EXHIBIT 2.1

 

ACQUISITION AGREEMENT

by and among

Private Media Group, Inc., a Nevada corporation,

-and-

2220445 Ontario Inc., a corporation organized under the laws of the Province of Ontario,

-and-

Entruphema Inc., a corporation organized under the laws of the Province of Ontario,

-and-

2062249 Ontario Inc., a corporation organized under the laws of the Province of Ontario,

-and-

Eric Johnson, Erik Schannen and Michel Lozier

-and-

Eric Johnson, in his capacity as Sellers Representative

As of October 9, 2009

 

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

( Continued )

 

 

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TABLE OF CONTENTS

( Continued )

 

 

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LIST OF EXHIBITS

 

 

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ACQUISITION AGREEMENT

THIS ACQUISITION AGREEMENT (“ Agreement ”) is made and entered into as of October 9, 2009, by and among PRIVATE MEDIA GROUP, INC ., a Nevada corporation (“ Private ” or “ Buyer ”), 2220445 ONTARIO INC ., a corporation organized under the laws of the Province of Ontario (“ Sub ”), ENTRUPHEMA INC ., a corporation organized under the laws of the Province of Ontario (the “ Company ”), 2062249 ONTARIO INC ., a corporation organized under the laws of the Province of Ontario (“ Holdco ”), ERIC JOHNSON, ERIK SCHANNEN and MICHEL LOZIER (each of Messrs. Johnson, Schannen and Lozier sometimes individually referred to as a “ Seller ” and together, the “ Sellers ”) and Eric Johnson in his capacity as Sellers Representative. Buyer, Sub, the Company, Holdco and each of the Sellers are sometimes referred to individually as a “ Party ” and collectively as the “ Parties ”.

Recitals

A. The Company owns 100% of the issued and outstanding shares of Sureflix Digital Distribution Inc., a Delaware corporation, and Sureflix Digital Logistics Inc., a corporation organized under the laws of Saint Christopher and Nevis (each, a “ Company Subsidiary ” and, together, the “ Company Subsidiaries ”). Sellers and Holdco own 100% of the issued and outstanding shares in the capital of the Company (the “ Company Shares ”). Sellers own 100% of the issued and outstanding shares in the capital of Holdco.

B. Prior to the consummation of the Transaction (as defined below), (i) Holdco and the Company will amalgamate (the “ Holdco Amalgamation ”), such that the issued and outstanding shares in the capital of the Company following the Holdco Amalgamation will be held as follows: Eric Johnson (31,017 Company Shares), Erik Schannen (162,840 Company Shares), and Michel Lozier (116,315 Company Shares), and (ii) Sub will have amended its articles of incorporation (the “ Amendment ”) to authorize Class A Preference Shares (the “ Sub Preference Shares ” and, together with the Sub Common Shares, the “ Sub Shares ”) which will be exchangeable into shares of Common Stock of Buyer, par value $0.001 per share (“ Private Shares ”). Such Sub Preference Shares and the Amalco Preference Shares (as defined below) are referred to herein as the “ Exchangeable Shares .” The terms and provisions of the Exchangeable Shares, including the basis on which the shareholders shall have the right to exchange Exchangeable Shares for Private Shares, shall be as set forth in the provisions attaching to the Exchangeable Shares in the form attached hereto as Exhibit A (the “ Exchangeable Share Provisions ”).

C. The parties intend that, subject to the terms and conditions set forth in this Agreement, Buyer will acquire the business and operations of the Company through the acquisition by Sub of all of the Company Shares in exchange for Sub Preference Shares (as contemplated in greater detail in Section 2.1(a) below, the “ Share Purchase ”) followed by an amalgamation of Sub and the Company (as contemplated in greater detail in Section 2.1(b) below, the “ Amalgamation ” and, together with the Share Purchase, the “ Transaction ”), all pursuant to the terms and conditions of this Agreement and in accordance with the Business Corporations Act (Ontario) (as from time to time amended or re-enacted, the “ Act ”).

