ESCROW
AGREEMENT
ESCROW
AGREEMENT, made as of the 23rd
day of
October, 2008, by and between Mandalay Media, Inc., a Delaware corporation
(the
“Company”),
the
investors listed on the Schedule of Investors attached hereto as Exhibit
A
(each
individually, an “Investor”
and
collectively, “Investors”)
and
American Stock Transfer and Trust Company, LLC, as Escrow Agent (the
“Escrow
Agent”).
WITNESSETH:
WHEREAS,
the Company is offering in a private placement (the “Offering”)
a
minimum of up to an aggregate of 1,685,393 shares (the “Minimum Shares”)
of its
common stock, $0.0001 par value per share (“Common
Stock”)
and a
maximum of up to an aggregate of 3,370,786 shares of Common Stock (the
“Maximum
Shares”
and
collectively with the Minimum Shares, the “Shares”),
at a
purchase price of $2.67 per share (the “Purchase
Price”)
and
warrants to purchase a maximum of up to an aggregate of 1,685,393 shares of
Common Stock (the “Warrants”)
(the
Shares and the Warrants collectively, the “Securities”),
pursuant to a Securities Purchase Agreement entered into by and among the
Company and certain investors, as may be amended, modified or otherwise
supplemented from time to time (the “Purchase
Agreement”);
WHEREAS,
the Company desires that all funds received in payment for the Securities from
each Investor, as applicable (the “Aggregate
Subscription Payments”)
will
be placed into a segregated account with the Escrow Agent (the “Escrow
Account”)
until
such time as the release or return of such Aggregate Subscription Payments
are
required pursuant to Section 4 hereof;
WHEREAS,
the Escrow Agent has consented to act as escrow agent in connection with the
Offering, subject to the terms and conditions hereinafter set
forth;
NOW,
THEREFORE, in consideration of the premises and mutual representations and
covenants hereinafter set forth, the parties hereto agree as
follows:
1. The
Company hereby appoints the Escrow Agent to serve as escrow agent in connection
with the Offering in accordance with the terms and conditions herein set forth,
and the Escrow Agent hereby accepts such appointment.
2. Funds
received from time to time from Investors in payment for the Securities for
which they have subscribed pursuant to the Purchase Agreement (each such
payment, a “Subscription
Payment”)
shall
be deposited with the Escrow Agent as follows:
(a) The
Company shall direct Investors to wire transfer each respective Subscription
Payment, in immediately available funds, to:
JP
Morgan
Chase Bank
55
Water
Street
New
York,
NY
ABA#
021
000 021
Account
#
323-062539
Attention:
Henry Reinhold
The
Escrow Agent shall advise the Company in writing as to the name of each Investor
from whom a Subscription Payment by wire transfer has been received, and shall
notify the Company orally (confirming such notice in writing) when the Aggregate
Subscription Payments so received equals or exceeds $4,400,000.
3. The
Escrow Account shall not be an interest-bearing account.
4. The
Aggregate Subscription Payments to be held in the Escrow Account shall be
subject to, and distributed to the Company in accordance with, the following
provisions:
Following
the receipt by the Escrow Agent of an amount of cash equal to or exceeding
$4,400,000, the Escrow Agent shall deliver the Aggregate Subscription Payments
to the Company by wire transfer to the Company’s designated account, as detailed
below, upon the earliest of (a) delivery of written instructions from any of
the
Investors to the Escrow Agent directing the Escrow Agent to deliver the
Aggregate Subscription Payments to the Company, (b) delivery of written notice
from the Company to the Escrow Agent, advising that the Company had received
lock-up agreements from its current stockholders in a number that is
satisfactory to the Investors and directing the Escrow Agent to deliver the
Aggregate Subscription Payments to the Company, and (c) 14 days after the
Initial Closing Date, as defined below; provided,
however,
if an
amount of cash equal to or exceeding $4,400,000 has not
been
received by the Escrow Agent and deposited into the Escrow Account within 24
hours following the execution of this Agreement or if the Escrow Agent has
refunded Subscription Payments to any of the Investors, then the Escrow Agent
will promptly return to each of the Investors its respective Subscription
Payment. “Initial
Closing Date”
shall
mean the date of the initial closing of the transaction contemplated by the
Purchase Agreement.
