1. Definitions. The words and phrases defined in this paragraph 1 are used in the Principal Agreement and in these Standard Terms as so defined:
Budget: the final budget of the Film, as described in paragraph 1(g) of the Principal Agreement, and which has been approved in writing by the Producer, the Guarantor, and, if required, the Distributors and the Financier.
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.
Collateral: see paragraph 8(a) of these Standard Terms.
Completion Agreement: the agreement between the Producer and the Guarantor consisting of the Principal Agreement and these Standard Terms.
Completion Funds: the monies needed to pay Over-Budget Costs, if any.
Completion Guaranty: the agreement between Financier and Guarantor.
Distribution Agreements: the agreements identified as the Distribution Agreements in paragraph 3 of the Principal Agreement.
Distributors: the distributing companies identified as such in paragraph 3 of the Principal Agreement.
Employees: persons engaged to perform services in relation to the production of the Film, whether as employees, or under loanout agreements, or as independent contractors or otherwise.
Employment Agreements: the agreements whereby personnel are employed to perform services in relation to the production of the Film, whether such agreements are employment agreements, loanout agreement or other types of agreements, and whether such agreements are oral or in writing, or are formal agreements, memorandum agreements, deal memoranda or otherwise.
Film: the motion picture designated as the Film in the Principal Agreement.
Financier: the company identified as 'Financier' in paragraph 2 of the Principal Agreement.
Financing Agreement: the agreement whereby the Financier agrees to provide the funds for payment of Budget Costs.
Gross Receipts: all of those gross receipts of the Film derived by and actually payable to Producer from the distribution, exhibition and other exploitation of the Film.
Guarantor: Film Finances, Inc.
Including: means including but not limited to.
Location Agreement: an agreement for the use of a location for the production of the Film.
Music: includes background music and songs (including the music, lyrics and titles of such songs) used in the Film.
Non-Budget Costs: costs which the Guarantor is not obligated to fund, pursuant to paragraphs 4.1 and 4.2 of these Standard Terms.
Over-Budget Costs: those production costs, if any, of the Film which are in excess of the Budget Costs.
Principal Agreement: the agreement between the Producer and the Guarantor to which these Standard Terms are annexed.
Prior Rights: the rights identified as such in paragraph 4 of the Principal Agreement, to which the Guarantor's recoupment rights and the Guarantor's security interest securing such recoupment rights, are subject and subordinate.
Producer: the company designated in the Principal Agreement as the Producer.
Production Bank Account: the term 'Production Bank Account' shall mean account [ ] in the name of the Producer located at [ ] where all advances by Financier shall be made unless otherwise agreed to in writing by Guarantor.
Production Schedule: the final production schedule of the Film (including the pre-production and post-production schedules), identified in paragraph 1(h) of the Principal Agreement.
Screenplay: the final screenplay on which the Film is to be based, identified in paragraph 1(b)(ii) of the Principal Agreement, and which has been approved in writing by the
Producer, the Guarantor and, if required, the Distributors and the Financier.
Secured Sums: all monies, if any, expended by the Guarantor in relation to the production and delivery of the Film, pursuant to this Principal Agreement or pursuant to the Completion Guaranty, including Completion Funds and all out-of-pocket costs, expenses, losses and liabilities reasonably incurred by the Guarantor directly in relation to or arising out of the performance of this Completion Agreement or the Completion Guaranty, less any refunds received and retained by the Guarantor from insurance or otherwise; provided, however, that Secured Sums will not include any costs or expenses incurred by the Guarantor in monitoring the production of the Film prior to such time, if ever, that Guarantor takes over control of the production of the Film, or any costs, salaries or expenses attributable to Guarantor's general overhead (including any costs or expenses incurred by Guarantor in connection with the preparation and negotiation of this Completion Agreement and all agreements ancillary thereto).
Underlying Literary Property: the literary property or other work, if any, upon which the Screenplay is based.
