Private Media Group (PRVT)

10.7 Recoupment From Amalgamation Consideration Shares.

(a) Other than in the case of fraud, willful misrepresentation or gross negligence, the Parties agree that any indemnification to which Buyer is entitled under this Agreement for breach of any and all representations and warranties of the Sellers contained in this Agreement and for any Indemnification Event arising under Section 10.2(a)(iii) shall be satisfied as a setoff against the Amalgamation Consideration Shares. Any such setoff shall be applied to the Sellers pro rata based upon the total Amalgamation Consideration Shares such Seller is eligible to receive. Further, if an Indemnification Event (in excess of the Indemnification Threshold) is pending at a time when Buyer is otherwise required to deliver any of the Amalgamation Consideration Shares to Sellers, then Buyer shall have the right, upon notice to the Sellers Representative, to withhold Amalgamation Consideration Shares from delivery to Sellers, including Closing Shares which Sellers are required to deliver to Buyer during the Restriction Period (“Holdback”) having a value equal to the total amount for which Sellers may become liable as a result thereof, until final determination of the pending claims.

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(b) Further, if one or more Indemnification Events (in excess of the Indemnification Threshold) are pending during the Restriction Period and Buyer in good faith determines that the Initial Deferred Shares are insufficient in amount to cover the amount of claims for which Sellers may become liable, then upon notice to the Sellers, Sellers shall deliver to Buyer, as a Holdback, such number of Closing Shares as Buyer in good faith determines are sufficient to cover the amount for which Sellers may become liable until final determination of the pending claims.

(c) The amount of Amalgamation Consideration Shares held back by Buyer shall be determined in good faith by Buyer, not to exceed the good faith dollar estimate of any Adverse Consequences Buyer may incur as a result of the breach underlying such claim. Amalgamation Consideration Shares shall be held back (and applied to the setoff, if any) in the following order: first, from the Initial Deferred Shares, second, from the Closing Shares, and third from the Earnout Shares, beginning with the Earnout Shares for the 2009 Earnout Period, followed by the Earnout Shares for the 2010 Earnout Period, the Earnout Shares for the 2011 Earnout Period and the Earnout Shares for the 2012 Earnout Period (unless any such Earnout Shares have been previously released to the Sellers, in which case Buyer may hold back the applicable number of Earnout Shares from the Earnout Shares for whichever Earnout Period as Buyer determines in its sole discretion).

(d) For purposes of determining the number of the Amalgamation Consideration Shares which Buyer may setoff against in satisfaction of Indemnification Events which are finally determined, the Amalgamation Consideration Shares shall be valued at the average closing price of Private Shares on the Trading Market over the ten (10) trading day period ending two (2) trading days prior to the date of the final determination of such claim in accordance with this Article 10.

(e) As and when there is a final determination of pending claims and application of any setoff, any remaining Amalgamation Consideration Shares shall be promptly released from the Holdback.

(f) If any Seller exchanges his Amalgamation Consideration Shares into Private Shares, such Private Shares shall be subject to the terms of this Section 10.7 in its entirety as if such Private Shares were Amalgamation Consideration Shares hereunder.

(g) For greater certainty, notwithstanding any other provision in this Agreement, other than in the case of fraud, willful misrepresentation or gross negligence, the setoff and/or Holdback of the Amalco Consideration Shares pursuant to this Section 10.7 shall be the sole and exclusive legal remedy (i.e. other than equitable remedies) of Buyer and Sub for the breach of any and all representations and warranties of the Sellers contained in this Agreement.