Financial Assurances

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Financial Assurances

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Producers who sign with SAG-AFTRA have access to the world's most talented and professional performers for their projects, but becoming signatory does require some paperwork.

Providing Financial Assurances is a subset of the signatory process for independent theatrical films and television movies, mini-series' and pilots an hour or longer. The Financial Assurances program is designed to help ensure performers are paid money owed to them under SAG-AFTRA contracts.  

The program takes the long view - to protect union members' interests throughout your project's life as it is exploited around the world, over multiple platforms and becomes part of one or more film libraries.

Click on the tabs below to learn how the Financial Assurances program works, and how to best prepare for the Financial Assurances process.

Click on the FAQs tab below to find answers to specific questions you may have.

Contact:

(855) SAG-AFTRA / (855) 724-2387

Theatrical Department

(323) 549-6828

Legal Department / Financial Assurances Counsel

(323) 549-6627

For brochures with all information contained on the tabs below, click these links:

FINANCIAL ASSURANCES At A Glance

 

Why Financial Assurances?

SAG-­AFTRA’s Financial Assurances program is designed to help ensure performers are paid what is owed to them under our contracts.

The program has two primary areas:

  • To establish responsibility for residuals payments; and
  • To obtain a secured interest — often called a “mortgage” or “lien” — in the film and proceeds from its exploitation

HOW DOES IT WORK?

When you produce a film under a SAG-­AFTRA contract, you submit documents that let us review the chain-­of-­title, corporate, financing and distribution structure of your project.

After the review, we will request:

  • Security Agreements signed by anyone who owns rights in the film, its copyright and exploitation;
  • Intercreditor or Subordination Agreements from other parties with secured interests;
  • Guaranty Agreements from parent companies of the signatory producer, copyright owners or other financially responsible parties enabling production;
  • Assumption Agreements from existing distributors; and
  • If there are distribution territories where distributors will not sign assumption agreements:
    • A residuals reserve cash deposit toward future residuals, or
    • A collection agreement to administer residuals payments.

HISTORY IS IMPORTANT

The history of your working relationship with SAG-­AFTRA, and that of the others involved in your project can affect the level of financial assurances we require.

We look at:

  • Initial compensation and residuals payments;
  • Claims history and responsiveness to claims; and
  • Willingness to provide requested financial assurances documents.

 

Who Handles Financial Assurances?
Your SAG-­AFTRA Contracts Department business representative will receive all documents and is your central point of contact. They work with:

  • A Contracts Department Financial Assurances specialist to help review; and
  • A Financial Assurances Counsel in our Legal Department to assist with negotiation of requested documents, such as collection agreements.

Financial Assurances & Security Deposits

We encourage you to have all financial assurances in place before the start of principal photography.

You must complete the financial assurances process as one condition to the return of the deposit. Please do not wait until you need your security deposit back to provide the required financial assurances. This will delay the return process.

Stay in touch with your SAG-­AFTRA Contracts Department business representative and any Financial Assurances Counsel with whom you are negotiating documents to resolve outstanding issues as soon as possible.

Need more Help?

  • SAG-­AFTRA Contracts Managers and Financial Assurances Counsel are happy to meet with you or speak by phone. Help us learn about your company, and discuss the types of Financial Assurances that may be most appropriate to your project structures.

 

To request a meeting, contact:

Theatrical Department
(323) 549-6828

Legal Department / Financial Assurances Counsel
(323) 549-6827

TOP 3 THINGS TO KEEP IN MIND

  • For the best service, submit all paperwork 3 weeks before the start of principal photography.
  • Budget for a residuals reserve or draft a collection agreement if your distributors will not sign assumption agreements.
  • A positive history of compliance with your SAG-­AFTRA payment obligations impacts the level of financial assurances we will require.

 

TO CONTACT US

SAG-AFTRA
5757 Wilshire Blvd. 7th Floor
Los Angeles, CA 90036
(855) SAG-AFTRA • (855) 724-2387
Theatrical Department (323) 549-6828

Financial Assurances: The Different Types

 

Collection Account Management Agreement ("CAMA")
CAMAs are agreements between parties with a financial stake in a project who are entitled to receive a portion of a film’s gross receipts. These parties agree that all gross receipts will be deposited with a third-party account administrator who will distribute the receipts in an agreed-upon order and amount (frequently referred to as the "waterfall.").