2. Warranties, Representations and Agreements of the Producer. the Producer hereby warrants, represents and agrees that:
a. The Screenplay, Production Schedule and Budget have been approved by the Producer and, if required, the Distributors and Financier. For the purposes of this agreement, a copy of the Screenplay, Production Schedule and Budget shall be initialled by the Producer, the Financier and the Distributors, and shall be delivered to and initialled by the Guarantor concurrently with the execution of this Completion Agreement.
b. The producers, executive producers, if any, director and principal members of the cast of the Film (as identified in paragraph 1 of the Principal Agreement) have been approved by the Producer, the Financier and, if required, the Distributors. If any such person is not identified in the Principal Agreement, the person engaged to perform such services shall be subject to the Guarantor's approval. Such approval shall not be based on artistic or creative considerations, but only on matters which, in the Guarantor's reasonable judgment, might increase Budget Costs or adversely affect the Guarantor's obligations under this Completion Agreement or the Completion Guaranty. The Producer has entered into or will use its best efforts (prior to the commencement of services of the respective Employee) to enter into written Employment Agreements with the persons identified in paragraph 1 of the Principal Agreement, and (if not so identified) with the persons engaged to perform the services referred to in said paragraph. All such written agreements shall be subject to the Guarantor's approval, which approval shall not be unreasonably withheld. In any case in which the use of a specific location for filming is an important element of the production of the Film, the Location Agreement shall also be in writing and shall be subject to the Guarantor's approval, which shall not be unreasonably withheld. Written notice of approval or disapproval shall be given within ten (10) business days after the respective agreement is submitted for approval, and shall not be deemed to have been given unless given in writing (or not responded to within said period). If the Guarantor disapproves of any agreement so submitted, the reason(s) for the disapproval shall be given in the notice. Disapproval because an agreement includes a 'stop date' or because it does not include 'pay or play' provisions (as those terms are understood in the entertainment industry) shall be deemed to be reasonable.
c. The Financing Agreement and the Distribution Agreements have been executed, have been approved by the Guarantor, and are in full force and effect, and no default exists thereunder.
d. Subject to the provisions of the Distribution Agreements and the Financing Agreement, the Producer owns, solely and exclusively, all such rights in the Screenplay and in the Underlying Literary Property, if any, and owns or, prior to the completion of production and delivery of the Film, will own (or will have obtained licenses for) all such rights in the music used in the Film, and in all results and proceeds of all services performed in relation to the production of the Film, and in all other content of the Film, as are and will be necessary to permit (without violating any rights of third parties) the production of the Film; and such rights are and will be free and clear of all adverse rights, claims and security interests whatsoever, except for the Prior Rights.
e. The Producer will be the producer of the Film.
f. Except as otherwise provided in the Financing Agreement or the Distribution Agreements, the copyright of the Film and all rights to market and exploit the Film will be owned solely and exclusively by the Producer throughout the production of and upon the completion of production of the Film.
g. Subject only to the Prior Rights, all of the Gross Receipts will be available for the recoupment of the Secured Sums, if any.
h. All proceeds received by Producer under the Financing Agreement shall be applied by Producer in payment of budgeted production costs of the Film in accordance with the Financing Agreement, the Distribution Agreements, the Budget and this Completion Agreement.
3. Insurance. The Producer represents, warrants and agrees that:
a. The Producer has obtained or will obtain that insurance in relation to the Film which is listed in Schedule 1 of this Completion Agreement. Said insurance shall be maintained in force throughout the production and until the delivery of the Film; provided that the so-called Errors and Omissions Insurance shall be maintained in force for a period of not less than three years from the date of commencement of production of the Film, or for such shorter period of time as the Guarantor may approve in writing. The Guarantor and its various underwriters under Policy #930222A and any renewals thereof shall be named as additional insureds and as loss payees of all such insurance, as their interests may appear. The insurer and the policies of insurance shall be subject to the Guarantor's reasonable approval. The Guarantor hereby approves the standard forms used by Truman Van Dyke, Lloyds of London, Fireman's Fund and Pacific Indemnity for the coverage listed in Schedule 1. Among other things, such insurance shall (i) provide that at least ten days' prior written notice of cancellation thereof must be served upon the Guarantor, if any such insurance is cancelled, and (ii) include a notice to the insurer of the Guarantor's rights pursuant to subparagraphs (c) and (e) of this paragraph 3. Copies of the insurance policies and of receipts for premiums paid shall be delivered to the Guarantor on demand.
