Basic Program
for Establishing a Mini-Major Movie Studio
by James Jaeger

This program assumes the Company has not been capitalized and the Entrepreneur is experienced in Producing. The Movie Mogul Manual fills in the details of this Program as well as other details on development, packaging, financing, producing and distribution at the feature level.

The Program

Anyone reading this Program (each step being a project or more specifically defined as an "Operating Target") could argue that life just doesn't follow orderly patterns, least of all film production. This may be true in part, but these are the basic Operating Targets you must go through to end up with an ongoing Motion Picture Production Company or Mini Major Movie Studio.

Many of the Operating Targets in the program can and do happen simultaneously or in moderately reverse order. Of course the order in which you might have to get something done may vary due to circumstances beyond your control. Nevertheless, when things are spinning and you wonder what you need to be putting your attention on next, then next... use this program, and don't keep it a secret from the other executives in the Company. Efficiency is built by doing things in as near the correct sequence as possible - thus minimizing the need to re-do things or "building the roof on a weak foundation".

Experience Required

It is assumed that the Entrepreneur is intimately familiar with the exact Executive, Staff, Crew and other personnel Movie Job Descriptions of each person described in this Program.

Inexperienced Entrepreneurs who have not done the projects recommended in Long Range Production Goals should not attempt this program until they are familiar with each production up to feature level and have done some or all of them for other Companies or for their own company. See "Long Range Production Goals" in The Mini Mogul Manual.

Companies always look easier to establish than they are. This is true of any product, however it's more true in the film business because so many of the ingredients of a motion picture are intangible and the production unit is often mobile.

This program, when executed, starts slow and continues to speed up exponentially if each step unfolds into the correct next step.

Once rolling, it is the President & CEO's responsibility to calmly see that each person does his or her job to the best possible standard - on time and within the budget he or she has been given.

I emphasize, depending on the production slate you wish to accomplish, this program will vary. Nevertheless you will have to successfully solve, sooner or later, each of the problems presented by these Operating Targets as well as the Production Targets which must be executed for each film produced by the Company.

While being involved, the President and key Executives should cause the Company to be an exciting, fun and productive place to work while accomplishing each Target in the Program.

Keeping the Momentum

Very importantly, this Program is written from the point of view that if the Company is going to take the time, energy and money to gear up to produce one feature, it will be interested in producing a second, third and more.

Since the natural inertia (of the physical universe) to getting anything done may be described by an exponential curve, an entrepreneur may spend a considerable amount of time getting an enterprise or film "rolling" before s/he hits the up-trend in the curve. Whether or not a first feature is successful is immaterial compared to the importance of capturing the energy connected once it's rolling and funneling this into a next, better, feature project. You do not, under any circumstances, want to let the Company's momentum be lost by not taking the steps to get into development and production on new projects before the last one is released. And this should not be a license to put out schlock.

Thus this Program considers if your Company is going to make one feature - it's going to make others immediately thereafter on up the quality- and viability-scale. This Program also assumes, and requires, that the CEO of the Company see that Executives reward, and re-employ, those who have done well while continued expansion makes it possible for New and Semi-Professional Filmmakers to enter the Company on this Program, constantly. Call this cronyism if you want, but I call it rewarding performance and dedication.

     One of the major goals of this Program and Company is to
employ and train as many people as possible and expand as
"wildly" as possible -- while staying solvent.  Too many companies
in the entertainment industry exclude and waste people, writing
letters that say: "We're sorry at this time we are not hiring any
more people and unfortunately do not anticipate hiring any in the
future.  We will, however, keep your resume on file."   Letters
like this, going out from a company, should be embarrassing
as what they're really saying is "We're dying . . . please
don't bother us."

Rough Order


General Sequence of Events


Producer I/T on Post

A human being decides s/he is going to produce features, at the correct gradient, and from this point forward, nothing will reverse this causative decision and the process of successfully pushing this Program through to completion. A Movie Mogul is born (hereinafter referred to as "Producer I/T")!

