We have been instructed by ............ (the "CLIENT") to carry out a legal diligence in relation to: (i) the acquisition by the Company (initially incorporated under the name ............) of ............, ............, ............ and ............ (together the "Acquisition Targets" and individually "Acquisition Target"), and (ii) the indirect acquisition by the Client of ………………… Group (consisting of the Company, ............, ............, ............, ............, ............, ............, ............, ............ and the Acquisition Targets) (together (i) and (ii) are referred to as the "Contemplated Transaction").

This due diligence report (the "Report") contains the results of the legal diligence conducted by [law firm]. The Report is organised as follows:

Section A: Executive Summary provides a concise overview of our key findings related to the Company, and indicates our assessment of the risks related to them and our suggestions concerning the way of addressing those risks.

Section B: Specialist Reviews describes the facts that we have established in the course of our due diligence review and contains our comments and legal conclusions with respect to those facts.

Section C: Appendices contains (i) a list of defined terms used throughout the Report, (ii) summary sheets of important documents reviewed by us in course of our due diligence exercise, and (iii) a list of all source documents provided for the purpose of this Report. Please note that as of the date hereof the list under paragraph (iii) of the foregoing sentence is not finalised by the Company; after the finalisation of the list it will be attached to this Report.

Capitalised terms used in the Report have the meaning specified in Appendix 1 hereto.

This Report is for the sole benefit of the Client and it may not be relied upon by any other person, firm or company whatsoever, except as may be expressly agreed by us. It may, however, be provided to the Client's financial and legal advisors in connection with the Contemplated Transaction, solely for their information.

Scope of Review

This Report was prepared by reference to and within the scope determined in Fee Proposal Letter dated DD/MM/YYYY.

The purpose of this Report is (i) to describe briefly though thoroughly the findings of our legal review, (ii) to highlight any issues that in our view may affect the Contemplated Transaction, and (iii) to assist the Client in identifying the relevant representations and warranties, indemnifications and/ or conditions precedent for the transaction documents envisaged for the Contemplated Transaction.

Method

Our review has been limited to: (i) the documents as disclosed to us by the Company in response to our written due diligence questionnaire, (ii) the verbal information provided by the Company; (iii) our independent enquiries in all public registries located in Sofia. The documents were made available to us within the period from DD/MM/YYYY until DD/MM/YYYY. A comprehensive list of all list of all source documents provided is annexed to this Report.

General

We have not reviewed those matters, which we consider to fall outside the scope of our assignment, and which are subject to review by other advisors to the Client in connection with the preparation of their respective reports with a view to the Contemplated Transaction. In particular, we have not reviewed financial, taxation or accounting matters and any operational, technical or actuarial matters.

This Report concerns only matters in relation to the laws of Bulgaria. Some of the reviewed documents are governed by the laws of other jurisdictions and this Report may include certain factual information from such review. We do not accept any responsibility for matters relating to or arising under the law of any other jurisdictions.

Basis and Limitations of the Review

The Report does not contain descriptions of each document reviewed. We have only identified and discussed those documents and issues, which we regard as being material in the context of the Contemplated Transaction.

We have sought additional information and clarifications from the Company's officers and legal counsels and this Report has been prepared solely on the basis of the documents provided and the verbal information obtained. Apart from inquires to the public registries located in Sofia (i.e., commercial registry with Sofia City Court; all public registries of granted individual licences and registrations under general licences maintained by the Communications Regulation Commission; all public registries of granted individual licences and registrations maintained by the Council of Electronic Media; the real estate registry with the Sofia Regional Court; the Central Pledge Registry; Bulgarian Patent Office; the web site of the Commission on Protection of Competition; and the web site of the Bulgarian Supreme Administrative Court) no independent verification of the information provided to us has been sought.

We have not sought or received confirmation, information or clarifications from the counter‑parties to the agreements or arrangements to which any member of ………… is a party, nor from any other third party, as to the status of such agreement or arrangement, the relationship between the parties thereto or otherwise.

To the extent that the Report contains information from agreements with third parties subject to confidentiality undertakings, breach of such undertakings may entitle such third parties to terminate the relevant agreement and/or claim damages in respect of the breach.

Assumptions on the documents received and verbal information provided

Our review of documents received and verbal information provided has been conducted on the following basis:

· Except where stated to the contrary herein, we have assumed the accuracy and completeness of the documents received and any documents referred to in the documents received, and that no relevant document, information or arrangement has been withheld from us.

· Except where stated to the contrary herein, we have assumed that each of the documents received is in full force and effect and, save where expressly brought to our attention, has not been terminated or amended.

· Except where stated to the contrary herein, we have assumed all documents received in the form of copies conform to the originals and that all signatures and company seals are genuine.

· Except where stated to the contrary herein, we have assumed that each contracting party to a document received has the right, power and authority and has taken all action necessary to execute and deliver, and to exercise its rights and perform its obligations under, the relevant document receive.

· Except where stated to the contrary herein, we have assumed that the documents received were, when provided, as current as possible at the time of our review and that no material changes had occurred or were envisaged.

· Where verbal information was provided to us, we have relied on its completeness and accuracy.

We note further that the following matters of Bulgarian law may affect existing legal relationships:

· Under Bulgarian law, any power of attorney is revocable;

· Under Bulgarian law, any contract for an indefinite period may be terminated;

· Upon bankruptcy, all debts of the bankrupt debtor become immediately due and payable;

· Good faith reliance on ownership of real property by virtue of an entry in Real Estate Registry is not finally dispositive to assure that an acquirer has or obtains good title; under Bulgarian law, courts always have the right to examine the validity of prior transfers, to conclude that there exists a defect in title;

· Any assignment of rights and title transfers between Bulgarian entities for no consideration may constitute non-monetary income or benefits subject to corporate or gift tax.

Should you have any queries concerning any of the information contained in this Report, please contact the following attorneys:

Yours faithfully,

legal review report

PART A: EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Issue Related to: CORPORATE STATUS	Specific Description of Identified Issue	Potential Risks Related to the Identified Issue	Recommended Ways of Addressing the Concerns in the Transaction Documents
	The Company: the Date Room does not contain certificate from the registration court evidencing that the Company is not into bankruptcy proceeding.	Uncertainty as to the fact whether a bankruptcy proceeding is initiated against the Company.	Representation and warranty of the seller to the effect that no bankruptcy proceeding is initiated against the Company.
	The Company: the Date Room does not contain copies of: (i) interim share certificates (together with all relevant endorsements) previously cancelled; (ii) decisions of the board of directors for cancellation of interim share certificates and for the issuance of new ones. Furthermore, the pledge over certain shares created in favour of [bank] was not deleted properly.	Uncertainty as to the good and clear title over the shares held by the current shareholders in the capital of the Company.	Conditions precedent ("CP" or "CPs") to closing should be included to the effect that: (i) the Company's board of directors has taken valid decision for cancellation of all current interim share certificates and issuance of new in place of the cancelled ones; (ii) the Company has taken possession over all interim share certificates (together with all endorsements and attachments thereto) previously cancelled or cancelled pursuant to paragraph (i); (iii) the Company has obtained statements from the former owners of the shares confirming that those shares were duly and validly endorsed to the existing shareholders (only if the CP under paragraph (ii) can not be satisfied), and (iv) the Company has obtained endorsements from [bank] for deletion of the pledges created on certain shares of the Company.
	The Company and Subsidiaries: election and dismissal of directors (including executive director) and/ or general managers is subject to registration in the commercial registry and is effective vis-à-vis third parties as of the registration.	If on the closing date the seller's directors/ general managers are registered in the commercial registry they may create liabilities on the Company.	Though should be given whether the CPs to closing and/ or the closing mechanics in the SPA should regulate the process of dismissal of the seller's directors/ general managers and the appointment of the buyer's directors/ general managers so that as of the closing date the buyer's directors/ general managers are duly registered in the commercial registry.
	Subsidiaries: the Data Room does not contain certificates for lack of liquidation and/ or bankruptcy proceedings with respect to all Subsidiaries.	Uncertainty as to the fact whether a liquidation or bankruptcy proceeding is initiated against Subsidiaries.	Representation and warranty with respect to all Subsidiaries to the effect that no liquidation or bankruptcy proceeding is initiated with respect to any of the Subsidiaries.
	............: the Data Room does not contain evidence that the shares are fully paid-in	Potential liability of the sole shareholder (the Company) for additional monetary contribution of BGN ………… plus interest (if any).	Representation and warranty of the seller to the effect that all shares in ............ are fully paid-in. Alternative solution could be a price adjustment mechanism.
	............: still members of the board of directors are persons who in the past were engaged in the management of the Company.	Existence of a side agreement that may entitle those members of the board of directors to certain rights.	Representation and warranty of the seller to the effect that no such side agreement exists.
	............: the acquisition by the Company of 100% of the shares in ............ is not yet registered in the commercial registry.	The acquisition by the Company of 100% of the shares in ............ is not effective vis-a-vis good faith third parties. Therefore, if such good faith third parties acquire from the sellers same shares and register those shares in the commercial registry prior to the registration of the Company's acquisition, such third parties will prevail.	As a minimum protection, a representation and warranty of the seller to the effect that: (i) the Company has good and clear title over 100% of the shares in ............ and its title is duly registered in the commercial registry, and (ii) the shares owned by the Company are fully paid-in. However, a better protection would be reached by including the satisfaction of (i) and (ii) as CPs to closing.
	............: the Data Room does not contain all relevant interim share certificates accompanied by all relevant endorsements.	Uncertainty as to the shareholding structure of .............	As a minimum protection, a representation and warranty of the seller to the effect that: (i) the Company has good and clear title to its respective shares in ............; and (ii) theses shares are duly issued and fully paid-in. However, a better protection would be reached by including the satisfaction of (i) and (ii) as CPs to closing.
	............: the Data Room does not contain the respective share transfer agreements pursuant to which ............ (100% subsidiary of the Company) acquired 100% of the shares in .............	Uncertainty as to ............ good and clear title to its shares in .............	Representation and warranty of the seller to the effect that: (i) ............ duly acquired 100% of the shares in ............; and (ii) these shares are fully paid-in.
	............: the Company is into pending liquidation proceeding for almost 6 years.	Uncertainty as to whether the Company (as sole shareholder) will acquire any liquidation quota. Theoretical possibility such liquidation proceedings to be transformed into bankruptcy proceedings.	Price adjustment mechanism could be employed to address the risk, which the buyer (through the Company) is exposed to, if the Company ends up without any liquidation quota. The latter recommendation, however, makes sense if ............ has significant assets.
	............ ............: the acquisition by the Company of 51% of the shares in ............ ............ is not registered in the shareholders' registry	The acquisition is not effective vis-à-vis the Company.	CP to closing should be that the Company management undertake the relevant steps to make that registration in the shareholders' registry.
	............ ............: allegedly the Company holds the remaining 49% of the shares in ............ ............ but no evidence for transfer of shares is provided in the Data Room.	Uncertainty as to the current shareholding of the Company in ............ .............	As a minimum protection, a representation and warranty of the seller as to its exact shareholding in ............ ............. However, a better protection would be reached by including the due and valid acquisition of 49% of the shares in ............ ............ by the Company as CP to closing.
	............: the Data Room does not contain the respective share transfer agreements pursuant to which the Company acquired 100% of the shares in .............	Uncertainty as to the Company good and clear title to its shares in .............	Representation and warranty of the seller to the effect: (i) ............ duly acquired 100% of the shares in ............; and (ii) these shares are fully paid-in.
	............: the Data Room does not contain recent court certificates of good standing and lack of bankruptcy or liquidation proceedings regarding ............ and its subsidiaries.	Uncertainty as to the good standing of ............ and its subsidiaries.	Representation and warranty of the seller regarding the current legal status and lack of bankruptcy or liquidation proceedings of ............ and any of its direct or indirect subsidiaries.
	............: the Data Room does not contain any documentary evidence of the transfer of the shares in ............ to .............	Uncertainty as to the current shareholding of ............ and as to whether the alleged transfer to ............. has been validly carried out.	Due to the structure of the Contemplated Transaction where the buyer through the Company will acquire title to the assets of ............, these points of concern would not have a significant effect (if any) to the acquisition of the Company. Nevertheless, the SPA should include appropriate representations and warranties concerning the assets subject to the Contemplated Transaction.
	............: the Data Room does not contain recent court certificates of good standing and lack of bankruptcy or liquidation proceedings.	Uncertainty as to the current legal status of ............ and as to the fact whether a liquidation or bankruptcy proceeding has been initiated against the Company.	Representation and warranty of the seller to the effect that ............ is in good standing and no bankruptcy / liquidation proceeding is pending or threatened with respect to .............
	............: the Data Room does not contain the documents regarding the capital increases through in-kind contributions carried out in YYYY and YYYY that should have been filed with the court for registration purposes.	Uncertainty as to the validity of the current amount of ............'s registered capital.	Representation and warranty of the seller to the effect that: (i) ............ has good, clear and marketable title over the assets contributed in ............'s capital; and (ii) the in-kind contributions were validity validly made in accordance with Bulgarian law.
	............: the Data Room does not contain a final share purchase agreement between the Company and ............'s shareholders and the preliminary agreement provided to us does not contain adequate representations and warranties of the sellers.	The Client would be left uncovered against risks associated with the various legal aspects of .............	Extended representations and warranties included in the SPA would solve the issue.
	............: the statute of limitation for challenging the incorporation of ............ will expire on DD/MM/YYYY.	There is a theoretical risk that someone might challenge the incorporation of .............	Representation and warranty of the seller to the effect that ............ is duly incorporated.
	............: the Data Room does not contain recent court certificates of good standing and lack of bankruptcy or liquidation proceedings.	Uncertainty as to the good of ............ and as to the fact whether a liquidation or bankruptcy proceeding has been initiated against the Company.	Representation and warranty of the seller to the effect that ............ is in good standing and bankruptcy / liquidation proceeding is pending or threatened against .............
	............: the Data Room does not contain documents evidencing the closing of the transfer of the shares in ............ to the Company. More specifically, missing are the interim share certificate for the shares in the Company and the shareholders' registry.	Uncertainty as to the current shareholding of ............ and as to whether the alleged transfer to the Company has been validly carried out.	Representation and warranty of the seller to the effect that the Company has good and clear title to the shares it held in .............
	............: the share purchase agreement with the Company does not contain adequate representations and warranties of the seller.	The Client would be left uncovered against risks associated with the various legal aspects of .............	Extended representations and warranties included in the SPA would solve the issue.
	............: the Data Room does not contain recent court certificate of lack of bankruptcy or liquidation proceedings.	Uncertainty as to the fact whether a liquidation or bankruptcy proceeding has been initiated against the Company.	Representation and warranty of the seller regarding the lack of bankruptcy / liquidation proceedings of ............ is advisable.
	............: the Data Room does not contain all documents related to the transfers of all shares of ............ to .............	Uncertainty as to the current shareholding structure of .............	Representation and warranty of the seller to the effect that ............ has good, clear, and marketable title to all of the shares in .............
REGULATORY COMPLIANCE	The Company: The Company holds four individual licences granted under the LT and it is registered under two general licences adopted by the CRC under the LT. The Company is also registered as a television operator under the LRT with respect to the creation and broadcasting through cable of a television programme on the whole territory of Bulgaria. It could be concluded that the licences and registrations held by the Company grant the latter the right to validly exercise its core business activities. All licences are duly awarded and still valid. All registrations are duly made and still in place.
	The Company: Pursuant to the specific requirements of the applicable Bulgarian law, the transfer of shares in the capital of commercial companies - licensed public telecoms operators, or the issuance of shares to new shareholders in such companies, which leads to a change of control over the management of the respective company, may be done only after the prior written permission of the CRC.	Failure of the Company (as licensee) to obtain a written permission from the CRC prior to completion of the Contemplated Transaction will cause a material breach and will jeopardise the individual licences and the registrations under the general licences.	CP to closing should be included in the SPA to the effect that the Company has obtained a written permission for the Contemplated Transaction from the CRC.

	The Company: Four pecuniary sanctions have been imposed to the Company by the CRC for violations of the terms of one of the general licences, under which the Company is registered. The Company has appealed the respective penal rulings for imposition of the referred sanctions and two of these rulings have been revoked by the court.	Systematic breach of the terms of the referred general licence by the Company may result in deletion by the CRC of the Company's registration under the general licence.	The seller should represent and warrant that (except as disclosed): (i) the Company is not in violation of any provision of any licence/registration that would give rise to any material fine, penalty, other liability or sanction on it or serve as grounds for revocation of the respective licence/ registration; and (ii) no other administrative penal proceedings are pending or threatened to the Company. Same representation could be given with respect to the Subsidiaries and the Acquisition Targets.
	The Company: On the basis of the documents provided it could not be undoubtedly concluded whether the Company has duly observed all its reporting obligations under the licences and registrations under LT, held by it, and under the LRT.	Failure of the Company to comply with its reporting obligations under the respective licence/registration under the LT or under the LRT will amount to a breach of the terms of the respective licence/registration or the applicable law and might lead to imposition of administrative sanctions.	The seller should represent and warrant that the Company has complied with all its obligations under the LT and the LRT, as well as under the licences/registrations held by it under said laws.
	The Company: We have not been provided with a confirmation by the Company whether the latter has duly paid all periodic fees due for maintaining the validity of its individual licences granted under the LT.	Failure of the Company to duly pay the periodic fees due for maintaining the validity of its individual licences granted under the LT will cause a material breach of and will jeopardise the Company's respective individual licences.	The seller should represent and warrant that the Company has duly paid all periodic fees due for maintaining the validity of its individual licences granted under the LT.
	Subsidiaries: ............, ............, ............, ............ ............ and ............ are registered under a general licence adopted by the CRC under the LT. ............ only holds an individual licence under the LT and it is registered as a television operator under the LRT. The registrations held by the referred Subsidiaries, and the individual licence held by ............, appear to be in full force and effect. ............, ............ and ............ does not seem to hold any licences or registrations under the LT or the LRT.
	............: From the information provided in the Data Room it would seem that ............ provides services under a general licence under which it is registered at the territory of a populated area, namely village of …………, …… District, which is not specifically included in the territorial scope of ............' registration under said general licence.	Provision of services by ............ at the territory of a populated area which is not included in the territorial scope of ............' registration under the respective general licence, will amount to a violation of the terms of said general licence and may lead to imposition of administrative sanctions under the LT, as well as, if such breach is qualified as material or systematic, may jeopardise the Company's registration under said general licence.	CP to closing should be that ............ request its registration under the respective general licence pursuant to the LT to be amended so that the referred populated area to be specifically included in the territorial scope of ............' registration under said general licence.
	Subsidiaries: On the basis of the documents provided in the Data Room it could not be concluded whether each of the Company's Subsidiaries has complied with its reporting obligations under their respective licences/registrations. No information by the Subsidiaries as to the due payment of applicable fees. No information or confirmation by any of the Subsidiaries as to any sanctions imposed on either of them by the respective regulatory authorities or as to any disputes with such authorities.	Failure on part of any of the Subsidiaries to comply with the applicable reporting or payment obligations may lead to imposition of administrative sanctions or eventually jeopardise the respective Subsidiary's licence/registration.	The seller should represent and warrant that: (i) any of its Subsidiaries has complied with all its obligations under the LT and the LRT, and under the licences/registrations held by the respective Subsidiary under said laws, and (ii) none of the Subsidiaries is in violation of any provision of any licence/registration that would give rise to any material fine, penalty, other liability or sanction on it or serve as grounds for revocation of the respective licence/ registration.
	Acquisition Targets: ............ and ............ are registered under two general licences adopted by the CRC under the LT, while ............ is registered under one of these general licences. ............ and ............ are registered as television operators under the LRT. The registrations held by the referred Acquisition Targets appear to be in full force and effect. ............ does not seem to hold any licences or registrations under the LT or the LRT.
	Acquisition Targets: Pursuant to the general licences adopted by the CRC under the LT, under which ............ and ............ are registered, the contemplated acquisition by the Company of 100% of the capital of said companies requires the prior written permission of the CRC. ............ has requested the prior written permission from the CRC for the contemplated acquisition by the Company, however as of the date of this Report, we have not been provided with any information or documents in relation to any ruling of the CRC on such request.	Failure on part of ............, respectively ............, to obtain a written permission from the CRC prior to completion of their respective contemplated acquisition by the Company, will cause a material breach and will jeopardise the registration of such companies under the general licences.	CP to the effect that ............/ ............ has: (i) requested the permission of the CRC; and (ii) such permission has been unconditionally granted.
	Acquisition Targets: Since the transfer of shares in the capital of ............ would not lead to a change of control over the management of the Company, the share transfer may be performed after the prior written notification to the CRC. As long as after the contemplated transfer of shares from the capital of ............ to a related party of ............, the Contemplated Transaction would not involve transfer of shares in the capital of ............ or issuance of shares to new shareholders in ............, we are of the opinion that the prior written permission of, or notification to, the CRC would not be required for the completion of the Contemplated Transaction in respect of .............	Failure on part of ............ to submit a written notification to the CRC prior to the completion of the contemplated transfer of shares from the capital of ............ to a related party of ............, will cause a material breach and will jeopardise the Company's registration under the respective general licences.	............ should notify in writing the CRC prior to completion of the contemplated transfer of shares from the capital of ............ to a related party of ............. Thought could be given whether duly obtaining all required approvals, consents, clearances, waivers and making of all required notifications with regard to the ............ acquisition by the Company should be a CP to closing or re-drafted as representation of the seller.
	Acquisition Targets: The construction papers provided in respect of ............'s cable network evidence that in addition to the cable networks developed by ............ in the town of ………… and village of …………, falling within the territorial scope of its registration under the respective general licence pursuant to the LT, ............ has also developed a cable network in a populated area that is not explicitly included in said territorial scope.	Eventual provision of cable TV services by ............ at the territory of the populated area not included in the territorial scope of its registration under the respective general licence will represent a breach of said general licence and may lead to imposition of administrative sanctions; if such breach is qualified as material or systematic, it might jeopardise the Company's registration under said general licence.	............ should request that its registration under the respective general licence under the LT be amended in a way that the referred populated area be specifically included in the territorial scope of ............'s registration under said general licence. Thought could be given whether this should be CP to closing or re-drafted as representation of the seller.
	Acquisition Targets: No information by the Acquisition Targets as to the due payment of applicable fees and compliance with the applicable reporting obligations under the LT and/or the LRT. Except in respect of ............, no information or confirmation by the other Acquisition Targets as to any sanctions imposed on either of them by the respective regulatory authorities or as to any disputes with such authorities.	Failure on part of any of the Acquisition Targets to comply with the applicable reporting or payment obligations may lead to imposition of administrative sanctions and eventually jeopardise their respective registrations.	The seller should represent and warrant that any of the Acquisition Targets has complied with all its obligations under the LT and the LRT, and under the licences/registrations held by the respective Acquisition Target under said laws, as well as that none of the Acquisition Target is in violation of any provision of any licence/registration that would give rise to any material fine, penalty, other liability or sanction on it or serve as grounds for revocation of the respective licence/ registration.

COMMERCIAL AGREEMENTS	Interconnection Agreements In general the reviewed interconnection agreements do not give rise to any major legal concerns. However, pursuant to the LT, the public operators entering into interconnection agreements should notify the CRC thereof within a period of 3 weeks prior to effectuation of the agreement concerned. We have not been provided with any such notification with regard to the interconnection agreements, executed between the Company and ............, ............ and .............	Failure of the Company to file the required notification may result in imposition of a fine under the LT between BGN 100 to BGN 1,000 for each particular case.	The seller should represent and warrant in the SPA that the Company has complied with all its obligations as a public telecoms operator under the LT.
	Customer Agreements None of the customer agreements presented in the Data Room gives rise to any major legal issues of concern. There is only one exception regarding the standard form customer agreement used by ............. Pursuant to the said agreement ............ provides to its customers fixed voice telephony, whereas according to the information presented in the Data Room and our independent verification made with the public registries, ............ is not licensed to provide fixed voice telephony.	Provision of fixed voice telephony service on part of ............ without the latter holding the required licence will amount to a violation of the LT and may lead to imposition of administrative penalties ranging between BGN 20,000 and BGN 250,000. In addition, should the breach be qualified as "repetitive" it may trigger suspension or prohibition on ............ to conduct the licensed activity.	CP to closing that ............ obtains a licence for provision of fixed voice service under the terms and procedure of the LT. Alternatively, ............ should stop the provision of such service.
	General Terms The General Terms used by ............, ............, ............, ............ and ............ in the course of rendering of services to their customers are subject to mandatory approval by the CRC but although requested we have not been provided with copies of CRC's decisions for approval of the respective General Terms.	If said General Terms are not duly approved by CRC, the latter might impose fines on the respective companies. Theoretically, if the breach is qualified as "material" or "repetitive", it is also possible that the CRC withdraws the respective company's registrations/ licenses under the LT. However, we would consider the latter scenario very unlikely in the cases at hand.	The seller should represent and warrant in the SPA that each of its Subsidiaries has complied with all its obligations as a public telecoms operator under the LT. Alternatively, a CP to closing could be the provision by the Company of CRC's approval decisions of said General Terms.
FINANCIAL ARRANGEMENTS	The Company: We have been not provided with any documents evidencing due perfection of a mortgage on real estate plots owned by ............ created as a third party security for the obligations of the Company under Loan Agreement N ………… of DD/MM/YYYY with [bank].	Banks do monitor security value and validity. Thus if the overall value of collateral turns to be less than required by the respective lender, that may trigger an event of default under the respective bank credit facility agreement and lead to acceleration of the loan facility. In case of insufficient securitisation of the respective loan facility the Company may be required to provide additional security.	The seller should represent and warrant in the SPA that there is no default or threat of an event of default under any of the bank credit facilities agreements to which the Company and/or any of its Subsidiaries is a party.
	The Company: As of MM/YYYY the tax authorities have registered two attachments on Company's assets in the Central Pledge Registry. However, as evident from a certificate issued by the tax authorities as of DD/MM/YYYY the Company does not have any outstanding tax obligations.	The assets formally look encumbered although the underlying debt was paid.	CP to closing should be the deregistration in the Central Pledge Registry prior to completion of the Contemplated Transaction of any encumbrances whose underlying debts were paid.
	The Company: Pursuant to pledge agreements, executed between the Company and [bank] and [bank], whose subject matter is a registered pledge on fiber-optic facilities of the Company, the written consent of [bank] and [bank] respectively shall be required prior to the transfer of the respective pledged assets to a third party.	Failure of the Company to obtain the written consent of [bank] or [bank] for the transfer of fiber-optic facilities from the Company to ............ might trigger acceleration of the respective loan facilities extended to the Company.	The seller should represent and warrant in the SPA that the written consent of [bank] and [bank] has been obtained prior to the transfer of fiber-optic facilities from the Company to .............
	The Company: The examination of the Company's title to the pledged fiber-optic facilities under the pledge agreements with [bank] and [bank] is outside of the scope of this Report.	Any uncertainty regarding the title in relation to the pledged fiber-optic facilities could diminish the degree of securitisation and could trigger acceleration of the respective loan facility.	The seller should represent and warrant in the SPA that there is no default or threat of an event of default under any of the bank credit facilities agreements to which the Company is a party.
	The Company: We have not been provided with evidence whether two pledge agreements executed with [bank] on DD/MM/YYYY have been duly perfected by filing with the CPR.	Failure of the Company to register the respective pledge agreements with the CPR will prevent the Company from receiving disbursements under the respective loan agreements and will result in the respective pledge agreements not being enforceable vis-à-vis third parties.	Representation and warranty of the seller to the effect that the Company has duly perfected the referred two pledge agreements.
	The Company: The loan agreement executed between the Company and [bank] on DD/MM/YYYY for the purposes of financing the acquisition by the Company of 100% of the capital of ............, is intended to be secured with a registered pledge on the account receivables of ............ from all its cable TV subscribers. Any such intended pledge agreement could be classified as null and void as contradictory to the financial assistance rule.	If any such pledge agreement by virtue of which a pledge on the account receivables of ............ from all its cable TV subscribers is created, be classified as null and void, the referred loan agreement with [bank] may be considered insufficiently secured and the bank may require additional security, and accelerate the facility due to insufficient securitisation.	CP to closing could be the amendment of said loan agreement with [bank] in a way to provide for valid security.
	The Company: As evident from the CPR, the Company seems to be a party to 3 financial lease agreements for lease of equipment, which have not been provided to us for review. In respect of these agreements we have not been provided with a confirmation by the Company as to whether it has duly complied with its obligations under the respective lease agreements.	Uncertainty as to the Company's obligations.	The seller should represent and warrant in the SPA that the Company has duly complied with its obligations under the lease agreements, which it is a party to.
	Acquisition Targets: We have not been provided with a confirmation by ............, as well as by ............, as to whether all pending interest and principal amounts due under financial agreements, which ............or ............, is a party to, have been duly paid.	Uncertainty as to the performance of the respective obligations.	The seller should represent and warrant that all pending interest and principal amounts due under financial agreements, which ............, or ............ is a party to, have been duly paid and there is no default or threat of an event of default under any of the financial agreements to which ............ or ............ is a party.
	............: Pursuant to a loan agreement dated DD/MM/YYYY executed between ............ and [bank], any changes in the corporate status of ............ (presumably its acquisition by the Company as well), for which the bank has not given its prior consent, may trigger acceleration of the loan.	Should the contemplated acquisition by the Company of 100% of the capital of ............ will result in a change in the corporate status of ............, failure of the latter to obtain the prior consent of [bank] for said acquisition might lead to acceleration of the loan facility.	Representation and warranty of the seller to the effect that ............ has obtained the prior consent of [bank]. Alternative solution could be that CP to closing be the obtaining by ............ of [bank]'s consent.
	............: The documents provided in the Data Room with regard to Loan Agreement executed between [bank] and ............ do not enable us to undoubtedly confirm valid title of the respective mortgagors over the real estates, which have been mortgaged as security under the said loan agreement.	If the respective mortgagors do not have title over the mortgaged real estates, the security agreements would have been void ab initio. Banks do monitor security value and validity. In case of insufficient securitisation of the loan facility ............ may be required to provide additional security. Failure of ............ to comply with such requirement might trigger an event of default and acceleration of the loan.	The seller should represent and warrant in the SPA that there is no default or threat of an event of default under any of the bank loan agreements to which any of the Company's Subsidiaries is a party.

NETWORKS	Almost none of the cable TV and radio signal networks operated by the Company or by the Subsidiaries has been constructed and is currently operated on the basis of validly issued construction and operation permits. No sufficient information was provided and it is not clear whether the Company and the Subsidiaries filed applications for legalisation of all the cable networks in due course where it was admissible.	Constructions or installations developed without relevant construction papers are considered "illegal constructions" and the persons operating such constructions shall be sanctioned through: (i) suspension of the operation of the respective constructions or (ii) ordering of the removal of such construction by its owner or by the competent authority at the expense of the owner, (iii) imposing relevant penalties.	The Company, each of the Subsidiaries and the Acquisition Targets shall provide the buyer as a CP to the Closing with either (i) a valid legalisation act, or (ii) a valid construction and operational permits for any cable TV and radio signals network operated by any of the Company, Subsidiaries or the Acquisition Targets.
	The radio relay equipment has been installed by the Company without any construction papers and the Company has not initiated a legalisation proceeding.	The applicable law does not allow "legalisation" of illegal construction via a subsequent act remedying the lack of construction papers for the initial development of the constructions if the owner has not declared such illegal construction till DD/MM/YYYY or if the construction is realized following that date.	The Company have to go through the entire procedure for obtaining a construction permit for the installation and operation of its radio relay equipment. We recommend that the obtaining of the required construction permits is a condition to the closing of the Transaction.
	The agreement between the Company and ...... for lease of ducts is terminated unilaterally by ...... but pursuant to an agreement between the parties, the Company may continue using the ducts under the terms set out in the terminated lease agreement until CRC approves the General Terms and Conditions of ...... in respect of lease of ducts.	The Company has no information when the approval of the General Terms of ...... shall be effected and therefore a new agreement for lease of duct shall be executed.	Entering into a valid agreement between the Company and ...... for the lease of ducts owned by the latter company to included as a CP.

ASSETS. REAL ESTATE	The transfer of title to certain real estate assets located in ………, representing two garages and an office premise, has not been made in the required form.	The Company (through its predecessor ………………………) has not received valid title to the respective real estate assets located in ……… .	If such assets are material for the core business of the Company, rectifying of the title deficiency has to be done prior to closing of the Contemplated Transaction.
	No sufficient information and documentation regarding the clear title over the real estate assets of the Company, the Subsidiaries and the Acquisition Targets was provided.	The absence of the relevant documentation prevents us form confirming the good title over the over the real estate assets of the Company, the Subsidiaries and the Acquisition Targets.	Should any of the over the real estate assets of the Company, the Subsidiaries and the Acquisition Targets is deemed material for the flawless provision of the core services by any of the aforementioned companies, a full title due diligence regarding those material assets must be made as a CP to the Closing of the Contemplated Transaction.
	We can confirm the lack of encumbrances to the real estate assets, owned by the Company, its Subsidiaries, or Acquisition Targets, only in respect of the assets located in ……….	We are not able to draw any conclusions in respect of lack or existence of any encumbrances to the assets located out of ………..	Provision of encumbrance certificates to the buyer for all the assets owned by the Company, its Subsidiaries, or Acquisition Targets located out of ……… as a CP.
	The initial term of almost all lease agreements for the premises used by the Company and ............ has expired or is about to expire.	A lease agreement, the initial term of which has expired, and if the lessee continues to use the property after the expiry date of the lease agreement without the objection of the lessor, is by operation of law converted into an agreement with an indefinite term and the lessor may easily terminate such an agreement upon giving one month's prior notice.	Provided that the lease agreements are material in respect of the Company's core business, we recommend that the Company to undertake all necessary steps for an explicit prolongation of the lease agreements for a fixed term, or sign new agreements, and to register those into the respective real estate registry.
	The majority of the provided lease agreements executed by the Company, its Subsidiaries, and Acquisition Targets, saved for five of the agreements, have not been registered with the relevant real estate registry.	In such case if the lessor transfers the title to the leased property during the term of the lease agreement, the new owner of the real estate may terminate the agreement by giving the lessee one month's notice.	If the leased property is deemed important for the flawless operation of the Company's core business, registration of the lease agreements related to that property into the real estate registry is recommended.

IP/IT	The Company: The Company has not entered into written agreements with the broadcasting organisation or their agents for the cable retransmission of certain channels.	Unauthorized broadcasting of channels by the Company that might trigger claims for infringement of copyrights by the respective holders thereof.	A representation and warranty in the purchase agreement should confirm the absence of unauthorised broadcasting by the Company.
	The Company: The Company is a party to one agreement with the collecting society Musicauthor. An agreement with Filmauthor has not been concluded due to a pending dispute whether cable operators must pay for copyright in case of cable retransmission.	Risk for claims of copyright infringement in the cases, where the other party to the broadcasting agreement has not provided a warranty with regard to its respective title to all intellectual property rights subject to distribution in the Company's cable network.	Representation and warranty of the seller to the effect that all broadcasting agreements to which the Company is a party provide for an appropriate warranty with regard to the respective counterparty's title to all intellectual property rights subject to distribution in the Company's cable network.
	The Company: Following the registration of the two combined trademarks "......", Reg. No ……. and "......", Reg. No ……, the Company has change its name and registered address and it has not notified the BPO regarding said changes in order to be entered in the State Trademark Registry of the BPO.	Since any correspondence regarding a trademarks, including notifications for filed cancellation and revocation claims is to be sent to the address of the registered holder as last entered into the State Trademark Registry, the inability of the Company to receive correspondence on such an address may affect its right to defend in potential cancellation or revocation claims.	Representation and warranty of the seller to the effect that the Company complied with all its respective obligations under the Bulgarian trademark legislation.
	............: ............ and ............ are registered as co-proprietors of two combined trademarks, namely "............", Reg. No …… and "............", Reg. No …… by virtue of an agreement concluded by them. In respect of these trademarks a conflict has arisen between the two legal entities due to the failure of ............ to fulfil its obligations under said agreement. Although ............ has rescinded this agreement and therefore the ground for registration of ............ as co-proprietor of these trademarks have been invalidated, as of the date of the Report both entities are registered as co-owners of referred trademarks.	The potential risk of the existing trademark conflict should be assessed in the light of our best judgement that these trademarks are the major brand under which ............ conducts its broadcasting activities.	We recommend that possible options for the resolving of the trademark conflict in short terms to be sought.

EMPLOYMENT	Based on the disclosed information, no trade unions are represented in the Company, the Subsidiaries and the Acquisition Targets. The Company, the Subsidiaries and the Acquisition Targets are not parties to collective labour agreements.	No risk for the Contemplated Transaction. On the contrary, the lack of established trade unions and collective labour agreements is an advantage in the event of a contemplated restructuring of the Company, the Subsidiaries and the Acquisition Targets.	A representation and warranty in the SPA should confirm the absence of collective agreements and of a trade union.
	Reportedly, all employees of the Company except the managing ones are hired under a standard form labour agreement, which is in compliance with the statutory requirements. The employees at management level are hired under a specific standard form labour agreement, which does not fully comply with the mandatory requirements of the Labour Code.	If the Bulgarian Labour Inspectorate ascertains non-compliance with the statutory requirements, it may impose an administrative sanction on the Company, the Subsidiaries and the Acquisition Targets in the amount of up to BGN 1,000, and in case of repetitive violation - up to BGN 2,000. The administrative sanction is imposed for the type of the violation in general (i.e., non- compliance of the contents of the employment agreement with the law), notwithstanding the number of employment contracts, which are affected by the violation. However, if in the course of inspection, the Inspectorate discovers other types of violations of the employment legislation, e.g., failure to record overtime, if any, in a special book, the Inspectorate could impose a separate sanction for this type of violation, etc.	As a CP to closing of the Contemplated Transaction, the Company, the Subsidiaries and the Acquisition Targets should bring all individual labour agreements and other employment related arrangements into compliance with the mandatory requirements of Bulgarian law. Alternatively, the issue could be covered in a representation and warranty and specific indemnity in the SPA.
	The Data Room contained standard form labour agreements applied by ............ ............, and ............, and a copy of a signed labour agreement with one of ............'s employees, all of which fail to comply with the statutory provisions.
	With regard to the Acquisition Targets, only ............ has provided a standard form labour agreement containing all mandatory required requisites.
	The Data Room contained no information on the Company's, the Subsidiaries' and the Acquisition Targets' performance of their obligation to register all individual labour agreements with the National Social Security Institute, as required by law. The Executive Director of ............ has declared that ............ has not registered the labour agreements with its employees with the National Social Security Institute.	The statutory provided pecuniary sanction for failure to fulfil the registration obligation amounts to BGN 1,000 for each non-registered labour agreement.	This issue should to be covered in a representation and warranty and a specific indemnity in the SPA.
	We have reviewed the management agreements with the Company's Board members. The Data Room contained an annex to the labour agreement with the executive director of ............ and a copy of the labour agreement with the general manager of ............. No management agreements have been provided with regard to the other Subsidiaries. The Data Room contained unsigned drafts of such agreements with ............ registered general managers, which according to the verbal information of the lawyers from [law firm] were offered to the current general managers for execution after the Contemplated Transaction.	Pursuant to the Law on Commerce, the members of the management bodies of commercial companies should be contracted under written agreements for the assignment of management. However, no sanction is provided for the failure to execute such management agreements. On a separate note, albeit generally admissible, it is highly unusual for registered members of the corporate bodies of commercial companies (such as the executive director of ............ or ............'s general manager) to be contracted under labour agreements.	A representation and warranty that the Subsidiaries and the Acquisition Targets and the members of their management bodies are not parties to any management agreements not disclosed in the Data Room must be included in the SPA, or copies of such agreements, if they exist, must be provided for review.
	The Company reports that it is a party to one pending labour dispute. Data Room contained no information whether the Subsidiaries and the Acquisition Targets are parties to any pending labour cases.	No risk for the Contemplated Transaction.	A representation that the Subsidiaries and the Acquisition Targets are not parties to any pending labour related dispute must be included in the SPA.

