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...

Accounting

4.1 For the first twelve (12) months after the Delivery Date or the last date of the month during which Gross Receipts are first credited to the Collection Account, in respect of each calendar month during which Gross Receipts are credited to the Collection Account, FCAM shall provide the Parties with a Statement within twenty (20) Business Days of the end of each calendar month to which it relates. 4.2 From the thirteenth (13th) month after the Delivery Date or the last date of the month...

Acknowledgement

On , 200 , before me, , personally appeared , personally known to me (or approved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is are subscribed to the within instrument and acknowledged to me that he she they executed the same in his her their authorized capacity(ies), and that by his her their signature(s) on the instrument the person(s), or the entity(ies) upon behalf of which the person(s) acted, executed the instrument.

Acknowledgements

The author would like to thank the following people who helped make this book possible. Alan Harris, Rob Sherr and Lucy Walker for contributing their respective chapters. James Shirras, from Film Finances Inc., for allowing me to use his sample documents in chapter six. Freeway Entertainment Group for allowing me to use their Collection Agreement in chapter seven. Tanya Scoot for her hard work and diligence on the manuscript. C cile Bouchet for her research assistance. Dr D.T. McVicar for his...

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...

Application Requirements

In order for the completion guarantor to assess the viability of a project they will require the following Most completion guarantors prefer that these documents are initially approved by the intended financiers and distributors for the film. Once the completion guarantor has reviewed these documents, they may wish to meet with certain key personnel such as the line producer, director, production accountant, production supervisor, stunt co-ordinator or anyone else that the company feels is...

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...

Assignment

Clause 5 contains provisions allowing the Beneficiary to assign the benefit of the letter of credit to any person. In practice, this means that the Beneficiary gives away its rights to receive any payments under the letter of credit to a specified third party. In a film transaction, this clause is usually necessary because a bank lending to the film partnership will require security. The film partnership is Beneficiary of both the right to receive payments under the Distribution Agreement and...

Auditors report

The Films Act requires a report to the Secretary of State verifying the particulars of salaries, wages and payments, prepared by an accountant who is a member of a body of accountants recognized under section 25 of the Companies Act 1989, who is not and was not at any time while the film was being made, a partner of, nor in the employment of, the maker of the film. The auditors' report should include the following wording ACCOUNTANTS' REPORT TO THE SECRETARY OF STATE FOR CULTURE, MEDIA AND...

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...

Closing Time

Once the bank's solicitor is satisfied that all conditions have been met, the loan can be drawn down. The bank will insist that certain payments are made out of the first draw down. These may include the completion guarantor's fees any payments to discharge finance provided for pre-production the bank's arrangement fee After draw down, contact with the bank will lessen, although the bank will have certain monitoring requirements to ensure that the production of the film is on track. Not least...

Complete Agreement

13.1 The terms of this Agreement (and the exhibits hereto) constitute the entire agreement between the parties with respect to the matters contained herein and supersede any prior understandings or representations by the parties with respect to the terms hereof. This Agreement may be modified only by an agreement in writing by all the parties hereto. As among the Bank, the Completion Guarantor, and the Licensee, but not as between the Producer and the Licensee, in the event of any inconsistency...

Conclusion

The LLP was the vehicle of choice for most film schemes incorporated since 2001 because of the added flexibility created by the LLP's structure, the existence of limited liability to all members and the tax transparent structure. In addition, and unlike an LP, an LLP permits its members other than the general partner to actively participate in the running of the business of the partnership. However, as word of caution, the way in which investments in an LLP and the running of an LLP are treated...

Contents

Financing Intellectual Property Rights 1 Sample Chain of Title Opinion Letter 8 Sample Chain of Title Documents 11 Short Form Assignment Agreement 14 Quit Claim and Notice of Ownership of 16 Copyright and Other Rights 2 Co-productions (Alan Harris) 20 Official Co-production Treaties 20 3 Banking the Deal (Rob Sherr) 45 From Term Sheet to Cash Flow Forecast 47 From Cash Flow Forecast to Commitment 50

Coproduction Agreement

When either seeking, or being approached by, potential coproduction partners it is important, before opening negotiations, to check out the potential co-producer and the project. Unless the producer is known to you it is advisable to explore the following points check company background and do a company search ask other producers or production companies in that country check out their production credits determine who they have already approached re financing co-production ensure that 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...

Designated members

Unlike an LP, an LLP is required to have a minimum of two 'designated members' who are responsible for undertaking certain statutory functions on behalf of the partnership as required by the Limited Liability Partnerships Act 2000 (the 'LLP Act'). These include notifying the Registrar of Companies of certain changes to the Partnership and ensuring that an annual return and accounts are filed with the Registrar of Companies. Unless certain members are notified to the Registrar as being the...