Prod I/T

Subscribe to The Hollywood Reporter & American Cinematographer

Producer I/T must subscribe to the Hollywood Reporter and American Cinematographer Magazine to keep abreast of the business and technical aspects of the Film Industry. In my opinion, these are the two best publications for getting a balance between the business and technical sides of the industry. Variety is also good. (

Prod I/T Fulfill production prerequisites

Prerequisite productions, as described in Movie Memo 20 August 1988RA, "Long Range Production Goals", should be fulfilled before moving beyond this point. __________ Prod I/T Purchase a Computer & Peripherals

Purchase a computer with at least the following specifications: IBM Computer (or Clone), 2- 18 gigabyte hard drives, one 3.5" floppy drive, one high speed CD drive, at least 650 megahertz clock speed, Super VGA 19-inch color monitor, a 56K Hayes-Compatible fax/modem, Hewlett Packard LaserJet printer, a Logitech laser mouse and the following programs: ME, Internet Explorer, Windows Media Player, MS Word, Excel, Outlook Express, Movie Magic, Scriptware, Text Pad. Of course this suggestion will be dated every 18 months so stay with what's happening and modify your purchases accordingly.) (See Movie Memos on configuring office and computer systems as they come out. Stay in touch with our producer services division, BackBone Enterprises for equipment updates and consulting. Do not have a bad attitude towards computers. It is a good idea to have at least (3) three computers: a state-of-the-art, workhorse for your desk, an R&D machine that is exactly the same as your workhorse and a portable that is some order of magnitude as powerful as your workhorse and office production machines. It's also a good idea to have a system at your home that is an exact duplicate (at least as far as your keyboard, mouse and monitor), of your office system. __________ Prod I/T PREFORMATION MARKET RESEARCH Live and Experience Life Fully

Producer I/T must be involved in "doing life" as well as reading screenplays, movie reviews, other trade magazines, periodicals & books on production technology. Attend the library often, talk with people from every walk of life and live life fully, getting out there in the environment and keeping a tab on what is happening, what people are talking about and where the Planet is going and could go. Be absolutely sure you keep a balance between live and dead input. "Live" input comes from talking to live people, in person, over the phone or by live computer interaction. "Dead" input comes from books, magazines, (network) television, letters or any other form of canned information that has a predetermined conclusion. __________ Prod I/T Screen 12 Features per Month

Producer I/T begins (or continues) a regular program of screening movies. The required number of films to see is at least three (3) features per seven (7) day week on cassette or at the theatre. This is not to include any TV movies, MOWs or TV Specials. At least three (3) films must be screened in a theatre each month. Minimum monthly viewing requirements therefore are twelve (12) feature films per month. Producer I/T should make a point of seeing every movie that makes five times its negative cost. These stats are sometimes reported in the trade magazines. Keep notes of what you liked on each film. __________ Prod I/T Determine Favorite Genres of Films

Decide on the genre of the film you would like to produce, (action, comedy, romance, thriller, horror, sci-fi, adventure, drama, tragedy). Producer I/T must determine and be certain of his or her top three (3) favorite genres at all times, even though this may change over time. By looking at a list of your top 30 favorite films, your favorite genres can be determined. __________ Prod I/T Understand who you are making movies for

As you continue to screen movies, isolate and understand the specific audiences you will be making films for, (i.e., age, gender, educational level, location, income level, class, religious preferences, etc.) by observing the people that go to movie theaters. Stand by the ticket booths and look at exactly WHO is handing over dollar bills. This is your Audience for THAT type of film. These are your Bosses. This is where your pay comes from. When the movie is over, observe the people coming out of the theater. If you, and they, are satisfied with the movie, and the movie was a genre you would like to work with: this is an ideal scene. Once you know your Boss, you can take him or her to new places and s/he might like them. __________ Prod I/T FINANCIAL CONSIDERATIONS Research Grosses of pictures like ones contemplated

Get copies of Weekly Variety, Hollywood Reporter and figures from the Margaret Herrick Library, (at the Academy of Motion Picture Arts & Sciences, 8949 Wilshire Blvd., Beverly Hills, 213/278-8990) to determine grosses of the films you have screened as well as other films in the genre. Determine what the gross returns were for each film you have seen that is in your top three genres. __________ Prod I/T Make list of hits in your three genres

