September 16, 2004
In this newsletter:
SUICIDE BLONDE WINS JUDGEMENT AGAINST RGH/LIONS SHARE PICTURES
On September 10, 2004, we were successful in having Judge James A Bascue of the Los Angeles Superior Court confirm an Arbitration Award we had previously won against RGH/Lions Share Pictures.
Our client, Suicide Blonde Productions, Inc., initiated arbitration against RGH/Lions Share Pictures for failure to live up to its distribution agreement obligations for the motion picture, “Suicide Blonde.”
In confirming the award, the Court granted Suicide Blonde $254,297.26 in damages, an amount that included $185,750 in lost revenue. Furthermore, the Court permanently enjoined RGH/Lions Share from advertising, selling, distributing, manufacturing, or shipping the picture, ordered RGH/Lions share to return all materials related to the picture, and required RGH/Lions Share to pay all reasonable attorneys fees and costs in securing the confirmation of the Arbitration Award.
MARK’S UPCOMING SPEAKING ENGAGEMENTS Oct. 2-3, UCLA
Mark will be teaching a UCLA Extension course on Financing Independent Features and Negotiating a Distribution Agreement, Oct. 2-3. During the seminar, participants will examine how independent films are financed and distributed. Seminar topics include financing via pre-sales, debt, and limited partnerships; negotiating tactics; typical contract terms; cross-collateralization; and creative accounting. Particular attention is paid to how producers and filmmakers can protect themselves by watering down warranties, getting added to the E&O policy, using the lab access letter to retain possession of the negative, and utilizing termination and arbitration clauses. To enroll in the course online, go to www.uclaextension.com and enter Course Reg # Q6736U.
Oct. 30, Los Angeles, CA California Lawyers for the Arts Film Business Seminar at Southwestern University School of Law. Call 310-998-5590 or email UserCLA@aol.com.
HOLLYWOOD FILM CONFERENCE SPECIAL OFFER
This year Mark will be chairing the Hollywood Film Conference, part of the Hollywood Film Festival, which will be held from Friday, October 15 to Sunday, October 17 at the Arclight Cinemas 6360 Sunset Blvd., in Hollywood. The conference will feature top industry speakers who will discuss financing and distribution of films.
In the past seven years over 600 industry professionals have participated as panelists in the conference, including executives from Columbia/TriStar, Fox Searchlight, MGM Studios, Miramax, NBC, New Line, Paramount Classics, Samuel Goldwyn Co., Seventh Art Releasing, Strand Releasing, Twentieth Century Fox, Showtime Networks, Walt Disney, and agents from CAA, ICM, William Morris and Writers & Artists among others. We have a special Offer for subscribers of this newsletter: more than 50% off the regular price of $495.00. Just mention that you heard about the conference from this newsletter and you can purchase admittance to the 3-day conference for only $195.00. Additional info at: www.hollywoodawards.com/conferences_film.html
FINANCING INDEPENDENT FILMS by Mark Litwak
Independent films can be financed in a variety of ways. In addition to a filmmaker using his own funds to make a movie, the most common methods are: 1) loans 2) investor financing 3) borrowing against pre-sales (a loan against distribution contracts) 4) distributor-supplied financing.
Loans can be secured or unsecured. A secured loan is supported or backed by security or collateral. When one takes out a car or home loan, the loan is secured by that property. If the person who borrows money fails to repay the loan, the creditor may take legal action to have the collateral sold and the proceeds applied to pay off the debt. An unsecured loan has no particular property backing it. Credit card debt and loans from family or friends may be unsecured. If a debtor defaults on an unsecured loan, the creditor can sue for repayment and force the sale of the debtor’s assets to repay the loan. If the debtor has many debts, however, the sale of his property may not be sufficient to satisfy all creditors. In such a case, creditors may end up receiving only a small portion of the money owed them.
A secured creditor is in a stronger position to receive repayment. In the event of a default, designated property (the secured property) will be sold and all the proceeds will be applied first to repay the secured creditor’s debt. Unsecured creditors will share in whatever is left, if anything.
The advantage of a loan, from a legal point of view, is that the transaction can often be structured in a fairly simple and inexpensive manner. A short promissory note can be used and the transaction often is not subject to the complex security laws that govern many investments. Thus, there is usually no need to prepare a private placement memorandum (PPM). Keep in mind that if the agreement between the parties is labeled a “loan,” but in reality it is an investment, the courts will likely view the transaction as an investment. Giving a creditor a “piece of the back-end,” or otherwise giving the creditor equity in the project, makes the transaction look like an investment. Read the full article at: www.marklitwak.com/articles/general/financing.html