b. The Producer shall from time to time during the production of the Film, if any material conditions change substantially and Guarantor determines in the exercise of its good faith sound business judgment that such change results in the need for additional insurance, obtain such additional insurance for such amounts as the Guarantor may reasonably specify, and shall immediately replace any cancelled insurance so as to maintain full insurance in effect at all times until the completion of the production and delivery of the Film. The Producer shall inform the Guarantor of all additional insurance, modifications, extensions or substitutions effected as aforesaid and shall deliver to the Guarantor on demand the additional policies of insurance or endorsements to existing policies and the receipts for premiums paid (which premiums shall be included in the cost of production of the Film). If Budget Funds or funds from other sources are not available for such premiums, the Guarantor shall advance the necessary funds to pay such premiums as Completion Funds.
c. The Producer shall not knowingly do or permit or suffer to be done any act or thing whereby any such policy of insurance may become in whole or in part void or voidable. If an insured event has occurred which results or contributes to the cost of the Film being over-budget, or which in the Guarantor's good faith sound business judgment may have such result, the insurance claim shall not be settled without the Guarantor's prior written approval.
d. If the Producer shall fail to obtain any such insurance or to maintain it in force, the Guarantor may obtain such insurance, and in that event any premiums paid by the Guarantor for such insurance shall forthwith be repaid to it by the Producer from the Budget Funds, or if such funds are not available, such payments shall be deemed to be Completion Funds advanced by the Guarantor.
e. If an insurance loss has occurred, the insurance recovery (unless paid to a third party, such as in relation to a personal injury or property damage claim) shall be paid and disbursed as follows:
i. If the recovery is paid after all costs of production have been paid, and if at the time of receipt of the recovery the cost of the Film is over-budget, the insured loss has caused or contributed to the over-budget condition and the Guarantor has expended or will become obligated to expend Secured Sums, the insurance recovery shall first be used to reimburse the Guarantor for such Secured Sums advanced by the Guarantor. The Guarantor shall not be concerned with the disposition of any surplus; such surplus shall be disbursed in accordance with the Producer's other contractual obligations. Likewise, if the Guarantor has not expended and will not become obligated to advance Secured Sums, the entire recovery shall, so far as the Guarantor is concerned, be disbursed in accordance with the Producer's directions.
ii. If the recovery is paid before all costs of production and delivery of the Film have been paid, such recovery shall be paid into the Production Account of the Film, and shall first be used to pay production and delivery costs of the Film. Any surplus of such funds remaining after all production and delivery costs of the Film have been paid shall then be used to reimburse the Guarantor for Secured Sums, if any. The Guarantor shall not be concerned with the disposition of any surplus thereafter remaining (or of any surplus in the Production Account, if there were no Secured Sums), and so far as the Guarantor is concerned, such funds shall be disbursed in accordance with the Producer's directions.
iii. Notwithstanding the foregoing, if an insured event occurs which results in the production of the Film being abandoned or which results in the Producer or Guarantor being unable to complete the production and deliver the Film, the insurance recovery shall be paid as follows: first, to Financier until the indebtedness under the Financing Agreement is repaid in full; second, to the Guarantor until the Secured Sums, if any, are repaid in full; and third, any surplus thereafter remaining shall be disbursed in accordance with the Producer's directions.
