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Marion Spiegelman

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Marion Spiegelman is Senior Vice President of Film Finances, Inc., the entertainment industry's oldest completion guaranty company.

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Her entertainment career began in 1966 as a television Contract Administrator for the William Morris Agency. In 1978, she expanded into the motion picture field by joining Melvin Simon Productions as their Legal Administrator. In 1986, after a brief retirement for motherhood, she joined Entertainment Completions, Inc., as their Vice President of Business Affairs. In 1988, she joined Film Finances. She is a member of Women in Film, serving three years as Chair of the Women in Film Foundation. She also a board member of California State University at Fullerton's LA Alumni Network Steering Committee. She has successfully juggled the multiple careers of corporate executive, motherhood, PTA president, board member, and earthmother to independent producers.

SO YOU WANT TO BOND YOUR PICTURE

By Marion Spiegelman
Senior Vice President, Business Affairs
Film Finances

Film Finances originated the concept of completion guarantees for motion pictures in 1950. The company, founded in London, expanded operations into Canada and the US in the mid-70's. Now based in Los Angeles, we have offices in London, Australia, Tokyo, Toronto, Scandinavia, India and a rep in South Africa. Our global network of offices provides clients access to local expertise in every major film production center.

We have guaranteed the completion and delivery of over 5000 feature films, television movies of the week and tv series, documentaries, animated features and, most recently, computer game productions, shot in almost every part of the world. Budgets range from $500,000 to $75,000,000.

The purpose of the completion guarantee is to provide a financier with assurances that the project can and will be delivered by a certain date, for a certain budget total and in accordance with pre-agreed specifications. In order for filmmakers to attract professional financiers (sales companies, banks, distributors, investment groups) to finance their projects, filmmakers will be required by such financiers to acquire a completion bond. The filmmaker/producers will then approach the bonding company for the bonding process to begin.

What we cover under the completion bond/guarantee are any overbudget costs that are incurred during the course of production or a defined loss that may be suffered by the financier should the project not be delivered at all. Our guarantee is conditioned upon the full budget amount being made available under the finance agreements and per an approved cash flow.

All the projects we guarantee are in turn backed up with a guarantee by Lloyd's of London and the financier receives an assurance that their investment will be secured by a Lloyd's loss payee endorsement.

We agree to issue completion guarantees after a thorough review of the script, schedule, budget and our due diligence of the filmmakers. Each of our offices have highly experienced production personnel who perform the due diligence on each project and monitor all phases of production from the point that we agree to issue a completion guarantee.

The process of issuing a completion guarantee can be divided in four stages.

Stage #1

EVALUATION OF THE PRODUCTION PLAN

First we review the script, the budget, the cash flow, the shooting schedule and the principals involved.

Our production staff with extensive production background either as line producers or production accountants - examines the items in detail.

A) Script review to identify any difficult, unusual or potentially expensive sequences - Such as:

• is the subject period or contemporary;
• are there large crowd sequences;
• how much action to be staged;
• how much stunt work - special effects;
• are there a large number of exteriors (possible problems of control and weather);
• will the sets be found at locations or must they be built; construction issues;
• are there weather or seasonal conditions not normal to proposed time of shooting;
• are there any particular skills for actors e.g. horse­riding, special choreography;
• where will it be shot - are some locations more expensive than others - foreign locations -political unrest ,  currency risk;
• are there visual effects and if so who will manage them, how are they being planned and we would require bids from several reputable VFX companies.

B.) Budget & Shooting schedule review  - entails going through the budget line by line with the following concerns:

• do the requirements and parameters of script coincide with time allowed for filming and the cost allocations in budget;
• can the correct # of crew be hired in each dept. at adequate rates of pay commensurate with skills required and the size of production;
• is there a realistic delivery date;
• is it an union or non-union shoot;
• are the delivery items budgeted;
• is there enough money to make the film;
• does the budget contain an amount equal to 10% of the direct costs which will be held for contingencies, and a 3% bond fee.

C.) Personnel Involved with the Project:

• who are the principal actors - are any required to be "essential elements", as such term is defined under Legal Preparation below.
• who are the people involved and their history (this is key to the film) i.e director, producer, line producer (who is responsible to bring the film in on budget), Unit production manager, director of photography, production designer, accountant, 1st assistant director and visual effects supervisor. In many cases we function as a referral service, since many producers and studio personnel call us for referrals or recommendations.

After our initial review of the items above:

• set up meeting with individual producers, director, upm, production accountant and sometimes art director or other production personnel whose views and explanations about the project can be of assistance;
• ask the director how he proposes to shoot any sequences which we considered difficult;
• discuss the director's plan for shooting days in accordance with # of hours set forth in budget for crew deals.

• All financing is available.
• All personnel (artistic and technical) are available as required.
• Our approval of principal cast agreements, financing and distribution agreements.
• Our approval of location agreements and any special effects, special visual effects or make-up effect agreements.
• Satisfactory production insurance coverage within budget allowance.
• Approval of story rights agreements.
• Receive undertakings from the individual producers and directors that they have approved script and examined the budget, production and post-production schedules and they believe that such elements are adequate to make the film. In addition they also acknowledge that the film stock allocated in the budget is sufficient.
• The letter may set out costs which are deemed to be outside the budget and therefore are not the guarantor's responsibility such as publicity, music and legal costs.
• The letter will specify that the budget will include a 10% contingency allowance such contingency to be based on the direct costs (the above and below the line costs).
• The Letter will specify our fee - a negotiated percentage of the direct costs, on an average - 3%.