 

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D. The respective Boards of Directors of Buyer, Sub and the Company have determined that this Agreement and the transactions contemplated thereby, including the Transaction, are in the best interest of their respective shareholders, and have approved the Transaction. Buyer, as the sole shareholder of Sub, has approved this Agreement and the transactions contemplated hereby, including the Transaction. Sellers and Holdco, as the holders of 100% of the Company Shares, have approved this Agreement and the transactions contemplated hereby, including the Transactions.

Agreement

NOW, THEREFORE , in consideration of the representations, warranties, covenants, and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are conclusively acknowledged, the Parties, intending to become legally bound, agree as follows:

1. DEFINITIONS

1.1 Certain Defined Terms . Certain terms used in this Agreement are defined in later sections. In addition to those defined terms, the following terms have the following meanings:

“ Adverse Consequences ” means any damages, penalties, fines, costs, reasonable amounts paid in settlement, liabilities (including, without limitation, any liability which may arise under an alter ego , de facto control, de facto merger, successor, transferee or other similar theory or ground for liability), obligations, Taxes, liens, losses, expenses, fees and court costs and reasonable attorneys’ fees and expenses incurred in connection with any action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, injunction, judgment, order decree or ruling, with appropriate adjustment for insurance proceeds which are actually received by the affected Party. Adverse Consequences shall not include exemplary or punitive damages unless such damages are imposed by a third party judgment.

“ Actual EBITDA ” means the EBITDA for the applicable Earnout Period.

“ Affiliate ” means (a) with respect to any Person, any Person controlling, controlled by, not at arm’s length or under common control with such Person (or an Affiliate of such Person), where “ control ” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise, and (b) in addition, (i) if such Person is a partnership, any partner thereof, (ii) if such Person is a limited liability company, any member thereof, and (c) any officer or director of such Person.

“ Amalco ” means the continuing corporation constituted upon the amalgamation of the Amalgamating Corporations pursuant to the Amalgamation.

“ Amalco Common Share ” means a common share in the capital of Amalco.

“ Amalco Preference Shares ” means the Class A Preference Shares in the capital of Amalco.

 

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“ Amalco Shares ” means the Amalco Common Shares and Amalco Preference Shares.

“ Amalgamation Agreement ” means the amalgamation agreement in the form attached hereto as Exhibit C.

“ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York or Toronto, Ontario are authorized or required by law to close.

“ Buyer ” is defined in the preamble to this Agreement and includes Buyer’s successors and assigns as contemplated under Section 13.4 and for purposes of Section 10.2(c), those Persons named in the last sentence of Section 10.2(c).

“ Canadian GAAP ” means accounting principles generally accepted in Canada as recommended in the Handbook of the Canadian Institute of Chartered Accountants, at the relevant time applied on a consistent basis.

“ Client ” means any Person to whom or which the Company or either of the Company Subsidiaries has provided any services that constitute any part of the Company’s Business, at any time within the twelve (12) months preceding the Closing Date, including without limitation any participants in any affiliate program of the Company or either Company Subsidiary or any private label theatre affiliate of the Company or either Company Subsidiary. Provided, however , that for purposes of Section 9.3(c) only, the term “Client” means any Person to whom or which Buyer or any of its subsidiaries (including Amalco) has provided any services that constitute: (i) any part of the Company’s Business at any time within the twelve (12) months preceding the Closing Date; or (ii) any part of the Online Media Business at any time between the Closing Date and the date of the activity otherwise restricted by Section 9.3(c); including without limitation any participants in any affiliate program of Buyer or any of its subsidiaries (including Amalco) or any private label theatre affiliate of Buyer or any of its subsidiaries (including Amalco).

“ Company Shares ” has the meaning given to it in Recital B hereto. For greater certainty, depending on the context, as used herein Company Shares refers to either (a) shares in the capital of the Company or (b) shares in the capital of the company to be formed by the Holdco Amalgamation.

“ Company’s Business ” means any business activity carried on by the Company or either of the Company Subsidiaries during the twenty-four (24) month period preceding the Closing Date, and shall include the business of licensing content to broadcasters, websites and other content providers and distributors (including providing pay-per-view and video on demand and other eCommerce products and services), principally in the adult entertainment products market, and related services.

