DISCLOSURE LETTER
This is the Disclosure Letter, as defined in the Share Purchase Agreement of even date, entered into between the SPE Mauritius Holdings Limited, SPE Mauritius Investments Limited, (collectively, Purchasers), the Shareholders listed in Schedule I and Maa Television Network Limited (the Agreement).
All capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement, dated as of the date hereof, to which this Disclosure Letter is attached.
This Disclosure Letter is being delivered to the Purchasers by the Sellers as disclosed against the Warranties of the Sellers and the Company provided in ArticlesIIIArticles III and IV of the Agreement.Such Subject to Sections 2.5(a)(i) and 11.7 of the Agreement, suchWarranties are qualified by the facts and circumstances contained or disclosed in this Disclosure Letter.
The events discloseddisclosures in this Disclosure Letter shall qualify the Warranties in the Agreement only to the extent that they are expressly affecting any particular Warranty and shall not be construed as an implied disclosure, in any manner, of any indirect consequence arising out of the events, unless specifically disclosed, and shall not dilute any other Warranty to this extent. The inclusion of an item in the information made available to Purchaser in the Data Room or in thethis Disclosure DocumentsLettershall not be deemed an indication or admission that such item is material to either Sellers or the Company, or is required by the Agreement to be reflected therein (and such inclusion shall not be deemed to establish or be considered for purposes of establishing a standard of materiality or other disclosure threshold). Without limiting the foregoing, no such references to or disclosure of a possible breach or violation of any Contract or applicable Law shall be construed as an admission or indication that a breach or violation exists or has actually occurred. Disclosure of such information will not be used as a basis for interpreting the terms “material”,“materially”, “Material Adverse Effect” or any similar qualification in the Agreement.
In no event will the disclosure of matters in this Disclosure Letter be deemed or interpreted to broaden the Company’s representations or warranties, obligations, covenants, conditions or agreements contained in the Agreement. The headings contained in this Disclosure Letter are solely for convenience of reference and shall not affect the meaning or interpretation of this Disclosure Letter, the Agreement or of any item, term or provision hereof or thereof.
DISCLOSURES:
Specific disclosures:
The following are the disclosures that are made in relation to the Warranties contained in the Agreement as given by the Sellers and the Company.
S. No. / Section of Agreement / Warranties / Disclosure3.12 / Each Seller has filed all Tax returns timely and there are no Tax demands outstanding (disputed or otherwise) and/ or likelihood of Tax demand arising in respect of any Tax matters pertaining to any period up to the date of transfer of Purchased Shares to the Purchasers. / Please see Section 3.12 of the Disclosure Letter.
4.5 / Except as set forth in Section 4.5 of the Disclosure Letter, there are no Proceedings pending or, to the Knowledge of the Sellers or the Company, threatened, against the Company or the MAA Business; and no Orders have been issued against the Company or the MAA Business. / See Annexure 1 Section 4.5 of the Disclosure Letter sets out the proceedings pending or, to the Knowledge of the Sellers or the Company, threatened, against the Company or the MAA Business and Orders that have been issued against the Company or the MAA Business. [Note: Please delete numbers 6 and 14 as these have been settled/disposed of.]
4.6 (b) / (i)The Company has all Consents of any Governmental Authority that are necessary for the conduct of its business or the ownership of its Assets; (ii)such Consents are in full force and effect; and (iii)no violations are or have been recorded in respect of any such Consent. / The Downlink Licenses for 3 Channels i.e. “Maa Movies”, “Maa Music” and“MaaJuniorGold” are due for renewal on 9 October2012October 2012. The Company has submitted the renewal applications along with necessary filing fees and supporting documents with the Ministry of Information & Broadcasting and is awaiting receipt of the renewed licenses.
4.8 (b) / Section4.8(b) of the Disclosure Letter sets forth an accurate and complete list of the holders of the Share Capital of the Company (including Options) and, opposite the name of each holder, the amount of all outstanding Share Capital owned by such holder. / Section 4.8(b) of the Disclosure Letter sets out the holders of outstanding Shares.
