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Term Sheet THIS TERM SHEET (“Term Sheet”) is entered into at Mumbai as on this 3rd day of September , 2013, BY AND BETWEEN: Network18 Media & Investments Limited, a company incorporated under the Companies Act, 1956, having its registered office at 503, 504 & 507, 5th Floor, Mercantile House, 15 Kasturba Gandhi Marg, New Delhi – 110001 (hereinafter referred to as “N18”); and Multi Screen Media Private Limited, a company incorporated under the Companies Act, 1956, having its registered office at Interface, Building 7, 4th Floor, Malad Link Road, Malad West, Mumbai – 400 064 (“MSM”). (N18 and MSM are hereinafter individually referred to as a “Party” and collectively as the “Parties”.) I. The Parties are evaluating setting up a joint venture company to own and operate an over the top online video (“OTT”) platform (“Proposed Transaction”) and have prepared a preliminary business plan for the same, which is annexed to this Term Sheet. II. The Parties hereby agree that this Term Sheet is intended as a summary for discussion purposes only prior to entering into a long form definitive and binding agreement and does not reference all of the terms, conditions, representations, warranties, covenants, and other provisions that would be contained in the definitive documentation in respect of the Proposed Transaction. For the avoidance of doubt, except as expressly provided in this Term Sheet, this Term Sheet does not constitute and will not give rise to any legally binding obligation on the part of any Party to these discussions or any of such Party’s affiliates unless and until such Parties have executed and delivered to each other definitive, binding written agreements in respect of the Proposed Transaction. III. The indicative terms on the basis of which the Parties would undertake further discussion and seek to consummate the Proposed Transaction in the form of a binding, definitive and long for agreement are as follows: 1. Formation of Joint The Parties are proposing to form a joint venture Venture, Business, and company (“JVCo”) to undertake the business of setting up and operating an OTT platform (“Platform”). The Shareholding : Parties propose to have an initial term of 5 years for the JVCo (“Initial Term”), which term may be renewed upon the expiry of the Initial Term or a subsequent term, as the case may be. N18 will (either through itself or through an affiliate) own 74% and MSM will own 26% of the equity share capital in the JVCo. The definition of “affiliate” will be agreed in the long form agreement. It is envisaged that A&E Television Networks LLC, an entity incorporated in the USA (“A&E”) will effectively own 15-20% of the equity share capital in the JVCo. The proposal of A&E investing in the JVCo is currently being discussed between N18 and A & E. In case A&E opts to become a party to the Proposed Transaction, this Term Sheet will be superseded by a fresh term sheet executed along the same lines. In case the terms offered to A&E are more favourable than MSM then such terms have to be mutually agreed upon between N18 and MSM before N18 agrees such terms with A&E. Further, N18 will have an option to disinvest its equity in the JVCo up to (and not exceeding) 15% in favor of a potential partner (“Stake Sale”) with MSM’s express written consent. (N18, MSM and the potential partner (if any) are hereinafter collectively referred to as the “Shareholders” and individually as a “Shareholder”). 2. Investment: Total investment in the JVCo by the Shareholders during the Initial Term will be as per the mutually agreed business plan, which is INR 214 crores (the “Total Capital Investment”). Each Shareholder will have an obligation to invest in proportion to its shareholding in the JVCo up to Total Capital Investment during the Initial Term and on a schedule to be set forth in the mutually agreed business plan. If the Board (defined hereinafter) determines that the JVCo requires additional funding beyond the Total Capital Investment, such additional funding shall be met in the manner set forth below: A. If within the first three (3) years of Initial Term, the JVCo requires additional capital commitment of an amount which is not more than 30% of the Total Capital Investment, that is INR 64.2 crores (30% of INR 214 crores) which is over and above the Total Capital Investment, then such additional capital requirement shall be met in the following order of priority: a. first by way of non convertible loans from banks, financial institutions etc. and if such funding is not available, b. by way of issuance at fair market value of equity shares or securities convertible into equity shares of any type or class (“Securities”) by the JVCo, by offering such Securities to each Shareholder on a pro-rata basis and all the shareholders have to subscribe to the Securities so offered by the