Definitions

In this Facility letter, the following expressions shall have the following meanings, unless the context otherwise requires. 'Insurance Policies' 'Interparty Agreement' 'Laboratory' 'Laboratory Pledgeholder's Agreement' 'Production Agreements' 'Production Finance Facility' 'Repayment Date' 'Repayment Schedule' 'Rights' 'Sales Agency Agreement' 'Sales Estimates' (Gap deals only) The definitions section is self-evident, but operates to set out the full meaning of any defined terms that are used...

Application on the assigned receipts

3.1 Upon receipt of the Bank's Assigned Receipts, the Bank shall be entitled to retain and shall immediately apply the same on account of the Obligations. Upon the indefeasible repayment of the Obligations in full, the Bank shall i. notify the Licensee, the Completion Guarantor, and the Producer thereof in writing (such notice being herein referred to as the 'Termination Notice') and thereupon the authority, instructions, and directions from the Producer to the Licensee under Paragraph 2 hereof...

Arbitration

7.1 Notwithstanding anything to the contrary in the Licence Agreement or elsewhere, the Licensee, the Producer and the Completion Guarantor and the Bank hereby agree that in the event any dispute, claim or controversy arises between any of the parties hereto with respect to this Agreement, whether in contract, tort, equity or otherwise or as to whether Mandatory Delivery has been made or whether any sums are owing pursuant to the Licence Agreement or the Completion Guarantee, the parties agree...

Banks and Security Documents An Introduction

This chapter looks at the form and content of the agreements that a bank typically will require a borrower to enter into in connection with a secured loan facility for the purposes of financing a film transaction. This chapter is written on the basis that a film production partnership, or company, is the borrower and that the bank, as security for its loan facility, requires a charge and assignment over the borrower's rights in the film and key contracts in connection with the film. The content...

Basis of opinion

I We have received all the information and documents necessary to enable me us to ascertain the amount of production expenditure and the labour costs (as defined in paragraphs 4 and 6 respectively, of Schedule 1 to the Films Act 1985) of the film. This includes a proper and reasonable proportion of any annual salaries and fees to be attributed directly to the making of the film, and the allocation of these, in accordance with the requirement of paragraphs 4 and 7 of that Schedule regarding a...

Bb Joint Responsibility

Except as otherwise provided in this Agreement, the Co-producers shall have joint responsibility for managing all aspects of the production of the Film, including all financial and creative decisions. In the event that the Co-producers shall fail to agree on any matter after reasonable consultation then, subject always to the provisions of this Agreement and the requirements of the Treaty and any special conditions imposed by the Relevant Authority, and to the constraints of the Budget and the...

Offer period

This offer will be available to the Borrower for acceptance until from the date of this Facility Letter, after which date the offer will lapse unless extended in writing by the Bank . A bank may attach certain conditions to the time-frame within which a borrower may actually draw down the facility. This caters for circumstances in which both the bank and the borrower might sign the agreement but where the borrower does not require the Facility monies on day one of the facility letter....

Date [ [ Notes to the Agreement

This letter is by way of Acknowledgement of the Notice of Assignment and payment instructions and serves as evidence to the Bank that the legal requirement to serve Notice of Assignment has been complied with. The Acknowledgement creates a direct contractual link between the Bank and the relevant party to the Agreement that has been assigned. The Bank will usually require that the Acknowledgement of Notice of Assignment contains certain acknowledgements and undertakings on the part of the...

Dd Engagement of Individuals

Each of the Co-producers shall be primarily responsible for the engagement (on terms to be agreed between them) of the respective nationals whose services are required and utilized for the production, completion and delivery of the Film. All such engagements as aforesaid must be within the financial and other terms as required and stipulated by the Budget and the Production Schedule. If the terms of such engagements cannot be agreed between the Co-producers the decision of shall be final. All...

Duration and Extent of Rights Granted

The agreement must contain a clause that sets out how long the producer can exploit the underlying rights. For feature films it is advisable to acquire as many rights as possible for the full period of copyright. A short duration will ultimately affect the sales agent's or distributor's ability to exploit the finished film. Most financiers or end users such as distributors will not acquire rights in a film unless the producer has all rights in the underlying work and subsequent film for the...

Enforcement

3.1 The security and charge created pursuant to this Charge shall become enforceable at any time after the occurrence of an Event of Default. 3.2 In addition to the foregoing provisions of this Clause, the Bank may at any time after an Event of Default is declared appoint in writing a Receiver or Receivers of the Charged Assets on such terms as to remuneration and otherwise as it shall think fit, and may from time to time remove any Receiver and appoint an alternative receiver. 3.3 If a...

Enterprise Investment Schemes EIS

EIS schemes encourage small, higher risk, unquoted trading companies to raise finance by issuing full risk ordinary shares to investors who are resident and ordinarily resident for tax purposes in the UK. They can provide a much needed and valuable source of equity to UK film production companies. Finance is sourced by the issue of a prospectus to the public and the sale of new, ordinary shares to investors in a 'qualifying' public limited company. The production of feature films is classed as...

Film production companies

EIS investment offers film production companies an alternative method of raising finance for the development and production of feature films to the more established a. film partnerships providing equity investment in the production costs of a film (these schemes afford high net worth investors a 40 per cent tax break on the cost of production but normally have a very high threshold for minimum investment in the scheme) b. sale and leaseback funds (which may be prevented from being combined with...