4.8 (b) / Except as set forth in Section4.8(b) of the Disclosure Letter, there are no options, warrants, conversion privileges, subscription or purchase rights or other rights presently outstanding to purchase or otherwise acquire any Share Capital of the Company, and there are no commitments, contracts, agreements, arrangements or understandings of any kind by the Company to issue any Share Capital of the Company. / Please see Annexure 2.Section 4.8(b) of the Disclosure Letter sets out the options issued by the Company.
4.10 (a) (i) / any Contract that the Company reasonably anticipates will involve individual or aggregate payments or consideration of more than the Rs. equivalent of $200,000 in the calendar year ending 31 December2012 or any subsequent year for goods and services furnished by the Company / Please see Annexure 3.Please see Section 4.10(a)(i) of the Disclosure Letter. [Note: The contracts with Sri Dhana Media, V2k Media works do not exceed approximate Rs. equivalent of $200,000. Please review and delete if appropriate]
4.10 (a) (ii) / any Contract relating to Indebtedness of the Company / Please see AnnexureSection 4.10(a)(ii) of the Disclosure Letter.
4.10 (a) (iii) / any Contract relating to the title to, or ownership, lease, use, sale, exchange or transfer of, any leasehold or other interest in any real or personal property; / Please see Annexure 5.Please see Section 4.10(a)(iii) of the Disclosure Letter. [All are leases. Please confirm that Maa doesn’t own any properties]
7. / 4.10 (a) (v) / any Contract under which the Company would incur any change-in-control payment or similar compensation obligations to its employees in connection with the Contemplated Transactions (including the Share Buyout) / Please see Annexure 6.
4.10 (a) (vi) / any stock option, stock purchase, stock appreciation or similar plan / Please see Annexure 7. [Note: The prior disclosure (4.10(a)(v)) was deleted because the ESOP is being amended such that there will not be a change in control payment] Please see Section 4.10(a)(vi) of the Disclosure Letter.
4.10 (a) (vii) / any Contract under which the Company has advanced or loaned an amount to any Person, other than trade credit and travel advances in the ordinary course of business consistent with past practice / Please see Annexure 8.Section 4.10(a)(vii) of the Disclosure Letter.
4.10 (a) (ix) / any employment, severance, retention, non-competition or separation Contract with any current or former director, officer, employee or consultant of the Company where the total Liability of the Company for each such Contract will involve individual or aggregate payments or consideration of more than the Rs. equivalent of $ 100,000 in the calendar year ending 31 December2012 or any subsequent year / Please see Annexure 9.Employment contract of COO contemplates payment of an annual salary of Rs. 70,00,008.
4.10 (a) (x) / any Contract which will substantially limit the Company’s ability to compete in the MAA Business in India or that provides for “most favored nations” terms or establishes an exclusive sale or purchase obligation with respect to any product or any geographic location / Please see Annexure Section 4.10.(a)(x) of the Disclosure Letter..
4.10 (a) (xi) / any Contract with any current or former officer, Director, Shareholder or Affiliate of the Company, with any family member of any of the foregoing, or with any Affiliate of any such family member / Please see Annexure 11Section 4.10(a)(xi) of the Disclosure Letter.
4.10 (a) (xviii) / any Contract that provides a termination right or other right in favor of the counterparty upon a change-in-control of the Company or otherwise as a result of the Contemplated Transactions / Please see Annexure 12.Please see Section 4.10(a)(xviii) of the Disclosure Letter. [Please provide copies of the Unitech and Viamcom contracts, which were not disclosed during diligence]
4.10 (a) (xix) / Any Contract under which by virtue of the Contemplated Transactions, (i) the Company is likely to be in default or lose any benefit, right or licence which it currently enjoys or (iii) a Liability or obligation of the Company is likely to be created or increased / Please refer to disclosure against sectionsee Section 4.10 (a) ()(xviii) above and Annexure 12of the Disclosure Letter.
