ending on the date occurring one (1) year after the later of the date his employment terminates and/or this Agreement terminates (irrespective of the circumstances of such termination, provided however, that if the termination is by the Bank without Cause or by notice of non-renewal and is not within the period commencing with the execution of a definitive agreement providing for a Change in Control and extending to eighteen months following the date on which a Change in Control occurs, then Section 6.3 (i)(a) and (ii) shall not apply), Employee will not engage in the following activities without the written consent of the Bank:
(i)    on Employee’s own or another’s behalf, whether as an officer, director, stockholder, partner, associate, owner, employee, consultant or otherwise:
(a)    compete with the Bank in the Bank’s Business;
(b)    solicit or do business which is the same, similar to or otherwise in competition with the Bank’s Business, from or with persons or entities: (1) who are customers of the Bank; (2) who Employee or someone for whom he was responsible solicited, negotiated, contracted, serviced or had contact with on the Bank’s behalf; or (3) who were customers of the Bank at any time during the last year of Employee’s employment with the Bank; or
(c)    offer employment to or otherwise solicit for employment any employee or other person who had been employed by the Bank during the last year of Employee’s employment with the Bank; 
(ii)    be employed or retained in (i) an executive management capacity, (ii) other management capacity providing the same or similar services which Employee provided to the Bank, or (iii) any capacity connected with competitive business activities, by any person or entity that engages in the same, similar or otherwise competitive business as the Bank’s Business; or
(iii)    directly or indirectly take any action, which is materially detrimental, or otherwise intended to be adverse to the Bank’s goodwill, name, business relations, prospects and operations.
6.3.1    The restrictions set forth in clauses (i)(a) and (ii) of this Section 6.3 shall apply to the following geographical areas: (i) within a 60-mile radius of the location of the Bank’s headquarters during Employee’s employment with the Bank; (ii) any city, metropolitan area, county, or state in which Employee’s substantial services were provided, or for which Employee had substantial responsibility, or in which Employee worked on Bank projects, while employed by the Bank; and (iii) any city, metropolitan area, county, or state in which the Bank is located or does or, during Employee’s employment with the Bank, did business.
6.3.2    Notwithstanding the foregoing, Employee’s ownership, directly or indirectly, of not more than five percent of the issued and outstanding stock of a corporation the shares of which are regularly traded on a national securities exchange or in the over-the-counter market shall not violate this Section 6.3. 
6.4    Remedies.  Employee acknowledges that his failure to abide by the Trade Secrets and Confidential Information, Bank Property or Competitive Business Activities provisions of this Agreement would cause irreparable harm to the Bank for which legal remedies would be inadequate.  Therefore, in addition to any legal or other relief to which the Bank may be entitled by virtue of Employee’s failure to abide by these provisions, the Bank may seek legal and equitable relief, including, but not limited to, preliminary and permanent injunctive relief, for Employee’s actual or threatened failure to abide by these provisions without the necessity of posting any bond, and Employee will indemnify the Bank for all expenses including attorneys’ fees in seeking to enforce these provisions. 
6.5    Tolling.  The period during which Employee must refrain from the activities set forth in Sections 6.1 and 6.3 shall be tolled during any period in which he fails to abide by these provisions.
6.6    Other Agreements.  Nothing in this Agreement shall terminate, revoke or diminish Employee’s obligations or the Bank’s rights and remedies under law or any agreements relating to trade secrets, confidential information, non-competition and intellectual property which Employee has executed in the past, or may execute in the future or contemporaneously with this Agreement.
7.    EXECUTIVE REPRESENTATION.  Employee represents and warrants that his employment and obligations under this Agreement will not (i) breach any duty or obligation he owes to another or (ii) violate any law, recognized ethics standard or recognized business custom.
8.    WAIVER OF BREACH.  The Bank’s or Employee’s waiver of any breach of a provision of this Agreement shall not waive any subsequent breach by the other party.
9.    ENTIRE AGREEMENT.  Except as expressly provided in this Agreement, this Agreement: (i) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (ii) constitutes the sole agreement between the parties with respect to this subject matter.  Each party acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement; and (ii) no agreement, statement or promise not contained in this Agreement shall be valid.  No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties.
