Embassy Row Acquisition Overview
January 25, 2008
Confidential Draft
Original Deal Structure
• $20.0MM up-front payment
• Up to $14.5MM in earn-outs tied to EBITDA on all ER shows
• 100% of earn-out paid if EBITDA target is met
• 0% of earn-out paid if EBITDA is below a floor
• Pro-rated if EBITDA is between floor and target
FY09
FY10
FY11
FY12
FY13
Total
Earn-Out
$0.0
$2.5
$3.0
$4.0
$5.0
$14.5
EBITDA Target
$0.0
$10.0
$12.0
$15.0
$20.0
$57.0
Floor
$0.0
$7.5
$9.0
$11.3
$15.0
$42.8
• 5 year contract and an additional 2 year non-compete
Max Total Consideration: $34.5MM
PV(1) of Max Total Consideration: $28.2MM
Note: (1) PV of up-front payment and maximum earn-outs at 16.5% discount rate
1
Revised Deal Structure
• $20.0MM up-front payment
• Up to $28.0 MM of potential earn-outs tied to exceeding EBITDA thresholds and generating
recurring profits
– Available earn-out = (EBITDA Above Threshold) x 66%; subject to a cap each year
– 50% of available earn-out paid regardless of earnings quality
– 50% of available earn-out multiplied by: (recurring profits (2) /target)
FY09
FY10
FY11
FY12
FY13
Total
Earn-Out Cap
$0.0
$4.0
$6.0
$8.0
$10.0
$28.0
Threshold EBITDA
$0.0
$5.0
$7.0
$10.0
$15.0
$37.0
Minimum EBITDA to Fully Earn-out
$0.0
$11.1
$16.1
$22.1
$30.2
$79.4
Recurring Profit Target
N/A
$5.0
$10.0
$15.0
$25.0
• After a 4 year employment contract:
– If Davies chooses not to stay; he is subject to a 2 year non-compete
– If Davies wants to stay; SPT may retain him for 2 years
– If Davies wants to stay and SPT doesn’t retain him; he is not subject to a 2 year non-compete
Max Total Consideration: $48.0 MM
PV(1) of Max Total Consideration: $35.7MM
Note: (1) PV of up-front payment and maximum earn-outs at 16.5% discount rate
(2) Syndication Profits + International Format Fees
2
Under the Revised Structure, Maximum Earn-outs are Greater but
Only if Davies Creates Greater Value for SPE
Revised Deal Structure
Low
FY09
EBIT (after earn-out)
Earn-out
SPE NPV
Medium
(1)
FY11
($2.4)
$0.5
$0.0
$0.0
SPE NPV
(1)
Earn-out
SPE NPV
(1)
Maximum
Earn-out
SPE NPV
(1)
Total
FY09
$2.7
$7.4
$12.9
$21.1
EBIT (after earn-out)
$0.0
($1.6)
($2.4)
($4.0)
Earn-out
SPE NPV
(1)
FY10
FY11
FY12
FY13
Total
$0.5
$2.8
$7.5
$13.0
$21.4
EBIT (after earn-out)
$0.0
$0.0
$0.0
($1.7)
($2.6)
($4.3)
Earn-out
FY10
FY11
FY12
FY13
Total
(1)
$1.3
$3.6
$8.0
$13.8
$24.7
EBIT (after earn-out)
$0.0
$0.0
($0.2)
($2.7)
($3.9)
($6.8)
Earn-out
SPE NPV
FY10
FY11
FY12
FY13
Total
($3.5)
$3.6
$6.6
$10.6
$16.7
$34.0
$0.0
($4.0)
($6.0)
($8.0) ($10.0) ($28.0)
$61.8
Note: (1) NPV at 16.5% = PV of Acquired EBITDA + PV of Exit at 10x – PV of Consideration