Company’s
account:
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Bank:
|
1st
Century Bank
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| |
1875
Century Park East, Suite 1400
|
| |
Los
Angeles, CA 90067
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| |
|
|
ABA
Number:
|
122-243-761
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| |
|
|
Account
Number:
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2100012273
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| |
|
|
Account
Name:
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Mandalay
Media, Inc.
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5. The
Company shall promptly notify the Escrow Agent of any termination of the
Offering.
6. To
induce
the Escrow Agent to act hereunder, the Company agrees that:
(a) Distribution
of the Escrow Account pursuant to Section 4 of this Agreement by the Escrow
Agent shall operate to divest all right, title, interest, claim, and demand,
either at law or in equity, of any party to this Agreement (other than the
distributee) in and to the Escrow Account and shall be a perpetual bar both
at
law and in equity as against the Escrow Agent and against any person claiming
or
attempting to claim such distributed Escrow Account from, through, or under
the
Escrow Agent.
(b) The
Escrow Agent shall not be under any duty to give the monies held by it hereunder
any greater degree of care than it gives its own similar property and shall
not
be required to invest any funds held hereunder except as directed in this Escrow
Agreement. Uninvested funds held hereunder shall not earn or accrue
interest.
(c) This
Escrow Agreement expressly sets forth all the duties of the Escrow Agent with
respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall not be bound by the provisions of any agreement except this
Escrow Agreement.
(d) The
Escrow Agent shall not be liable, except for its own gross negligence or willful
misconduct and, except with respect to claims based upon such gross negligence
or willful misconduct that are successfully asserted against the Escrow Agent,
the Company shall indemnify and hold harmless the Escrow Agent (and any
successor Escrow Agent) from and against any and all losses, deficiencies,
liabilities, claims, suits, actions, damages, settlements and expenses,
including reasonable attorneys fees and disbursements, arising out of and in
connection with this Escrow Agreement. Without limiting the foregoing, the
Escrow Agent shall in no event be liable in connection with its investment
or
reinvestment of any cash held by it, if any, hereunder in good faith, in
accordance with the terms hereof, including, without limitation, any liability
for any delays (not resulting from gross negligence or willful misconduct)
in
any such investment or reinvestment of any Subscription Payment, or any loss
of
interest incident to any such delays.
(e) The
Escrow Agent shall be entitled to rely upon any order, judgment, certification,
demand, notice, instrument or other writing delivered to it hereunder without
being required to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity or the service thereof. The Escrow
Agent may act in reliance upon any instrument or signature believed by it to
be
genuine and may assume that any person purporting to give receipt or advice
or
make any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
(f) The
Escrow Agent may act pursuant to the advice of counsel with respect to any
matter relating to this Escrow Agreement and shall not be liable for any action
taken or omitted in accordance with such advice.
(g) The
Escrow Agent does not have any interest in the amounts deposited hereunder
but
is serving as escrow holder only and having only possession thereof. The Company
shall pay or reimburse the Escrow Agent upon request for any transfer taxes
or
other taxes relating to the escrowed property incurred in connection herewith
and shall indemnify and hold harmless the Escrow Agent from any amounts that
it
is obligated to pay in the way of such taxes. Any payments of income from this
Escrow Account shall be subject to withholding regulations then in force with
respect to United States taxes. The parties hereto will provide the escrow
agent
with appropriate W-9 forms for tax I.D., number certifications, or W-8 forms
for
non-resident alien certifications. It is understood that the Escrow Agent shall
be responsible for income reporting only with respect to income, if any, earned
on investment of funds deposited in the Escrow Account and is not responsible
for any other reporting. This Section 6(g) and Section 6(d) shall survive
notwithstanding any termination of this Escrow Agreement or the resignation
of
the Escrow Agent.
(h) The
Escrow Agent shall have no duties or responsibilities except those expressly
set
forth herein. The Escrow Agent shall not be bound by any notice of a claim,
or
demand with respect thereto, or any waiver, modification, amendment,
termination, cancellation, or revision of this Agreement, unless in writing
and
signed by the other parties hereto and received by the Escrow Agent, and, if
the
Escrow Agent’s duties as escrow agent hereunder are affected, unless the Escrow
Agent shall have given its prior written consent thereto. The Escrow Agent
shall
not be bound by any assignment by the Company of its rights hereunder unless
the
Escrow Agent shall have received written notice thereof from the assignor.