10.    SEVERABILITY.  If a court of competent jurisdiction holds that any provision or sub-part thereof contained in this Agreement is invalid, illegal or unenforceable, that invalidity, illegality or unenforceability shall not affect any other provision in this Agreement.  Additionally, if any of the provisions, clauses or phrases in Section 6, Trade Secrets, Confidential Information, Company Property and Competitive Business Activities, are held unenforceable by a court of competent jurisdiction, then the parties desire that such provision, clause, or phrase be “blue-penciled” or rewritten by the court to the extent necessary to render it enforceable.
11.    PARTIES BOUND.  The terms, provisions, covenants and agreements contained in this Agreement shall apply to, be binding upon and inure to the benefit of the Bank’s successors and assigns.  Employee may not assign this Agreement.
12.    REMEDIES.  Employee acknowledges that his breach of this Agreement would cause the Bank irreparable harm for which damages would be difficult, if not impossible, to ascertain and legal remedies would be inadequate.  Therefore, in addition to any legal or other relief to which the Bank may be entitled by virtue of Employee’s breach or threatened breach of this Agreement, the Bank may seek equitable relief, including but not limited to preliminary and injunctive relief, and such other available remedies.    
13.    GOVERNING LAW.  This Agreement and the employment relationship created by it shall be governed by North Carolina law without giving effect to North Carolina choice of law provisions.  The parties hereby consent to exclusive jurisdiction in North Carolina for the purpose of any litigation relating to this Agreement and agree that any litigation by or involving them relating to this Agreement shall be conducted in the courts of Wake County, North Carolina or the federal courts of the United States for the Eastern District of North Carolina.  
14.    SECTION 409A OF THE INTERNAL REVENUE CODE.  
14.1    Parties’ Intent. The parties intend that the provisions of this Agreement comply with Section 409A of the Code and the regulations thereunder (collectively, “Section 409A”) and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.  If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause Employee to incur any additional tax or interest under Section 409A, the Bank shall, upon the specific request of Employee, use its reasonable business efforts to in good faith reform such provision to comply with Code Section 409A; provided, that to the maximum extent practicable, the original intent and economic benefit to Employee and the Bank of the applicable provision shall be maintained, and the Bank shall have no obligation to make any changes that could create any additional economic cost or loss of benefit to the Bank.  The Bank shall timely use its reasonable business efforts to amend any plan or program in which Employee participates to bring it in compliance with Section 409A. Notwithstanding the foregoing, the Bank shall have no liability with regard to any failure to comply with Section 409A so long as it has acted in good faith with regard to compliance therewith.
14.2    Separation from Service.  A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination also constitutes a “Separation from Service” within the meaning of Section 409A, and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment,” “separation from service” or like terms shall mean “Separation from Service.” 
14.3    Separate Payments.  Any installment payment required under this Agreement shall be considered a separate payment for purposes of Section 409A.
14.4    Delayed Distribution to Key Employees.  If the Bank determines in accordance with Sections 409A and 416(i) of the Code and the regulations promulgated thereunder, in the Bank’s sole discretion, that Employee is a Key Employee of the Bank on the date his employment with the Bank terminates and that a delay in benefits provided under this Agreement is necessary to comply with Code Section 409A(A)(2)(B)(i), then any severance payments and any continuation of benefits or reimbursement of benefit costs provided by this Agreement, and not otherwise exempt from Section 409A, shall be delayed for a period of six (6) months following the date of termination of Employee’s employment (the “409A Delay Period”).  In such event, any severance payments and the cost of any continuation of benefits provided under this Agreement that would otherwise be due and payable to Employee during the 409A Delay Period shall be paid to Employee in a lump sum cash amount in the month following the end of the 409A Delay Period.  For purposes of this Agreement, “Key Employee” shall mean an employee who, on an Identification Date (“Identification Date” shall mean each December 31) is a key employee as defined in Section 416(i) of the Code without regard to paragraph (5) thereof.  If Employee is identified as a Key Employee on an Identification Date, then Employee shall be considered a Key Employee for purposes of this Agreement during the period beginning on the first April 1 following the Identification Date and ending on the following March 31.
15.    Counterparts.  This Agreement may be executed in counterparts, each of which shall be an original, with the same effect as if the signatures affixed thereto were upon the same instrument.
[Signature Page Follows]

IN WITNESS WHEREOF, the parties have entered into this Agreement on the Effective Date.

EMPLOYEE

                                            
Lawrence F. DesPres

FOUR OAKS BANK & TRUST COMPANY

By:                         
Name:     David H. Rupp    
Title:     Chief Executive Officer

# AR Employment Agreement - Despres

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