JVCo; B. If within the first five (5) years of Initial Term (and provided the additional capital requirements in the first three years have not exceeded 30% of the Total Capital Investment, that is an additional INR 64.2 crores over and above the Total Capital Investment), the JVCo requires additional capital commitment of an amount which is more than 30% of the Total Capital Investment, that is an additional amount greater than INR 64.2 crores, then such additional capital requirement shall be met in the following order of priority: a. First by way of non convertible loans from banks, financial institutions etc. and if such funding is not available; b. by way of issuance of Securities by the JVCo, by offering such Securities to each Shareholder on a pro-rata basis; provided that MSM shall not be obliged to participate in such issuance and provided further that MSM’s equity stake including any commensurate voting rights shall not be diluted below MSM”s shareholding at that time and neither shall MSM’s right to return of capital proportionate to the value of its shareholding prior to such issuance be reduced in any manner or form. The Parties will mutually agree to various funding options and mechanisms in the long form definitive and binding agreement which will set out how additional funding can be made by Shareholders other than MSM without diluting MSM’s shareholding if it does not participate in funding. C. If after the first five (5) years of Initial Term, the JVCo requires further capital then such additional capital requirement shall be met in the following order of priority: (i) by way of non convertible loans from banks, financial institutions, etc., (ii) by way of issuance of Securities by the JVCo, by first offering such Securities to each Shareholder on a pro-rata basis. In case a Shareholder does not subscribe to the Securities then such Shareholder’s equity stake in the JVCo will accordingly get diluted. 3. Consummation of the The following terms shall be conditions consummating the Proposed Transaction: Proposed Transaction: to 1. The Parties shall have executed the definitive (i) share subscription and shareholders’ agreement (“Share Subscription and Shareholders’ Agreement”); (ii) content license agreement, (iii) domain name acquisition agreement, and (iv) such other agreements as agreed to by the Parties to consummate the Proposed Transaction, set up the JVCo and give the JVCo the necessary rights to own, operate, exploit and manage the Platform; 2. All regulatory and corporate approvals shall have been obtained by the Parties and the JVCo (to the extent applicable); 3. Finalisation of the business plan for JVCo for the Initial Term; and 4. Such other conditions as agreed to by the Parties. 4. Name of the JVCo; The name of the JVCo will be unanimously agreed to Board of Directors and by the Parties. Officers: The nominees of the Shareholders on the board of JVCo (“Board”) shall be in proportion to their shareholding in the JVCo. The Board shall at all times consist of seven (7) directors. Initially MSM shall have two nominee Directors on the Board of JVCo. A Shareholder will have a right to nominate its director on the Board of JVCo proportionate to its shareholding as long as it holds not less than 7% Securities of the JVCo. The management and operations of JVCo will be conducted under the supervision and guidance of the Board. The Board will delegate day-to-day operations of JVCo to certain key officers of the JVCo. Subject to MSM’s approval, N18 will nominate the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) of the JVCo who will be appointed by the Board. The CEO will report to the Board and the CFO will report to the CEO. 4A. Restriction on Transfer During the Initial Term, the Parties will have an of Shares of JVCo by obligation to invest up to each of their proportionate share of the Total Capital Investment as per the agreed the Parties business plan of the JVCo and their shares will be locked-in, i.e. they cannot transfer their shares to another party (other than to an affiliate) for the entire duration of the Initial Term. After the expiry of the Initial Term, a Party can transfer its shares in the JVCo subject to the right of first refusal of the non transferring Shareholder(s) and after taking prior consent of the other Party, which consent will not be unreasonably held. Detailed provisions pertaining to the right of first refusal and the reasons on which a Party can withhold consent for transfer of shares by the other Party will be provided in the Share Subscription and Shareholders’ Agreement. 