SOCIAL SECURITY/ HEALTH INSURANCE	All employees of the Company, the Subsidiaries and the Acquisition targets are allegedly secured under the general rules of social and health security in Bulgaria. An agreement for additional health insurance to which the Company is a party was provided. The Data Room contained no information on any additional voluntary social or health insurance schemes applicable to Subsidiaries' and Acquisition Targets' employees.	No risk for the Contemplated Transaction.	A representation that the Company, the Subsidiaries and the Acquisition Targets do not have any outstanding public obligations with respect to their employees should be included in the share sale agreement.

ENVIRONMENTAL ISSUES	The due diligence investigation has not revealed any non-compliance with Bulgarian environmental law or with the terms of the Company's licences and there are no environmental issues that may cause concern.	No potential risk for the Contemplated Transaction.	No recommendations.

HEALTH AND SAFETY ISSUES	………… Group: the Company's, the Subsidiaries' and the Acquisition Targets' full compliance with health and safety requirements could not be verified from Data Room documents.	The possible sanctions for non-compliance with health and safety legislation are up to BGN 1,000, and in case of repetitive violation - up to BGN 2,000.	A representation and warranty as to the Company's, the Subsidiaries' and the Acquisition Targets' compliance with health and safety legislation to be included in the SPA.

DISPUTES/ LITIGATION	The Company: Potential dispute between ............ and the Company regarding the validity of the transfer of certain real estates to ............ (subsequently merged into the Company) from ............ as a result of corporate reorganisation.	The risk for the Company to lose the possession of the real estates since the title has not been validly transferred.	An indemnity clause should be included in the SPA covering this risk.
	Potential dispute to be initiated by the holders of copyright with respect to the TV programs of the channels Pro 7, RTL, ZDF, ARD, and SAT 1, broadcasted by the Company in infringement of LCNR as certified in a penal order issued by the Ministry of Culture.	Risk for payment of damages in the range of BGN 50, 000 - 100 000;	An indemnity clause should be included in the SPA covering this risk.
	Suspension of ongoing construction or prohibition of the access or exploitation of already constructed cable telecommunication networks owned by the Company, its subsidiaries and acquisition targets	Risk for the use of the cable telecommunication networks and subsequently, for the normal operation of the business.	An indemnity clause should be included in the SPA covering this risk.

COMPETITION ISSUES	The Company, Subsidiaries & Acquisition Targets: Based on the information in the Data Room it seems that currently no member of ………… Group (including the Acquisition Targets): (i) is a party to any arrangement, which violates competition; (ii) has done any act which might be considered as abuse of dominant position or unfair competition behaviour.	During our due diligence investigation we independently found out a couple of competition related proceedings initiated in the past against the Company and concerning prohibited arrangements and unfair competition. All these proceedings were terminated afterwards upon request of the respective petitioner.	Representation and warranty of the seller to the effect that neither the Company, nor any of its Subsidiaries, nor any of the Acquisition Targets: (i) is parties to any arrangement that violates competition; (ii) has done any act which might be considered as abuse of dominant position or unfair competition behaviour..
COMPETITION ISSUES	............: the Data Room does not contain information whether the Company has filed a merger notification with regard to its proposed acquisition of .............	Based on our communication with the Company it seems that such a notification is required according to the opinion of the Company.	CP to closing could be the filing by the Company of a merger notification with respect to its proposed acquisition of .............

RELATED PARTY TRANSACTIONS	The Company: Some provisions in loan agreements entered into between the Company and its related parties may be considered not on arms' length basis.	In case of existence of clauses, which are not on arms' length basis, there is a potential risk of tax implications for the Company.	An indemnity clause should be included in the SPA covering this risk.
RELATED PARTY TRANSACTIONS	The loan agreement executed between the Company and ............ on DD/MM/YYYY could be classified as null and void as contradictory to the financial assistance rule.	If the agreement executed with ............ would be declared null and void ............ would be entitled to claim immediate repayment of any amounts disbursed under said loan agreement.	Representation and warranty of the seller that said agreement is valid. Alternatively, CP to closing could be the amendment of the loan agreement to become valid. An indemnification clause could also be a solution.

PART B: SPECIALIST REVIEWS

1. CORPORATE STATUS OF THE TARGET GROUP

............ Group is doing business in the field of cable television broadcasting, internet access, data transmission, fixed voice telephony services, international carrier services, construction of telecom networks and "leased lines" services. The "leased lines" services, however, will be subject to separation in a new company (the "............ Company") that will acquire all the assets and liabilities of the Company and its Subsidiaries related to this business prior to consummation of the Contemplated Transaction. Due to the fact that ............ will not be part of the Contemplated Transaction, the legal review below will not discuss ............ implications; it will focus on the corporate status of the Company, its Subsidiaries and its Acquisition Targets as reported to us.

1.1 Corporate Status of the Company

1.1.1 Incorporation and Corporate History of the Company

1.1.1.1 Incorporation

The Company was incorporated on DD/MM/YYYY by virtue of court decision No. …/DD/MM/YYYY of Sofia City Court. We have not been provided with all other incorporation documents preceding the court decision. However, on the basis of our independent review of the relevant corporate documents filed in the commercial registry, we can conclude that the Company was duly incorporated.

1.1.1.2 Corporate History

(i) Major Events

The Company was initially incorporated with a registered capital of BGL 50,000,000 (respectively BGN 50,000 after its denomination).^{^[1]} In YYYY, the registered capital of the Company was increased twice with monetary contributions and issuance of new shares to BGN 8,210,000 and BGN 9,134,200, respectively. In 2001, the Company's registered capital was increased again with in-kind contribution and issuance of new shares to BGN 12,254,200. Said capital increases were duly registered in the commercial registry.

In MM/YYYY the following entities merged into the Company: ............-............ , .........…, ............, ............, ............, …………, …………, …………, …………, …………, …………, …………. In YYYY two more entities merged into the Company: ………… and ............. The mergers were duly registered in the commercial registry and the Company became universal successor in title to the assets and liabilities of the merged companies.

In MM/YYYY, the Company created two non-possessory pledges over its going concern in favour of [bank]. During the course of YYYY, the two pledges were properly deleted from the commercial registry by virtue of several decisions of Sofia City Court and currently no pledges exist over the going concern of the Company.

(ii) Notes/ Recommendations

We have not been provided with most documents required to assess whether all major changes in the corporate history of the Company were made in compliance with law and the Company's by-laws. However, all of them were duly registered by Sofia City Court and there is no evidence that any interested party challenged any of these changes within the statutory limitation period.[2] In addition, we made independent inquiry in the commercial registry and received satisfactory information regarding these corporate changes. Accordingly, we can conclude that said corporate changes were made generally in compliance with law and Company's by-laws and principally do not pose any serious problems.

1.1.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by Sofia City Court, the Company's corporate legal status as of this date is as follows:

Company Name [name], a stock corporation.

Seat and Registered Address [address]

Scope of Activities Manufacturing of electronic and electrical products; performing information, program and creative services; carrying out transactions and services related to telecommunications and media (without advertising); research, design, construction and operation of cable video systems and any other types of telecommunication systems; impresario and producer's activity, commercial agency; any other activity not prohibited by law.

Registered Capital BGN 12,254,200, divided into 122,542 materialised ordinary registered voting shares of face value BGN 100 each.

Corporate Governance (i) a general meeting, and (ii) a board of directors consisting of [name], [name] and [name].

Management and Representation By the executive director [name].

As of DD/MM/YYYY the Company is in good standing and is not into liquidation. The Company has not provided a certificate evidencing that it is not into bankruptcy proceeding. Therefore, if such a document is not provided until the signing of the SPA an explicit representation of the seller should be included to the effect that no bankruptcy proceeding is initiated against the Company.

1.1.3 By-laws

The current by-laws of the Company were duly registered in the commercial registry. The by-laws are fairly standard and generally follow, and comply with, the relevant provisions of Bulgarian law. There are no extraordinary provisions (share transfer restrictions or options, for instance) and the only provision deserving discussion is the unanimous vote of the shareholders required for the approval of increase or decrease of the Company's registered capital and for the election of members of the Board of Directors. However, since the Contemplated Transaction will confer 100% control on the level of the Company in favour of the buyer this particular provision should not be of serious concern.

1.1.4 Share Capital. Shareholding Structure. Shares.

(i) Factual Information

The registered capital of the Company is BGN 12,254,200 divided into 122,542 materialised ordinary registered voting shares of face value BGN 100 each. Each share entitles the shareholder to one vote in the general meeting of the Company as well as to an equal right of dividend and liquidation quota. The shares may be transferred by way of endorsement. In order such a transfer to be effective vis-à-vis the Company it shall be entered into the shareholders' registry. All the shares in the Company were fully paid-in.

Based on the Company's shareholders' registry, shareholders in the Company are: (i) ………………………, holding ……. shares representing … % of the Company's registered capital; and (ii) …………, holding …… shares representing … % of the Company's registered capital. It should be noted that ………… endorsed (transferred) all its shares in the Company to …………. ; however, said transfer is not yet registered in the Company's shareholders' registry and therefore is not yet effective vis-à-vis the Company. It should also be noted that we have not been provided with all interim share certificates (especially those that were previously cancelled) and the relevant endorsements (especially those related to the cancelled interim share certificates) that would enable us to conclusively confirm: (i) who the current shareholders in the Company are, and (ii) whether the shares in the Company are free and clear of any encumbrances.

The Company informed us that due to inter-office mismanagement of the previous owners all interim share certificates subsequently cancelled are not available. There are no decisions of the board of directors as of the relevant period of time for cancellation of particular interim share certificates and for issuance of new ones on their place. Furthermore, certain of the Company's shares were pledged in favour of [bank] for securitisation of a certain loan agreement; although said agreement was allegedly fully paid-off, the release of the pledge was done improperly (i.e., by way of returning the pledge endorsement to the pledgor instead of making a new explicit endorsement for release of the pledge).

(ii) Notes/ Recommendations

Therefore, from legal standpoint we are not in a position to ascertain decisively that the current shareholders in the Company hold good and clear title over all their respective shares. In such a case our recommendation would be that certain conditions precedent to closing be included in the SPA to the effect that: (i) the Company's board of directors has taken valid decision for cancellation of all current interim share certificates and issuance of new in place of the cancelled ones; (ii) the Company has taken possession over all interim share certificates (together with all endorsements and attachments thereto) previously cancelled or cancelled pursuant to paragraph (i); (iii) the Company has obtained statements from the former owners of the shares confirming that those shares were duly and validly endorsed to the existing shareholders (only if the CP under paragraph (ii) can not be satisfied), and (iv) the Company has obtained statement from [bank] confirming that any encumbrances created in its favour on certain shares of the Company were duly and validly deleted.

1.1.5 Dividends

The Company has not provided any information regarding distribution of dividends for YYYY. However, we were advised by [accountants] that the Company' profit and loss account for YYYY is negative. Therefore, we can assume with great amount of certainty that no dividends were distributed for YYYY due to the lack of profit.

1.1.6 Corporate Governance

The corporate governance bodies of the Company are: (i) general meeting, and (ii) board of directors.

The general meeting consists of all shareholders. The powers of the general meeting include, among others, changes in the by-laws; increase and decrease of the registered capital; reorganisation and dissolution of the Company; appointment and dismissal of the members of the board of directors; appointment and dismissal of auditors, approval of the annual financial statements, dividend distribution and corporate bonds issues, etc.

The board of directors is entitled to approve, among others, the following actions of the Company: acquisition, closure or deposal of undertakings or parts thereof; material changes in the Company's activity or material organisational changes; long term cooperation; annual budget and business plan of the Company; acquisition and disposal of real estates and long term financial assets; undertaking investment loans as a borrower; creation of mortgages or pledges, etc.

1.1.7 Management and Representation. Organisational Chart

(i) Factual Information

Currently the Company's board of directors consists of three members who may be dismissed by the general meeting even before the expiration of their term of office. One of the members of the board of directors is an executive director who manages the day-to-day activity of the Company and represents it before third parties. The representative power of the executive director may be withdrawn by the board of directors at any time; however, such a withdrawal will be effective vis-à-vis good faith third parties only after the registration of such withdrawal in the commercial registry.

(ii) Notes/ Recommendations

In view of the above, it is our recommendation that the conditions precedent to closing and/ or the closing mechanics in the SPA regulate in detail the process of dismissal of the seller's directors and the appointment of the buyer's directors so that as of the closing date the buyer's directors (including the executive director) are duly registered in the commercial registry. This recommendation should apply also to all Subsidiaries and Acquisition Targets.

1.2 Corporate Status of the Subsidiaries

1.2.1 ............

1.2.1.1 Incorporation

............ ("............") was incorporated on DD/MM/YYYY by virtue of Decision No. …/DD/MM/YYYY of Sofia City Court. We have not been provided with all other incorporation documents preceding the court decision. However, on the basis of our independent review of the relevant corporate documents filed in the commercial registry, we can conclude that ............ was duly incorporated. In YYYY, the Company acquired 100% of the shares in ............ and was duly registered as a sole shareholder.

1.2.1.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by Sofia City Court, as of this date ............ is in good standing and is not into liquidation. The Company has not provided a certificate from the respective court of registration evidencing that ............ is not into bankruptcy proceeding. Therefore, if such a document is not provided until the signing of the SPA an explicit representation of the seller should be included to the effect that no bankruptcy proceeding is initiated against .............

1.2.1.3 By-laws

We have not been provided with the latest version of the by-laws. However, on the basis of our independent review of the relevant corporate documents filed in the commercial registry, we can conclude that the by-laws of ............ are fairly standard and generally follow, and comply with, the relevant provisions of Bulgarian law.

1.2.1.4 Capital. Shareholding Structure

The registered capital of ............ is BGN 50,000, divided into 10,000 materialised ordinary registered voting shares of face value BGN 5 each. The Company is 100% shareholder in ............. No documents evidencing valid transfer of title to the shares in ............ have been provided to us. However, on the basis of our independent review of the relevant corporate documents filed in the commercial registry, we can conclude that the Company validly acquired its shareholding in .............

We were not able to identify whether all the shares in ............ were fully paid in. On the basis of our independent review of the relevant corporate documents filed in the commercial registry, we only discovered that the shares of ............ were paid-in at 26% of their nominal value (i.e, BGN 13,000). If the latter is the case, it could trigger a liability of the sole shareholder for additional monetary contribution of BGN 37,000 plus interest (if any). Therefore, in the SPA a representation of the seller that all shares in ............ are fully paid-in should be included. Alternative solution could be a price adjustment mechanism, although the value of the potential liability is insignificant within the framework of the Contemplated Transaction.

1.2.1.5 Corporate Governance

The corporate governance bodies of ............ are: (i) sole shareholder, and (ii) board of directors. The executive director of ............ represents the Company before third parties. The sole shareholder is entitled to take unilaterally all decisions that are in the powers of the general meeting. Therefore, the Company controls solely the general meeting of ............. With respect to the board of directors it appears that (apart from [name]) still members are persons who in the past were engaged in the management of the Company. Although we were unofficially informed that ............ is not an active company and that is the reason why the old names in the board of directors still appear, the seller of the business should provide explicit representation that there is no a side agreement in ............ that entitles the old management to certain rights.

1.2.2 ............

1.2.2.1 Incorporation

............ ("............") was incorporated on DD/MM/YYYY by virtue of a decision of the District Court in …………... We have not been provided with all other incorporation documents preceding the court decision. However, on the basis of the above mentioned court decision and considering the fact that no evidence was provided that anyone challenged the incorporation of ............, it could be concluded that ............ was duly incorporated.

1.2.2.2 Good Standing

According to a Certificate of Good Standing No. ……/DD/MM/YYYY issued by …….. District Court, as of that date ............ is in good standing. The Company has not provided a certificate from the respective court of registration evidencing that ............ is not into liquidation or bankruptcy proceeding. Therefore, if such a document is not provided until the signing of the SPA an explicit representation of the seller should be included to the effect that no liquidation and bankruptcy proceedings are initiated against .............

1.2.2.3 By-laws

The by-laws of ............ provided to us are dated DD/MM/YYYY but we were not able to track down whether they were registered in the commercial registry. Since there is a pending proceeding for the registration of the transfer of 100% of the shares to the Company we presume that the by-laws will be changed accordingly. Therefore, we consider any further discussion on that point useless at this stage.

1.2.2.4 Capital. Shareholding Structure

The registered capital of ............ is BGN 5,000, divided into 500 shares of BGN 10 each.[3] The Company has acquired 100% of the shares in ............ by virtue of duly executed share transfer agreements; however, the share transfer agreements have not been registered in the commercial registry yet due to certain inconsistencies in the corporate documentation. Until that registration is made the Company may not assert its title over these shares vis-à-vis good faith third parties. Therefore, in the SPA as a minimum protection a representation of the seller should be included to the effect that: (i) the Company has good and clear title over 100% of the shares in ............ and its title is duly registered in the commercial registry, and (ii) the shares owned by the Company are fully paid-in. However, a better protection would be reached by including the satisfaction of (i) and (ii) as conditions precedent to closing.

1.2.2.5 Corporate Governance

Currently, the corporate governance bodies of ............ are (i) general meeting of shareholders, and (ii) general managers. Once the share transfer is registered in the commercial registry, the sole shareholder will have the powers of the general meeting. Currently the two general mangers carry out the management of ............ and represent ............ before third parties jointly. After the registration of the Company as 100% shareholder in ............ (or simultaneously with such registration) we presume that new general manager(s) will be appointed whose powers the Company will determine.

1.2.3 ............

1.2.3.1 Incorporation

............ ("............") was incorporated on DD/MM/YYYY by virtue of Decision No. …. of the District Court in …... We have not been provided with all other incorporation documents preceding the court decision. However, on the basis of the above mentioned court decision and considering the fact that no evidence was provided that anyone challenged the incorporation of ............, it could be concluded that ............ was duly incorporated.

1.2.3.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by the District Court in …….., as of this date ............ is in good standing and no liquidation or bankruptcy proceeding is initiated against .............

1.2.3.3 By-laws.

On the basis of the provided documentation, we were not able to conclude whether the version of ............' by-laws (that was given to us): (i) were duly registered in the commercial registry of ……. District Court; and (ii) are the latest by-laws approved by the general meeting of ............. Otherwise, the by-laws are fairly standard and generally follow, and comply with, the relevant provisions of Bulgarian law. The by-laws are almost identical to the by-laws of the Company except for certain majorities provisions designed to enable the Company to take unilaterally all decisions of the general meeting. There are no any particular provisions that deviate in any material respect from the standard regulation of Bulgarian law.

1.2.3.4 Capital. Shareholding Structure

The registered capital of ............ is BGN 50,000, divided into 50,000 materialised ordinary registered voting shares of face value BGN 1 each. We have not been provided with all relevant interim share certificates accompanied by all relevant endorsements to enable us conclusively confirm the shareholding structure of ............. On the basis of ............ shareholders' registry, it seems that the Company holds ~88% of the shares in ............, whereas the rest of the shares are held by certain minority shareholders. However, without all relevant interim share certificates and all relevant endorsements we are not in a position to confirm the Company's title to its shares in ............ and whether all these shares were duly issued and fully paid-in. Therefore, as a minimum protection a representation of the seller should be included in the SPA to the effect that: (i) the Company has good and clear title to its respective shares in ............; and (ii) theses shares are duly issued and fully paid-in. However, a better protection would be reached by including the satisfaction of (i) and (ii) as conditions precedent to closing.

1.2.3.5 Corporate Governance

The corporate governance bodies of ............ are: (i) general meeting, and (ii) board of directors. The executive director of ............ represents the Company before third parties. The highest majority for taking certain decisions of the general meeting is 75% of the represented shares. The Company allegedly holds ~88% of all shares and, therefore, seems to be entitled to unilaterally take all decision of the general meeting.

1.2.4 ............

1.2.4.1 Incorporation

............ ("............") was incorporated in MM/YYYY by virtue of Decision No. …. of the District Court in ……... We have not been provided with all other incorporation documents preceding the court decision. However, on the basis of the above mentioned court decision and considering the fact that no evidence was provided that anyone challenged the incorporation of ............, it could be concluded that ............ was duly incorporated.

1.2.4.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by the District Court in …….., as of that date ............ is in good standing and no liquidation or bankruptcy proceeding is initiated against ............. There is no pledge entered into over the going concern of ............ or over its shares.

1.2.4.3 By-laws.

We are not in a position to establish conclusively whether the by-laws of ............ provided to us are duly registered in the commercial registry. Otherwise, the by-laws are fairly standard and generally follow, and comply with, the relevant provisions of Bulgarian law. There are no any particular provisions that need to be discussed.

1.2.4.4 Capital. Shareholding Structure

Pursuant to Decision No. …./DD/MM/YYYY and Certificate of Good Standing dated DD/MM/YYYY, sole shareholder in ............ is ............ ("............"), which in turn is wholly owned subsidiary of the Company. Although we have not been provided with all relevant share transfer agreements, on the basis of the cited court decision and certificate, and considering the fact that no evidence was provided that anyone challenged said share transfers, we could conclude that ............ duly acquired 100% of the shares in ............. However, in order to mitigate any risk, a representation of the seller should be included in the SPA to the effect that: (i) ............ duly acquired 100% of the shares in ............; and (ii) these shares are fully paid-in.

1.2.4.5 Corporate Governance

The corporate governance bodies of ............ are: (i) sole shareholder, and (ii) general manager. The sole shareholder is entitled to take unilaterally all decisions that are in the powers of the general meeting. The general manager is entitled to solely represent and manage ............ in accordance with the decisions of the sole shareholder.

1.2.5 ............

The only available information with respect to ............ ("............"), even after our independent inquiry in the commercial registry, is that the Company was terminated in 2000 and was put into liquidation. The factual situation puts serious question about the reasons for such delay. Hypothetically, when a company is into liquidation a bankruptcy proceeding may still be initiated in certain cases. A potential bankruptcy proceeding regarding ............ may threaten the interests of the Company (respectively the buyer as a controlling entity) to a certain extent since the Company might not receive any liquidation quota. Therefore, in the SPA a price adjustment mechanism could be employed to address the risk, which the buyer (through the Company) is exposed to, if the Company ends up without any liquidation quota. The latter recommendation, however, makes sense if ............ has significant assets.

1.2.6 ............

1.2.6.1 Incorporation

............ ............ ("............ ............") was incorporated in MM/YYYY by virtue of Decision dated DD/MM/YYYY of the District Court in …….. We have not been provided with all other incorporation documents preceding the court decision. However, on the basis of a resolution of constituent meeting dated DD/MM/YYYY and the above mentioned court decision, we could conclude that ............ ............ was duly incorporated.

1.2.6.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by the District Court in ……….., as of that date ............ ............ is in good standing. However, the Company has not provided a certificate from the registration court evidencing that ............ ............ is not into liquidation or bankruptcy proceeding. Therefore, if such a document is not provided until the signing of the SPA an explicit representation of the seller should be included to the effect that no liquidation and bankruptcy proceeding are initiated against ............ .............

1.2.6.3 By-laws.

On the basis of the provided documentation, it seems that the current version of ............ ............'s by-laws were duly registered in the commercial registry of ………. District Court. The by-laws are fairly standard and generally follow, and comply with, the relevant provisions of Bulgarian law except for the nominal value of the shares. Under Bulgarian law, the minimal nominal value of a share in a stock corporation is BGN 1. A higher nominal amount of a share must be determined in a round number (e.g., BGN 1, 2,3 ..., etc.). Article 8 of ............ ............'s by-laws states that the nominal value of the shares is BGN 2.5, which contradicts Bulgarian law. Therefore, a technical amendment in Article 8 of the by-laws of ............ ............ should be made in order to make the nominal value of the shares consistent with Bulgarian law. This will result in a cancellation of the existing shares and issuing of new shares with correct nominal value. This technical operation, however, will not have any effect on the registered capital of ............ ............ but aims to bring the nominal value of its shares in compliance with Bulgarian law.

1.2.6.4 Capital. Shareholding Structure

Pursuant to the above-cited Certificate of Good Standing dated DD/MM/YYYY, the registered capital of ............ ............ is BGN 50,000 divided into 20,000 materialised ordinary registered voting shares of face value BGN 2.5 each. ............ ............ was initially incorporated by unrelated to the Company persons. Subsequently, the Company acquired 51% of the shares (as evidenced by Interim Share Certificate No. …..); however, this acquisition is not registered in the shareholders' registry and, therefore, is not effective vis-à-vis ............ ............. In YYYY the Company should have acquired the remainder 49% of the shares (as indicated by a preliminary sales and purchase agreement of 9,800 shares, representing 49% of the registered capital of............). However, we have not been provided with the relevant interim share certificates evidencing the Company's title to 49% shareholding; no registration in the shareholders' registry exists to that effect. Accordingly, we are not in a position to ascertain the valid acquisition of 100% of the shares in ............ ............ by the Company.

Therefore, if the missing information is not provided until the signing of the SPA, as a minimum protection a representation of the seller should be included thereof to the effect that: (i) the Company has duly and validly acquired 100% of the shares in ............ ............ free and clear of any encumbrances; and (ii) the Company's shares in ............ ............ were duly and validly issued and fully paid-in. However, a better protection with respect to the 49% of the shares in ............ ............ would be reached by including the due and valid acquisition of said 49% by the Company as condition precedent to closing.

1.2.6.5 Corporate Governance

The corporate governance bodies of ............ ............ should consist of: (i) sole owner[4], and (ii) board of directors. The sole shareholder is principally entitled to take unilaterally all de............ions that are in the powers of the general meeting. The board of directors of ............ ............ consists of 3 members. The executive director represents ............ ............ before third parties.

1.2.7 ............

1.2.7.1 Incorporation

............ ("............") was incorporated in MM/YYYY by virtue of Decision No. …/ DD/MM/YYYY of Sofia City Court. We have not been provided with all other incorporation documents preceding said court decision. However, on the basis of our independent review of the relevant corporate documents filed in the commercial registry, we can conclude that ............ was duly incorporated.

1.2.7.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by Sofia City Court, as of that date ............ is in good standing and no liquidation proceeding is initiated with respect to ............. the Company has not provided a certificate from the registration court evidencing that ............ is not into bankruptcy proceeding. Therefore, if such a document is not provided until the signing of the SPA an explicit representation of the seller should be included to the effect that no bankruptcy proceeding is initiated against .............

1.2.7.3 By-laws.

The current by-laws of ............ were duly registered in the commercial registry. The by-laws are fairly standard and generally follow, and comply with, the relevant provisions of Bulgarian law. There are no any particular provisions that need to be discussed.

1.2.7.4 Capital. Shareholding Structure

The registered capital of ............ is BGN 5,000, divided into 50 shares of BGN 100 each. Sole shareholder in ............ is the Company. On the basis of our independent review of the relevant corporate documents filed in the commercial registry, we can conclude that the Company duly acquired its shares in .............

1.2.7.5 Corporate Governance

1.2.8 ............

1.2.8.1 Incorporation

............ ("............") was incorporated in MM/YYYY by virtue of Decision No. …../ DD/MM/YYYY of the District Court in ………. We have not been provided with all incorporation documents preceding said court decision. However, on the basis of the above mentioned court decision and considering the fact that no evidence was provided that anyone challenged the incorporation of ............, it could be concluded that ............ was duly incorporated.

1.2.8.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by …….. District Court, as of that date ............ is in good standing. The Company has not provided a certificate from the registration court that ............ is not into liquidation or bankruptcy proceeding. Therefore, if such a document is not provided until the signing of the SPA an explicit representation of the seller should be included to the effect that no liquidation or bankruptcy proceeding is initiated against .............

1.2.8.3 By-laws.

The current by-laws of ............ were duly registered in the commercial registry of ………. District Court. The by-laws are fairly standard and generally follow, and comply with, the relevant provisions of Bulgarian law. There are no any particular provisions (share transfer restrictions or options, for instance) that need to be discussed.

1.2.8.4 Capital. Shareholding Structure

Pursuant to its by-laws, the registered capital of ............ is BGN 5,000 divided into 100 shares of BGN 50 each. According to the above-cited Certificate of Good Standing date DD/MM/YYYY, sole shareholder in ............ is the Company. However, we were not able to identify that the Company duly acquired its shareholding in ............ from the previous shareholders. Although these share transfers were duly registered in the commercial registry and no interested party seems to have appealed within the statutory limitation period, a relevant representation in the SPA should be included to minimise any possible risk for the buyer.

1.2.8.5 Corporate Governance

The corporate governance bodies of ............ are: (i) sole shareholder, and (ii) general manager. The sole shareholder is entitled to take unilaterally all decisions that are in the power of the general meeting. The general manager is entitled to solely represent and manage ............ in accordance with the decisions of the sole shareholder.

1.3 Corporate Status of the Acquisition Targets

1.3.1 ............

1.3.1.1 Incorporation and Corporate History

............ ("............") was incorporated in MM/YYYY by virtue of Decision No. …../ DD/MM/YYYY of ……….. District Court. We have not been provided with all incorporation documents preceding said court decision. However, on the basis of the above mentioned court decision, it could be concluded that ............ was duly incorporated. In addition, the applicable statute of limitation under the Law on Commerce has expired in MM/YYYY and, consequently, ............ is effectively shielded from any challenge of the validity of its incorporation.

............ was incorporated by two individuals (…………….. and ………………..) with the minimum capital required under the Law on Commerce. Additional shareholders were admitted to ............ through transfer of shares by the existing shareholders, but we have not been provided with copies of the relevant share transfer agreements, of the requests for admission of the new shareholders, or of the minutes of the general meeting of shareholders of ............ accepting the requests (those are all documents required for a valid entry into the capital of a limited liability company). Thus, based only on the court decisions registering the entry of the new shareholders into ............, we can reasonably presume, but not confirm, that the transfers of shares in ............ to new shareholders were validly performed.

According to the documentation reviewed with respect to ............, it seems that there have been no changes in the capital of the Company since its incorporation in YYYY, i.e., the capital has always been, and currently is, at the minimum amount required by law.

1.3.1.2 Good Standing

According to an old Certificate of Good Standing dated DD/MM/YYYY issued by ……….. District Court, the corporate legal status of ............ as of the date of that certificate was as follows:

Company Name ............, a limited liability company.

Seat and Registered Address [address]

Scope of Activities Design, supply, installation, and maintenance of devices and equipment for receiving satellite television programmes and relaying them through cable networks, software marketing and engineering, etc.

Registered Capital BGN 5,000, divided into 100 shares of BGN 50 each.

Corporate Governance (i) general meeting of the shareholders, and (ii) two general managers (…………. and …………).

Management and Representation By the two general managers, jointly and severally.

As we have not been provided with the relevant court certificate, we are not able to confirm whether or not ............ is currently in liquidation or insolvency proceedings. Therefore, we would recommend that the SPA include a representation of the seller to the effect that ............ is in good standing and no liquidation or bankruptcy proceeding is pending or threatened with regard to .............

1.3.1.3 By-laws.

According to the copy of the by-laws of ............ dated DD/MM/YYYY, the by-laws of the Company are fairly standard and do not raise any particular concerns. We would like to emphasize, however, that we are not aware whether the copy provided to us represents the by-laws of ............ that are currently on record with …….. District Court.

1.3.1.4 Shareholding Structure

On the basis of the documentation provided to us, none of which is recent enough, it appears that as of DD/MM/YYYY there were … shareholders in ............, all of them individuals. The two founding shareholders were holding among them 80 % of the Company's capital (in equal shareholdings) and the remaining ten shareholders were each holding two shares, acquired from the founding shareholders. As pointed out above, although the transfers of shares in ............ to new shareholders appear to have been duly registered in the commercial registry of ………. District Court (based on court decisions reviewed), we can only presume, but not confirm, that those transfers were validly carried out in accordance with the relevant requirements of the Law on Commerce. According to verbal information provided by the Company, 100 % of the shares in ............ have been recently transferred to a Dutch company and the court has already registered the transfer. However, as we have not received written information or documents confirming the transfer, we are unable to state an opinion on this transfer or, for that matter, on the current shareholding structure of .............

However, due to the structure of the Contemplated Transaction where the buyer through the Company will acquire title to the assets of ............, said points of concern regarding the shareholding structure of ............ would not have a significant effect (if any) to the acquisition of the Company. Nevertheless, the SPA should include appropriate representations and warranties concerning the assets subject to the Contemplated Transaction.

1.3.1.5 Corporate Governance

The corporate governance bodies of ............ are: (i) general meeting of the shareholders, and (ii) two general managers (at least as of DD/MM/YYYY). To the extent that the …… company has been registered as sole shareholder of ............, it is entitled to take unilaterally all decisions that are in the power of the general meeting. According to the Certificate of Good Standing from DD/MM/YYYY, the two general managers were managing and representing ............ jointly and severally. Please note that absent a copy of the by-laws currently on record with the court, we cannot comment on the powers of the general meeting or of the general managers that are currently applicable.

1.3.1.6 ............'s Subsidiaries

We have been provided with copies of court decisions, certificates, and by-laws concerning the following subsidiaries/ equity participations of ............:

· ............, a limited liability company incorporated on DD/MM/YYYY. According to a Certificate of Good Standing dated DD/MM/YYYY, ............ is the sole shareholder in that company;

· ............, a sole shareholder limited liability company incorporated on DD/MM/YYYY with ............ as sole shareholder in the Company;

· ……………….., a limited liability company incorporated in DD/MM/YYYY. According to the documents provided to us, as of DD/MM/YYYY, ............ was a shareholder in the Company holding 1/3 of the shares. The other shareholders were …… and ………;

· ............, a limited liability company incorporated on DD/MM/YYYY, in which ............ was holding 51 % of the shares at the time of incorporation;

· ............, a limited liability company incorporated on DD/MM/YYYY, in which ............ holds 90 % of the shares (according to by-laws of the Company dated DD/MM/YYYY);

· ............, a limited liability company incorporated on DD/MM/YYYY, in which ............ holds 49 % of the capital (the two other shareholders are the founding shareholders of ............ itself).

We have not received documents regarding any other subsidiaries of ............. According to the limited documentation we have received with respect to the companies listed above, they were validly incorporated and the statute of limitation for challenging their incorporation has expired (except for ............). As we have not been provided with the relevant court certificates, however, we cannot state any opinion as to the current legal standing of these subsidiaries. Therefore, we would recommend that the SPA include a representation of the seller to the effect that ............'s subsidiaries are in good standing and no liquidation or bankruptcy proceeding is pending or threatened with regard to these subsidiaries.

1.3.1.7 Acquisition Status

We have not been provided with any preliminary or final agreement regarding the sale of the shares in ............. According to unofficial verbal information from the Company, all of the shares in ............ have already been transferred to a ………. company and the transfer has been registered with ……….. District Court. Due to the lack of relevant documents, however, we are unable to comment on the validity of such transfer.

1.3.2 ............

1.3.2.1 Incorporation and Corporate History

............ ("............") was incorporated in MM/YYYY by virtue of Decision No. … / DD/MM/YYYY of …………. District Court. We have not been provided with the incorporation documents filed with the court for the purpose of incorporation of ............. However, on the basis of the above mentioned court decision, it could be concluded that ............ was duly incorporated. Moreover, the applicable statute of limitation provided for in the Law on Commerce has expired in MM/YYYY and, consequently, ............ is effectively shielded from any challenge of the validity of its incorporation.

............ was initially incorporated by two individuals (still affiliated with companies that are shareholders in ............) under the name ............. On DD/MM/YYYY, ……….. District Court registered the entry into the capital of ............ of a new shareholder - ............, carried out through in-kind contribution to the capital of ............ of a real estate asset (office building valued at BGN ……….). On DD/MM/YYYY, the court registered a second in-kind contribution by ............ consisting of a cable network valued at BGN ……….. We have not been provided with any of the documents that ............ should have filed with the court in accordance with the Law on Commerce. However, based on the court decisions registering the capital increases, listing all documents filed with the court, we can reasonable assume that the court registered the increases on the basis of all necessary documents in compliance with the applicable statutory requirements. Nevertheless, due to the lack of documents regarding the in-kind contributions, we are not able to state an opinion as to the validity of the transfer of the title to the contributed assets (please refer to Section 4.3.2.1 and Section 4.3.2.3 of this Report). Therefore, if this documentation is not made available until the signing of the SPA, a representation of the seller should be included to the effect that: (i) ............ has good, clear and marketable title to the assets contributed in its capital by way of in-kind contribution; and (ii) the in-kind contributions were validly made in accordance with Bulgarian law.

On DD/MM/YYYY, ……….. District Court registered the entry into the capital of ............ of two new shareholders - (incorporated in YYYY) and ……………… (incorporated in YYYY). The new shareholders entered into ............ by means of purchase of shares from ............ and from the two initial individual shareholders (the latter exited the capital of ............ but remained affiliated with the Company's management). On the basis of copies of the share transfer agreements executed with notarisation of the parties' signatures as provided for in the Law on Commerce and, also, considering the court decision registering the transfers, we conclude that the share transfers were validly carried out, including with respect to the corporate approvals of the transfers by ............ and by the new shareholders (copies have been provided to us).

1.3.2.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by ……… District Court, the corporate legal status of ............ as of that date is as follows:

Company Name ............, a limited liability company.

Seat and Registered Address [address]

Scope of Activities Production and broadcast of television programmes, production of movies, video and sound recordings, intellectual property transactions, information, programming, and other services, construction and exploitation of cable telecommunication networks for transfer of data and Internet services, etc.

Registered Capital BGN 269,700, divided into 5,394 shares of BGN 50 each.

Corporate Governance (i) general meeting of shareholders, and (ii) two general managers.

Management and Representation By the two general managers (…………….. and ……………….), acting jointly and severally.

We have not been provided with the relevant court certificate, but according to an affidavit of the general manager ……………. dated DD/MM/YYYY, ............ is not in liquidation or insolvency proceedings. Absent an official court certificate, however, we cannot confirm this statement. Therefore, if such a document is not provided until the signing of the SPA an explicit representation of the seller should be included to the effect that no liquidation or bankruptcy proceeding is initiated against .............

According to the affidavit of the general manager of ............ ................... cited above, ............ does not hold shares in other companies and does not have branches.

1.3.2.3 By-laws.

We have been provided with an undated but signed by all shareholders copy of the by-laws of ............. According to the court decision from DD/MM/YYYY, there were amendments to the by-laws adopted by the shareholders on DD/MM/YYYY. We have no information, however, whether the copy of the by-laws reviewed by us represents the by-laws of the Company currently on record with ………. District Court. Otherwise, according to the copy made available for our review, the by-laws of ............ are fairly standard and generally follow, and comply with, the relevant provisions of Bulgarian law. The only exception would be the 3/4 voting majority required for all resolutions of the general meeting of the shareholders (under the Law on Commerce most of the less important resolutions of the general meeting can be adopted by simple majority). There are no any particular provisions (share transfer restrictions or options, for instance). However, since the Contemplated Transaction will confer to the Company title to 100% of the shares in ............ said voting majority provision should not be of a concern.

