6 The Completion Guarantee
After we deliver, it's your problem mate!
Completion guarantor to sales agent
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 film was not completed for a particular
reason. There are many reasons why a film may not complete. Running out of money usually
tops the list.
Therefore, most banks or financiers of a production require a
completion guarantee or a completion bond (a ‘bond’ or
‘guarantee’) that will either:
- guarantee that the film is completed and delivered on time and on budget; or
- guarantee to repay the financier its investment if the film cannot be
completed.
A feature film production will require a bond almost without
exception. Financiers are unwilling to provide an open chequebook to a production. They
need certainty that if and when the sum that they have agreed to provide runs out,
additional funds will be available to finish the production. The fee charged by
completion guarantors for providing a guarantee is approximately 5-6 per cent of the
production budget of the film. However, guarantors commonly give refunds, referred to as
the ‘guarantee fee rebate’ if the guarantee is not called upon.
Under their agreement with the producer and as an
obligation to the bank or financier to whom the guarantee is given, guarantors have the
right to monitor a film from the first day of principal photography of production. This
means that a completion guarantee company needs extensive knowledge of the production
process. Monitoring the production gives the guarantor the ability to stop any potential
problems or overruns either by stepping in and taking over production or by exercising
some lesser form of control over the production. The guarantor's objective, as
with all insurers, will be to minimize the extent of its financial liability.
Application Requirements
In order for the completion guarantor to assess the viability of a
project they will require the following:
- a copy of the screenplay;
- a budget;
- a production schedule.
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 relevant for the film.
The completion guarantor will ensure that the experience of those
involved is sufficient to complete the Film within the budget and schedule. If the
completion guarantor feels uncomfortable with any personnel then they will suggest
another suitably qualified person.
Once the completion guarantor is satisfied with the various elements
set out above, they will issue a letter of intent. (See end of chapter for sample
letter.)
Documentation
Once the producer has signed off on the letter of intent, the
completion guarantor will issue long form documents. The documents used
by the completion guarantor include:
- the guarantee between the guarantor and the bank/ financier(s);
- the completion agreement - between the guarantor and the producer.
The completion agreement will give the guarantor the right to monitor
the production and, if necessary, assume control of it.
The Guarantee
Most film financings involve a bank. 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 agreement. For example, if the
distribution contract stipulates who the lead actors of the film are and the producer
makes a film with two different lead actors then this would give the distributor a
reason to refuse delivery and payment of the film. A distributor can also refuse
delivery for various technical reasons and therefore it is essential that the guarantor
agrees to guarantee to the financier the delivery of substantially what the distributor
is agreeing to pay for. This will include the attachments (actors, directors) to the
film and technical quality.
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 to protect. From a financier's or
bank's perspective they will want the Strike Price to be the same amount of
money that they are providing in relation to the film. In circumstances where there is
more than one financier, the completion guarantor will not accept any financial
responsibility until the entire budget of the film has been funded. Under a completion
guarantee, one of the condition precedents is that the fee payable to the guarantor is
paid either at the start of principal photography or upon signature of the agreement.
Completion guarantees usually have a schedule that sets out specific
completion and delivery issues in relation to the film. These usually make reference to
various agreements of broadcasters and distributors or others that are liable for
payment upon delivery.
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 film. This will include amongst
others the production bank account and any distribution agreements.
In a completion guarantee there are certain exclusions that the
completion guarantor will not be obligated to pay for. These will include:
- the cost of certain delivery items which are not mandatory under the delivery
schedule or set out in the definition of Delivery Materials of the guarantee;
- the cost of legal fees, interest and other finance fees that are not specifically
stated;
- in some circumstances the completion guarantee will only cover those costs that are
required to actually finish and deliver the film to a specific distributor. For
example, it will not be responsible for certain distribution expenses such as
censorship or exhibitor requirements or perhaps making a foreign language version of
a film, which would include dubbing or sub-titling. If the completion
guarantor decides not to deliver the film, then its liability will be limited to the
amount set out as the Strike Price.
Completion guarantees are also drafted so that the guarantor will not
have certain responsibilities. Matters that are excluded include the following:
- defects in the chain of title. The completion guarantor will require an Errors and
Omissions Policy to cover any potential problems with the underlying rights,
copyright or screenplay for the film;
- the artistic quality of the film;
- for extra costs, such as obtaining a certificate from the British Board of Film
Classification or the Motion Picture Association of America;
- the cost of cutting, re-editing, re-recording or perhaps making cover shots for a
television version of the film;
- additional delivery items.
Force Majeure
One of the major issues for consideration in the completion
guarantee is the force majeure clause. This means ‘superior force’
and it refers to certain events beyond the control of the completion guarantor that may
force suspension of the agreement. The actual clause in a completion guarantee may look
like this:
The term ‘Force Majeure’ shall refer to any production
exigency, including but not limited to prevention or interruption of the
production of the film because of an accident; fire; explosion; casualty;
epidemic; act of God; earthquake; flood; torrential rain; strike; walkout;
picketing; labour controversy and other disputes; civil disturbances; terrorist
acts; embargo; riot; act of a public enemy; war or armed conflict;
unavailability of any essential materials and supplies; equipment,
transportation; power or other commodity; failure or delay of any transportation
agency; laboratory or any furnisher of essential supplies; equipment or other
facilities; enactment of any law; any judicial or executive order or decree; the
action of any legally constituted authority under death, incapacity or
unavailability or default of the director or any principal cast member or other
event or cause of the nature of force majeure beyond the control of the producer or Guarantor which causes any interruption or
suspension of, or materially hampers, interferes with or delays the commencement
of the production or delivery of the film to the distributors.
As you can see, this list is quite substantial and if one of these
events restricts the completion guarantor from delivering the film, then under the force
majeure clause the agreement will be under suspension. This will enable the completion
guarantor to postpone the agreed delivery date for a specific period, which is usually
equal to the duration of the force majeure plus an additional period of time to enable
the completion guarantor to resume production. In most cases there is an outside
delivery date which is between 30 and 60 days from the original delivery date under the
agreement.
Abandonment
In some circumstances the completion guarantor will have the right
to abandonment, which means that it can repay the bank or financier in full rather than
complete the film. In these circumstances, the completion guarantor will make a
commercial decision that the production is not capable of completion and it is cheaper
to abandon it.
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 will enable the financier or bank to go directly to the
re-insurer for payment if the completion guarantor fails to pay for any over-cost,
abandonment or if the guarantor goes bankrupt. The terms ‘Loss Payee
Endorsement’ or ‘Cut Through Letter’ are used in most
financing documents.
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, if required, have the right to step in and take over the production of
the film from the producer.