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...

Entire agreement

This Agreement contains the entire understanding of the parties hereto and replaces any and all former agreements, understandings and representations and contains all of the terms, conditions, understandings and promises of the parties hereto, relating in any way to the subject matter hereof. This Agreement may not be modified except in writing signed by the parties. IN WITNESS WHEREOF the parties have executed this Agreement effective as of the date and year first set forth above. PRODUCER...

The financing of the film

This section outlines where and how the film is to be financed. It outlines the financial contributions to be advanced from each co-producer and when they fall due. This is extremely important and must be calculated in conjunction with the co-production structure being used, as some treaties require a minimum amount to be contributed by a co-producer. It is also where the cash flow of the film is outlined, the bank and the account are named and any compliance issues of handling the transactions...

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...

GCopyright Ownership

As co-producers under the Treaty the Co-producers will be co-owners of the copyright in the Film when made and accordingly (and where appropriate by present assignment of future copyright) for the full period of copyright and all renewals and extensions thereto wherever possible, and, to the extent permitted by law, in perpetuity i. In the Territory, shall be the exclusive and sole owner of the entire copyright, title and interest in and to the Film including, without limitation, all rights of...

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...

Interest

The Borrower shall pay interest on the Facility from time to time outstanding of per annum. This clause sets out the rate of interest applicable to the facility. Obviously, the borrower is required to pay back both the principal amount of any facility plus the accrued interest. This clause should detail the applicable rate of interest, explains the way in which interest is calculated and the dates on which the borrower must repay the amount of accrued interest to the bank In some cases, a...

Governing law

This Agreement shall be governed by the laws of . The parties hereto each hereby submit to the jurisdiction of the courts of . Notwithstanding the foregoing, the Bank may, at its option, bring suit or institute other judicial proceedings against the Producer or any of its assets in any state or federal court of the United States or any Province of Canada or in the United Kingdom of any country or place where the Producer or the Licensee or such assets may be found. IN WITNESS WHEREOF, the...

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...

Investors

The investor must hold shares in the EIS investment scheme for at least 3 years. 2. EIS schemes provide a convenient means of tax relief. Individuals previously unconnected with the company in which they invest may a. obtain income tax relief (currently at 20 per cent) in any one tax year on the maximum investment of (currently) 200,000 in any one tax year b. defer capital gains tax in conjunction with the income tax relief at 1(a) above in respect of any chargeable gain arising from the...

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...

Repaymentprepayment

This clause describes how and when the borrower must repay the facility. There are many repayment possibilities and, usually, repayment is structured to match the borrower's projected ability to repay. Some facility letters may require a borrower to make scheduled repayments of principal and interest throughout the term of any facility. Other facility letters may require a borrower to make regular scheduled repayments of interest but with the principal amount of the facility only falling due...

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...

Lucy Walker

Lucy Walker joined Osborne Clarke in 1998 and is currently an associate in the banking and finance group. Lucy specializes in film finance together with general finance, leasing and regulatory work (including issues relating to cards and payment systems, and the regulatory issues affecting consumer credit and banking and financial services). She has acted for Barclays Bank plc on a series of structured film finance transactions and has also advised both funds and producers on a wide spectrum of...

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...

Members agreement

An LLP does not have a Memorandum or Articles of Association as a limited company would have, nor does it have a specified management structure. Therefore, it is up to the members to agree amongst themselves how they should run and regulate the LLP. It is important that a properly drafted Members' Agreement is prepared to set out the terms of the partnership, especially as partnership law cannot be expressly implied in relation to those terms. The Members' Agreement should cover, amongst other...

Miscellaneous

If either party does not exercise a right or power when it is able to do so this will not prevent it exercising that right or power. When it does exercise a right or power it may do so again in the same or a different manner. Each party's rights and remedies under this Letter of Credit are in addition to any other rights and remedies it may have. Those other rights and remedies are not affected by this Letter of Credit. This Letter of Credit may be signed in any number of separate counterparts....

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...

Notices

10.1 Any notice required or permitted to be given under this Agreement shall be in writing and sent by hand, first-class recorded letter or facsimile addressed to the relevant Party at the Party's address given in this Agreement or such other address as may be notified to by that Party to the other hereto. 10.2 Any such notice sent by first-class recorded letter shall be deemed to have been received five (5) Business Days after posting any such notice sent by facsimile shall be deemed to have...

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

Save as required by law or any competent authority, all payments under this Letter of Credit shall be made A. without set-off or counterclaim whatsoever and B. free and clear of any deduction or withholding for or on account of any taxes. In addition, all payments, under this Letter of Credit shall be made in pounds sterling and in immediately available funds and for value on the due date. Clause 4 contains specific provisions relating to payments made under the letter of credit and the...