1.3.2.4 Shareholding Structure

On the basis of the court de............ion from DD/MM/YYYY and information provided by ............, currently there are three shareholders in the Company, namely ............, …………., and ……………., each of them holding ……. shares with total value of BGN …………. As pointed out above, all three shareholders acquired validly their shares in the Company.

1.3.2.5 Corporate Governance

The corporate governance bodies of ............ are: (i) the general meeting of the shareholders, and (ii) two general managers. Once the transfer of the shares to the Company is registered in the commercial registry, the Company as sole shareholder will have the powers of the general meeting and will, thus, fully control the general meeting of ............. Currently the two general mangers carry out the management and representation of ............ jointly or severally, in accordance with the decisions of the general meeting of the shareholders; however, after the registration of the Company as sole shareholder in ............, the management structure could be changed.

1.3.2.6 Acquisition Status

We have been provided with executed copies of the preliminary agreement for transfer of 100% of the shares in ............ to the Company dated DD/MM/YYYY and of a supplemental agreement dated DD/MM/YYYY. According to these documents, the Company undertakes to purchase all of the shares in ............ for an amount equal to EUR …………, of which EUR …….. were already disbursed as advance payment as of the date of the supplemental agreement. Also, the parties agreed to enter into a final share purchase agreement within one week from receiving competition clearance and the approval of the transaction by CRC, whereas both approvals are condition precedent to closing. On DD/MM/YYYY, the Competition Protection Commission approved the transaction (decision No. …..), but we have no information as to expected approval of CRC. Also, we have not received information as to whether a final share purchase agreement has already been executed or negotiated.

With respect to the preliminary agreement, including the supplemental agreement, we would like to emphasize that (i) in case of failure by the Company to enter into the final share purchase agreement or to pay the purchase price, the selling shareholders of ............ have the right to terminate the preliminary agreement retaining the amount of the advance payment (EUR ………..), and (ii) the preliminary agreement does not contain any adequate representations and warranties of the selling shareholders (such should be in any event included in the final share purchase agreement).

1.3.3 ............

1.3.3.1 Incorporation and Corporate History

............ ("............") was incorporated on DD/MM/YYYY by virtue of decision No. 1 of ………… District Court. The Company was incorporated as a sole shareholder stock corporation by …………., a stock corporation itself incorporated on DD/MM/YYYY. The initial registered capital of ............ was formed by an in-kind contribution by ……………. of a cable network and other movable and real estate assets. According to the documents provided to us, the in-kind contribution was validly performed in accordance with all procedural requirements of the Law on Commerce. According to an affidavit of the executive director of ............, there have been no changes in the corporate status of the Company since its incorporation.

Based on the documents reviewed with respect to the incorporation of ............, we are of the opinion that the Company was validly incorporated. However, it should be noted that the statute of limitation for challenging the validity of the incorporation of ............ will expire on DD/MM/YYYY. Until then, a challenge is theoretically possible, although according to the documents reviewed, we do not expect any reasonable grounds for challenge to appear. That is why we would recommend a representation of the seller in the SPA to the effect that ............ is duly incorporated.

1.3.3.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by ……….. District Court, the corporate legal status of ............ as of that date was as follows:

Company Name ............, a stock corporation.

Seat and Registered Address [address]

Scope of Activities Purchase and resale of goods. manufacturing and sale of goods, commercial agency, purchase, construction, and furnishing of real estate for the purpose of sale, and leasing and forwarding activities.

Registered Capital BGN ………, divided into ……….. materialised ordinary registered voting shares of face value BGN 1 each.

Corporate Governance (i) a sole shareholder (…………), and (ii) a board of directors composed of three members.

Management and Representation By the executive director …………………...

We have not received the relevant court certificate, but according to an affidavit of the executive director, the Company is not in liquidation or insolvency proceedings. Also, according to the same affidavit, ............ does not have branches or subsidiaries and does not hold shares in other companies. Still, in the SPA we would recommend that a representation of the seller be included to the effect that ............ is not into liquidation or bankruptcy proceeding.

1.3.3.3 By-laws

According to the copy of the by-laws of ............ filed with the court for the purpose of registration of the Company, the by-laws are standard and in compliance with the relevant provisions of the Law on Commerce. We would like to point out that the scope of activity of the Company, as provided for in the by-laws, does not include any activity related to providing cable network services. Consequently, the by-laws should be amended to reflect this type of activity; though under Bulgarian law a commercial company may do any activity that is not prohibited by law; however, if an authorisation is required for a particular type of activity, such activity could be carried out only after the grant of such authorisation.

1.3.3.4 Shareholding Structure

………… is the sole shareholder of ............. The shares in the capital of ............ were fully paid-in through the in-kind contribution by …………...

1.3.3.5 Corporate Governance

The corporate governance bodies of ............ are: (i) sole shareholder, and (ii) board of directors composed of three members. The sole shareholder is entitled to take unilaterally all decisions that are in the power of the general meeting. In addition, the executive director of ............ is empowered with the day-to-day management and representation of the Company. There are no unusual provisions in the by-laws with respect to the respective powers of the sole shareholder, the board of directors, and the executive director, i.e., these follow the standard provisions of the Law on Commerce.

1.3.3.6 Acquisition Status

We have been provided with an executed copy of the final share purchase agreement entered into between the Company and ............ on DD/MM/YYYY. The agreement should have entered into force by DD/MM/YYYY, when the Company should have paid EUR ………….. The residual amount of the total purchase price of EUR ……….. should be paid on or before DD/MM/YYYY.

The agreement provides for liquidated damages to be paid by the Company as follows: (i) in the amount of the advance payment of EUR ………… (paid upon execution of the agreement) in the event of termination by the seller based on default of the Company, (ii) in the amount of the advance payment of EUR …….. plus an amount equal to EUR …………. in the event the transaction is prohibited or invalid because of violation of a regulatory act or an act of an administrative body, and (iii) in the amount of the advance payment of EUR ……. plus any amounts paid by DD/MM/YYYY in the event the Company does not pay the residual amount (EUR ………) of the purchase price by DD/MM/YYYY.

Another important provision of the final share purchase agreement is the non-competition covenant, according to which ............ undertakes, without the consent of the Company, not to pursue activities related to the exploitation of cable telecommunication networks on the territory of ……….. This covenant, however, does not apply to the current members of the board of directors of ............ appointed by …………..

Our main concern with respect to the share purchase transaction between ............ and the Company is that the agreement does not provide for adequate, if any, representations and warranties of the seller. In fact, the only representation and warranty is contained in the preliminary agreement dated DD/MM/YYYY, according to which ............ represents and warrants that ............ is the sole legitimate owner of the real estate and vehicles belonging to the Company. A definition of "lien" is also provided for in the preliminary agreement, without, however, any representation and warranty to the effect that there are no liens on the assets of ............. Therefore, these gaps should be addressed in the SPA by relevant representations and warranties so as to minimise any risk for the Client.

We have no information whether the amounts mentioned above have already been paid, in particular the amount of EUR …………, the payment of which is a condition to the entry into force of the final share purchase agreement.

1.3.4 ............

1.3.4.1 Incorporation and Corporate History

............ ("............") was incorporated in YYYY as a stock corporation under the name ............ by virtue of a decision of …………. District Court. We have not been provided with any of the incorporation documents related to the incorporation of the Company nor have we received the first court decision registering ............. However, considering the fact that the statute of limitation for challenging the Company's incorporation has already expired in MM/YYYY, we conclude that ............ is shielded from any challenge directed against the validity of its incorporation.

We have not received sufficient documentation in order to be able to trace the corporate history of ............ and the evolution of its shareholding structure since the Company's incorporation. We have only been able to review the court decision dated DD/MM/YYYY registering a capital increase from BGN ………… to the current amount of BGN ……….. carried out through cash contribution. The resolution for the capital increase was taken by the board of directors, which was authorised for that purpose by the then-effective by-laws of the Company (a copy has been provided for review). Based on the reviewed documents, we may conclude that the capital increase was validly performed in accordance with the Law on Commerce and the by-laws of the Company in force at the time of the increase.

1.3.4.2 Good Standing

According to a Certificate of Good Standing dated DD/MM/YYYY issued by ………….. District Court, the current corporate legal status of ............ as of that date is as follows:

Company Name ............ , a stock corporation.

Seat and Registered Address [address]

Scope of Activities Construction and exploitation of a cable telecommunication network on the territory of …………, production and broadcast of television programmes, etc.

Registered Capital BGN ……………, divided into …….. materialised ordinary registered voting shares of face value BGN 100 each.

Corporate Governance (i) a general meeting of the shareholders, and (ii) a board of directors composed of three members.

Management and Representation By the executive director ………………..

As we have not received the relevant court certificate, we cannot confirm whether or not ............ is currently in liquidation or insolvency proceedings. Therefore, in the SPA we would recommend that a representation of the seller be included to the effect that ............ is not into liquidation or bankruptcy proceeding.

We have no information whether ............ has any branches or subsidiaries and whether it holds shares in other companies.

1.3.4.3 By-laws

We have not been provided with the latest version of ............'s by-laws.

1.3.4.4 Shareholding Structure

According to written information provided by ............, there are five shareholders in the Company, of which ............ ("............"), a limited liability company incorporated in …………, is the majority shareholder. On the other hand, according to the preliminary share purchase agreement with the Company and other documents provided to us (including copies of the shareholders' registry and the interim share certificates for the shares in ............), it appears that ............ should currently be the sole shareholder of ............. However, considering that we have not been able to review all documents related to the transfers to ............ (share transfer agreements, corporate approvals), we would recommend to address the issue through representation and warranty in the SPA to the effect that ............ has good, clear, and marketable title to all of the shares in .............

1.3.4.5 Corporate Governance

The corporate governance bodies of ............ are: (i) general meeting of the shareholders (currently a sole shareholder), and (ii) board of directors composed of three members. The sole shareholder is entitled to take unilaterally all decisions that are in the power of the general meeting. Therefore, it could be concluded that currently ............ the Company controls solely the Company. As we have not been provided with the current by-laws of ............, we are unable to comment on the respective powers of the sole shareholder, the board of directors, and the executive director provided for in the by-laws.

1.3.4.6 Acquisition Status

We have reviewed (i) an executed copy of the preliminary agreement entered into between the Company and ............ on DD/MM/YYYY for the transfer of 100 % of the shares in ............ to the Company at the price of EUR …………, and (ii) an executed copy of minutes for placing the shares in ............ into escrow in the hands of a notary public. The preliminary agreement provides for closing of the transaction within two months from the date of execution of the agreement. However, we do not have information as to the closing of the transaction.

We would like to point out that although the share purchase agreement provided to us is titled "preliminary agreement," it in fact represents a full-scale share purchase agreement providing in details for the closing mechanism of the transaction. In addition, the agreement contains detailed and, in our opinion, adequate representations and warranties of the seller covering all essential contingencies that are typically provided for in this type of agreements.

2. REGULATORY MATTERS AND REGULATORY COMPLIANCE

2.1 Regulatory and Regulatory Compliance Matters related to The Company

Comments and Conclusions

Based on the documents available in the Data Room and the verbal information received, we did not identify any grounds on which the validity of the licences issued to the Company or the registrations under the general licences under the Law on Telecommunications (the "LT"), or the registration of the Company under the Law on Radio and television (the "LRT"), may be questioned, and they appear to be in full force and effect.

Pursuant to the specific requirements of the applicable Bulgarian law, the transfer of shares in the capital of commercial companies - licensed public telecoms operators, or the issuance of shares to new shareholders in such companies, which leads to a change of control over the management of the respective company, may be done only after the prior written permission of the Communications Regulatory Commission (the "CRC") is obtained. With a view to the above, the Company should obtain the written permission of the CRC for the Contemplated Transaction as a condition precedent to closing. Failure of the Company (as licensee) to obtain a written permission from the CRC prior to completion of the Contemplated Transaction will cause a material breach and will jeopardise the individual licences and the registration under the general licences.

Pursuant to the specific requirements of the individual licences and registrations under general licences, held by the Company, the latter shall notify the CRC of any changes in the circumstances registered under its corporate file within a 14-day period as of occurrence thereof. With a view to the above, if the Contemplated Transaction results in a change in any of the circumstances registered under the Company's corporate file, we would recommend that the Company notifies the CRC of such change within the said time period. Failure of the Company to notify the CRC within the required time period of any changes in the circumstances registered under the Company's corporate file will amount to a breach of the terms of the respective licence/ registration and may lead to the imposition of fines.

From the documents provided in the Data Room it would seem that the Company has complied with its obligation to provide the CRC with an annual report for its activity under its respective licences and registrations under the LT within the time period set out in the respective licence/registration. However, on the basis of the documents provided it could not be undoubtedly concluded whether the Company has duly observed all its reporting obligations under the licences and registrations under LT, held by it, and under the LRT. Generally, failure of the Company to comply with its reporting obligations under the respective licence/registration under the LT or under the LRT will amount to a breach of the terms of the respective licence/registration or the respective applicable law and may lead to imposition of administrative sanctions. In view of the above, we would recommend that the SPA include a representation of the seller to the effect that the Company has complied with all reporting and other obligations under the licences and registrations under LT, held by it, and under the LRT.

As of the date of this Report, the Company has been imposed 4 (four) pecuniary sanctions for violations of the provisions of a general licence under which the Company is registered. The Company has appealed the respective penal rulings for imposition of the referred sanctions and the court revoked two of these rulings. Systematic breach of the terms of the referred general licence by the Company may result in deletion by the CRC of the Company's registration under said general licence.

2.1.1 Licences. Transferability of Licences. Allocated Frequencies

On the basis of the documents provided in the Data Room, it could be concluded that the Company holds 4 (four) valid individual licences, which are analysed in this Section 2.1.1. Detailed summaries of the reviewed individual licences are included in Appendix 2.1.1-1 to this Report.

All individual licences are issued by the CRC under the LT and are valid and in full force and effect as of the date of this Report. All individual licences were issued by the competent regulatory authority in accordance with applicable regulations. The individual licences are issued for a different term, ranging between 10 years and 15 years. The term of an individual licence may be further prolonged by the CRC upon submission of the Company's request to that effect, provided that the Company meets the requirements of the Bulgarian legislation, including the requirements with respect to the national defence and security.

The individual licences are not assignable. Each of the licences may be transferred to a third party only after a prior written permission is obtained from the CRC. The licences do not provide for any restrictions with respect to taking or providing security by the Company. The transfer of shares in the capital of the Company or the issuance of shares to new shareholders in the Company, which leads to a change of control over the management of the Company[5], may be done only after the prior written permission of the CRC is obtained. With a view to the above, the Company should obtain the written permission of the CRC for the Contemplated Transaction as a condition precedent to closing. Failure of the Company to obtain a written permission from the CRC prior to completion of the Contemplated Transaction will cause a material breach and will jeopardise the individual licences issued to the Company.

The CRC may revoke an individual licence only if it establishes (i) a material or repeated breach of the terms of the LT or the conditions of the respective licence, or (ii) financial or technical impossibility of the Company to carry out its activity, or (iii) actions on part of the Company that may pose a threat to the national security or the defence of the country, and in addition - only after the CRC notifies the Company and the latter does not remedy the non-compliance within a remedy period specified by the CRC. The Company may surrender the performance of all or part of its obligations under the licence upon a reasoned request to the CRC if the Company's rendering of the licensed services proves to be impossible. The CRC must assess the motivation of the request and must issue its opinion within one month from the date of submission of the request.

The Company has represented that it has duly paid the initial licence fees due upon issuance of the licences. Pursuant to the LT and the Tariff on the Fees Collected by the Communications Regulatory Commission under the Law on Telecommunications, in respect of its individual licences the Company shall also pay (i) annual fees for the regulatory services provided by the CRC, determined as a percentage of the gross income from the licensed activities, net of VAT, after deduction of the cost (if any) for outgoing traffic, for interconnection and for providing specific access, as well as (ii) annual fees for the use of scarce resource (where such is allocated to the Company). Those periodic fees are determined on the basis of non-discrimination towards operators and therefore the competitors pay fees based on the same formula under the above-mentioned Tariff. We have been provided with summarised information as to the range of the annual fees payable by the Company for the year YYYY with regards to its licensed activities, which information is presented in Appendix 2.1.1-2 hereto. However, we have not been provided with a confirmation by the Company whether the latter has duly paid all period fees due for maintaining the validity of its licences. Therefore, the SPA should contain a representation of the seller to the effect that all periodic fees for maintaining the validity of the Company licences are duly paid.

As a provider of a voice telephony service, the Company is obliged to pay an annual contribution to the Fund for Covering the Universal Service Costs, as determined by the Managing Board of the latter Fund. Pursuant to the LT, the total annual contribution of a licensee may not exceed 0.8 (zero point eight) per cent of the licensee's gross income generated as a result of the rendering of a voice telephony service, after deducting the expenses for outgoing traffic in the case of interconnection and the expenses for specific access. However, said obligation under the LT, which is also repeated in the individual licences granted to the Company, discussed in Sections 2.1.1.1 and 2.1.1.3 below, is effective as of DD/MM/YYYY. The Managing Board of the Fund for Covering the Universal Service Costs is yet to determine the amount of the contributions to be paid by the respective operators for the year YYYY. Therefore, as of the date of the Report we are not in a position to establish what is the amount to be paid by the Company to the Fund for Covering the Universal Service Costs for the year YYYY.

2.1.1.1 Individual Licence No ……………. / DD/MM/YYYY for Carrying out Telecommunications through Public Fixed Telecommunications Network and Provision of Fixed Voice Telephony Service

Individual Licence No ……………./ DD/MM/YYYY represents actually assignment of Individual Licence No …………. / DD/MM/YYYY for Carrying out Telecommunications through Public Fixed Telecommunications Network and Provision of Fixed Voice Telephony Service issued in the name of ……………[6].

The licence has entered into effect as of the date of issuance of Decision No …. of DD/MM/YYYY of the CRC for the grant in the name of ………………….. of Individual Licence No …………….. / DD/MM/YYYY for Carrying out Telecommunications through Public Fixed Telecommunications Network and Provision of Fixed Voice Telephony Service. Individual Licence No ……………… / DD/MM/YYYY was re-grated again in the name of ………………………. by virtue of Decision No ……….. of DD/MM/YYYY of the CRC in order to be rendered in compliance with the provisions of the LT. However, we have not been presented with copies of Individual Licence No ………… / DD/MM/YYYY and Individual Licence No …………… / DD/MM/YYYY.

The subject matter of the licence is carrying out telecommunications through a fixed public telecommunications network and provision of fixed voice telephony service. The territorial scope is the territory of Bulgaria. The licence is valid until DD/MM/YYYY. The term of the licence may be extended upon application of the licensee made not later than 6 (six) months prior to expiry of the term of the licence.

On the basis of the information stated in the public Register of Granted Individual Licences for Carrying out Telecommunications through Public Fixed Telecommunications Network and Provision of Fixed Voice Telephony Service kept with the CRC, it could be concluded that there have been 5 (five) amendments to the referred licence, whereas the latest amendment was made on DD/MM/YYYY. However, we have not been provided with any information or documents related to subsequent amendments to the licence.

From the information in the Data Room, it would seem that as of the date of this Report the Company has duly paid the quarter contributions from the annual fee for the year YYYY, due by the Company in respect of the referred licence. However, we have not been provided with a confirmation by the Company to this effect, or with sufficient information on the basis of which we could independently verify the above.

On the basis of the information provided, it could not be undoubtedly concluded whether the Company has complied with all its reporting obligations under the referred licence. Failure of the Company to comply with its reporting obligations will amount to a breach of the terms of said licence and may lead to imposition of administrative sanctions.

In view of the above, we would recommend that the SPA include a representation of the seller to the effect that the Company has complied with all reporting and other obligations under this licence.

2.1.1.2 Individual Licence No ……………….. of DD/MM/YYYY for Carrying out Telecommunications through Telecommunications Network for Provision of Leased Lines Including International Leased Lines

The subject matter of the licence is carrying out telecommunications through a telecommunications network for provision of leased lines services, including international leased lines services. The territorial scope is the territory of the Republic of Bulgaria. The licence is granted for a term of 20 (twenty) years with a possibility for extension upon application of the licensee made not later than 6 (six) months prior to expiry of the term of the licence. The licence enters into effect as of the date of its grant. The licence was amended on DD/MM/YYYY.

The Company has represented that the discussed licence will remain with ............. Therefore, for the purposes of this Report the referred licence shall not be examined in further detail.

2.1.1.3 Individual Licence No …………… / DD/MM/YYYY for Carrying out Telecommunications through Public Telecommunications Network for Provision of Voice Access Service of the Type Carrier Selection and Pre-selection

Individual Licence No …………. / DD/MM/YYYY was granted to the Company by Decision No ….. of DD/MM/YYYY of the CRC.

The subject matter of the licence is carrying out telecommunications through public telecommunications network for provision of voice access service of the type "selection" and "pre-selection". The territorial scope is the territory of Bulgaria. The licence is granted for a term of 10 (ten) years with a possibility for extension upon application of the licensee made not later than 6 (six) months prior to expiry of the term of the licence. The licence enters into effect as of the date of its grant.

Pursuant to the public registries kept with the CRC the referred licence was last amended on DD/MM/YYYY. However, we have not been provided with any information or documents in relation to any amendments to this licence.

We have not been provided with any information evidencing compliance of the Company with its reporting obligations to the CRC under the referred licence. Failure of the Company to comply with its reporting obligations will amount to a breach of the terms of said licence and may lead to imposition of administrative sanctions.

Therefore, we would recommend that the SPA include a representation of the seller to the effect that The Company has complied with all reporting and other obligations under this licence.

2.1.1.4 Individual Licence No …………… / DD/MM/YYYY for Carrying out Telecommunications through Private Telecommunications Network from the Fixed Radio Service - Radio-Relay Lines

Individual Licence No ………….. / DD/MM/YYYY was granted to the Company by Decision N …. of DD/MM/YYYY of the CRC.

The subject matter of the licence is carrying out telecommunications through private telecommunications network from fixed radio service - radio-relay lines. The territorial scope is specified in Appendix 1 to the licence, which appendix envisages several radio-relay stations located in the towns of ………. and ………... The licence is granted for a term of 15 (fifteen) years with a possibility for extension upon request of the licensee, provided that the latter meets the requirements of the Bulgarian legislation, including the requirements with respect to the national defence and security. The licence enters into effect as of the date of its grant.

Pursuant to this licence the Company is entitled to use the following frequency spectrum:

10.15 GHz - 10.68 GHz and 11.7 GHz - 12.5 GHz.

In respect of the referred licence, the Company qualifies as a private operator within the meaning of the LT[7]. Therefore, in respect of the this licence no special rules for transfer of shares from the capital of the Company or acceptance of new shareholders apply, i.e. no prior notification to, or permission of, the CRC is required.

Pursuant to the public registries kept with the CRC the referred licence has been last amended on DD/MM/YYYY. However, we have not been provided with any information or documents in relation to any amendments to this licence.

2.1.1.5 Other Comments

Based on the information provided in the Data Room it could be concluded that the Company held (i) Individual Licence N ……………. / DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Broadcasting of Radio and Television Signals and Provision of Telecommunications Services through it at the territory of the town of ............ and village of ............, ............ District; (ii) Individual Licence N ……….. / DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Broadcasting of Radio and Television Signals and Provision of Telecommunications Services through it at the territory of the town of ............; (iii) Individual Licence N ………….. / DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Broadcasting of Radio and Television Signals and Provision of Telecommunications Services through it at the territory of the town of ............; (iv) Individual Licence N …………… / DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Broadcasting of Radio and Television Signals and Provision of Telecommunications Services through it at the territory of the town of Sofia; and (v) Individual Licence N ………… / DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Broadcasting of Radio and Television Signals and Provision of Telecommunications Services through it at the territory of the town of ............. However, we have not been provided with copies of said licences.

Under the Revoked LT, the construction, maintenance and operation of a public cable telecommunications network for broadcasting of radio and television signals was subject to a licensing regime. Therefore, it could be concluded that after the entry into force of the effective LT, the above-enumerated individual licences held by the Company have been replaced by the Company's registration under General Licence …, discussed in Section 2.1.2.1 (i) below.

2.1.2 Other Regulatory Permits and Authorisations

2.1.2.1 Registrations under the LT

(a) Registrations under the LT, held by the Company

We have reviewed the following two certificates, evidencing the registration of the Company under two general licences adopted by the CRC under the LT:

(i) Certificate No ……………. / DD/MM/YYYY for Registration under General Licence No …. of DD/MM/YYYY for Carrying out Telecommunications through Public Cable Telecommunications Network for Broadcasting of Radio and Television Programs and Provision of Telecommunications Services through it ("General Licence …");

(ii) Certificate No …………… / DD/MM/YYYY for Registration under General Licence No … of DD/MM/YYYY for Carrying out Telecommunications through Public Telecommunications Network for Transmission of Data without Using Scarce Resource and Provision of Telecommunications Services through it ("General Licence …").

General Licence …

We established that the Company is duly registered under General Licence … and validly carries out the telecommunications activities pursuant to said general licence.

Pursuant to the public registry of persons registered under General Licence …, the initial registration of the Company under General Licence … was made on DD/MM/YYYY. Therefore, it could be concluded that the commencement date of the provision of services by the Company under said General Licence … is DD/MM/YYYY.

The geographic boundaries specified in the Company's registration certificate No. …………… / DD/MM/YYYY and the registry of persons registered under General Licence … , kept with the CRC, cover the territory of ............ District - town of ………… ; city of …………; city of …………..; …………….. District - town of …………. and city of …………..; ………… District - city of ………… and village of ………….; city of ………….; …………… District - city of ………… and town of ………….; city of ……………; ............ District - city of ............ and village of ............; city of ............; city of Sofia; city of …….. ………; city of ............; city of ………….. and city of .............

From the information in the public registry of persons registered under General Licence … kept with the CRC, it could be concluded that amendments to the Company's registration have been registered and the last such registration was made on DD/MM/YYYY. However, we have not been provided with any information or documents in this regard.

The Company has complied with its obligation to provide the CRC with an annual report for its activity for the year YYYY under General Licence … within the time period set out in General Licence …. However, on the basis of the information provided, it could not be undoubtedly concluded whether the Company has complied with its obligation to provide the CRC on a 6-month basis with an updated list of the broadcasted foreign programmes and documents related to acquisition of such rights. Failure of the Company to comply with all its reporting obligations under General Licence … will amount to a breach of its terms and may lead to imposition of administrative sanctions.

Therefore, we would recommend that the SPA include a representation of the seller to the effect that the Company has complied with all its reporting and other obligations under General Licence ….

General Licence …

We established that the Company is duly registered under General Licence … and validly carries out the telecommunications activities pursuant to said general licence.

The geographic boundaries specified in the Company's registration certificate No ………… / DD/MM/YYYY and the registry of persons registered under General Licence …, kept with the CRC, cover the whole territory of the Republic of Bulgaria.

Based on the information in the public registry of persons registered under General Licence … kept with the CRC, it could be concluded that amendments to the Company's registration have been made and the last such amendment was made on DD/MM/YYYY. However, we have not been provided with any information or documents in this regard.

The Company has complied with its obligation to provide the CRC with an annual report for its activity for the year YYYY under General Licence … within the time period set out in said General Licence.

Change of Control and Other Provisions

Pursuant to the terms of General Licence …. and General Licence …, any transfer of shares in the Company or the issuance of shares to new shareholders in the Company, which results in a change of control over the Company's management, is subject to a prior written permission from the CRC. With a view to the above, the Company should obtain the written permission of the CRC for the Contemplated Transaction as a condition precedent to closing. Failure of the Company to obtain a written permission from the CRC prior to completion of the Contemplated Transaction will cause a material breach and will jeopardise the registrations of the Company under General Licence … and General Licence ….

No periodic fees are payable under General Licence … and General Licence …. Detailed summary sheets of General Licence … and General Licence … are enclosed in Appendix 2.1.2.1 (a) to this Report.

(b) Legal Framework of Registrations under the LT

In principle, a general licence sets out the terms and conditions for the carrying out of certain telecommunications activities, which under Bulgarian telecommunications legislation do not require an individual licence, but, on the other hand, are not allowed to be provided on a free regime basis. General licences are issued by the CRC and are published in the State Gazette.

The procedure for registration under a general licence is non-competitive, quite simple and straightforward and should be carried out under equal, publicly opened and transparent basis. An applicant must submit an application for registration before the CRC together with corporate status documents and documents evidencing compliance with the conditions and requirements of the respective general licence.

The CRC shall register any eligible applicant under a given general licence within 30 (thirty) days of the date of the filing of the application, if the applicant has presented a document certifying the payment of the registration fee. The CRC must grant a certificate of registration and must keep a public registry of the persons registered under a general licence. If the CRC fails to rule on the application, the rights and obligations related to the provision of a telecoms service under a given general licence shall arise within 30 (thirty) days after the date of the filing of the registration application (i.e., deemed consent). Where the applicant does not comply with the conditions and requirements attached to the general licence, the application for registration may be rejected by the CRC giving its reasons.

The telecommunications activity, subject to a general licence, may be performed only by a person who has been registered by the CRC onto the relevant registry kept by the CRC. The general licence is not limited in time and the number of persons who may be registered under a given general licence is not limited. The registration is intuitu personae and is not transferable.

2.1.2.2 Registrations under the LRT

(a) Registrations under the LRT, held by the Company

We reviewed Decision No … of DD/MM/YYYY of the Council of Electronic Media (the "CEM") for registration of the Company as a television operator under the LRT with respect to the creation and broadcasting of a television programme "………………….". We have requested, but as of the date of this Report we have not been provided yet with, a copy of the respective certificate issued to the Company for the discussed registration.

By virtue of the above-mentioned Decision No … of DD/MM/YYYY of the CEM, the Company is registered as a commercial television operator[8]. The profile of the programme is specialised - information for the subscribers of the Company. The method of broadcasting is through cable for the territory of Bulgaria. The starting date for broadcasting of the programme is DD/MM/YYYY.

We have not been provided with any documentation on the basis of which it could be concluded whether the Company has duly observed its reporting obligations under the LRT, summarised in Section 2.1.2.2 (b) below. Failure of the Company to comply with such obligations will amount to a violation of the LRT and may lead to imposition of administrative sanctions. Therefore, we would recommend that the SPA include a representation of the seller to the effect that the Company duly observes its reporting obligations under the LRT.

(b) Legal Framework of Registrations under the LRT

In principle, a registration under the LRT is required for the creation of radio or television programmes for broadcasting through technical means different from terrestrial radio broadcasting.[9]

The procedure for registration under the LRT is non-competitive, quite simple and straightforward. An applicant must submit an application for registration before the CEM together with a set of documents, explicitly listed in the LRT, including among others corporate status documents, a programme design, a programme conception, a programme profile, a programme scheme, a list of the additional television services, and documents proving commercial rights and licences for use of creations in the programmes, which creations are subject to copyright, and licences for use of related rights for broadcasting of foreign programmes.

The CEM shall rule on the application for registration within 14 (fourteen) days from the date of the filing of the application. In the event of irregularities or omissions in the submitted set of documents, the CEM shall provide the applicant with a 7-day period for remedy of such irregularities or omissions. The CEM may refuse registration only in the event the submitted programme design, programme conception, programme profile or programme scheme contradicts to the provisions of law, or any irregularities or omissions have not been remedied within the time period set by the CRC as explained above. The CEM must issue a certificate of registration and must keep a public registry of the persons registered under the LRT.

Registrations under the LRT are of unlimited term. The CEM may not impose any limitations on registered persons in relation to the scope of broadcasting of the programme.

Pursuant to Art. 125a, Section (6) of the LRT any registered television operator shall notify the CEM of the terms of broadcasting, the programme time, the place and the method of broadcasting, as well as for any changes related thereto within a 14-day term. Pursuant to Art. 125b of the LRT any telecoms operator that broadcasts foreign programmes shall provide to the CEM on a 6-month basis an updated list of foreign programmes broadcasted and documents related to acquisition of rights for such broadcasting.

Pursuant to an amendment to the LRT enacted in MM/YYYY registered television operators shall pay initial and annual registration fees in amounts determined in a tariff adopted by the Council of Ministers upon proposal of the CEM. Such fees are among the sources of financing of the Radio and Television Fund to the CEM, which is a fund created for the purposes of financing of radio and television activity. The Tariff on the Fees for Radio and Television Activity was adopted by the Council of Ministers on 17 May 2004 and it sets out the amount of the initial fee for registration as a television operator (about BGN 530) and an annual fee for exercising control over the activity of a registered television operator for compliance with the law and the terms of the registration. By virtue of Decision N ….. of DD/MM/YYYY, the Bulgarian Supreme Administrative Court declared as null and void those provisions from the referred Tariff setting out the amount of the annual fees collected by the CEM As a result of the above, presently in practice no fees are collected by the CEM under the LRT until new tariff provisions are adopted by the Council of Ministers..

The CEM shall delete the registration under the LRT upon systematic breach of law by the registered television operator.

2.1.3 Pending Applications for Licences, Permits or Authorisations

We have been informed by the Company that it intends to apply for registration as a television operator under the LRT in respect of creation and broadcasting of television programme "………………..". Pursuant to the related documents provided in the Data Room, the profile of said programme shall be multi-thematic, the programme shall be broadcasted through cable and the territorial scope shall encompass the town of …………….

The Company has represented that except for the intended application discussed above, as of the date of this Report there are no pending applications for licences, permits or authorisations, submitted by the Company. Similar representation of the seller should also be included in the SPA.

2.1.4 Relationship with the Regulatory Authorities

We have been provided with documents evidencing the imposition of 4 (four) pecuniary sanctions to the Company for violations of Article 7, item 3^{^[10]} of General Licence ….. The pecuniary sanctions have been imposed by virtue of 4 (four) penal rulings issued by the CRC. The Company has appealed the referred penal rulings. Two of the rulings have been revoked by the respective competent regional court. In general, it should be taken into consideration that systematic breach of the terms of General Licence … by the Company may result in deletion by the CRC of the Company's registration under said licence. For further analysis on the discussed penal rulings and the status of the court cases on appeal of such rulings, please refer to Section 8.3 of this Report.

We have been provided with 28 (twenty eight) protocols of findings, issued by regional controlling officials from the CRC's administration. Except for the above 4 (four) penal rulings and the deeds for establishing violations thereto, we have not been provided with any other deeds for establishing violations or any other penal rulings of the CRC for imposition of sanctions. It should be noted that pursuant to the general provisions of the Bulgarian administrative-penal law, administrative-penal proceedings shall not be initiated if a deed for establishing the violation has not been issued during a period of 3 (three) months as of finding out the defaulting person/entity, or if a one-year period has elapsed as of committing the violation. Furthermore, the administrative-penal proceedings shall be terminated if a penal ruling has not been issued within 6 (six) months as of issuing the deed for establishing the violation. In respect of a large number of the referred protocols of findings, the above-mentioned statute of limitations applicable to issuing a deed for establishing violation, has already expired.

In view of the above, we would recommend that the SPA include a representation of the seller to the effect that, apart from the information regarding administrative penal proceedings disclosed in the Data Room, no other administrative penal proceedings are pending or threatened to the Company.

2.2 Regulatory and Regulatory Compliance Matters related to the Subsidiaries

Comments and Conclusions

On the basis of the information derived from the public registries of individual licences and the public registries of registrations, kept with the CRC and the CEM, and the information provided by the Company, it could be concluded that ............, ............, ............, ............ ............ and ............ are registered under a general licence adopted by the CRC under the LT. ............ only holds an individual licence granted under the LT and it is registered as a television operator under the LRT. The registrations held by the referred Subsidiaries, and the individual licence held by ............, appear to be in full force and effect. ............, ............ and ............ does not seem to hold any licences, registrations or authorisations under the LT or the LRT.

Based on the information provided in the Data Room it seems that ............ provides services under a general licence on a territory, which is not specifically included in the territorial scope of ............' registration under said general licence. The latter will amount to a violation of the terms of the respective general licence and may lead to imposition of administrative sanctions under the LT, as well as, if such breach is qualified as material or systematic, may jeopardise the Company's registration under said general licence. With a view to the above, it is recommendable that ............ requests that its registration under the respective general licence be amended in a way that the referred populated area be specifically included in the territorial scope of ............' registration under said general licence.

The Company has represented that as of the date of this Report there are no pending applications for licences, permits or authorisations, submitted by either of the Subsidiaries.

2.2.1 ............

Pursuant to the public registries kept with the CRC ............ does not seem to hold any individual licences or registrations under general licences under the LT.

Pursuant to the public registries kept with the CEM ............ does not seem to hold any individual licences or registrations under the LRT.

Pursuant to information provided by The Company, ............ is not an active company and The Company plans to close it down.

2.2.2 ............

Pursuant to the public registry of persons registered under General Licence … kept with the CRC, ............ is registered under General Licence … pursuant to Certificate No …-…… on DD/MM/YYYY. The commencement date of the provision of services by ............ under General Licence … is DD/MM/YYYY. The geographic boundaries specified in the referred public registry with respect to ............'s registration cover the territory of town of ……., …………. District.

No periodic fees are payable under the above referred general licence. A detailed summary sheet of General Licence No … is enclosed in Appendix 2.1.2.1 (a) to this Report. For a summary of the legal framework of registrations pursuant to a general licence under the LT, please refer to Section 2.1.2.1 (b) above.

2.2.3 ............

2.2.3.1 Licences

Pursuant to the public registries of individual licences, kept with the CRC, ............ has been granted Individual License No ……….. for a Telecommunications Network of the Fixed Radio Service of the "Point to Point" Type. The licence was issued on DD/MM/YYYY for a term of 15 (fifteen) years. However, we have not been presented with a copy of said licence.

2.2.3.2 Other Regulatory Permits and Authorisations

(a) Registrations under the LT

Pursuant to the public registry of persons registered under General Licence … kept with the CRC, ............ is registered under General Licence … pursuant to Certificate No ……… on DD/MM/YYYY. The commencement date of the provision of services by ............ under General Licence … is DD/MM/YYYY. The geographic boundaries specified in the referred public registry with respect to ............' registration cover the territory of city of ….. and village of …….., ………. District.

From the information provided in the Data Room it would seem that ............ provides services under General Licence …. also at the territory of village of …………, ……….. District. However, village of …………… is not specifically included in the territorial scope of ............' registration under General Licence …. Provision of cable TV services by ............ at the territory of said village, without specific authorisation, will amount to a violation of the terms of General Licence … and may lead to imposition of administrative sanctions under the LT, as well as, if such breach is qualified as material or systematic, may jeopardise the Company's registration under said general licence. With a view to the above, it is recommendable that ............ requests that its registration under General Licence … be amended in a way that the referred village be specifically included in the territorial scope of ............' registration under said general licence.

We have been provided with an annual report for the activity of ............ under General Licence … for the year YYYY, filed with the CRC within the required deadline. However, on the basis of the referred documents solely it could not be concluded whether ............ has complied with all its reporting obligations under General Licence …. Failure of ............ to comply with such obligations will amount to a violation of the terms of General Licence … and may lead to imposition of administrative sanctions. Therefore, we would recommend that the SPA include a representation of the seller to the effect that ............ comply with all its reporting obligations under General Licence ….