“ Confidential Information ” means any proprietary information of a specified Person, that is not generally available to the public (unless such information has entered the public domain and become available to the public through fault on the part of the Party to be charged hereunder), all of which the Parties agree constitute trade secrets under the governing trade secrets law, relating to:

(i) the identity of any Client or Supplier;

 

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(ii) the identity, authority and responsibilities of key contacts at each such Client or Supplier;

(iii) the service cost burden with respect to each such Client or Supplier;

(iv) the specific types of services provided or to be provided to any such Client;

(v) the specific types of goods (including media content) or services provided or to be provided by any Supplier;

(vi) the terms of agreements with of a Client or Supplier;

(vii) the nature of specific programs and plans, including their design, funding and administration, and any other information supplied by, or developed for, such Clients or Suppliers;

(viii) the operations manuals, prospecting manuals and guidelines, pricing policies and related information, marketing manuals and plans, and business strategies, techniques and methodologies of such specified Person;

(ix) the financial information and compensation data, including information set forth in internal records, files and ledgers, or incorporated in profit and loss statements, fiscal reports and business plans, of such specified Person;

(x) the inventions, discoveries, devices, algorithms, computer hardware and computer software (including any source code, object code, documentation, diagrams, flow charts, know-how, methods or techniques associated with the development or use of the foregoing computer software) of such specified Person;

(xi) the internal memoranda and other office records, including electronic and data processing files and records of such specified Person; and

(xii) any other information constituting a trade secret of such specified Person under the governing trade secrets law.

“ Confidentiality Agreement ” means the Non-Disclosure Agreement dated October 7, 2009 by and between the Company and Buyer.

“ Copyright ” means all copyrights, copyrightable works, mask work rights, rights in databases, data collections, copyright registrations and applications for copyright registration and equivalents and counterparts of the foregoing in any jurisdiction.

“ Dollar ” or “ $ ” means the United States Dollar unless otherwise specified herein.

“ Domain Name ” means all Internet electronic addresses, uniform resource locators and alphanumeric designations associated therewith and all registrations for any of the foregoing.

 

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“ Earnout Schedule ” means the schedule attached hereto as Exhibit D.

“ Earnout Shares ” means Amalco Preference Shares issuable to Sellers pursuant to the provisions of Section 2.7 of this Agreement.

“ EBITDA ” (earnings before interest, taxes, depreciation and amortization) is a non-GAAP financial measure and for the purpose of this Agreement it is defined as GAAP net income plus interest, income taxes, depreciation and amortization, related to the Online Media Business.

“ Effective Time ” means the date and time specified in the Articles of Amalgamation, which, for greater certainty, shall be the same date as the Closing Date.

“ Employee Benefit Plan ” means all employment, consulting, retirement, pension, supplemental pension, savings, retirement savings, bonus, profit sharing, stock purchase, stock option, phantom stock, share appreciation rights, deferred compensation, commission, severance, notice or termination pay, change of control, life insurance, medical, hospital, dental care, vision care, drug, sick leave, short-term or long-term disability, salary continuation, unemployment benefits, vacation, incentive, compensation or other employee benefits, agreement (including, as applicable, any material contracts), plan, program, arrangement, policy, practice or undertaking whether written or oral, formal or informal, funded or unfunded, registered or unregistered, qualified or non-qualified, insured, self-insured or uninsured, that is maintained, contributed to, or required to be contributed to, for the benefit of the employees, consultants, former employees or consultants, or their spouses, dependants, survivors or beneficiaries, or which the Company or any Company Subsidiary is a party to or bound by or under which the Company or any Company Subsidiary has any liability (whether present or future, absolute or contingent), whether or not subject to any Laws, except that the term “Employee Benefit Plans” will not include any statutory plans which the Company or any Company Subsidiary is required to participate in or comply with, including any government-sponsored pension, employment insurance, parental insurance, prescription drugs, workers’ compensation and health insurance plans.

“ Employment Agreements ” means the agreements between the Company and each of the Sellers, the form of which is attached hereto as Exhibit F.