Under the completion agreement the producer will agree with the
completion guarantor the following:
- to produce and deliver the film on time and on budget and in accordance with the
various production and financing agreements, and any of the agreements relating to a
distributor who has pre-bought the rights in the film;
- to make the film in accordance with the budget, the script, the production schedule,
engage only those actors and production personnel that are approved prior to
shooting by the completion guarantor;
- to give the completion guarantor the right to inspect the production records and
obtain weekly production cost reports;
- to allow any representative of the completion guarantor access to any location or
studio where the film is being shot which also includes any post-production
activities such as cutting and editing.
Completion guarantors usually make it clear that they want to work
with the producer in a constructive way rather than in an acrimonious or meddling
manner. From a producer's perspective they may wish to limit the amount of
control that a completion guarantor may have. Usually this is done by the producer
providing daily cost and production reports that are in accordance with the budget and
cash flow for the film. They will also ask the completion guarantor to pre-approve
various production personnel and actors.
Under the completion agreement the completion guarantor will usually
have the right to suspend, dismiss or replace artists or production personnel, provided
that this does not compromise or breach any existing distribution or talent agreements.
In manyfilm financings, there are essential elements that cannot be
replaced. If there are essential elements in a film (such as a lead actor or director),
prior to closing the financing, the film company will suggest a list of approved
replacements for them. However, in some circumstances, there may be a requirement for
essential element insurance. From a practical perspective, it is best not to agree any
essential elements in a production.
Essential element insurance covers a situation where a financier or
distributor makes it a condition of their financing or pre-sale that a specific element
such as an actor or director must be involved in that film. If the actor dies or cannot
finish the film for any reason then this insurance will cover the cost of abandoning
production of the film.
In some circumstances, the completion guarantor will have the right
to take over the production of the film. This is very rare and most completion
guarantors have no interest in doing this. If the completion guarantor exercises its
right to take over control of the film, then the completion guarantor will be deemed to
have been irrevocably appointed as the manager and agent of the producer to complete the
film. The completion guarantor must give the producer, the bank, the distributor and any
other financiers notice in writing of this decision to take over control of the
production. Once this happens, the completion guarantor will assume responsibility for
all aspects of the production, which include the bank accounts, the use of production
funds, all personnel, facilities and equipment being used or to be used in relation to
the film, and any other aspect that the completion guarantor requires to finish the
film. The completion guarantor will have the right to deal directly with the film
laboratory or post-production house. In relation to the production bank account, the
bank, who will most likely have a charge over the production account, will then have to
comply with the completion guarantor's instruction so that they can make
payments on behalf of the producer. From a bank's perspective, the completion
guarantor will take a charge over the film and the related assets of the producer. This
charge, however, will rank in second place in order of priority to the bank or
financier.
The completion guarantor will also have the right to take over from
the producer if the producer or his/her company becomes bankrupt, goes into
receivership, liquidation or makes an arrangement with his creditors. Generally, any
insolvencyproceedings against the producer will give the completion
guarantor the right to take over the production.
The completion guarantor will, in most cases, require specific types
of insurance before signing off on the completion guarantee and completion agreement.
These include:
- cast and crew insurance;
- employees and public liability insurance;
- personal accident insurance;
- errors and omissions insurance;
- faulty stock, camera, editing, negative, videotape and processing insurance;
- political risk insurance (e.g., if shooting in Iraq!).
Completion Guarantors
The following is a list of completion guarantors in the UK:
- Film Finances - James Shirras, Director, Film Finances Ltd, 15 Conduit Street,
London W1S 2XJ - Tel +44 207 629 6557.
- International Film Guarantors - Luke Randolph, Managing Director, IFG (International
Film Group), 25 Maddox Street, London W1S 2QT - Tel +44 207 493
4686.
How to Find Sample Completion Guarantor's Documents
- See Film Finances Inc.’s website, http://www.ffi.com for a sample Completion Guarantee and Sample Completion
Agreement.
- See International Film Guarantors Inc.’s website, http://www.ifgbonds.com for a sample
Completion Guarantee Agreement and Producers Completion Agreement.
Completion Bond Letter of Commitment
From: [Name of Completion Guarantor]
Re: [Name of Film]
Dear [Producer],
We are pleased to inform you that we approve, in principle, the issuance of a guarantee of completion on the above motion picture production, subject to our review and approval of the screenplay, final budget and schedule, and approval of our legal counsel of the underlying documentation.
Yours faithfully For and on behalf of
[Bond Company]
Film Finances' Sample Completion Guarantee
Film Finances, Inc.
9000 Sunset Boulevard, Suite 1400
Los Angeles, California 90069
As of [ ], 200[ ]
[ ]
(the ‘Financier’)
[ ]
[ ]
Attn: [ ]
Re: ‘[ ]’ (the ‘Film’)
Gentlemen:
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 has applied to us to provide such guaranty, and we have agreed to do so subject
to, and in consideration of, the payment to us of the fee hereinbelow referred to.
In consideration of the foregoing premises and of your lending the
referenced funds to the Producer, we have agreed with you as follows:
- Guaranty. Subject to the provisions of this agreement we:
- guaranty the Completion and Delivery of the Film (as that term is defined in
Schedule I attached hereto);
- agree to procure or provide the Completion Funds, if any are needed, to
Complete and Deliver the Film, as aforesaid, if the Producer shall fail to
do so; and if Producer fails toComplete and Deliver the Film,
we shall Complete and Deliver the Film as aforesaid; and
- if we fail to Complete and Deliver the Film as aforesaid, we shall make the
payments specified in paragraph 7(a) hereof.
- Definitions. The terms defined herein shall have the meaning set forth in Schedule
II attached hereto.
- Fee. Our obligations hereunder are conditioned upon the payment to us of our fee of
$[ ] in full, as follows: [ ] (‘Fee’).
- Production Controls: pursuant to the Completion Agreement (the terms of which you
need not be concerned) we shall have the right to Complete and Deliver the Film in
accordance with this Completion Guaranty, or to procure the Completion and Delivery
of the Film by any other person or company in accordance with the terms of the
Completion Agreement.