5. Licensing of Content to JVCo by the Parties and other content on the Platform: Subject to the rights available to it, each Party shall license to JVCo for its Platform long-form and shortform non-linear content. The content would include but not be limited to programmes broadcast on television channels currently owned and/or operated by the Parties (subject to rights limitations) after an agreed period of time from initial broadcast of such programmes on said television channels. The Parties will discuss the following terms in relation to the licensing of the content of channels owned and operated by it and its affiliates: 1. the term of licensing the content to the JVCo will be held till a Shareholder holds equity in the JVCo; 2. certain minimum number of hours of content to be made available to the JVCo for exploitation on the Platform shall be agreed by the Parties; 3. rights in certain number of defined marquee properties shall be made available to the JVCo for exploitation on the Platform; 4. save and except for each Party’s owned apps and websites, certain exclusive viewing window would be granted to the Platform during which the content is not made available to other similar OTT platforms. The Parties will have a right to grant the exclusive viewing windows to such Affiliates which will be listed in the long form definitive and binding agreement; and 5. 6. the license fee payable under each content license agreement shall be in accordance with the agreed business plan of the JVCo; provided however that license fee payable shall not under any circumstances be less than the percentage of revenue share that a Party receives from YouTube under content hosting agreements. The principal purpose of the JVCo will be to make nonlinear VOD content from the television channels available on the Platform. MSM and N18 hereby confirm that they (either directly or through their affiliates) own the digital rights in the content of the respective channels of the networks to which they represent and as broadly envisaged to be made available to the Platform to constitute the JVCo. For purposes of clarity, MSM represents the Sony Entertainment Network channels and N18 represents its affiliates’ channels. 6 Domain name of the Platform: For launching the Platform, the JVCo shall use the domain name ‘in.com’ at a net present value of INR 30,00,00,000. The Parties have agreed to the valuation of the domain name ‘in.com’ for it to be acquired by JVCo from N18 and/or its affiliates. NW18 will give a suitable representations and warranties in the long form definitive and binding agreement that it owns the domain name ‘in.com’ and that it will transfer the same to the JVCo. upon consummation of the long form definitive and binding agreement. 7. Sole Partner for the Business: The Parties represent that save and except for their own channel websites and apps, they (or any of their Indian affiliates) have not invested in any other OTT platform. The Parties agree that after the Proposed Transaction is consummated and while the Share Subscription and Shareholders’ Agreement is binding on the Parties, they will not invest in another OTT platform and for purposes of clarity, each Party’s owned and operated websites and apps shall always be excluded from the provisions of this Clause 7. 8. Veto Matters So long as each Shareholder effectively holds at least 20% of the paid up share capital of the JVCo, the veto matters set forth in Annexure A, hereto shall require the affirmative vote of: 1. in the case of board meetings, at least one (1) director nominated by each Shareholder; and 2. in the case of Shareholders’ meetings, by at least one (1) representative of each Shareholder. 8A Appointment of Statutory Auditors The statutory auditors of the JVCo will be one of the Big 4 accounting firms (or their Indian affiliates). In the event it is proposed that an accounting firm other than one of the Big 4 accounting firms be appointed as the statutory auditors of the JVCo, the unanimous consent of all Shareholders would be required. For the purpose of this Clause 8A, “Big 4 accounting firms” means any of the following: Ernst & Young; KPMG; Deloitte; and PricewaterhouseCoopers. 9. Confidentiality: The Parties will keep this Term Sheet and its contents entirely and strictly confidential and shall not make any announcements in connection with the same. The Parties will ensure that their respective advisors, agents and representatives shall have access to the Term Sheet on a need to know basis and such person shall keep confidential this Term Sheet and its contents. 10. Exclusivity of Negotiation: 10A. Anti-bribery laws and Compliance with Foreign Corrupt For a period of 180 days from the date of execution of this Term Sheet or such other period as may be agreed to by the Parties in writing and by way of an amendment to this Term Sheet, the Parties will not directly or indirectly engage in discussion and negotiation with any third Party in connection with setting up an OTT platform. The Parties acknowledge that in entering into the long form, definitive and binding agreement for the Proposed Transaction and any other related agreements Practices Act (“FCPA”): including the Share Subscription And Shareholders’ Agreements; content license agreement; and domain name acquisition agreement (collectively referred to as the “Contemplated Agreements”), the JVCo shall at all times be in compliance with the FCPA, including any amendments thereto. The detailed provisions pertaining to FCPA shall be detailed in the Contemplated Agreements. 