“ Environmental Law ” means all Laws, any of which govern or relate to pollution, protection of the environment, natural resources, safety and health Releases or threatened Releases of Hazardous Substances, solid or hazardous waste, as any of these terms are or may be defined in such Laws or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances and all Laws with regard to record keeping, notification, disclosure and reporting requirements respecting Hazardous Substances.

“ Exchange Act ” means the U.S. Securities Exchange Act of 1934, as amended.

“ Family Affiliate ” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, including adoptive relationships, of any Person.

 

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“ Governmental Authority ” means any government or any agency, district, bureau, board, commission, court, department, official, office, political subdivision, court, tribunal or other instrumentality of any government, whether federal, state, provincial or local, domestic or foreign.

“ Hazardous Substance ” means petroleum, petroleum by-products, polychlorinated biphenyls, friable asbestos and any other chemicals, materials, substances or wastes which are defined or regulated as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “toxic air pollutants,” “hazardous air pollutants,” “pollutants,” or “contaminants” under any Environmental Law.

“ Indebtedness ” of any Person means: either (a) any liability of any Person (i) for borrowed money (including the current portion thereof), or (ii) under any reimbursement obligation relating to a letter of credit, bankers’ acceptance or note purchase facility, or (iii) evidenced by a bond, note, debenture or similar instrument (including a purchase money obligation), or (iv) for the payment of money relating to leases that are required to be classified as capitalized lease obligations in accordance with GAAP (or, where applicable, Canadian GAAP), or (v) for all or any part of the deferred purchase price of property or services, including any “earnout” or similar payments or any non-compete payments, or (vi) under interest rate swap, hedging or similar agreements, or (b) any liability of others described in the preceding clause (a) that such Person has guaranteed, that is recourse to such Person or any of its assets or that is otherwise its legal liability or that is secured in whole or in part by the assets of such Person. For purposes of this Agreement, Indebtedness includes (A) any and all accrued interest, success fees, prepayment premiums, make-whole premiums or penalties and fees or expenses actually incurred (including attorneys’ fees) associated with the prepayment of any Indebtedness, (B) any and all amounts owed by the Company or any Company Subsidiary to any of their Affiliates, including, without limitation, the Sellers, and (C) any and all bonuses or incentive payments owed by the Company or any Company Subsidiary to any of their employees.

“ Independent Accountant ” means Buyer’s independent accountant for the applicable fiscal year or Earnout Period, as the case may be.

“ Indemnification Threshold ” means (a) with respect to inaccuracy in or breach of the Tax Representations or a claim under Section 10.2(a)(iii), the amount of $100,000 and (b) with respect to any other inaccuracy in or breach of representations and warranties in Articles 5 and 6 (other than the Surviving Representations), the amount of $200,000.

“ Intellectual Property ” means Copyrights, Domain Names, Patents, Software, Trademarks and Trade Secrets.

“ Knowledge ” means actual knowledge or such knowledge as would have been obtained by making a reasonable investigation in light of the facts and circumstances, taking into consideration the capacity (as an employee, officer, director or shareholder of another Person) of the Person being charged with such knowledge.

 

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“ Laws ” means all federal, state, provincial, local, municipal, foreign or other laws, including all statutes, codes, ordinances, decrees, rules, regulations, ruling or requirement, municipal by-laws, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, ruling or awards, policies, guidelines, whether temporary, preliminary or permanent, issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority and general principles of common and civil law and equity.

“ Legal Requirement ” means any act or omission mandated by any constitution, law, ordinance, rule, regulation, injunction, judgment, ruling, charge, decree, statute, or similar enactment or promulgation by any government, governmental entity, regulatory body, stock market or exchange (including, without limitation, a Trading Market), court, or other similar body.

“ Material Adverse Effect ” means, with respect to any event or circumstance, an effect caused thereby or resulting therefrom that would, or would be reasonably likely to, be materially adverse as to, or in respect of, the condition (financial or otherwise), business, results of operation or prospects of a specified Person or Persons, when taken as a whole.