f. If any costs are incurred by the Producer which ought to have been covered by insurance pursuant to this paragraph 3, but which are not insured, or are not insured for at least the minimum amounts specified in Schedule 1, the Producer shall pay the Guarantor on demand such sums as would have been received from the insurer had such costs been insured in full or (as the case may be) had been insured for at least the minimum amounts specified in Schedule 1, but not exceeding (with sums paid to the Guarantor pursuant to subparagraph (e) of this paragraph 3) any unreimbursed Secured Sums. If the Producer has in force all of the insurance provided for in Schedule 1, and any other insurance required by the Guarantor pursuant to subparagraph (b) of this paragraph 3, the Producer shall be deemed to have satisfied the requirements of this subparagraph (f). Nothing contained herein shall be deemed to render the Producer liable to the Guarantor for any breach of contract by the Film's insurers. g. If the Film goes over-budget, in whole or in part, because of acts of omission or commission by third parties which are not covered, or are only partially covered, by insurance obtained hereunder, the Guarantor shall be subrogated to all of the Producer's rights and remedies against and recoveries from such third party or its insurers, to the extent of the Secured Sums, if any, resulting from such over-budget condition. Any surplus of such recoveries over the amount of such Secured Sums shall be paid to the Producer, the Financier or other party, as their respective interests may appear. The Producer agrees to execute and deliver to the Guarantor such instruments as may be reasonably necessary or desirable to evidence or effectuate such subrogation, and otherwise to cooperate with the Guarantor for this purpose. Subject to the terms of the Completion Guaranty, the Guarantor shall control all actions taken to recover such loss, including all settlement negotiations, and the Producer agrees to do nothing which would prejudice these rights. The cost of obtaining such recoveries, if and to the extent paid by the Guarantor, shall be Secured Sums. The Guarantor will consult with the Producer with respect to all actions taken by the Guarantor to recover any such loss and all settlement negotiations relating thereto. In any event, the Guarantor's rights pursuant to this subparagraph shall be subject to the rights of the Producer's insurers in the case of a partially insured loss.
4.1 Non-Budget Costs. The Guarantor shall not be obligated to advance Completion Funds for any of the following costs:
a. legal fees in excess of the amount allowed in the Budget;
b. the cost of delivery items not provided for in the Budget;
c. advertising and publicity costs in excess of the amounts allowed in the Budget;
d. except to the extent required by the Completion Guaranty, interest and finance charges;
e. any costs incurred in obtaining for the Film the seal, certificate or rating of the Motion Picture Association of America, Inc., or arising from the Film not conforming to the standards and requirements of production set forth in the Production Code of said association, other than the fee of said association for such seal, certificate or rating, if provided for in the Budget; provided, however, that the Guarantor will not itself photograph or record any material which would result in a rating of said association more restrictive than 'R' and further provided that the Film as delivered by the Guarantor will qualify for that rating which is necessary to Complete and Deliver the Film (as that term is defined in the Completion Guaranty);
f. any costs incurred to photograph, record or include in the Film 'cover shots' for television or other purposes or other substitute or additional material except and only to the extent provided for in the Budget;
g. except to the extent provided for in the Budget, the cost of previews;
h. except to the extent provided for in the Budget, any costs incurred in connection with recutting, reediting, retakes and changes required for reasons other than (1) correction of technical defects or (2) conforming the Film to the contractual specifications for which the Guarantor is responsible pursuant to the Completion Guaranty;
i. except to the extent provided for in the Budget, guild and union deferred or contingent payments;
j. any payments pursuant to tax indemnity obligations;
k. scenes or other material not included in the Screenplay;
l. except to the extent provided for in the Budget, any costs incurred as a result of the violation by the Producer of any collective bargaining agreement, or of any law or governmental regulations;
any production costs incurred after the completion and delivery of the Film, except such production costs, if any, for which the Guarantor is responsible under the Completion Guaranty;
any distribution expenses, including costs incurred in meeting censorship or exhibitor requirements, or to make foreign language versions of the Film (dubbed, subtitled or otherwise) or any other versions other than the original English language version (unless included in the Budget). The Producer agrees not to expend Budget Funds or Completion Funds for the payment of Non-Budget Costs, and to pay all such Non-Budget costs from other funds.