Financial Services Regime

Many LLPs, utilized as film fund vehicles will, unless the members have had the responsibility for the 'day to day' running of the LLP (which recent case law states must be actual involvement as opposed to the right to be consulted over the more material matters of the business of the LLP), constitute an unregulated 'collective investment scheme' (CIS) for purposes of the Financial Services and Markets Acts 2000 (FSMA) and the Financial Services Authority (FSA). The implications of an LLP being...

Management of the production

This section deals with the management of the production. It looks at the issue of joint responsibility and usually outlines which co-producer has the ultimate say should there be a disagreement. It will discuss the engagement of individuals, cast and crew and the structure for this engagement. Also the issue of insurances, E& O (errors and omissions) and completion guarantees, etc., access to the locations, studios and facilities, delivery and registration of the film. It will also confirm...

General

6.1 In the performance of its duties and exercise of its powers under this Agreement, FCAM will be entitled to rely upon any document reasonably believed by FCAM to be genuine and to have been sent or signed by the person by whom it purports to have been sent or signed and the opinion and statements of any professional advisor selected by FCAM in connection herewith and shall not be liable to any Party for any consequence of any such assumption, action or reliance. 6.2 FCAM and FCustody shall...

HDistribution Rights

It is hereby acknowledged that all distribution rights in the Film in the Remaining Territory shall be granted to a mutually agreed sales agent. For the avoidance of doubt any and all receipts and revenues derived by the Co-producers arising from the exploitation of the Film and all allied and ancillary rights in the Remaining Territory shall be allocated to the Co-producers in the same proportions as their contributions respectively. i. Principal photography of the Film is scheduled to...

Maximum amount of facilityincreased costs

A bank is similar to any other corporate entity in that it is subject to tax on its profits against which it may set off its losses and it is also subject to special statutory requirements imposed on banks in order to ensure that, for the protection of bank customers, a bank has adequate capital reserves at any given time. When making available a Facility a bank will always calculate the rate of return or, put simply, amount of profit, that it will earn as a result of lending to the borrower....

Fees and costs

A bank will always charge a fee for making available a facility and may well seek to recover its legal and other costs from the borrower. These items are specified and described in this clause. It is important for the borrower always to check the terms and dates on which any fees or expenses will be payable. It is common practice for the bank to deduct its fees and expenses from the principal amount of the Facility made available to the borrower. Potentially, this could result in the borrower...

Registration of the Film

Each Co-producer shall register the Film and all relevant contracts with the relevant national authorities in its own country and shall bear itself the costs of such registration unless such costs are included in the Budget. jj. The Co-producers acknowledge that any and all benefits received from the Relevant Authorities in respect of the Film shall be the sole property of the Co-producer to which such benefit is paid. kk. All receipts from the exploitation of the Film shall be applied on the...

Incorporation of the LLP

Much like limited companies, LLPs are incorporated by registration at Companies House and the incorporation document (Form LLP2) must be submitted by the initial members of the LLP. The Form LLP2 will set out the name of the LLP, the registered office address, details of the initial members and will identify which of those members are to be the designated members, together with a statement that the LLP complies with the LLP Act. On incorporation, the Registrar of Companies will issue the LLP...

Instruction

From Film Partnership as Borrower and Chargor (the ' Film Partnership ', 'we' or 'us') This Notice is given pursuant to the agreement (the 'Agreement') made between us and you dated relating to the Film. We hereby give you notice that under a deed of charge and assignment dated we have assigned our right to receive advances or other sums payable by you to us pursuant to the Agreement (the 'Payments') to the bank ('Bank') by way of security, and we hereby give you irrevocable authority and...

Interpretation

1.1 In this Charge, the following expressions shall have the following meanings unless the context otherwise requires 'Bank' includes persons deriving title under the Bank 'Borrower' includes persons deriving title under the Borrower or entitled to redeem this security 'Charge' means this charge and any and all schedules, annexures and exhibits attached to it or incorporated by reference 'Charged Assets' means, to the extent of the Borrower's right in and title to such assets, the Film, the...

Introduction

Increasingly over the past few years one of the most important items in the producer's toolbox has been an understanding of coproduction treaties and conventions. The British Government has entered into co-production treaties with other countries in Europe and around the world with the purpose of encouraging a pooling of creative, artistic, technical and financial resources among producers of those countries. Films produced under the terms of a co-production treaty qualify as national content...

Termination and force majeure

I. commit a material breach of this Agreement and (if capable of remedy) shall fail to remedy the same within 7 days of written notice notifying the breach and requiring its remedy or ii. go into liquidation (other than for the purposes of solvent amalgamation or reconstruction) or become insolvent or bankrupt or have a liquidator, receiver, administrator or other similar official appointed over any of its assets or fail to satisfy any final judgement within 7 days thereof or shall cease to...

Representations warranties and indemnity

In many respects, the purpose of this clause correlates with the purpose of the conditions precedent clause. A bank will lend on the basis of a certain set of facts as presented to it by the borrower. Whilst the conditions precedent constitute documentary evidence of those facts, the representations and warranties are statements made by the borrower confirming the set of facts is true. Again, as with conditions precedent, the nature of the representations to be made by the borrower will closely...