(b) Registrations under the LRT

Pursuant to the public Registry of Operators having the Right to Carry out Television Activity through Cable and/or Satellite kept with the CEM, ............ is registered as a commercial television operator with respect to the creation and broadcasting of two programmes. The first programme is stated as bearing the trade mark "…………" (i.e. "…………"). The profile of the programme is general (multi-thematic). The method of broadcasting is through cable. The scope of broadcasting is regional and encompasses …… District, …….. District, ………… District, ............ District, ............ District, ……… District, ............ District, city of ………., city of ………. and city of ………. The duration of the programme is 24 hours.

The second programme is stated as bearing the trade mark "…….." (i.e. "…………."). The profile of the programme is specialised (musical). The method of broadcasting is through cable. The scope of broadcasting is regional and encompasses ……….. District, ………… District - city of ………….., town of ………., town of …………., …………. District - town of …………, town of ……….., city of ……….., ……….. District - city of ………., town of …………, ............ District - city of ............, town of …………, city of ............, city of ……….. The duration of the programme is 24 hours.

We have not been provided with copies of the registration certificates issued by the CEM to ............ evidencing the above-referred registrations in relation to any of the programmes, or any other documents in this respect.

2.2.3.3 Other Comments

From the information provided in the Data Room it could be concluded that ............ held Individual Licence N …………… / DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Broadcasting of Radio and Television Signals and Individual Licence N ………… / DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Broadcasting of Radio and Television Signals. As explained above, under the Revoked LT, the construction, maintenance and operation of a public cable telecommunications network for broadcasting of radio and television signals was subject to a licensing regime. Therefore, it could be concluded that after the entry into force of the effective LT, the above referred licences of ............ for construction, maintenance and operation of a public cable telecommunications network for broadcasting of radio and television signals have been replaced by ............' registration under General Licence …, discussed in Section 2.1.4.2 (a) above.

2.2.4 ............

We reviewed the following certificate, evidencing the registration of ............ under General Licence …: Certificate No ………… / DD/MM/YYYY for Registration under General Licence No ….

The commencement date of the provision of services by ............ under General Licence … is DD/MM/YYYY. The geographic boundaries specified in the referred Registration Certificate cover the territory of town of ………. and village of ……….., ……….. District.

From the information provided in the Data Room it could be concluded that ............ held Individual Licence N …………. / DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Radio and Television Signals and Provision of Telecommunications Services through it in the town of ………….. For the reasons explained above, it could be concluded that after the entry into force of the effective LT, the above-mentioned individual licence of ............ was replaced by the latter's registration under General Licence ….

We have not been provided with any information evidencing compliance on part of ............ with its reporting obligations under General Licence …. Failure of ............ to comply with such obligations may lead to imposition of administrative sanctions. Therefore, we would recommend that a representation of the seller be included in the SPA to the effect that ............ fully complies with its reporting obligations under General Licence ….

We have been provided with 1 (one) protocol of findings, issued in respect of ............ on DD/MM/YYYY by controlling officials from the CRC's administration. However, we have not been provided with any information or documents evidencing the issuance of a deed for establishing violations or a penal ruling by the CRC on grounds of said protocol of findings. With a view to the applicable statute of limitation periods, discussed in Section 2.1.4 above, we are of the opinion that a deed for establishing violations or a penal ruling may no longer be issued on grounds of the referred protocol of findings.

2.2.5 ............

Pursuant to the public registries kept with the CRC ............ does not seem to hold any individual licences or registrations under general licences under the LT.

Pursuant to the public registries kept with the CEM ............ does not seem to hold any individual licences or registrations under the LRT.

As explained in Section 1.2.5, ............ is into pending liquidation proceeding.

2.2.6 ............

We reviewed the following certificate, evidencing the registration of ............ ............ under General Licence …: Certificate No ……………./ DD/MM/YYYY for Registration under General Licence No ….

The commencement date of the provision of services by ............ ............ under General Licence … is DD/MM/YYYY. The geographic boundaries specified in the referred Certificate of registration of ............ ............ under General Licence cover the territory of village of …………….. and town of ............, …………. District.

Based on the information provided in the Data Room it could be concluded that ............ ............ held (i) Individual Licence N ………….. / DD/MM/YYYY for Construction, Maintenance and Operation of a Cable Telecommunications Network for Radio and Television Signals and Provision of Telecommunications Services through it in ………….. District - village of ………………; and (ii) Individual Licence N ……………../ DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Radio and Television Signals and Provision of Telecommunications Services through it in ………… District - town of ............. For the reasons explained above, it could be concluded that after the entry into force of the effective LT, the above-mentioned individual licences of ............ ............ have been replaced by the latter's registration under General Licence ….

2.2.7 ............

Pursuant to the public registries kept with the CRC ............ does not seem to hold any individual licences or registrations under general licences under the LT.

Pursuant to the public registries kept with the CEM ............ does not seem to hold any individual licences or registrations under the LRT.

2.2.8 ............

We reviewed the following certificate, evidencing the registration of ............ under General Licence …: Certificate No ………………/ DD/MM/YYYY for Registration under General Licence No …;

In the public registry of persons registered under General Licence … kept with the CRC, the date of initial registration of ............ under General Licence … is stated as DD/MM/YYYY. Therefore, it could be concluded that the commencement date of provision of services by ............ under General Licence … is DD/MM/YYYY. The geographic boundaries specified in the referred Registration Certificate cover the territory of town of ………., …………. District.

From the information in the public registry of persons registered under General Licence … kept with the CRC and the referred certificate, it could be concluded that one amendment to the Company's initial registration was made on DD/MM/YYYY. However, we have not been provided with any information as to what circumstance the referred amendment related to.

We have been provided with an annual report for the activity of ............ for the year YYYY under General Licence …, prepared as per a sample form report adopted by the CRC. However, we have not been provided with evidence as to whether such report has been submitted before the CRC within the required deadline. On the basis of the information provided, it could not be undoubtedly concluded whether ............ has complied with all its reporting obligations under General Licence …. Failure of ............ to comply with such obligations may lead to imposition of administrative sanctions. Therefore, we would recommend that a representation of the seller be included in the SPA to the effect that ............ fully complies with its reporting obligations under General Licence ….

Based on the information provided in the Data Room it could be concluded that ............ held Individual Licence N ……………/ DD/MM/YYYY for Construction, Maintenance and Operation of a Public Cable Telecommunications Network for Radio and Television Signals and Provision of Telecommunications Services through it in ………… District - town of …………., which represented an assignment of Individual Licence N ……………. / DD/MM/YYYY for the same type of activity, issued to ............ ^{^[11]}. For the reasons explained above, it could be concluded that after the entry into force of the effective LT, the above-mentioned individual licence of ............ has been replaced by the latter's registration under General Licence ….

We have been provided with 3 (three) penal rulings issued by the CRC on DD/MM/YYYY, by virtue of which pecuniary sanctions in amounts ranging between BGN 200 and BGN 500 have been imposed for violations of the terms of the above-mentioned Individual Licence N …………. / DD/MM/YYYY, held by ............, which violations have been established by a protocol of findings on DD/MM/YYYY. We have not been provided with information or documents as to whether ............ has paid the above pecuniary sanctions, or whether it has appealed those of them that were subject of appeal.

In addition, we have been provided with 1 (one) protocol of findings, issued in respect of ............ on DD/MM/YYYY by controlling officials from the CRC's administration. However, we have not been provided with any information or documents evidencing the issuance of a deed for establishing violations or a penal ruling by the CRC on grounds of said protocol of findings. In respect of said protocol of findings the statute of limitation periods, discussed in Section 2.1.4 above, shall apply.

In view of the above, we would recommend that the SPA include a representation of the seller to the effect that: (i) ............ is not party to other administrative penal proceedings except for those disclosed in the Data Room, and (ii) ............ paid all fines imposed pursuant to such administrative proceedings when due.

2.3 Regulatory and Regulatory Compliance Matters related to the Acquisition Targets

Comments and Conclusions

On the basis of information derived from the public registries of individual licences and of registrations kept with the CRC and the CEM, and the information provided by the Company, it could be concluded that ............ and ............ are registered under two general licences adopted by the CRC under the LT, while ............ is registered under one of these general licences. ............ and ............ are registered as television operators under the LRT. The registrations held by the referred Acquisition Targets appear to be in full force and effect. ............ does not seem to hold any licences, registrations or authorisations under the LT or the LRT.

Pursuant to the specific requirements of the general licences adopted by the CRC under the LT, under which ............, ............ and ............ are registered, the transfer of shares in the capital of any of the above Acquisition Targets, or the issuance of shares to new shareholders in said companies, which leads to a change of control over the management of the respective company, may be done only after the prior written permission of the CRC is obtained. Where the transfer of shares in the capital of the respective company, or the issuance of shares to new shareholders in the respective company, would not lead to a change of control over the management of the Company, the share transfer, respectively the acceptance of new shareholders, may be performed after the prior written notification to the CRC.

With a view to the above, as long as the contemplated transfer of shares from the capital of ............ to a related party to ............ would not result in change of control over the management of ............ within the meaning of the LT, said transaction would require the prior written notification to the CRC. Failure on part of ............ to submit a written notification to the CRC prior to the completion of said transaction, will cause a material breach and will jeopardise the Company's registration under the respective general licences. However, as long as after the discussed share transfer to a related party to ............ (in respect of which ............ should submit a prior written notification to the CRC), the Contemplated Transaction would not involve transfer of shares in the capital of ............ or issuance of shares to new shareholders in ............, we are of the opinion that the prior written permission of, or notification to, the CRC would not be required for the completion of the Contemplated Transaction in respect of .............

In relation to the contemplated acquisition by The Company of 100% of the shares in the capital of ............ and ............, such acquisition may be completed only after the prior written permission of the CRC is obtained.

In respect of ............, we have been provided with a letter by virtue of which ............ requested the prior written permission of the CRC for the contemplated acquisition by the Company of 100% of its shares. The referred letter was filed with the CRC on DD/MM/YYYY. We have not been provided with any information or documents related to any ruling of the CRC on the request. In relation to ............, we have not been provided with any information or documents evidencing whether ............ has requested the prior written permission from the CRC for the contemplated acquisition by the Company of 100% of its capital. Failure on part of ............ to obtain a written permission from the CRC prior to completion of the contemplated acquisition by the Company will cause a material breach and will jeopardise the registration of the Company under the general licences. Therefore, a condition precedent to closing in the SPA should be that the respective Acquisition Target has requested the permission of CRC and such permission has been unconditionally granted.

The construction papers provided in the Data Room in respect of ............'s cable network evidence that in addition to the cable networks developed by ............ in the territory of town of ……….. and village of …………., which fall within the territorial scope of ............'s registration under General Licence … (please see Section 2.3.4 below), ............ has also developed a cable network in a populated area, village of …………, that is not explicitly included in said territorial scope. Eventual provision of cable TV services by ............ at the territory of such populated area not included in the territorial scope of its registration under General Licence … will represent a breach of the terms of General Licence … and may lead to imposition of administrative sanctions, as well as, if such breach is qualified as material or systematic, may jeopardise the Company's registration under said general licence. With a view to the above, it is recommendable that ............ requests that its registration under General Licence … be amended in a way that the referred populated area be specifically included in the territorial scope of ............'s registration under said general licence.

2.3.1 ............

2.3.1.1 Licences

(a) Individual Licence N …………………. / DD/MM/YYYY for Television Activity

Under Individual Licence N ……….. / DD/MM/YYYY (as amended), ............ shall provide for broadcasting a programme named "............". For the creation and broadcasting of the programme ............ shall operate as a commercial television operator under the LRT. The Licence is issued for a period of 10 (ten) years with a possibility for renewal. The territorial scope of this licence (as amended) is national. The method of broadcasting provided for in this licence (as amended) is through cable and satellite. It should be noted that we have been provided with an incomplete copy of the above referred licence.

The Licence has been issued under the revoked Law on Telecommunications (the "Revoked LT"). However, pursuant to the effective LRT, a registration only is required for creation of radio and television programmes to be broadcasted through technical means different from terrestrial radio broadcasting (i.e. including through cable and/or satellite).

With a view to the above, it could be concluded that Individual Licence N ……………. / DD/MM/YYYY for Television Activity has been ex officio replaced with registration of ............ as a television operator in respect of creation and broadcasting of television programme "............" (please see Section 2.3.1.2 (b) below). Further to our inquiry with the CEM, said conclusion has been confirmed to us.

A summary sheet of the discussed licence is provided in Appendix 2.3.1.1 hereto.

2.3.1.2 Other Regulatory Permits and Authorisations

(a) Registrations under the LT

We reviewed the following two certificates, evidencing the registration of ............ under two general licences under the LT:

(i) Certificate No ………….. / DD/MM/YYYY for Registration under General Licence …; and

(ii) Certificate No ……………. / DD/MM/YYYY for Registration under General Licence ….

General Licence …

We established that ............ is duly registered under General Licence … and General Licence … and validly carries out the telecommunications activities pursuant to those two general licences.

The commencement date of the provision of services by ............ under General Licence … is DD/MM/YYYY. The geographic boundaries specified in ............'s registration certificate ……….. / DD/MM/YYYY cover the territory of ............ District - city of ............, town of ............ and ............ District - town of ............. Pursuant to the public registry of persons registered under General Licence …, the registration covers also the territory of town of ............, town of ............, town of ............, town of ............, village of ............, village of ............, village of ............, village of ............, village of ............, and village of ............ - ............ District.

Based on the information in the public registry of persons registered under General Licence … kept with the CRC, it could be concluded that there have been 7 (seven) amendments related to the registration of ............ under General Licence … and the last such amendment was made on DD/MM/YYYY. However, we have not been provided with any information or documents in this respect.

General Licence …

The commencement date of provision of services by ............ under General Licence … is DD/MM/YYYY. The geographic boundaries specified in ............'s registration certificate No. ………… / DD/MM/YYYY cover the territory of the city of ............. Pursuant to the public registry of persons registered under General Licence …, kept with the CRC, the registration covers the territory of the Republic of Bulgaria.

From the information in the public registry of persons registered under General Licence … kept with the CRC, it could be concluded that there has been 1 (one) amendment related to the registration of ............ under General Licence … and such amendment was made on DD/MM/YYYY. However, we have not been provided with any information or documents in this respect but it could be assumed that this amendment relates to the territorial scope of the registration (please see the foregoing paragraph).

We have not been provided with any information evidencing compliance on part of ............ with its reporting obligations under General Licence … and General Licence …. Failure of ............ to comply with such obligations will amount to a violation of the terms of the respective general licence and may lead to the imposition of administrative sanctions. However, since the Contemplated Transaction will involve the transfer of ............ assets and subscribers to the Company but not ............'s shares, any such non-compliance would not have a significant effect (if any) on The Company's activity.

No periodic fees are payable under the above referred general licences. Detailed summary sheets of General Licence … and General Licence … are enclosed in Appendix 2.1.2.1 (a) to this Report. For a summary of the legal framework of registrations pursuant of a general licence under the LT, please refer to Section 2.1.2.1 (b) above.

(b) Registrations under the LRT

Pursuant to the public Registry of Operators having the Right to Carry out Television Activity through Cable and/or Satellite kept with the CEM, ............ is registered as a commercial television operator. The programme is stated as bearing the trade mark "............". The profile of the programme is general (multi-thematic). The method of broadcasting is through cable and satellite. The scope of broadcasting is the Republic of Bulgaria. The duration of the programme starting as of DD/MM/YYYY is 24 hours. We have not been provided with a copy of a certificate issued by the CEM to ............ evidencing the referred registration or any other documents in this respect.

As mentioned above, it could be concluded that the discussed registration of ............ as a television operator under the LRT ex officio replaced Individual Licence N ……………. / DD/MM/YYYY for Television Activity granted to ............ under the Revoked LT with respect to the then effective LRT, discussed under Section 2.1.4.4 (a) above. Further to our inquiry with the CEM, said conclusion has been confirmed to us.

We have not been provided with any information evidencing compliance of ............ with its reporting obligations under the LRT. Failure of ............ to comply with such reporting obligations may lead to imposition of administrative sanctions. However, since the Contemplated Transaction will involve the transfer of ............ assets and subscribers to The Company but not ............'s shares, any such non-compliance would not have a significant effect (if any) on The Company's activity.

(c) Other Comments

We were provided with a copy of Certificate No ………….. / DD/MM/YYYY issued by the CRC to ............ [12] for registration under General Licence …. The geographic boundaries specified in said certificate cover the territory of ............ District - village of ………………….

2.3.1.3 Pending Applications for Licences, Permits or Authorisations

We have not been provided with any information related to pending applications for licences, permits or authorisations, filed by .............

2.3.1.4 Relationship with the Regulatory Authorities

We have not been provided with any information related to the relationships of ............ with the CRC or the CEM.

2.3.2 ............

2.3.2.1 Licences

Pursuant to the public registries kept with the CRC and the CEM ............ does not seem to hold any individual licences issued under the LT or the LRT.

2.3.2.2 Other Regulatory Permits and Authorisations

(a) Registrations under the LT

We reviewed the following two certificates, evidencing the registration of ............ under two general licences under the LT:

(i) Certificate No ……………./ DD/MM/YYYY for Registration under General Licence …; and

(ii) Certificate N ………….. / DD/MM/YYYY for Registration under General Licence ….

We established that ............ is duly registered under General Licence … and General Licence … and validly carries out the telecommunications activities pursuant to those two general licences.

We have not been provided with any information evidencing compliance on part of ............ with its reporting obligations under General Licence … and General Licence …. Failure of ............ to comply with such obligations will amount to a violation of the terms of the respective general licence and may lead to the imposition of administrative sanctions. Therefore, we would recommend that the SPA include a representation of the seller to the effect that ............ complies with all its reporting obligations under General Licence … and General Licence ….

No periodic fees are payable under the above referred general licences. Detailed summary sheets of General Licence … and General Licence … are enclosed in Appendix 2.1.2.1 (a) to this Report. For a summary of the legal framework of registrations pursuant to a general licence under the LT, please refer to Section 2.1.2.1 (b) above.

(b) Registrations under the LRT

We reviewed the following decision for registration of the Company as a television operator under the LRT: Decision N …………. of DD/MM/YYYY issued by the CEM for registration of ............ as a television operator under the LRT.

By virtue of said Decision the CEM has decided to register ............^{^[13]} as a commercial television operator in relation to the creation and broadcasting of television programme "............". The profile of the programme is general (multi-thematic). The method of broadcasting is through cable. The scope of broadcasting is regional and encompasses ............ District, ............ District, ............ District and ............ District. The starting date for broadcasting of the programme is DD/MM/YYYY. We have not been provided with a copy of a certificate issued by the CEM, evidencing the discussed registration.

We have not been provided with any information evidencing compliance of ............ with its reporting obligations under the LRT. Failure of ............ to comply with such reporting obligations may lead to imposition of administrative sanctions. Therefore, we would recommend that the SPA include a representation of the seller to the effect that ............ complies with all its reporting obligations under the LRT.

For an analysis of the legal framework of the registration as a television operator under the LRT, please refer to Section 2.1.2.2 (b) above.

2.3.2.3 Pending Applications for Licences, Permits or Authorisations

We have not been provided with any information related to pending applications for licences, permits or authorisations, filed by .............

2.3.2.4 Relationship with the Regulatory Authorities

By virtue of Penal Ruling No … of DD/MM/YYYY issued by the Chairman of the CEM a pecuniary sanction in the amount of BGN ………… (…………..) has been imposed on ............ for violation of Article 82, Section (1) of the LRT, requiring that any advertisement be clearly perceived as such and be separated from the other parts of the programme through visual or sound means. Pursuant to the referred penal ruling the programme "............" broadcasted on DD/MM/YYYY between 7 pm and 10 pm emitted an advertisement, which was not compliant with the above requirement. The penal ruling had been subject to appeal before the court within 7 (seven) days as of its delivery to ............. We have not been provided with any information as to whether ............ has actually appealed the penal ruling, or whether it has paid the imposed sanction.

2.3.3 ............

Pursuant to information provided by the Company and further to our independent search with the public registries kept with the CRC and the CEM, as of the date of this Report ............ does not seem to hold any licences or registrations under the LT or the LRT.

The Company has represented that ............ will apply for registration under General Licence … after its acquisition by the Company.

2.3.4 ............

2.3.4.1 Licences

Further to our independent search with the public registries kept with the CRC and the CEM, as of the date of this Report ............ does not seem to hold any individual licences granted under the LT or the LRT.

2.3.4.2 Other Regulatory Permits and Authorisations

We reviewed the following certificate, evidencing the registration of ............ pursuant to a general licence under the LT: Certificate No ……… / DD/MM/YYYY for Registration under General Licence …...

We that ............ is duly registered under General Licence … and validly carries out the telecommunications activities pursuant to such general licence.

We have not been provided with any information evidencing compliance on part of ............ with its reporting obligations under General Licence …. Failure of ............ to comply with such obligations will amount to a violation of the terms of said general licence and may lead to the imposition of administrative sanctions. Therefore, we would recommend that the SPA include a representation of the seller to the effect that ............ complies with all its reporting obligations under General Licence ….

No periodic fees are payable under the above referred licence. A detailed summary sheet of General Licence … is enclosed in Appendix 2.1.2.1 (a) to this Report. For a summary of the legal framework of registrations under a general licence under the LT, please refer to Section 2.1.2.1 (b) above.

2.3.4.3 Pending Applications for Licences, Permits or Authorisations

We have not been provided with any information related to pending applications for licences, permits or authorisations, filed by .............

2.3.4.4 Relationship with the Regulatory Authorities

We have not been provided with any information related to the relationships of ............ with the CRC or the CEM.

3. COMMERCIAL CONTRACTS

3.1 Material Commercial Contracts to Which The Company is a Party

For the purposes of this Section 3.1 of the Report we have reviewed only commercial contracts, which the Company is a party to, that have been classified as material, because they meet any of the following criteria: (i) annual value in excess of EUR ……. (the "Company Materiality Threshold"); or (ii) related to something of strategic value to the Company's operations; or (iii) a term longer than 1 year (the criteria under items (i) through (iii) are jointly referred to as the "Company Materiality Criteria").

In addition it should be noted that our review excluded any agreements for leased lines, for sale of capacity and for data transmission as the Company has represented that such agreements shall be assigned to ............. The latter agreements, which we have not reviewed for the purposes of this Report due to the above reasons, are listed in Appendix 3.1 to this Report. We have requested but as of the date of this Report we have not been provided with, a list of the particular commercial contracts that would be assigned to ............. ............ should take over the particular contracts by way of assignment or novation. In view of the above, below we have discussed briefly the legal framework of assignment and novation under Bulgarian law.

3.1.1 Legal Framework of Assignment and Novation under Bulgarian Law

Bulgarian law does not contain specific provisions on the assignment of contracts as a whole, but provides separately for the assignment of contractual rights and contractual obligations, as discussed below. With a view of the above, for the purpose of ............'s take over of some of the contracts to which the Company is party, the Company would have to assign to ............ both its rights and obligations under the respective agreements in compliance with the provisions applicable to such assignments.

3.1.1.1 Assignment of Contractual Rights and Obligations

(a) Assignment of Rights

Under Bulgarian law contractual rights may be assigned by virtue of an agreement between the assignor and the assignee, while the consent of the debtor is not necessary. This rule applies, unless a right may not be assigned by virtue of law, due to the nature of the right, or by virtue of an agreement.

In order for an assignment of rights to be effective vis-à-vis the debtor and any third party, the assignor has to notify the debtor of the assignment. The assignor is obliged also to provide to the assignee the documents evidencing the assigned right (agreements or other instruments), and to confirm the assignment in writing to the assignee.

As a result of the assignment the assignee replaces the assignor as a creditor (i.e. the assignor can no longer exercise its respective right against the debtor), and the assigned right passes to the assignee together with any and all ancillary rights, such as collateral and interest, unless otherwise agreed between the assignor and the assignee. The assignor is liable for the existence of the assigned right at the time of the assignment only in the event the assignment has been made for consideration (i.e. is not gratuitous). However the assignor is not liable for the solvency of the debtor, unless the assignor has specifically undertaken such liability. In the event such liability has been undertaken, it is limited to the amount of the consideration paid to the assignor for the assigned rights.

(b) Assignment of Obligations

Under Bulgarian law a debtor can be released from his obligation by way of delegation of this obligation to a third party only with the explicit consent of the creditor. Once the consent of the creditor has been granted, he can claim only against his new debtor. In the event of such a delegation, any collateral provided by a third party would lapse, unless the third party has agreed explicitly that the new debtor can take advantage of such collateral. However, if the original debtor has secured the obligation by a pledge or a mortgage, these remain in effect and would serve as collateral for the obligation of the new debtor.

In the event the creditor has not granted his explicit consent for the substitution of his debtor by a new one, the original debtor could agree with the new one that the latter will step into the former's obligation, in which case the original debtor and the new one will be jointly and severally l[bank]le to the creditor. If the creditor approves such an agreement between his original debtor and a new debtor for stepping of the latter into the original debtor's obligation, said agreement may not be revoked or amended without the consent of the creditor.

Evident from the above, the Company could be replaced as a debtor under a particular agreement only with the explicit consent of the other party to the agreement. In the event such consent is provided, it would be advisable for ............ to agree that it shall be liable for any default, which has occurred prior to the replacement of the Company by ............. Furthermore, in the event the other party to the agreement does not grant its consent for the replacement, and ............ and the Company become jointly and severally liable under certain commercial contracts executed by the Company, it would be recommendable for the Company to negotiate with ............ the allocation of liabilities between them as co-debtors.

3.1.1.2 Novation

Under Bulgarian law novation is defined as an agreement by virtue of which a contractual relationship (obligation) is discharged, whereas at its place a new contractual relationship (obligation) arises, which differs from the original contractual relationship (obligation) either with respect to the parties thereto, or with respect to its subject matter. Different from assignment of rights discussed above, in the event of novation, the security created in respect of the original obligation remains in force in respect of the new obligation, only if the person who has granted the respective security provides their consent to this effect. Consequently, with the acquittal of the original obligation all accessory rights and obligations related thereto (such as security granted) shall also be discharged. As explained above, the security granted in respect of the original obligation could continue to secure the new obligation only if the respective person who has created the security provides their consent to this effect.

Both with respect to assignment and novation discussed above, it could be taken into consideration that specific legal requirements related to the form of the transaction should be complied with in the event of assignment of a contractual right, or stepping into a contractual obligation, or replacement of the debtor under a contractual obligation, or novation of a contractual obligation, where such right or obligation respectively is secured with a mortgage. However, for the purposes of this Report we shall not engage in further legal analysis of applicable form requirements.

3.1.2 Interconnection Agreements

Under the LT public telecommunications operators are obliged to interconnect their networks by a written agreement.

The Company is a party to a number of interconnection agreements with other licensed public telecommunications operators, and namely:

(i) Interconnection Agreement, initially executed between ………… and …………….. on DD/MM/YYYY, whereas the Company subsequently substituted ………………. under said agreement;

(ii) Interconnection Agreement, initially executed between ……………………. and …………………… on DD/MM/YYYY, whereas the Company subsequently substituted ……………… under said agreement;

(iii) Interconnection Agreement, executed between ……………….. and ………………… on DD/MM/YYYY, whereas the Company subsequently substituted ……………… under said agreement;

(iv) Two-Way Wholesale Interconnection Agreement, executed between ............ and the Company;

(v) Clearing House Services Interconnect Agreement, executed between ............ and the Company on DD/MM/YYYY; and

(vi) Reciprocal Services Agreement, executed between ............ and the Company on DD/MM/YYYY.

As interconnection agreements are of strategic value to the Company's operations, summaries of the interconnection agreements which the Company is a party to, are provided in Appendix 3.1.2 to this Report.

Generally the interconnection agreements which the Company is a party to, include provisions which are standard for interconnection agreements pursuant to the Bulgarian law. All of the above agreements provide for a confidentiality clause, as well as intellectual property rights stipulations (except for the agreement executed with ……………… and regulations with regard to the occurrence of force majeure event. Most of the agreements also include limitation of liability clauses. The tariffs for the services provided are specified in attachments to the main agreements. Said interconnection agreements are governed by Bulgarian law, whereas the Bulgarian Chamber of Commerce and Industry is chosen to be the competent authority to resolve any legal disputes arising between the parties (except for the agreement with ......, where any claims should be brought before the competent Bulgarian court). All agreements include a non-assignment clause, which may be overcome only with the prior explicit written consent of the other party.

With respect to the interconnection agreements with ............, ............ and ......, the latter have been originally signed by ............. We have been provided with substitution agreements signed between the Company and ............, pursuant to which the Company replaced ............ as a party to the above-said interconnection agreements. The referred substitution agreements do not give rise to any legal concerns. Therefore, it could be concluded that the replacement of ............ by the Company under the referred interconnection agreements has been validly carried out pursuant to the applicable legal provisions.

Pursuant to the LT, the public telecoms operators entering into interconnection agreements should notify the CRC thereof within a period of 3 (three) weeks prior to effectuation of the agreement concerned. On the basis of the documentation provided relating to the reporting to the CRC of the interconnection agreements, executed with ............, ...... and ............, a reasonable assumption could be made that the substitution of ............ by the Company under the referred agreements was duly notified to the CRC.

We have not been provided with any notification before the CRC with regard to the interconnection agreements, executed between the Company and ............, ............ and ............. Failure of the Company to file the required notification may result in imposition of a fine under the LT amounting from BGN 100 to BGN 1,000 for each particular case.

Therefore, we would recommend a representation of the seller in the SPA to the effect that the Company complies with all its notification obligations under the LT.

3.1.3 Provision of Services to the Subscribers

The Company provides to its customers three main types of services: (i) Internet access; (ii) fixed voice telephony services; and (iii) cable TV. Pursuant to the information provided in the Data Room as of the end of MM/YYYY the Company had ……….. active subscribers. The services under items (i), (ii) and (iii) above (the "Services") are rendered under individual written agreements executed with subscribers following a standard form agreement prepared by the Company and two types of General Terms which apply respectively to provision of fixed voice telephony services and cable TV, namely (i) General Terms for Rendering of Cable TV ("General Terms I"), and (ii) General Terms for Rendering of Fixed Voice Telephony Service ("General Terms II"). On the basis of our review of these General Terms, it could be concluded that they are in compliance with the mandatory legal requirements. Furthermore, General Terms I and General Terms II were duly approved by the CRC as required by the LT.

The standard form agreement used by the Company provides only for the names of the parties, chosen services (i.e. Internet access, fixed voice telephony services, cable TV, or any combination thereof), term of the service and fees due, where for all other arrangements between the Company and the respective subscriber the provisions of General Terms I, and/or General Terms II respectively, shall apply.

In case a subscriber chooses to use all of the Services a standard form agreement called Triple Play Standard Form Agreement is used. This agreement provides only for the names of the parties, fees due, term of one year and liquidated damages due by the subscriber in case of premature termination in the amount equal to the discount made to the subscriber for using of the Triple Play pack. For all other arrangements the provisions of the above General Terms I and General Terms II apply respectively.

On the basis of the documents provided in the Data Room, it could be concluded that generally, subject to the comment below, the annual fees due by subscribers under individual agreements for provision by The Company of any of the Services, or the Triple Play pack, executed following the respective standard form agreement, do not exceed the Company Materiality Threshold.

However, we have been provided with some agreements for provision of Internet access, cable TV and fixed voice telephony, the annual fees under which exceed the Company Materiality Threshold. Although General Terms I and General Terms II also apply respectively to the referred agreements, the latter differ from the standard form agreements and therefore they have been briefly summarised hereinbelow.

3.1.3.1 Agreements for Provision of Internet Access

Pursuant to the data provided for review in the Data Room the Company is a party to the following agreements for provision of Internet access, the annual fees under which exceed the Company Materiality Threshold:

· Agreement No. ……….. for Provision of Services, dated DD/MM/YYYY executed between the Company and ............, where The Company accepts to provide the Subscriber against consideration with access to the international Internet environment with capacity of 1024 Kbps and to the Bulgarian Internet environment with capacity of 3584 Kbps via termination of Ethernet ports in end points of the Subscriber's network, as well as with some other additional and extra services related to the Internet access;

· Agreement No. …… for Provision of Services, dated DD/MM/YYYY, executed between the Company and …………., where the Company (accepts to provide to the Client against consideration the following services: (i) access to local national networks (peering) with the speed of 11 Mbps; (ii) additional services: two networks with 256 IP addresses; and

· Agreement No. ……….. for Provision of Services, dated DD/MM/YYYY, executed between the Company and …….., where the Company accepts to provide to the Client against consideration the following services: (i) access to the international Internet environment with capacity of 1.5 Mbps; (ii) access to the Bulgarian Internet environment with capacity of 4 Mbps; (iii) additional services: 256 IP addresses pursuant to the requirements of RIPE.

No unusual, onerous, assignment or change of control provisions exist with regard to any of the above agreements. Therefore we are of the opinion that the latter do not appear to give rise to legal concerns and/or risks in the context of the Contemplated Transaction.

A more detailed review of the above agreements is provided in Appendix 3.1.3.1 to this Report.

3.1.3.2 Agreements for Provision of Cable TV

According to the data provided for review in the Data Room the Company is a party to the following two agreements for provision of cable TV, the annual fees under which exceed the Company Materiality Threshold:

· Agreement No. …, dated DD/MM/YYYY, executed between the Company and ……………….., where the Company (accepts to provide against consideration to ……………………. a television signal for broadcasting of the main package of programs of the cable television transmitted via its own network; and

· Agreement No. ….., dated DD/MM/YYYY, executed between the Company and ………………….., where the Company accepts to provide against consideration to ……….. a television signal for cable television to certain edifices as agreed between the parties. The main package of programs transmitted by the supplier should include at least 30 television programs.

None of the agreements includes any unusual, onerous, assignment or change of control provisions and therefore we are of the opinion that they do not appear to give rise to legal concerns and/or risks in the context of the Contemplated Transaction. Furthermore it should be noted that we have no indications whether the second agreement is still effective as of the current moment, since its term should have expired on DD/MM/YYYY and no documents evidencing the prolongation of said term of the agreement have been provided to us.

A more detailed review of the above agreements is provided in Appendix 3.1.3.2 hereto.

3.1.3.3 Agreements for Provision of Fixed Voice Telephony

We have been provided with a limited number of agreements for rendering of fixed voice telephony service, the annual fees under which exceed the Company Materiality Threshold. These agreements are as follows:

· Agreement No. …. for Provision of Fixed Telephony Service, executed between the Company and …………… on DD/MM/YYYY, where the Company undertakes against consideration to provide to ............ fixed telephony service. The Company provides to ............ one or more telephone numbers, thus enabling the latter to conduct incoming and outgoing telephone calls;

· Agreement No. ……. for Provision of Fixed Telephony Service, executed between the Company and ………. on DD/MM/YYYY, where the Company undertakes against consideration to provide to ………… fixed telephony service;

· Agreement No. …… for Provision of the Fixed Telephony Service, executed between the Company and ……….. on DD/MM/YYYY, where the Company undertakes against consideration to provide to …………… fixed telephony service. The Company provides to ……….. …. telephone numbers, thus enabling the latter to conduct incoming and outgoing telephone calls; and

· Agreement No. …. for Provision of Telephony Service, Internet and Cable Television, executed between the Company and ……… on DD/MM/YYYY. Pursuant to the Agreement the Company undertakes against consideration to provide to ............ the following services: (i) fixed telephony service, whereas the Company provides one or more telephone numbers, thus enabling ............ to conduct incoming and outgoing telephone calls; (ii) international ground capacity of 128 Kbps; access to the local Internet networks (peering) with the speed of 512 Kbps as well as additional service: 1 IP address; and (iii) cable television.

Our review of the above agreements does not reveal any unusual, onerous, assignment or change of control provisions and therefore the latter agreements do not appear to give rise to legal concerns and/or risks in the context of the Contemplated Transaction.

A more detailed review of the above agreements is provided in Appendix 3.1.3.3 to the Report.

3.1.4 Financing Agreements

For the purposes of our review of the financing agreements which the Company is a party to, we did not consider the following matters to fall within the scope of this Report, and accordingly they have not been addressed:

(i) whether all conditions precedent were satisfied prior to disbursement;

(ii) the amounts outstanding under the facilities;

(iii) whether the facilities have been disbursed in part or in full;

(iv) whether interest payments are up to date; and

(v) whether an event of default has occurred.

On the basis of the documents provided in the Data Room it could be concluded that the Company is a party to (i) 7 bank loan agreements for loan facilities extended to the Company and (ii) 17 loan agreements executed between the Company and related parties[14]. The Company has represented that the above credit lines are the only effective credit facilities, extended to it as of the date of this Report. Furthermore, the Company has reported that there is no other off-balance sheet financing entered into by it. The Company has also reported that as of the date of this Report there are no letters of credit or negotiable instruments issued directly or indirectly on behalf of it.

The Company has verbally represented that it has duly complied with all its obligations, and there is no default on its part, under any of the credit facilities, extended to it.

3.1.4.1 Loan Agreements

For the purposes of this Section of the Report, we have focused on the following issues in relation to the loan agreements, which the Company is a party to:

(i) the loan amount;

(ii) security;

(iii) governing law;

(iv) assignability and change of control provisions.

We have been provided and we have reviewed the following bank loan agreements entered into by the Company: (i) Loan Agreement No. …. of DD/MM/YYYY executed with …………. ("[BANK]") ("[BANK] Loan Agreement 1"); (ii) Loan Agreement No. … of DD/MM/YYYY executed with [bank] ("[BANK]") ("[BANK] Loan Agreement 1"); (iii) Loan Agreement No. …… of DD/MM/YYYY executed with [bank] AD ("[bank] Loan Agreement"); (iv) Loan Agreement No. … of DD/MM/YYYY executed with [BANK] Bank AD ("[BANK] Loan Agreement 2"); (v) Loan Agreement of DD/MM/YYYY executed with [bank] AD (currently [bank]) ("[bank] Loan Agreement"); (vi) Loan Agreement No. … of DD/MM/YYYY executed with [BANK] ("[BANK] Loan Agreement 2"), and (vii) Loan Agreement No. … of DD/MM/YYYY executed with [BANK] ("[BANK] Loan Agreement 3").

Short summaries of the above bank loan agreements are provided in Appendix 3.1.4.1 to this Report.

The documents provided in the Data Room contained information on two other loan agreements executed between [BANK] and the Company. However, the Company has represented that said loans have been repaid. Therefore, the referred two loan agreements will not be discussed for the purposes of this Report.

(i) [BANK] Loan Agreement 1

Loan Type and Amount: term loan facility for the amount of EUR ………… to be used for working capital purposes.

Term: Commitment period: 6 months after execution date; amounts are disbursed as a lump-sum or in tranches; repayment: after a 6 month grace period in 7 instalments of approximately EUR ………. each, starting on DD/MM/YYYY; final maturity date: DD/MM/YYYY; prepayment within the first 6 months after execution of the agreement: subject to broken funding indemnity fee prepayment between the 7th and 12th month after execution of the agreement: no fee.

Security: (i) registered pledge on account receivables of the Company from ............ ............, ………….., …………., ………………, and cable TV subscribers; (ii) two promissory notes issued by the Company; (iii) consent for direct debiting of the Company's accounts with [BANK].

Governing law: Bulgarian.

Assignment and Change of Control: no specific provisions.

Other Observations: interest on the loan is set to 10% p.a.; fees: a lump-sum processing fee: 0.75% p.a., commitment fee: 3% p.a. Default interest is calculated as the interest rate plus a margin of 15 points p.a.

(ii) [BANK] Loan Agreement 1

Loan Type and Amount: term loan facility for the amount of EUR ……………. to be used for working capital purposes.