Make a list of the films that are hits in the genres you have picked so you have the upside potential as well. Determine why they were hits. __________ Prod I/T Determine the Average Gross Rentals

Kick out the high and the low grossers and take an average. This is the "Average Gross Rentals" for each of your three genres. __________ Prod I/T Research Production Budgets

Research the production budgets, if possible, so you can determine how much each film grossed v. how much it cost to produce and compare it to the Maximum Budget figure you have come up with. Here again, try the Margaret Herrick Library or the AFI Library: 213/278-8777 and the Internet through various links found at __________ Prod I/T Calculate the maximum budget for your first production(s)

Get an idea of how much money can be spent on films of various genres and quality levels with relative safety. Taking each of your genres, divide the Average Gross Rentals by three (3) and used this figure as the maximum you will spend for production in each genre (the "Maximum Budget"). __________ Prod I/T Determine whether parts of the budget can be deferred

If talent, cast and crew are willing to defer all or part of their fees until the picture is released and generates income, this can give you an effective larger budget to work with. Persons who are apprentices can work on the production in exchange for training in stead of cash. __________ Prod I/T Decide how many features are going to be developed

As an Example: You can develop 1 feature project and spend 10 years getting it off the ground or you can develop 10 feature projects and get any 1 of them off the ground in 1 year. You must decide your priorities. I suggest developing a small handful of projects that you and the company adore like children -and go from there. Do not get too crazy about one project, yet do not get too dispersed on many projects. Ten to twenty five projects in development is a reasonable start, but always have them in a known priority. ___________ Prod I/T Make a list of potential investors

Make a list of all potential accredited investors to see if they are collectively able to provide enough money to capitalize the company's operations and development until the first feature is financed at the Maximum Budget you have calculated for your top priorities. Then do the same for the next projects. __________ Prod I/T MARKET POSITION Determine what exploitable Elements you have

Determine what exploitable element(s) you have at hand to attract your Audiences to each project contemplated - such as a hot literary property, an acting talent with Name appeal, a directing talent that is an incredible story teller, special effects no one has seen, a topical or controversial subject, an exploitable subject that is in good taste, access to terrific locations, comedic talent, subject with historic significance, sexy or weird looking friends, high adventure or action, flashy sets, vehicles or props, true life story or subject with Academy appeal, a producing or management team that gets $5 dollars worth of production value on the screen for every dollar spent. __________ Prod I/T

Determine what elements have been exploited before

Determine what elements have been used before to sell pictures. The two most basic sales instruments are word-of-mouth and the 1-sheet. A 1-sheet is that poster of the movie you see on the wall next to the box office. Go stare at 1-sheets, and break them down into their elements. Ask the question while you are staring: "What elements is this 1-sheet using to get me to shell out my $5?" Is it the names at the bottom? Is it the overall look? Is it the subject? Was is none of those, but the fact that you just "heard" it was a good movie?" __________ Prod I/T Look at cassette jackets and one-sheets

Go to video rental stores and look at the 1-sheets that have been reduced to a video cassette jacket. Ask the same questions as you did at the theater. Develop a feeling for what films are selling and what promotion is selling them. __________ Prod I/T Collect advertising elements

In a folder, start collecting 1-sheets, movie ads from Variety and Hollywood Reporter, newspaper ads, production logos, and other art work that you feel is effective in selling the types of movies you will be producing. __________ Prod I/T Look at Lead Lines

Look at the lead lines or one liners that appear with all forms of advertisements. Lines such as "They thought it was dead!" What's it about, in a sentence. Don't you hate it when people go through two minute explanations of the movie, pinning your attention, and then you still have no idea if what's it about? Good one liners can do much to sell a movie. __________ Prod I/T (Have the Senior VP Marketing execute Market Positioning)

When the Senior VP Marketing is posted he or she should execute this portion of the program as many times as possible. __________ President RAISE SEED MONEY Begin accounting system for all cash and non-cash contributions