4.10 (c) / All Material Contracts are in effect, have been duly authorized by all necessary corporate action of the Company and have been duly stamped and registered in accordance with applicable Law (if required). The Company is in full compliance with Section 297 of the Act / (1) Stamp Duty: All the Material Contracts for movies, serials, programmes, events, syndication, distribution, VAS of the Company required to be stamped are insufficiently stamped, except the Material Contracts listed in Annexure 13.Section 4.10(c) of the Disclosure Letter.
(2) Stamp Duty and Registration: All the Material Contracts for the lease of the Company’s properties required to be stamped and registered are insufficiently stamped and not registered, except the following Material Contracts:
- Leave and License Agreement dated 7 July 2012 for Mumbai office No. 205/206
- Leave and License Agreement dated 22 March 2012 for Mumbai office No. 202
[Please provide disclosure as to the financial exposure (in terms of Rs) that the failure to stamp has created]
4.10 (f) (ii) / There are no agreements or understandings to which the Company is a party or is bound which (i) grant direct or indirect management, operational or voting rights or economic interest in the Company to any third Person including any power of attorney; or[…] (ii) provide for the sharing of the revenue of the Company with any third party / Please see Annexure 14.The contracts set out in Section 4.10(f)(ii) of the Disclosure Letter provide for the sharing of the revenue of the Company with third parties [Note: please provide details of the contracts]
4.11 (b) / The Company does not own or lease Assets in any jurisdiction other than India / Please see Annexure 15Section 4.11(b) of the Disclosure Letter.
4.11 (f) / The Company is in actual possession and/or control of all its Assets andto the Knowledge of the Sellers or the Company there are no circumstances which might result in any Governmental Authority seizing, attaching or expropriating any such Assets / Decoders along with Smart Cards (subject to reconciliation) are lying with MSOs/Cable Operators for getting the signals of Maa Network Channels. There are 23,000 such Decoders and the book value for the same is Rs.293.42 Lakhs as on 30 June 2012.
4.12 (a) / Except as disclosed in Section 4.12(a) of the Disclosure Letter, all Tax Returns required to be filed by or with respect to the Company or the MAA Business have been filed in accordance with applicable Law and are complete in all respects, the contents of all Tax Returns are accurate and adequate disclosures have been made therein. The Company has and continues to maintain adequate documentation in respect of claims made in the Tax Returns. Neither the Sellers nor the Company has received notice of any intention to re-open any closed assessments of the Company or the MAA Business, as the case may be, for any Tax period in respect of which Tax Returns have been filed / (1)Approval for “Maa TV Employees Group Gratuity Assurance Scheme”, administered by ‘Life Insurance Corporation Of India’ is pending with Income Tax Department. As such annual returns of the gratuity trust yet to be submitted.
(2) Income Tax refund of Rs.23,03,551/- for the Assessment Year 2008-09 pending with the Income Tax Department. [ Note: This disclosure is not relevant to the representation]
20. / 4.12 (l) / Except as disclosed in Section 4.12(l) of the Disclosure Letter, no director or officer of the Company has within the previous three years paid or become liable to pay, and there are no circumstances by reason of which the Company or such director or officer may become liable to pay to any Tax Authority, any penalty, fine, surcharge or interest in respect of Tax / [The personal Income Tax issues of any director or officer has no bearing on Maa Business, hence Company is not aware of the same.]
4.14 (a) / Section4.14(a) of the Disclosure Letter sets forth a correct and complete list setting forth the name, position, job location, primary place of residence, salary or wage rate, commission status, bonus opportunity, date of hire, full- or part-time status, for each employee of the Company as of the Signature Date / Please see Annexure 16Section 4.14(a) of the Disclosure Letter.
4.14 (e) / Section4.14(e) of the Disclosure Letter sets forth a correct and complete list of the Company Plans. The Company has no unfunded outstanding Liabilities to any employee-related fund or scheme, including those relating to pension, provident fund, medical aid, retirement or any other employee emoluments in respect of past or present employees / Please see Annexure 17.Please see Section 4.14(e) of the Disclosure Letter. [Note: Please provide only a list of the Company Plans in Annexure 17/Section 4.14(e) rather than attaching copies.]