L Covenants

This clause contains covenants that are essentially promises by the borrower in favour of the bank to do or undertake certain actions. Covenants will vary in subject matter in accordance with the nature of the borrower's business and the purposes for which the facility is required. Some covenants may aid the flow of information between the bank and the borrower, for example a covenant by the borrower to provide the bank with specified information regarding the progress of the film covenants by...

L Entire agreement

This Agreement (including the Schedules hereto, which are deemed a part of this Agreement) constitutes the entire agreement between the parties hereto in respect of the subject matter hereof and no terms, obligations, representations, promises or conditions, oral or written, express or implied, have been made or relied upon other than those contained herein. For the avoidance of doubt each party irrevocably waives any right it may have to seek a remedy for i. any misrepresentation which has...

Limited liability

An LP generally offers limited liability for investors. However, one partner must still act as a general partner (GP) with unlimited liability. In practice, a special purpose vehicle without assets is usually set up as the GP to try to 'ring fence' any potential liability. In an LLP all the partners (or 'members' as they are more commonly known) enjoy limited liability and their position is largely analogous with that of shareholders in a limited company in that, subject to certain limited...

M Notices

Any notice required to be given under the provisions of this Agreement shall be in writing and in English, shall be copied by the sender to all of the other Co-producers and shall be deemed to have been duly served if hand delivered or sent by facsimile or other printout communication mechanisms or, within the United Kingdom, by pre-paid special or first class recorded delivery post, or, outside the United Kingdom, by pre-paid international recorded airmail, correctly addressed to the relevant...

Matters pertaining to the licence agreement

1.1 The Producer and the Licensee each represent and warrant that, as of the date hereof, no default exists under the Licence Agreement, that the Licence Agreement is in full force and effect and that the Licence Fee (as hereinafter defined) shall be payable to the Bank in the manner set forth therein, as herein modified. 1.2 The Licensee hereby acknowledges, for the benefit of the Bank and the Completion Guarantor only, that it has approved all elements of the Film over which the Licensee has...

N Governing law

This Agreement shall be construed and performed in all respects in accordance with, and shall be governed by, the laws of and the parties irrevocably submit to the exclusive jurisdiction of the Court of . IN WITNESS whereof the parties hereto have executed this instrument the day, month and year first above written. SIGNED and DELIVERED by UK CO-PRODUCER Schedule 1. Production specifications The Film shall be a 35 mm sound and colour film provisionally entitled ' ' originally recorded in the...

Notes to the Agreement

In order for an assignment of the benefit of any agreement or other assets to be legally effective, the party assigning its rights must give written notice to the other party or parties to the agreement. In this particular example, the Notice includes a payment instruction that the other party to the agreement should pay all amounts payable under that agreement direct to the Bank. For example, if giving notice to a distributor following assignment of the benefit of a Distribution Agreement, the...

Obligations of the Parties

Each of the Parties agrees with FCAM, FCustody and with the other Parties 5.1 that they will not during the term of this Agreement authorize or permit any third party to collect or administer Gross Receipts nor will any Party interfere with, frustrate or take any action contrary to the terms of this Agreement 5.2 to provide FCAM promptly with copies of all SubDistribution Agreements, other relevant agreements, irrevocable instructions or other information FCAM may reasonably request in order to...

Other acceptable security

At the time of writing (March 2004) there is an active market in providing advance funding on the net producer benefit arising out of a UK sale and leaseback agreement. Some banks are prepared to look at these agreements in the same way as they look at distribution agreements and it may be possible to obtain up to 100 per cent of the estimated net producer benefit. The principal conditions applying will be the issuance of preliminary approval of co-production status by the Department for...

Payments to the bank and rights of offset

4.1 Subject to Mandatory Delivery (as hereinafter defined) being effected, the Licensee hereby agrees to make payment of the Licence Fee to the Bank as provided in Paragraph 2 hereof, in full, without offsets, withholdings, counterclaims or defences which the Licensee may have or claim against the Producer pursuant to the Licence Agreement (including without limitation, any right of cross-collateralization with respect to any other films or programmes), all of which are expressly reserved by...

Payments under the Guarantee

If the completion guarantor needs to pay for completion of a film, then it will be entitled to recoup its contribution to the production costs from the first proceeds of exploitation of the film. Once the completion guarantor has paid back the bank or primary financier of the film, then it will be in a position to recoup any monies (including interest) advanced by it. If the completion guarantor takes over the production it is entitled to an assignment of all the agreements relating to the...

Pitfalls

B. during the minimum investment period of 3 years investors may not hold any rights that protect them from the risk of investment such as the right to redeem the shares c. investors may lose their entire investment (although the losses may be set against income or gains at the taxpayer's highest rate of tax under paragraph 2(d) above) d. the 'qualifying' company must be public, thereby exposing it to regulatory and statutory obligations e. if the minimum amount is not raised within 40 days of...

Producer Residuals

All expenses incurred by FCAM as provided for in this Agreement the sum of ( ) to be paid from the first Collected Gross Receipts together with of all Gross Receipts the feature film television programme a brief specification of which is set out in Schedule 3 all monies or any other proceeds derived from Sub-Distribution Agreements or from any other source of exploitation relating to the Film or the Rights received by any Party directly or indirectly the persons, firms or entities specified in...

