Proposed Partnership with the Apollo Foundation

Proposed Partnership with the Apollo Foundation

July 26, 2009

Mr. Sean Puffy Combs

a/k/a P Diddy

1234 Ciraque Lane

New York, NY

Dear P Diddy:

This letter when signed by you (“P. Diddy”) and by South Africa Broadcasting Corporation, (“SABC”) shall indicate the intent of P. Diddy and SABC to form an entity (“Newco”) that will launch and operate “HIP HOP SPACE”, a new satellite channel that will target the hip hop and urban audience (“Business”).

1.Overall Structure: Newco will be owned by P. Diddy and SABC in the following ratios:

P. Diddy70%


The purpose and structure of Newco and the Business is set forth in the attached Confidential Term Sheet, and it is anticipated by both P. Diddy and SABC that Newco and the Business will be properly documented in definitive agreements.

2.Negotiations: P. Diddy and SABC agree to negotiate in good faith the terms of the Business and acknowledge that P. Diddy may terminate the negotiations in writing at any time and for any reason provided that for a period of sixty days following the termination of negotiations,SABC shall not enter into negotiations with any third party, directly or indirectly, or furnish information to a third party with respect to a similar project.

3.Confidentiality: P. Diddy and SABC agree that in order to negotiate the formation of Newco, they shall provide each other (the provider of such information being the “Provider”) certain valuable and confidential information, whether in written or oral form, regarding their respective businesses, subscribers/customers, properties, services, operations, plans and strategies (financial, strategic, marketing and otherwise), including but not limited to, trade secrets, know-how, and all ideas or data relating to the Provider and its businesses, together with all analyses, compilations, forecasts, reports, studies, market analyses or other documents commissioned by or for Provider (the "Information"), andP. Diddy and SABC agree to keep confidential such Information and not directly or indirectly disclose to any other person or entity any or all of the Information without Provider’s prior written consent. Notwithstanding the foregoing, each party may disclose the information to such party’s attorneys, accountants, officers, employees, consultants, and advisors only to the extent that such disclosure is reasonably required to facilitate this transaction.

4.Governing Law: This letter of intent and the attached term sheet shall be governed by the laws of New York, United States of America without regard to otherwise applicable principles of conflicts of laws or choice of law rules of that or any other jurisdiction that would result in the application of the substantive or procedural laws or rules of any other jurisdiction except that federal law shall apply to the extent relevant..

5.Non Binding. This letter is shall be non binding, except Paragraphs 2 and 3 above shall be binding. This letter constitutes the entire understanding and agreement between P. Diddy and SABC with respect to the Business and the formation of Newco, and supersedes all prior agreements, representations, warranties and understandings of P. Diddy and SABC.

If you are in agreement with the terms and conditions outlined above and contained in the attached ConfidentialTerm Sheet, please sign below and return a copy of this letter to our attention. Given the nature of this proposed transaction, this letter together with the attached Confidential Term Sheet will be subject to, among other things, final internal approvals and the negotiation, preparation and mutual execution of definitive agreements containing such terms and conditions as are customarily included in agreements of this nature.

Yours truly,

Jazzy J. Fresh

Attorney for P. Diddy



Authorized Signatory


This confidential term sheet (“Term Sheet”) summarizes the principal terms and conditions with respect to the potential formation of a company (“Newco”) whose owners will be P. Diddy (“P. Diddy”) and South Africa Broadcasting Company (“SABC”) and is attached to and incorporated by reference in that letter of intend dated July 26, 2009 between P. Diddy and SABC (“Letter Statement”). This Term Sheet is non binding and intended solely as a basis for further discussion between P. Diddy and SABC. For greater clarity, except to the extent set forth otherwise in the Letter of Intent, no binding obligations on P. Diddy or SABC will be created, implied or inferred until more complete and customary agreements are executed by both P. Diddy and SABC. In addition, efforts by either party to complete due diligence, negotiate, perform valuations, obtain financing or prepare agreements for execution shall not be considered as evidence of intent by either party to be bound by this Term Sheet or otherwise.

P. Diddy and SABCanticipate the formation of Newco and the operation of its business on the following terms:

1.General: Newco will be a limited liability company formed under the laws of South Africa.