4.16 (b) / Section4.16(b) of the Disclosure Letter sets forth a correct and complete list of (i)all Owned Intellectual Property that is registered, issued or the subject of a pending application, and (ii)all unregistered Owned Intellectual Property. All of the registrations, issuances and applications set forth on Section 4.16(b) of the Disclosure Letter are valid, in full force and effect and have not expired or been cancelled, abandoned or otherwise terminated, and payment of all renewal and maintenance fees, costs and expenses in respect thereof, and all filings related thereto, have been duly made. The Company owns and possesses all right, title and interest in and to the Owned Intellectual Property free and clear of all Encumbrances / Please see Annexure 18Section 4.16(b) of the Disclosure Letter.
4.16 (c) / Section4.16(c) of the Disclosure Letter sets forth a correct and complete list of all material Contracts (i)pursuant to which the Company use any Licensed Intellectual Property, or (ii)pursuant to which the Company has granted to a third party any right in or to any Owned Intellectual Property (collectively, the “IP Licenses”). Prior to the Signature Date, the Purchasers either have been supplied with, or have been given access to, a complete copy of each written IP License, together with all amendments, supplements, waivers or other changes thereto. The Company is not in material breach, violation or default under any IP License and no event has occurred that, with notice or lapse of time or both, would constitute such a material breach, violation or default by the Company, or, to the Knowledge of the Sellers and the Company, the other parties thereto. / Please see Annexure 19 and Annexure 20Section 4.16(c) of the Disclosure Letter.
4.16 (d) / The conduct of the MAA Business does not infringe or otherwise violate any Intellectual Property or other proprietary rights of any other Person, and, other than as set forth in Section 4.16(d) of the Disclosure Letter, there is no Proceeding pending or, to the Knowledge of the Sellers and the Company, threatened alleging any such infringement or violation or challenging the Company’s rights in or to any Company Intellectual Property and, to the Knowledge of the Sellers and the Company, there is no existing fact or circumstance that would be reasonably expected to give rise to any such Proceeding. To the Knowledge of the Sellers and the Company, no Person is infringing or otherwise violating any Owned Intellectual Property or any rights of the Company in any Licensed Intellectual Property / Please refer to disclosure against section 4.5 above and Annexure 1.Section 4.5 of the Disclosure Lettersets out the proceedings pending or, to the Knowledge of the Sellers and the Company, threatened alleging any such infringement or violation or challenging the Company’s rights in or to any Company Intellectual Property.
4.16 (f) / All films acquired by the Company have been duly completed, released and suitable prints of the films have been obtained by the Company / Please see Annexure 21.Please see Section 4.16(f) of the Disclosure Letter for details of the prints that are not suitable or have not been delivered.
4.16 (g) / The Licensed Intellectual Property will not be lost or rendered liable to termination, by virtue of the Contemplated Transactions / Please refer to disclosure against sectionSection 4.10 (a) (xviii) above and Annexure 12.Section 4.10(a)(xviii) of the Disclosure Letter.