 

The Union’s CAMA Requirements

 

For a CAMA to be acceptable to the union, the CAMA must:

 

1. Be effective upon the first dollar of worldwide gross receipts;
2. Place the union’s residuals set-aside in second position in the distribution schedule after only CAMA administrator’s fees and expenses; and
3. Contain the customary terms and conditions in connection with the calculation and payment of residuals, including the 6.2% SAG-AFTRA residuals set-aside for the payment of residuals.

 

 

 

 

Guaranty Agreements

Guarantors are additional parties who agree to be responsible for the signatory producer’s obligations if the producer defaults on its obligations under the Basic Agreement.

 

 

 

 

From Whom a Guaranty May Be Required
SAG-AFTRA may request guaranties from:

  • Entities that are rights-holders on the SAG-AFTRA Security Agreement (other than the signatory producer);
  • Parent companies of the signatory and/or copyright owners;
  • Financially responsible parties enabling or controlling production.

Items Needed: All corporate or company structure documents (articles of incorporation/organization and bylaws/operating agreements) for the signatory, rights-holders and parent companies; financing documents; and complete chain-of-title.

 

Security Interests
SAG-AFTRA requires a secured interest (also known as a "lien" or "mortgage") in all rights related to a film. This includes distribution rights.

What Will Be Required: All rights-holders will need to sign the SAG-AFTRA Security Agreement.

Items Needed: Complete chain-of-title (including all assignments, option/purchase agreements, proof of payments, sales agency and distribution agreements) to determine who owns the film and exploitation rights.

Additional: If other parties hold security interests in the film and exploitation rights, the union may request these documents to establish its lien priority position:

  • Intercreditor Agreement - Offered to known banks, bond companies and bona fide third-party production lenders to whom the union agrees to subordinate its secured interest; and
  • Interparty Subordination Agreement - Required lien subordination for all other secured parties, including equity investors, non-bank lenders, sales agents and distributors.

 

Distributor’s Assumption Agreement

When a distributor acquires rights to exploit a film, the Basic Agreement requires the producer to obtain and deliver a Distributor’s Assumption Agreement (DAA) so that the distributor assumes primary responsibility for the signatory producer’s residuals reporting and payment obligations.

Items Needed: Copies of distribution agreements and sales agency agreements.

What If a DAA Will Not Be Provided: The union will require a residuals reserve and/or become party to a collection agreement that contains SAG-AFTRA\'s customary terms, conditions, residuals set-aside provisions and an acceptable position in the waterfall.

 

TO CONTACT US

SAG-AFTRA
5757 Wilshire Blvd. 7th Floor
Los Angeles, CA 90036
(855) SAG-AFTRA • (855) 724-2387
Theatrical Department (323) 549-6828

FINANCIAL ASSURANCES CHECKLIST

 

Signatory Paperwork

The Theatrical Contracts Department will provide you with a signatory packet explaining all Contracts Department requirements.

 

Key to Financial Assurances in the signatory packet are:

_____ Theatrical Distribution Checklist
_____ All requirements regarding corporate documents.

 

 

 

Complete Chain-of-Title & Written Proof of Receipt by Copyright Office

Chain-of-title can include:

_____ Assignments, transfers, quitclaims
_____ Options and purchase agreements
_____ Proof of option exercise, including cancelled checks and transfer of rights
_____ Writer\'s agreements or certificates of authorship
_____ Form PA registered with the U.S. Copyright Office
_____ Distribution agreements, (or short form licenses) including those related to financing

 


Most Important:

_____ Provide written proof that the U.S.
Copyright Office received all of the above.

Financing Documents
_____ Production loan and financing/investment documents
_____ Copyright mortgages or liens
_____ Co-production deals
_____ Crowd funding information
_____ Intercreditor, interparty or subscription agreements and private placement memoranda
_____ Tax credit information applicable to financing

 

Collection Agreement ("CAMA")
_____ Existing draft or completed agreement if we need to amend to add SAG-AFTRA as a party

 

Residuals Reserve
_____ Use our "Residuals Reserves" guide, here, to approximate what we might request, particularly if:

  • You have a sales agent or a distributor who will not sign the SAG-AFTRA assumption agreement and you are not making SAG-AFTRA party to a collection agreement covering the distributor or sales agent territories, or
  • A financer\'s loan is being repaid before money flows through your collection account.