- Conditions of Guaranty: we shall be under no obligation hereunder:
- Until the Strike Price has been made available to the Producer or us in
full, as and when required by the Producer or us, as provided in the
Financing Agreement, whether or not an event of default has occurred
thereunder. Notwithstanding anything to the contrary contained herein, you
shall not be obligated to supervise or administer to the application of the
Strike Price to be made by you to Producer or us as aforesaid, it being
agreed that your obligation shall only be to advance such sums in accordance
with the terms of the Financing Agreement and this Completion Guaranty;
- To obtain any seal, certificate or rating of the Motion Picture Association
of America, Inc. (‘MPAA’), except as required to
Complete and Deliver the Film;
- To deliver any materials other than the Delivery Materials prior to the
Delivery Date or to deliver the Delivery Materials to any locations other
than the locations, if any, designated in Schedule I attached hereto;
- For the quality of the Film or the Delivery Materials, other than the
technical quality thereof necessary to Complete and Deliver the Film;
- In respect of any defect in the copyright of the Screenplay, the Underlying
Literary Property, if any, or the Film, or in the rights acquired for the
Film in the Screenplay or in the Underlying Literary Property, if any, or in
the title of the Film, or in the music of the Film (except
for the rights in such music that are acquired by us in the event we take
over the production of the Film and then acquire rights in and to music
which is used in the Film);
- With respect to any claim or liability arising out of any tort or any breach
of contract committed by the Producer, except to the extent necessary to
Complete and Deliver the Film;
- With respect to any of the Excluded Risks (as defined in Schedule II); and
- Any Over-Budget Costs arising as a result of currency fluctuations.
- Excluded Costs: notwithstanding any provisions of this Completion Guaranty to the
contrary, the Guarantor shall not be obligated to provide funds for the payment of
the following costs except to the extent such costs are (i) specified in the Budget,
(ii) required to Complete and Deliver the Film, (iii) required to correct technical
defects in the Film, or (iv) conform the Film to contractual specifications for
which we are responsible under this Completion Guaranty;
- The cost of delivery items which are not Delivery Materials;
- The cost of legal, interest and finance fees and expenses, except as
provided for in paragraph 7(a) hereof;
- 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 except the original
version in the language specified in the Screenplay; advertising and
publicity costs, including costs incurred for previews;
- Any costs incurred to photograph, record or include in the Film
‘cover shots' for television or other purposes or other
substitute or additional material; provided, however, that if
‘cover shots' are required to Complete and Deliver the
Film, we will be obligated to deliver such ‘cover shots';
and,
- Any costs incurred after the Completion and Delivery of the Film or incurred
in connection with recutting, reediting, retakes (other than retakes done by
the director during the ordinary course of production in accordance with the
Production Schedule) and changes.
- Failure to Complete and Deliver the Film; Insurance:
- In the event that we fail to Complete and Deliver the Film, our liability
hereunder shall be limited (except as otherwiseprovided
herein) to (i) the payment to you of, and we shall pay to you upon demand,
an amount equal to the Obligations (as defined in Schedule II) less so much
thereof as may have been refunded to and retained by you by insurance or
otherwise indefeasibly paid to you in connection with the Film, and (ii) the
payment of any additional costs or expenses of the Film that we are required
to pay pursuant to this Completion Guaranty. The payment referred to in
paragraph 7(a)(i) hereof shall be made to you without reduction or set-off
and notwithstanding any Completion Funds advanced by us to Producer or
expended by us directly to Complete and Deliver the Film in accordance with
the terms of this Completion Guaranty. Upon our payment to you provided in
paragraph 7(a)(i) hereof, we shall be automatically subrogated to all of
your rights, claims, causes of action and security interests in relation to
the Film. You agree to execute such assignments and other instruments as we
may reasonably require to evidence and effectuate such subrogation at our
sole cost and expense.
- If any claim covered by production/indemnity insurance should arise in
relation to the Film, 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 provided as an Insurance Recovery specified in
Schedule II attached hereto.
- Rights of Financier: so long as you do not interfere with our ability to Complete
and Deliver the Film pursuant to this Completion Guaranty, you may at all times,
without prejudice to this Completion Guaranty and without discharging or in any way
increasing our liability hereunder, make further advances to the Producer or grant
to the Producer any time or indulgence, or deal with, exchange, release, modify or
abstain from perfecting or enforcing any security interest or other guaranty or
rights which you may have from or against the Producer or with any other person or
guarantor, provided that such action shall not materially prejudice our rights or
obligations under this Completion Guaranty. In any event, you agree that, without
our prior written consent, which consent shall not be unreasonably withheld, you
will not agree to any amendment to the Financing Agreement or any agreements
ancillary thereto or take any other action (including interference with our access
to the physical elements of theFilm) which in any way materially
prejudices our rights or obligations under this Completion Guaranty. If the
Financing Agreement provides that you have the right to take over control of the
production of the Film you acknowledge that such right is subject to our rights
under this Completion Guaranty. You shall not be obligated to see to the application
of the funds provided by you pursuant to the Financing Agreement.
- Subordination: we hereby subordinate any rights and claims which we may have against
the Producer, and its principals and affiliates (whether by way of subrogation or
otherwise) and any security interest which we may have in any collateral of the Film
in which you have or may have a security interest pursuant to the Financing
Agreement or other agreements furnished to us by yourselves, to the repayment to you
of the Obligations in full and to all of your rights and security interests and
claims under the Financing Agreement or otherwise in connection with the Film.
- Assignment: you shall have the right to assign the benefit of this Completion
Guaranty, in whole or in part, to any third party who succeeds to the
Financier's rights in the Film or the Financing Agreement. Any other
assignment to any other person or company shall be null and void.
- Notices: any notice given hereunder shall be conclusively deemed to have been
received by the addressee and to be effective on the day on which it is personally
delivered to such party at the address set forth below (or at such other address as
such party shall specify to the other party in writing) or, if sent by registered or
certified mail, on the fifth business day after the date on which it is mailed,
postage pre-paid, addressed to such party at such address, or if sent by cable,
telegram, telex or telecopier on the third business day after the day on which it is
wired or telexed, charges pre-paid or provided for, addressed to such party at such
address:
a
If to you, at [ ], with a copy to[ ];
b
If to us, at its offices at 9000 Sunset Boulevard, Suite
1400, Los Angeles, California 90069, with simultaneous copies to Ballantyne,
McKean & Sullivan, Ltd., Latham House, 16 Minories, London EC3N 1AX,
Attn: Roy Martin, Esq. and to Sedgwick, Detert, Moran & Arnold, One
Embarcadero Center, Sixteenth Floor, San Francisco, California 94111, Attn:
David Bordon, Esq.