4.17 (a) / A true and complete list and description of all Real Estate leased or licensed by the Company is set forth in Section 4.17(a) of the Disclosure Letter. The Company holds a valid leasehold or license interest as lessee under leases in full force and effect in all Real Property used in connection with its respective business or otherwise leased by it, free and clear of any Encumbrances, other than those created or imposed in the ordinary course of business / Please refer to disclosure against section 4.10 (a) (iii) above and Annexure 5.Section 4.10(a)(iii) of the Disclosure Letter sets of the leases that the Company has entered into. None of the leases/licenses agreements for immoveable property except the following are stamped or registered in accordance with applicable law
- Leave and License Agreement dated 7 July 2012 for Mumbai office No. 205/206
- Leave and License Agreement dated 22 March 2012 for Mumbai office No. 202
4.17 (d) / All agreements in respect of Real Estate leased or licensed by the Company are duly stamped and registered, where applicable / Please refer to disclosure against Section 4.10 (c).None of the leases/licenses agreements for immoveable property except the following are stamped or registered in accordance with applicable law
- Leave and License Agreement dated 7 July 2012 for Mumbai office No. 205/206
- Leave and License Agreement dated 22 March 2012 for Mumbai office No. 202
4.18 (a) / The Company, its businesses and material Assets are insured under policies set forth in Section 4.18(a) of the Disclosure Letter, all premiums due in respect of such insurance policies have been paid and the Company has complied in all material respects with the conditions to which the Liability of such insurers under the insurance policies are subject / Please see Annexure 22.Section 4.18(a) of the Disclosure Letter sets out the insurance policies obtained by the Company that are existing and valid.
4.19 (a) / Section 4.19(a) of the Disclosure Letter sets forth a true, correct and complete list of all of the Company’s Affiliates and description of their relationship to the Company / Please see Annexure 23Section 4.19(a) of the Disclosure Letter.
4.19 (b) / Section 4.19(b) of the Disclosure Letter sets forth a true, correct and complete list of all of the Related Party Agreements. / Please refer to disclosure against sectionSection 4.10 (a) ()(xi) above and Annexure 11of the Disclosure Letter.
4.23 / To the Knowledge of the Sellers, there is no fact that the Sellers or the Company has not disclosed to the Purchasers in writing which materially adversely affects or insofar as the Sellers can reasonably foresee could materially adversely affect the Condition of the Company or the ability of the Sellers or the Company to perform their respective obligations under this Agreement, any of the other Transaction Documents or any other document contemplated hereby or thereby. / (1) The Company has given an amount of Rs.50,00,000/- (Rupees Fifty Lakhs Only) to M/s.SnehaChitra Pictures, vide agreement dated 18November18 November2011. As on date the total amount recoverable from them including interest is Rs.52,38,648/- (Rupees Fifty Two Lakhs Thirty Eight Thousands Six Hundred and Forty Eight Only). This amount can be recovered either by way of cash or through acquisition of satellite rightsof their future films.
(2)The Company has given an amount of Rs.1,00,00,000/- (Rupees One Crore Only) to M/s.SreeKeerthi Creations, vide agreement dated 14 December2007 and recovered an amount of Rs.29,60,600/- (Rupees Twenty Nine Lakhs Sixty Thousands Six Hundred Only). As on date the total amount recoverable from them is Rs.79,39,400/- (Rupees Seventy Nine Lakhs Thirty Nine Thousands Four Hundred Only).This amount can be recovered through acquisition of the satellite rights of their future films.
[Please provide more detail on these including copies of the agreements. Why were these advances made? What are the terms of the agreements? ]
4.24 / In relation to each instrument to which the Company is a party or in the enforcement of which the Company may be interested and which attracts stamp duty in any relevant jurisdiction, (a) such instrument, if required by the Tax Authority to be produced, has been produced to the relevant Tax Authority, (b) such instrument, if stamp duty is payable on such instrument, has been stamped and (c) the Company has duly paid all interest, fines and penalties thereon payable by it in accordance with the provisions of any applicable Law. / Please refer to disclosure against section 4.10 (c) above and Annexure 13.All the Material Contracts for movies, serials, programmes, events, syndication, distribution, VAS of the Company required to be stamped are insufficiently stamped, except the Material Contracts listed in Section 4.10(c) of the Disclosure Letter.
(2) Stamp Duty and Registration: All the Material Contracts for the lease of the Company’s properties required to be stamped and registered are insufficiently stamped and not registered, except the following Material Contracts:
- Leave and License Agreement dated 7 July 2012 for Mumbai office No. 205/206
- Leave and License Agreement dated 22 March 2012 for Mumbai office No. 202
35. / [Mr.Rao to provide the Seller Warranties’ disclosures]
General Disclosures: