CASE STUDY GODS AND GENERALS THE GOOD, THE BAD AND THE UGLY. Background

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1 CASE STUDY GODS AND GENERALS THE GOOD, THE BAD AND THE UGLY Background Gods and Generals is an epic American Civil War feature that filmed in the State of Virginia and the State of Maryland over a period of several weeks in The film was directed by Ron Maxwell and distributed by Warner Brothers. The film s director sought financial support from the State of Virginia to help fund portions of the Virginia production work. As a result, the Virginia state legislature set up an incentive fund to partner with the production company in exchange for certain promotional and marketing benefits. There were certain deliverables that were agreed upon by both parties which resulted in a performance agreement between the two entities. Situation Analysis The Virginia Film Office had to devise a plan that would encourage filming in Virginia, hiring Virginians and promote the state s vast American Civil War heritage. Therefore, for the sum of $500,000 payable to the production company, terms and deliverables were agreed upon to ensure that certain promotional benefits would come to the Commonwealth of Virginia. The attached contract outlines the terms and language used as the basis for this agreement. Results In the end, all agreement terms were met by the production company and distributor as stipulated in the contract. It was the Film Office s experience that the production company that will take the leadership role in ensuring that deliverables are met by the studio, network or distributor. In the case of Virginia, the state offered incredible authentic historical locations and natural assets that were extremely important to the production company. The range of assets offered to a production could include authentic sites, government owned property or natural settings that are controlled by the government. Involved in the negotiations between the two parties were lawyers from both the State of Virginia and production company. In the end, it was up to the Film Office to make sure all the deliverables were met and that materials promised met established deadlines. Page 1 of 8

2 GODS & GENERALS COMMONWEALTH OF VIRGINIA CIVIL WAR INCENTIVE FUND Appropriations Act, Chapter 1073, item 548G(1) Legislative Language Out of the amounts in this item, the Governor is authorized to provide up to $1,000,000 the first year from the general fund to be used as incentives to partner with a film company for the filming, in Virginia, of up to two movies on the Civil War. Prior to the offer of any incentives, the film company must certify that a distribution and production agreement has been reached with a network, cable or theatrical distributor. Any consideration for incentives shall be directly tied to an in-kind promotional agreement between such company and the Virginia Tourism Corporation. Such in-kind agreements may include promotional advertising, inclusion of a promotional trailer, and promotional links to related Web Domains. The Virginia Tourism Corporation may also set other criteria in determining the amount of incentives to award such company. Page 2 of 8

3 GODS & GENERALS PERFORMANCE AGREEMENT This Performance Agreement (the Agreement ) is made day of, by and between the a public body corporate and political subdivision of the Commonwealth of Virginia (hereinafter called Authority VTC) and (hereinafter called COMPANY ) WITNESSETH: Whereas the Commonwealth of Virginia, by 2000 Acts of Assembly, Chapter 1073, Item 548(G)(1), as amended, authorized the Governor to provide up to Five Hundred Thousand Dollars as an incentive to a film company producing a Civil War-related movie in the Commonwealth; and Whereas the Civil War Incentive Fund (the Fund ) was created from the aforesaid appropriation; and Whereas the VTC has been authorized by the Governor to make grants from the Fund in consideration of economic and promotional benefits to the Commonwealth, as provided in the aforesaid Act of Assembly; and Whereas the COMPANY is funding the production through its wholly owned subsidiary, Gods and Generals, Inc. ( G & G ), of a feature film tentatively entitled Gods and Generals intended for theatrical release as well as video cassette and DVD rentals and sales (the Film ); and Whereas the VTC has previously discussed (based on prior versions of the above referenced legislation) making a grant to the COMPANY from the Fund in the amount of up to One Million Dollars ($1,000,000.00) in consideration of certain promises and agreements of the COMPANY as hereinafter set out. Now therefore, in consideration of the promises and the agreements hereinafter recited, the VTC and the COMPANY agree as follows: A. The COMPANY has caused G & G to film a substantial portion of the Film in the Commonwealth of Virginia which the Authority agrees will result in significant direct economic benefits to the Commonwealth of Virginia. The VTC agrees and acknowledges that the COMPANY has fulfilled this portion of the Agreement and, as a result, the Commonwealth of Virginia has realized significant economic benefits. Page 3 of 8

4 B. Within fifteen (15) days of the execution of this Agreement by the COMPANY and the VTC, the VTC agrees that it shall pay the sum of Three Hundred Thousand Dollars and no cents ($300,000.00) (the Initial Payment ) to the COMPANY. Disbursement of the Initial Payment is dependent upon and subject to the execution of a distribution contract (the Distribution Agreement ) between the COMPANY AND (hereinafter called DISTRIBUTOR ) and acknowledgement of the terms of this Agreement by DISTRIBUTOR. The VTC agrees and acknowledges that it has received sufficient evidence of the fully executed Distribution Agreement and the DISTRIBUTOR S acknowledgement of the terms of this Agreement, as set forth in the DISTRIBUTOR S letter delivered to the VTC dated January 10, C. The COMPANY agrees to provide the in-kind promotional opportunities and other benefits for the Commonwealth of Virginia set forth below. The VTC agrees and acknowledges that COMPANY S efforts to provide such promotional opportunities and other benefits shall be subject to and only available to the extent that such promotional opportunities and other benefits are consistent with DISTRIBUTOR S customary policies and procedures governing the distribution of all of its motion pictures. 1. The COMPANY shall use its good faith efforts (exercisable in its reasonable discretion and subject to its respective good faith business and creative judgment) to endeavor to provide the VTC with non-exclusive access to portions of the Film s footage and B-roll that include Virginia location images to utilize in crosspromotions for website, broadcast usage and distribution at tourist attractions in Virginia solely for the purpose of promoting the Virginia sites appearing in the Film and tourism in the Commonwealth of Virginia; provided, however, no footage or B-roll shall be used such that it incorporates the likeness of any individual(s) appearing in the footage, the B-roll and/or Film or otherwise. For purposes of clarification and notwithstanding anything to the contrary contained herein, the VTC shall have no right to use the name, likeness or any underlying rights in and/or to any individuals appearing in the footage, the B-roll and/or the Film. 2. The COMPANY shall use its good faith efforts (exercisable in its reasonable discretion and subject to its respective good faith business and creative judgment) to endeavor to provide a link to the VTC s website on the portion of the DISTRIBUTOR S website used to promote the Film. Page 4 of 8

