Mr. Chris Coelen
Re: Michael Davies Overall Term Deal
As of December 22, 2005
Page 1 of 45
SONY PICTURES TELEVISION INC.
9336 W. Washington Blvd., TCS-D107
Culver City, CA 90232
(310) 202-3466
As of December 22, 2005
Diplomatic, a New York corporation
c/o Mr. Chris Coelen
United Talent Agency
9560 Wilshire Blvd., Suite 500
Beverly Hills, CA 90212
Re: Michael Davies Overall Term Deal
Gentlemen:
This shall confirm the basic terms of the overall term agreement (“Agreement”) between, on the one hand, Sony Pictures Television Inc. (“SPT”) and, on the other hand, Diplomatic (“Lender”) furnishing the services of Michael Davies (“Artist”), as follows:
1. Term: Subject to execution by the parties, 3 years, commencing January 2, 2006 (“Term”).
2. Overhead Guarantee: SPT will cashflow $1,200,000 per year (for a total of $3,600,000 during the Term) in direct, out-of-pocket overhead costs paid to Lender on a monthly basis and subject to audit by SPT. Lender agrees that overhead costs shall be within customary television industry parameters; furthermore, Lender shall timely consult with SPT on an ongoing basis regarding Lender’s commitment to incur such costs. SPT’s recoupment of such overhead shall be on an annual basis, as follows: (a) $600,000 shall be payable to SPT from 50% of the fees and 100% of the overhead charge-backs earned from all of Artist's projects including, without limitation, pre-existing projects for which Artist continues to receive fees and/or has the right to charge overhead; (b) from 100% of network penalties until SPT is fully recouped; (c) after SPT has recouped $600,000 of the yearly $1,200,000 overhead guarantee on a cross-collateralized annualized basis, SPT’s continued recoupment shall no longer be payable from 50% of the fees earned as in item (a) above, but shall continue to be payable from 100% of the overhead charge-backs earned as in item (a) above, subject to the balance of this Paragraph 2; (d) commencing upon SPT having recouped the $600,000 pursuant to item (a) above, SPT and Lender shall recoup, on a dollar-for-dollar 50-50 basis the next $400,000 in overhead recoupment excluding network penalties as in item (b) above; and (e) upon SPT’s recoupment of the $1,200,000 for any such year, then prospectively for that year (subject to loss-carry-forwards when SPT’s overhead guarantee has not been fully recouped from prior years), SPT and Lender shall share on a dollar-for-dollar 50-50 basis all revenues prospectively generated from budgeted overhead charge-backs for the applicable year. Notwithstanding the foregoing, SPT shall not recoup against Artist’s fees, except SPT shall invoice Lender at each six (6)-month anniversary of the commencement of the Term setting forth the difference (the "Difference") between the sum of $300,000 and the amount that SPT shall have previously recouped pursuant to the foregoing sentence (it being agreed that, to the extent SPT recoups in excess of the $300,000 in any semi-annual period, such excess shall "carry-forward" towards recoupment of the sum of $300,000 in the next subsequent semi-annual period[s])—but in no event shall the Difference exceed 50% of all fees paid to Lender (it being understood that fees earned but not paid will, as applicable, be assigned to SPT at its request)--and Lender shall remit the Difference to SPT within ten (10) business days of receipt of said invoice. If Lender shall fail to timely remit the Difference, then SPT shall have the right, for the balance of the Term, to deduct (or to be paid directly by the applicable project financier) the Difference from 50% of the fees earned by Artist from all of Artist's projects (including, without limitation, pre-existing projects for which Artist continues to receive fees) until SPT has recouped the Difference in each applicable semi-annual period of the Term. For purposes of clarification, if the Difference is a negative number, such negative number shall also “carry-forward” to the next subsequent semi-annual period(s), as applicable, until paid by or on behalf of Lender or recouped in accordance with the provisions above. Any unrecouped SPT overhead shall be added to the following year's overhead cost until all years are fully recouped by SPT. There shall be no post-term recoupment; however, any unrecouped portion of the SPT’s overhead guarantee hereunder (with interest—but no overhead—thereon) shall be allocated among the various projects and treated as a cost of production for purposes of calculating Lender’s back-end participation.