- Miscellaneous Provisions: this Completion Guaranty has been executed in [ ], and
shall in all respects be interpreted, enforced and governed by the laws of [ ]. The
language of this Completion Guaranty shall be construed as a whole according to its
fair meaning and not strictly for or against either of the parties. If any one or
more of the provisions of this Completion Guaranty shall be held to be illegal or
unenforceable in any respect, the legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. NO MODIFICATION OR
WAIVER OF ANY PROVISION OF THIS COMPLETION GUARANTY OR WAIVER OF ANY DEFAULT
HEREUNDER SHALL BE EFFECTIVE UNLESS IN WRITING AND SIGNED BY AN OFFICER OF BOTH YOU
AND US (IN THE CASE OF A MODIFICATION) OR BY THE WAIVING PARTY (IN THE CASE OF A
WAIVER) AND SUCH WRITING EXPRESSLY STATES THAT SUCH WRITING IS A MODIFICATION OR
WAIVER (AS APPLICABLE) OF THIS COMPLETION GUARANTY.
- Corporate Action: we warrant that we are not required to obtain any authorizations,
approvals or consents from any governmental bodies or regulatory authorities for the
execution and delivery by us of this Completion Guaranty and the performance
thereof; provided, however, if any such authorizations, approvals or consents are
hereafter required, Guarantor shall comply with such requirements. We further
warrant that the execution, delivery and performance of all of the terms and
provisions hereof have been duly authorized by proper corporate or other action
under the laws of the State of California and that no consent of any third party to
the execution, delivery and performance hereof is otherwise required.
- Remedies: in the event of a dispute hereunder, the provisions for arbitration
specified in Schedule III attached hereto shall apply. Each and all of the several
rights and remedies provided for in this Completion Guaranty or at law or in equity
shall be cumulative and no one of them shall be exclusive of any other right or
remedy. The exercise of any one or more of such rights or remedies shall not be
deemed to be a waiver of or an election not to exercise any other such right or
remedy. The obligations of the Producer and us are several, not joint. You may
proceed against us without having first instituted proceedings or made demand upon
or againstProducer. If action, suit or other proceeding is brought
for the enforcement of this Completion Guaranty, to declare rights or obligations
hereunder, or as a result of an alleged breach, default or misrepresentation by
either party, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and other costs, in addition to any other relief to which
that party may be entitled.
- Amendments: any amendments to this Completion Guaranty must be in writing, and if
any such amendments are agreed to concurrently with the execution hereof, the same
shall be those specified in Schedule IV attached hereto.
- Counterparts: this Completion Guaranty may be signed in counterparts and each such
counterpart shall constitute an original document and each such counterpart, taken
together, shall constitute one and the same instrument.
- Miscellaneous: the captions used herein are for convenience only and have no other
significance. The term 'we', 'us' or
'our' as used herein shall mean Guarantor and the term
'you' or 'your' as used herein shall mean
Financier. Please sign below to indicate your approval to the terms hereof,
including the Schedules attached hereto, which are incorporated herein by
reference.
Very truly yours,
Film Finances, Inc. By:[ ] Its: [ ]
Agreed:
[ ]
('Financier')
By:[ ] Its: [ ]
Schedule I: Completion and Delivery of Film
- The term ‘Completion and Delivery of the Film’ or
‘Complete and Deliver the Film’ as used in this Completion
Guaranty shall have the following meaning:
- The production of the Film in accordance with the Budget and the Production
Schedule, and the Film as produced shall: (i) be based upon the Screenplay;
(ii) qualify for an MPAA rating of not more than [ ]; (iii) be [ ] to [ ]
minutes in length, including main and end titles; (iv) be shot in color [ ]
black and white [ ] in 35 mm; (v) be of technical first class quality; and
have the following elements, all of which are subject to the approval by the
Guarantor:
Principal Cast:
[ ] in the role of [ ]
[ ] in
the role of [ ]
[ ] in the role of [ ]
Director: [ ]
Producer: [ ]
- the delivery to [ ] by the Delivery Date of the film and soundtrack
materials specified in Exhibit ‘A’ attached hereto (the
‘Delivery Materials').
- The term ‘Delivery Date’ shall mean [ ], subject to
postponements due to the occurrence of events of force majeure which extend the
delivery date and any periods of notice, cure and arbitration as provided in
Schedule III attached hereto.
- The term ‘Distribution Agreements' shall mean the following
agreements:
[ ]
[ ]
- The term ‘Distributors' shall mean the following:
[ ]
- The term ‘Production Bank Account’ shall mean account
[ ]
located at [ ], in the name of the Producer, where all advances by Financier shall
be made unless otherwise agreed to in writing by Guarantor.
You hereby acknowledge that if you receive written notice
from us that we are entitled to assume control of the production funds of the
Film, you will provide your consent that the only authorized signatories on the
Production Bank Account be a signatory or signatories designated by us.
In the event you exercise any rights of offset against the
Production Bank Account, whether arising out of a security interest or
otherwise, our obligations under paragraph 7(a) of the Principal Agreement of
this Completion Guaranty shall not be modified or altered as a result thereof,
and you shall still be responsible (as far as we are concerned) to advance the
Strike Price (as hereinafter defined) in full.
- The term ‘Strike Price’ shall mean the aggregate sum of U.S. [
], including the Fee.
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.
Completion Agreement: the agreement between the Producer and
the Guarantor.
Completion and Delivery of the Film: the term
‘Completion and Delivery of the Film’ shall have the meaning
specified in Schedule I.
Completion Funds: the monies needed to pay Over-Budget Costs,
if any.
Completion Guaranty: this agreement consisting of the Principal
Agreement and the attached Schedules.
Delivery Date: the term ‘Delivery Date’
shall have the meaning specified in Schedule I.
Delivery Materials: the term ‘Delivery
Materials' shall have the meaning specified in Schedule I.
Distribution Agreement(s): the term ‘Distribution
Agreement(s)’ shall have the meaning specified in Schedule I.
Distributor(s): the term ‘Distributor(s)’
shall have the meaning specified in Schedule I.
Excluded Costs: those costs of the Film which are not
Guarantor's responsibility under paragraph 6 of the Principal Agreement.
Excluded Risks: the term ‘Excluded Risks'
shall mean any loss based upon, arising out of, directly or indirectly resulting from or
in consequence of or in any way involving:
- loss or destruction of or damage to any property whatsoever or any loss or expense
whatsoever resulting or arising therefromor any consequential loss
and any legal liability of whatsoever nature directly or indirectly caused by or
resulting or arising from a) ionizing radiations or contamination by radioactivity
from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel,
b) the radioactive, toxic, explosive or other hazardous properties of any explosive
nuclear assembly or nuclear component thereof, or (c) any actual or alleged seepage,
pollution or contamination of any kind;
- insolvency and/or financial default of the Financier;
- war, whether declared or not, civil war or insurrection;
- the failure to obtain or maintain various insurance for the Film required by
Guarantor including but not limited to Producers' Indemnity Insurance,
(i.e., cast insurance, negative insurance, props, sets, wardrobe and miscellaneous
equipment insurance) or with respect to any loss actually paid or reimbursed under
any such insurance policies.