4.2 Certain Costs in Excess of Budget. Producer hereby agrees that a. the rates of compensation (including minimum guarantees) which the Producer has agreed and shall agree to pay personnel engaged to perform services in relation to the Film, and the number of persons employed in each classification (including but not limited to performers, extras, stand-ins and crowds) will not exceed the rates and allowances provided therefor in the Budget;
b. the rates upon which the expense allowances provided for in the Budget are computed will not be exceeded; and c. the cost of obtaining and recording the music and lyrics contained in the Film, including all worldwide clearances with respect thereto, will not exceed the allowances provided therefor in the Budget. If any of the limitations provided for above in this paragraph are exceeded, the resulting excess costs ('Excess Costs') shall not be Guarantor's responsibility, and Producer shall provide or cause to be provided any additional monies needed to finance such Excess Costs, on demand. No Budget Funds will be expended for the payment of such Excess Costs. Notwithstanding the foregoing, if the production and delivery of the Film are completed within the Budget, so that the Guarantor is not called upon to provide Completion Funds, the Excess Costs may be paid for from the unused excess of the Budget Funds, or if any such Excess Costs are incurred, but are offset by savings in any of the costs referred to in this paragraph, such savings of costs may be used to pay such Excess Costs.
5. Guarantor's Rights Concerning Production.
a. The Producer shall, until the Guarantor shall be released from the Completion Guaranty, promptly inform the Guarantor of all matters substantially and adversely affecting the Producer's credit and financial condition, including any proceedings threatened or commenced against the Producer, the progress of such proceedings, and any judgments obtained against the Producer.
b. The Producer shall produce the Film in all respects in accordance with the provisions of the Distribution Agreements, the Financing Agreement, the Screenplay, the Production Schedule and the Budget, and shall not without the prior written consent of the Guarantor vary from or make or agree to make any modification therein or in the personnel or other details of production approved by the Guarantor other than minor variations or modifications arising as a result of the normal exigencies of film production and/or minor discretionary changes customarily made by the director which do not result in an increase in the cost of production of the Film or in a violation of the Distribution Agreements or the Financing Agreement. In this regard, and without limiting the generality of the foregoing, the Producer will not enhance the Film in any manner without the prior written consent of the Guarantor. In the event the Producer enhances the Film, the Producer shall provide (or shall cause to be provided) such sums as are necessary to pay for the cost of such enhancement, and the cost of any such enhancements shall in no way be the responsibility of Guarantor; provided, however, if the production and delivery of the Film are completed within the Budget, so that the Guarantor is not called upon to provide Completion Funds and the Film is enhanced but the cost of the enhancement is affected by savings of cost in other categories of the Budget, the Producer's obligations under this paragraph 5(b) shall be limited to provided the funds needed to pay the amount not affected, if any. The term 'enhance' means adding to or changing any elements of the Film which result in increasing the cost of production of the Film.
c. During the production of the Film the Producer shall keep the Guarantor informed about the progress of production and the plans for continuing and completing the production and delivery of the Film, shall telephone or telex to the Guarantor daily production progress reports, shall prepare and promptly deliver to the Guarantor weekly itemized production cost statements (including item by item good faith estimates of cost to complete), and shall promptly submit to the Guarantor any estimates of future expenditures or statements of costs incurred or other production reports which the Producer is required to submit to the Distributors, or the Financier or which the Guarantor may reasonably require from time to time. The Guarantor or its representatives shall be entitled at any reasonable times and without interfering with the production and delivery of the Film until it shall be released from the Completion Guaranty to attend at the studios or locations where the Film is being produced to watch the production of the Film, to see rushes or rough cuts and to inspect the production accounts, books and records of the Producer in relation to the Film and take extracts therefrom.
