Document:

GUARANTY

     

    This
      Guaranty (the “Guaranty”)
      is
      given as of February 12, 2008, by MANDALAY
      MEDIA, INC.,
      a
      Delaware corporation (“Guarantor”)
      to
      VALUEACT SMALLCAP MASTER FUND, L.P. (“ValueAct”).

     

    WHEREAS,
      Guarantor has entered into an Agreement and Plan of Merger dated as of December
      31, 2007, by and among Guarantor, Twistbox Acquisition, Inc., a Delaware
      corporation and a wholly-owned subsidiary of Guarantor, Twistbox Entertainment,
      Inc. (the “Company”)
      and
      Adi McAbian and Spark Capital, L.P. as representatives of the stockholders
      of
      the Company, as the same may be amended from time to time (the “Merger
      Agreement”),
      pursuant to which Guarantor will acquire all of the capital stock of the
      Company;

     

    WHEREAS,
      the Company is indebted to ValueAct in the original principal amount of
      $16,500,000 pursuant to a Senior Secured Note due January 30, 2010, dated July
      30, 2007, as amended (the “Note”);

     

    WHEREAS,
      each of ValueAct, Guarantor and the Company desire to amend the Note;
      and

     

    WHEREAS,
      ValueAct is willing to enter into such amendment on the condition that the
      Guarantor enter into this Guaranty. 

     

    NOW,
      THEREFORE, the Guarantor, in consideration of the foregoing, agrees as
      follows:

     

    1.  Guaranty.
      Subject
      to the other terms and the limitations contained in this Guaranty, the Guarantor
      does hereby guarantee to ValueAct the payment by the Company of up to $8,250,000
      of principal (the “Guaranteed
      Amount”)
      under
      the Note in accordance in all material respects with the terms, conditions
      and
      limitations contained in the Note (the “Obligations”).
      In
      the event of a default in payment of the Obligations by the Company under the
      Note, upon receipt of written notice of such default from ValueAct (which notice
      shall specify the nature of such default and any dispute between ValueAct and
      the Company with respect thereto), the Guarantor shall forthwith pay the same,
      provided,
      however,
      that
      Guarantor may (or may cause the Company) to cure such default within a period
      of
      5 business days after the date on which written notice specifying such default
      shall have been given by ValueAct to the Guarantor.
      The
      Guarantor’s obligations under this Guaranty shall be subject to the limitation
      that in no event shall the Guarantor be required to expend more than the
      Guaranteed Amount in
      the
      performance of its obligations under this Guaranty and in no event shall the
      Guarantor be required to expend any amount with respect to interest, fees,
      costs, expenses or other amounts.

     

    2.  Scope
      and Duration of Guaranty.
      Subject
      to the limitations set forth herein, this Guaranty shall continue in full force
      and effect until the Company or the Guarantor shall have satisfactorily
      performed or fully discharged the Obligations. Further, this Guaranty (a) shall
      remain in full force and effect without regard to, and shall not be affected
      or
      impaired by any invalidity, irregularity or unenforceability in whole or in
      part
      of this Guaranty, and (b) shall be discharged only by complete performance
      of
      the undertakings contained herein (subject to the limitations set forth herein);
      provided, that the Guarantor shall have the full benefit of all defenses,
      setoffs, counterclaims, reductions, diminution or limitations of any Obligations
      available to the Company pursuant to or arising from the Note
      or
      otherwise.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.  Waivers
      by Guarantor.
      The
      Guarantor hereby waives, as a condition precedent to the performance of its
      obligations hereunder, (a) notice of acceptance hereof, (b) any requirement
      that, after a default by the Company, ValueAct exhaust any right, power or
      remedy or proceed against the Company under the Note or any other agreement
      or
      instrument referred to therein, and (c) any defense arising by reason of
      disability, lack of authority or power. Without limiting the generality of
      the
      foregoing, it is agreed that the occurrence of any one or more of the following
      shall not affect the liability of the Guarantor hereunder:

     

    (i) at
      any
      time or from time to time, without notice to the Guarantor, the time for any
      performance of or compliance with any of the Obligations shall be
      extended;
      or

     

    (ii) any
      of
      the Obligations shall be modified, supplemented or amended in any respect in
      accordance with the terms of the Note.
      Notwithstanding anything contained herein to the contrary, no modification,
      supplement or amendment to the Note shall be made without the Guarantor’s prior
      written consent.

     

    4.  Subrogation.
      The
      Guarantor hereby agrees that until the payment
      and discharge
      in full
and/or
      waiver of performance
      of the
      Obligations, it shall not exercise any right or remedy arising by reason of
      the
      performance of any of its obligations under this Guaranty, whether by
      subrogation or otherwise, against the Company.

     

    5.  Transfer
      of Guaranty.
      Upon
      written notice to the Guarantor, ValueAct may transfer its rights under this
      Guaranty to any party to whom it sells, transfers or otherwise disposes of
      all
      or any part of the Note.

     

    6.  Miscellaneous.

     

    6.1  Limitation.
      The
      Guarantor’s obligations under this Guaranty are to pay the Obligations of the
      Company under the Note (subject to the limitations set forth in this Guaranty)
      and no others. In no event shall the Guarantor be liable for any damages, direct
      or indirect, consequential, punitive or otherwise, as a result of the Company’s
      failure to perform any of its obligations under the Note.
      Guarantor’s liability shall be limited solely to actual
      and direct damages determined by a court of competent jurisdiction in a
      proceeding not subject to further appeal to have arisen
      primarily and directly as a result of Guarantor’s failure to perform its
      obligations under this Guaranty.