Term: commitment period: DD/MM/YYYY; repayment: grace period until DD/MM/YYYY, bullet repayment on DD/MM/YYYY, prepayment allowed.

Security: (i) registered pledge on fiber-optic facility - Sofia - Kulata; (ii) registered pledge on account receivables of the Company from ............; (iii) consent for direct debiting of the Company's accounts with [BANK].

Governing law: Bulgarian.

Assignment and Change of Control: no specific provisions.

Other Observations: interest on the loan is set to base rate of [BANK] plus a margin of 4.52% p.a.; fees: a lump-sum management fee: 0.75% p.a. payable upon first utilisation of the loan facility. Default interest is calculated as the interest rate plus a margin of 10 points. The Company is obliged to direct all its proceeds to its accounts with [BANK].

(iii) [bank] Loan Agreement

Loan Type and Amount: revolving credit line facility with a limit of EUR 1,000,000 to be used for working capital purposes.

Term: DD/MM/YYYY, with a possibility for extension of the term for repayment with further 15 months upon request of the Company. Pursuant to verbal information provided by the Company, the term for repayment of the loan has been extended to DD/MM/YYYY.

Security: (i) first ranking mortgage on real estate owned by ............; (ii) a promissory note to be issued by the Company; (iii) consent for direct debiting of the Company's accounts with [bank] AD.

Governing law: Bulgarian.

Assignment and Change of Control: no specific provisions.

Other Observations: interest on the loan is set to 6-month EURIBOR plus a margin of 8.38% p.a.; fees: a lump-sum management fee: 2% of the authorised amount of the loan; commitment fee: 3 % of the amount of the loan that has not been utilised. Default interest is calculated as the interest rate plus a margin of 10 points. The Company is under the obligation to realise 3-month net turnover of minimum BGN ………… through its accounts with [bank] AD.

(iv) [BANK] Loan Agreement 2

Loan Type and Amount: investment loan for the amount of EUR ………… to be used for the acquisition of .............

Term: final maturity date is DD/MM/YYYY; the loan is to be repaid in 54 monthly instalments, starting as of DD/MM/YYYY; prepayment allowed.

Security: (i) registered pledge on optic fibre cable networks and equipment owned by the Company; (ii) pledge on the going concern of ............, to be executed within 90 days after the acquisition of ............ by the Company; (iii) two promissory notes to be issued by the Company and (iv) consent for direct debiting of the Company's accounts with [BANK].

Governing law: Bulgarian.

Assignment and Change of Control: Obligation of the Company not to sell, transfer, lease or otherwise dispose of more than 5% of its long-term assets, except when replacing these long-term assets with new assets at an equal or higher value.

Other Observations: interest on the loan is set to 10% p.a.; fees: management fee: 0.75% for each 12-month loan period; commitment fee: 3% p.a. of the amount of the loan that has not been utilised. Default interest is calculated as the interest rate plus a margin of 15 points p.a. Further, the Company shall direct at least BGN 1,000,000 of its proceeds to its accounts with [BANK]. Failure on part of the Company to comply with said obligation shall lead to increase of the aforementioned interest rates with 1 point. The Company has undertaken an obligation to notify [BANK] in case of an in-kind contribution of the pledged assets in the capital of a company owned by the Company.

(v) [bank] Loan Agreement

Loan Type and Amount: investment loan for the amount of EUR …………. to be used for payment of construction works under Framework Agreement of DD/MM/YYYY executed between ………………. and the Company for development of a support system and purchase of equipment for optic network STM 16, purchase of optic equipment for supporting optic network and hardware components. Pursuant to information from the Company said loan facility has been repaid. With a view to the above, for the purposes of this Report we shall not engage in further review of this loan agreement.

(vi) [BANK] Loan Agreement 2

Loan Type and Amount: investment loan for the amount of EUR ………… to be used for the acquisition of .............

Term: Commitment period: DD/MM/YYYY; repayment: 6 months grace period until MM/YYYY, to be repaid in 59 equal monthly instalments of EUR ……… each, starting on DD/MM/YYYY with a final maturity date DD/MM/YYYY.

Security: (i) registered pledge on account receivables of the Company - blocked funds under account of the Company at [BANK] at the amount of EUR …………; (ii) registered pledge on fiber-optic facility - two pipes of underground duct network for fiber optic implementation along the route Sofia-Kulata; registered pledge on account receivables of the Company and of ............ from all cable TV subscribers of the Company, respectively of ............, located on the territory of ............ amounting to not less than BGN ………. monthly; (iii) consent for direct debiting of the Company's accounts with [BANK].

Governing law: Bulgarian.

Assignment and Change of Control: no specific provisions.

Other Observations: interest on the loan is set to base interest rate of [BANK] plus a margin of 4.52% p.a.; fees: management fee: 1% p.a. on the amount of the loan, other fees and commissions as per [BANK]'s Tariff of Interest, Fees and Commissions. Default interest is calculated as the interest rate plus a margin of 10 points p.a.; obligation of the Company to inform [BANK] immediately upon opening of a bank account in another bank; obligation of the Company to inform [BANK] prior to applying for a loan facility from another bank and about the amount, term and conditions of such loan facility; obligation of the Company to direct all proceeds from cable TV subscribers on the territory of ............ to its accounts with [BANK]. In case the Company does not utilise the services of [BANK] or provides to [BANK] false information about its activity, [BANK] may accelerate the loan.

(vii) [BANK] Loan Agreement 3

Loan Type and Amount: investment loan for the amount of EUR …….. to be used for additional payment for acquisition of .............

Term: Commitment period: DD/MM/YYYY; repayment through proceeds under Agreement for Acquisition of Fiber-Optic Facility, executed between ............ and the Company on DD/MM/YYYY and Annexes No. 1 and 2 to it, but not later than DD/MM/YYYY.

Security: (i) second ranking registered pledge on account receivables of the Company under Agreement for Acquisition of Fiber-Optic Facility, executed between ............ and the Company on DD/MM/YYYY and Annexes No. 1 and 2 to it; (ii) consent for direct debiting of the Company's accounts with [BANK].

Governing law: Bulgarian.

Assignment and Change of Control: no specific provisions.

Other Observations: interest on the loan is set to the base interest rate of [BANK] plus a margin of 4.52% p.a.; fees: management fee: 1% p.a. on the amount of the loan, other fees and commissions as per [BANK]'s Tariff of Interest, Fees and Commissions. Default interest is calculated as the interest rate plus a margin of 10 points p.a.; obligation of the Company to inform [BANK] immediately upon opening of a bank account in another bank; obligation of the Company to inform [BANK] prior to applying for a loan facility from another bank and about the amount, term and conditions of such loan facility; obligation of the Company to direct all proceeds from cable TV subscribers on the territory of ............ to its accounts with [BANK]. In case the Company does not utilise the services of [BANK] or provides to [BANK] false information about its activity, [BANK] may accelerate the loan.

3.1.4.2 Associated Security Agreements

We have been provided with and we have reviewed the following security agreements, which the Company is a party to: (i) Account Receivables Pledge Agreement of DD/MM/YYYY, executed with [BANK], securing claims under the [BANK] Loan Agreement 1 (the "[BANK] Pledge Agreement 1"); (ii) Account Receivables Pledge Agreement of DD/MM/YYYY, executed with [BANK], securing claims under the [BANK] Loan Agreement 1 (the "[BANK] Pledge Agreement 1"); (iii) Registered Pledge Agreement of DD/MM/YYYY, executed with [BANK], securing claims under the [BANK] Loan Agreement (the "[BANK] Pledge Agreement 2"); (iv) Registered Pledge Agreement of DD/MM/YYYY, executed with [BANK] and the Company, securing claims under [BANK] Loan Agreement 2 (the "[BANK] Pledge Agreement 2"); (v) Account Receivables Pledge Agreement No. …… of DD/MM/YYYY, executed with [BANK], securing claims under the [BANK] Loan Agreement 2 ("[BANK] Pledge Agreement 3"); (vi) Account Receivables Pledge Agreement No. ……. of DD/MM/YYYY, executed with [BANK], securing claims under the [BANK] Loan Agreement 3 ("[BANK] Pledge Agreement 4") and (vii) two promissory notes issued by the Company in favour of [BANK].

(i) [BANK] Pledge Agreement 1

Subject matter of the collateral under the [BANK] Pledge Agreement 1 is a registered pledge^{^[15]} of the Company's account receivables arising out of the following agreements: (i) Agreement No. …. / DD/MM/YYYY for Provision of Service entered into between the Company and ............ ............; (ii) Service Agreement No. …… / DD/MM/YYYY entered into between the Company and …………; (iii) Service Agreement ….. / DD/MM/YYYY for Provision of Service entered into between the Company and ………….; (iv) Agreement …. / DD/MM/YYYY for Provision of Service entered into between the Company and …………… ; (v) Agreement No. …. / DD/MM/YYYY for Provision of Service entered into between the Company and ……………………..; and (vi) agreements for provision of cable TV service with subscribers of the Company. The [BANK] Pledge Agreement 1 secures any claims of [BANK] under [BANK] Loan Agreement 1 and shall remain in force until final repayment of any and all amounts due under [BANK] Loan Agreement 1 (principal, interest and default interest). The pledge is duly perfected by means of filing with the Central Pledge Registry with the Ministry of Justice (the "CPR") and is enforceable vis-à-vis third parties. Until final repayment of the obligations of the Company to [BANK] under [BANK] Loan Agreement 1, the Company may not without the prior written consent of [BANK] create a pledge in favour of third parties on the account receivables pledged under [BANK] Pledge Agreement 1 and may not dispose of part or the entire amount of the pledged receivables.

The Company has undertaken the obligation to notify the third parties - debtors under the above agreements, of the pledge agreement and to require that they direct payments under the respective agreements to accounts of the Company with [BANK]. As of the date of this Report we have not been provided with any information or documentation as to whether the pledge is duly perfected vis-à-vis the debtors under the above enumerated agreements, by way of a notification. However, any possible irregularity in this respect would only lead to the Company being entitled to collect the respective account receivables until receipt by the respective debtor of a notice of the pledge.

(ii) [BANK] Pledge Agreement 2

Subject matter of the collateral under [BANK] Pledge Agreement 2 is a registered pledge on equipment and fiber-optic facilities described in detail in annexes to the agreement, which annexes however have not been provided for review. [BANK] Pledge Agreement 2 secures any claims of [BANK] under [BANK] Loan Agreement 2. The pledge is duly perfected by means of filing with the CPR and is enforceable vis-à-vis third parties. Pursuant to [BANK] Pledge Agreement 2 the Company may transfer the pledged assets only after the prior written consent of [BANK].

(iii) [BANK] Pledge Agreement 1

Subject matter of the collateral under the [BANK] Pledge Agreement 1 is a registered pledge on account receivables arising out of Agreement for Acquisition of Fiber-Optic Facility dated DD/MM/YYYY and Annex No.1 dated DD/MM/YYYY and Annex No. 2 dated DD/MM/YYYY thereto between the Company as Seller and ............ as Buyer. The [BANK] Pledge Agreement 1 secures any claims of [BANK] under the [BANK] Loan Agreement 1 and shall remain in force until final repayment of all amounts due under said loan agreement (principal, interest and any other payments due). The pledge is duly perfected by way of filing with the CPR and is enforceable vis-à-vis third parties. The Company has undertaken an obligation to notify its debtor under the above mentioned Agreement for Acquisition of Fiber-Optic Facility of the pledge. As of the date of this Report we have not been provided with any information or documentation as to whether the pledge is duly perfected vis-à-vis the debtor under the Agreement for Acquisition of Fiber-Optic Facility, by way of a notification. However, as discussed above any possible irregularity in this respect would only lead to the Company being entitled to collect the respective account receivables until receipt by the debtor of a notice of the pledge. Such notice could be made either by the Company, in its capacity of pledgor, or by [BANK], in its capacity of pledgee.

It is worth mentioning that under the [BANK] Pledge Agreement 1 the Company has undertaken an obligation vis-à-vis [BANK] to amend the Agreement for Acquisition of Fiber-Optic Facility only after the prior written consent of [BANK]. The Company has also undertaken an obligation in case of execution of other agreements with its clients to require them to direct 40% of their payments to the Company's accounts with [BANK]. In case of default under the [BANK] Loan Agreement, [BANK] is entitled to satisfaction from the proceeds of the pledged account receivables.

(iv) [BANK] Pledge Agreement 2

The subject matter of the collateral under the [BANK] Pledge Agreement 2 is a registered pledge on an underground segment of a fiber-optic facility - Sofia Kulata routing described in details in Annex 1 to the [BANK] Pledge Agreement 2. The [BANK] Pledge Agreement 2 secures any claims of [BANK] under [BANK] Loan Agreement and shall remain in force until final repayment of all amounts due under this loan agreement. The pledge is duly perfected by way of filing with the CPR and is enforceable vis-à-vis third parties. The Company may transfer the pledged assets only upon [BANK]'s prior written consent. In case of default under the [BANK] Loan Agreement, [BANK] is entitled to satisfaction from the proceeds from the sale of the pledged assets.

(v) [BANK] Pledge Agreement 3

The subject matter of the collateral under [BANK] Pledge Agreement 3 is a registered pledge on account receivables of the Company amounting to at least EUR ………… under its bank account with [BANK]. The [BANK] Pledge Agreement 3 secures any claims of [BANK] under the [BANK] Loan Agreement 2 and shall remain in force until final repayment of all amounts due under said loan agreement (principal, interest and any other payments due). Funds under the pledged receivables, including interest accrued, shall be blocked in the account until final repayment of debt under the [BANK] Loan Agreement 2. As of the date of this Report we have not been provided with any documents evidencing whether this pledge has been duly perfected by means of filing with the CPR. Failure of the Company to register the pledge with the CPR will prevent the Company from receiving disbursements under the loan agreement and will result in the [BANK] Pledge Agreement 3 not being enforceable vis-à-vis third parties. Until final repayment of the obligations of the Company to [BANK] under [BANK] Loan Agreement 2, the Company may not without the prior written consent of [BANK] create a pledge in favour of third parties on the account receivables pledged under [BANK] Pledge Agreement 3 and may not dispose of part or the entire amount of the pledged receivables.

(vi) [BANK] Pledge Agreement 4

Subject matter of the collateral under [BANK] Pledge Agreement 4 is a second ranking registered pledge on account receivables arising out of Agreement for Acquisition of Fiber-Optic Facility dated DD/MM/YYYY with Annex No. 1 dated DD/MM/YYYY and Annex No. 2 dated DD/MM/YYYY thereto between the Company as Seller and ............ as Buyer. The [BANK] Pledge Agreement 4 secures any claims of [BANK] under the [BANK] Loan Agreement 3 and shall remain in force until final repayment of all amounts due under said loan agreement (principal, interest and any other amounts due). As of the date of this Report we have not been provided with any documents evidencing whether this pledge has been duly perfected by means of filing with the CPR. Failure of the Company to register the pledge with the CPR will prevent the Company from receiving disbursements under the loan agreement and will result in the [BANK] Pledge Agreement 4 not being enforceable vis- à-vis third parties. Until final repayment of the obligations of the Company to [BANK] under [BANK] Loan Agreement 3, the Company may not without the prior written consent of [BANK] create a pledge in favour of third parties on the account receivables pledged under [BANK] Pledge Agreement 4 and may not dispose of part or the entire amount of these receivables.

(vii) Promissory Notes

We have been provided with two promissory notes issued on DD/MM/YYYY by the Company in favour of [BANK] for the amount of EUR …………. and respectively EUR ……….. Both promissory notes have a term until DD/MM/YYYY and are payable on demand. Each of the promissory notes is a standard one and complies with the mandatory provisions of Bulgarian law. Said promissory notes seem to have been issued by the Company in relation to [BANK] Loan Agreement 1.

We have not been provided with copies of the promissory notes which should have been issued by the Company in relation to [bank] Loan Agreement and [BANK] Loan Agreement 2.

Notes and Observations

The [bank] Loan Agreement is secured with a mortgage on 11 plots owned by ............. We have not been provided with documents evidencing the due perfection of this third-party security and we are not in a position to comment on its validity. If this mortgage has not been duly executed this might lead to insufficient securitisation of the [bank] Loan Agreement resulting in acceleration of the loan facility.

It is worth mentioning that the acquisition of ............ seems to be financed through [BANK] Loan Agreement 2. Pursuant to the terms of [BANK] Loan Agreement 2, the obligations of the Company under the latter agreement are to be secured with a pledge on the going concern of ............, which shall be perfected within 90 days after the acquisition of ............ by the Company. Failure of the Company to procure the execution of this security might lead to acceleration of the loan.

Next, it should be noted that the acquisition of ............ seems to be financed through [BANK] Loan Agreement 2. Pursuant to the terms of [BANK] Loan Agreement 2, the obligations of the Company under the latter agreement are to be secured with a registered pledge on the account receivables of ............ from all its cable TV subscribers. With a view to the above, there is a risk that any pledge agreement, by virtue of which a registered pledge is created over the account receivables of ............ from its cable TV subscribers, be classified as null and void as contradictory to the financial assistance rule. If any such pledge agreement would be declared null and void, [BANK] Loan Agreement 2 may be considered insufficiently secured and the bank may require additional security, and accelerate the facility due to insufficient securitisation. With a view to the above, it is recommendable that a condition precedent to closing be the amendment of [BANK] Loan Agreement 2 in a way to provide for valid security.

Pursuant to a certificate issued by the CPR in June 2005 two attachments on the Company's assets have been registered by the tax authorities. We have not been provided with any documents or information relating to such attachments. However, as evident from a tax certificate issued by the tax authorities as of DD/MM/YYYY the Company does not have any outstanding tax obligations. Thus, any registered attachments on the Company's assets for tax obligations, which have been paid, need to be deregistered.

The CPR Certificate of DD/MM/YYYY evidences also one pledge on future receivables to the Company's bank account with [BANK]. The discussed pledge was registered in MM/YYYY and secures the amount of EUR ……. Pursuant to verbal information from the Company said pledge has been registered in relation to a service agreement for banking card Mastercard Business executed between the Company, ………… and [BANK]. Pursuant to such agreement the Company may use a revolving loan with a limit of up to EUR ……… and final maturity DD/MM/YYYY. However, said agreement has not been provided in the Data Room and we are not in a position to comment on its validity and clauses.

Pursuant to [BANK] Pledge Agreement 2 and respectively [BANK] Pledge Agreement 2, subject matter of the collateral under which is a registered pledge on equipment and fiber-optic facilities of the Company, the written consent of [BANK], respectively [BANK], shall be required prior to the transfer of the respective pledged assets to a third party. With a view to the above, the written consent of [BANK], respectively [BANK], shall be obtained prior to the transfer of fiber-optic facilities from the Company to ............, as a condition precedent to such transfer. Failure of the Company to obtain the written consent of [BANK], respectively [BANK], for the transfer of the respective pledged fiber-optic facilities from the Company to ............ might trigger acceleration of the respective loan facilities extended to the Company.

Furthermore, given that examination of title of the Company over the fiber-optic facilities operated by it has remained outside the scope of this Report, any uncertainty of title in relation to the pledged fiber-optic facilities could diminish the degree of securitisation and could trigger acceleration of the respective loan facility. With a view to the above, the seller should represent and warrant in the SPA that the Company is the true and beneficial owner of all the equipment and fiber-optic facilities that it uses and operates.

3.1.4.3 Lease Agreements

In respect of lease agreements, which the Company is a party to, we have not been provided with a confirmation by the Company as to whether it has duly complied with its obligations under the respective lease agreements.

(a) Financial Lease Agreements

Our independent verification with the CPR indicated the existence of 3 leasing agreements for lease of equipment, to which the Company is a party. However, we have not been provided with copies of such financial lease agreements or any information in this regard.

(b) Operating Lease Agreements

The Company has leased 11 automobiles under operating lease agreements concluded with: (i) …………, (ii) ………… and (iii) …………... The vehicles have been leased for a period of 37 months[16]. The title over the leased vehicles remains with the respective lessor, while the Company has only acquired a right to operate with and exploit the vehicles. After expiry of the term of the respective lease agreement and payment of the last instalment thereunder, lessee has the right to gain title over the respective vehicle. Bulgarian law is applicable to all automobile lease agreements concluded by the Company.

In all agreements no assignment or sub-lease is permitted without the prior written consent of the respective lessor.

Events of default include delayed payment, misrepresentation, insolvency or liquidation procedures with regard to the lessee. The lease agreements with …………. and ……………. contain a liquidated damages clause, pursuant to which in case of payment default on part of the lessee the lessor is entitled to 0.1% of the due instalment per day.

It should be noted that default under any of the lease agreements with ............ shall be considered as default under all the other lease agreements executed with ............ and entitles the latter to terminate the agreement and regain possession of the respective vehicles.

Under the lease agreement with ............ the Company has the obligation to ensure advertising time for ............ with "…" and "…………" programmes for the term of the lease agreement. However, according to the repayment schedule of this lease agreement the last instalment thereunder was due in MM/YYYY. If all instalments have been duly paid, the term of this lease agreement should have expired. However, the Company has not provided us with a confirmation as to whether the lease agreement with ............ is still effective as of the date of this Report.

3.1.5 Supply Agreements

With a view of the Company Materiality Criteria, we have identified as material a limited number of agreements for supply of telecommunication equipment to which the Company is a party. A brief summary of such agreements is provided below.

Although we have requested, we have not been provided with any information or documentation regarding performance of the supply agreements, discussed below.

3.1.5.1 Framework Agreement for the Supply of Telecommunications Equipment executed between the Company and …………….. on DD/MM/YYYY (the "Framework Agreement")

The Framework Agreement provides for the execution of separate agreements for supply of telecommunications equipment and services and the licensing of the related software products. The equipment and services shall be supplied on the basis of individual purchase orders of the Company. By virtue of the Framework Agreement the value of the supplied equipment or services shall be established at a price determined either as (i) price payable as a one-time payment, or (ii) price payable on a periodic basis, or (iii) price established by the time spent for the service or the materials used for the equipment, or (iv) price at a fixed amount. Additional expenses related to the independent supply agreements may be invoiced separately and …. is under the obligation to inform the Company on a case-by-case basis of such costs.

The Company is entitled to a warranty period for the supplied equipment, commencing on the date of its installation. The equipment is delivered to the Company along with all licences and technical certificates required to operate the equipment.

The Framework Agreement contains a prohibition for assignment, in whole or in part, without the prior written consent of the other party. Nevertheless, the assignment of the agreement in whole or in part within the group of either of the contractors or to a successor organisation (by way of merger or acquisition) does not require any consent. The agreement does not contain change of control or non-competition provisions.

Each one of the parties may terminate the Framework Agreement by serving a written notice to that effect to the other party following the expiration or termination of the terminating party's obligations. Any provisions of the Framework Agreement, which due to their nature shall continue to be in effect after its termination, are binding on the successors and assignees of the parties.

The Framework Agreement is governed by Bulgarian law and any disputes shall be resolved by the respective competent courts of the Republic of Bulgaria.

The agreement does not give grounds for any legal concerns.

3.1.5.2 Framework Agreement for the Supply of Telecommunications Equipment executed between the Company and ……………. dated DD/MM/YYYY (the "………. Framework Agreement")

The ............ Framework Agreement outlines the standard set of terms and conditions and provides for the execution of separate agreements for supply of telecommunications equipment, in which the particular prices, payment conditions, delivery terms and conditions will be defined.

The agreement, purchase orders and execution thereof, shall be governed by the United Nation Convention on Contracts for the International Sale of Goods and the law of France. From a Bulgarian law point of view the choice of foreign law as governing law shall be considered a valid choice of law. Consequently we shall only outline the most important clauses of the agreement but we shall not engage in any legal conclusions.

The disputes arising out of or related to the ............ Framework Agreement t, if they cannot be amicably settled within a period of 30 days, shall be referred to and finally resolved by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce.

The Company is entitled to a warranty period for the supplied equipment of 12 consecutive months after the date of signing of an act of acceptance following successful installation, testing, commissioning and acceptance of the products; or of 18 months after the date of the customs declaration provided that the seller has received a copy of it, whichever comes first.

3.1.6 Insurance Agreements

Pursuant to the applicable effective Bulgarian legislation the Company is not mandatory obliged to maintain any kind of insurance, except for third party liability insurance in respect of own or leased vehicles. According to the documents provided for review the Company has executed and maintains two types of insurance related to its assets and automobiles. However, we have not been provided with any information or documents evidencing whether the Company has executed third party liability insurance policies in respect of the vehicles owned or leased by it. Failure to execute third party liability insurance in respect of such vehicles may result in administrative-penal liability of the driver of the respective vehicle and as a most extreme measure suspension of the operation of the respective vehicle until execution of the required insurance.

Except for the comment above, the reviewed documentation does not raise any major legal concerns related to the insurance policies, maintained by the Company, that may have a negative impact on the business of the latter and/or on the Contemplated Transaction.

Below please find specific information regarding the insurances concluded by the Company.

Insurance Policies Executed and Maintained by the Company

(i) Property Insurance

Company's buildings, machines and electronic equipment are insured with [BANK] - …………………… against theft, explosion, implosion, flood, hail, storm, earthquake, industrial fire etc. pursuant to insurance policies # ……………… and # ………………... Both policies are valid until DD/MM/YYYY. The total insurance amount under the two policies amounts to BGN ………….. and the total insurance premium amounts to BGN ………….

(ii) Casco Insurance

We have been provided with a number of insurance policies regarding Casco insurance of all automobiles leased to the Company under operating lease agreements executed with ............, ............ and …………………. In addition we have also been provided with 5 Casco insurance policies under which the Company has insured automobiles already owned by it. The reviewed Casco insurance policies are valid as of the date of this Report and do not give rise to any legal concerns.

3.2 Material Commercial Contracts to Which a Subsidiary is a Party

We have requested all agreements to which a Subsidiary is a party, meeting any of the following criteria: (i) having an annual value in excess of EUR ………..; or (ii) relating to something of strategic value to the Subsidiary's operations; or (iii) having a term longer than 1 year (the "Subsidiary Materiality Criteria").

3.2.1 ............

3.2.1.1 Commercial Agreements

Regarding the commercial agreements executed by ............ we have been provided for review only with a standard agreement for provision of Internet, cable TV and fixed voice telephony, used by the Company, and the General Terms applying to it with regard to the provision of cable TV. The standard agreement itself provides only for the names of the parties, chosen services (i.e. Internet access, fixed voice telephony, cable TV, or any combination thereof), term of the service and fees due, where for all other arrangements in relation to the provision of cable TV the provisions of the General Terms shall apply. The General Terms, adopted by ............ regarding the provision of cable TV, are in compliance with the mandatory contents requirements set out in the LT. However, although we have requested, we have not been provided with any information or documents related to approval of said General Terms by the CRC, as required by the law. If the General Terms are not duly approved by the CRC, the latter might impose fines on ............. Theoretically, if the breach is qualified as "material" or "repetitive", it is also possible that the CRC withdraws ............' respective registration under the LT. However, we would consider the latter scenario very unlikely in the case at hand. With a view to the above, it is recommendable that the seller represent and warrant in the SPA that ............ has complied with all its obligations as a public telecoms operator under the LT. Alternatively, a CP to closing could be the provision by the Company of CRC's approval decision of the referred General Terms.

It is important to note that pursuant to the public registries of issued individual licences kept with the CRC, ............ has not been granted a licence for provision of fixed voice telephony service. Provision of such service on part of ............ without the latter holding the required licence will amount to a violation of the LT and may lead to imposition of administrative penalties ranging between BGN ………. and BGN ……….. In addition, should the breach be qualified as "repetitive" it may trigger suspension or prohibition on ............ to conduct the licensed activity. It should also be noted that pursuant to ............'s standard agreement the Company is authorised to execute it on behalf and for the account of ............. With that regard it is also possible that the intention of the Company and ............ were to have the fixed voice telephony service rendered to ............'s customers directly by the Company. However, we have not been provided with any further information or documents (such as for example a written agreement between ............ and the Company, verbal information etc.) to that respect. With a view to the above, it is recommendable that ............ either obtains a licence for provision of fixed voice service under the terms and procedure of the LT, or alternatively it should stop the provision of such service.

3.2.1.2 Insurance Agreements

Pursuant to the effective applicable Bulgarian legislation ............ is not mandatory obliged to maintain any kind of insurance, except for third party liability insurance in respect of own or leased vehicles, if any.

According to the documents provided for review ............ has insured 42 of its employees against death as a result of professional illness or accident, and against permanent and temporary disability as a result of accident. The insured amount under the policy is BGN ……….. for each employee. We have not been provided with documents evidencing the payment of the premium under the policy amounting to BGN …….. as a whole. The insurance policy is valid until DD/MM/YYYY and it does not give rise to any legal concerns.

However, we have not been provided with any information or documents evidencing whether the Company has executed third party liability insurance policies in respect of the vehicles owned or leased by it, if any. Failure to execute third party liability insurance in respect of such vehicles may result in administrative-penal liability of the driver of the respective vehicle and as a most extreme measure suspension of the operation of the respective vehicle until execution of the required insurance.

3.2.2 ............

With regard to the commercial agreements executed by ............ we have been provided for review only with General Terms applying to the provision of cable TV. Said General Terms are in compliance with the mandatory provisions of the LT. However, we have not been provided with any information or documents related to approval of said General Terms by the CRC, as required by the law. If the General Terms are not duly approved by the CRC, the latter might impose fines on ............. Theoretically, if the breach is qualified as "material" or "repetitive", it is also possible that the CRC withdraws ............'s respective registration under the LT. However, we would consider the latter scenario very unlikely in the case at hand. With a view to the above, it is recommendable that the seller represent and warrant in the SPA that ............ has complied with all its obligations as a public telecoms operator under the LT. Alternatively, a condition precedent to closing could be the provision by the Company of CRC's approval decision of the referred General Terms.

3.2.3 ............

The information related to commercial agreements presented in the Data Room with regard to ............ contained only General Terms applying to the provision of cable TV. Although the said General Terms were adopted and approved by CRC (with Decision No. … of DD/MM/YYYY) in relation to Individual License No. ……… of DD/MM/YYYY granted to ............ under the Revoked LT (please see Section 2.2.8 above of this Report) it should be noted that our review of the said General Terms showed that they are in compliance with the LT currently in force. However, we have not been provided with any information or documents related to approval of said General Terms by the CRC granted after the adoption of the new LT and substitution of the referred licence with a registration of ............ under General Licence …, as discussed in Section 2.2.8 above of the Report. If the General Terms are not duly approved by the CRC, the latter might impose fines on ............. Theoretically, if the breach is qualified as "material" or "repetitive", it is also possible that the CRC withdraws ............'s respective registration under the LT. However, we would consider the latter scenario very unlikely in the case at hand. With a view to the above, it is recommendable that the seller represent and warrant in the SPA that ............ has complied with all its obligations as a public telecoms operator under the LT. Alternatively, a condition precedent to closing could be the provision by the Company of CRC's approval decision of the referred General Terms.

With regard to ............, ............, ............,............ and ............ as of the date of this Report we have not been provided with any agreements to which any of these Subsidiaries is a party, meeting any of the above Subsidiary Materiality Criteria, and therefore we are not in position to further elaborate on this Section of the Report, or to produce any statement, analysis or opinion regarding said companies.

3.3 Material Commercial Contracts to Which an Acquisition Target is a Party

For the purposes of this Section 3.3 of the Report we have reviewed only commercial contracts, to which an Acquisition Target is a party, that meet any of the following criteria: (i) having an annual value in excess of EUR …….. ("Acquisition Target Materiality Threshold"); or (ii) related to something of strategic value to the respective Acquisition Target's operations; or (iii) having a term longer than 1 year (the criteria under items (i) through (iii) above are jointly referred to as the "Acquisition Target Materiality Criteria").

3.3.1 ............

3.3.1.1 Commercial Agreements

With regard to the commercial agreements executed by ............ we have been provided for review only with a standard agreement for provision of Internet and cable TV and the General Terms applying to it. The reviewed standard agreement provides only for the names of the parties and address for provision of the services. The General Terms, adopted by ............, are in compliance with the mandatory provisions of the LT. In said General Terms it is stated that they have been approved by the CRC, but we have not been provided for review with the respective CRC's decision for such approval. If said General Terms are not duly approved by CRC, the latter might impose a fine on ............. Theoretically, if the breach is qualified as "material" or "repetitive", it is also possible that the CRC withdraws ............'s respective registration under the LT. However, we would consider the latter scenario very unlikely in the case at hand. With a view to the above, it is recommendable that the seller represent and warrant in the SPA that ............ has complied with all its obligations as a public telecoms operator under the LT. Alternatively, a condition precedent to closing could be the provision by the Company of CRC's approval decision of the referred General Terms.

3.3.1.2 Insurance Agreements

Pursuant to the applicable effective Bulgarian legislation ............ is not mandatory obliged to maintain any kind of insurance, except for third party liability insurance in respect of own or leased vehicles.

According to the documents provided for review ............ has executed two insurance policies for insurance of its machines, equipment and buildings against damages and loss. The reviewed policies do not reveal any legal concerns, but it should be noted that they have already expired at the end of the year YYYY and we have not been provided with any documents evidencing that their term has been duly prolonged. With a view to the above and lacking any information to the opposite, it is highly probable that ............'s machines, equipment and buildings are not insured as of the date of this Report. Should this be the case, ............ shall bear on its own behalf the risk for loss or damages of such machines, equipment and buildings.

However, we have not been provided with any information or documents evidencing whether ............ has executed third party liability insurance policies in respect of any vehicles owned or leased by it. Failure to execute third party liability insurance in respect of such vehicles may result in administrative-penal liability of the driver of the respective vehicle and as a most extreme measure suspension of the operation of the respective vehicle until execution of the required insurance.

3.3.1.3 Financing Agreements

As a general comment we have not been provided with a confirmation by ............ as to whether all pending interest and principal amounts due under financial agreements, which ............ is a party to, have been duly paid. With a view to the above, it is recommendable that the seller represent and warrant that all pending interest and principal amounts due under financial agreements, which ............ is a party to, have been duly paid and there is no default or threat of an event of default under any of the financial agreements to which ............ is a party.

(a) Loan Agreements

We have been provided with 1 loan agreement to which ............ is a party. Said loan agreement is dated DD/MM/YYYY and it has been executed with [bank] ("[bank] Loan Agreement").

Loan Type and Amount: revolving credit line facility with a limit of BGN …… to be used for working capital purposes.

Term: DD/MM/YYYY.

Security: (i) mortgage on a real estate (Multimedia Centre located in Sofia); (ii) registered pledge on motor vehicles; (iii) promissory note issued by ............ in favour of the bank.

Governing law: Bulgarian.

Assignment and Change of Control: no specific provisions.

Other Observations: interest on the loan is set to base interest rate of the bank plus a margin of 8.5% p.a. ............ is under the obligation to use solely the services of [bank]. In case of failure on part of ............ to comply with this obligation, [bank] may accelerate the loan.

We have not been provided with any information or confirmation by ............ as to whether the discussed loan facility has been duly repaid, given that the term of the loan agreement expired on DD/MM/YYYY.

(b) Associated Security Agreements

As of the date of this Report the following security agreements have been provided for our review: (i) Pledge Agreement of DD/MM/YYYY; (ii) a mortgage on real estate and (iii) a promissory note.

(i) Pledge Agreement of DD/MM/YYYY executed between ............ and [bank] ("[bank] Pledge Agreement")

Subject matter of the collateral under this pledge agreement is a registered pledge of movable assets (11 motor vehicles) listed in the agreement. The agreement secures any claims of [bank] under the [bank] Loan Agreement and shall remain in force until final repayment of any and all amounts due under the [bank] Loan Agreement. The pledge is duly perfected by way of filing with the CPR and is enforceable vis-à-vis third parties. Our independent verification with the CPR showed that this pledge is second ranking.

(ii) Mortgage

Our independent research with the Sofia Real Estate Registry as of DD/MM/YYYY evidenced registration of a mortgage on ……………. owned by ............, which mortgage has been deregistered at request of [bank].

(iii) Promissory Note

The promissory note was issued on DD/MM/YYYY by ............ in favour of [bank] for the amount of BGN ………. plus interest and any amounts due under the [bank] Loan Agreement. Said promissory note is signed per aval^{^[17]} by ………… and ……………. However it is doubtful whether this promissory note is valid. Pursuant to the LC a promissory note is an unconditional promise for payment. The promissory note issued by ............ contains ambiguous wording referring to the debt of ............ under the [bank] Loan Agreement. In case of a dispute between the parties it is not predictable how a court would construe the referred wording of the promissory note.

(c) Other Comments

Our independent verification with the Sofia Real Estate Registry as of DD/MM/YYYY evidenced registration of a mortgage in favour of ............, executed by a third party (……………). Said mortgage refers to a loan agreement executed between ............ and [bank] for the amount of BGN ……………. with final maturity date DD/MM/YYYY. We have not been provided with a copy of this loan agreement or any information in this regard.

Pursuant to a certificate from the CPR of DD/MM/YYYY there is a registration of (i) a first ranking pledge in favour of [bank] on the movable assets that are subject matter of the collateral under the [bank] Pledge Agreement discussed under item (b) (i) above, and (ii) a pledge dated DD/MM/YYYY in favour of [bank] on a TV station, located in ............, and 10 vehicles. We have not been provided with any security agreements relating to the referred pledges or any other information in this regard.

3.3.2 ............

3.3.2.1 Commercial Agreements

According to the documents provided for review ............ provides two types of services: (i) Internet access; and (ii) cable TV. The agreements related to the provision of these services are discussed hereinbelow.

(i) Internet Access

Internet access is provided by ............ pursuant to General Terms, which apply to the individual written agreements executed with customers following the standard form agreement used by ............. The standard form agreement provides only for the names of the parties, term of the service, technical specifications and fees due, where for all other arrangements the provisions of the General Terms shall apply. Such General Terms are not subject to any mandatory legal control envisaged by Bulgarian law and do not give rise to any legal concerns. Except for said General Terms and the standard form agreement, no signed individual written agreements were provided for review.

(ii) Cable TV

On the basis of the registrations under the LT and the LRT, held by ............ (please see Section 2.1.4.9 above), it could be concluded that ............ validly provides cable TV services. Pursuant to the general licences adopted by the CRC under the LT, under which ............ is registered (please see Section 2.1.4.9 (a) above), ............ is under an obligation to adopt General Terms governing the relationships with its end users. The General Terms provided by ............ comply with the mandatory legal requirements and do not give rise to any legal concerns. However it should be noted that although we have requested, as of the date of this Report we have not been provided with a copy of CRC's decision for approval of said General Terms, as required by law. If the General Terms have not been duly approved by the CRC, the latter might impose a fine on ............. Theoretically, if the breach is qualified as "material" or "repetitive", it is also possible that the CRC withdraws ............'s respective registration under the LT. However, we would consider the latter scenario very unlikely in the case at hand. With a view to the above, it is recommendable that the seller represent and warrant in the SPA that ............ has complied with all its obligations as a public telecoms operator under the LT. Alternatively, a condition precedent to closing could be the provision by the Company of CRC's approval decision of the referred General Terms.

............ provides the cable TV service pursuant to a standard form agreement to which the General Terms apply. Said standard form agreement provides only for names of the parties and address for provision of the service and it does not give rise to any legal concerns and/or potential legal risks with regard to the Contemplated Transaction.