Protection of the bank and receiver

9.1 Neither the Bank nor the Receiver shall be liable to the Borrower in respect of any loss or damage which arises out of the exercise or the attempted or purported exercise of or the failure to exercise any of their respective powers. 9.2 Without prejudice to the generality of Clause 9.1, entry into possession of the Film or the Rights or any part of them shall not render the Bank or any Receiver liable to account as mortgagee in possession, and if and whenever the Bank or any Receiver enters...

Protection of third parties

8.1 No purchaser, mortgagee or other third party dealing with the Bank and or any Receiver shall be concerned to enquire whether any of the powers which they have exercised or purported to exercise has arisen or become exercisable or whether the Secured Amounts remain outstanding or as to the propriety or validity of the exercise or purported exercise of any such power, and the title of a purchaser or other person and the position of such a person shall not be prejudiced by reference to any of...

Representations and warranties

The Producer hereby represents and warrants to Y with respect to f. Except as set out above, it has not sold, transferred, assigned or otherwise disposed of any of its right, title and interest in and to the Screenplay. g. It has the right and capacity to enter into and perform this Agreement. h. There are no liens or encumbrances on the Screenplay, and no claims have been made or litigation instituted or, to the best of its knowledge, threatened with respect thereto. i. It has not produced or...

Sale and leaseback a case study Transaction

The Producer, a UK company, sells a film to a partnership for, say, 10 million and enters into a 15-year lease. a. Producer issues an invoice to the partnership for 10 million + VAT 17.5 per cent ( 1,750,000). b. The partnership invoices producer for all 15-year lease payments for, say, 13 million + VAT 17.5 per cent ( 2,275,000). VAT applies where the seller lessee is a UK company. In the above example, the producer is therefore in a net VAT payable position to the partnership of 525,000 (...

Schedule B Form of LC Demand Certificate

Irrevocable Letter of Credit No Dated 200 issued by In favour of We refer to the above Letter of Credit (the 'Letter of Credit'). Terms defined in the Letter of Credit have the same meanings when used in this L C Demand certificate. We are not in receipt of the Certificate of Delivery. Accordingly we hereby demand the amount of ( pounds sterling). This payment is demanded in accordance with, and is due under, Clause 2 of the Letter of Credit. Yours faithfully (Authorized Signatory) Schedule 2...

Schedule Definitions

In this Agreement the following words and expressions shall have the meanings hereby ascribed to them which meanings shall apply to this Agreement and the Schedules hereto 'Accounting Currency' 'Beneficiary (ies)' 'Completion Guarantor' 'Delivery Date' those persons, firms or entities specified in Schedule 4 any day excluding Saturdays, Sundays and any days which are public holidays in the country in which any of the Parties has its principal place of business a designated bank account held in...

Schedule II Definitions

Budget the final budget of the Film dated , 200 , which has been approved in writing by the Producer, the Guarantor and, if required, the Distributor(s) and Financier. Guarantor hereby acknowledges its receipt and approval of the Budget. Budget Costs the projected production costs of the Film as set forth in the Budget. Budget Funds the monies needed to pay the Budget Costs. Complete and Deliver the Film the term 'Complete and Deliver the Film' shall have the meaning specified in Schedule I....

Tax transparency

Both LPs and LLPs are tax transparent vehicles, that is to say that each of the investing members is considered to be undertaking a pro-rated part of the partnership trade with a view to a profit (this last requirement excludes charities from being set up as LLPs or other forms of partnership). However, this may cause some timing difficulties in terms of a member's individual tax liability in that, if a profit accrues to the LLP, the member will be liable to pay tax on such profit when it...

Termination of obligations

The Issuer shall be released from its obligations under Clause 2 (without prejudice to any then outstanding liability of the Issuer to the Beneficiary as a result of a L C Demand complying with the terms of this Letter of Credit having already been made) on the earlier to occur of A. the date (if any) notified by the Beneficiary to the Issuer in writing as the date upon which the obligations of the Issuer hereunder are to be released and this Letter of Credit is returned or B. if no L C Demand...

Territory

Reference to the manner or place or means by which the Film is exploited and which have been notified to FCAM in writing all copyright and similar rights in and to the Film and all ancillary or associated rights thereto or in the underlying rights thereof the proceeds from the exploitation of which are intended by the Parties to be collected and distributed pursuant to the terms hereof a statement by FCAM specifying the sources from which Collected Gross Receipts have been derived and their...

The Completion Agreement

The completion guarantor will enter into a separate agreement with the producer that gives the guarantor certain rights of control in relation to the production so that it can perform its obligations to the financier or bank. The completion agreement ensures that the producer undertakes to deliver the film on budget and on time and according to the specifications of all the various financiers and or distributors. The main focus of the completion agreement is that the completion guarantor will,...

The Insiders Guide to Film Finance

Philip Alberstat BSc BA LLB (London) AMSTERDAM BOSTON HEIDELBERG LONDON NEW YORK OXFORD PARIS SAN DIEGO SAN FRANCISCO SINGAPORE SYDNEY TOKYO Focal Press is an imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP 30 Corporate Drive, Burlington MA 01803 Copyright 2004, Philip Alberstat. All rights reserved The right of Philip Alberstat to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988 No part of this publication...

