PRIVATE, PRIVILEGED AND CONFIDENTIAL

SUBJECT TO CONTRACT AND BOARD APPROVAL

PROPOSAL TO PURCHASE SCS EXISTING INTEREST IN SYCO MUSIC AND TO AMEND JOINT
VENTURE AGREEMENT BETWEEN SONY AND SC DATED 23RD DECEMBER 2009
1. SC SERVICE AGREEMENT
The Term of the service agreement in respect of recorded music shall be extended from 31st
December 2015 until 31st March 2021 (the Extended Term) with a salary of US $500k per
annum plus current contribution to expenses.

2. PURCHASE OF MUSIC MARGIN ROYALTY

Sony will purchase SCs existing music interests and music margin royalty in respect of Syco
artists signed prior to 31st March 2015 with effect from 1st April 2015 for US $25M payable as
to 50% on signature and the balance on 31st March 2021.

3. NEW ARRANGEMENTS IN RESPECT OF SYCO MUSIC ARTISTS

3.1 Artists Covered
Artists signed to Syco in the UK and USA after 31st March 2015 (New Artists)
Artists derived from Syco formats signed to Sony affiliates outside the UK and USA
after 31st March 2015 (Overseas Artists)
3.2 Profit Share
In respect of New Artists SC shall be entitled to a 50% share of Sonys profits derived
therefrom, which profits shall be calculated in accordance with Schedule A attached
hereto.
3.3 Music Margin Royalty
SCs Music Margin royalty will continue to be payable upon the same terms in
respect of Overseas Artists from record one but at the following rates:
i.

23% net ppd for net sales in home territory

ii.

21.5% net ppd for net sales in major markets

iii.

20.5% net ppd for net sales in ROW

Such royalty to be subject to the deductions and reduced rate provisions as provided
for in Sonys intercompany licence agreement.

4. EXISTING AGREEMENT

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The purchase of SCs music interest will include all rights and benefits from 1st April 2015
attached thereto. For the avoidance of doubt, this includes without limitation the right to
any accrued dividends and all Music Margin royalties earned but not yet paid.

5. EXCHANGE RATE
All stated USD amounts will be paid in GBP converted at a rate of 1 equals $1.682.

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SCHEDULE A

Profit shall mean Revenue less Costs in the UK and USA.

Revenue shall mean:

a) 100% of revenue received by Sony in connection with the exploitation of New Artist
recordings (including ancillary income and public performance / broadcast income) in the UK
and USA; and
b) in respect of sales of recordings by New Artists outside the UK and / or USA a 28% of net PPD
(no packaging) royalty (subject to customary royalty reductions for reduced rate categories).

Costs shall mean:

a) All out of pocket arms length marketing, advertising and promotion costs
b) All advances and royalties paid to the applicable New Artists and producers
c) A physical distribution fee of 14% and a digital distribution fee of 10% on sales in the UK and
US
d) An overhead fee of 5% of Revenue to cover the costs of non-Syco Music staff and services
such as Business Affairs, Finance, HR, International etc
e) All A&R costs including without limitation recording costs, video costs and other recoupable
costs
f)

All production costs including without limitation artwork, manufacturing, royalties,

mechanical royalties, packaging, origination and inventory costs

g) All reasonable legal costs in respect of prosecuting and / or defending claims

h) All direct overhead costs (including allocated office space and Syco Music staff costs) related
to Syco Music in the UK and USA.

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