Fee: the term ‘Fee’ shall have the meaning
specified in paragraph 3 of the Principal Agreement.
Film: the motion picture designated as the Film in the
Principal Agreement.
Financier: the guaranteed party under this Completion Guaranty
which shall be [ ].
Financing Agreement: the agreement referred to in the first
grammatical paragraph of the Principal Agreement.
Guarantor:Film Finances, Inc.
Including:means including but not limited to.
Insurance Recovery:all insurance recoveries in relation to the
production of the Film shall be paid as follows: (i) if paid prior to
Guarantor's having advanced any funds, or prior to Guarantor's having
taken over production of the Film, they shall be deposited in the Production Bank
Account and they shall be made available to pay production costs of the Film before
Guarantor is called upon to provide funds toward the completion of the Film
(‘Completion Sums'), (ii) if paid after Guarantor has advanced any
Completion Sums or after Guarantor has taken over production of the Film, they shall be
paid to Guarantor, and shall be used to reimburse Guarantor for any Completion Sums
advanced by Guarantor and thereafter to pay production costs of the Film before
Guarantor isrequired to advance additional (or any) Completion Sums;
(iii) any surplus remaining after such receipts have been applied pursuant to the
foregoing shall be paid to Producer or Financier as their respective interest may
appear. Notwithstanding the foregoing, if an insured event occurs which results in
Guarantor's election to abandon production of the Film, the insurance recovery
shall be paid first to Financier until Financier has been fully repaid all Obligations
pursuant to the Financing Agreement, and thereafter to Guarantor until
Guarantor's has recovered an amount equal to any Completion Sums advanced by
Guarantor. Any surplus shall be paid to Producer or Distributor as their interests may
appear.
MPAA:Motion Picture Association of America, Inc.
Non-Budget Costs:costs which the Guarantor is not obligated to
fund pursuant to the Principal Agreement, including the Excluded Costs.
Obligations: the term ‘Obligations' shall
mean (i) all sums advanced by Financier under the Financing Agreement, including,
without limitation, the principal amount of all advances made by Financier under the
Financing Agreement, and (ii) interest on said advances payable to Financier under the
Financing Agreement and all costs and expenses payable to Financier thereunder.
Over-Budget Costs: those costs of Completing and Delivering the
Film which are in excess of the Strike Price.
Principal Agreement: the agreement (to which this Schedule is
annexed) between the Financier and the Guarantor whereby the Guarantor undertakes this
Completion Guaranty.
Producer: the company designated in the Principal Agreement as
the Producer which shall be [ ].
Production Bank Account: the term ‘Production Bank
Account’ shall have the meaning set forth in Schedule I.
Production Schedule: the final production schedule of the Film
(including the pre-production and production schedules) dated [ ], 200[ ], which has
been approved in writing by the Producer, the Guarantor and, if required, the
Distributor(s) and the Financier.
Screenplay: the final screenplay on which the
Film is to be based, dated as of [ ], 200[ ], written by [ ], and which has been
approved in writing by the Producer, the Guarantor and, if required, the Distributor(s)
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 the Completion
Agreement or pursuant to this Completion Guaranty, including Completion Funds and, if
Completion Funds have been advanced, all out-of-pocket costs, expenses, losses and
liabilities reasonably paid to third parties (other than lawyers) by the Guarantor
directly in relation to or arising out of the performance of the Completion Agreement or
this Completion Guaranty, less any refunds received and retained by the Guarantor from
insurance or otherwise; provided, however, that Secured Sums shall not include any costs
or expenses incurred by the Guarantor in monitoring the production of the Film prior to
such time, if ever, that the Guarantor takes over control of the production of the Film,
or (irrespective of whether Guarantor has taken over control of the production of the
Film) any costs, salaries or expenses attributable to the Guarantor's general
overhead (including any costs or expenses incurred by the Guarantor in connection with
the preparation and negotiation of this Completion Guaranty and all agreements ancillary
thereto).
Underlying Literary Property: the underlying literary material,
if any, upon which the Screenplay is based.
Schedule III: Notice Cure and Arbitration Agreement
- With respect to any dispute relating to the delivery of the Film the following
provisions will apply:
- 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’);
- 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 otherwise modified in order to complete same;
provided that if within three (3) business days after receiving the
Objection Notice, Producer or Guarantor request additional information which
they believe in good faith is necessary in order to determine whether
Delivery has been effected notwithstanding such Objection Notice, or how any
defect in Delivery can be cured, then Distributor shall have three (3)
business days after its receipt of such request to respond in good faith
thereto (the ‘Response’). Following the receipt of the
Objection Notice or Response, whichever is applicable, Guarantor shall have
the following alternatives:
- Effect Delivery in accordance with the specifications of the
Objection Notice and (if applicable) the Response, but in no event
later than thirty (30) business days after receiving the Objection
Notice or Response, whichever is later to occur, and give such party
notice thereof (‘Cure Notice’); or,
- Give Distributor written notice (‘Arbitration
Notice’) within five (5) business days after receiving the
Objection Notice or Response, whichever is later to occur, that
Delivery has been effected notwithstanding the Objection Notice and
that Guarantor has elected to submit the issue of whether Delivery
has been effected for expedited arbitration in accordance with
paragraph 3(a) hereof; provided that if there are any items referred
to in the Objection Notice which the Guarantor elects to correct,
deliver or modify to enable Guarantor to serve a Cure Notice, the
time allowed for serving an Arbitration Notice in respect of any
items which the Guarantor does not so intend to correct deliver or
modify shall beextended so that it is co-terminous
with the period allowed for the service of the Cure Notice.
- Distributor, Producer and Guarantor hereby agree that in the event any dispute
arises between any of the parties hereto as to whether or not Delivery has been
effected such dispute will be submitted to binding arbitration as hereinafter
provided.
- If a Cure Notice is given as aforesaid, then Distributor shall have five (5)
business days from and after its receipt of same within which to verify that
Delivery has been effected in accordance with the specifications of the Objection
Notice and (if applicable) the Response and to notify Guarantor, Financier,
Distributor and Producer that either:
- Delivery has been effected as aforesaid (and such notice shall constitute an
Acceptance Notice for all purposes hereunder); or,
- Delivery has not been effected and Distributor has elected to submit the
issue of whether Delivery has been effected (and such issue only) for
expedited arbitration in accordance with paragraph 3(a) below
(‘Arbitration Notice’).
