SHIVER FINANCING STRUCTURE
SHIVER represents an exceptional and unique opportunity for equity participation in a film that has high profit potential without any direct cash investment by the equity participants.
The producers believe that the production of SHIVER (anticipated to commence production in early 2008) will result in one of the most exciting and commercially successful films of 2008-09. The unique financing formula (via letters of credit strictly conditional upon completion of the picture) represents a grand opportunity for private investors to participate in a picture that has such significant upside profit potential with a built-in cult following and without providing any direct cash investment, whatsoever.
The following financing formula provides optimum security.
See Sample EP Agreement (link)
Standby Letters Of Credit:
1. Equity financing will be via Equity Participations in the form of IRREVOCABLE STANDBY LETTERS OF CREDIT conditional upon completion of the picture. Financing may also be accommodated via direct cash participations, production services participations (i.e. studio, post production facilities), foreign pre-sales and gap financing. The letters of credit plus other financing elements will be utilized as underlying collateral for a production bank loan supported by a completion guarantee acceptable to the lending bank, (National City Bank, St. Louis, Mo.).
The letters of credit will have the following conditions:
The letters of credit will have an expiration period of eighteen months (during which period, the picture must be completed) and may not be triggered until six to nine months after completion of the picture (an allowance for time to conclude sales, distribution and licensing deals to ostensibly accommodate the cost of the picture. Thus, it is likely the letters of credit may never be triggered.
See - Sample Letter Of Credit. (link)
2. A Missouri L.L.C. (The Shiver Company LLC) will arrange all interim financing via a production loan from a reputable banking institution and obtain a completion bond.
3. The advantage of the above financing formula for the equity participant is as follows:
a) No direct cash investment is required. The actual financing of the picture will be provided via a bank production loan.
b) The letter of credit can only be triggered upon certification by a laboratory and the completion bond company that the picture has been completed. Once production is announced, the producers will begin arranging for licensing of the picture in foreign territories. It is likely that sufficient foreign sales/licensing deals will be accommodated during the period of production (8-12 months) to cover the entire budget of the picture; in which case, the L.C. will never be cashed. In addition, the L.C. will be open for a period of 18 months. In the event of any shortfall on recoupment from time of completion of the picture, the L.C. will still have a six -nine month buffer period before it can be negotiated providing sufficient time to effect further sales
PROFIT PARTICIPATIONS AND SCREEN CREDITS: Equity Participants receive:
a) A Fifteen Percent premium pro rata, pari passu in accordance with respective equity participations.
b) Proportionate, pro rata, pari passu share of 50% of net proceeds (profits).
c) Co-associate producer credits in main or end titles.
All third party profit participants (actors, director other talent) are from producers' share, so equity participants' share is never diluted
RECOUPMENT AND DISTRIBUTION OF REVENUES
A SEPARATE ACCOUNT will be set up at a reputable U.S. bank. All monies received by the production entity from the distribution/exploitation of the picture from all sources (theatrical, TV, home video/DVD, foreign, et al) will be remitted to this special account to be administered by a neutral, third party, fiduciary agent (bank, accounting firm) which will then distribute the monies in accordance with a predetermined schedule as follows.
a) First, to pay off the production bank loan and any bank gap financing (recoupment of cost of picture).Thereafter:
b) Fifteen Percent premium to Equity Participants pro rata, pari passu per respective equity participations.
c) Deferments, if any (to talent & third party participants)
d) Profits in accordance with predetermined profit schedule.
THE SHIVER PRODUCTION QUALIFIES FOR A MISSOURI STATE FILM INCENTIVE TAX CREDIT APPROVED IN THE AMOUNT OF $600,000 (subject to Missouri production expenditure of $1.7 million). THIS TAX CREDIT IS A NON-RECOUPABLE AMOUNT. THUS, THE RECOUPABLE AMOUNT FOR COST OF PRODUCTION BECOMES ONLY APPROXIMATELY $2.5 MILLION.
FURTHER, THE PROJECT QUALIFIES FOR A FIRST YEAR TAX WRITE OFF EQUAL TO THE ENTIRE AMOUNT OF THE PRODUCTION BUDGET UNDER THE 2004 TAX LAW PASSED BY CONGRESS TO STEM RUNAWAY PRODUCTIONS. (clink for link)HENCE, THERE IS VIRTUALLY NO DOWNSIDE RISK FOR AN EQUITY PARTICIPANT IN THE SHIVER PROJECT (pursuant to the above parameters) .
The above financing formula is unchallengeable. The only element that one must evaluate is the likelihood of how much potential profit can be anticipated versus that of any potential loss. In this respect, it is virtually impossible for most any film in the "thriller" genre with relatively recognizable names to be unsaleable. There is a constant demand for product to fill the pipeline for foreign and domestic distribution as well as for theatrical, satellite, cable, free television and home video/dvd markets.