“ Nasdaq ” means the Nasdaq Stock Market, Inc.

“ Online Media Business ” shall mean the combined Internet and Internet-related business conducted by Private and its subsidiaries from time to time following the Closing Date, including the business activity carried out by the Company.

“ Ordinary Course of Business ” means the lawful ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

“ Organizational Documents ” means, with respect to a specified entity, the certificate or articles of incorporation (including certificates of designations), articles of amalgamation, bylaws, constating documents, operating agreement and other organizational documents, as may be applicable to such entity.

“ Patents ” means all patents, industrial and utility models, industrial designs, certificates of invention and other indicia of invention ownership issued or granted by any Governmental Authority, and all applications, provisionals, reissues, re-examinations, extensions, divisions, continuations (in whole or in part) and equivalents and counterparts of the foregoing in any jurisdiction.

“ Person ” means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unlimited liability company, an unincorporated organization, a limited liability company, or a governmental entity (or any department, agency, or political subdivision thereof).

“ Pre-Closing Taxes ” means Taxes of the Company or any Company Subsidiary for all taxable periods ending on or before the Closing Date or commencing prior to and ending after the Closing Date to the extent allocable to the pre-closing portion of such tax period; all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company (or any predecessor

 

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of any of the foregoing) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulation §1.1502-6 or any analogous or similar federal, state, provincial, local, or foreign law or regulation; and any and all Taxes of any other Person imposed on the Company as a transferee or successor, by contract or pursuant to any law, rule, or regulation, which Taxes relate to an event or transaction occurring before the Closing Date.

“ Pro Rata ” means the percentage obtained by dividing one Company Share by the number of outstanding Company Shares immediately prior to the Closing.

“ Prospective Client or Supplier ” means (a) any Person with whom the Company and/or Buyer or either of the Company Subsidiaries negotiated at any time during the twelve (12) months preceding the date of any activity prohibited by Section 9.3(c) for the provision of any goods (including media content) or services to be used in the operation of the Company’s Business or the Online Media Business at any time and (b) any Person with whom the Company or either of the Company Subsidiaries negotiated at any time during the twelve (12) months preceding the date of any activity prohibited by Section 9.3(c) to provide any services that constitute any part of the Company’s Business or the Online Media Business, including without limitation any participants in any affiliate program of the Company or either Company Subsidiary or any private label theater affiliate of the Company or either Company Subsidiary.

“ Release ” means any release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, dumping or disposing of a Hazardous Substance on, above, under, onto, in or into the environment.

“ Restricted Territory ” means the city of Toronto, each of the counties of the Province of Ontario, the ten provinces of Canada, the 50 states of the United States, the European Union and any European Union member state and each and every other geographic area outside Canada, the United States and the European Union where the Company or any Company Subsidiary conducts business as of the Closing Date.

“ Securities Act ” means the U.S. Securities Act of 1933, as amended.

“ Security Interest ” means any mortgage, pledge, lien, hypothecation, charge, Bank Act (Canada) security or other security interest, other than (a) construction, mechanic’s, materialman’s, and similar liens, (b) liens for Taxes not yet due and payable, (c) liens securing rental payments under capital lease arrangements, (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money, (e) encumbrances securing payment of Taxes which are not in arrears, (f) pledges or deposits made in the Ordinary Course of Business in connection with workers’ compensation, unemployment insurance or other similar social security legislation; and (g) encumbrances, security deposits or reserves required by law or regulation or by any Governmental Authority or regulatory agency.

“ Settlement Price ” means the average volume-weighted average price at which the Private Shares are traded on Nasdaq over the fifteen (15) consecutive Trading Days immediately prior to the Closing Date.

 

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“ Software ” means all computer software and code, including assemblers, applets, compilers, source code, object code, development tools, design tools, user interfaces and data, in any form or format, however fixed.

“ Sub Common Shares ” means a common share in the capital of Sub.