     

    6.2  Governing
      Law.
      This
      Guaranty is to be governed by and construed in accordance with the laws of
      the
      State of Delaware, without regard to its conflicts of laws rules. 

     

    6.3  Notices.
      All
      notices and other communications provided for herein shall be in writing and
      shall be delivered by hand or overnight courier service, mailed by certified
      or
      registered mail or sent by facsimile transmission, as follows:

     

    Guarantor: 

    

    Mandalay
      Media, Inc.

    2121
      Avenue of the Stars, Suite 2550

    Los
      Angeles, California 90067

    Attention:
      James Lefkowitz

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    with
      a
      copy to:

    

    Kenneth
      R. Koch, Esq.

    Mintz
      Levin Cohn Ferris Glovsky and Popeo, P.C.

    666
      Third
      Avenue

    New
      York,
      New York 10017

    

    ValueAct: 

     

    435
      Pacific Avenue, 4th
      Fl.

    San
      Francisco, CA 94133

    Attention:
      Jimmy Price

    

    Either
      the Guarantor or ValueAct may change its address for notices and other
      communications hereunder by notice to the other. Each such notice or other
      communication shall for all purposes of this Guaranty be treated as effective
      or
      having been given (i) when delivered if delivered personally, (ii) if sent
      by
      registered or certified mail, at the earlier of its receipt or three business
      days after registration or certification thereof, (iii) if sent by overnight
      courier, on the next business day after the same has been deposited with a
      nationally recognized courier service for next day delivery, or (iv) when sent
      by confirmed facsimile, on the day sent (if a business day) if sent during
      normal business hours of the recipient, and if not, then on the next business
      day.

     

    6.4  Amendments
      and Waivers.
      No
      amendment, modification, termination or waiver of any provision of this Guaranty
      or consent to any departure by the Guarantor therefrom shall be effective absent
      the written agreement of the Guarantor and ValueAct. 

     

    6.5  Headings.
      Section
      and subsection headings contained in this Guaranty are inserted for convenience
      of reference only, shall not be deemed to be a part of this Guaranty for any
      purpose, and shall not in any way define or affect the meaning, construction
      or
      scope of any of the provisions hereof.

     

    6.6  Waiver
      of Jury Trial.
      EACH
      PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
      RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
      INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS
      CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
      THEORY).

     

    

     

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    IN
      WITNESS WHEREOF, the Guarantor has duly executed and delivered this Guaranty
      and
      ValueAct has executed its acceptance of this Guaranty effective as of the date
      first written above.

     

    
      	 	
              MANDALAY
                MEDIA, INC.

               

              By: /s/
                Jay Wolf 

              Name: 
                Jay Wolf

              Title:
                Chief Financial Officer

            

    

    

    

    Accepted:  

     

    
      	 	
              VALUEACT
                SMALLCAP MASTER FUND, L.P., 

              By
                VA Smallcap Partners, LLC, its General Partner

               

              By: /s/
                David Lockwood 

              Name: 
                David Lockwood

              Title:
                Managing MemberTERMINATION
      AGREEMENT

    

    

    This
      Termination Agreement (the “Agreement”) is dated as of February 12, 2008 and is
      entered into between TWISTBOX ENTERTAINMENT, INC., a Delaware corporation (the
      “Company”) and VALUEACT SMALLCAP MASTER FUND, L.P. (the “Holder”).

    

    WHEREAS,
      reference is made to that certain Class A Warrant No. WR-1, dated July 30,
      2007,
      issued by the Company to the Holder (the “Warrant”). Capitalized terms used and
      not otherwise defined herein shall have the meanings ascribed to them in the
      Warrant; 

    

    WHEREAS,
      reference is made to that certain Agreement and Plan of Merger dated as of
      December 31, 2007, by and among Mandalay Media, Inc., a Delaware corporation
      (“Parent”), Twistbox Acquisition, Inc., a Delaware corporation and a
      wholly-owned subsidiary of Parent, the Company and Adi McAbian and Spark
      Capital, L.P., as representatives of the stockholders of the Company, as the
      same may be amended from time to time (the “Merger Agreement”); and

    

    WHEREAS,
      in order to consummate the transactions contemplated by the Merger Agreement,
      the undersigned desire to terminate the Warrant as set forth herein.

    

    NOW,
      THEREFORE, for good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, the parties hereto agree as follows:

    

    1.
       Each
      of
      the undersigned hereby agrees that, effective immediately, the Warrant shall
      be
      terminated and all of the terms and provisions contained therein shall be of
      no
      further force and effect. 

    

    2. This
      Agreement may be executed in one or more counterparts, and by facsimile, each
      of
      which shall constitute an original agreement, but which together shall
      constitute one in the same instrument. 

    

    

    

    [SIGNATURE
      PAGE TO FOLLOW]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned have executed this Termination Agreement as
      of
      the date first written above.

    
 

    
      	 	 

              TWISTBOX
                ENTERTAINMENT, INC.

               

              By:
                /s/ Ian Aaron

              Name:
                Ian Aaron

              Title: 
                CEO

              

               

              VALUEACT
                SMALLCAP MASTER FUND, L.P., 

              By
                VA Smallcap Partners, LLC, its General Partner

               

               

              By:
                /s/ David Lockwood

              Name:
                Managing Member 

            

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

    

    

    
      4251282v.2

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