• experimental content, e.g. unproven special effects;
• projects involving directors or actors who, in our opinion cannot be insured or who have reputations for being uncontrollable;
• projects set in remote locations or politically volatile locations; or
• productions which require some exceptional item to be made available very cheaply - e.g. robotic creatures.

1. Currency risks - can they be covered by buying forward exchange contracts or by locking in a rate;
2. Risks caused by planning a non-union production with a potential unionization pending - IATSE, Teamsters. (unionized costs can escalate due to increased staffing and fringe benefits or higher wages);
3. Delivery obligations that are specified in the distribution contracts such as can the film be delivered by the delivery date;
4. Does the budget contain bank charges;
5. What 'essential elements' are there. Under this category, we are sometimes required by the distributor to guarantee that the film will contain the performance of a certain individual or be directed by a particular director.
   In such a case we will request a provision in the document with the distributor that there is some type of replacement mechanism. However in certain cases, the distributor is only interested in taking a film if it does include a particular actor or director and will not accept a replacement for them even in the event of their death or disability. Such actors and directors are called "essential elements". In these instances, we insist that these elements (i) have signed, unconditional contracts with respect to their performance in the film and (ii) that cast insurance is extended to cover these elements as essential so that if they are unable to complete their services as a result of death or disability, the cast insurance will cover the entire cost of the film to be abandoned ( i.e. all story rights costs, finance charges, etc.) which the bond company would otherwise be responsible under the guaranty.

1. Chain of title documents - underlying rights - writer agreements,  assignments;
2. Principal cast agreements *;
3. Director and producer agreements *;
   • * In reviewing these documents we must be certain that the agreements do not grant rights which could seriously endanger our ability to deliver the film in a timely manner. Some issues can be of concern e.g.:
   1. stop dates (a date by which the party has to be released to another obligation),
   2. approval rights (an actor over a director or directors over cast, and how many heads of departments etc),
   3. salaries and fringes in the contracts correctly reflected in the budget, or
   4. final cut rights granted to the director or producer.
4. Pertinent location agreements;
5. Distribution agreements;
6. Financing agreements;
7. Delivery requirements - are all required delivery elements reflected in the budget;
8. Film and sound laboratories and production bank account information;
9. Crew list;
10. Production insurance coverage -cast, negative insurance, liability, worker's comp, errors & omissions, particularly with regards to:
    1. term of policies - do they coincide with the delivery date,
    2. are the limits and deductibles reasonable,
    3. is there special coverage in line with special effects, aircraft coverage etc.,
    4. appropriate premiums are budgeted,
    5. principal cast and director are fully covered with no exclusions.

1. Completion Guaranty: This agreement is between the financier and the bond company. The Guaranty undertakes to the financier that the film will be completed and delivered and that guarantor will provide any monies that may be required to effect completion and delivery in excess of the budgeted costs. It also defines the definition of "complete and deliver".
2. Completion Agreement - This agreement is between the production entity and the bond company. This agreement sets forth the responsibilities of the production entity and guarantor's takeover rights. Under this agreement, the production entity grants to guarantor a security interest in the film and also sets forth guarantor's recoupment rights in the event we advance any overbudget monies.
3. Director and Producer Inducement Letters: These letters are signed by the individual producers and director. The letter is an undertaking from them that they have read the script, reviewed the budget and schedule and find them sufficient to make the film. They also acknowledge our take-over rights in the event the film threatens to be unable to come in on budget or on schedule.

• 1. Daily call sheets and production reports
• Production reports indicate the progress of the film, including what scenes and # of pages shots to date, # of feet of film shot; length of day (12 hour day is the norm). Was the1st shot made reasonably soon after set call; what personnel were employed that day, as well as other information which is vital in tracking a film.
  
  
• 2. Weekly production cost reports
• Cost reports indicate expenditures of the film, cost to date and cost to complete for each budget category.

1. Again we monitor the production to ensure that all sound and editing and all other post-production responsibilities are met within budget and within the post schedule.
2. On staff, we have a full-time post-production department which closely monitors the various stages of post-production ( i.e. editing process, mixing, scoring, etc.) We make sure that the post-schedule is adequate and that the post-production stays on schedule and that no technical problems arise.
3. Once delivery has been made to the distributor, the distributor has a period of time to inspect the materials. If they find any problems, they are required under the agreements to inform the producer and the guarantor in specific detail of the problems. As we only guaranty that the film will be of first-class technical quality, we then have a period of time to cure the problems that the distributor has indicated.
4. What happens if delivery is not made? Under the agreements, the guarantor is required to pay off the financiers and, if that is the case, under the agreements, all rights in and to the film belong to the guarantor. The guarantor then has the option to try to sell the film to another distributor or distribute the film itself.

1. Make sure all your financing is in place before you start shooting!!!
2. Make sure all your paperwork is together - chain of title docs, insurance, corp. paperwork before you start the process.
3. Make sure your cast and director are insurable without any exclusions or high deductibles.
4. Know up front if one of your cast members is essential for delivery of the film.
5. Budget delivery items generously.
6. Do your homework  - ask the guarantor for advice!!