3.3.2.2 Loan Agreements

Only one loan agreement executed by ............ has been provided for our review. The loan agreement is dated DD/MM/YYYY and has been executed by and between [bank] and ............ ("[bank] Loan Agreement"). Pursuant to the [bank] Loan Agreement any changes in the corporate status of ............, for which the Bank has not given its prior consent, might trigger acceleration of the loan. With a view to the above, if the contemplated acquisition by The Company of 100% of the capital of ............ will result in changes in the corporate status of ............, the latter should obtain the prior consent of [bank] as a condition precedent to such acquisition. In the latter case, failure of ............ to obtain the prior consent of [bank] for said acquisition might lead to acceleration of the loan facility.

We have not been provided with a confirmation by ............ as to whether all pending interest and principal amounts under the [bank] Loan Agreement have been duly paid. With a view to the above, it is recommendable that the seller represent and warrant that all pending interest and principal amounts due under financial agreements, which ............ is a party to, have been duly paid and there is no default or threat of an event of default under any of the financial agreements to which ............ is a party.

Loan Type and Amount: investment loan for the amount of BGN ……… to be used for the construction of a cable telecommunications and Internet network.

Term: the loan is to be repaid in … monthly instalments of BGN ……… each, starting on DD/MM/YYYY with final maturity date DD/MM/YYYY.

Security: (i) a first ranking mortgage over 3 real estates owned by ............; (ii) a promissory note issued by ............; and (iii) joint undertaking of debt by ............, …………. and ............ ………….. (shareholders in ............).

Governing law: Bulgarian.

Assignment and Change of Control: any changes in the corporate status of ............, for which the bank has not given its prior consent, might trigger acceleration of the loan.

Other Observations: interest on the loan is set to base rate plus a margin of 8.5%, but not less than 11% p.a.; fees: management fee is set to 1% p.a., commitment fee: 0.5%, prepayment fee: 5%. Default interest is calculated as the interest rate plus a margin of 10 points p.a. ............ has undertaken the obligation that ............, ............, ………….. and ………………. will use solely the services of the bank. In case of failure of ............ to comply with this obligation the interest rate is increased with a margin of 2 points.

3.3.2.3 Associated Security Agreements

(i) Joint Undertaking of Debt

There are three agreements of DD/MM/YYYY for joint undertaking of debt executed between ............, [bank] and respectively …………….., ............ and ............ ………… (the latter three entities collectively the "Co-debtors"). Said agreements have been executed under the same terms. Pursuant to these agreements the Co-debtors agree to assume the obligation of ............ under the [bank] Loan Agreement. As a result of such joint undertaking of debt ............, ……………, ............ . and ............ ……………. are jointly and severally liable to the Bank for the repayment of the loan.

(ii) Promissory Note of DD/MM/YYYY

The promissory note was issued on DD/MM/YYYY by ............ in favour of [bank] for the amount of BGN ……. and interest of 11% p.a. The promissory note is payable on demand. It has been signed per aval by …………, …………………. and ............ The promissory note is a standard one and complies with the mandatory provisions of Bulgarian law.

(iii) Contractual Mortgage

We have been provided with a notary deed for execution of a contractual mortgage over three real estates, namely: (i) premises on the 3rd floor of a business complex, located in ............, owned by ............; and (ii) a shop, studio and food store owned by ............. The contractual mortgage secures any claims of [bank] under the [bank] Loan Agreement. The mortgage has been duly registered with the Real Estate Registry in ............ on DD/MM/YYYY. Such mortgage is deemed valid only if the respective mortgagor had title over the mortgaged real estate at the time of execution of the contractual mortgage. We have not been provided with any information as to whether this mortgage is still registered with the Real Estate Registry in ............ as of the date of this Report.

The documents provided in the Data Room do not enable us to undoubtedly confirm whether ............, respectively ............, had valid title over the mortgaged real estates. Any uncertainty of title with respect to the mortgaged real estates might diminish the degree of securitization of the loan facility under the [bank] Loan Agreement and may trigger acceleration of the loan.

3.3.3 ............

As explained in Section 2.3.3 above, as of the date of this Report ............ does not seem to hold any licences or registrations under the LT or the LRT. The Company has represented that ............ will apply for registration under General Licence … after its acquisition by the Company. Therefore, as of the date of this Report ............ does not seem to provide any telecoms services or services related to the creation and broadcasting of television programmes under the LRT.

Pursuant to Preliminary Agreement of DD/MM/YYYY entered into between ………….. (the former sole owner of the capital of ............) and the Company related to the contemplated acquisition of 100% of the capital of ............ by the Company, …………. shall continue to provide cable TV services until ............ is registered under General Licence …, whereas ………….. shall rent ............'s cable network under a rent agreement with the latter. Pursuant to the referred Preliminary Agreement after ............ is registered under General Licence …, …………. shall promptly assign to ............ its rights under the contracts with subscribers, as well as it shall direct all subscribers for concluding contracts with ............. With a view to the above, as long as ............ has not obtained a registration under General Licence … as of the date of this Report, it would seem that ............ is not a party to any agreements with subscribers for provision of cable TV services.

According to verbal information by the Company's management ............ is not a party to any loan agreements or associated security agreements. Our independent verification with the CPR showed that there are no registered pledges executed by .............

With regard to the insurance policies maintained by ............ it should be noted that pursuant to the effective applicable Bulgarian legislation the Company is not mandatory obliged to maintain any kind of insurance, except for third party liability insurance in respect of own or leased vehicles.

According to the documents provided for review in the Data Room ............ has executed and maintains three types of insurance related to its assets and automobiles.

The reviewed documentation does not raise any major legal concerns related to the insurance policies, maintained by the Company that may have a negative impact on the business of the latter and/or on the Contemplated Transaction.

Below please find specific information regarding the insurance policies concluded by .............

(i) Property Insurance

Part of ............'s machines and electronic equipment are insured with ………………… against theft pursuant to insurance policy # ……………. The policy is valid until DD/MM/YYYY and the insurance amount thereunder amounts to BGN …….. We have not been provided with any information evidencing whether the insurance premium due amounting to BGN … has been paid in full.

(ii) Vehicle Insurance

(a) Third Party Liability Insurance

Pursuant to the insurance policies provided in the Data Room and to an affidavit signed by Mr. ……………… in his capacity as general manager of ............, the Company has insured against third party liability all its 7 automobiles, where the term of all policies expires in the second half of the year YYYY.

(b) Casco Insurance

According to the reviewed information and the above said affidavit only one of the seven automobiles owned by ............ has Casco insurance. The said policy is valid until DD/MM/YYYY and does not give rise to any legal concerns.

3.3.4 ............

We have not been provided for review with any commercial agreements, including loan agreements and associated security agreements, to which ............ is a party and thus we are not in position to elaborate on this Section of the Report, nor to produce any statement, analysis or opinion.

4. ASSETS. REAL ESTATE ASSETS AND OTHER PROPERTY.

4.1 Assets of The Company

A general note we highlight that we have analysed only the assets necessary for the provision of cable, Internet or telephony services by the Company and the assets, which the Company shall transfer to ............ are not subject to this Report.

4.1.1 Development and Operation of the Telecommunication Network

4.1.1.1 Cable Network for Provision of TV and Radio Signals

Pursuant to certificate No. ………… / DD/MM/YYYY the geographic boundaries in which the Company is entitled to perform telecommunication activities under General Licence … cover the territory of ............ District - town of ............; town of ............; town of ............; ............ District - town of ............ and town of ............; ............ District - town of ............ and village of …………….; town of …………; …………….. District - town of …………….. and town of …………; town of ............; ............ District - town of ............ and village of ............; town of ............; town of …………; town of ............; town of ............; town of ............ and town of .............

Pursuant to Art. 167, Par. 5 of the LT, the telecommunication infrastructure is owned by the operator who has developed such infrastructure. Therefore, we requested to be provided with the requisite construction papers for development of the network. However, we have not been provided with any construction papers or any other documents evidencing title of ownership of the Company to the cable network for provision of TV and radio signals, by which the licensed activity is carried out.

Pursuant to the provisions of the LT the public telecommunication operators carrying out telecommunications activities through aerial cable telecommunication networks constructed in urbanised territories with over 3,000 residents, in resort settlements and in resort settlement formations as well as in settlements and in parts of them announced as reserves with historic, archaeological, ethnographic or architectural significance shall lay the cable networks under the surface of the ground in underground technical conduits till DD/MM/YYYY. Such obligation does not apply to the public telecommunication operators carrying out telecommunications activities through cable telecommunication networks in towns and villages with up to 3,000 residents.

As per the verbal statement of the technical director of the Company all optical and trunk coaxial cables are underground. Such cables are laid down into the ducts owned by ...... on the basis of the Agreement for Provision of the Service "Use of Ducts from the Town Telephone Ducts Network" (for further details please see Section 4.1.5.2 hereinafter). The aerial cables still exist in the distribution part of the small networks (………, ............, ……………., ............, and …………) and in the areas of bigger networks, where small houses are located, where no ...... underground infrastructure exists and it is no commercially viable for the latter company to build its own underground infrastructure. We have requested information about the percentage of underground and aerial cables in each city where the cable networks exist, but as of the date of this Report we still have not been given with such information.

4.1.1.2 Telecommunications Network for Fixed Radio Service - Radio-Relay Lines

Individual Licence N ………… / DD/MM/YYYY for Carrying out Telecommunications through Private Telecommunications Network from Fixed Radio Service - Radio-Relay Lines specifies the locations, on which the radio-relay equipment forming part of the Company's telecommunication network should be installed. Pursuant to said licence, the radio-relay equipment of the Company should be installed on five locations in the towns of ............ and ............ (in respect of the administrative address of such locations, please see Appendix 4.1.1.2), where the Company should proceed with the following: (i) agree with the owners of the sites, where the equipment should be installed, in respect of the conditions for the installation and the utilisation of such sites; and (ii) ensure the issuance of all construction permits by the municipalities and the registration of the network with the cadastre plan.

Pursuant to a verbal statement of the Company's management, all sites on which its radio-relay equipment has been installed are used on the basis of valid lease agreements. However, the Company did not provide us with copies of these lease agreements.

4.1.2 Compliance with Planning and Regulatory Requirements

4.1.2.1 Cable Network for Delivery of TV and Radio Signals

The development of the Company's cable TV and radio signals network should be accomplished in compliance with the Law on Territorial Development, and in particular with the specific requirements for completion of construction and installation works. Pursuant to the Bulgarian law, construction process goes through the certain stages, the most important of which are: (i) approval of investment designs for the edifices, respectively the equipment; (ii) issuance of construction permit allowing the development of the edifice, or the installation of the equipment, pursuant to the approved designs; and (iii) permitting the operation of the completed edifice, or equipment, by way of issuance of operational permit or certificate of operation. The Law on Territorial Development differentiates six categories of constructions, where some of the above described stages of construction and installation works may vary or may not be required for a certain construction category. Pursuant to the Law on Territorial Development, constructions or installations developed without relevant construction papers (construction permit, operational permit, etc.) are considered "illegal constructions" and are subject to removal. The Company has confirmed that no construction permits have been issued in respect of its cable TV and radio signals networks saved for the whole cable network located in the city of ............ and for some section of those networks located in cities of ............ and ............. Therefore, we could draw the conclusion that almost the entire cable TV and radio signals network operated by the Company shall be qualified as illegal construction.

In YYYY an amendment to the currently effective Law on Territorial Development was adopted, which allowed certain constructions, developed without the requisite construction papers, to be legalised. Thus, putting into operation of buildings, installed equipment, etc., which have gone through a legalisation procedure, shall be evidenced not by an operational permit, but by "a deed for legalisation". Such procedure for legalisation must be initiated by the owner of the respective illegal construction by filing an application prior to DD/MM/YYYY to the body, which should have issued the requisite construction permission. The illegal constructions, for which no legalisation was requested, shall be removed. Pursuant to the verbal statement The Company's representatives verbally stated that the Company had already filed applications for legalisation of all cable TV and radio signals networks in the due term, but the legalisation acts are not issued yet. Despite our requests, no documents evidencing that the Company had initiated the legalisation procedure were given to us. Based on the above discussed facts, we may conclude that the legalisation of the Company's cable TV and radio signals is still not accomplished yet.

Persons operating constructions, which have been established as "illegal" by the competent authorities, shall be prohibited to operate the illegal constructions, should be ordered to remove the construction by their own expense or the competent authority shall remove the construction at the expense of the owner, and shall be imposed with the relevant penalties. The penalties vary from BGN 5,000 to BGN 50,000. Penalty from BGN 1,000 to BGN 10,000 may be imposed to persons operating illegal constructions.

We were provided with a Record of Findings No. …. dated DD/MM/YYYY and issued by the competent municipal authorities in respect of the cable TV and radio signal network located in the town of ............, evidencing that the network represents illegal construction. Said record was followed by Order No ………… dated DD/MM/YYYY of the Regional Directorate for National Construction Supervision for imposing the sanction "suspension of ongoing construction of the cable network". The Company has appealed the order but the appeal has been withdrawn on DD/MM/YYYY. For further details in respect of the litigation proceedings please refer to Section 8.4.1 hereto.

4.1.2.2 Telecommunications Network for Fixed Radio Service - Radio-Relay Lines

Although Individual Licence N ……….. / DD/MM/YYYY for Carrying out Telecommunications through Private Telecommunications Network from Fixed Radio Service - Radio-Relay Lines stipulates that the Company should ensure the issuance of all relevant construction permits related to the installation of the radio relay equipment, the Company has confirmed that no such permits have been issued in respect of its radio-relay equipment and no applications for legalisation of the installed equipment are filed.

The development of the Company's radio transmission network and the installation of the radio relay equipment should be also accomplished in compliance with the Law on Territorial Development as referred to the cable TV and radio signals network discussed in the proceeding Section 4.1.2.2.

Since the currently applicable law does not allow "legalisation" of illegal construction via a subsequent act remedying the lack of construction papers for the initial development of the constructions, the only remedial action, which the Company may proceed with, is going through the entire procedure for permitting the installation of its radio relay equipment, as well as for the authorisation of its operation. In such case, it might be necessary the Company to formally remove the radio relay equipment before installing it pursuant to the applicable procedures.

4.1.3 Title to Real Estate Assets

The legal status of the Company's real estate assets has been assessed on the basis of the provided title documentation, encumbrance certificates and certificates for restitution claims, as well as on the basis of documents evidencing zoning status of the underlying land and requisite construction papers. We have made an independent verification at the Sofia Real Estate Registry only with respect of the real estate assets located in Sofia.

We have been provided with title documents is respect of the following real estate assets, deemed to be owned by the Company:

(i) assets located in ………, representing five apartments and four garages,

(ii) office premises in …….,

(iii) land and office building developed thereon located in ............,

(iv) shop in ............,

(v) office premises in ............,

(vi) properties located in ............, representing two garages and an office.

For a detailed description of the Company's real estate assets please refer to Appendix No. 4.1.3 to this Report.

4.1.3.1 Acquisition of Company's Property

The Company has acquired the majority of its real estate assets on a contractual basis, i.e. under agreements for purchase of real estate with certain individuals or entities.

The real estate assets in …………., ………… and ............ are acquired on the grounds of duly executed notary deeds for purchase. It appears that the reviewed notary deeds were properly executed and meet all the formal legal requirements, which is a strong indication of the Company's valid title over the real estates. In addition those notary deeds were registered with the respective real estate registry. However, we have not been provided with and therefore we have not reviewed the requisite title documents of the sellers under the referred notary deeds, which would enable us to confirm that all the discussed real estates have been transferred to the Company by true owners and thus the Company has acquired good title of ownership thereto. Should any of the assets acquired under the reviewed notary deeds for purchase is deemed to be of a material importance for the flawless provision of the core services of the Company, we would recommend an additional full title due diligence regarding the material real estate assets so identified be carried out.

With respect to the real estate asset in ............, The Company evidenced its title by a notary deed evidencing title ownership. Pursuant to the said notary deed in 2002 the competent notary public acknowledged that The Company was the legal owner of the asset in ............. Since we have not been provided with the source documents, on the basis of which the discussed notary deed was issued, we are not able to make an independent verification of the good title of The Company over the discussed real estate asset. Should the real estate asset in ............ is deemed to be of a material importance for the flawless provision of the core services of the Company, we would recommend a full title due diligence regarding said asset be carried out.

The Company claims that title to the office premises in ............ has been acquired through legal succession from ............ ............ EAD. In fact, said real estate asset in ………… was contributed to ............ ............ EAD as an in-kind payment of the subscription price for shares issued by the latter company in YYYY. Subsequently, pursuant to a court resolution dated DD/MM/YYYY issued by ……….. District Court, ............ ............ EAD has been merged into the Company, where all assets and liabilities of the merging company passed onto the Company. We have not been provided with any evidence that either ............ ............ EAD or the Company has registered its title to the contributed asset in the Real Estate Registry in ............. As a result, the title transfer effected on the ground of said in-kind contribution may not be opposed vis-a-vis third parties.

The Company claims title to the assets in ............ on the grounds of legal succession from ……………….. Pursuant to the court resolution dated DD/MM/YYYY, ………………….. has been merged into the Company, where all assets and liabilities of the merging company passed onto the Company. ……………… was established as a separate legal entity by way of spin-off from ............ AD, where the newly incorporated company was a legal successor of certain part of the assets and liabilities of ............ AD as of DD/MM/YYYY. Based on the reviewed documentation and the applicable legislation effective as of the time of the separation of …………………. from ............ AD, we may conclude that the transfer of title over the real estate assets from ............ AD to …………………. has not been made in the required form and therefore ……………….. has not received valid title to the respective real estate assets. Since ………………………. did not duly acquire the respective assets upon its spin-off from ............ AD, it was not in a position to transfer validly title to those assets to the Company. Such a conclusion is supported by the fact that ............ AD has filed a claim for proclaiming the effected spin-off as null and void. For further details in respect of the claim of ............ AD please see Section 8.4.2.

With respect to the invalid transfer of real estate assets upon the Company's predecessor spin-off from ............ AD[18], we recommend that the latter company and the Company enter into a settlement agreement (in a notarial form) providing for an expressed acknowledgement that the real estate assets located in ............ which formed part of the property of ............ AD (and which subsequently were operated and/or used by the Company) were validly transferred to the Company. Such a notarial transaction would ensure that all discussed real estate assets are validly transferred to the Company and, upon registration of the notary deeds with ............ Real Estate Registry, the Company's title in relation thereto would be binding vis à vis third parties.

4.1.3.2 Construction and Zoning Status

We were not provided with sufficient documentation to enable us to assess the Company's compliance with applicable construction and zoning plan regulations except with respect to the building in ............. Based on the reviewed construction papers and drawings, we may conclude that that building was built and put into operation in compliance with the pertinent laws and regulations.

4.1.3.3 Restitution Claims

The documentation provided to us was insufficient to draw any conclusions on the existence or the absence of any restitution claims in respect of the Company's assets. In order to confirm that there is no risk for restitution in respect of the assets of the Company, official certificates should be obtained from the competent authorities, evidencing the lack of restitution claims in respect of the Company's assets. We have requested the Company to apply for issuance of such certificates by the competent authorities. However, as at the date of this Report, such certificates were not provided to us.

4.1.4 Liens, Mortgages and Other Third Party Rights

As the date of this Report we have received certificates of encumbrances only regarding the Company's real estates located in Sofia. We have also made an independent verification with the Sofia Real Estate Registry. We confirm that the Company's properties in Sofia are not encumbered with any liens, mortgages and other third party rights.

In respect of the properties located out of Sofia, we were only informed verbally by the Company's management that there were no encumbrances except a mortgage over The Company's assets in ............. The representative of the Company's management stated further that the Company was in a process of lifting and deregistration of said mortgage. We are not in position to make any firm conclusions regarding the existence or the absence of any liens, mortgages and other third party rights over the Company's real estate assets located outside Sofia.

4.1.5 Lease Agreements

We were presented with copies of sixty-one lease agreements executed by the Company or its predecessors in their capacity as a lessee and as sublessor. Such lease agreements could be divided into three main categories according to the leased assets: (i) lease of office premises; (ii) lease of ducts for placing the cables of the Company and (iii) lease of electricity poles for fitting of aerial cables of the Company.

4.1.5.1 Lease of Premises Used for Offices of the Company

We were provided with fifty-six lease agreement executed in respect of office premises. The Company executes two of the provided agreements in its capacity of sublessor.

Detailed information on specific terms and conditions of the presented lease agreements executed in respect of office premises, executed in respect of the assets used by the Company, is presented in Appendix 4.1.5.1 to this Report.

(a) Agreements Executed by the Company as a Lessee

The premises leased by the Company are located in nineteen Bulgarian cities. Most of the agreements are executed for comparatively short terms, i.e. one or two years. A large part of the contracts envisage the possibility the agreement be automatically prolonged with a term equal to the initial one, or, if after expiration of the term none of the parties has explicitly requested termination, the agreement be deemed prolonged for undefined term.

A large number of the agreements has expired. If the lessee continues to use the premises after the expiration of the term of the agreement without the lessor's opposition, the agreement shall be deemed turned into one with an indefinite term. Under Bulgarian law a lease agreement executed for indefinite term can be terminated by each of the parties serving one month prior notice to the other party.

An insignificant number of the agreements are certified by a notary public and only five of them are registered with the respective Real Estate Registry. If a lease agreement bears an authentic date (i.e. a date certified by a notary public) such agreement is compulsory for the new owner, but for no longer than one year as of the date of the transfer. If a lease agreement is registered with the Real Estate Registry, such agreement is obligatory for the new owner for the envisaged term.

(b) Agreements Executed by the Company as a Sublessor

We were provided with two agreements entered into by the Company in its capacity of a sublessor. The agreements concern parts of the office building with address [address]. As seen from the presented copies, the agreements are not registered with the Real Estate Registry.

4.1.5.2 Lease of Ducts

We have been provided with copies of two agreement to which the Company is a party and which provide for leasing of ducts for fitting the Company's cables. The lessor under both agreements is ......, acting through its head office (lease of ducts agreement dated DD/MM/YYYY, herein after the "Main Lease of Ducts Agreement") and through its branch in the town of …………, respectively.

It must be noted that the Main Lease of Ducts Agreement has been unilaterally terminated by ....... However, in MM/YYYY ...... and the Company agreed in writing that the Company should continue leasing ducts from ...... and the terms of the terminated Main Lease of Ducts Agreement should apply until CRC approves the general terms of ...... with respect to lease of ducts. We were not provided with information whether ...... had already prepared and submitted to the CRC the above referred general terms. Appendix 4.1.5.2 to this Report contains detailed information on the specific terms and conditions of the reviewed lease agreements for lease of ducts.

4.1.5.3 Lease of Electricity Poles

We were provided with three copies of lease agreements where the Company has leased electricity poles for fitting of cable equipment. The agreements have expired and we do not have information whether they are prolonged. Provided that the Company continues using the electricity poles after the expiration of the initial term of the agreement without the lessor's opposition, the term of the agreement shall be prolonged for an indefinite period.

Appendix 4.1.5.3 hereto contains a summary of all lease agreements for poles entered into by the Company.

4.1.6 Co-location Agreements

The Company and ...... have entered into a Contract for Provision of the Service "Shared Use of Premises and Facilities" dated DD/MM/YYYY. Said agreement has been entered in compliance with the Contract for Interconnection of Public Telecommunication Networks dated DD/MM/YYYY and envisages the shared use of certain premises and equipment by the Company and ...... thus enabling the interconnection between the telecommunication networks of the parties thereto.

For a detailed review of the agreement, please refer to Appendix No. 4.1.6.

4.2 Major Real Estate Assets and Other Property of the Subsidiaries

4.2.1 Development and Operation of the Telecommunication Network

The Company provided no relevant information in respect of the construction and operation of the cable TV and radio networks owned by its Subsidiaries or operated thereby. Therefore we are not in a position to opine on the validity of the construction and operation of the cable TV and radio networks owned by any of the Subsidiaries.

4.2.2 Compliance with Planning and Regulatory Requirements

The Company confirmed that no construction permits have been issued in respect of the cable TV and radio signals networks of its Subsidiaries. However, a representative of the Company's management stated that the subsidiaries had already filed applications for legalisation of all their networks in the due term, but the legalisation acts are not issued yet. Therefore, based on the information and documentation provided until the date of this Report, we may conclude that none of the cable TV and radio signals networks of the Subsidiaries are constructed and operated in compliance of pertinent Bulgarian construction laws and regulations. Our comments contained in Section 4.1.2.1 regarding the consequences of illegal constructions will apply also with respect to the networks of the Subsidiaries.

We were provided with documents evidencing that the cable TV and radio signals network located in the village of …………. (near the town of …… ) and operated by ............ has been declared by the competent authorities illegal and the Regional Directorate for National Construction Supervision has imposed the sanction "prohibition of access and operation of the cable network". The Company has appealed said order but no decision has rendered until the date hereof. For further details in respect of the litigation process please see Section 8.4.1 below.

The cable network operated by ............ has also been declared as illegal by the Regional Directorate for National Construction Supervision and the sanction "prohibition of access and operation of the cable network" has been imposed on the Subsidiary. Besides the fact that ............ appealed the imposed sanction, the court upheld that the network is illegal and it could not be legally operated. We have not been provided with information on what ground ............ operates such network as of today. For further details in respect of the litigation procedure please see Section 8.4.1 herein.

4.2.3 Title to Real Estate Assets

Although we have requested, we have not been provided for review with any title documents or relevant information in respect of the assets owned by the Subsidiaries. The Company presented title documents only in respect of the office premises located in the town of ............, which are deemed to be owned by ............ ............. For further comments in respect of the ............ ............'s property, please refer to Appendix 4.2.3 to this Report.

4.2.4 Liens, Mortgages and Other Third Party Rights

Since we have not been provided with the relevant certificates of encumbrances or any documents or information regarding the existence or the absence of any encumbrances on the real estate assets owned by the Subsidiaries, we are not able to confirm that said real estate assets are no encumbered with any liens, mortgages or other rights of third parties.

4.2.5 Lease Agreements

We were provided with copies of lease agreements executed only by ............ and ............. We were given no information on the existence of any effective lease agreements with respect to the other Subsidiaries.

4.2.5.1 Lease Agreements Executed by Cable Informational System

We were provided with copies of nine agreements executed by ............ as a lessee. One agreements concerns lease of ducts, another is executed in respect of lease of electricity poles, six agreements deal with lease of office and store premises and one agreements is executed in respect of telecommunication equipment. The review of the provided lease agreement does not reveal any ground for legal concerns. For summary of the provided lease agreement to which ............ is a party please refer to Appendix 4.2.5.1 to this Report.

4.2.5.2 Lease Agreements Executed by ............

We were provided with only one agreement entered into by ............ providing for a lease of office premise located in the town of ............. The review of the provided lease agreement does not reveal any ground for legal concerns. A summary of the provided lease agreement to which ............ is a party is enclosed as Appendix 4.2.5.2 hereto.

4.3 Major Real Estate Assets and Other Property of the Acquisition Targets

4.3.1 ............

4.3.1.1 Development and Operation of the Telecommunication Network

According to Certificate No ……………. / DD/MM/YYYY for Registration under General Licence …., ............ is entitled to carry out telecommunications activities through a public cable TV and radio signals network within the territory of the ............ District - town of ............, town of ............ and ............ District - town of ............. Pursuant to the public register of persons registered under General Licence … kept with the CRC, the last date of registration is DD/MM/YYYY and the registration covers also the territory of the town of ............, town of ............, town of ............, town of ............, village of ............, village of ............, village of ............, village of ............, village of ............, and village of ............ - ............ District.

The construction papers provided to us refer only to the cable TV and radio signals network located in ............. We have not been given any description or relevant information in respect of the cable networks located in the other towns and villages in which ............ is entitled to carry out telecommunication activities.

The construction papers related to ............'s network evidenced that the Company has also constructed a section of fibre optic path from ............ to ……………. , which section is located in …………. village but the latter is not included in the territorial coverage of the registration of ............ under General Licence …. On the other hand the Company provided us with construction permit for development of cable TV and radio signal network located in the village of ………… issued in the name of ............ ……………… (one of ............'s subsidiaries). Since the description of the permitted construction is insufficient, we are not able to confirm whether the construction permits refer to identical constructions of cable networks.

As evidenced from the construction papers issued in respect of the cable network in ............, ............ laid down the cables of its network into ducts owned by ....... Said ducts were used on the basis of Agreement for Use of Ducts of the Town Telephone Ducts System No. …………../ DD/MM/YYYY executed by and between ...... and ............. We requested ............ to provide us with a copy of the referred lease of ducts agreement but until the date hereof the Company failed to respond to our request.

4.3.1.2 Compliance with Planning and Regulatory Requirements

Pursuant to the reviewed construction papers ............ has duly constructed and put into operation a cable network for distribution of TV and radio signals located in the town of ............, Western Region, Trakya Region, Southern Region, Northern Region, Eastern Region and Central Region.

We have been also provided with construction permit regarding the construction of a section of a fibre optic path from ............ to …………., which section is located in …………. village. We were not given a copy of the operational permit for that particular part of the ............'s network, therefore we may not confirm that it was legally constructed and put into operation.

We have not been provided with any construction papers regarding the other cable networks for distribution of TV and radio signals located outside of ............. In respect of the legal consequences of operation of cable networks developed without construction papers please see Section 4.1.2.1 hereinabove.

4.3.1.3 Title to Real Estate Assets

We were provided with no documents and information in respect of the real estate assets owned by .............

4.3.1.4 Liens, Mortgages and Other Third Party Rights

No documents and information regarding the lack or the existence of any encumbrances to real estate assets owned by ............ were provided to us.

4.3.1.5 Lease Agreements

We have been provided with copies of fifteen lease agreements executed by ............ in its capacity of lessee. A part of the leased premises are used by ............ for installing equipment and some of them are used for offices. Most of the agreements were executed for a definite term, where a comparatively large part of them have already expired. We have not been provided with any information which of them were assumed as silently prolonged and which of them were terminated. None of the provided copies of the lease agreement contains information for its registration with the respective real estate registry.

For any further details in respect of the provided lease agreements please see Appendix 4.3.1.5.

4.3.2 ............

4.3.2.1 Development and Operation of the Telecommunication Network

According to Certificate No ………… / DD/MM/YYYY for Registration under General Licence …, ............ is entitled to carry out telecommunications activities a public cable TV and radio signals network within the territory of the town of .............

Pursuant to the provided corporate documents in YYYY ............ has acquired title to a cable network for transmitting TV and radio signals located in ............ and comprising a main station, 52 television modulators, 30 digital satellite receivers, 2 decoders, one subtitles decoder, one coder, 2 fibre communications hubs, 78 amplifiers, underground trunks with length of 10 kilometres, consisting of coaxial cables, PVC ducts, transformers and metal ducts. The Company has acquired title to the asset in question by virtue of in-kind contribution made by the shareholder ............. Since we have not been provided with the requisite documents submitted to the court upon the registration of the in-kind contribution we are not able to confirm that the procedure for in-kind contribution was duly followed and the Company has duly acquired title to the cable network.

As evidenced from the provided construction papers, part of the Company's cables are laid dawn into the ducts owned by ....... We have not been provided with any documents evidencing the legal ground for the use of such ducts. No information was given to us where the other part of the Company's cables were installed.

4.3.2.2 Compliance with Planning and Regulatory Requirements; Development Agreements

We were provided with construction papers[19] issued in respect of part of the cable network located in ............. Such papers refer only to a part of the cable TV and radio signals network operated by ............. We were also provided with certificates issued by the ............ Cadastre Agency evidencing that the cable network in …., ….., …… and ……… Residential Quarters were duly plotted on the cadastre map of ............ which is a condition precedent for putting into operation of the construction. However, we have not been provided with the operational permits issued in respect of the permitted construction, which are the final acts evidencing the legality of construction of the cable network and putting it into operation thereafter. In respect of the legal consequences of operation of cable networks developed without construction papers please see Section 4.1.2.1 hereinabove.

4.3.2.3 Title to Real Estate Assets

Pursuant to the statement of the Company's management, the only real estate asset owned by ............ is an office located in ............. We were provided with and we reviewed a duly executed notary deed evidencing that on DD/MM/YYYY ............ had transferred to ............ OOD the title to an office. On the basis of that notary deed, we may assume that at the time of preparing this Report, ............ does not own any real estate assets.

4.3.2.4 Lease Agreements

We were provided with copies of five lease agreements to which ............ is a party, where three of those agreements concern office premises and the remaining two agreements relate to movables. Under two of the agreements the Company leases office premises in ............, at ............ and at the ……………… - ............ OOD (the latter company is a shareholder of the Company).

We have not identified any concerns with respect to the lease agreements entered into .............

For further details regarding the lease agreement to which ............ is a party, please refer to Appendix 4.3.2.4.

4.3.3 ............

4.3.3.1 Development and Operation of the Telecommunication Network

Pursuant to the provided corporate documents ............ has acquired upon its incorporation title to a cable network for delivery of TV and radio signals located in ............. The Company has acquired the asset in question by virtue of an in-kind contribution duly made by the sole shareholder ……………. The description of the network set forth in the Company's Articles of Associated as required by law, fails to provide sufficient detail about the major parameters and elements of that network.

4.3.3.2 Compliance with Planning and Regulatory Requirements;

The Municipality of ............ has issued the following construction permits for development of the cable TV and radio signal network operated by …………………: Construction Permit No … dated DD/MM/YYYY, Construction Permit No. … dated DD/MM/YYYY, Construction Permit No. … dated DD/MM/YYYY and Construction Permit No. … dated DD/MM/YYYY. Those permits refer to laying down underground trunk cables in ......'s ducts located in certain areas of ............. Since the description of the areas is quite vague, we are not able to confirm that the construction permits refer to the whole cable network operated by ............ or only to a part of it. We were also not provided with the operational permits issued in respect of the permitted construction, which are the final acts evidencing the legality of construction of the cable network and putting it into operation thereafter.

4.3.3.3 Title to Real Estate Assets

Pursuant to the provided corporate documents in YYYY the sole shareholder ……………. has contributed the following 2 real estates as an in-kind contribution against acquiring shares in the capital of the Company: (i) Apartment № 2, located in ............, with …… sq.m. built-up area, and (ii) Apartment № 12, located in ……………, with ……… sq. m. built-up area. Following the review of the provided real estate documents we may conclude that the in-kind contribution was duly made, by the actual owner of the properties and therefore ………… has duly acquired title to the real estate assets in question. The in-kind contribution has been registered with …………. Real Estate Registry on DD/MM/YYYY.

4.3.3.4 Liens, Mortgages and Other Third Party Rights

Pursuant to the provided Certificate of Encumbrances No. ………. dated DD/MM/YYYY as of DD/MM/YYYY the properties of …………. have not been encumbered with any mortgages, attachments, liens and third parties' rights.

4.3.3.5 Lease Agreements

According to the declaration signed by the Executive Director of the Company, the latter has entered only one agreement so far, and namely – agreement for free of charge use of the assets contributed to ............ upon its incorporation and representing the cable network, the two apartments, six vehicles and certain movables. The other party under the agreement is ………….. Please note that pursuant to the wording of the agreement …………. is acting as a grantor of the use and ............ is acting as an user. As we were informed by the Company's legal advisers there was a mistake in wording and the parties shall executed a correction specifying that in fact ……………. shall be considered as user and ............ shall be considered as grantor. Provided that the correction is done then under the terms and conditions of the use agreement ……………… shall be entitled to use the assets in question for free and such assets shall be returned to …………. at first request.

As we were informed by the Company's legal advisers the purpose of this agreement is to allow …………… to continue the provision of telecommunication services to the subscribers until ………… obtains registration under General License № …. According the preliminary contract for the purchase of the shares of the Company, after the Company purchases the shares of ………….., ………… will continue to use the cable network under a lease contract with the Company. After …………. obtains a registration under General License № …, …………… will terminate its registration under that license.

As per information provided by the Company, in addition to the owned premises ............ uses two other office premises for installation of telecommunication equipment, which premises are used also by the sole shareholder …………………. The first office is located in ............, and is designated for a main station, office and technical department. The first office is owned by ……………… and there is no lease agreement executed between the companies. The second office is located on the same address and ………………. owns such premise. The premise is used by ............ on the grounds of a lease agreement dated DD/MM/YYYY, which agreement shall expire till the end of YYYY. The provisions of the agreement do not demonstrate any points of concern.

4.3.4 ............

4.3.4.1 Development and Operation of the Telecommunication Network

Pursuant to Certificate No ……….. / DD/MM/YYYY for Registration under General Licence …, ............ is entitled to carry out telecommunications activities through a public cable TV and radio signals network within the territory of ............ District - town of …. and village of ……. We requested information about the percentage of underground and aerial cables in each town and village, where the cable networks exist, but as of the date of this Report we have not received a response to our request.

The underground cables are laid down into the ducts owned by ...... on the ground of Agreement for Provision of the Service "Use of Ducts from the Town Telephone Ducts Network" (for further details please refer to Section 4.3.4.5 (a) hereinafter).

4.3.4.2 Compliance with Planning and Regulatory Requirements;

We were provided with construction papers[20] regarding the construction of underground trunk cables from …… to ….. and from ….. to ……... Pursuant to the provided documents ............ has duly constructed and put into operation thereafter the trunk cables in question. We have not been provided with any documents evidencing the legality of the construction of the other cables located within the territory of each of the three towns and villages - ………, ………. and ……….. In respect of the legal consequences of operation of cable networks developed without construction papers please see Section 4.1.2.1 hereinabove.

4.3.4.3 Title to Real Estate Assets

We have not been provided with any information related to real estate assets owned by .............

4.3.4.4 Liens, Mortgages and Other Third Party Rights

We have not been provided with any information related to the existence or the absence of any encumbrances in respect of the assets owned by .............

4.3.4.5 Lease/ Agreements

We were provided with three lease agreements executed by ............ in its capacity of lessee. One of the agreements refers to lease of ducts and two of them concerns lease of premises.

For detailed summary of the provided lease agreements please refer to Appendix 4.3.4.5 hereto.

(a) Lease of ducts

............ is a party to Agreement for Provision of the Service "Use of Ducts from the Town Telephone Ducts Network" executed between the Company and ......, where ...... shall provide ............ with the use of ducts on the whole territory of Bulgaria. The review of the provided agreements does not demonstrate any points of concern.

(b) Lease of premises

We were provided with a lease agreement in respect of premises in ……….., executed by ............ in its capacity of lessee and ………… Municipality in its capacity of lessor. We were also provided with an annex for prolongation of another lease agreement, but the agreement itself was not provided to us. No documents were given to us that would enable us to confirm that the described two lease agreements were awarded by the ………… Municipality to ............ a result of a duly held procurement procedure.

4.3.4.6 Co-location Agreements

The Company presented an agreement executed by ............ and ...... where the parties agreed on co-location of equipment in Radio Relay Station located in the village of …………. Pursuant to the provisions therein the agreement shall be in force till the enactment of the provision of service "Co-location of equipment" by ...... and execution of explicit agreement on that terms between the parties. We have not been provided with any information whether the parties have executed such agreement.

For detailed summary of the reviewed co-location agreement please refer to Appendix 4.3.4.6 of this Report.

5. INTELLECTUAL PROPERTY

5.1 Intellectual Property Rights of The Company

5.1.1 Broadcasting Agreements

For the purposes of this Section 5.1.1 "broadcasting agreement" means an agreement concluded by the Company with a broadcasting organisation or its agent, whereunder the Company has been granted the right to retransmit via cable network the channels subject of such agreements.