- In the event Distributor or Guarantor elects to submit the issue of
whether Delivery has been effected to arbitration pursuant to this
agreement, the following shall apply:
- the arbitration shall be submitted to three (3) arbitrators
who shall be selected as follows:
- Upon receipt of notice (‘Arbitration Notice’) from Guarantor or Distributor
(‘First Party’) that it has elected to submit such dispute to arbitration, the party
(‘Second Party’) receiving notice and the party serving notice shall each appoint one arbitrator
with knowledge and experience in the United States motion picture industry and the technical delivery issues relating to motion pictures, and said arbitrators so selected shall then appoint a third arbitrator and shall give written notice thereof to both parties within two (2) days of such appointment; provided, however, that if either Distributor or Guarantor shall fail to appoint its respective arbitrator within five (5) business days after receipt of the Arbitration Notice, then the arbitrator appointed by the other party shall have full authority to act as the sole arbitrator of such arbitration; the two party-appointed arbitrators shall appoint the third arbitrator within ten (10) days of the appointment of the later of the two (2) to be appointed, failing which, at the request of either party, the then President of the American
Arbitration Association, or his/her replacement in the event the President is unavailable, shall be requested to appoint the third arbitrator within ten (10) days of the application.
- The arbitration shall commence at a location in Los Angeles, within twenty
(20) business days after the selection of the three (3) arbitrators
(‘Arbitrators'), and such arbitration shall continue on
each consecutive business day therefrom until fully concluded, unless
continued by the Arbitrators for good cause shown. Except as expressly
provided for herein, such arbitration shall be conducted in accordance with
the commercial rules and procedures of the American Arbitration Association
then in effect.
- There shall be made available to the Arbitrators all relevant documents and
the delivery materials. The parties shall participate in an exchange of
information before the hearing. The parties acknowledge and agree that each
party shall be entitled to reasonable discovery for the purposes of any such
arbitration, including (without limitation) document production and the
taking of depositions. The party desiring such discovery may apply to the
Arbitrators at the outset of the arbitration for particular discovery
requests. The parties will make themselves and all documents as may be
required available so as to enable full and complete discovery in a timely
fashion. The Arbitrators may deny only such discovery as is unreasonable or
is intended unduly to delay the prompt conclusion of the arbitration.
- The Arbitrators must determine whether Delivery has been effected or has not
been effected, and shall promptly notify the parties in writing of the
finding made.
- The Arbitrators' award shall provide for payment by the losing
party or parties of the Arbitrators' and any court
reporter's fees, as well as the reasonable attorneys' fees
incurred by the prevailing party in the arbitration.
Schedule IV
The following provisions shall amend the Completion Guaranty to
which this Schedule IV is appended:
[ ]
[ ]
Film Finances' Sample Completion Agreement
AGREEMENT made as of the [ ] day of [ ], between [ ], a [ ]
corporation (‘Producer’) of [ ] [ ] FILM FINANCES, INC., a
California corporation (herein ‘Guarantor’), of 9000 Sunset
Boulevard, Suite 1400, Los Angeles, California 90069.
WITNESSETH:
- Representations of Producer: the Producer represents that it intends to
produce a motion picture (the ‘Film’) having the following
elements:
- Present title: ‘[ ]’
- Based upon:
- Underlying literary property: None
- Screenplay: entitled ‘[ ]’, written by [ ] dated
[ ];
- Producer: [ ];
- Director: [ ];
- Executive Producer: [ ];
- Principal members of the cast.
[ ] in the role of ‘[
]’,
[ ] in the role of ‘[ ]’;
Subject to Guarantor's approval.
- Budget (dated [ ]) consisting of:
Direct Costs $[ ].00
Contingency Allowance $[ ].00
Guarantor's Fee $[ ].00
========
Total $[ ].00
- Production Schedule dated: [ ];
- Location agreements: To be approved by Guarantor if requested.
- Delivery Date: [ ]
- Financing: the Producer further represents that the financing for all of the
Budget Costs, and the interest and other financing charges in connection therewith,
will be provided pursuant to that certain agreement (‘Financing
Agreement’) dated as of [ ] between [ ] and Producer.
- Distribution:producer further represents that the following distribution
rights in the Film have been granted to the following distributors:
- Pursuant to that certain agreement (‘[ ] Agreement’)
dated as of [ ] as amended [ ], between Producer and [ ] (‘[
]’). Producer has granted to [ ] certain rights in and to the Film
in the territories specified in the [ ] Agreement;
- Pursuant to that certain agreement (‘[ ] Agreement’)
dated as of [ ] between Producer and [ ] (‘[ ]’),
Producer has granted to [ ] certain rights in and to the Film in the
territories specified in the [ ] Agreement. [ ] are collectively referred to
herein as the Distributors and the [ ] Agreement and the [ ] Agreement are
collectively referred to herein as the Distribution Agreements.
- Guarantor's Rights: the Producer further represents that if the
Guarantor expends any Secured Sums, and if such Secured Sums are not otherwise
repaid to the Guarantor in full, the Guarantor shall have the right to recoup the
unpaid balance of such Secured Sums from the Gross Receipts of the Film. Such right
of recoupment shall be subject to the Prior Rights, which for the proposes of this
Completion Agreement consist of:
- The rights and security interests of Financier pursuant to the Financing
Agreement;
- The rights and security interests, if any, of the Distributors pursuant to
the Distribution Agreements; and
- A Screen Actors Guild security interest, if any (provided that said guild
executes a subordination agreement in form and substance satisfactory to
Guarantor) and laboratory liens in relation to the production of the Film
(provided that each such laboratory executes a laboratory pledgeholder
agreement (or similar instrument) in form and substance reasonably
satisfactory to Guarantor).
In this regard, to secure the repayment of the Secured Sums to Guarantor
Producer hereby assigns to Guarantor the Gross Receipts of the Film which are
payable to Producer, and Producer hereby agrees to execute all such documents and
instruments reasonably acceptable to Producer which are required to evidence the
aforementioned assignment, but said security interest shall be deemed terminated for
all purposeswhether or not Guarantor executes such documents and/or
instruments. At such time, if ever, that Guarantor has recouped the Secured Sums,
Guarantor's security interest in the Collateral (including the Gross
Receipts) shall terminate and Guarantor shall execute and deliver to Producer such
documents and instruments as Producer may deem to be reasonably necessary to
evidence or effectuate such termination. Notwithstanding anything contained herein
to the contrary, Guarantor acknowledges that the Secured Sums and the repayment
thereof shall be without recourse to Producer and shall be paid to Guarantor from
the Gross Receipts of the Film, but Guarantor reserves all rights and remedies which
it may have at law or in equity as a result of any material breach of this
Completion Agreement or (to the extent such breach gives rise to any liability to
Guarantor) the Financing Agreement.