Begin keeping a journal entitled "Contributions Journal." Itemize any and all cash and service/products anyone contributes towards the development of the company and project(s). Include what cash, services (hours) and assets you have contributed in the same fashion. These will be your start-up moral obligations to adjust someday when you have succeeded. In this journal, keep careful record of any and all points you give away for each project and what stock is outstanding. Do not promise anyone any securities in your company in exchange for work as this could be a violation of securities law. (See "The Pro Rata System") __________ Prod I/T Estimate Seed Money to establish the Company

You will need $10,000 to $50,000 Seed Money to license The Movie Mogul Manual, get office space, set up a phone and stationery, rent or purchase office furniture, equipment and supplies and retain an attorney and accountant. See the Budget for "Costs of the Offering" to get an idea where you must spend money in order to get a private placement off the ground. Usually the sum is $50,000. The rule is, the less money you have to work with the longer it will take. __________ Prod I/T Raise Seed Money

The only place you can usually get Seed Money is from yourself, your family or your friends. This is one of the hardest steps in this entire program to get through. It takes confidence in yourself and your plan to raise seed money because you are taking money from people that you might never be able to pay back. Only take this money when you know what you are doing, have confidence in your self and your plan and know that they won't hate and/or sue you too much if you fail. If you succeed, you could also make all these people quite wealthy - this should be one of your goals since they believed in you early on. Never give other's preferential treatment over these people once you have succeeded and in fact, shut out any people that did not believe in you early-on once you have succeeded. The world is made with too many people of little vision - why give them the means to reproduce. ____________ Prod I/I COMPANY FORMATION Producer I/T Assumes Producer Status

Producer I/T is now finished with basic training and assumes the viewpoint of a professional Producer, especially after having raised the seed money in the last step. Producer I/T shall be rightfully called "Producer" hereafter (and no one else really deserves this title, especially those to call themselves "producers" because they were let into the industry or a film project by a relative or fellow parishioner). __________ Prod I/T License a Movie Mogul Manual from MME

After Production prerequisites of 20 August 1988RA are met and verified by the Quality Control Board, Producer is eligible to license The Movie Mogul Manual from MME for the purpose of establishing their own company and producing feature films. MME, a division of MEC, will only license The Movie Mogul Manual to Applicants that, in its sole discretion, meet qualifications as set forth in the Movie Company Licensing Agreement. If Applicant is accepted, he or she, as an entrepreneur/producer, assumes the status of Producer immediately and is invited to execute this program as the President & CEO of their own company. Upon execution of the Movie Company License Agreement, and payment of all fees pursuant to the Agreement, the Applicant, now referred to as "Producer" will receive Materials to get started as set forth in the Licensing Agreement. ___________ Producer ___________ MME Qual Bd Create a Business Plan

Get several books that illustrate how a business plan should be written and read them carefully. Using elements of The Movie Mogul Manual, the Org Board, Hats, this program, Budgets and Spread Sheet projections, create a first draft Business Plan. There are also computer programs that will help you draft a business plan. Date each draft. __________ President Retain a Personal Attorney

If you do not already have one, retain a personal attorney - meaning an attorney that will be representing YOU - personally - not the company you are about to incorporate. Make this absolutely clear to your personal attorney and do not give this attorney any stock in your company, so there is no possibility of a conflict of interest. He/s gets paid from your personal estate. Get any legal problems or outstanding ethics problems you might have in your life remedied terminatedly. Get together a written list of all rudimentary legal questions you might have wandering around in your mind and ask them. If your personal counsel cannot answer all of them - ask him or her to let you know WHAT TYPE of attorney can answer the rest. Since the law is so intricate and immense - you MUST address questions to specialists (i.e., civil attorney, securities attorney, tax attorney, criminal attorney, etc.) Once all this is done, ask your personal attorney for referrals to three quality securities attorneys and three certified public accountants. __________ Producer Learn How to Properly Utilize Professionals