11. Binding Provisions: Clause 9 (Confidentiality), Clause 10 (Exclusivity of Negotiation), Clause 12 (Expenses) and Clause 13 (Governing Law) of this Term Sheet are binding legal obligations of the respective Parties for a period of 180 days from the date of execution of this Term Sheet. In case the long form binding and definitive agreements are not executed within such period of 180 days or such other extended period as may be mutually agreed by the Parties in writing, then either Party has a right to terminate this Term Sheet forthwith by providing a written notice to the other Party. . 12. Expenses: Each Party will bear its own costs and expenses in connection with the preparation, negotiation and execution of the definitive agreements. 13. Governing Law: This Term Sheet shall be governed by and construed in accordance with the laws of India. Any disputes arising hereof shall be submitted to the exclusive jurisdiction of the Mumbai courts. [Signature Page Follows] For Multi Screen Media Private Limited For Network18 Limited Media & Investments ________________________ Name: Designation: ________________________________ Name: Designation: Annexure A Veto Matters 1. Any change to the capital structure of the JVCo, other than as set forth: in the business plan; or Clause 2, above. 2. Alteration of the provisions of the charter documents of the JVCo; 3. Reduction, redemption, buy-back or cancellation of equity shares or securities convertible into equity shares; amendment or variation to the rights of the shareholders; 4. Binding the JVCo by a scheme of arrangement or compromise under the Companies Act, 1956 or applying to a Court to wind-up the JVCo or to wind-up the JVCo voluntarily; 5. Declaration and distribution of dividends by the JVCo; 6. Changing the nature of the Company’s business activities; 7. Acquisition, sale or disposition of any material assets of the JVCo whose book or transaction value exceeds INR 10 crores otherwise than in the ordinary course of business; 8. Any decision in relation to, including the making of, an initial public offering and/or listing of the equity shares including the size of the issue, price of the equity shares; 9. Entering into any related party transaction and/or arrangement except for any transactions contemplated under this Term Sheet; or as per the business plan; 10. Creating any subsidiary of the JVCo or permitting any company to become a subsidiary of the JVCo; 11. Making loans, advances, investments or providing guarantees or security to the Shareholders or their respective affiliates, save and except any trade advances made proportionately under the Content License Agreement to the content licensors by the JVCo; 12. Borrowings and the grant of any security or guarantee with respect to such borrowing, excluding any short term financing or working capital facilities not exceeding INR 10 crores at any given time as required in the ordinary course of business; 13. Any initiation of material litigation by the company, settlement proceedings arising out of any litigation or arbitration, by the JVCo that could be reasonably expected to have a negative impact of more than 10% on the billed revenues of the JVCo; 14. Approval of the business plan and the annual budget or any part thereof or any amendments/changes thereto; 15. Any single leasing arrangements having an annual liability of greater than INR. 10 crores other than in the ordinary course of business; 16. Approvals for capital expenditure involving single annual spend beyond INR 10 crores save and except if such expenditure is included in the business plan; 17. Contracts or arrangements not in the ordinary course of business exceeding INR 10 crores; 18. Acquisition or disposal of any asset or contract or arrangement for purchase or disposal of goods or services (not in accordance with the business plan) for value exceeding INR 10 crores ; 19. Adoption of accounting policies and change therein including write offs/amortization; 20. Any repurchase or early repayment of any indebtedness in excess of INR 10 crores; 21. The assignment, novation or transfer of material business agreements; 22. Change in the registered office and decision to keep the registers and statutory documents at a place other than the registered office; 23. Approval of annual accounts, retentions or provisions not in the ordinary course of business; and 24. Any other items which may be discussed and agreed in the Share Subscription and Shareholder’s Agreement.