- Application for Guaranty: the Producer has applied to the Guarantor to issue
its guaranty of completion of production of the Film to the Financier.
- Agreement of the Parties: in consideration of the Producer's
representations set forth above, and of the Producer's warranties and
agreements hereunder, and subject to the payment by the Producer to the Guarantor of
the referenced Guarantor's Fee of $[ ].00, upon the execution hereof, the
Guarantor agrees to issue its Completion Guaranty to the Financier, in form mutually
approved by the Guarantor and the Financier, and upon the terms and conditions set
forth in the Guarantor's Standard Terms attached hereto and made a part of
this agreement by this reference. By executing this Completion Agreement, the
parties hereto agree that they will, respectively, fully perform their respective
obligations and agreements under this Completion Agreement, and under the agreements
which are ancillary hereto.
-
Notices:
- Copies of all notices to the Producer shall be sent to:
[ ]
[ ]
[ ]
[ ]
IN WITNESS WHEREOF, the parties hereto have executed
this Completion Agreement on the day and year first above written.
[ ]
(‘Producer’)
By [ ]
Its [ ]
FILM FINANCES, INC. (‘Guarantor’)
By [ ]
Its [ ]
Completion Agreement: Standard Terms
- 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 theProducer, 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.
- Warranties, Representations and Agreements of the Producer. the Producer
hereby warrants, represents and agrees that:
- 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.
- 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 creativeconsiderations, 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.
- 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.
- 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 violatingany 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.
- The Producer will be the producer of the Film.
- 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.
- Subject only to the Prior Rights, all of the Gross Receipts will be
available for the recoupment of the Secured Sums, if any.
- 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.
- Insurance. the Producer represents, warrants and agrees that:
- 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 ofreceipts
for premiums paid shall be delivered to the Guarantor on demand.
- 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.
- 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.
- 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.
- 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:
- If the recovery is paid after all costs of production have been
paid, and if at the time of receipt of the recoverythe 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.
- 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.
- 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.
- 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 leastthe 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.
- 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:
- legal fees in excess of the amount allowed in the Budget;
- the cost of delivery items not provided for in the Budget;
- advertising and publicity costs in excess of the amounts allowed in the
Budget;
- except to the extent required by the Completion Guaranty, interest and
finance charges;
- 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);
- 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;
- except to the extent provided for in the Budget, the cost of previews;
- 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;
- any payments pursuant to tax indemnity obligations;
- 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.
- 2 Certain Costs in Excess of Budget.Producer hereby agrees that
- 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;
- the rates upon which the expense allowances provided for in the Budget are
computed will not be exceeded; and
- 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.
-
Guarantor's Rights Concerning Production.
- 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.
- 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.
- 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 productionand 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.
- 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.
- If:
- 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 suchrisk arising
will be avoided or adequately reduced by the steps proposed to be
taken by the Producer, or
- 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
- 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.
- If:
- 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
- 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 ofincurring 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 Producerfrom 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 inrelation 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.
- 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.
- 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 immediatelyexercise its rights under paragraphs 8 and 9 of these
Standard Terms.
-
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 participations. The Collateral, as that
term is used in this Completion Agreement, consists of: (i) all positive and
negative film, all sound tracks and all other physical properties of or
relating to the Film, whether now or hereafter in existence and wherever
located; (ii) all literary property and ancillary rights in relation to the
Film, including without limitation the Screenplay, the Underlying Literary
Property, if any, and the copyrights thereof, (iii) the copyright or
copyrights of the Film; (iv) the music of the Film; (v) all rights to
distribute, lease, license, sell, exhibit, broadcast or otherwise deal with
the Film by all methods and means and in all media throughout the universe;
(vi) all contracts and contract rights, accounts, inventories and general
intangibles of the Producer relating to the Film or to any literary property
and ancillary rights and any other elements of the Film referred to in this
subparagraph; (vii) the Gross Receipts and all other financial proceeds of
the Collateral, including all income and receipts derived and to be derived
from the marketing, distribution, licensing, sale, exhibition, broadcasting
and other exploitation of the Film and of the other elements of the
Collateral, and (subject to paragraph 3 of these Standard Terms) all
proceeds of insurance relating to the Film; (viii) the Reserved Rights.
- With respect to its security interest, the Guarantor, its successors and
assigns, are hereby granted all of the rights, powers and privileges of a
secured party under the California Uniform Commercial Code in force and
effect from time to time.
- The Producer agrees to execute and deliver to the Guarantor, when requested
by the Guarantor from time totime, UCC Financing Statements
and a Mortgage of Copyright in form satisfactory to the Guarantor for
recording purposes, confirming and evidencing the Guarantor's
security interest in and to the Collateral. The Guarantor is hereby
irrevocably appointed the Producer's attorney-in-fact to execute
such instruments in the name and stead of the Producer, should the Producer
fail to do so upon request, and to file or record them as deemed necessary
or advisable by the Guarantor.
- The Producer shall not (i) grant any rights or security interests (other
than the Prior Rights) ranking in priority to or pari passu with the
security interest hereby granted; (ii) while any monies are due to the
Guarantor hereunder, agree to market or exploit any of the Collateral, other
than pursuant to the Distribution Agreements, and the Financing Agreement,
without the prior written consent of the Guarantor.
- The security interest hereby granted shall terminate: (i) if and when it is
finally determined that the Guarantor will incur no liability under the
Completion Guaranty; or (ii) (if such liability has been incurred) if and
when the Guarantor has received payment in full of the Secured Sums. When
and if said security interest terminates, the Guarantor shall execute such
instruments as may be necessary to evidence the release and termination of
its security interest.
- In the event that, pursuant to the Completion Guaranty, the Guarantor repays
any financing provided by the Financier, then, in addition to its security
interest hereunder, the Guarantor shall automatically be subrogated to the
security interests of the Financier in relation to such financing, and shall
in all respects succeed to the position of the Financier under the Financing
Agreement and under all instruments ancillary thereto.
- Additional Remedies.As an additional remedy, but subject to and so as not to
adversely affect the rights of the Distributors pursuant to the Distribution
Agreements, and of the Financier pursuant to the Financing Agreement, or any other
Prior Rights, if the Guarantor expends or advances any Secured Sums the Guarantor
shall, after consulting with the Producer, have all or any of the following rights
(either itself or by appointment of an agent, on such terms as to thecompensation of such agent and otherwise as the Guarantor shall reasonably determine):
- To take possession of the Collateral or any part thereof;
- To manage and control, or to supervise the management and control, of the
business of the Producer in relation to the Film, and for this purpose to
raise or borrow monies upon the security of the Collateral or any part
thereof, and to engage such personnel or such other companies as it shall
consider necessary;
- To enter into distribution, exhibition, sales and leasing agreements in
relation to the Film or any of the Collateral for any media and for any
territories, and to make any settlements, arrangements and compromises, and
to do such other acts and things in relation to the Film as the Producer
would itself have the right to do.