FY11
($2.4)
$0.5
$0.0
$0.0
(1)
Earn-out
SPE NPV
(1)
FY13
Total
$2.7
$7.7
$11.5
$20.0
$0.0
($1.2)
($3.8)
($5.0)
FY10
FY11
FY12
FY13
Total
($2.4)
$0.5
$2.8
$7.7
$11.5
$20.1
$0.0
$0.0
$0.0
($1.5)
($4.1)
($5.6)
FY10
FY11
($2.0)
$1.3
$0.0
$0.0
$2.7
FY12
FY13
Total
$3.8
$7.6
$12.7
$23.4
$0.0
($3.1)
($5.0)
($8.1)
$14.4
FY09
EBIT (after earn-out)
FY12
$1.0
FY09
($2.0)
$15.0
FY10
FY09
SPE NPV
$3.3
FY09
EBIT (after earn-out)
FY13
($2.4)
FY09
EBIT (after earn-out)
FY12
$1.5
FY09
EBIT (after earn-out)
Earn-out
High
FY10
Original Deal Structure
FY10
FY11
FY12
FY13
Total
($3.5)
$4.0
$5.5
$7.5
$11.5
$25.0
$0.0
($2.5)
($3.0)
($4.0)
($5.0) ($14.5)
$10.0
3
– Appendix –
4
Example Earn-out Calculation
Assumptions
Calculation
• Earn-out Cap:
$10.0M
• EBITDA Above Threshold = ($20 - $15 = $5)
• Threshold EBITDA:
$15.0M
• Available Earn-out = (66% x $5 = $3.3)
• EBITDA Achieved:
$20.0M
• Recurring Profit Target:
$25.0M
• Recurring Profit Achieved:
$12.5M
–50% of Available Earn-out paid
automatically = (50% x $3.3 = $1.65)
–50% of Available Earn-out subject to
Ratio = (50% x $1.6 = $1.8)
(Ratio = $12.5/$25.0 = 50%)
Total Earn-out Paid
$2.4M
5
Key Assumptions – Revised Deal Structure
Low Case
Mid Case
High Case
Model Assumptions
Model Assumptions
Model Assumptions
• Chargeback: 0%
• Chargeback: 0%
• Chargeback: 5%
• Interactive Growth: 0%
• Interactive Growth: 5%
• Interactive Growth: 10%
EBIT
FY09
EBIT
FY10
FY11
FY12
FY13
($0.1)
$2.9
$5.9
$9.6
$14.9
Incremental EBITDA
$1.2
$1.1
$0.3
$2.8
$3.9
Total EBITDA
$1.1
$4.0
$6.2
$12.5
$18.8
Amortization
($3.5)
($3.5)
($3.5)
($3.5)
($3.5)
EBIT b/f Earn-out
($2.4)
$0.5
$2.7
$9.0
$15.3
$0.0
$0.0
$0.0
($1.6)
($2.4)
($2.4)
$0.5
$2.7
$7.4
$12.9
0%
0%
0%
17%
15%
Status Quo - P10 EBITDA
Total Earn-Out
EBIT
EO / EBIT b/f EO
FY09
FY10
FY11
FY12
FY13
($0.1)
$2.9
$5.9
$9.6
$14.9
Incremental EBITDA
$1.2
$1.1
$0.4
$3.1
$4.2
Total EBITDA
$1.1
$4.0
$6.3
$12.7
$19.1
Amortization
($3.5)
($3.5)
($3.5)
($3.5)
($3.5)
EBIT b/f Earn-out
($2.4)
$0.5
$2.8
$9.2
$15.6
$0.0
$0.0
$0.0
($1.7)
($2.6)
($2.4)
$0.5
$2.8
$7.5
$13.0
0%
0%
0%
19%
16%
Status Quo - P10 EBITDA
Total Earn-Out
EBIT
EO / EBIT b/f EO
Recurring Profits
FY09
FY10
FY11
FY12
FY13
($0.1)
$2.9
$5.9
$9.6
$14.9
Incremental EBITDA
$1.6
$1.9
$1.4
$4.6
$6.3
Total EBITDA
$1.5
$4.8
$7.3
$14.2
$21.2
Amortization
($3.5)
($3.5)
($3.5)
($3.5)
($3.5)
EBIT b/f Earn-out
($2.0)
$1.3
$3.8
$10.7
$17.7
$0.0
$0.0
($0.2)
($2.7)
($3.9)
($2.0)
$1.3
$3.6
$8.0
$13.8
0%
0%
5%
25%
22%
Status Quo - P10 EBITDA
Total Earn-Out
EBIT
EO / EBIT b/f EO
Recurring Profits
FY09
FY10
FY11
FY12
FY13
$0.9