Goals, strategy, budgets and business plans are basically your call and eventually will be you and your management's call. You should utilize your legal and accounting professionals to provide independent advice, play "devils advocate," make sure whatever you are doing is legal, and for wisdom as to the prudence of some action based on historic information and precedents as such pertain to your Company's particulars. From this point of view, you are responsible for making ethical business decisions and your professionals are there to help you accomplish same within the boundaries of the law. Bear in mind that some things that are legal may not be ethical. ___________ President ____________ Management Start looking for a Securities Attorney for the Company
Begin doing 5 to 10 interviews to retain a Corporate/Securities Attorney who will incorporate your company and then work with THE Company to do a Private Placement. This attorney may be with a large firm or a smaller firm. A large firm will charge about $25,000 to $40,000 to do the private placement and a small firm will charge $15,000 to $25,000. A private securities attorney may charge $5,000 to $10,000 in consideration for future work once the company is financed. Bear in mind however, the larger the firm, the more conservative they will most likely be and the longer it could take to get things done. The advantage of hiring a large firm over a smaller firm is, the attorney with the larger firm will have associates in the firm that are facile with many different areas of law and all this wisdom can more easily be brought to bear on the Company's needs. Most likely no one will jump out to be General Counsel of the Company unless you are a) rich or b) you are famous with some sort of track record. So continue to be on the look-out for that golden individual who will someday assume this responsibility. See "Hiring Legal Counsel" (MM 08 March 1989) program to execute this step. __________ President __________ Board Start looking for an Independent Accountancy for the Company

Begin doing 5 to 10 interviews to retain a Certified Public Accountant who works for one of the "Big 6" accounting firms. You must hire a Big 6 accountancy and he or she must be a certified public accountant. Your eventual investors will want to see an audited financial statement from an independent accountancy in your private placement memorandum. If you hire a local accountancy, when you make offers to investors in other states, they will not be familiar with your independent accountancy hence, to that degree, they may have back-off on investing with your company. Again, the advantage of hiring a large accountancy over a smaller one is, the larger accountancy will have associates in the firm that are facile with many different areas of generally accepted accounting principles as well as how such pertains to the law. And again, most likely no one will jump out to be your Chief Financial Officer (CFO) of the Company unless you are a) rich or b) you are famous with some sort of track record. So continue to be on the look-out for that golden individual who will someday assume this responsibility. __________ President __________ Board Establish your Investor's Exit Strategy

Before establishing the capital structure of the Company, make sure your Business Plan provides your investors with an "exit strategy." This could be a future initial public offering (an "IPO") or a Company buy-out with cash flow from a successful movie or from another company or investor group. This is vital, otherwise you will probably have no investors subscribe to your offering(s). __________ President Establish your Capital Structure

The Company's capital structure involves how many shares of stock you will authorize and issue and what types. Do not issue debentures or debt to start. Do not issue Warrants if you are not public and there is no established market value of the securities the warrants will convert to. Authorize and issue at least 30 million shares of common and at least 500,000 shares of 10 to 1 convertible preferred. If your exit strategy is to go public with an IPO, make sure you allow enough shares in your capital structure plans to accomplish such. Times change. This entrepreneur's strategy must constantly be reviewed by yourself, your management and your professionals. ___________ President Establish a 3 room office with at least 350 square feet

Set up an office near a photocopy machine, express mail depot. The office should be near additional offices that can be rented or annexed.

__________ Producer Get Rudimentary Furnishings

Basically a place to sit and meet with an attached sweat shop and files and phone area. __________ Producer Post a Paper Organization Chart

Post the temporary paper version of you company organization chart or (Org Board) so you, and others, can see a graphic representation of the Company-to-be. __________ Producer Establish Communications Systems

Set up an extended range phone with conference call, call waiting and call forwarding, such for outgoing calls and computer line only. ISDN might be a way to go as you will have a higher speed A and B channel for your computer and phone. Costs are coming down. As far as a phone answering system, use either a high quality single "box" answering machine or the phone company's sophisticated voice mail system - not some cheap multi box answering machine. __________ Producer Buy a Small Photo Copier

