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 include the completion of the application to open the account together with the mandate to operate the account, certain incorporation documents (e.g., Certificate of Incorporation and Memorandum and Articles of Association or partnership deed) and documents to identify the principals (shareholders or partners), executive officers (directors) and the authorized signatories.
A word of warning: this sounds straightforward but banks are very particular about this documentation. Leave plenty of time to fulfil this condition, especially as this includes satisfaction of the individual bank's anti-money laundering procedures.
2. Corporate governance documents. These will include incorporation documents (see above) and various resolutions.
3. Security documents. These will include charges and assignments over the film and any distribution agreements, an interparty agreement, a collection agreement, a laboratory pledge holders agreement and a completion guarantee.
4. Insurances. The bank will need to see evidence that it is a named loss payee under all the film insurances, including the production insurance, errors and omissions insurance and any third party liability insurance.
5. Opinions. This will include an opinion letter on chain of title. It may also be necessary to obtain opinion on documents entered into by parties in other legal jurisdictions.
6. Other. This will include such matters as receiving a final certified copy of the budget and cash flow, satisfaction of repayment of any pre-production facilities and may also include matters relating to specific types of lending such as advance financing of sale and leaseback.
All these conditions precedent have been met. There are some things that you can do that will help move matters along. Here are some simple tips.
• Give yourself as much time as possible. A period less than eight weeks is definitely too short.
• Ensure that the film rights are properly vested in the rights holding company.
• Identify any potential conflicts early on and get them resolved.
• Give early warning on any potential difficulties in meeting any of the conditions.
• Ensure that you fully understand the requirements of the bank -don't be afraid to ask.
• Encourage the solicitors acting to identify early on who is responsible for producing which document.
• Encourage the creation of a conditions precedent schedule showing the status of each document and then its regular circulation.
• Make sure your solicitor is driving the transaction forward and that all parties are communicating.
Was this article helpful?
If you have ever wanted the secrets to making your own film, here it is: Indy Film Insider Tips And Basics To Film Making. Have you ever wanted to make your own film? Is there a story you want to tell? You might even think that this is impossible. Studios make films, not the little guy. This is probably what you tell yourself. Do you watch films with more than a casual eye? You probably want to know how they were able to get perfect lighting in your favorite scene, or how to write a professional screenplay.