5 3. The COMPANY shall use its good faith efforts (exercisable in its reasonable discretion and subject to its respective good faith business and creative judgment) to endeavor to prominently highlight and mention Virginia filming sites and historical sites appearing in the Film in the promotional materials and press kits developed for the national publicity campaign. 4. An East Coast screening of the Film will take place in Virginia with actors (in starring and featured roles) and executives from the Film invited to attend. Except as specifically set forth above, the exact details for such screening shall be determined by the COMPANY in its sole discretion. 5. The COMPANY shall use its good faith efforts (exercisable in its reasonable discretion and subject to its respective good faith business and creative judgment) to endeavor to provide the VTC with promotional still photography and other promotional materials that include Virginia location images to market, for purposes of tourism, the Virginia historical sites featured in the Film. 6. The Commonwealth of Virginia and mutually determined Virginia localities where filming took place will receive credit in the end credit crawl of the Film. Except as specifically set forth above, the exact size, style, placement form, duration, color and all other matters relating to such credits shall be determined by COMPANY in its sole discretion. 7. The COMPANY shall use its good faith efforts (exercisable in its reasonable discretion and subject to its respective good faith business and creative judgment) to endeavor to include a thirty (30) second promotional trailer featuring Visit Virginia and Virginia is for Lovers in the video and DVD release of the Film. The VTC will provide the COMPANY with the necessary images and footage in the format required by COMPANY. Except as specifically set forth above, all other matters relating to such promotional trailer shall be determined by COMPANY in its sole discretion. Page 5 of 8

6 D. The COMPANY shall provide to the VTC all documentation reasonably required to verify that each of the benefits stated above have been accomplished. E. The COMPANY shall provide such documentation as to each item in Section C of this Agreement within a reasonable period of time following the COMPANY S compliance with or completion of each item. Nevertheless, the COMPANY shall provide such documentation as to all items no later than two (2) years following the theatrical release of the Film. The VTC agrees that in confirming the COMPANY s compliance with Section C hereof, the VTC shall look only to actions taken and matters occurring within two (2) years of the theatrical release of the Film. The VTC shall issue its final confirmation within ninety (90) days following the end of the aforesaid two (2) year period or the date that all documentation has been provided, whichever first occurs. F. If the COMPANY shall timely provide the aforesaid documentation and the VTC shall issue its final confirmation, as provided above, that the COMPANY has complied with each and every item in Section C, then the VTC shall so advise the Governor of Virginia and request that the Governor certify to the Chairmen of the House Appropriations Committee and the Senate Finance Committee of the Virginia General Assembly that all the items or incentives set out in Section C hereof have been satisfied in a timely fashion. Upon such certification by the Governor as aforesaid, the sum of Two Hundred Thousand Dollars ($200,000)(the VTC has no authority to pay the Supplemental Payment to the COMPANY unless and until the Governor has made the aforesaid certification, and that the VTC has no authority to compel the Governor to take such action. The Supplemental Payment shall not be due or payable unless and until the governor has made the aforesaid certification. It is expressly understood and agreed by the COMPANY that the Governor is not a party to this Agreement and is not required to take any action pursuant to this Agreement. G. It is further expressly understood that for the COMPANY to be eligible for the Supplemental Payment the COMPANY shall have substantially performed each and every time set out in Section C, notwithstanding that the COMPANY, in its discretion, shall have the right under Section C to not perform or to modify the nature of performance. Moreover, it shall not be sufficient that the DISTRIBUTOR shall have acted in a manner consistent with its customary practices and procedures if such customary practices and procedures do not substantially provide the benefits contemplated by each item in Section C. To the extent that any item in Section C provides for the good faith of the COMPANY, the VTC shall determine if this requirement has been met. Page 6 of 8

7 H. The COMPANY acknowledges that notwithstanding any prior discussions regarding an award of One Million Dollars ($1,000,000), the Initial Payment and the Supplemental Payment (if all conditions with respect to the Supplemental Payment have been met, including the certification by the Governor) shall be the sole payments made to the COMPANY pursuant to this Agreement. I. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. Jurisdiction shall be in the state courts of the Commonwealth of Virginia. The parties consent to venue in the circuit court of the City of Richmond, Virginia. J. This Agreement may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart by telefax is permitted and is binding on the party executing such counterpart. K. The VTC and the COMPANY represent and warrant that the undersigned, as applicable, are authorized to enter into this Agreement and that this Agreement is binding and enforceable against the VTC and the COMPANY, as applicable. Page 7 of 8

8 Witness the following signatures and seals the day and year first above written. THE VIRGINIA TOURISM AUTHORITY d/b/a The Virginia Tourism Corporation By Title: By Title: Page 8 of 8