2.Purpose of Newco: Newco will be organized for the purpose of launching, owning and operating a television satellite channel to target the hip hop and urban audiences, which will be known as HIP HOP SPACE. Newco shall only engage in activities and transactions that are necessary to launch, own and operate HIP HOP SPACE. It is anticipated that HIP HOP SPACE will launch as SABC 4. It is further anticipated that after launch AS SABC 4, HIP HOP SPACE will be further distributed using broadband technology and other platforms such as Video on Demand (VOD), cell phone and PDAs.

3.Principal Office: Newco shall be located at 2551 Strand Street, Cape Town, South Africa.

4.Management of Newco: Newco shall be managed by a board of managers (the “Board”). The Board shall consist of 5 managers, three of whomshall be designated byP. Diddy and two of whomshall be designated by SABC. An operating agreement (“Operating Agreement”) betweenP. Diddy and SABC shall set for the rights to elect the Board and the management powers of the Board and the Members.

5.Business Plan: Prior to the formation of Newco, P. Diddy and SABC will prepare and agree to adhere to a mutually agreed upon business plan for the first 5 years of operation of the Business.

6.Matters Requiring Consent: The following shall be subject to the consent of all of the Members and action shall only be taken following a resolution duly adopted by a unanimous vote or written consent of the Members:

(a)The approval of any agreements, documents or other arrangements between or involving Newco and P. Diddy, SABC or any member or their affiliates

(b)The removal of a manager other than by the party which designated the manager to be removed;

(c)The approval of the appointment of the members to any committee established by the Board;

(d)The terms of any employment agreements and /or compensation terms with officers of Newco, as well as the appointment, removal or change of any officer of Newco;

(e)The approval of, and amendment to, the business plan or any budgets, assessments or financial plans;

(f)The approval of agreements providing for the payment or receipt in excess of One Million Rand;

(g)Any changes to the Operating Agreement or the Bylaws of Newco;

(h)The merger into or with or acquisition of all or part of the business of another person or entity;

(i)The liquidation, dissolution, winding up or voluntary bankruptcy of Newco;

(j)Any material change in the business of Newco or new business initiatives outside the scope of the Business;

(k)The issuance, purchase or redemption by Newco of any securities of Newco and any change, increase or reduction in the capitalization of Newco;

(l)The sale of membership interests in, or any type of equity interest in, Newco of the Business;

(m)The sale of all or substantially all of the assets of Newco or the Business; and

(n)The entering into an agreement of transaction which is not in the usual and ordinary course of the Business.

7.Officers: The Board shall select the officers of Newco with the exception of the President by a majority vote. The President of Newco shall be selected by a unanimous vote of the Board. It is agreed that the initial President of Newco shall be L’il Kim.

8.Initial CapitalContributions and Ownership: Upon execution of, and pursuant to the terms of the Operating Agreement, SABCshall contribute cashfor a total funding commitment of Fifty Million Rand (R50,000,000) to Newco inconsideration of its membership interestsin Newco (“Total Funding Commitment”). The Total Funding Commitment shall be paid as follows: an initial cash contribution of Twenty Million Rand (R20,000,000) shall be paid in full upon execution of the Operating Agreement (“Initial Cash Contribution”) and the balance shall be paid in subsequent cash contributions that will be made conjunction with the cash requirements of the Business Plan and upon receipt of notice from the Board outlining the amount of each required subsequent cash contribution (“Additional Cash Contribution”). For greater specificity, the Initial Cash Contribution and each Additional Cash Contribution shall be applied against, and reduce (on a rand for rand basis), SABC’s Total Funding Commitment. P. Diddy shall cease the launch and operation of the proposed hip hop channel “HIP HOP SPACE”, a joint venture between P. Diddy and MNET (“MNET Venture.”) In addition, P. Diddy will contributethe trademark and trade name HIP HOP SPACE, as well as all of the assets of the MNET Venture, including but not limited to all footage, productions, talent and host agreements and sponsorships and promotions (“P. Diddy Contribution”). The value of P. Diddy’s contribution will be determined by a valuation performed by Bear Sterns, or other such company that P. Diddy and SABC select that specializes in the valuation of new media businesses. The cost of such valuation shall be borne by Newco. However in the event that Newco is not formed, and the parties do not establish the Business, the cost of the valuation shall be borne equally by P. Diddy and SABC. The P. Diddy Contribution shall equal a value of not less than Ten Million Rand (R10,000,000) to Newco membership interests in Newco. The total membership interests in Newco shall be 1,000 in consideration for P. Diddy and SABC’s separate membership interests. In consideration for the contributions outlined above, P. Diddy and SABC shall receive the following membership interests:

P. Diddy70% of total Membership Interests

SABC, LLC30% of total Membership Interests

9.Additional Capital Contributions: Additional capital contributions shall be made by P. Diddy and/or SABC only upon a unanimous vote of the Members. If upon a vote of the Members approving additional capital contributions, either party fails to make such additional capital, such party shall be deemed to be in default and the failure to cure the default within five business days of notice of the defaulting party shall (a) lose its ability to make additional capital contributions; (b) lose its representation on the Board; and (c) automatically forfeit its Membership Interests.