d. The Guarantor shall have the right to demand from the Producer an explanation of any matter relating to the production of the Film, whether or not arising from anything disclosed in the documents and accounts made available to the Guarantor as aforesaid, if it seems to the Guarantor in the exercise of its good faith sound business judgment that such matter is likely to involve the Guarantor in the risk of incurring liability under the Completion Guaranty. The Producer shall give such explanations as may be required without delay and (if required by the Guarantor) shall attend one or more meetings at which the producer, director or any other person concerned with the production, whose presence the Guarantor shall request, shall be present to discuss the matter with the Guarantor's representatives (provided always that no such meetings shall by reason of their place, time or frequency interfere with the production of the Film) and shall give full consideration to the views and proposals put forward by the Guarantor regarding the steps to be taken to avoid or reduce such risk.
i. after such explanations or meeting(s) the Guarantor shall not be satisfied, in the exercise of its good faith sound business judgment, that the likelihood of such risk arising will be avoided or adequately reduced by the steps proposed to be taken by the Producer, or ii. at any time it seems to the Guarantor, in the exercise of its good faith sound business judgment, that the production is likely to involve the Guarantor in a risk of incurring liability under the Completion Guaranty, or iii. the Producer shall at any time fail, refuse or neglect to comply with any of the terms of this Completion Agreement, the Distribution Agreements, or of the Financing Agreement, and the Guarantor determines in the exercise of its good faith sound business judgment that such failure, refusal or neglect is likely to involve The Guarantor in a risk of incurring liability under this Completion Agreement or the Completion Guaranty, the Producer shall (1) forthwith and thereafter faithfully comply with all instructions given by the Guarantor with respect to the production of the Film for the purpose of avoiding or reducing such risk or remedying such failure, refusal or neglect, including but not limited to the dismissal of any person(s) engaged in the production of the Film, provided that no such instruction shall be contrary to the provisions of the Distribution Agreements, or of the Financing Agreement, or any other contractual obligations of the Producer in respect of the Film previously approved by the Guarantor, except with the consent of the third person concerned, and (2) if requested by the Guarantor, place at the disposal of the Guarantor the production bank accounts and all other production funds in relation to the Film, but the Guarantor shall expend such funds only for the production and delivery of the Film.
i. the Producer shall be in default in the performance of any of its material obligations under any of the provisions of this Completion Agreement, and shall fail to remedy such default within two (2) business days after service of written notice thereof by the Guarantor upon the Producer and the Financier, or ii. at any time it seems to the Guarantor, in the exercise of its good faith sound business judgment, that the production is likely to involve the Guarantor in a risk of incurring liability under the Completion Guaranty, and the Producer fails within two (2) business days after service of written notice thereof by the Guarantor, as aforesaid, to cure the situation which is of concern to the Guarantor, to the Guarantor's satisfaction, or to carry out immediately and faithfully any instructions given by the Guarantor pursuant to the provisions of this paragraph 5, the Guarantor shall have the right to take over control, and to complete, the production and delivery of the Film, subject to the provisions of the Completion Guaranty. Where reference is made above to two (2) business days, and the instructions to cure given by the Guarantor are of such nature that they cannot be completed within two (2) business days, the Guarantor may, in its sole discretion, but need not, allow the Producer such additional time to remedy the default or to cure the situation as the Guarantor shall deem to be sufficient to do so, provided that the Producer immediately initiates the required action and diligently carries it to completion, and provided that the situation does not worsen, in the Guarantor's good faith sound business judgment. If the Guarantor exercises its right to take over control of the production of the Film, the Guarantor shall be deemed to have been irrevocably appointed the manager and agent of the Producer for such purpose. The Guarantor shall give the Producer, Distributors and Financier written notice of its decision to take over control of the production of the Film, as aforesaid, and forthwith upon service of such notice the Producer shall place at the disposal and under the control of the Guarantor the production bank account(s) and all other production funds, and all persons, facilities and equipment employed and used