The Company has provided to us for review (i) copies of the broadcasting agreements executed by the Company; (ii) two different lists of all channels broadcasted by the Company; and (iii) certificates issued by the broadcasting organisations or the agents in evidence of the right of the Company to broadcast certain channels prior to execution of agreement thereto.

Based on our review of the source documentation and the verbal information given to us by the Company, we have identified the broadcasting agreements, which meet the Company Materiality Criteria and we have outlined the issues, which in our opinion could give raise to certain disputes in respect to the broadcasting activity of the Company.

5.1.1.1 Summarized Information Regarding the Channels Broadcasted by the Company

We established that the two lists that enumerate the channels broadcasted via the Company's cable network specify different number and titles of such channels. Given the discrepancy between the two lists we are not in a position to identify the channels currently broadcasted by the Company. In response to our request for provision of updated list of all channels broadcasted by the Company as of the date of the Report, the Company furnished us with an excerpt of account No … of DD/MM/YYYY. This document contains a list of the respective broadcasting organizations or their agents, but not the particular channels.

We have not made an independent verification whether the channels enumerated in these lists are actually the ones broadcasted by the Company. There might be other channels broadcasted without due authorisation, which may trigger the Company's liability.

The source documentation contained also copies of documents like certificates and confirmations, issued by the broadcasting organisations as evidence that the Company is in process of negotiations for the execution of broadcasting agreements with the respective entity.

A table containing the channels, specified in the lists, as well as summarised information regarding the respective agreements concluded by the Company for the broadcasting of these channels has been provided as Appendix 5.1.1.1(a). Said table indicates, namely: (i) the execution date; (ii) the validity term; (iii) the monthly license fee; (iv) termination provisions and (v) warranties provisions of each of the agreements provided for review.

As Appendix 5.1.1.1(b) we have provided a list of certain channels for the broadcasting of which the Company has not entered into written agreements.

According to the Company in the cases where no written agreement is available or it has expired, negotiations are pending and, in the meanwhile, invoices are issued by the broadcasting organisation or agent, certifying that the parties have contractual relations. Such explanation poses the issue regarding the form of validity of the broadcasting agreement under the Bulgarian law.

Under the Law on Copyright and Neighbouring Rights the granting of exclusive rights for the use of a work shall be explicit and in writing. As long as the broadcasting agreements are exclusive for the territory covered by the cable operator they must be concluded in writing. The absence of a written form means that such agreements cannot grant exclusive rights for cable retransmissions of works protected by copyright.

5.1.1.2 Broadcasting Agreements with Validity Term Exceeding One Year

Our review of the source documentation ascertained that the written broadcasting agreements concluded by the Company have a term of validity of one year, save to three agreements concluded with (i) …………..; (ii) ……………….; and (iii) …………………….., United Kingdom[21].

5.1.1.3 Broadcasting Agreements Meeting the Company Materiality Threshold

We identified 15 agreements that meet the Company Materiality Threshold. Below we have indicated the two agreements stipulating for the highest amounts due by The Company for the broadcasting right.

Under the agreements concluded with ………………., the Company has obtained the exclusive right for cable broadcasting of the reality shows ……………… and ………………… against payment of consideration respectively of BGN ……….. and BGN …………., VAT excluded. As of the date of the Report both agreements have been expired. However, parties have agreed that the obligations concerning the payments of the fee and the advertising provisions thereof shall remain into force until DD/MM/YYYY and DD/MM/YYYY respectively.

Under the agreement concluded with ………………… (………), the latter has granted to the Company the exclusive right to distribute ……….. program on the territory of Bulgaria via its own cable telecommunication network or via the cable telecommunication network of third parties against payment of consideration amounting to BGN …………. per month.

The amounts of the other agreements identified as material vary between EUR 3,000 and EUR 10,000 per month. However, the estimation is rough, since some of the amounts have to be calculated on the basis of a formula involving the number of subscribers, which cannot fall under a certain minimum guaranteed number. Therefore there might be other agreements to meet the Company Materiality Threshold, as well as the amounts exceeding the above estimation.

It should be noted that some of the agreements contain provisions authorising the other party to conduct audits in order to verify the data regarding the particular number of subscribers and the correct calculation of their receivables. This obligation requires punctuality and timely notification to the other party. On the basis of information provided in the Data Room it becomes clear that until recently the practice of cable operators in Bulgaria has predominantly included a statement of a number of subscribers not corresponding to the real number at the time of conclusion of the agreement. However, the Company has expressed its will to adhere to the principle of transparency to the maximum possible extent.

5.1.1.4 Agreements with Collecting Societies

The Data Room contained a copy of one agreement concluded with collecting society, namely an agreement with Misicauthor, dated DD/MM/YYYY. Pursuant to said agreement Musicauthor on behalf of its members and on behalf of the members of similar foreign collecting societies has granted to The Company the non-exclusive right to use for the needs of its programming all protected works belonging to its repertoire. The right granted includes wireless broadcasting and broadcasting via satellite and/or cable. The agreement with Musicauthor was executed due to the launch of the information channel of the Company using musical works as explained by The Company.

In consideration of the granted right the Company shall owe an annual fee amounting to 1 % of the total revenues generated by the activity related to the creation and distribution of the TV channel. Under the agreement the minimum guaranteed amount per month is set to BGN 700, VAT excluded. The financial terms of the agreement remain valid until DD/MM/YYYY and the parties agreed to renegotiate them until DD/MM/YYYY.

The year YYYY is considered as the first year of the agreement, which is subject to automatic renewal for additional periods of one calendar year.

Currently there is a dispute between another collecting society, namely Filmauthor and a part of the Bulgarian cable operators. The latter claim that they are not obliged to pay for cable retransmission of works protected by copyright provided that the retransmission is simultaneous with the broadcasting conducted by the respective broadcasting organisation. It is our opinion that the cable operators are obliged to pay fees pursuant to the provisions of the Law on Copyright and Neighbouring Rights. The lack of any court practice on this issue prevents us from knowing precisely the eventual interpretation by the court. In any event, the Company has not concluded an agreement with Filmauthor, which threaten to engage its liability in case of litigation.

5.1.1.5 Change of Control Provisions

Neither of the broadcasting agreements provided for review by the Company contains any provision requiring the consent or notification to the other party in cases of change of control over the Company.

5.1.2 Copyright & Neighbouring Rights

5.1.2.1 Software Licensed for Use to the Company

(i) ......... Products

The Data room contained copies of 3 standard ......... Open Licenses, whereunder the Company has been granted the right to use software products. These licenses represent standard form documents issued in the name of The Company that do not bear the seals and the signatures of the parties thereto.

Below please find information regarding the subject matter of the licenses:

(a) ……………….. .

(b) ………………….

Given the ......... standard licensing policies, it could be reasonably assumed that the licenses for use of the software identified above have been concluded as of the moment of installation of the software on the computers of the Company by acceptance of the terms and conditions of the licences electronically. Therefore, the lack of certain requisites in the licences and namely signatures of the parties thereto may not raise serious concerns.

Based on the reviewed documentation we are not in a position to advise if the licenses discussed above could terminate upon change of control over the licensee. In this respect the standard terms and conditions applicable to different types of ......... software products should be consulted.

We are not aware what is the actual number of computers owned by the Company and operating ......... software products. This information could be crucial in order to estimate whether all computers are duly licensed to operate the software products in question. It should be noted that any unauthorized use of software by the Company, could require additional expenses in the form of license fees for the unlicensed workstations.

(ii) Symantec Antivirus Software

The Data Room contained copy of one certificate issued on DD/MM/YYYY in the name of the Company regarding the licensing of (a) 31 copies Symantec Antivirus The certificate specifies DD/MM/YYYY as the support end date.

(iii) IP Commander Software

On DD/MM/YYYY the Company has entered into Software License Agreement with ........., ......... (as licensor). By virtue of the agreement the licensor grants to The Company a perpetual, non-exclusive, non-transferable license over IP Commander software products, namely Dynamic Host Control Protocol (DHCP), True File Transfer Protocol (TFTP) and Domain Name Server (DNS) service software, as well as the management console software. IP Subscribers licenses are based on the number of Internet subscribers using a single cable modem with dynamic IP address to access the network.

By signing of the agreement the licensor agrees that the Company shall be entitled to sub-license its rights thereunder to the companies owned or controlled by it.

The agreement stipulates that any and all rights, title and interest in the software are and shall remain with the licensor ........., ..........

The Company has agreed that IP Commander software will be its sole DHCP service providing software for minimum of 3 (three) years commencing DD/MM/YYYY until DD/MM/YYYY, where such limitation is not applicable for the billing system and other elements of the Operational Support System (OSS) and Business Support System (BSS) of the Company.

Upon signing of the agreement the Company was obliged to pay the license fee for 4,000 managed subscribers' licenses. In addition the Company has undertaken to order for 10,000 additional subscribers licenses cumulatively over the term of the agreement. Failure of the Company to fulfil this obligation will result on payment of the difference between the price paid for the total number of subscribers licenses already ordered and the list price for the same number of subscribers as set out in Appendix A to the agreement.

According to Appendix A for 3-year term, commencing on DD/MM/YYYY the Company shall due a licence fee for IP Commander Base software a license amounting to USD 3,500. In addition the Company shall pay USD 1.25 per each IP Commander subscriber license. The amount of the annual technical support fee is determined as 18 % of the total amount paid for the software licence and all subscribers licences. Appendix A to the agreements sets forth that all prices are fixed for the first three years of the agreement and subject to re-negotiation by the parties.

Pursuant to the provisions of said agreement its initial term is 3 (three) years commencing DD/MM/YYYY and thereafter on a perpetual basis until terminated. The Company is entitled to terminate the agreement after DD/MM/YYYY by destroying the software along with all copies in any form and notifying therefor the licensor. Provided that the Company terminates the agreement prior to such date and the termination is not due to the licensor's fault, the Company shall pay in full 50 % of the full list price for subscribers already purchased, as well as 50 % of the full support price for each remaining year of support as set forth in Appendix A to the agreement.

The agreement is governed by the laws of the ………………….., It does not contain any provisions related to notification or requiring the consent of the licensor in case of change of control over the Company.

5.1.2.2 Software Products Developed by Employees of the Company

According to the verbal information of the Company's legal counsel the Company is not using any software products developed by its employees in the course of the employment relationship. .

5.1.3 Patents and Industrial Design

No information or documentation was included in the Data Room regarding patents or patent applications in the name of the Company. In an interview, the Company informed us that the Company does not have any rights in patents for inventions or utility models or industrial design, and that it has not applied for patent protection of any invention or utility model or for the registration of an industrial design.

5.1.4 Trade Marks

The information contained in this Section of the Report derives from the certificates of initial registration of the trademarks and other documents in respect to trademark applications, made available to us in the Data Room. Based on our review of said documents we have provided detailed information regarding the trademarks owned by or filed for registration by the Company in Appendix 5.1.4.

All of the trademarks provided for review have been registered or filed for registration only in Bulgaria through the national registration procedure.

With regard to the two combined trademarks "......", Reg. No ……… and "......", Reg. No ……, we established that they have been registered in the name of the Company Bulgaria AD, where the current name of the Company is the Company. As registered address of the proprietor is specified [address], while currently the registered address of the holder is [address]. Under the Law on Marks and Geographical Indications ("LMGI") any proprietor of a trademark shall notify the Bulgarian Patent Office ("BPO") regarding any change of its name and/or registered address to be entered into the State Trademark Registry. The Company has not applied for the registration of its new company name and registered address with the registry kept at the BPO. Under Bulgarian law any and all correspondence regarding a trademark, including notifications for filed cancellation and revocation claims, is to be sent to the address of the registered holder as last entered into the State Trademark Registry. Therefore the inability of the Company to receive correspondence on its current address may affect its right to defend in potential cancellation or revocation actions.

The registration procedure in respect to the five trademarks filed for registration by the Company, as indicated in Appendix 5.1.4, is at the stage of examination by the Bulgarian Patent Office. We may not comment on the probability of successful registration of the pending trademark applications.

5.1.5 Intellectual Property Rights Created by Employees

Pursuant to the verbal information the Company, the Company does not own any intellectual property rights created by its employees in the course of their employment relationships.

5.1.6 Disputes

Currently five administrative proceedings, in which the Company is a party and arising out of the broadcasting activity of the latter, are pending. Four of them concern penalty orders issued by CRC for broadcasting of channels unregistered with the Media Regulatory Body in accordance with the LRT and one is related to a penalty order issued by the Ministry of Culture and Tourism for alleged copyright infringement committed through unauthorised broadcasting. All administrative proceedings are addressed in Section 8.4.1.

5.2 Major Intellectual Property Rights of the Subsidiaries

The Data Room documentation did not contain any information or documentation in respect to any intellectual property rights in the name of the Subsidiaries.

5.3 Major Intellectual Property Rights of the Acquisition Targets

5.3.1 ............

5.3.1.1 Broadcasting Agreements

No broadcasting agreements have been provided for review in the Data Room. Therefore we are not in a position to address this issue.

5.3.1.2 Copyright & Neighbouring Rights

We have not been provided with any information or reliable documentation like contracts, certificate of license grant, etc. regarding any software licensed for use to ............. Therefore we are unable to consider whether it has been duly granted the right to use the software products currently using.

5.3.1.3 Trade Marks

(i) Trade Marks Registered in the Name of the Company

Our review of the provided source documentation, as well as our independent verification with the BPO established that ............ together with ............ , are the registered co-proprietors of two combined trademarks, namely "............", Reg. No ……. and "............", Reg. No ………...

The combined trademark "............", Reg. No …….. has been filed for registration on DD/MM/YYYY and enjoys protection for certain services of international classes 35, 37 and 38. The combined trademark "............", Reg. No ………. has been filed for registration on DD/MM/YYYY and has been granted protection for certain goods of international classes 06, 09 and 16.

As the registration of "............" trademark, Reg. No …….. will expire on DD/MM/YYYY, a renewal request should be filed with the BPO not later than six months following the expiry of the term of protection. Our independent verification conducted with the State Trademark Registry of the BPO established that no renewal request in respect of "............" trademark, Reg. No ……. has been filed as of DD/MM/YYYY.

We have found out that ............ has not fulfilled its obligation to notify the BPO for the changes of its registered address, namely from [address], ............ and respectively to [address]. Please refer to our comments regarding the importance of such notifications, provided in Section 5.1.4 of this Report.

(ii) Trademark Conflict in Respect to Trademarks Owned by the Company

Our review of the available documents ascertained that between ............ and ............ a conflict in respect of the two trademarks specified above has arisen. Initially the trademark applications have been filed with the BPO only in the name of ............. Subsequently, by virtue of an agreement concluded by both legal entities ............ has been also indicated as applicant under the applications for registration of these two trademarks. ............ failed to fulfil its obligations under said agreement and on DD/MM/YYYY a notary invitation has been delivered to ............ for rescinding of the agreement on the part of .............

Although ............ has rescinded the agreement and therefore the ground for registration of ............ as co-proprietor of these trademarks has been invalidated, both entities are still registered as co-owners of these trademarks as of the date of the Report. For the purposes of the invalidation of the registration of ............ as proprietor of the trademarks, indisputable evidences thereto should be submitted with the BPO. It is our concern that ............ is not in a position to provide such evidences in order the BPO to take a de............ion for the invalidation of the registration of the other proprietor.

To the best of our judgment, the trademarks subject to the discussed conflict are the major brand under which ............ conducts its broadcasting activities and therefore possible options for its resolving in short terms should be sought.

For the purposes of giving more detailed opinion on said trademark conflict, further information and documentation should be furnished.

5.3.2 ............

5.3.2.1 Broadcasting Agreements

No broadcasting agreements have been provided for review at the Data Room.

5.3.2.2 Copyright & Neighbouring Rights

We have not been provided with any information or reliable documentation like contracts, certificate of licence grant, etc. regarding any software licensed for use to ............. Therefore we are unable to consider whether it has been duly granted the right to use any software products.

5.3.2.3 Trade Marks

Our independent verification conducted with the BPO find no registered or applied for registration trademarks in the name of .............

5.3.3 ............

5.3.3.1 Broadcasting Agreements

We have been informed by the Company that ............ is not a party to broadcasting agreements.

5.3.3.2 Copyright & Neighbouring Rights

5.3.3.3 Trade Marks

On the basis of our independent verification conducted in the BPO we did not find out any registered or applied for registration trademarks in the name of .............

5.3.4 ............

5.3.4.1 Broadcasting Agreements

5.3.4.1.1. Summarized Information Regarding the Channels Broadcasted by ............

For the purposes of this Section of the Report we reviewed 24 broadcasting agreements provided by the Company. We are not in a position to comment whether these agreements cover all the channels, which are actually broadcasted by .............

For summarized information regarding said agreements concluded by ............ please refer to Appendix 5.3.4.1.1.

The amounts of the license fees due under the broadcasting agreements are insignificant, because of the small range of around 1 000 subscribers.

5.3.4.1.2. Broadcasting Agreements with Validity Term Exceeding One Year

Our review of the source documentation established that all broadcasting agreements will expire at the end of YYYY or in the beginning of YYYY, except four agreements. These are the agreements for the broadcasting of the channels (i) …; (ii) ….; (iii) ….; and (iv) …. that are valid respectively until DD/MM/YYYY, DD/MM/YYYY, DD/MM/YYYY, and DD/MM/YYYY. The agreements in respect to the channels …, ……, ….., ……., ……, and …….. have clauses for automatic renewal, but the remaining agreements have to be renewed in writing.

5.3.4.1.3. Agreements with Collecting Societies

No agreements concluded by ............ with collecting societies have been provided to us for review.

5.3.4.1.4. Change of Control Provisions

Neither of the broadcasting agreements provided for review contains any provision related to the change of control over .............

5.3.4.1.5. Warranty Provisions

Generally, all agreements contain warranty clauses that the licensor is a holder of the copyright and the intellectual property rights with some exceptions. Pursuant to the agreement with ……………….. for the broadcasting of the channel ………, ……………………. does not take responsibility for the compliance of the program with the legislative and sub-legislative acts applicable on the relevant territory.

……………. has undertaken to obtain at its all expense all necessary rights with respect to rights societies or holders of intellectual property rights, which may be required for the transmission.

The agreement with …………. for the broadcasting of the channels …………, …………., and ………… music does not contain any warranty clauses regarding copy or other intellectual property rights.

5.3.4.2 Copyright & Neighbouring Rights

5.3.4.3 Trade Marks

On the basis of our independent verification with the BPO we did not find out any registered or applied for registration trademarks in the name of .............

Conclusions

The Contemplated Transaction will not affect the current status of the industrial property and copyright held by or licensed to the Company and will not trigger any requirements for reporting to registries or competent authorities.

6. EMPLOYMENT AND SOCIAL SECURITY ISSUES

6.1 Employment Issues related to The Company

Based on the information provided in the Data Room, the number of Company employees as of MM/YYYY was ….. Although requested we have not been provided with an updated information on the current number of the Company employees.

6.1.1 Collective Labour Agreement ("CLA")

The Data Room contained no information on the possible existence of CLAs in the Company and the lawyers from [law firm] verbally confirmed that the Company is not a party to any collective labour agreement^{^[22]}. The documentation provided to us for review did not contain any reference as to the unionisation of the Company's employees.

6.1.2 Individual Labour Agreements

6.1.2.1 General Notes

(a) Execution of Individual Labour Agreements

Under Bulgarian law a labour agreements shall be executed in writing and should contain a certain minimum of mandatory requisites^{^[23]}.

The standard form labour agreement provided to us for review complies with the minimum contents required by the Labour Code.

(b) Reporting Obligation

As of MM/YYYY, employers in Bulgaria are obliged to inform the Bulgarian National Social Security Institute about the execution, amendment and termination of labour agreements. In addition, any existing labour agreements were required to be reported to the Institute by DD/MM/YYYY.

The Data Room did not contain evidence on the Company duly performing its statutory obligation for notification of the National Social Security Institute on all executed, amended or terminated labour agreements.

Generally, any employer who fails to comply with the above mandatory requirements shall be subject to a pecuniary sanction amounting to BGN 1,000 for each particular event of default.

(c) Data Protection

Pursuant to the LPDP any person, including employers, who wishes to process (i.e. collect, record, systemise or store) personal data and create a registry therefrom, shall notify the Bulgarian Commission for Personal Data Protection in advance by filing an application and sample documents approved by the Commission.

Although requested by us, the Data Room did not contain a copy from the application for registration with the Commission on Personal Data Protection. Therefore, we are not in a position to verify the Company's due performance of its obligation for registration in compliance with the statutory data protection rules.

6.1.2.2 Current Individual Labour Relations of the Company

(A) Relations with Ordinary Staff

The Data Room contained a standard form labour agreement reportedly used for all Company employees except for those occupying managing positions.

(a) Major Characteristics

The employees are initially contracted for a probation period of 6 (six) months. Since the reviewed standard form labour agreement does not specify in whose favour the probation period is stipulated, it shall be considered agreed to the benefit of both parties. During the term of probation, each of the parties is entitled to terminate the employment without prior notice and without stating a motive for termination. Following the expiration of the said 6 (six)- months term, the agreement converts into one of unlimited duration. Thereafter, each party could terminate the labour agreement upon serving a 30 (thirty) days prior written notice to the other on the grounds explicitly provided by the Labour Code^{^[24]}.

The standard form labour agreement provides for a normal duration of the working time, i.e. a 5 (five) days workweek and 8 (eight) hours workday. The Company employees are entitled to an annual paid leave of 20 (twenty) business days, which equals the statutory provided minimum amount.

The agreement obligates the employee to refrain from rendering services to, as well as to work or participate in, companies performing activities, which compete those of the Company.

(b) Specific Comments and Concerns

The standard form labour agreement does not contain any extraordinary clauses.

(B) Relations with Employees at Management Level

(i) Standard Form Labour Agreement with Managing Employees

In the course of our due diligence exercise we have reviewed a standard form labour agreement under which the Company reportedly employs its managing officers.

(a) Major Characteristics

The managing employees are initially contracted for a probation period of 3 (three) months stipulated in favour of the employer[25]. Following the expiration of the said 3 (three)-months term, the agreement converts into one of unlimited duration.

The agreement prohibits the employee to disclose confidential information regarding the Company as well as to perform activities competing those of the Company for the term of effectiveness of the labour agreement and for 3 (three) years after its termination. Further, the employee is prohibited to accept employment or to "have own company"[26] within the duration of the labour agreement.

(b) Specific Comments and Concerns

Our review of the latter standard form labour agreement indicates that it does not comply with the minimum mandatory contents imposed by statute, namely it fails to (i) provide for the duration and distribution of the working time, and (ii) specify the duration of the basic and additional annual paid leave to which the employee is entitled.

Failure of the parties to a labour agreement to provide for said mandatory elements would not per se cause invalidity of the labour agreement in question. However, if the Labour Inspectorate, which is an administrative body with the Bulgarian Ministry of Labour and Social Policy competent to exercise control for compliance with the labour legislation, ascertains any non-compliance with the statutory requirements in the course of its regular or extraordinary inspections, it may oblige the employer to remedy the inconsistencies. It may further impose to the employer an administrative sanction, which is in the form of a monetary fine varying from BGN 250 to BGN 1,000, and in case of repetitive violation - from BGN 500 to BGN 2,000.

On a separate note, whenever a labour agreement lacks any of the mandatory requisites, the statutory minimum would apply. Thus, the lack of a stipulation on the duration and distribution of the working time would normally lead to application of the statutory provided normal duration of working time to the employees contracted under this standard form labour agreement, namely 8 (eight) hours a day, 40 (forty) hours a week. Likewise, by reason that the standard form labour agreement for managing positions fails to stipulate for the duration of the basic and additional annual paid leave, such employee would be entitled to the statutory provided minimal duration of the annual paid leave of 20 (twenty) business days[27].

Another issue identified with respect to the standard individual labour agreement for managing positions is the different duration of the termination notice period for both parties, i.e. 3 (three) months in the event of unilateral termination by the employee and 30 (thirty) days in the event of unilateral termination by the employer. Since 1 August 2004 the Labour Code requires the notification period to be identical for both parties. Such contravention to the mandatory rules of the law may lead to imposition of pecuniary sanctions at the amounts specified above.

(ii) Current Relations with Managing Employees

The Data Room contains signed copies of the labour agreements with the Operations Manager, Mr. …………; the Administrative Director, Ms. ……………; the Chief Officer Subsidiaries and Control, Mr. ………………… (Mr. ………… was subsequently moved to the position of a Financial Director); the Financial Director, Mr. ………….. (subsequently moved to the position of a Controller); and the Chief Technical Officer, Mr. ……………. Only Mr. ………….. and Mr. ……………….. have been initially employed under probation terms, while the other labour agreements do not stipulate for a probation period.

In general, all of the reviewed labour agreements follow the pattern of the standard form agreement discussed in Section 6.1.2.2 B (i) above. Only the labour agreement for the position of the Chief Technical Officer with Mr. ……………… fully complies with the statutory requirements and does not suffer from the inconsistencies of the standard form labour agreement for management positions discussed above.

The agreements with Mr. …………… and Mr. ……………. provide for a different duration of the termination notice period for both parties, i.e. 3 (three) months in the event of unilateral termination by the employee and 30 (thirty) days in the event of unilateral termination by the employer, the latter provision being in violation of the effective legislation. The agreements with the Administrative Director and the Operations Manager provide for an equal termination notice period of 30 (thirty) days, while the termination notice period under the agreement with the Chief Technical Officer is 3 (three) months.

Although required by law, the reviewed labour agreement with the Operations Manager, Mr. ………………., does not provide for the additional remunerations of permanent character (e.g., a statutory addition for length of service) due to the employee^{^[28]}. In such case, the employee shall be entitled to the minimum amounts provided by the RAOLRP.

For the consequences of such non-compliance, if ascertained, please refer to our respective comments in Section 6.1.2.2 B (i) (b).

6.1.3 Director/Officer Agreements

6.1.3.1 General Notes

Pursuant to the Bulgarian Law on Commerce, the relations between the Company and the members of its managing bodies should be governed by separate written management agreements. Such agreements do not qualify as labour ones but rather are governed by the general provisions of Bulgarian contract and commercial legislation. Alternatively, the members of a company's managing bodies could be contracted under a labour agreement, which option is not widely used mostly due to the number of restrictions imposed by the Bulgarian labour legislation on the termination of labour agreements.

6.1.3.2 Agreements with the Members of the Board of Directors of the Company

In the course of the due diligence exercise we have reviewed copies of the agreements with all three members of the Board of Directors. The three agreements follow one and the same template.

It is our observation that the said agreements bear neither an execution date nor a date of entering into effect. The reviewed agreements do not stipulate a term either. Normally, the agreement with a Board member is effective during the term of his/ her office and shall terminate as of the moment of deregistration of the Board member from the commercial registry with the respective court of registration.

The agreements discussed herein do not stipulate for any compensations due to the Board member upon termination as well as for any penalties in the event of non-performance.

Further, the Board members are prohibited from performing activities competing those of the Company unless the latter has given its explicit consent, as well as from disclosing of confidential information. By reason that the agreements do not provide for a term within which the confidentiality and not-to-compete obligations are valid, it could be reasonably assumed that the Board members are bound by them only for the duration of the agreements. The reviewed agreements do not provide for any specific penalties in the event of a breach of the confidentiality or not-to-compete obligation.

The three agreements with the Board members could be terminated (i) upon mutual consent of the parties; (ii) in the event of appointment of a new member of the Board to replace the member who is a party to the agreement to be terminated; (iii) in the event of death or placement under custodian guardianship of the Board member; and (iv) in case of physical impossibility of the Board member to perform the assigned duties.

6.1.4 Other Service Agreements with Employees

The Data Room contained unsigned drafts of the consultancy agreements with two of the Board members, namely Mr. ………… and Mr. ………, which differ only in the amount of the remuneration due.

Evident from the agreements, they have been presumably executed on DD/MM/YYYY and are valid for a term of five years. The consultants undertake to render technical and financial advice with regard to the construction of the fibre-optic facility on the territory of the Republic of Bulgaria. The consultancy agreements could be terminated upon mutual consent of the parties or with three months prior written notice by each of the parties.

The reviewed agreements contain a confidentiality clause obligating the consultants to refrain from disclosing confidential information to third parties unless it is required by law or with a prior consent by the Company. The latter obligation is binding on the consultants only for the duration of the agreements.

Based on our review we opine that the discussed consultancy agreements do not qualify as labour ones and are in compliance with the requirements of the applicable Bulgarian contract law.

We have requested but as of the date hereof we have not been provided with information about any other service agreements executed between the Company and its employees.

6.1.5 Internal Rules

The Data Room contained a copy of Internal Rules applicable to the Company's employees. They introduce the guidelines in the recruitment, assessment and professional development of the employees. In addition, they arrange for the working time, breaks and leaves, the payment of remuneration, health and safety policies of the Company, the manner of termination of employment. Confidentiality and non-competition clauses are also provided therein, although such clauses are stipulated in the individual labour agreements. As a general principle, with respect to any issues already agreed between the parties in the individual labour agreement, the internal rules will be binding on the single employee only to the extent they are more beneficial to him/her.

The Internal Rules are in compliance with the effective legislation and do not contain extraordinary provisions or provisions which could raise concern.

6.1.6 Social Security and Health Insurance

6.1.6.1 Mandatory Social Security and Health Insurance

We have been verbally informed that all employees of the Company are secured under the general rules of social and health security in Bulgaria.

The Data Room contained a deed of inspection issued by the National Social Security Institute for an inspection covering the period from DD/MM/YYYY till DD/MM/YYYY. Such inspection has established that all due social security and health insurance contribution for the inspected period were dully paid.

There was no up-to-date information on the due fulfilment on the part of the Company of its obligations for payment of social security and health insurance contributions for its employees. The Company has provided a certificate issued by the National Social Security Institute verifying that it has not had established obligations for payments of social security and health insurance contributions to the budget as of DD/MM/YYYY.

6.1.6.2 Voluntary Social Security and Health Insurance

The lawyers from [law firm] could not undoubtedly verify whether the Company employees benefit from additional pension security. The Data Room contained an agreement on additional voluntary health insurance executed between the Company and ……………. Joint Stock Company [BANK] AD dated DD/MM/YYYY and valid until DD/MM/YYYY. We have also reviewed an insurance policy on life insurance together with medical expenses made by the Company in favour of its employees, which has expired on DD/MM/YYYY. We have requested information on the prolongation thereof or on the execution of a new insurance policy but as of the date hereof we have not been presented with such.

6.1.7 Profit Sharing, Share Purchase or Other Benefit Plans

The Data Room did not contain any information on profit sharing, share purchase or other benefit plans, which apply to the Company employees. The lawyers from [law firm] confirmed that, to the best of their knowledge, the Company employees do not benefit from any profit sharing and share purchase plans.

6.1.8 Non-Competition, Confidentiality and Non-Disclosure Agreements with Employees and Third Parties

The Data Room did not contain separate non-competition, confidentiality and non-disclosure agreements. Evident from the provided documents such clauses are included in the standard form labour agreements with ordinary staff and with managing employees, the management agreements with Board members and the draft consultancy agreements with Board members.

6.1.9 Other Employment Related Issues

Evident from the documents contained in the Data Room the Company is a party to only one labour dispute. For more information, please refer to Section 8 of this Report. In addition, it was verbally confirmed that no strikes have ever occurred at the Company.

The lawyers from [law firm] have verbally informed us that the Company has not adopted any specific rules for termination of the individual labour agreements and has not implemented any material redundancy programs.

6.2 Employment Issues related to the Subsidiaries

6.2.1 Number of Employees in each Subsidiary

Although requested, no information on the current number of Subsidiaries' employees have been presented to us for the purposes of this Report. Evident form the documents contained in the Data Room ............ ............ has employed 8 employees as of DD/MM/YYYY.

6.2.2 Collective Labour Agreements

According to the information contained in the Data Room and confirmed verbally by the representatives of [law firm], none of the Subsidiaries is a party to CLAs.

6.2.3 Individual Labour Agreement

(A) Relations with Ordinary Staff of the Subsidiaries

With regard to the Subsidiaries, the Data Room contained the standard form labour agreements used by ............ ............ and ............. In addition, we have reviewed a copy of a signed agreement with an employee of ............ and an annex to labour agreement with a ............ employee.

Although required by statute the standard form labour agreement used by ............ ............ fails to (i) provide for the necessary identification of the parties[29], and (ii) specify the amount of the basic and additional annual paid leave to which the employee is entitled.

Likewise, the standard form labour agreement of ............ does not have the minimum mandatory contents and in particular it fails to (i) provide for the duration of the termination notice, and (ii) specify the amount of the basic and additional annual paid leave to which the employee is entitled. Since the said agreement is for undefined term, the lack of stipulated duration of the termination notice would result in the application of the statutory provided minimum of 30 (thirty) days termination notice.

The signed labour agreement with one of ............'s employees does not meet the statutory requirements to the minimum contents of labour agreements as well. It fails to specify (i) the place of work, and (ii) the termination notice period. Pursuant to the Labour Code, in the event that the labour agreement does not explicitly provide for the place of work of the employee, the principle place of business of the employer should be deemed as such.

For further comments on the prospective consequences of the irregularities of the individual labour agreements addressed above, please refer to Section 6.1.2.2 (B) (i) (b) hereof.

The annex to the labour agreement with a ............ employee arranges for a change in the employee's position and introduces open-ended working time[30]. It further prohibits the employee from performing competing activities within the term of validity of the labour agreement. The annex contains an extensive intellectual property clause arranging that the employer shall be considered an exclusive owner of all inventions, models, works, etc. created by the employee within the course of his/her employment. Pursuant to the effective legislation the copyright over computer programs and databases created by the employee within his/her employment vests with the employer. However, the copyright over other works shall arise for the employee. The employer is granted by the law a limited royalty-free license to use said works. This license is limited as to the purposes and scope of the use of the work. The employer is granted a statutory license to use the work only for its own purposes and in a way and to the extent, inherent to its ordinary scope of activity. Therefore, if the employer intends to use the copyright in the said works to the full extent possible, it should be granted such right by virtue of a contract concluded with the employee. Such contractual license needs to mention specifically that the works may be used by the employer exclusively for whatever purpose and outside the ordinary scope of its activity. The wording of the reviewed annex does not, in our opinion, grant such contractual license to .............

We have requested but we have not been provided with any documents evidencing the current individual labour relations of the other Subsidiaries.

(B) Relations with Key Employees

Although requested, the Data Room does not contain any information about employment relations with key employees of any of the Subsidiaries.

(C) Other Relevant Considerations

The Data Room did not contain evidence on the Subsidiaries due performing their statutory obligations for notification of the National Social Security Institute on all executed, amended or terminated labour agreements. We have not been provided with information on the due fulfilment of the Subsidiaries' obligation for registration in compliance with the statutory data protection rules either.

6.2.4 Director/Officer Agreements

We have been provided with an annex to the labour agreement with the Executive Director of ............. The reviewed annex follows the template of the annex with the ............ employee discussed in Section 6.2.3 (A) hereof. Since we have not reviewed the labour agreement with the Executive Director, we are not in a position to comment on its compliance with the statutory requirements, and to provide information on the termination procedure applicable to him and/or its legality.

The Data Room contained a signed copy of the labour agreement with the General Manager of ............ executed for a period of one year^{^[31]}. The agreed termination notice period is 3 (three) months and is equal for both of the parties. This labour agreement fails to stipulate (i) the amount of the additional remuneration due to the employee, (ii) the amount of the basic and the additional annual paid leave, and (iii) the duration and the distribution of the working time. For our comments on the consequences related to the lack of the said statutory elements of the labour agreement, please refer to Section 6.1.2.2 (B) (i) (b) and Section 6.1.2.2 (b) (ii) hereof.

According to the said agreement the General Manager is entitled to use a company car. The reviewed agreement provides for confidentiality and non-competition obligations binding on the General Manager within the term of the agreement and for 3 (three) years after its termination. Penalties in the event of breach of the confidentiality and the non-competition obligation are not stipulated.

As already discussed in Section 6.1.3.1, albeit generally admissible, it is highly unusual for registered members of the corporate bodies of commercial companies (such as the Executive Director of ............ or ............'s General Manager) to be contracted under labour agreements.

Although requested we have not been presented with and we have not reviewed agreements with members of the managing bodies of the other Subsidiaries.

6.2.5 Other Service Agreements with Employees

In the course of our due diligence exercise no service agreements with employees of any of the Subsidiaries were provided to us for review.

6.2.6 Internal Rules

The Data Room did not contain information about internal rules adopted by the employer and applicable to the Subsidiaries' employees. The lawyers from [law firm] have verbally confirmed that the Subsidiaries have not adopted internal rules.

6.2.7 Social Security and Health Insurance

6.2.7.1 Mandatory Social Security and Health Insurance

Although requested we have not been provided with any documents evidencing the payment of all social security and health insurance contributions due by any of the Subsidiaries.

However, we have reviewed a deed of inspection performed with respect to ............ ............ by the National Social Security Institute. It has established that during the inspected period (between DD/MM/YYYY and DD/MM/YYYY) ............ ............ had outstanding obligations to the State Social Security Fund at the amount of BGN ………. (including principal and statutory interest). It was found that ............ ............ did not have established outstanding health insurance payments. We are not in the position to comment whether the so established obligations have been discharged.

The Data Room contained also a deed of inspection on ............ conducted by the National Social Security Institute regarding the period DD/MM/YYYY - DD/MM/YYYY. No outstanding social security and health insurance obligations were established. Notwithstanding, a conclusion on the due payment of the social and health security contributions by ............ as of the current moment could not be made on the basis of the provided documents.

6.2.7.2 Voluntary Social Security and Health Insurance

No information about agreements on additional voluntary social security and health insurance in favour of the Subsidiaries' employees has been provided either.

6.2.8 Profit Sharing, Share Purchase or Other Benefit Plans

We have not been provided with any documents evidencing the application of any benefit plans to the employees of any of the Subsidiaries. The lawyers from [law firm] confirmed that to the best of their knowledge the Company employees do not benefit from any profit sharing, share purchase and other benefit plans.

6.2.9 Non-Competition, Confidentiality and Non-Disclosure Agreements with Employees and Third Parties

The Data Room did not contain information about any non-competition, confidentiality and non-disclosure agreements or other relevant instruments executed between the Subsidiaries and its employees or third parties, although such information was expressly requested by us.

6.2.10 Other Employment Related Issues

Evident from the documents contained in the Data Room and confirmed by the lawyers from [law firm] the subsidiaries are not parties to any labour disputes. In addition, it was verbally verified that no strikes have ever occurred at the Subsidiaries.

The lawyers from [law firm] have verbally informed us that, similar to the Company the Subsidiaries have not adopted any specific rules for termination of individual labour agreements and have not implemented any material redundancy programs.

6.3 Employment Issues related to the Acquisition Targets

6.3.1 Number of Employees in each Acquisition Target

With reference to the number of employees of the Acquisition Targets some information could be extracted form the provided documents. However, the Data Room did not contain clear information on the current number of the employees, although requested by us.

Evident from the provided report of …………. dated MM/YYYY ............ had … employees by the end of YYYY.

According to the due diligence report of [law firm] dated MM/YYYY ............ has reported to have … employees as of the date thereof.

Evident from the documents contained in the Data Room ............ has … employees as of the date of this Report. In addition, pursuant to a declaration signed by Mr. …………, Executive Director of ............, all of the employees are contracted under labour agreements of undefined term.