The rights

All proprietary, statutory, contractual and common law rights throughout the world acquired by the Borrower whether as owner, maker, author or otherwise, in and to the Film and any other videotape, computer film, computer disk, film and any sound recordings made in the course of the production of the Film, including the Source Material, and without prejudice to the generality of the foregoing but subject to the Sales Agency Agreement, the Distribution Agreement, and the Completion Guarantee...

The [ Territory

Sums amounting in the aggregate to per cent of the Budget or of the Cost of Production which is the estimated cost of producing and delivering the Film as the same shall be approved by the Co-producers annexed hereto as Schedule 2 the cashflow schedule for the Film as approved by the parties hereto and annexed hereto as Schedule 3 the British Contribution and or the Contribution as the context permits the final total aggregate cost of all items included in the original Budget actually incurred...

The Coproducers Contributions

The Co-producers shall each be responsible for advancing or causing to be advanced a proportion of the monies required for the financing of the cost of the production of the Film shall advance or cause to be advanced not less than the Contribution, being ( ) net of all taxes, levies and duties, if applicable, in accordance with the Cashflow Schedule UK CO-PRODUCER shall advance or cause to be advanced not less than the British Contribution, being ( ) net of all taxes, levies and duties, if...

Vesting of rights acknowledgements of priority

5.1 Notwithstanding anything to the contrary set forth in the Licence Agreement, the grant of all rights to the Licensee in respect of the Film (including, without limitation, the copyright interests therein) pursuant to the Licence Agreement or any security agreements or copyright assignments executed in connection therewith shall be subject in all events to the Licensee's indefeasible and irrevocable payment in full of the Licence Fee in accordance with the terms hereof, and the Licensee...

Waivers remedies cumulative

The powers which this Charge confers on the Bank are cumulative and without prejudice to its powers under general law, and may be exercised as often as the Bank deems appropriate. The rights of the Bank and the Receiver (whether arising under this Charge or under the general law) shall not be capable of being waived or varied otherwise than by an express waiver or variation in writing and, in particular, any failure to exercise or any delay in exercising on the part of the Bank or the Receiver...

What about a film that has already been released

Paragraph 70 of the Statement of Practice states that 'where a film is sold prior to general public release for a sum equal to production expenditure the Revenue will not seek to challenge the price This also applies where there is a pre-release agreement and the sale takes place within three months of release'. So, in most cases, the S& L must take place prior to release. However, it is also open for a partnership lessor to purchase a film on the basis of a valuation, i.e., without relying...

What are the costs of the transaction

From the gross benefit, there are three areas of expenditure the producer must take into account and for which he is responsible i. Payment of the guarantee fee to the guarantee bank (referred to in the business as the defeasance bank). Rates that are independently negotiated by the producer are approximately 0.4-0.5 per cent depending on which bank the producer selects. Again, it is a highly important tax principle that the producer must arrange and negotiate the terms of his own guarantee....

What is the applicable legislation

The UK tax write-off is found in Section 48 of the Finance (No. 2) Act 1997. This was added to by the Finance (No. 2) Act 1999 which extended the relief by a further 3 years until 1 July 2005. There are three conditions to be met before Section 48 applies 1. the expenditure must be incurred after 2 July 1997 and before 1 July 2005 2. the total production expenditure on the film must be 15 million or less 3. the film must be 'completed' after 2 July 1997. The government issues detailed...

What is the definition of a British film

To qualify as a British Film, a film must be certified as such by the DCMS under the Films Act 1985 (as amended). There is presently no method available to obtain certification prior to completion of a film. In certain circumstances, the acquisition of film rights by the partnership may take place prior to certification being issued if, either (i) satisfactory evidence has been provided that the film will clearly qualify as a British Film or (ii) security, in the form of a policy of insurance...

What rights does a producer give away

The producer sells the master negative and licenses worldwide distribution rights to the partnership. In order to achieve this, standard form documentation will include a laboratory pledgeholder letter that effectively passes on the ownership of the master negative to the partnership. That is the critical issue for the tax efficiency of this transaction combined with the licence of distribution rights. The licence transfers the worldwide exploitation rights to the partnership by way of licence....

Registration of Security

Where a company (that is a company formed under the Companies' Acts) or a limited liability partnership ('LLP') creates a registerable security interest over its property and assets then, under section 395 of the Companies' Act, that mortgage, charge or security document must be registered at Companies' House within 21 days of the date of its creation. Section 396 of the Companies' Act 1985 lists what constitutes a registerable security interest. A charge and assignment by way of security as...

Books

Independent Producers' Guide to Film & TV Contracts. Focal Press. Andersen, Arthur, 1996. The European Film Production Guide Finance, Tax, Legislation, France, Germany, Italy, Spain, UK (Blueprint Media Business School S.) Routledge. Baumgarten, Paul A., 1992. Producing, Financing and Distributing Film A Comprehensive Legal and Business Guide. Limelight Editions Campisi, Gabriel, 2003. The Independent Filmmaker's Guide to Writing a Business Plan for Investors....