Our Best Tips

  • Transparency will save you time.
  • Try not to give us documentation piecemeal – it will slow you down.
  • Check whether your company is up to date on residuals or claims obligations – this can affect the level of financial assurances we require.
  • Remember we are building a relationship that we hope will last a long time!

 

TO CONTACT US

SAG-AFTRA
5757 Wilshire Blvd. 7th Floor
Los Angeles, CA 90036
(855) SAG-AFTRA • (855) 724-2387
Theatrical Department (323) 549-6828

Legal Department / Financial Assurances Counsel (323) 549-6627
sagaftra.org/fa

FINANCIAL ASSURANCES FAQs

 

Residuals Reserves and Collection Agreements

What might trigger a request for a reserve?

  • Your distributor will not sign an assumption agreement and their territory is not covered in a collection agreement to which SAG-AFTRA is a party.
  • You have a sales agent for territories where we will not receive assumption agreements and there is no collection agreement – or there is, but we are not party to it.
  • Your production lender will not sign our intercreditor agreement, or your equity lender will not sign our interparty/subordination agreement.
  • Your collection agreement is not finalized with us before principal photography starts. We return the reserve when all parties sign the collection agreement.
  • Your distributor will not deliver an assumption agreement or Qualified Distributor Guaranty (QD) before accepting delivery. We return the reserve when the outstanding document is delivered.
  Why am I sometimes asked for both a collection agreement and a residuals reserve?
  • If moneys will not flow through your collection account before a bank loan or lender is repaid, we may request a reserve calculated only on the gross receipts used to repay the loan.
  • If the collection agreement does not cover the world, we may request a reserve to cover remaining territories, unless we receive an assumption agreement or a Qualified Distributor letter of guaranty to cover them.

 

Why does the union need to be a party to my collection agreement?
We agree to have residuals payments handled through a collection agreement as an alternative to receiving assumption agreements from distributors as required under the Basic Agreement. Just as an assumption agreement gives us a contractual relationship with the party responsible for paying residuals, so does becoming party to the collection agreement.

 

Guaranties

Why do you need guaranties from parties other than your signatory producer?
We know it is customary in the independent film business to create single-purpose vehicles for various reasons. These companies are typically created for a single film, often hold no assets, and tend to have short life spans.

In contrast, residuals obligations have long life spans. We require the financially responsible ongoing concerns involved with the production to sign guaranties to help ensure that the Basic Agreement’s terms will continue to be met for the duration.

 

Security Deposits

Why haven\'t I gotten my security deposit back?
You may not have finalized your financial assurances documents. The security deposit letter you sign when delivering the funds states that delivering all required financial assurances is one condition to return of the deposit.

Your SAG-AFTRA Contracts Department business representative may have sent you a list of outstanding requirements at the time your film was cleared. If you are unsure about what we still need, your Contracts business representative will clarify.

 

Chain-of-Title

Why do I need to record it with the U.S. Copyright Office?
The chain-of-title needs to be registered in the public record to protect our security interest from challenge in a bankruptcy or foreclosure.

Why do you need proof that the Copyright Office received my Form PA?
By law, we cannot record an effective security interest until the underlying work is registered. Copyright Office records will not show registration for some time after filing, so we need separate proof of receipt by the Copyright Office.

Why do you need to see my distribution agreements?
Distribution agreements are part of the chain-of-title because a transfer of distribution rights is a transfer of copyright ownership.

Why do you need to see my sales agency agreement?
We review it to confirm that the sales agent is not also a distributor, producer or financier. If they are, other documents may be required of them.

 

Financing Agreements

Why do you need to see my financing agreements?
Companies wear lots of hats. A financier may also be a distributor, sales agent, equity investor or producer. Since each of these roles relates to different types of financial assurances, we review the financing agreement to understand the scope of a company’s role.

A financier may also have lien or payment requirements that conflict with SAG-AFTRA’s, which we need to identify and resolve.

 

TO CONTACT US

SAG-AFTRA
5757 Wilshire Blvd. 7th Floor
Los Angeles, CA 90036
(855) SAG-AFTRA • (855) 724-2387
Theatrical Department (323) 549-6828

Residuals Reserves

 

What Is a Residuals Reserve?

A residuals reserve is a cash deposit for the producer’s use to pay residuals when due under the Basic Agreement.

 

Residuals Reserves vs. Security Deposits

The security deposit is calculated based on performer salaries to secure payment during production and delivery of required financial assurances. 

The residuals reserve is  a form of financial assurance required in certain circumstances and is calculated based on actual or estimated sales of film rights.