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...

Power of Attorney

It is standard for a charge or security document of this type to contain a power of attorney. Under this clause, the Borrower appoints the Bank as its attorney to sign any documents and take any action on behalf of the Borrower as required under the Charge. This provides the Bank with protection in circumstances where the Borrower is, for example, being uncooperative or where relevant signatories are unavailable. In such cases the Bank could sign for and on behalf of the Borrower as the...

Preamble

The preamble introduces the parties and their relationship to each other and briefly describes the purpose for the Interparty Agreement. THIS INTERPARTY AGREEMENT made the day of 200 BETWEEN (hereinafter called the 'PRODUCER') and (hereinafter called the 'LICENSEE') and (hereinafter called the 'BANK') (hereinafter called the 'COMPLETION GUARANTOR') WHEREAS pursuant to the terms of a loan agreement between the Bank and the Producer dated (the 'Loan Agreement'), the Bank has agreed to advance...

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...

Recitals

UK CO-PRODUCER and (together referred to as 'the Co-producers') intend to co-produce a full length feature film provisionally entitled ' ' ('the Film') based upon the original screenplay written by . B. The Co-producers intend to produce, complete and deliver the Film in accordance with the terms and provisions of the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of concerning the Co-production of Films dated (the 'Treaty')...

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...

Rights Granted

This is the clause that is of most concern to a bank or potential financier. At one time, producers would acquire all rights in the underlying work for the full period of copyright. This would enable the producer to exploit the rights by all means and in all media without any restrictions whatsoever and without the obligation to make any further payments except to certain performers in relation to residuals, repeat fees, or other collection organizations. Now that deals have become much more...

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 A Form of LC Demand Certificate

FOR THE URGENT ATTENTION OF Date 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. The Distributor has failed to pay ( pounds sterling) in respect of the Payment due on the Payment Date which fell on insert date . Accordingly, we hereby demand payment of this amount of ( pounds sterling) and, in addition, of...

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....

Security review

The security review clause, clause 7, contains provisions for the benefit of the Beneficiary that enable the Beneficiary to review the adequacy and value of the security represented by the letter of credit. The general right of review is applicable on or after the fifth anniversary of the date of the letter of credit and there is also a specific provision which applies at any time following the second anniversary of the date of the letter of credit in circumstances where the Issuer's credit...

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 acceptability of the distribution agreements

Banks will tend to split distribution agreements into three categories 1. Primary collateral - these will be with counterparties of undoubted standing and will include all the US Major Studios. It may be that a lesser counterparty is prepared to support its payment obligation with a letter of credit. A letter of credit transfers the obligation to pay to a bank and in most cases this will be considered primary collateral. Other conditions will apply, such as the completion guarantor adopting the...

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 Guarantee

The bank will cash flow certain agreements that the producer has with film distributors who agree to pay the producer for rights in the film, if and when the film is delivered to those distributors. This is known as discounting a distribution advance. The risk to the financier is that the distributor may refuse to pay the advance, because the film is not delivered, or the film does not meet the contractual specifications set out in the distribution...

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...

Websites

Raindance http www.raindance.co.uk British Film Commission http www.britfilmcom.co.uk British Film Office http www.britfilmusa.com CNC (Centre National de la Cin matographie) http www.cnc.fr Department for Culture, Media and Sport Film Distributors' Association http www.launchingfilms.com SAG (Screen Actors Guild) http www.sag.org PACT (Producers' Alliance for Cinema and Television) http www.pact.co.uk Film Money & Funding faqs http www.filmcentre.co.uk The British Film Institute http...

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 costs are allowable in calculating production expenditure

The UK does not have a formal accounting standard covering the film industry. However, production expenditure should, nevertheless, be identified by reference to normal accountancy principles, subject to the specific issues outlined below. It is not possible to list comprehensively what constitutes production expenditure. What follows is a guide. The cost of underlying rights used for a film salaries, fees, benefits (and living expenses) and all associated costs (such as NIC and payroll taxes)...

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....

[productions Limited [

1,000,000 any one claim, 3,000,000 in the aggregate This document is intended for use as evidence that the insurance, as described herein, has been effected and shall be subject to all terms and conditions of the policy which will be issued and that, in the event of any inconsistency herewith, the terms and provisions of such policy shall prevail.

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...

Execution

11.1 This Agreement may be executed in any number of counterparts (each of which shall be deemed an original) and all of which, taken together, shall constitute one and the same agreement and any party may enter into this Agreement by executing a counterpart. 11.2 If one or more parties do not execute this Agreement, it shall nevertheless be in full force and effect as between the Parties that have executed this Agreement and FCAM and FCustody. The Entitlement(s) of any Parties who do not sign...