Private Media Group (PRVT)

6.17 Tax Matters

(a) The Company and each Company Subsidiary has timely filed (including any applicable extensions) all Tax Returns required to be filed by it, and all such Tax Returns are true, correct and complete in all material respects. All amounts of Taxes due and owing by the Company and each Company Subsidiary (whether or not shown on any Tax Return) have been fully paid. The provision for Taxes on the Financial Statements reflect an adequate reserve for all Taxes payable by the Company and each Company Subsidiary for all taxable periods or portions thereof through the date of such financial statements, and no liability for Taxes has been incurred by the Company or any Company Subsidiary subsequent to such date except in the Ordinary Course of Business. The Company and each Company Subsidiary has made adequate and timely installment payments of all Taxes required to be made by it under applicable Tax Laws. Neither the Company nor any Company Subsidiary is required to pay Tax or to file any Tax Return in any Tax jurisdiction in which it does not file Tax Returns or has received a notice in that respect. Neither the Company nor any Company Subsidiary currently is the beneficiary of any extension of time within which to pay any Tax or to file any Tax Return.

(b) There are no contingent Tax liabilities or any grounds that could prompt an assessment or reassessment of the Company or any Company Subsidiary, including aggressive treatment of income, expenses, deductions, credits or other amounts in the filing of

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earlier or current Tax Returns or any other related filings. There are no ongoing or pending Tax audits, dispute, claim, proceeding, examination or investigation concerning any Tax liability that has been raised by any Governmental Authority, against the Company or any Company Subsidiary and the Company has not been notified of any request for such an audit or other examination. There are no outstanding agreements or waivers extending the statute of limitations applicable to any Taxes or Tax Return of the Company for any period and no such agreement or waiver has been requested. All Tax Returns of the Company and each Company Subsidiary have been assessed. All deficiencies for Taxes asserted or assessed against the Company have been fully and timely paid, settled or properly reflected on the Company Financial Statements. There are no Security Interests for Taxes upon the assets, properties, earnings or business of the Company or any Company Subsidiary.

(c) Neither the Company nor any Company Subsidiary is a party to or bound by any Tax allocation, indemnification or sharing agreement (whether written or unwritten) (each, a “Tax Sharing Agreement”) and does not have any liability for the Taxes of any Person under Section 160 of the ITA, as a transferee or successor, by contract, or otherwise.

(d) The Company and each Company Subsidiary has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, directors, officers, independent contractor, creditor, past and present shareholder, or other third party, and has paid such amount when due, in the form required under applicable Laws, or has made adequate provision for the payment of such amounts to the proper receiving authorities, and has complied in all material respects with all reporting and recordkeeping under applicable Laws with respect to such withholding. The Company and each Company Subsidiary has properly maintained all books and records required to be maintained in connection with employment taxes. The amount of any Tax withheld but not so remitted by the Company and each Company Subsidiary has been retained in the appropriate accounts.

(e) The Company is not required to include any item of income in, or exclude any item of deduction or loss from, taxable income for any taxable period ending after the Closing Date as a result of any (i) change in accounting method for a taxable period ending on or before the Closing Date, (ii) prepaid amount received on or prior to the Closing Date, (iii) installment sale or open transaction made on or prior to the Closing Date, or (iv) event that occurred on or prior to the Closing Date.

(f) The Company has made available to Buyer complete and correct copies of all federal, state, provincial, local and foreign Tax Returns filed by, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, the Company and each Company Subsidiary for all periods beginning with the fiscal year ended December 31, 2003.

(g) The Company has not, and has never been deemed to have for purposes of the ITA, acquired or had the use of property for proceeds greater than the fair market value thereof from, or disposed of property for proceeds less than the fair market value thereof to, or received or performed services or had the use of property for other than the fair market value from or to, or paid or received interest or any other amount other than at a fair market value rate to or from, any Person with whom it does not deal at arm’s length within the meaning of the ITA. Neither the Company nor any Company Subsidiary is, nor ever has been, a party to a transaction or agreement that is in conflict with the Tax rules on transfer pricing in any relevant jurisdiction.

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(h) No power of attorney has been granted by the Company or any Company Subsidiary with respect to any matter relating to Taxes which is currently in force.

(i) Neither the Company nor any Company Subsidiary is a party to any joint venture, partnership or other arrangement or contract that would be treated as a partnership for U.S. or Canadian federal income tax purposes.

(j) The Company’s cost amount, as defined in the ITA, in respect of its assets is accurately reflected on the Company’s Tax Returns to the extent such cost amounts are required to be reflected in the Tax Returns under applicable Laws.

(k) Neither the Company nor any Company Subsidiary has at any time benefited from a forgiveness of debt or entered into any transaction or arrangement (including conversion of debt into shares of its share capital) which could have resulted in the application of Sections 80 through 80.04, inclusive, of the ITA.

(l) The Company and each Company Subsidiary has collected from each receipt from any of the past and present customers (or other Persons paying amounts to the Company) the amount of all Taxes (including goods and services tax and provincial sales taxes) required to be collected and has paid and remitted such Taxes when due, in the form required under appropriate Laws or made adequate provision for the payment of such amounts to the proper receiving authorities. The amount of Tax collected but not remitted by the Company and each Company Subsidiary will be retained in the appropriate accounts and remitted by the Company to the appropriate authorities when due.

(m) None of the Sellers is a non-resident of Canada within the meaning of the ITA.

(n) Neither the Company nor any Company Subsidiary has a permanent establishment (as defined in the applicable Tax treaty or convention) in any country other than Canada.

6.18 Insurance. Section 6.18 of the Disclosure Schedule sets forth a true and complete list and brief description (including all applicable premiums and deductibles) of all policies of, and binders evidencing, life, fire, worker’s compensation, product liability, general liability and other forms of insurance issued to the Company and each Company Subsidiary covering any period on or after January 1, 2005, and all pending claims thereunder. Such policies are in full force and effect, neither the Company nor any Company Subsidiary is in default under any of them, all policies are paid in full and no premiums are due prior to February 24, 2010. The limits of liability of all insurance policies of the Company and each Company Subsidiary have not been exhausted and/or are not impaired. No notice of cancellation or termination or nonrenewal has been received with respect to any such policy. No reservation of rights letter in the defense of claims has been issued by a carrier in connection with a policy set forth in Section 6.18 of the Disclosure Schedule. During the last three years, neither the Company nor any Company Subsidiary has been refused any insurance with respect to its business or its assets, nor has coverage been limited by any insurance carrier to the Company or any Company Subsidiary or

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with which the Company or any Company Subsidiary has carried insurance or has applied for insurance. No event relating to the Company or any Company Subsidiary has occurred that could reasonably be expected to result in a retroactive upward adjustment in premiums, audit adjustment in premiums, experience based liability or loss sharing cost adjustment under any of the insurance policies set forth on Section 6.18 of the Disclosure Schedule. The insurance maintained by the Company and the Company Subsidiaries is sufficient to comply with all applicable Legal Requirements and agreements to which the Company or the Company Subsidiaries is a party. To the knowledge of the Company and the Sellers, no insurance carrier providing insurance to the Company or the Company Subsidiaries is in receivership, conservatorship, liquidation or similar proceedings, and no such proceeding with respect to any such carrier is imminent.