Pursuant to the draft due diligence report of [law firm] dated MM/YYYY ............ had … employees as of the date of the report. In comparison, according to the documents provided in the Data Room ............ had … employees as of MM/YYYY.

6.3.2 Collective Labour Agreement

The Data Room contained no information on the possible existence of CLAs in the Acquisition Targets. The representatives of [law firm] have verbally confirmed that none of the Acquisition Targets is a party to any CLA.

6.3.3 Individual Labour Agreement

(A) Current Individual Labour Relations with the Ordinary Staff of the Acquisition Targets

Data Room contained a copy of a signed labour agreement used by ............ for the position of a cashier dated DD/MM/YYYY. According to the verbal information communicated to us by the representatives of [law firm], all employees of ............ are contracted under labour agreements of identical contents. The reviewed labour agreement contains all mandatory requisites except the necessary identification of the parties. It is executed for undefined term and provides for a normal duration of the working time (8 (eight) hours a day, 5 (five) days a week). The duration of the annual paid leave, to which the employees are entitled is 20 (twenty) days[32]. The termination notice period is equal for both parties and amounts to 30 (thirty) days.

We have not been provided with any documents evidencing the current individual labour relations of the other Acquisition Targets.

(B) Relations with Key Employees

We have requested but as of the date of this Report the Data Room did not contain any information about the employment relations with key employees of any of the Acquisition Targets.

(C) Other Relevant Issues

We have requested but as of the date of this report the Data Room did not contain evidence on the Acquisition Targets' duly performing of their statutory obligation for notification of the National Social Security Institute on all executed, amended or terminated labour agreements.

In the course of our due diligence exercise we have reviewed a declaration signed by the Executive Director of ............ that the latter company has not registered the labour agreements with its employees with the National Social Security Institute. For more information on the consequences of the non-performance of this statutory obligation, please refer to our comments in Section 6.1.2.1 (b) of this Report.

The Data Room did not contain information on the due fulfilment of the Acquisition Targets' obligation for registration in compliance with the statutory data protection rules although we have requested such.

6.3.4 Director/Officer Agreements

The Data Room contained a copy of the management agreement with Mr. ……………., Executive Director of ............, dated DD/MM/YYYY and valid until DD/MM/YYYY. The said agreement could be terminated by ............ upon prior written 3 (three) months notice served to the Executive Director, in which case ............ shall pay a compensation to Mr. …….. amounting to one monthly remuneration equal to BGN 350 (three hundred and fifty). In addition, he is entitled to compensation for his unused paid leave.

According to the management agreement, Mr. ……….. is entitled to bonus equal to 50 % of his annual remuneration in the event of due fulfillment of the business targets specified by ............. The Executive Director is entitled to use a company car.

The reviewed management agreement provides for a confidentiality obligation, which is binding on the Executive Director only within the term of the agreement, while the non-competition obligation is valid for the term of the agreement and for 1 (one) year after its termination. Penalties in the event of breach of the confidentiality and the non-competition obligation are not stipulated.

Based on our review, we are on the opinion that the management agreement with the Executive Director of ............ does not contain extraordinary provisions and is in compliance with the effective legislation.

Although requested we have not been provided with the agreements executed with members of the managing bodies of the other Acquisition Targets.

According to the verbal information communicated to us by the representatives of [law firm] the two registered general managers of ............ are presently offered consultancy agreements, which will be executed after the completion of the Contemplated Transaction. The Data Room contained information neither on the particular purpose of these agreements nor on the amount of the remuneration offered to the general managers, therefore we are not in the position to comment on the impact of such consultancy agreements if executed prior to the Contemplated Transaction.

6.3.5 Other Service Agreements with Employees

In the course of our due diligence exercise we have reviewed a signed copy of a legal services agreement dated DD/MM/YYYY, to which ............ is a party. The agreement is valid until DD/MM/YYYY. According to the said agreement, the legal consultant is entitled to a monthly remuneration of BGN 200. An additional remuneration shall be agreed for cases constituting substantial actual and legal complexity and for drafting of contracts of a price exceeding BGN 50,000; in the latter case the amount of the additional remuneration could not be less that 2 % of the contractual price. A separate remuneration is due for representation before the court, which is at the amount set forth by the Regulation N 1 dated 9 July 2004 on the Minimum Amounts of Attorneys' Fees.

The legal services agreement can be terminated upon mutual consent of the parties or by 3 (three) months prior written notice by either of the parties[33]. Based on our review, we opine that the legal services agreement discussed above does not qualify as labour one and is in compliance with the requirements of the applicable Bulgarian contract law.

The Data Room did not contain other service agreements, to which the Acquisition Targets are party.

6.3.6 Internal Rules

Data Room did not contain information about internal rules adopted by the employer and applicable to the Acquisition Targets' employees. The lawyers from [law firm] verbally confirmed that neither of the Acquisition Targets has adopted internal rules.

6.3.7 Social Security and Health Insurance

6.3.7.1 Mandatory Social Security and Health Insurance

Although requested we have not been provided with any documents evidencing the payment of all social security and health insurance contributions due by any of the Acquisition Targets. However, evident from a certificate issued by the National Social Security Institute dated DD/MM/YYYY and provided in the Data Room, as of the latter date ............ does not have established obligations for payments of social security and health insurance contributions for its employees to the state budget.

6.3.7.2 Voluntary Social Security and Health Insurance

No information about agreements on additional voluntary social security and health insurance in favour of the Acquisition Targets' employees has been provided either.

6.3.8 Profit Sharing, Share Purchase or Other Benefit Plans

We have requested but we not been provided with any documents evidencing the application of any benefit plans to the employees of any of the Acquisition Targets. The lawyers form [law firm] verbally verified that the Acquisition Targets do not apply any profit sharing, share purchase or other benefit plans to their employees.

6.3.9 Non-Competition, Confidentiality and Non-Disclosure Agreements with Employees and Third Parties

The Data Room did not contain information about any non-competition, confidentiality and non-disclosure agreements or similar instruments executed between the Acquisition Targets and their employees or third parties.

6.3.10 Other Labour Related Issues

Evident from the documents contained in the Data Room as confirmed by the lawyers from [law firm], the Acquisition Targets are not parties to any labour disputes. In addition, it was verbally verified that no strikes have ever occurred at the Acquisition Targets.

The lawyers from [law firm] have verbally informed us that the Acquisition Targets have not adopted any specific rules for termination of the individual labour agreements as well as any redundancy programs.

To the best of our knowledge, the acquisition of ............ by the Company will take the form of financial lease. Such form of acquisition might potentially trigger labour law implications to the extent that in the event of lease of assets as a part of the employer's undertaking, the lessee (the Company) would by virtue of the law replace the lessor (............) as an employer of those employees whose employment is related to the leased assets.

6.4 Labour Law Implications of the Contemplated Transaction

The indirect acquisition of the Company by the Client would neither affect the employment relationship between the Company and its employees nor create any additional obligations for the Company (such as obligation for provision of information to or conduct of consultations with employees or third parties). Therefore, we do not foresee any employment-related complications that could arise in regard to such acquisition.

7. ENVIRONMENTAL ISSUES. HEALTH AND SAFETY ISSUES

7.1 Environmental Issues

Bulgarian law requires the Company to conduct its business in compliance with the general norms and principles of the Law on Protection of the Environment and the sector-specific secondary legislation. In addition, the LT also imposes on telecoms operators the general obligation to protect the environment, and the life and health of human beings. Furthermore, Bulgarian environmental law implements the "polluter pays" concept with regard to environmental liability. Any failure to comply with the environmental law may be a ground for civil and/ or administrative liability.

The Company owns and leases real estate for office purposes only. Therefore, the Company uses the services of public utility companies related to water supply, effluent water discharge, waste collection and transportation. Furthermore, according to verbal information by the Company the exploitation of the real estate and other assets of the Company is in conformity with the environment law. In view of the scope of the Company's business, it is our understanding that The Company's operations are not related to environmental risks, such as pollution of air, water or soil. In addition, the due diligence investigation has not revealed any non-compliance either with Bulgarian law or with the terms of the Company's licences, and there are no environmental issues that may cause concern.

7.2 Health and Safety Issues

7.2.1 General Notes

Bulgarian labour legislation imposes a number of obligations on the employer with regard to healthy and safe conditions at work. The statutory health and safety requirements that an employer has to comply with include, inter alia, the performance of risk assessment at the working places, the provision of medical services to the employees by a special health and safety office, the provision of personal protective means to the employees, the instruction of the employees on the safe and healthy working conditions upon commencement of their employment and on a regular basis, etc.

7.2.2 Health and Safety Issues related to The Company

The Company has provided a copy of an agreement with a health and safety office ………………. Dated DD/MM/YYYY valid until DD/MM/YYYY. Under the said agreement, the health and safety office undertakes to service the Company employees against payment of a monthly subscription fee of BGN 1 per employee. The health and safety office further undertakes to perform risk assessment of work places against payment of a price of BGN 2 per place. The term for performance of the agreed risk assessment was DD/MM/YYYY. The Data Room contained no evidence of the due performance of the latter obligation.

According to the answers to our request dated DD/MM/YYYY no labour accidents have ever occurred with Company's employees. It was also confirmed that no audits by external contractors and pertaining to compliance with occupational safety and health requirements have been conducted. However, the Company's full compliance with the statutory health and safety requirements could not be fully verified based on the review of the Data Room documents. For the sake of completeness it should be noted that the possible sanctions for non-compliance with health and safety legislation are established in the Labour Code. The minimum and maximum amount of the sanctions are, respectively, BGN 250 and BGN 1,000. In the event of repeated non-compliance, these amounts are BGN 500 and BGN 2,000 respectively. The specific amount is determined by the controlling body (the Labour Inspectorate) according to the gravity of the violation and the specific circumstances under which it was committed.

7.2.3 Health and Safety Issues related to the Subsidiaries

The Data Room contained a copy of an agreement with a health and safety office to which ............ is a party. The said agreement is executed on DD/MM/YYYY and is valid until DD/MM/YYYY. The contractual price of BGN 500 per year shall be paid through providing of time for advertisements in the emissions of the TV channel ............. We have not been provided with other information of the further compliance of the Subsidiaries with the health and safety legislation.

7.2.4 Health and Safety Issue related to the Acquisition Targets

The Data Room did not contain information on the compliance of the Acquisition Targets with the statutory health and safety requirements.

8. PENDING OR THREATENED LITIGATION AND INVESTIGATIONS

8.1 General Notes

In respect of pending or threatened litigation and investigation regarding the Company, we applied two materiality thresholds: (i) the Company Materiality Threshold, and (ii) the likely impact on the business of the Company. The analysis is based on: (i) brief information regarding the outstanding litigation cases, involving the Company or its Subsidiaries as a party, (ii) review of copies of court and administrative de............ions and orders as provided by the Company, and (iii) independent review of the public registries. In respect of ............ and ............ almost all information provided was contained in the due diligence reports prepared by the legal counsels of the Company in YYYY for the purposes of their acquisition. We were provided with a written statement of the manager of ............ confirming the absence of any pending or threaten litigation cases against this company. As regards ............ two de............ions affirming penal orders issued by CRC were provided, however, the amounts of the fines were insignificant.

Details of each case summarised below are contained in Appendix 8.

8.2 ……………………. v. ………………… and …………………….

Pursuant to information provided in the Data Room, on DD/MM/YYYY ……………………, a ……………….. limited liability company, initiated a lawsuit in the District Court of …….. against …………………. and ………………, Cause No. ………….. ………… seeks a judgment against …………… and ……………… in the amount of at least Euros …………… plus damages, attorneys' fees and costs. However, during the review we were provided with an Order of Non-Suit without Prejudice issued by the District Court of …………… dated DD/MM/YYYY, certifying that the said case was non-suited without prejudice and an Order of Dismissal without Prejudice of the District Court of ……….. dated DD/MM/YYYY was granted to ……………. Therefore, this case does not any longer raise any issues of concern.

8.3 ……………. v. the Company

The claim of ………………. in the amount of BGN ……………. under civil case No …………… before the ………….. Regional Court has been withdrawn on the ground of a settlement agreement reached between the parties ………….. and the Company. In result, the attachment of the bank accounts of the ………………… by the court as an injunctive measure of future claim has been released. We reviewed the documents and hereby confirm that the dispute has been settled, the case is no more pending and at the time of review the relations between the parties do not raise concerns in respect to threaten litigation.

8.4 Other Disputes

Pursuant to the information provided by the Company and the documents provided for review, at the time of review the Company is a party to :(i) one labour dispute concerning compensation for non-admission of the plaintiff to work following unlawful dismissal, (ii) two civil disputes, in which the Company is a defendant, one for alleged breach of contractual obligations and one for incorrect registration in the commercial registry, (iii) one arbitration proceedings related to alleged unpaid rents under a lease agreement for administrative area where the amount of the claim is BGN ………….; and (iv) eight administrative proceedings, including disputes with/ for: (a) the Ministry of Culture and Tourism in respect to alleged copyright infringement, (b) CRC in respect of alleged broadcasting of channels unregistered under the LRT, (c) Regional Construction Control Directorates in respect of alleged "illegal constructions", (d) termination of the Company's registration in the town of ............ due to non commencement of the activity within the period set out in the license, and (e) one investigation conducted by the Commission on Trade and Protection of Consumers in respect to the statement of the Company that "The Company is the biggest cable operator". Certain past disputes before the Commission on Protection of Competition (the "CPC") are mentioned in brief in Section 9.6.

8.4.1 Administrative Proceedings

The Minister of Culture and Tourism imposed a sanction to The Company for unauthorised broadcasting by cable throughout the City of ............ of the channels PRO 7, RTL, ZDF, ARD, and SAT 1. The penal order was issued on the grounds of a protocol, certifying the unauthorised broadcasting. Regardless of the relatively low amount of the sanction of BGN 1,000, we would identify the outcome of these proceedings as significant concern since the penal order may serve as grounds for future claims for compensation against The Company on the part of the respective copyright holders. As of the time of review the order was appealed and still has not come into force. However, if the penal order is confirmed by the Court and becomes enforceable the respective copyright holders would be entitled to claim damages relying on the order. When the grounds of the claim are established but the information does not suffice to evidence the particular amount, the copyright holder may demand alternatively (i) the revenues received as a result of the infringement, (ii) the value of the object of the infringement at the retail price of legally reproduced copies, or (iii) an amount ranging from BGN 50,000 to BGN 100,000 as determined by a court ruling. Therefore, the threat for future litigation exceeding the material threshold is in place.

In respect of other pending administrative proceedings two typical cases may be distinguished.

First, all four proceedings before CRC involve penalties of the Company due to broadcasting of channels unregistered under LRT. However, two of them were already revoked at the first instance on the ground of violation of the right of defence of the Company, i.e. on procedural grounds, due to a discrepancy between the wording of the penal order and the respective provisions of the law and the licence as referred therein. All reviewed penal orders were based on the lack of registration of the respective channels; however, the reviewed two court de............ions held that under LRT and the license a registration is required only in respect to operators of channels. If the said reasoning is accepted by the respective courts of appeals and, also, in respect to the other two cases, the outcome would be in favour of the Company without need for the court to rule on the merits of the cases. Such outcomes are very likely regardless of the fact that the already stated de............ions are not binding and even not persuasive in respect to the other courts before which the cases are pending. A ground for such a conclusion is the almost identical wording of the reviewed de............ions in their part concerning the analysis of the said discrepancy.

Second typical administrative proceedings are related to orders of the chief of the respective regional construction control directorate imposing suspension of ongoing construction or prohibiting the access or exploitation of already constructed cable telecommunication networks. One case involves the Company and two cases concern ............ and ............. With respect to ............ all remedies by means of appeal of the order has been used without success and at the time of review we were informed that the cable network is used on the ground of extension of the time limit for voluntary performance of the obligations under the order by the Regional Construction Directorate. However, no legal grounds for this extension might be found and the duration of the current exploitation is uncertain. If the legalisation of the construction does not take effect soon the risk for the normal operation of the business of this Subsidiary would be in place. Therefore, we would outline this problem as important for the business of the two Subsidiaries.

Another administrative proceeding was initiated by way of appeal of a de............ion for determining the price of the Company's right (i.e., easement) of passing through real estates - public municipal property. the price was determined to i.e., BGN 60,200. The proceeding was terminated due to the refusal of the Company to go on with it. According to the information provided by the Company the latter decided as more reasonable for the business to pay the so determined price.

8.4.2 Civil Proceedings (............ AD v. The Company)

Under one of the civil disputes ............ AD[34] interrogates the validity of certain entries in the commercial registry concerning the spin-off of ………………….. from ............ AD. ……………… merged into the Company in YYYY. ............ AD alleges that the partition protocol enclosed to the court application: (i) was not drafted on the ground of due entries in the financial statements of ............ AD, (ii) was not updated as of the date of the respective financial statements, (iii) contained entries not connected with the activity of ............ AD as a cable operator, and (iv) contained incorrect entries. According to ............ AD the alleged irregularities with the resolution of the general meeting results in an invalid entry in the commercial registry. Accordingly, the plaintiff claims the annulment of the spin-off of ………………………. from ............ AD and the incorporation of …………………….. as new entity.

According to the Company, ............ AD is precluded from further proceeding with the claim on the ground of Law on Commerce, which prescribes that an action against a newly incorporated company may not be commenced later than 1 year after its incorporation. Said time limit expired three years prior to the commencement of the action. In our view, this defence seems sound and a positive outcome for the Company is very likely. Therefore, the spin-off of …………………….. from ............ AD and its subsequent merger into the Company should not be affected.

However, there are some concerns related to real estates acquired by The Company as a result of the spin-off of ………………….. from ............ AD and subsequent merger of ……………………… into the Company. These concerns may serve as grounds for future claims against the Company. Thus, certain real estates were included in the said partition protocol without the issuance of respective notary deeds, which is a violation of the mandatory form for transfer of real estates under Bulgarian legislation. This problem is explained in more details in Section 4.1.3.1 and Appendix 4.1.3. The plaintiff will not be precluded from the statute of limitations to commence an action for questioning the ownership of the real estates, as the statute of limitations prescribes a period of 10 years for acquisition in case of non bona fide transferee. Therefore, a risk for future litigation arising out of this matter is in place.

9. COMPETITION ISSUES

9.1 Relevant Market

9.1.1 Relevant Product Market

The Bulgarian Commission on Protection of Competition (the "CPC") has noted in its practice that the whole telecommunications sector could be generally subdivided into the following independent markets: cable TV broadcasting, fixed telephony services (including VoIP), "leased lines" services, mobile voice services, Internet access, data transmission, international carrier services, and construction of telecommunication networks. However, after the completion of the Contemplated Transaction, ............ Group will operate mainly on the following markets: (i) cable TV broadcasting, (ii) Internet access, and (iii) fixed telephony services (including VoIP).

9.1.2 Relevant Geographic Market

In line with the consistent practice of the CPC regarding cable TV broadcasting[35], the relevant geographic market should be defined as regional and encompasses certain populated area. The Company and its Subsidiaries, for example, provide cable TV broadcasting in the following populated areas: ............, …….., ............, ............, and village of ………, ............, ............, ............ and village of ............, ............, ............, ............ ............. With respect to Internet services and fixed telephony services (including VoIP), the geographic market should be defined as national and include the whole territory of Bulgaria.

9.2 Agreements, Decisions and Concerted Practice

On the basis of the provided information, it seems that as of the time of this Report neither member of ............ Group (including the Acquisition Targets) is a party to any agreement, decision or concerted practice, which aim at, or result in, prevention, restriction or violation of competition on any of the relevant markets discussed above. However, during our due diligence investigation we independently found out that a number of proceedings before the CPC were initiated in the past against The Company and concerning agreements, decisions or concerted practices that allegedly aimed at, or resulted in, prevention, restriction or violation of competition. All these proceedings were terminated afterwards upon request of the respective petitioner. In view of that information, we would recommend that a representation of the seller be included in the SPA to the effect that neither The Company, nor any of its Subsidiaries, nor any of the Acquisition Targets are parties to any agreement, decision or concerted practice, which aim at, or result in, prevention, restriction or violation of competition on the relevant market.

9.3 Abuse of Dominant Position

The Data Room does not contain any information concerning abuse of dominant position by any member of ............ Group (including the Acquisition Targets). Even though, we would recommend that the SPA include a representation of the seller to the effect that neither the Company, nor any of its Subsidiaries, nor any of the Acquisition Targets has done or omitted to do any act, which has (or could have) as its object or effect the prevention, restriction or distortion of competition, and/or the impairing of consumer's interests.

9.4 Merger Control

Please be advised that with respect to the acquisition of the Company by the Client the merger control implications could be dealt with in a separate memorandum upon request. The purpose of the memorandum would be to outline the applicable Bulgarian merger control regime.

9.5 Unfair Competition

On the basis of the information provided in the Data Room, it seems that neither member of ............ Group (including the Acquisition Targets) has done, or omitted to do, any act that may be considered as unfair competition; only one of ............'s subsidiaries (please see Section 9.7.1.2 below) was fined in the past for unfair competition. Furthermore, as explained in Section 9.2 above, a number of proceedings before the CPC were initiated in the past against the Company. These proceedings were based among others on allegations of unfair competition. All these proceedings were terminated afterwards upon request of the respective petitioner. In view of that, we would recommend that a representation of the seller be included in the SPA to the effect that neither the Company, nor any of its Subsidiaries, nor any of the Acquisition Targets has done or omitted to do any act that may be considered as unfair competition.

9.6 Competition Related Proceedings

As discussed in Sections 9.2 and 9.5 above, a number of competition-related proceedings before the CPC were initiated in the past against the Company. All these proceedings were terminated subsequently upon request of the respective petitioner. In view of that, we would recommend that a representation of the seller be included in the SPA to the effect that there is no competition related proceeding that is pending or threatened with respect to any member of ............ Group (including the Acquisition Targets).

9.7 Specific Findings regarding the Acquisition Targets

9.7.1 ............

9.7.1.1 Merger Control

Our analyses of the Contemplated Transaction shows that even the financial lease of ............'s assets to the Company would trigger a merger control filing obligation provided that the joint turnover of the undertaking concerned on the Bulgarian market for the year preceding the transaction exceeds BGN …………..(around Euro …………………..).

9.7.1.2 Unfair Competition

A proceeding for unfair competition was initiated against one of ............'s subsidiaries, ............, in the past. During the course of the proceeding the CPC found out that the prices offered by this company are considerably lower than those of its competitors. After considering that said prices had been offered for more than four years, the CPC ruled that such behaviour is unfair commercial practice and imposed a sanction in the amount of BGN ………….

9.7.2 ............

The Data Room contains information that the CPC cleared the acquisition by the Company of 100% of the shares in ............ by virtue of De............ion No. … of DD/MM/YYYY.

9.7.3 ............

The Company filed for merger control clearance of its acquisition of 100% of the shares in ............ on DD/MM/YYYY. As of the date of this Report, the CPC has not ruled yet on the notification.

9.7.4 ............

Pursuant to information provided by the Company, the latter will file for a merger control clearance regarding its acquisition of ............. We do not have information whether the Company has already filed a merger notification and what is the status of the proceeding. Therefore, a condition precedent to closing in the SPA could be the filing by the Company of a merger notification with respect to its proposed acquisition of .............

10. RELATED PARTY TRANSACTIONS

10.1 General Notes

We have been provided 12 (twelve) loan agreements executed between the Company as a borrower and the following related parties of the Company as lenders: (i) ……….. .; (ii) ……………….; (iii) ............; (iv) ............; (v) ............; (vi) ……………….. and (vii) ............ ............. Short summaries of the referred agreements are included in Appendix 10 to this Report. We have not been provided with any information or confirmation by the Company as to whether all pending interest and principal amounts under the discussed loan agreements are duly paid.

10.2 Specific Legal Concerns arising out of certain loan agreements

10.2.1 Unusually High Interest Rates

Some provisions in loan agreements entered into between the Company and its related parties may be considered not on arms' length basis. In particular, such provisions are the following: (i) in the loan agreement between ………………… and the Company executed on DD/MM/YYYY, there is a provision setting out an interest rate of 18% p.a., which shall be repaid upon request of ……………. - such interest rate would seem to be unusually high; (ii) in the loan agreement executed between …………. and the Company, there is a provision setting out an obligation of the Company to pay to ………………. an origination fee of USD …………. at the loan maturity date; however the amount of such origination fee would seem customary for a loan agreement and, therefore, does not pose serious concerns.

10.2.2 Transfer Pricing

There is one loan agreement between ............ and the Company, which does not provide for interest due by the Company for the term of the agreement. Under Bulgarian law borrowing or lending of amounts for interest, which diverges from the statutory default interest rates[36] with more or less than one quarter at the time of conclusion of the agreement, is considered an example of "transfer pricing". With a view to the above, the lack of a provision for interest in the discussed loan agreement could potentially lead to increase of the Company's financial result for the respective year with the amounts that the tax authorities would consider due as interest to the lender.

10.2.3 Financial Assistance Rule

Pursuant to the Loan Agreement executed between ............ and the Company dated DD/MM/YYYY, the credit facility extended under the agreement is to be used for the purposes of purchasing shares from the capital of ............. Pursuant to the Law on Commerce a joint stock company, such as ............, may not grant loans or security for the purposes of acquisition of shares of the same company by a third party. With a view to the above, the discussed loan agreement would appear null and void as contradictory to the financial assistance rule. As a result of such nullity, ............ would be entitled to claim immediate repayment of such amounts.

10.2.4 Loan Agreements

Although the documents provided to us indicate the existence of at least 3 loan agreements executed between ……………….. and the Company, the only document provided for our review was a loan agreement between the Company and ………………… dated DD/MM/YYYY. The loan agreement that was provided expired but we do not have any information whether it was paid back. Otherwise, the agreement does not cause any particular concern.

PART C: APPENDICES

[1] Please note that as of the time of the Company's incorporation Bulgaria was (and still is) in a currency board situation, where the local currency is fixed to the EURO. Initially EURO 1 was equal to BGL 1955.83. After the denomination of the Bulgarian currency in 1999, EURO 1 is equal to BGN 1.95583.

[2] Please note that there is a civil case initiated by …………. against the Company contesting the spin-off of ………………. from …………, which (if successful) might have certain effect on the subsequent merger of ……………. into the Company. For more information on this case please refer to Section 8 and Section 4.1.3.1 infra.

[3] The figures representing the registered capital and the value of the shares are specified in ……….'s by-laws. There is no evidence that said figures were registered in the commercial registry.

[4] Please note that we do not possess documents evidencing that the Company is sole shareholder in ………...

[5] "Control over the management of a company" is legally defined by the LT to include the cases where a person/entity: (i) owns, including through a subsidiary or by virtue of an agreement with another person/entity, more than half plus one of all votes in the general meeting of the shareholders of the company; or (ii) may determine, directly or indirectly, more than half of the members of the management body of the company; or (iii) may in any other way exercise decisive influence over the taking of decisions in relation to the company's telecoms activity.

[6] Pursuant to information provided by the Company, the Company and ……………….. are related parties, as ………………….. is owned by ……………., chief executing officer of the Company, and his brother.

[7] "A private operator" is legally defined by the LT as any entity that carries out telecommunications through a private telecommunications network for its own needs on the grounds of an individual license or a registration under a general licence.

[8] The LRT distinguishes between two types of radio and television operators, and in particular: (i) public operators, and (ii) commercial operators. Public radio and television operators are legally defined as natural persons-sole traders and legal entities holding a licence for radio and television activity, the main purpose of whom is to contribute for the realisation of the constitutional right to information. Commercial radio and television operators are legally defined as sole owners and commercial companies holding a licence for radio and television activity, the main purpose of whose operations is the distribution of profit between their owners. Their main purpose being the realisation of the constitution right of citizens to information, public radio and television operators have some specific obligations, including among others an obligation to broadcast political, economic, cultural, scientific, educational and other socially important information, an obligation to encourage the creation of works from Bulgarian authors, and others. Next, the LRT sets out different restrictions as to the duration of the time for advertisements in respect of public radio and television operators (up to 15 minutes per twenty-four hours and up to 4 minutes per hour) and commercial radio and television operators (up to 15% from the programme time and up to 12 minutes per hour). Except for the above major differences, the legal requirements applicable to public and commercial operators are generally the same.

[9] To the opposite, radio and television activity by way of using available, and/or by way of construction, maintenance and use of new telecommunications networks for terrestrial radio broadcasting shall be performed on grounds of an individual licence issued by the CEM under the terms and procedure set out in the LRT.

[10] Pursuant to Article 7, item 3 of General Licence … persons/entities registered under General Licence … are entitled to broadcast only programmes of radio and television operators, registered and/or licensed under the LRT.

[11] …………………… was one of the founders and one of the initial share holders in ……………..

[12] …………………………. seems to be a wholly owned subsidiary of ………………... For more details on the legal status of ………………., please refer to Section [1] of this Report.

[13] The referred Decision of the CEM is actually issued in the name of ………………, under which name ……………… has been initially registered.

[14] The loan agreements executed between the Company and related parties are discussed in Section 10 of this Report.

[15] A registered pledge is a security interest in movable property or other assets specified by the Law on Registered Pledges where possession of the collateral remains with the pledgor. A registered pledge may be created in respect of the following assets: (i) receivables, including floating pools of receivables, book-entry form securities and movables, except for ships and planes; (ii) equity participation in companies; (iii) floating pools of machines and equipment, goods and materials and book-entry-form securities; (iv) industrial property rights, and (v) going concerns. A registered pledge agreement must be executed in writing. In addition, in order to be enforceable vis-à-vis third parties, it has to be filed with the Central Pledge Registry (the "CPR") or with another specific registry, as the case may be. Filing and registration with the respective registry achieves perfection of the security interest and priority vis-à-vis competing security interests. Filing is valid for a term of five years and it may be renewed for another five-year term provided that a request for renewal is made before expiry of the original five-year term. In general, the pledgee under a registered pledge is entitled to seek satisfaction from: (i) the value of the pledged property, (ii) any proceeds acquired as consideration for the disposal of the pledged property, or (iii) where the pledged property can not be separated from the Company's other property, assets of equivalent value.

[16] There is only one lease agreement with …………………………, which provides for a lease period of 36 months.

[17] The persons who sign a promissory note "per aval" are jointly and severally liable for payment of the debt under the promissory note together with the issuer.

[18] ………………….. should not be mistaken with the existing Subsidiary of the Company - ………………….. (as defined in Appendix 1).

[19] Please note that the provided construction papers do not contain information about the length of the network, but only to its location: …… and ………., …….. Residential Quarter, ……….. Residential Quarter, ………. Residential Quarter, ……… Residential Quarter. We were also provided with permits for excavation, issued in respect of repair works of the existing cable network.

[20] Operational Permit No. … dated DD/MM/YYYY issued by Regional Directorate for National Construction Supervision, Record Evidencing the operational Fitness of Construction dated DD/MM/YYYY issued in respect of construction of underground coaxial trunk cables from ……… to ……….., Certificate No. ……… dated DD/MM/YYYY for permission the use of roads representing municipal ownership, Certificate No. … dated DD/MM/YYYY issued by …….. Municipality, Operational Permit No. … dated DD/MM/YYYY issued by Regional Directorate for National Construction Supervision, Record Evidencing the operational Fitness of Construction dated DD/MM/YYYY issued in respect of construction of underground coaxial trunk cables from ………. to ………….. .

[21] These agreements shall expire as follows: (i) the agreement with ………… expires on DD/MM/YYYY; (ii) the agreements with …………………… expires on DD/MM/YYYY; and (iii) the agreement with ……………………., United Kingdom shall expire on DD/MM/YYYY.

[22] As a general rule, a collective labour agreement, irrespective of whether concluded at municipal, industry, branch-of-industry, or company level, may regulate any labour or social security relations that are not governed by the mandatory provisions of the Bulgarian labour legislation. It can also address issues that are regulated by the law, provided that the provisions of the collective labour agreement are at least as favourable for the employee as the respective statutory provisions.

[23] In particular, the labour agreement shall stipulate for: (i) the place of performance of the employee's labour duties, (ii) the position title and the nature of labour duties; (iii) the execution date of the agreement and its starting date; (iv) the duration of the labour agreement (unlimited or for a definite term); (v) the duration of the basic and if applicable, the extended annual paid leave, as well as of the additional annual paid leave; (vi) one and the same notification period for termination of the labour agreement by either of the parties; (vii) the amount of the basic labour remuneration and of the obligatory statutory additional labour remuneration (e.g. additional payments for length of service), as well as the terms of payment thereof; and (viii) the duration of the working day or week, respectively.

[24] The grounds for termination by the employer are exhaustively listed in the Labour Code, while the employee does not need a specific reason in order to terminate the employment. By way of example, the employer can terminate an individual employment in the following cases: (i) closing of the enterprise in which the individual is employed, or of a part of the enterprise; (ii) reduction of the number of work positions; (iii) decrease of the volume of work; (iv) discontinuation of work by the employing enterprise for more than 15 (fifteen) business days; (v) lack of capacity of the employee for effective performance of his/her labour duties; (vi) lack of professional qualification or required educational background, necessary for the effective performance of labour duties, etc. The employer can terminate the labour agreement unilaterally without serving notice to the employee in case of severe breach of the employment contract or work discipline (i.e. disciplinary dismissal of an employee). Termination on any other grounds outside the ones exhaustively enumerated by the Labour Code is illegal.

[25] During the term of probation, the employer is entitled to terminate the employment without prior notice and without stating a motive for termination.

[26] The expression "to have own company" reiterates the wording of the agreement. Due to the unclear wording, it could be argued whether it shall mean that the employee is prohibited form establishing or participating in a company as a sole owner or shall be interpreted to mean participation in a company in general, irrespective of the shareholding.

[27] Pursuant to the Labour Code, employees working under specific conditions or under conditions that could be detrimental to their health as well as employees working under open-ended working time are entitled to at least 5 (five) additional days of annual paid leave. Two categories of employees are entitled to annual paid leave of longer duration, namely 26 (twenty six), e.g. employees under 18 years of age and disabled employees with reduces working capacity of 50 (fifty) % and more.

[28] Such additions are due and payable by virtue of Labour Code and the RAOLRP the parties to a labour agreement may not validly agree that such amounts will not be due. The additional remunerations currently due by the employers should the respective employee is entitled to receive them, are (i) additional remuneration payable for years of employment on record; (ii) additional remuneration for work in hazardous and other specific labour conditions; (iii) additional remuneration for higher academic qualifications, related to the provided labour; (iv) additional remuneration for night work; and (v) additional remuneration for overtime work.

[29] Due to its more or less technical nature, the said issue will not be addressed in further detail of our comments.

[30] The employer, upon consultations with the representatives of employees, could issue an order establishing open-ended working time for some categories of employees, due to the special nature of their work. The employees working under open-ended working time shall, if necessary, perform their duties even after the expiry of the regular working hours. The employees working under open-ended working time shall be entitled to additional paid leave at the amount of no less than 5 business days per year. Work performed by employees under open-ended working time regime on weekends and official holidays shall be additionally paid as overtime.

[31] Pursuant to the Labour Code, the possibilities for execution of fixed-term employment contracts are quite narrowed. Thus, a fixed term labour agreement could only be executed for the performance of work that is temporal, seasonal or short-term in character, with employees being hired by companies in bankruptcy or liquidation proceedings, for substitution of absent employee, etc. Only as an exception from the general statutory rules, labour agreements of fixed term could be executed for a period of not less than one year. It is further required the particular reasons for the execution of fixed term labour agreement are explicitly specified therein, which requirement is not met in the reviewed standard form labour agreement of defined term. In general, a labour agreement executed in violation of the statutory provisions shall be deemed executed for unlimited duration.

[32] Although not expressly specified, the length of the employees' paid annual leave shall be calculated in business days (since the minimum duration set forth in the Labour Code is 20 business days).

[33] In the event of termination by notice the terminating party owes to the other party a compensation amounting to the monthly remuneration of the legal consultant multiplied by the number of months remaining until the expiration of the original term of the agreement.

[34] ………………… should not be mistaken with the current Subsidiary of the Company - ………………...

[35] See Decision No. … of DD/MM/YYYY, where the CPC has determined the relevant market of cable TV services.

[36] Please be advised that under Bulgarian law the statutory default interest rate amounts to: (i) the base interest rate of Bulgarian National Bank plus 10 points for obligations denominated in BGN, or (ii) the 3-month Libor for the respective currency plus 10 points, for obligations denominated in foreign convertible currency.

СКИ | МАРКЕТИНГ | ЕКИПИРОВКА | МАГАЗИНИ И АУТЛЕТИ | TV | БАНКИ

сряда, 31 януари 2018 г.

1. CORPORATE STATUS OF THE TARGET GROUP

1.1.1 Incorporation and Corporate History of the Company

1.1.1.1 Incorporation

1.1.1.2 Corporate History

1.1.2 Good Standing

1.1.3 By-laws

1.1.4 Share Capital. Shareholding Structure. Shares.

1.1.5 Dividends

1.1.6 Corporate Governance

1.1.7 Management and Representation. Organisational Chart

1.2.1 ............

1.2.1.1 Incorporation

1.2.1.2 Good Standing

1.2.1.3 By-laws

1.2.1.4 Capital. Shareholding Structure

1.2.1.5 Corporate Governance

1.2.2 ............

1.2.2.1 Incorporation

1.2.2.2 Good Standing

1.2.2.3 By-laws

1.2.2.4 Capital. Shareholding Structure

1.2.2.5 Corporate Governance

1.2.3 ............

1.2.3.1 Incorporation

1.2.3.2 Good Standing

1.2.3.3 By-laws.

1.2.3.4 Capital. Shareholding Structure

1.2.3.5 Corporate Governance

1.2.4 ............

1.2.4.1 Incorporation

1.2.4.2 Good Standing

1.2.4.3 By-laws.

1.2.4.4 Capital. Shareholding Structure

1.2.4.5 Corporate Governance

1.2.5 ............

1.2.6 ............

1.2.6.1 Incorporation

1.2.6.2 Good Standing

1.2.6.3 By-laws.

1.2.6.4 Capital. Shareholding Structure

1.2.6.5 Corporate Governance

1.2.7 ............

1.2.7.1 Incorporation

1.2.7.2 Good Standing

1.2.7.3 By-laws.

1.2.7.4 Capital. Shareholding Structure

1.2.7.5 Corporate Governance

1.2.8 ............

1.2.8.1 Incorporation

1.2.8.2 Good Standing

1.2.8.3 By-laws.

1.2.8.4 Capital. Shareholding Structure

1.2.8.5 Corporate Governance

1.3.1 ............

1.3.1.1 Incorporation and Corporate History

1.3.1.2 Good Standing

1.3.1.3 By-laws.

1.3.1.4 Shareholding Structure

1.3.1.5 Corporate Governance

1.3.1.6 ............'s Subsidiaries

1.3.1.7 Acquisition Status

1.3.2 ............

1.3.2.1 Incorporation and Corporate History

1.3.2.2 Good Standing

1.3.2.3 By-laws.

1.3.2.4 Shareholding Structure

1.3.2.5 Corporate Governance

1.3.2.6 Acquisition Status

1.3.3 ............

1.3.3.1 Incorporation and Corporate History

1.3.3.2 Good Standing

1.3.3.3 By-laws

1.3.3.4 Shareholding Structure

1.3.3.5 Corporate Governance

1.3.3.6 Acquisition Status

1.3.4 ............

1.3.4.1 Incorporation and Corporate History

1.3.4.2 Good Standing

сряда, 31 януари 2018 г.