STANDSTILL AGREEMENT
STANDSTILL AGREEMENT
This
Standstill Agreement (the “Agreement”), is made and entered into as of December
__, 2008, by and between SILVERBIRCH INC. (the
“Lender”), an Ontario corporation having an office at Xxxxx 000, 000 Xxxxxxx
Xxxxx, Xxxxxxx, Xxxxxxx X0X 0X0, and RED MILE ENTERTAINMENT, INC.,
(the “Borrower”, and together with the Lender, the “Parties”), a Delaware
corporation having its chief executive office at 000 Xxx Xxxxxxx Xxxxxx, Xxxxx
#0, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
BACKGROUND
WHEREAS, the Borrower is
indebted to the Lender on account of a Promissory Note dated May 7, 2008 (the
“Promissory Note”), in the principal amount of $750,000, executed and delivered
by the Borrower to the Lender, and there remains owing under the Promissory Note
the principal sum of $750,000, together with accrued interest, fees and costs;
and
WHEREAS, the Promissory Note,
and all other original and amended pledge, credit and security agreements and
documents related to or executed in connection with the Promissory Note are
hereinafter collectively referred to as the “Loan Documents”; and
WHEREAS, the Lender asserts
that the Borrower is in default under one or more of the Loan Documents;
and
WHEREAS, the Borrower asserts
that it has various claims against the Lender under the merger agreement between
the Parties dated October 7, 2008 (the “Merger Agreement”) and defenses under
the Loan Documents; and
WHEREAS, by virtue of the
existence of such defaults, claims and defenses, the Parties may have remedies
and rights against the each other at law and in equity; and
WHEREAS, the Parties, without
any Party in any way admitting the validity of the claims, positions or
arguments advanced by any other Party, wish to enter into this Agreement on the terms and
conditions set forth herein in which both Parties will refrain from exercising
their rights or remedies.
NOW, THEREFORE, in
consideration of the foregoing, the promises and covenants set forth herein, and
for good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the Parties agree as follows:
1. Recitals
and Definitions. The Parties acknowledge and
agree that the recitals set forth above form an integral part of this Agreement
and are incorporated herein in all respects.
2. Standstill
Period.
A. Standstill
Period. The Parties will forbear and standstill from
exercising their respective rights and remedies against each other during the
Standstill Period. “Standstill Period”
means the period starting on the date hereof and ending on the Standstill
Termination Date. “Standstill Termination
Date” means the date which is the earlier of (i) the date of the payment
of the Final Settlement Payment (as such term is defined below), (ii) July 31,
2009, or (iii) the date that the Lender gives written notice to the Borrower of
the Lender’s election to terminate the Standstill Period in the event of an
early termination described below.
B. Early
Termination. The Lender may elect to terminate the Standstill
Period if the Borrower breaches or fails to comply with any of the terms of this
Agreement.
Notice of
termination may be given by the Lender to the Borrower by electronic mail
(e-mail), overnight courier, mail or personal delivery to the address of the
Borrower set forth above and shall be effective (a) if sent by e-mail, on the
business day following the date the e-mail was sent, (b) if sent by overnight
courier, on the business day following delivery to a reliable overnight courier,
(c) if mailed, three business days after mailing, and (d) if personally
delivered, on delivery.
C. Effect of Standstill Period
Termination. On and after the Standstill Termination Date, the
Parties may exercise any and all of their respective rights and remedies without
the requirement of any further notice or satisfaction of any other condition;
provided, however, that if the Standstill Termination Date follows payment of
the Final Settlement Payment by Borrower, the Parties respective rights and
remedies will be subject to the Mutual Release set forth in Section 3.C
below.
3. Borrower’s
Obligations; Release of Claims.
A. Acceptance of Agreement and
Confirmation of Obligations. The Borrower will execute and
return two copies of this Agreement, together with the first Settlement Payment
Installment (as defined below) of a check in the amount of $50,000, to the
Lender, no later than the close of business on December 30,
2008. Upon receipt of the copies and the check, the Lender will
execute the copies and return one copy to the Borrower. The Lender’s
offer to enter into this Agreement shall expire on the close of business on
December 30, 2008.
B. Payment of
Obligations. The Borrower agrees to pay to the Lender the
following amounts in Canadian Dollars (“CAD”) on the following
dates:
(1). CAD
$50,000 upon the execution of the Agreement;
(2). CAD
$225,000 on the earlier of (i) Borrower achieving the beta milestone as such
milestone is identified and defined in the agreement between the Borrower and
Atari, Inc. in connection with the development of the game commonly referred to
as “Heroes over Europe” (the “Atari Agreement”) and receiving the next
installment payment from Atari Inc.; and (ii) February 6, 2009;
(3). CAD
$250,000 on the earlier of (i) Borrower achieving the next
succeeding milestone following the milestone referred to in paragraph
(2) above and receiving the applicable installment payment from Atari Inc.; and
(ii) March 20, 2009; and
(4). CAD
$75,000 on the earlier of: (i) Borrower signing a publishing agreement in
connection with the project commonly referred to as the “Sin City project”; and
(ii) July 31, 2009.
Hereinafter,
individually these payments shall be referred to as “Settlement Payment
Installments” and collectively, the four Settlement Payment Installments shall
be referred to as the “Final Settlement Payment.”