 

What can Trigger a Reserve Request?

  • You have a sales agent for territories that will not be covered by a SAG-AFTRA Distributor’s Assumption Agreement, and SAG-AFTRA is not a party to a collection agreement covering those territories.
  • Your distributor will not sign a standard SAG-AFTRA Distributor’s Assumption Agreement, and SAG-AFTRA is not a party to a collection agreement covering their territory.
  • Your production lender will not sign our intercreditor agreement, or your equity lender will not sign our interparty/subordination agreement.
  • Your collection agreement is not finalized with SAG-AFTRA as a party before principal photography starts. We return the reserve when all parties sign the collection agreement.
  • Your distributor will not deliver a Distributor’s Assumption Agreement or Qualified Distributor Letter of Guaranty before accepting delivery of the project. We return the reserve when you deliver the outstanding fully executed document.

 

Types of Residuals Reserves

  • Worldwide reserve: A reserve covering all territories and markets worldwide.
  • Partial reserve: A reserve covering only certain territories or markets. You have provided acceptable financial assurances which apply to some, but not all territories or gross receipts.
  • Reserve against a bank loan. You have made SAG-AFTRA party to a collection agreement, but your production lender is being repaid out of first grosses before residuals funds become available through the collection account.

 

Types of Residuals Reserves

  1. Review your pre-sales and/or sales projections for all markets and territories that the reserve will cover. (Remember: Reserves are calculated based on actual or estimated sales, described in the Basic Agreement as “distributor’s gross receipts,” not on projected profits.)
  2. Allocate the reasonable percentage of total sales to theatrical, DVD, pay TV, free TV and new media platforms, as applicable. If the reserve is being calculated only against the amount of your production loan, use your loan repayment amount as “total sales.”
  3. Subtotal the sales for each market based on your allocations.
  4. Multiply each market subtotal by the applicable residuals rate for that market (see chart.)
  5. Total the results from each market. That’s your estimate.

 

EXAMPLE:

FEATURE FILM (released theatrically) with $8 million in estimated sales.

Market & Allocation Subtotal out of $8M in Sales Residuals Rate Reserve Amount
Theatrical = 15% $1.2M 0 0
DVD = 20% $1.6M 4.5% on first 1M
5.4% on 600K
$45,000
$32,400
Pay TV = 30% $2.4M 3.6% $86,400
Free TV = 25% $2M 3.6% $72,000
SVOD = 5% $400K 3.6% $14,400
* EST = 5% (e.g. iTunes) $400K 5.4% (of 20%) $4,320
TOTAL $8M = $254,520

* Producer shall pay residuals on the Electronic Sell-Thru (EST) market at a rate of 5.4% of 20% of Distributor’s Grosses for the first 50,000 units and 9.75% of 20% thereafter.

 

Allocations are for example only and will vary depending on elements such as genre, cast, budget, territories sold, and term length and value.

 

Required Documents and Delivery of Funds

Custody Agreement: This agreement contains the information regarding account custody, payment methods, requirements and remedies for breach of the agreement. Your Contracts business representative will issue this for signature.

Tax Forms: For reportable interest, use W-9 for domestic companies or W-8 for foreign entities.

Delivery of Funds: Reserve funds may be deposited via cashier’s check or wire only. Your Contracts business representative provides wire instructions.

 

Limits of Reserve Coverage

The party who signed the Custody Agreement is responsible for the following:

  • All payroll house fees and expenses;
  • Producer’s share of payroll taxes and any related reporting required by law (including, as applicable, Social Security, withholding, unemployment and disability insurance), and;
  • Other taxes legally required in connection with the reserve funds, including taxes assessable on the reserve account’s accrued interest.

 

Does SAG-AFTRA Ever Refund Some or all of a Residuals Reserve?

Yes. Your Custody Agreement states that after the project has been exploited for at least two years, either you or SAG-AFTRA can request a meeting in writing to discuss the adequacy of the reserve funds. You may request the return of some or all unused funds in view of the project’s exploitation history and prognosis.

Send your written request to residuals.reserves@sagaftra.org with relevant information about exploitation and the basis upon which you believe we should consider a refund. FA Compliance will review the file and past residuals payment history, and contact you to discuss your request.

 

Important Things to Remember

SAG-AFTRA does not automatically pay performers from a residuals reserve.