and to be employed and used by the Producer for the production of the Film, and shall in all other respects required by the Guarantor cooperate with the Guarantor so that all necessary personnel, facilities and equipment will be available to the Guarantor, as manager and agent for the Producer, as would have been available to the Producer had the Producer remained in control of production of the Film. The Guarantor shall incur no liability to the Producer from such appointment as manager and agent for the Producer, and from the performance by the Guarantor of its functions in those capacities, but in the performance of such functions the Guarantor agrees to observe the contractual obligations of the Producer to third parties relating to the production of the Film, provided that they have been made known to the Guarantor and (to the extent required to be approved under this Completion Agreement) approved by the Guarantor, and are consistent with the provisions of this Completion Agreement, the Distribution Agreements, the Financing Agreement, the Budget and Production Schedule. The Guarantor shall fully indemnify Producer against all costs, claims, demands, losses and liability incurred by the Producer because of or arising out of any default by the Guarantor under the immediately preceding sentence of these Standard Terms, if and only to the extent, if any, that the Producer has been prejudiced by the occurrence of any such default. The Guarantor reserves all of its rights and remedies against the Producer, at law or in equity, in the event of any material or substantial breach of this Completion Agreement by the Producer. The exercise of the rights granted to the Guarantor under subparagraphs (e) and (f) of this paragraph 5 shall terminate if (x) the Producer shall raise such additional funds or take such other steps as shall in the Guarantor's good faith judgment adequately protect the Guarantor from incurring liability under the Completion Guaranty (including immediate repayment of any Secured Sums), but without prejudice to the right of the Guarantor subsequently to exercise any of its rights under said subparagraphs (e) and (f), if the Guarantor should again conclude that its position under the Guaranty is at risk, or (y) each of Financier, Distributors and Producer release Guarantor from any and all of its obligations under this Completion Agreement, the Completion Guaranty and any other agreement which the Guarantor enters into in connection with the Film, and immediately repay the Secured Sums, if any, to the Guarantor. If the Guarantor takes over control of production of the Film, the Guarantor shall keep true and accurate records of its expenditures in relation to the Film, and shall retain all such records, and any other documents which it may obtain in relation to its production of the Film, for not less than one year. Thereafter, if it desires to dispose of such records and documents, it shall first offer them to the Producer and Distributors, who in the meanwhile shall have access thereto at reasonable times for auditing purposes. If the Producer or Distributors fail to take possession of such records and documents within thirty (30) days after they are offered to the Producer or Distributors, the Guarantor shall have the right to destroy them.
6. Recoupment. To the extent that the Producer has or will have any control of or interest in the worldwide Gross Receipts and the gross income from the sale or exploitation of the other Collateral referred to in paragraph 8 hereof, the Producer shall pay or cause to be paid to the Guarantor out of said Gross Receipts and other income an amount equal to the Secured Sums, if any, subject only to the Prior Rights.
7. Insolvency and Adverse Proceedings. The Secured Sums, if any, shall become immediately due and payable to the Guarantor by the Producer if the Producer is adjudicated a bankrupt, or if a petition for or consent to any relief under any bankruptcy, receivership, liquidation, compromise, arrangement or moratorium statute is filed against the Producer, or if a petition for the appointment of a receiver, liquidator, trustee or custodian for all or a substantial part of the Producer's assets is filed, or if a receiver, liquidator, trustee or custodian for all or a substantial part of the Producer's assets is appointed, or if any judgment is obtained against the Producer which substantially and adversely affects its credit and financial standing, and such judgment is not discharged or stayed within fourteen days after such judgment is obtained, or if an attachment or execution is levied upon any of the Producer's property needed for the production of the Film and such attachment or execution adversely affects the production of the Film, or if proceedings are initiated to wind up or liquidate the Producer (except winding up for the purposes of consolidation or other corporate reorganization), or if the Producer shall cease or threaten to cease to carry on its business. The occurrence of any such event shall permit the Guarantor to immediately exercise its rights under paragraphs 8 and 9 of these
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