C. Payment
of the Final Settlement Payment; Mutual Release. Subject to timely payment
of the Final Settlement Payment by Borrower, the Parties automatically and
without the necessity of the execution of any additional documents, fully
and forever irrevocably, unconditionally and completely release, remise, acquit
and discharge each Party and its respective heirs, successors, assigns,
representatives, subsidiaries, affiliates and divisions, and the respective
officers, directors, shareholders, agents, employees, representatives,
successors and assigns of each of the foregoing, from all claims, liabilities
and causes of action whatsoever including, without limitation, those arising out
of the Loan Documents and the Merger Agreement. The Parties
expressly waive the provisions of California Civil Code Section 1542, which
provides as follows:
A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE
DEBTOR.
4. No
Extension of Maturity; No Waiver. Except as
expressly provided herein, (a) the execution of this Agreement by the Lender,
(b) its course of dealing with respect to any default, or (c) any omission or
delay by the Lender in the exercise of any right or remedy shall not operate as
(i) an extension of the maturity of the Promissory Note, or (ii) a waiver of any
of the Lender’s rights or remedies under any of the Loan
Documents. Without limiting the generality of the foregoing sentence,
the Borrower confirms that the Lender has not made any commitment or any other
assurance that it will extend the term of the Standstill Period.
5. Conflicting
Terms; No Other Modifications. To the extent
that any of the terms and conditions of this Agreement are inconsistent with any
of the terms and conditions of the Loan Documents, the terms and conditions of
this Agreement shall prevail. Except as otherwise provided herein,
all of the terms and conditions of the Loan Documents shall remain unaffected
and in full force and effect.
This Agreement shall not be construed
to: (i) impair the validity, perfection or priority of any lien or security
interest securing the Borrower’s obligations to the Lender; (ii) waive or impair
any rights, powers or remedies of the Lender under any of the Loan Documents
upon termination or expiration of the Standstill Period; or (iii) make any loans
or other extension of credit to the Borrower.
6. Jury
Trial Waiver. The Parties
hereby knowingly, voluntarily, and intentionally waive any rights to trial by
jury, which the Parties may have in any action or proceeding, in law or in
equity, in connection with, related to or incidental to the relationship
established between them in connection with this Agreement, any of the Loan
Documents, any proposed merger involving the Parties or the transactions related
thereto or hereto. The scope of this waiver is intended to encompass
any and all disputes that may be filed in any court and that relate to the
subject matter of this Agreement, including, without limitation, Claims,
contract claims, tort claims, breach of duty claims, and all other statutory and
common law claims. The Borrower represents and warrants
that no representative or agent of the Lender has represented, expressly or
otherwise, that the Lender will not, in the event of litigation, seek to enforce
this right to jury trial waiver.
7. Entire
Agreement. This Agreement
contains the entire agreement among the parties as to the subject matter hereof
and there exist no oral agreements, commitments or understandings with respect
thereto. This Agreement may be modified only by written agreement
signed by each of the parties hereto. The Borrower has not relied
upon any representations or warranties made by the Lender, its agents or
attorneys, which are not reflected in this Agreement.
8. Binding
Effect and Governing Law. This Agreement
shall bind and inure to the benefit of the parties and their respective
successors and assigns, including, but not limited to, the Parties’ secured
lenders. Except to the extent that Article 9 of the Uniform Commercial Code
provides for the application of the law of any other jurisdiction, this
Agreement shall be governed by and construed, interpreted and enforced in
accordance with the law of the State of California and, to the extent
applicable, the federal law of the United States without regard to the law of
any other jurisdiction.
9. Severability. In case any term
or provision of this Agreement shall be held to be invalid, illegal or
unenforceable in whole or in part, neither the validity of the remaining part of
such provisions or terms, nor the validity of any other provision or term of
this Agreement shall be in any way affected thereby.
10. Execution
in Counterparts. This Agreement
may be executed in any number of counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts together shall
constitute one and the same document.
11. No Accord
and Satisfaction. The
Parties acknowledge and agree that the execution and performance of this
Agreement does not in any way release or constitute an accord and satisfaction
or novation of any of the Loan Documents and the Loan Documents shall remain in
full force and effect except as specifically amended herein.
12. Representations
and Warranties. The Parties hereby represent and warrant as
follows:
A. Due Authorization,
Non-Contravention, etc. The execution, delivery and
performance by the Parties of this Agreement is within the Parties’ corporate
powers, has been duly authorized by all necessary corporate action, and does
not
(1)
contravene the Parties’ charter documents;
(2)
contravene any contractual restriction, law or governmental regulation or
court
decree
or order binding on or affecting the Parties; or
(3)
result in, or require the creation or imposition of, any lien on any of the
Borrower’s
properties.
B. Government Approval,
Regulation, etc. No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body or other person is required for the due execution, delivery or performance
by the Parties of this Agreement.
C. Validity,
etc. This Agreement constitutes the legal, valid and binding
obligation of the Parties enforceable in accordance with its terms.
IN WITNESS WHEREOF, the
foregoing is accepted and agreed to as of the date first above
written.
[REMAINDER
OF PAGE LEFT BLANK INTENTIONALLY]
RED MILE ENTERTAINMENT,
INC.
By: /s/ Xxxxxxx
Xxxxxxxx
Name: __Chester
Aldridge____________________
Title:_____________________________________
SILVERBIRCH
INC.
By: /s/ Xxxxxx
Xxxxxx
Name: __Graham Xxxxxx
Title:_____________________________________