  • The producer must still submit quarterly reporting as required under the Basic Agreement. Producer must also provide all required documentations required by the Basic Agreement, such as a final cast list and quarterly reporting details, including allocation of any advances. Only the funds owed for residuals at the time of reporting will be paid out of the reserve account.
  • Please send all reporting, payroll house invoices and payments relating to reserves to the address on the back of this brochure.

 

How to Pay Residuals from the Reserve

#1 Direct Drawdown

  • Have your payroll house calculate residuals due based on your reporting and send FA Compliance the payroll house invoice and reporting.
  • Provide the producer’s share of the invoice to the payroll house (the obligations not funded from the reserve) and have the payroll house confirm to FA Compliance that they received the funds.
  • If FA Compliance has no questions or concerns, we will initiate a check or wire from the reserve to your payroll house in the amount necessary to prepare the performers’ residuals checks.

#2 Reimbursement from Reserve

  • Have your payroll house send FA Compliance the performers’ checks, the invoice and related reporting.
  • If FA Compliance has no questions or concerns, we will arrange for you to be reimbursed from the reserve for the residuals amounts and the employees’ share of payroll taxes within 15 business days after receiving the performers’ checks. FA Compliance will have the residuals checks processed and sent to the performers.

You can also use this method if you are equipped to handle residuals payments in-house.

 

To learn how to budget for a residuals reserve and pay residuals from a reserve, click here.

TO CONTACT US

SAG-AFTRA
Financial Assurances Compliance
5757 Wilshire Blvd. 7th Floor
Los Angeles, CA 90036
(855) SAG-AFTRA • (855) 724-2387
residuals.reserves@sagaftra.org

Financial Assurances: Security Deposits

 

Security Deposits and Financial Assurances

The security deposit process and the financial assurances process are closely related.

Unresolved financial assurances issues can delay return of your deposit -- so, taking care of required financial assurances as soon as possible can help protect you against delay.

 

 

Purpose of SAG-AFTRA Security Deposits
Security deposits protect SAG-AFTRA members with respect to signatory producer obligations related to production. Security deposits must be posted before the start of principal photography.

The SAG-AFTRA security deposit is held according to the terms of the Security Deposit Letter that signatory producers sign. The letter states, among other things, that the deposit is “security” for the payment of all performers and background actors under the SAG-AFTRA jurisdiction, including delivery of financial assurances to the union.

 

 

Security Deposit Calculation
Security deposits are calculated based upon 40% of all of the performer salaries (including pension & health contributions).

 

 

Use of SAG-AFTRA Security Deposit Funds
1. Payment of Production Claims
The Security Deposit Letter authorizes the union to deduct funds from the security deposit to pay outstanding contributions and to settle outstanding claims.

2. Filing Fees
The Security Deposit Letter authorizes the union to deduct costs for filing documents related to the security interest in public offices, such as the United States Copyright Office and the appropriate Secretaries of State. This amount changes based on the cost of filing. The deduction only affects pictures in which the union takes a secured interest.

 

Security Deposit Return
The security deposit is returned after the signatory production company delivers or has shown the following:

  • That all initial compensation has been correctly paid to all performers and background actors engaged on the picture;
  • That all claims on the picture have been resolved, including any liquidated damages claims;
  • That all pension and health contributions have been correctly paid to the appropriate pension and health plans;
  • That all production documents have been submitted, including the Final Cast List, the Casting Data Report, performer contracts, Exhibit G’s, and in some cases, the final cost report; and
  • That all requested financial assurances have been delivered to SAG-AFTRA.

 

Facilitating the Security Deposit Return Process

    • Prepare for the financial assurances process before you begin the signatory process using the Financial Assurances Checklist and other tools available at SAGAFTRA.org/fa.
    • Resolve all financial assurances issues before principal photography begins.
    • If for some reason SAG-AFTRA allows principal photography to begin before financial assurances issues are resolved, resolve them as soon as possible.
    • Your assigned Contracts business representative will provide a list of items that remain outstanding when the picture is cleared to start principal photography. Please follow up with your Contracts business representative at the end of principal photography to make sure you have provided everything.

 


DID YOU KNOW?

Most common delay to security deposit return:
Outstanding financial assurances issues.

 

TO CONTACT US

SAG-AFTRA
5757 Wilshire Blvd. 7th Floor
Los Angeles, CA 90036
(855) SAG-AFTRA • (855) 724-2387
Theatrical Department (323) 549-6828