Schedule Distribution of Collected Gross Receipts

To FCAM in payment of FCAM's Remuneration and the FCAM Expenses and thereafter 2. any Residuals as notified to FCAM and thereafter 3. the Completion Guarantor in respect of monies paid out (if any) pursuant to the terms of the Completion Guarantee and thereafter 4. the Distributor in respect of such fees, commissions and expenses as shall have been notified to FCAM pursuant to Clause 5.5 of FCAM's Standard Terms of Agreement and thereafter 5. pari passu the deferees as follows c. Name as to USD...

Sale and Leaseback Transactions

Although sale and leaseback transactions will come to a close in July 2005, it is worthwhile looking at the scheme because of its importance over the last few years to the British film industry. At the time of writing this book, the scheme will be replaced with a transferable tax credit system. Some feel that this type of transferable tax credit system will be similar to the one used in Luxembourg. Check the Department for Culture, Media and Sports DCMS website for further details.

How are sale and leaseback transactions structured

The leasing structure developed in the UK enables a qualifying film to be sold by a producer to a partnership. That partnership is a see-through vehicle for tax purposes and enables tax losses to be passed on to the individual partners in that partnership. The partnership then enters into a finance lease, usually for a period of 15 years, leasing back the distribution rights to either the original producer or a third party. As far as the producer is concerned, the distribution rights will be...

Film Finances Sample Completion Guarantee

We have been informed by referred to herein as 'Producer' that you have agreed to advance to Producer to pay for the production costs of the Film upon the terms and conditions of that certain agreement between yourselves and 'Producer' dated as of , 200 the 'Financing Agreement' . The Producer has also informed us that as a condition to your advancing the funds, you have required the Producer to procure for you a guaranty of completion of the production and delivery of the Film. The Producer...

Rob Sherr

Rob is the Commercial Banking Manager and an Assistant General Manager at Bank Leumi UK plc. He has been in banking for 27 years during which time he has largely been involved with commercial lending. He joined Bank Leumi in 1999 as Head of Media, having spent the previous nine years working at Coutts amp Co. In 1993 he became one of the founding managers of Coutts' Media Banking Office. Under Rob's guidance, Bank Leumi participated in the development of completion bonded finance to video games...

Schedule III Notice Cure and Arbitration Agreement

With respect to any dispute relating to the delivery of the Film the following provisions will apply a. Distributor shall issue a notice 'Objection Notice' specifying the defects in the Completion and Delivery of the Film as defined in the Completion Guaranty to which this Schedule III is attached hereafter 'Delivery' b. The Objection Notice shall specify with particularity and in detail the purported defects in Delivery of the Film, and all items that must be corrected, delivered or...

Cut Through

If the completion guarantor is not part of a large insurance company, then it will obtain re-insurance from a third party insurance broker such as Lloyds of London. The re-insurance is a way for the completion guarantor to spread its risk on a production. A bank participating in financing of a film will require that they are insured directly with the insurance company rather than the third party broker. In these circumstances, the completion guarantor will arrange a 'cut through letter', which...

Security Interest

To the extent, if any, that the Producer owns any right, title or interest in the Collateral, the Producer hereby grants to the Guarantor a security interest in the Collateral to secure repayment of the Secured Sums, if any. Said security interest shall be subject to the Prior Rights, but shall have priority over any other rights or security interests of any other person, company or entity in or with respect to the Collateral, including deferments and gross receipts or net profit...

Conditions precedent

The loan agreement will incorporate a list of all the conditions that will need to be fulfilled before the loan can be drawn down. The length of the list will vary from transaction to transaction but typically will contain between 15 and 40 conditions. Below are some general headings into which these conditions fall and a brief explanation of some individual matters that will need attention. 1. Account opening documents. The bank's account opening requirements must be fulfilled. These will...

Schedule Form of Certificate of Delivery

The undersigned, 'Guarantor' hereby certifies and confirms to ' ' the following in respect of the feature length theatrical film tentatively entitled ' ' 'the Film' . 1. The Film stars as ' ', as ' ', as ' ' or substitute actresses and or actors engaged in accordance with the terms of the Interparty Agreement relating to the Film between, inter alia, and Guarantor. The Film is directed by or a substitute director engaged in accordance with the terms of the Interparty Agreement relating to the...

Schedule Insurance

Cast Insurance in an amount equal to at least 100 per cent of the amount of the Budget to cover, among other things, extra expense necessary to complete the principal photography of the Film due to the death, injury or sickness of any principal performer or the director. b. Negative Insurance in an amount equal to at least 100 per cent of the amount of the Budget to cover, among other things, all risks of direct physical loss, damage or destruction of raw film stock, exposed film, whether...

FCAMS Standard Terms of Agreement

1.1 Any Party owning or controlling any Rights hereby undertakes with FCAM and the other Parties hereto to issue irrevocable instructions to Sub-Distributors in a form approved in writing by FCAM to pay all Gross Receipts directly into the Collection Account. 1.2 The Producer hereby undertakes to procure that the Distributor or, if no Distributor is appointed, the Producer itself will promptly notify FCAM of delivery of the Film to the respective Sub-Distributor s and, to the extent known, the...