3. Development Commitments: Lender/Artist acknowledge that SPT may be entering into a coterminous development commitment agreement for Artist to develop and produce programming for GSN (formerly known as Game Show Network) (the “SPT-GSN Agreement”). SPT agrees that any GSN penalties arising therefrom which may become payable to SPT shall first be applied to SPT’s overhead recoupment and, if SPT is fully recouped, shall be split 50-50 with Lender. Lender/Artist have been consulted in connection with the negotiation of, and consent to, the terms and conditions of the SPT-GSN Agreement (attached hereto and incorporated herein by reference as Exhibit “A”). Lender/Artist agree that, if entered into, the terms of said Exhibit “A”—where inconsistent with the terms of this Agreement—will prevail.
4. Production: For reality (i.e., nonscripted) programming, Artist shall be free to develop and produce programming as an independent producer, subject to (a) such programming not having a deficit (it being agreed that, in order to avoid a deficit, Lender and UTA may contribute, respectively, Artist’s fees and UTA’s package fees to the extent that they have accrued and are payable, and any such contributions shall be recouped as a cost of production); furthermore, other than SPT’s 10% overhead described within Paragraph 6 hereof, overhead shall be included in the determination of whether a program is in “deficit”); (b) the terms and conditions of Exhibit “B” attached hereto and by this reference incorporated herein, which shall be subject to such changes as Lender and SPT shall negotiate in good faith (it being agreed that, in the absence of an agreement, the particular project will not be produced during the Term hereof); (c) all third-party development and production agreements providing SPT with all necessary exploitation rights reasonably contemplated hereunder by SPT and Lender; and (d) Artist affirmatively and timely consulting with SPT regarding all creative and business matters. As between Lender/Artist and SPT, SPT shall own all copyrights in and to, and the results and proceeds of, such programming throughout the universe in perpetuity in all media now known or hereafter devised. Until such programming is delivered to SPT pursuant to its delivery requirements (attached hereto and incorporated herein by reference as Exhibit “C”), Lender/Artist shall be solely responsible for the programming as an independent production company and shall indemnify SPT from, and hold SPT harmless against, all claims, judgments, costs, and expenses arising therefrom. For reality programming with a deficit and for scripted programming with or without a deficit, SPT shall control development/production.
5. Fees; Lock; Credits; Subsequent Productions: For all reality programming, Lender shall be paid an EP fee per pilot or “Strip” (i.e., 1-to-5 original programs intended for broadcast within a calendar-week period) equal to 10% of the final budget, with no cap. For scripted programming, $40,000 per original episode (reducible to $35,000 to the extent aggregate of other EP fees on such series exceeds $80,000) for broadcast and premium pay network, $32,500 per original episode (reducible to $27,500 to the extent aggregate of other EP fees on such series exceeds $60,000) for basic cable; presentations at 100%, and pilots at 150%, of series episodic fee. 5% cumulative annual increases in series episodic or Strip fees for reality and scripted. All other EP fees to be negotiated in good faith based upon then current industry standards. Locked for life. Artist to receive EP, and Lender to receive production company (if animation desired by Lender, at Lender’s sole direct cost and subject to network/SPT guidelines), on-screen credits, on separate cards. Subject to network approval and Artist then actively rendering such services in the television industry,Artist shall be locked for life to subsequent domestic productions; provided, however, the parties shall, at the time, negotiate in good faith the terms and conditions applicable to each such production (it being understood that the terms and conditions hereunder shall serve as the floor therefor). If the parties are unable to reach such an agreement for Artist’s services or, if Artist is unable or unwilling for any reason to render services, then, in lieu thereof, Lender shall receive in connection with such production (a) sums equal to 50% of the originally-applicable MGR payable hereunder if a generic spin-off or special (or 33-1/3% if planted), and (b) a royalty of $3,500 per original special, episode, or Strip if a generic spin-off or special (or $2,500 if planted) plus 100% of such applicable royalty over the first five (5) free broadcast reruns (but no payments for reruns exceeding one per year). With respect to foreign productions that are produced by SPT or an affiliated company thereof, the parties shall, at the time, negotiate in good faith the terms and conditions applicable to each such production (it being understood that there is no floor therefor). With respect to foreign productions that are produced by a nonaffiliated company under license from SPT, there shall be no obligation to negotiate for Artist’s services. Lender’s entitlement to Artist’s executive producer fees shall accrue with respect to each pilot, episode, or Strip, as follows: one-third (1/3) upon commencement of production thereof; one-third (1/3) upon completion of production thereof; and one-third (1/3) upon delivery thereof. Without limiting SPT’s rights and remedies in connection with the immediately-preceding sentence, such compensation shall, as an accommodation to Lender, be payable on a weekly basis over the applicable production periods (i.e., from preproduction through postproduction) as reasonably determined by SPT.