$4.0
$6.8
$13.9
$22.3
Recurring Profits
EBIT
Net Present Value
Recurring Profits
Recurring Profits
FY09
FY10
FY11
FY12
FY13
$0.9
$4.0
$6.8
$13.9
$22.3
Net Present Value
Recurring Profits
FY09
FY10
FY11
FY12
FY13
$0.9
$4.0
$6.8
$13.9
$22.3
Net Present Value
Acquired EBITDA (1): $5.7
Acquired EBITDA (1): $9.1
Value of Exit (2): $19.7
Value of Exit
Total Consideration: ($21.9)
Total Consideration: ($22.1)
Total Consideration: ($23.4)
Net Present Value: $1.5
Net Present Value: $3.3
Net Present Value: $15.0
Consideration / 2007 EBITDA (3): 6.3x
Consideration / 2007 EBITDA (3): 6.3x
Consideration / 2007 EBITDA (3): 6.7x
Acquired EBITDA (1): $5.3
Value of Exit
(2):
$18.2
(2):
$29.3
Notes: Assumes a risk adjusted discount rate of 16.5% for all NPV calculations
(1) Includes value of new shows and excludes value of shows created under current contract (i.e., excludes P10 from incremental value calculation)
6
(2) Includes exit at 10x multiple in 2013
(3) Assumes $3.5M in EBITDA for 2007
Key Assumptions – Original Deal Structure
Low Case
Mid Case
High Case
Model Assumptions
Model Assumptions
Model Assumptions
• Chargeback: 0%
• Chargeback: 0%
• Chargeback: 5%
• Interactive Growth: 0%
• Interactive Growth: 5%
• Interactive Growth: 10%
EBIT
FY09
Status Quo - P10 EBITDA
EBIT
FY10
FY11
FY12
FY13
($0.1)
$2.9
$5.9
$9.6
$14.9
$1.2
$1.1
$0.3
$2.8
$3.9
Incremental EBITDA
Total EBITDA
FY09
Status Quo - P10 EBITDA
Incremental EBITDA
FY10
FY11
FY12
FY13
($0.1)
$2.9
$5.9
$9.6
$14.9
$1.2
$1.1
$0.4
$3.1
$4.2
FY09
Status Quo - P10 EBITDA
Incremental EBITDA
FY11
FY12
FY13
$2.9
$5.9
$9.6
$14.9
$1.6
$1.9
$1.4
$4.6
$6.3
$1.1
$4.0
$6.2
$12.5
$18.8
$1.1
$4.0
$6.3
$12.7
$19.1
$1.5
$4.8
$7.3
$14.2
$21.2
($3.5)
($3.5)
($3.5)
($3.5)
($3.5)
Amortization
($3.5)
($3.5)
($3.5)
($3.5)
($3.5)
Amortization
($3.5)
($3.5)
($3.5)
($3.5)
($3.5)
EBIT b/f Earn-out
($2.4)
$0.5
$2.7
$9.0
$15.3
EBIT b/f Earn-out
($2.4)
$0.5
$2.8
$9.2
$15.6
EBIT b/f Earn-out
($2.0)
$1.3
$3.8
$10.7
$17.7
$0.0
$0.0
$0.0
($1.2)
($3.8)
$0.0
$0.0
$0.0
($1.5)
($4.1)
$0.0
$0.0
$0.0
($3.1)
($5.0)
($2.4)
$0.5
$2.7
$7.7
$11.5
($2.4)
$0.5
$2.8
$7.7
$11.5
($2.0)
$1.3
$3.8
$7.6
$12.7
0%
0%
0%
14%
25%
0%
0%
0%
16%
26%
0%
0%
0%
29%
28%
EBIT
EO / EBIT b/f EO
Total Earn-Out
EBIT
EO / EBIT b/f EO
Recurring Profits
Total Earn-Out
EBIT
EO / EBIT b/f EO
Recurring Profits
FY09
FY10
FY11
FY12
FY13
$0.9
$4.0
$6.8
$13.9
$22.3
Recurring Profits
Total EBITDA
FY10
($0.1)
Amortization
Total Earn-Out
Total EBITDA
EBIT
Net Present Value
Recurring Profits
Recurring Profits
FY09
FY10
FY11
FY12
FY13
$0.9
$4.0
$6.8
$13.9
$22.3
Net Present Value
Recurring Profits