All such acts of the Guarantor shall be such as in its good faith judgment it
considers to be in the best interests of the Guarantor, the Distributors, the
Financier and the Producer. If called upon by the Guarantor, the Producer shall,
without compensation, render such assistance to the Guarantor in connection with
such action by the Guarantor or its appointee as the Guarantor may reasonably
require from time to time. The Producer irrevocably appoints the Guarantor its
attorney-in-fact, with power to appoint other persons as attorney-in-fact, to
execute such instruments in the name and stead of the Producer as they may consider
necessary and proper in acting pursuant to this paragraph 9. The powers and
authority of the Guarantor pursuant to this paragraph 9 shall cease when the
Guarantor has recouped the Secured Sums, without prejudice however to any acts done
by the Guarantor or its appointee and the continued effectiveness of all instruments
executed by them or either of them pursuant to this paragraph. Subject to the Prior
Rights, all monies received by the Guarantor or its appointee pursuant to the
exercise of the Guarantor's powers and authority under this paragraph,
which remain after payment or recoupment of all costs, charges and expenses
incidental to the exercise of such powers and authority, and after payment of the
Secured Sums, shall be paid to the Producer or other party entitled thereto.
- Statements.If and as long as there are any unrecouped Secured Sums, the
Producer shall deliver or cause to bedelivered to the Guarantor,
concurrently with or immediately following delivery thereof to the Producer, copies
of all statements and reports which the Producer receives from the Distributors and
other third parties in relation to the marketing and exploitation of the Film, or
any of the other Collateral.
- The Completion Guaranty. the Producer hereby acknowledges and confirms that it
is not entitled to nor does it have any interest in the benefit of the Completion
Guaranty, and the Producer hereby waives and releases all interest and benefit in
the Completion Guaranty, present or future.
- Miscellaneous Provisions. this Completion Agreement has been executed in the
State of California, and shall in all respects be interpreted, enforced and governed
by the laws of that State. The language of this Completion Agreement shall be
construed as a whole according to its fair meaning and not strictly for or against
either of the parties. If the Producer consists of more than one company, this
agreement shall be binding jointly and severally upon such companies and each of
them. Any term used in this Completion Agreement in the singular shall be deemed to
be used in the plural wherever appropriate. The Producer acknowledges that the
Guarantor has entered into agreements with certain insurers who insure certain of
the Guarantor's obligations in relation to the Film. Pursuant to those
arrangements, such insurers shall have the right to assume the Guarantor's
obligations and rights under this Completion Agreement, subject to the terms hereof.
If any one or more of the provisions of this Completion Agreement shall be held to
be illegal or unenforceable in any respect, the legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby. No
modification or waiver of any provision of this Completion Agreement or waiver of
any default hereunder shall be effective, unless in writing and signed by the
parties hereto (in the case of a modification) or by the waiving party (in the case
of a waiver), and any such waiver shall apply only to the specific matter waived.
- Notices.Notices may be served by either party hereto on the other by mail,
telecopy or telegram, and shall be deemed to have been served at the expiration of
one business day after the date of mailing, postage pre-paid, or the date ofdispatching the telecopy or telegram, charges pre-paid or otherwise
provided for. In proving such service it shall be sufficient to show (by affidavit
of the person who sent the notice) that the telecopy, telegram or letter was
dispatched or posted as aforesaid. The respective addresses of the parties shall be
as stated at the beginning of the Principal Agreement, but either party may change
its address from time to time by written notice to the other party.
END OF STANDARD TERMS
Schedule 1: 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.
- 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 developed or undeveloped, and
sound tracks.
- Faulty Stock, Camera and Processing Insurance to cover, among other things, loss,
damage or destruction of raw film stock, exposed film, whether developed or
undeveloped, and sound tracks caused by or resulting from fogging or the use of
faulty sound equipment, faulty developing, faulty editing and faulty processing.
- Props, Sets and Wardrobe Insurance to cover, among other things, all risks of direct
physical loss, damage or destruction of props, sets and wardrobe during production
of the Film.
- Extra Expense Insurance to cover, among other things, any extra expense necessary to
complete the principal photography of the Film due to the damage or destruction of
property, including, without limitation, facilities, props, sets or equipment used
in connection with the Film, including loss due to faulty generators.
- Miscellaneous Equipment Insurance to cover, among other things, all risks of direct
physical loss, damage or destruction to cameras, camera equipment, sound, lighting
(including breakage of globes) and grip equipment, and mobile equipment, vans or
studio location units or other such similar units owned by, or rented to, the
producer of the Film.
- Property Damage Liability Insurance covering, among other things, the damage to or
destruction of the property of others, including, without limitation, the loss of
use of that property while such property is in the care, custody or control of the
Producer of the Film.
- Errors and Omissions Insurance covering, among other things, the legal liability and
defense of the producer of the Film against lawsuits alleging the unauthorized use
of title, format, ideas, characters, plots, plagiarism, unfair competition andbreach of implied or quasi-contract. Such insurance shall also
protect against alleged libel, slander, defamation of character and invasion of
privacy. The Errors and Omission Insurance shall be in the minimum amount of
$1,000,000 U.S. per occurrence and $3,000,000 U.S. in the aggregate with a
deductible of $10,000 U.S. and a period of coverage of not less than three years
from delivery of the Film (plus such longer periods as coverage is required to be in
effect pursuant to contracts for the exhibition or distribution of the Film).
- Comprehensive Liability Insurance covering the producer of the Film against, among
other things, all claims for bodily injury, personal injury or property damage which
arise in connection with the Film, with minimum liability limits of $1,000,000 U.S.
- Worker's Compensation Insurance as required by the various jurisdictions in
which any services are rendered in connection with the Film covering, among other
things, all temporary or permanent cast or production crew members.
- Any insurance coverage required by applicable collective bargaining agreements.
Coverage is to be blanket and the limits of liability must be sufficient so as to
meet all requirements of such collective bargaining agreements.
- Broad Form Monies and Securities Insurance covering, among other things, the loss of
money or other securities through disappearance, destruction or wrongful abstraction
at any location site any place in the world in an amount equal to the greater of
$25,000 or the amount of the highest estimated weekly cash payroll for the
Film.