MUMBAI: Canadian digital studio Rainmaker Entertainment has agreed to sell its animation studio assets to Beijing-based Xing Xing Digital through its wholly owned subsidiary Rainmaker Studios Inc. (RSI).

The assets are being acquired in consideration for the assumption of existing Rainmaker book liabilities in an approximate amount of $7 million and the assumption of all real property leases.

The transaction is conditional upon, among other things, the approval of Rainmaker‘s shareholders and the receipt of the required regulatory approvals, including any approvals required under the Investment Canada Act.

In connection with the transaction, Rainmaker has agreed to provide a loan to RSI in the aggregate principal amount of $5 million. The loan has a term of four years and will bear interest at a rate of prime plus two per cent. The loan may be prepaid at any time without penalty.

Additionally, Rainmaker shall be granted an option, exercisable during the fourth year of the loan, to convert the principal and accrued interest in respect of the loan into common shares of RSI.

Based on the starting principal amount of the loan, Rainmaker would be entitled to acquire 30 per cent of the outstanding common shares of RSI at the time of conversion. Also, during the term of the loan, Rainmaker shall be entitled to nominate one of five directors to the board of RSI.

The board of directors of Rainmaker has unanimously approved entering into the asset purchase agreement and recommends that Rainmaker shareholders approve the Transaction.