“ Supplier ” means any Person which has provided the Company or either of the Company Subsidiaries with any goods (including media content) or services used in the operation of the Company’s Business, at any time within the twenty-four (24) months preceding the Closing Date. Provided, however , that for purposes of Section 9.3(c) only, the term “Supplier” means any Person which has provided Buyer or any of its subsidiaries (including Amalco) with any goods (including media content) or services used in the operation of the Company’s Business at any time: (i) within the twenty four (24) months preceding the Closing Date; or (ii) in the operation of the Online Media Business at any time between the Closing Date and the date of the activity otherwise restricted by Section 9.3(c).

“ Target EBITDA ” shall mean, with respect to an Earnout Period, the EBITDA amount for each Earnout Period as provided in the Earnout Schedule, adjusted as provided therein for foreign currency translation.

“ Tax ” means (i) any federal, state, provincial, local or foreign income, gross receipts, payroll, employment, occupation, reemployment, excise, duties, capital, premium, franchise, environmental, withholding, deductions at source, social security (or similar tax), unemployment, real property, personal property, sales, goods and services, use, transfer, stamp, registration, alternative or add-on minimum, ad valorem, value added, profits, accumulated earnings, estimated or other tax, fees, assessments or governmental charges of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not and (ii) any liability arising under any agreements or arrangements with any Person with respect to the liability for, or sharing of the payment of any amounts of the type described in the immediately preceding clause (i) (including pursuant to provisions of any applicable Laws, and including any liability for Taxes as a transferee or successor, by contract or otherwise).

“ Tax Returns ” means any return (including estimates and extensions), election, declaration, report, document, claim for refund, or information return or statement relating to Taxes required to be filed with a taxing authority, including any schedule or attachment thereto, and including any amendment thereof.

“ Trademarks ” means all trademarks, trade names, fictitious business names, service marks, certification marks, collective marks and other proprietary rights to words, names, slogans, symbols, logos, devices, sounds, other things or combination thereof used to identify, distinguish and indicate the source or origin of goods or services, and all registrations, renewals and applications for registration, equivalents and counterparts of the foregoing in any jurisdiction, and the goodwill associated with each of the foregoing.

“ Trade Secrets ” means all inventions, discoveries, ideas, processes, designs, models, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know-how, proprietary information, customer lists, software code, technical information, data and databases, drawings and blueprints, and all other information and materials that would constitute a trade secret under applicable law in any jurisdiction.

 

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“ Trading Day ” means a day on which the principal Trading Market is open for business.

“ Trading Market ” means the following exchanges or markets on which the Private Shares are listed or quoted for trading on the date in question: The Nasdaq Capital Market; The Nasdaq Global Market; the Nasdaq Global Select Market; the American Stock Exchange; the New York Stock Exchange; or the OTC Bulletin Board.

“ Treasury Regulations ” means the United States Treasury Regulations promulgated under the Code, as amended from time to time.

“ U.S. Person ” means (a) any natural person resident in the United States; (b) any partnership or corporation organized or incorporated under the laws of the United States; (c) any estate of which any executor or administrator is a U.S. person; (d) any trust of which any trustee is a U.S. person; (e) any agency or branch of a foreign entity located in the United States; (f) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (g) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary, organized, incorporated, or (if an individual) resident in the United States; and (h) any partnership or corporation, in each case (A) organized or incorporated under the laws of any foreign jurisdiction; and (B) formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts. The following are not “U.S. Persons”: (a) any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States; (b) any estate of which any professional fiduciary acting as executor or administrator is a U.S. person if (A) an executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and (B) the estate is governed by foreign law; (c) any trust of which any professional fiduciary acting as trustee is a U.S. person, if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person; (d) an employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country; (e) any agency or branch of a U.S. person located outside the United States if: (A) the agency or branch operates for valid business reasons; and (B) the agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located; and (f) the International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans.

 

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1.2 Other Defined Terms . The following terms are defined in the Sections of this Agreement indicated below:

 

 

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1.3 Interpretation . In this Agreement, unless a clear contrary intention appears,

(a) the singular number includes the plural number and vice versa;

(b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement; and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

 

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(c) reference to any gender includes each other gender;

(d) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(e) reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(f) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

(g) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

(h) “or” is used in the inclusive sense of “and/or”;

(i) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding”

(j) references to the term “federal law” shall mean the federal laws of Canada and the federal laws of the United States unless otherwise expressly provided; and

(k) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

1.4 Accounting Terms and Determinations . Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with United States Generally Accepted Accounting Principles (“ GAAP ”).

