February 24, 2014

CONFIDENTIAL
Avid Life Media, Inc.
20 Eglinton Avenue West
Suite 1200
Toronto, Ontario M4R 1K8
Attn: Jason DeZwirek, Chairman
Jonathan Pollack, Secretary
Noel Biderman, Chief Executive Officer
Re:

Letter of Intent

Gentlemen:
The purpose of this letter of agreement is to confirm the present intention of Dragon Global
Management, LLC, by and through an affiliate (Dragon), to acquire Avid Life Media, Inc.
(Avid) (the Transaction). The proposed terms and conditions are as follows:
1.

Purchase Price. Dragon will pay an aggregate purchase price of C$100.0 million for 100%
of the capital stock of Avid, C$80.0 million of which will be payable in cash at closing and
C$20.0 million of which will be held in escrow for up to two years against representations
and warranties (including as to legal matters and the sufficiency of working capital) of
Avid. Avid will have no funded debt and a normalized level of working capital at closing.

2.

Management. Dragon intends to explore the possibility of entering into employment

agreements with key senior managers in Avid's organization.

3.

Conditions to Closing. The obligations of Dragon to proceed with the Transaction are
subject to: (i) the completion of all business, financial, regulatory and legal due diligence
satisfactory to Dragon; (ii) Avid's operation of the business in the ordinary course until the
Transaction is completed; (iii) the completion by Ernst & Young of Avid's audited
financial statements for the twelve-month period ended December 31, 2013; (iv) the
receipt of all required consents or approvals from government authorities; (v) the
attainment of debt financing, to the extent necessary, from a financial institution and (vi)
the negotiation, execution and delivery of one or more definitive agreements, containing
representations, warranties, covenants, indemnification and escrow provisions that are
customary for transactions of this type.

4.

Non-Binding Understanding. This letter of intent is intended to be and it shall be

construed only as an expression of current intent of the parties and not as a binding offer or
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binding agreement of the parties. Notwithstanding the foregoing, the provisions contained
in paragraphs 4 through 8 shall be binding on the parties.
5.

Confidentiality. The Dragon and Avid agree to maintain the confidentiality of this letter of
intent and the subject matter therof. Neither Dragon nor Avid shall issue any press release
or any other public statement concerning discussions related to the proposed Transaction
without the prior written consent of the other party, except as required by law, regulation
or stock exchange rules. Except as provided in the preceding sentence, neither party shall
disclose any of the financial details of the transaction to a third party, other than their
consultants, attorneys, accountants, advisors and bankers without the prior written consent
of the other party.

6.

Due Diligence. After the signing of this letter of intent, Avid will provide Dragon and its
representatives access at reasonable times to all updated and current information related to
the business of Avid, it being understood that any purchase is fully conditioned upon the
prior and satisfactory completion by Dragon of its due diligence investigation of the
business of Avid. This shall include, but not be limited to, review and assessment of the
financial condition of Avid, Avid's prospects for revenue, environmental or other
contingent liabilities of Avid, regulatory matters and employment matters of Avid and any
pending or threatened litigation affecting Avid or its business. The parties shall negotiate
in good faith and use diligent and reasonable efforts to enter into a definitive agreement
with respect to the Transaction contemplated hereby within 90 days from the date of this
letter.

7.

Exclusivity. Avid agrees, on behalf of itself and its shareholders, directors, officers,
employees, agents and representatives, for a period commencing on the date hereof and
terminating on the later of May 30, 2014 or 90 days from the date of execution of this letter
by all parties hereto, that Avid shall not and shall cause its respective shareholders,
directors, officers, employees, agents and representatives not to, directly or indirectly (i)
submit, discuss, initiate, encourage, participate in, solicit, or negotiate with any person,
other than Dragon, any proposal or offer regarding a possible merger, sale, strategic
alliance or other disposition of all or any part of Avid or its capital stock or assets or other
similar transaction (outside the ordinary course) or (ii) disclose to any person, other than
Dragon or its agents, any information not customarily disclosed concerning the business,
assets, liabilities, properties or personnel of Avid, or afford to any person other than
Dragon and its agents access to the properties, books or records of Avid. Avid will
promptly disclose to Dragon any such offer or proposal that it or its shareholders, directors,
officers, employees, agents and representatives receive during such period. Both parties
agree to extend the exclusivity period for an additional 30 days from the original period if
both parties are using their diligent and reasonable efforts to complete due diligence and
enter into a definitive agreement.

8.

Costs. Each of the parties shall bear its own costs and expenses in connection herewith.

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