6. Contingent Compensation: For reality programming without a deficit, Lender shall receive sums equal to 50% of the modified gross receipts utilizing a 10% domestic distribution fee (25% if produced for first-run syndication), a 10% international distribution fee (25% if produced for first-run syndication), and a 10% overhead (“MGR”), such 50% of MGR to be reducible (subject to Lender approval not to be unreasonably withheld) by all participations (with no floor); provided, however, there shall be no distribution fee for an initial domestic single-broadcaster or single-cablecaster license (or any extension or renewal thereof) for (a) original programs, or (b) original programs plus reruns thereof. For reality programming with a deficit and for scripted programming, Lender shall receive sums equal to 25% of the MGR (same fees and overhead as above), reducible (subject to Lender’s right to timely consult) by all participations to a floor of 12.5%. For all reality programming, no overhead charge if SPT not providing any finance/production/postproduction/business affairs overhead support; provided, however, SPT’s providing contingent compensation participation accounting shall not, itself, serve to trigger the imposition of overhead. No distribution fee on direct revenues from product integration. For other forms of exploitation, SPT shall charge the following applicable distribution fees: 10% for format sales; 25% for merchandising; and 15% all other forms including, without limitation, home entertainment (dvd, videos, etc.) and video-on-demand. For reality programming withouta deficit (excluding distribution expenses from the calculation of such deficit), all series are cross-collateralized (it being understood that distribution expenses shall not be cross-collateralized); for reality programming witha deficit (excluding reality series with an unintended deficit resulting from series production costs exceeding the initial network license fees) and scripted programming, all series are noncrossed. Agency package commissions shall be deducted “off-the-top”; there shall no overhead on interest; there shall be no interest on overhead; and interest shall be charged at prime plus 1%. Except as otherwise expressly stated hereunder and, except for distribution fees, distribution costs, overhead and interest, MGR shall be defined and accounted for as per Exhibit “D” attached hereto and incorporated herein by reference subject to good faith negotiations.
7. Exclusivity: Other than current projects (a) in production to which Artist is contractually locked, (b) ordered to production prior to the effective date of this Agreement, or (c) excluded as per Exhibit “F” hereof, Artist shall be exclusive to SPT in television during the Term. Artist shall—at the time network license agreements are negotiated during the Term—give good faith consideration to the network’s requests with respect to exclusivity and level of EP services after the Term; however, Artist’s shall not be required, without his consent, to render services more restrictive than “nonexclusive, but real and meaningful”. Lender/Artist represent and warrant that, effective upon execution of this Agreement by the parties, they will give their consent to ABC terminating the existing written first-look agreement between ABC and Lender/Artist for nonfiction primetime programming (“ABC-Artist Agreement”). It is the intention of Lender/Artist and SPT that SPT enter into an agreement with ABC (a copy of which is attached hereto as Exhibit “E” and by this reference incorporated herein) for ABC to have a first-look for a period of approximately eighteen (18) months (i.e., one year beyond the current termination date of the ABC-Artist Agreement) for scripted and reality programming for primetime or latenight network (i.e., the 6 current broadcast networks, ABC, CBS, NBC, FBC, WB, and UPN) broadcast. This Agreement is subject to SPT’s receipt and approval of conditionally included/excluded Artist development projects (attached hereto and incorporate herein by reference as Exhibit “F”); where not encumbered by third-parties, Lender shall bring such projects to SPT. To the extent Artist is nonexclusive as provided above, such third-party services shall not materially interfere with Artist’s services to SPT.