Distribution of Gross Receipts

3.1 FCAM shall commence distribution of Collected Gross Receipts from the Collection Account from the later of the Delivery Date or the last date of the month during which Gross Receipts are first credited to the Collection Account and then monthly thereafter for the first year, quarterly for the following two years and annually thereafter. 3.2 FCAM shall not be obliged to remit Entitlements to any Beneficiary unless such Beneficiary is entitled to be paid not less than USD 500.00. 3.3 FCAM...

Foreword

Barely a day goes by without some film-related story making the pages of the average newspaper. We are not just talking about the reviews ghetto, but the lifestyle, travel and business sections. With some films and film companies having become brands in their own right, the corporate divorce between Disney and Pixar was treated to front page treatment. What does this tell us Film has become big news, big business and dominated by the studio big-boys. Maybe. But at the same time part of its...

Liability of the Completion Guarantor

Under a completion guarantee, the guarantor is not liable for any payments under the guarantee until certain condition precedents have been satisfied. In the completion guarantee there are certain conditions whereby the completion guarantor is under no obligation to make any payments until an amount called the 'Strike Price' has been paid into the production bank account. The Strike Price is the total amount of contributions by the financing parties of a production that the guarantor will agree...

Gross Receipts

The Recoupment Schedule set out below reflects a sales agency agreement between a sales agent and a producer in relation to an advance of funds to the producer for certain rights in a film. The term 'Advance' will also be defined in the agreement with the producer. Other terms such as 'Deferred Fees', 'Sales Agent Costs', 'Excluding Sales Agent Costs', 'Gross Receipts', 'Net Receipts', 'Film', 'Producer' and others will also be defined within the agreement. The example below reflects an...

European Convention

The Council of Europe's Convention on Cinematographic Co-production came into force in 1994. The Convention has been ratified by more than twenty European countries, including the UK. As with the official co-production treaties, a production that is produced in accordance with the terms of the Convention will be entitled to receive national status and national benefits from each of the co-producing countries. If one of the co-producers is a British company, the film will be entitled to receive...

Financing Intellectual Property Rights

One of the fundamental elements of the film business is the buying and selling of rights rights in books, scripts, treatments, magazine articles, short stories and various other forms of intellectual property. It is customary for a producer or production company to initially option the underlying rights in a project that is based on an existing form of intellectual property. For economic reasons, the cost of an option is much less than buying the rights. As a rule of thumb, producers generally...

About the Author

Philip Alberstat is a media finance and production lawyer specializing in film, television and broadcasting. He has worked on films such as The 51st State, Goodbye Mr Steadman, Beyond The Sea and numerous television programmes and series. He is on the editorial board of Entertainment Law Review and is the author of the Independent Producers' Guide to Film and TV Contracts 2000 , and Law and the Media 2002 . Philip is involved in raising finance for film and television productions and...

Gap Financing

If you think gap financing is to fix your kids' teeth, think again. Lewis Horowitz, well-known film financier and banker Gap financing, is a form of lending whereby a bank lends money against the value of unsold rights to a film. For example, if the budget for a film is three million pounds 3 m and two million pounds 2 m of the budget is already covered by pre-sales, tax funds, public subsidies and other collateral, the remaining one million pounds 1 m that is not covered by any collateral, is...

Stichting Freeway Custody

This Agreement shall be construed and performed in all respects in accordance with and shall be governed by English Law and the parties irrevocably submit to the arbitration procedure contained in Clause 8. AS WITNESS the hands of the parties hereto the day and year first above written. EXECUTED and unconditionally delivered as its Agreement by FREEWAY CAM B.V. EXECUTED and unconditionally delivered as its Agreement by STICHTING FREEWAY CUSTODY EXECUTED and unconditionally delivered as its...

Net Profits

As a general rule of thumb, a film producer should try to retain 50 per cent of net profits for himself and use the other 50 per cent to pay investors in the film. Producers will be required to pay talent, such as writers, actors and the director, a share of the net profits as part of their overall payment. The balance retained by the producer is sometimes known as 'Producer's Net Profits'. During the deal-making process, it is important to define what the producer is actually offering. Those...

Banking Documents Lucy Walker and Philip Alberstat

Banks and Security Documents - An Introduction 54 Notice of Assignment and Irrevocable Payment 96 Instruction Acknowledgement of Notice of Assignment 98 Laboratory Pledgeholder's Agreement 101 5 The Interparty Agreement 106 6 The Completion Guarantee 121 Liability of the Completion Guarantor 123 Payments under the Guarantee 124 Completion Guarantors 129 How to Find Sample Completion Guarantor's Documents 129 Completion Bond Letter of Commitment 130 Film Finances' Sample Completion Guarantee 131...

Bank Facility Letter

From Name of Bank To Producer Date 200 The bank has agreed to provide you with production finance of up to amount of Facility the 'Production Finance Facility' in respect of the Film as defined below inclusive of all applicable interest, costs and fees subject to the following terms and conditions and repayable in accordance with the Repayment Schedule This is the introductory paragraph to the Facility Letter which is addressed to the Borrowers. The paragraph should contain an indication of the...