1.5 Legal Representation of the Parties . This Agreement was negotiated by the Parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any Party shall not apply to any construction or interpretation hereof.

2. THE TRANSACTION; CLOSING

2.1 The Transaction

(a) The Share Purchase . At the Closing, subject to the terms and conditions of this Agreement, Sellers and Sub shall effect the Share Purchase; for greater certainty, Sellers shall sell, transfer and assign to Sub, and Sub shall purchase from Sellers, good and marketable title to all of the Company Shares held by Sellers, free and clear of all Security Interests, restrictions and claims or rights of another in exchange for the issuance by Sub of the Sub Preference Shares pursuant to the remainder of this Article 2.

 

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(b) The Amalgamation . At the Closing and immediately following the Share Purchase, subject to the terms and conditions of this Agreement and the Amalgamation Agreement, and in accordance with the Act, Sub and the Company shall effect the Amalgamation by way of statutory amalgamation under the Act.

2.2 Closings; Effective Time .

(a) The closing of the Transaction (the “ Closing ”) shall take place at the offices of Davis LLP, 1 First Canadian Place, Suite 5600, PO Box 367, 100 King Street West, Toronto, ON M5X 1E2 at 10:00 a.m. (local time) on the first Business Day after the satisfaction or waiver of each of the conditions set forth in this Agreement, or at such other time, date and location as the Company and Buyer agree (the date on which the Closing occurs being the “ Closing Date ”).

(b) At the Closing, Sub and the Sellers will consummate the Share Purchase in accordance with the terms and conditions of this Agreement. Immediately following the consummation of the Share Purchase, upon and subject to the terms and conditions of this Agreement and the Act, the Articles of Amalgamation and any other filings required by the Act (the “ Amalgamation Documents ”) shall be filed to effect the Amalgamation, under which Sub and the Company will amalgamate and continue as Amalco.

(c) Private, in its capacity as the sole shareholder of Sub, hereby approves the Share Purchase and the Amalgamation. Each of the Sellers and Holdco, in their capacity as the owners of 100% of the outstanding shares of the Company, hereby approves the Share Purchase and the Amalgamation.

2.3 Effect of the Amalgamation . At the Effective Time:

(a) the amalgamation of the Company and Sub (the “ Amalgamating Corporations ”) and their continuance as one corporation, Amalco, under the terms and conditions prescribed in the Amalgamation Agreement shall be effective,

(b) the property of each of the Amalgamating Corporations shall continue to be the property of Amalco,

(c) Amalco shall continue to be liable for the obligations or each of the Amalgamating Corporations,

(d) any existing cause of action, claim or liability to prosecution with respect to either or both of the Amalgamating Corporations shall be unaffected,

(e) any civil, criminal or administrative action or proceeding pending by or against either of the Amalgamating Corporations may be continued to be prosecuted by or against Amalco,

 

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(f) any conviction against, or ruling, order or judgment in favor of or against, either of the Amalgamating Corporations may be enforced by or against Amalco,

(g) the Articles of Amalgamation of Amalco shall be deemed to be the articles of incorporation of Amalco and the Certificate of Amalgamation shall be deemed to be the certificate of incorporation of Amalco,

(h) the by-laws of Sub shall be the by-laws of Amalco until repealed or amended in the normal manner provided for in the Act,

(i) the board of directors of Amalco shall consist of those individuals listed as such in the Amalgamation Agreement, and

(j) the officers of Amalco shall consist of those individuals listed as such in the Amalgamation Agreement.

2.4 Conversion of Shares .

(a) Amalgamation Consideration; Adjustments .

(i) The “ Amalgamation Consideration ” shall be an aggregate of 6,000,000 Amalco Preference Shares (subject to adjustment as set forth in Section 2.4(a)(ii)