8. Outside Commitments: Lender/Artist shall promptly obtain ABC's written approval to assign the ABC-Artist Agreement to SPT which shall then come under the terms of this Agreement. Provided it does not materially interfere with Artist’s services to SPT, Artist shall also continue to own and run Embassy Row as a brand marketing company but not as a television development, production, or distribution company.
9. Package: UTA Package.
10. Reversion: Projects for which SPT shall have expended out-of-pocket development costs during the Term and that have not been ordered to production by the end of the Term shall revert to Lender subject to (a) SPT’s first-priority security interest and lien to secure repayment to SPT of an amount equal to the aggregate of SPT’s out-of-pocket development costs if and upon Lender obtaining a third-party commitment for production of a project based in whole or in part on the particular property but not later than commencement of principal photography of a project based thereon, and (b) SPT also receiving sums equal to 5% of 100% of the net proceeds (or 3% of 100% of the adjusted or modified gross, if applicable) granted by any producer/distributor of said project; and the definition of said net profits (or adjusted or modified gross, if applicable) shall be no less favorable than that accorded Lender.
11. Insurance: Lender shall obtain and maintain appropriate Errors & Omissions insurance and the customary production package of insurance (including, without limitation, general liability and workers’ compensation) in connection with all projects hereunder and shall have SPT named as an additional insured thereon. All such policies shall comply with SPT’s risk management guidelines for suppliers.
12. Other Term and Conditions: As are standard in SPT agreements of this nature, subject to good faith negotiations within SPT parameters.
13. Standard Deal Memo Rider: The Agreement set forth herein is further subject to the provisions of SPT's Standard Deal Memo Rider, attached hereto and by this reference incorporated herein, subject to good faith negotiations within SPT parameters. If there is a conflict or inconsistency between the provisions of the Rider and this Agreement, the provisions of this agreement shall prevail.
Please confirm your agreement with the foregoing by countersigning where indicated below.
Sincerely,
Don Loughery
Executive Vice President, Business Affairs
THE FOREGOING IS AGREED TO AND ACCEPTED:
DIPLOMATIC, a New York corporation
Federal ID#: 13-4113628
by______
Michael Davies
Its: President
C:\TEMP\notesC9812B\Davies,M.OTD.letter.agreement.revised9.signed.docC:\Documents and Settings\Jeff\My Documents\SONY PICTURES TELEVISION\OVERALL, HOLDING, FIRST LOOK DEALS\DAVIES, MICHAEL OTD\Davies,M.OTD.letter.agreement.revised9.red.doc
Mr. Chris Coelen
Re: Michael Davies Overall Term Deal
As of December 22, 2005
Page 1 of 45
CONSENT OF ARTIST
The undersigned hereby acknowledges that s/he has read and is familiar with each and every provision of this agreement ("Agreement") and hereby endorses and approves this Agreement and agrees to be bound thereby and to perform all of the terms and conditions thereof insofar as the same are to be performed by him/her in the same manner as if s/he had executed this Agreement with SPT. Furthermore, the undersigned acknowledges that SPT would not, without this endorsement and approval, have entered into this Agreement. The undersigned represents that Lender is a corporation duly entitled to do business in California and agrees that s/he shall look solely to Lender for all compensation which may be due him/her as a result of services performed by virtue of this Agreement.