Official Coproduction Treaties

These include treaties agreed between Great Britain and Canada, Australia, New Zealand, France, Germany, Italy and Norway. The treaties vary in their individual requirements and guidelines. Some require that the production qualifies under a points system i.e., Australia , where points are awarded to key participants who are nationals of one or other of the co-producing countries, while other treaties have less onerous qualification requirements. See the table for highlights of the individual...

Appendix A Glossary of Film Production and Finance Terms

Above the line term denoting portion of a film's budget, usually including the writer, director, producer and main cast. Access letter a letter under which a laboratory undertakes to honour orders placed by a distributor, even though the laboratory may be owed money by the producer or, in relation to the film, by other persons. See also Laboratory letter and Pledge holder agreement. Adjusted gross deal a distribution agreement where the distributor deducts from gross receipts the costs of...

Notice of assignment and acknowledgement

The Producer hereby notifies the Licensee that it has irrevocably assigned to the Bank and has granted the Bank a security interest in and to all right, title, and interest in and to the Film, the Producer's rights in and to and under the Licence Agreement, the licence fee payable to the producer in respect of the Film under Paragraph of the Licence Agreement in the amount of the 'Licence Fee' and any and all other sums if any payable thereunder or hereunder collectively, the 'Bank's...

Letter of Credit

Irrevocable Letter of Credit - insert name of film production partnership or company On the terms and subject to the conditions set out below, Issuer hereby issues this irrevocable Letter of Credit in favour of the Beneficiary at the request of the Distributor. The introductory paragraph relates to issuance of the letter of credit in favour of the Beneficiary. In this example, the letter of credit has been issued at the request of the Distributor. In film transactions, letters of credit and or...

Termination

9.1 FCAM and FCustody may at any time terminate this Agreement upon thirty 30 Business Days by written notice to all of the Parties provided that FCAM's and FCustody's notice shall specify the arrangements proposed to be made by FCAM and FCustody to pay Entitlements which, apart from such termination, would then have been payable to Beneficiaries under the provisions hereof and FCAM and FCustody shall give good faith consideration to any representations made to FCAM and FCustody concerning such...

Credit Provisions

The credit provisions will be checked to ensure that prior to delivery of the film, the writer or author will receive their agreed credit. This provision should state that any inadvertent failure to give a credit will not enable the individual entitled to that credit to seek an injunction against the producers or subsequent theatrical distributor. If this was the case, then a writer who was entitled to a credit that was not given for whatever reason could actually stop the film from being...

Security

The obligations of the Borrower to the Bank under this Facility Letter shall be secured by security in the Bank's preferred form as follows d The Laboratory Pledgeholder's Agreement e Such Distributor Notices as may be relevant and Any future security which the Bank may from time to time hold for the Borrower's liabilities relating to the Film. ii. For the avoidance of doubt, the Borrower acknowledges that all security held and to be held by the Bank for the Borrower's liabilities shall,...

Completion Guarantees

A completion guarantee is a particular type of contract of insurance required by financiers and distributors of films to protect the investment they have made until such time as the film is delivered to them for exploitation. Completion guarantors are specialist companies who offer a form of insurance coverage against certain events that could prevent a film production from being completed. Contributors to the financing of a production would lose their investment, without a hope of return, if a...

Certificate of Authorship

Reference is made to the film currently entitled the 'Film' I, Name of Writer hereby certify that I wrote the original screenplay entitled 'the Work' and that pursuant to various assignment agreements, 'the Producer' owns all right, title and interest throughout the world in and to said Film based on the Work and the results and proceeds of my writing services in accordance with the said agreement and the Producer shall be deemed the author and sole owner of the Work and all other literary...

Legal Advice

7.1 FCAM may at any time and in its absolute discretion but after having consulted with each of the Parties seek independent legal advice with regard to any non-payment of Gross Receipts by any Sub-Distributor or to any other matter relating to or affecting the performance of FCAM's duties or powers set out in this Agreement and each Party hereby undertakes to assist FCAM to obtain as fully informed and accurate legal advice as possible by 7.1.1 providing FCAM with copies of any relevant...

Criteria for Gap Financing

The banks that are now involved in the gap financing business usually have certain requirements before approving a loan. Banks, typically, will gap finance between 10 and 40 per cent of a film's budget. However, most gap financiers tend to gap only 20 per cent of a film's budget. In general, banks will not gap finance a film unless there are already several major pre-sales in place. Having a pre-sale in place shows that there is a market for this type of film and that the sale estimates given...

Short Form Option Agreement

KNOW ALL MEN BY THESE PRESENTS That in consideration of the payment of 1 and other good and valuable consideration, receipt of which is hereby acknowledged, the undersigned, Author , does hereby grant to 'Producer' and its assigns, successors, licensees and transferees forever, the exclusive and irrevocable right and option to purchase from the undersigned all audiovisual rights of every kind, now known or hereafter devised, including, without limitation, the sole and exclusive film, television...

Sample Recoupment Schedule

Sales Agent shall be entitled to deduct and retain a Deferred Sales Agent Fee in respect of the first Gross Receipts received up to in accordance with paragraph 2. Sales Agent shall be entitled to deduct and retain the Sales Agent Fee from Gross Receipts received beyond the first as set forth in the paragraph 2 c , such fee being inclusive of all sub-Sales Agent fees and any Sales Agent or similar fees whether or not paid to affiliates, subsidiaries or other companies...