The
Escrow Agent is authorized to comply with and obey laws, orders, judgments,
decrees, and regulations of any governmental authority, court, tribunal, or
arbitrator. If the Escrow Agent complies with any such law, order, judgment,
decree, or regulation, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person even if such law, order, judgment, decree,
or regulation is subsequently reversed, modified, annulled, set aside, vacated,
found to have been entered without jurisdiction, or found to be in violation
of
or beyond the scope of a constitution or a law.
(i) If
the
Escrow Agent (i) shall be uncertain as to the Escrow Agent’s duties or rights
hereunder, (ii) shall receive any notice, advice, direction, or other document
from any other party with respect to the Escrow Account which, in the Escrow
Agent’s opinion, is in conflict with any of the provisions of this Agreement, or
with any notice, advice, direction or other document it has received from
another party, or (iii) should be advised that a dispute has arisen with respect
to the payment, ownership, or right of possession of the Escrow Account or
any
part thereof (or as to the delivery, non-delivery, or content of any notice,
advice, direction, or other document), the Escrow Agent shall be entitled,
without liability to anyone, to refrain from taking any action other than to
use
the Escrow Agent’s best efforts to keep safely the Escrow Account until the
Escrow Agent shall be directed otherwise in (x) a writing executed by each
of
the Company and the Investors or (y) by an order, decree, or judgment of a
court
of competent jurisdiction which has been finally affirmed on appeal or which
by
lapse of time or otherwise is no longer subject to appeal, but the Escrow Agent
shall be under no duty to institute or to defend any proceeding, although the
Escrow Agent may, in the Escrow Agent’s discretion and at the expense of the
Company as provided in Section 6(o), institute or defend such
proceedings.
(j) The
Escrow Agent makes no representation as to the validity, value, genuineness
or
the collectability of any security or other document or instrument held by
or
delivered to it.
(k) The
Company authorizes the Escrow Agent, if threatened with litigation or sued,
to
interplead all interested parties in any court of competent jurisdiction and
to
deposit the Escrow Account with the clerk of that court.
(l) The
Escrow Agent shall not be called upon to advise any party as to the wisdom
in
selling or retaining or taking or refraining from any action with respect to
any
securities or other property deposited hereunder.
(m) The
Escrow Agent (and any successor Escrow Agent) may at any time resign as such
by
delivering the Aggregate Subscription Payments received by the Escrow Agent
and
all interest and other income earned thereon to any successor Escrow Agent
designated by the Escrow Agent, in writing, or to any court of competent
jurisdiction, whereupon the Escrow Agent shall be discharged of and from any
and
all further obligations arising in connection with this Escrow Agreement. The
resignation of the Escrow Agent will take effect on the earlier of (i) the
appointment of a successor (including a court of competent jurisdiction), or
(ii) the day which is ten (10) days after the date of delivery of its written
notice of resignation to the Company. If at that time the Escrow Agent has
not
designated a successor Escrow Agent, the Escrow Agent’s sole responsibility
after that time shall be to safekeep the Subscription Payments received by
the
Escrow Agent and all interest and other income earned thereon until receipt
of a
designation of successor Escrow Agent or a final order of a court of competent
jurisdiction.
(n) The
Escrow Agent shall have no responsibility for the contents of any writing of
the
arbitrators or any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents
thereof.
(o) The
Company shall pay Escrow Agent $2,500 for Escrow Agent’s services
hereunder.
(p) The
Company hereby irrevocably submits to the jurisdiction of any New York State
or
federal court sitting in New York City in any action or proceeding arising
out
of or relating to this Escrow Agreement, and hereby irrevocably agrees that
all
claims in respect of such action or proceeding shall be heard and determined
in
such a New York State or federal court, without regard to its rules respecting
conflicts of law. The Company hereby consents to and grants to any such court
jurisdiction over the Company and over the subject matter of any such dispute
and agrees that delivery or mailing of any process or other papers in the manner
provided herein, or in such manner as may be permitted by law, shall be valid
and sufficient service thereof.