FY09
FY10
FY11
FY12
FY13
$0.9
$4.0
$6.8
$13.9
$22.3
Net Present Value
Acquired EBITDA (1): $5.7
Acquired EBITDA (1): $9.1
Value of Exit (2): $19.7
Value of Exit
Total Consideration: ($22.4)
Total Consideration: ($22.7)
Total Consideration: ($24.0)
Net Present Value: $1.0
Net Present Value: $2.7
Net Present Value: $14.4
Consideration / 2007 EBITDA (3): 6.0x
Consideration / 2007 EBITDA (3): 6.5x
Consideration / 2007 EBITDA (3): 6.9x
Acquired EBITDA (1): $5.3
Value of Exit
(2):
$18.2
(2):
$29.3
Notes: Assumes a risk adjusted discount rate of 16.5% for all NPV calculations
(1) Includes value of new shows and excludes value of shows created under current contract (i.e., excludes P10 from incremental value calculation)
7
(2) Includes exit at 10x multiple in 2013
(3) Assumes $3.5M in EBITDA for 2007
Comparison of Max Earn-out Cases
Original Structure: Max Earn-out
Revised Structure: Max Earn-out
Model Assumptions
Model Assumptions
• EBITDA fixed at Earn-out target
• EBITDA fixed at Format target
levels
levels
EBIT
FY09
Status Quo - P10 EBITDA
($0.1)
EBIT
FY10
FY11
FY12
FY13
$2.9
$5.9
$9.6
$14.9
Incremental EBITDA
$0.1
$7.1
$6.1
$5.4
$5.1
Total EBITDA
$0.0
$10.0
$12.0
$15.0
$20.0
Amortization
($3.5)
($3.5)
($3.5)
($3.5)
($3.5)
EBIT b/f Earn-out
($3.5)
$6.5
$8.5
$11.5
$16.5
Total Earn-Out
EBIT
$0.0
($2.5)
($3.0)
($4.0)
($5.0)
($3.5)
$4.0
$5.5
$7.5
$11.5
0%
38%
35%
35%
30%
EO / EBIT b/f EO
FY09
Status Quo - P10 EBITDA
FY09
FY10
FY11
FY12
FY13
N/A
$2.9
$5.9
$9.6
$14.9
FY13
$9.6
$14.9
$0.1
$8.2
$10.2
$12.5
$15.3
Total EBITDA
$0.0
$11.1
$16.1
$22.1
$30.2
Amortization
($3.5)
($3.5)
($3.5)
($3.5)
($3.5)
EBIT b/f Earn-out
($3.5)
$7.6
$12.6
$18.6
$26.7
Total Earn-Out
EBIT
EO / EBIT b/f EO
$0.0
($4.0)
($6.0)
($3.5)
$3.6
$6.6
$10.6
($8.0) ($10.0)
$16.7
0%
53%
48%
43%
38%
Recurring Profits
FY09
FY10
FY11
FY12
FY13
N/A
$5.0
$10.0
$15.0
$25.0
Acquired EBITDA (1): $26.4
Value of Exit (2): $71.1
$23.8
Total Consideration: ($28.2)
Total Consideration: ($35.7)
Net Present Value: $10.0
Consideration / 2007 EBITDA
FY12
$5.9
Net Present Value
Acquired EBITDA (1): $14.4
(2):
FY11
$2.9
Recurring Profits
Net Present Value
Value of Exit
FY10
Incremental EBITDA
Recurring Profits
Recurring Profits
($0.1)
Net Present Value: $61.8
(3):
8.1x
Consideration / 2007 EBITDA (3): 10.2x
Notes: Assumes a risk adjusted discount rate of 16.5% for all NPV calculations
(1) Includes value of new shows and excludes value of shows created under current contract (i.e., excludes P10 from incremental value calculation)
8
(2) Includes exit at 10x multiple in 2013
(3) Assumes $3.5M in EBITDA for 2007