10.Restrictions on Competition: Neither P. Diddynor SABC or any of theiraffiliates will compete with Newco either directly or indirectly in the following areas: the creation and operation of a television network or non linear channel that focuses on the hip hop culture.

11.Transfer of Interests:Except as provided for below, without the prior written consentof the other party, neither P. Diddynor SABC, nor any of their assignees or successors in interest shall sell, assign or otherwise transfer any interest in Newco.

12.Deadlock Events: If a majority of the Board of Newco can not agree on any material business or management issue arising out of the Business, a deadlock will be deemed to exist (the “Deadlock”). Upon the occurrence of a Deadlock, either party may:

(a)Submit the matter to bindingarbitration; or

(b)Exercise the BuySell Option set forth below.

13.Buy-Sell Option: Where a Deadlock exists or certain other instances to be detailed in the definitive documents, exists then a party shall have the right to exercise a buy-sell option (the “Buy-Sell Option”), where the electing party would be required to designate a price at which it would be willing to sell its interest or to purchase the other party’s interest in Newco, and the non-electing party would have the option to buy or sell such interest at that price.

14.Representations and Warranties: P. Diddy and SABCwill represent and warrant as follows:

(a)Each party has the authorization to enter into the Business and to perform the obligations contained therein;

(b)Theexclusive ownership of the assets being contributed to Newco are free of any lien, security interest, infringement, or adverse claim;

(c)Any statements regarding the value of any assets being contributed to Newco are accurate;

(d)Such other representations and warranties concerning the contribution, business, liabilities, and good standing of the parties; and

(e)Such other representations and warranties typically obtained in transactions of this type. The parties will agree to indemnify and hold harmless Newco and the other party for any losses or liabilities arising from any breach of a representation or warranty.

15.Key Employee: Newco will enter into an Employment Agreement and Confidentiality Agreement with Will P. Diddy (“Key Employee”) containing substantially the following terms:

(a)Fifteen (15) year term.

(b)Base salary of Five Hundred Thousand Rand (R500,000) yearly.

(c)Bonus (if any) as determined by the Board of Newco.

(d)Confidentiality and assignment to Newco of all projects and intellectual property created during the term.

(e)P. Diddy will be responsible for the creative direction of Newco and will be responsible for heading all advertising sales for Newco.

16.Provisions of Services by SABC: Pursuant to an Administrative Services Agreement to be entered into between Newco and SABC, SABC shall provide the following services to Newco:

(a)Accounting and book keeping services;

(b)Legal and rights clearances;

(c)Operational and technical support;

(d)Marketing support, including where applicable the use of SABC’s television channel;

(e)Programming and creative consultation.

Pursuant to the Administrative Services Agreement, Newco will reimburse SABC for the agreed upon services at an agreed upon rate. Further, SABC will be compensated for the use of its facilities by Newco.

17.Conditions to Closing:

(a)Truth and accuracy of representations and warranties and performance of all obligations by the parties;

(b)Satisfactory conclusion of due diligence investigation by SABC of DOD;

(c)Satisfactory valuation of DOD;

(d)Receipt of satisfactory opinions of counsel;

(e)Agreement on Business Plan;

(f)Finalization and execution of all documents and agreements in form and substance satisfactory to the parties, including but not limited to the Employment Agreement with P. Diddy and the Administrative Services Agreement with TV One;

(g)No litigation or governmental proceeding pending or threatened;

(h)Approval of the Boards of Managers of SABC; and

(i)Other customary conditions.

20.Expenses: Each party shall bear its own legal fees and expenses in connection with this transaction.

21.Proposed Schedule: The expected time schedule is as follows:


First Draft of Definitive Agreements______

Approval by Board of Directors______

Regulatory Filings______

Signing Definitive Agreements______

Closing Date______