(q) No
printed or other matter in any language (including, without limitation,
prospectuses, notices, reports and promotional material) which mentions the
Escrow Agent’s name or the rights, powers, or duties of the Escrow Agent shall
be issued by the Company or on the Company’s behalf unless the Escrow Agent
shall first have given its specific written consent thereto.
(r) The
Company authorizes the Escrow Agent, for any securities held hereunder, if
any,
to use the services of any United States central securities depository it deems
appropriate, including, but not limited to, the Depositary Trust Company and
the
Federal Reserve Book Entry System.
(s) The
Escrow Agent’s responsibilities and liabilities hereunder, except as a result of
the Escrow Agent’s own bad faith or gross negligence, will terminate upon the
delivery by the Escrow Agent of the Escrow Account under any provision of this
Agreement.
7. This
Escrow Agreement shall be binding upon and inure solely to the benefit of the
parties hereto and their respective successors and assigns, and shall not be
enforceable by or inure to the benefit of any third party except as provided
in
Section 6(m) with respect to a resignation by the Escrow Agent. No party may
assign any of its rights or obligations under this Escrow Agreement without
the
written consent of the other party.
8. This
Agreement may only be modified by a writing signed by the parties hereto, and
no
waiver hereunder shall be effective unless in writing and signed by the party
to
be charged.
9. This
Escrow Agreement shall be construed in accordance with the laws of the State
of
New York, without regard to its rules respecting conflicts of laws. It may
be
executed in several counterparts, each of which shall be deemed an original,
and
all of which shall constitute but one instrument.
10. Any
notice, consent or request to be given in connection with any of the terms
or
provisions of this Escrow Agreement shall be in writing and shall be sent by
certified mail, return receipt requested, or delivered against written
receipt:
|
|
(a) |
if
to the Escrow Agent, to:
|
American
Stock Transfer and Trust Company, LLC
59
Maiden
Lane
New
York,
NY 10038
Attention:
Henry Reinhold
Telephone: 718-921-8225
Facsimile: 718-234-5001
|
|
(b) |
if
to the Company, to:
|
Mandalay
Media, Inc.
c/o
Trinad Capital, L.P.
2121
Avenue of the Stars, Suite 2550
Los
Angeles, California 90067
Telephone: 310-601-2500
Facsimile: 310-277-2741
|
|
(c) |
if
to the Investors, to:
|
ValueAct
SmallCap Master Fund, L.P.
435
Pacific Avenue, 4th
Fl.
San
Francisco, CA 94133
Attention:
Jimmy Price
Trinad
Capital Master Fund, Ltd.
2121
Avenue of the Stars, Suite 2550
Los
Angeles, California 90067
Attention:
Jay Wolf
Guber
Family Trust
c/o
Peter
Guber
4751
Wilshire Boulevard
3rd
Floor
Los
Angeles, CA 90010
Any
notice, consent or request given by certified mail shall be deemed given at
the
time of certification thereof.
11. This
Agreement shall terminate upon the date on which the Aggregate Subscription
Payments have been fully disbursed from the Escrow Account in accordance with
Section 4 of this Escrow Agreement.
[Signature
page to follow]
IN
WITNESS WHEREOF, the parties have duly executed this Escrow Agreement as of
the
date first above written.
|
AMERICAN
STOCK TRANSFER AND TRUST COMPANY, LLC
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| |
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By:
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/s/
Herbert J. Lemmer
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| |
Name:
|
Herbert
J. Lemmer
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Title:
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Vice
President
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| |
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|
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MANDALAY
MEDIA, INC.
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| |
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By:
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/s/
James Lefkowitz
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Name:
|
James
Lefkowitz
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Title:
|
President
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INVESTORS:.
|
| |
|
|
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ValueAct
SmallCap Master Fund, L.P.
|
|
By
VA Smallcap Partners, LLC, its General Partner
|
| |
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By:
|
/s/
David Lockwood
|
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Name:
|
David
Lockwood
|
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Title:
|
Managing
Member
|
| |
|
|
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Trinad
Capital Master Fund, Ltd.
|
| |
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By:
|
/s/
Robert Ellin
|
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Name:
|
Robert
Ellin
|
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Title:
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Director
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| |
|
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Guber
Family Trust
|
| |
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By:
|
/s/
Peter Guber
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Name:
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Peter
Guber
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Title:
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Trustee
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[Signature
Page to Escrow Agreement]