Unless you are physically right next doors to a photo copy center, you must purchase a small photo copier. You do not have to have anything fancy, just make sure the 8-1/2" X 11" copies look good and the machine does not have to be hand fed. It does not have to collate, or accept more than one piece of paper but it would be nice if it does. You do not need a big production machine at this time - you will have to rent that later. Expect to spend about $500 to $1,000 on this. __________ Producer Get All Job Descriptions in Order

The time to know and get all your Hats (i.e. Company Job Descriptions) and organizing considerations handled is NOT: A. After you are financed, burning precious time with your investors hard earned money. B. When you are in any aspect of production. This is not to say things will not change once you get personalities on the scene, they may or will, it is only to say that the more you have nailed down firmly - the better chance the firm you are creating will have to orient itself to the environment and expand. __________ Producer Select and Hire your Securities Attorney and form a Corporation

Producer, as incorporator, incorporates, or has his or her securities attorney file a (Delaware) C corporation and gets stock authorized. After the State sends in the Certificate of Incorporation, purchase a Corporation Kit with stock certificates, corporate seal. Get a set of Articles and By-Laws recommended by your counsel at hand. __________ Attorney __________ Producer Issue Stock to Family and Friends/Associates

With the advice and counsel of your personal attorney and/or the company securities attorney offer stock in the Corporation to the people in your Contributions Journey that have contributed to your start up and education in consideration for them releasing you and the company from any and all future liability, if any. Points on any movie projects are a different thing and can be given to persons who will contribute to specific projects only. Points should be given to people who contribute semi-professional and I/T services to a specific project and stock should be given out to people who contribute money and professional level service to the general start up activities of the company with no particular emphasis on a given project. This is so these contributions are diversified over all the projects you will develop and produce. You must make it as safe and risk free as possible for people who contribute financing and professional time to the development of your company. __________ President __________ Attorney Hold Organizing Meeting to appoint Board of Directors

Stockholders get together and elect a Board of Directors. Articles and By-Laws at hand should be adopted, or amended and then adopted. ___________ Stockholders ___________ Attorney Post President & CEO of the Corporation

Founding Entrepreneur/Producer who was the Incorporator, the Movie Mogul who was born above (that means you), should assume the post of President & CEO and establish the Office of the President. (Hereinafter founding Producer shall be referred to as "President." This post is roughly the equivalent of a "Corporate Head" as distinct from a "Studio Head". Initially the President holds all of the posts in the company from above, including Sole Director, Secretary and Treasurer, where allowed by law. The other major posts the president holds are as follows: President of Production Exec VP Operations/Deputy President Senior VP Marketing VP Finance VP Business Affairs VP Administration VP Quality Control VP Development VP Production Services __________ President Post Secretary

A Secretary is elected by the Board and starts to perform the duties of the post. The President may hold this post in some states. __________ Board __________ Secretary Post Treasurer

A Treasurer is elected by the Board and starts to perform the duties of the post. The President or the Secretary may hold this post in some states. ___________ Board ____________ Treasurer Open a Main Bank Account

Open a main bank account in the name of the Corporation with authority to accept checks on any fictitious name registrations. Any and all transactions of the corporation now go through this account. __________ Treasurer __________ Secretary File Basic Authorities to do Business

If the corporation does business in any other state other than the state in which it was incorporated, an Authority to do Business may have to be filed. Also if the Corporation does business under any other name other than the name of the corporation, the Corporation must file a Fictitious Business Name Statement must be filed and published in each state business under this name will be done. ___________ Attorney ___________ President ___________ Secretary Retain a Tax Accountant

Treasurer and President retain a tax accountant to file the necessary tax reports that will have to be filed for the corporation. ___________ Treasurer ___________ President File Basic Taxes

A Corporate Tax ID number must be established. Federal, State, Local and Franchise taxes will have to be filed and paid as they come due. ___________ Tax Account ___________ President Select and Hire your Independent Accountancy and get Audited

The cost to get an audit done by a Big 6 firm, (and it must be an audit, not a compilation or any other form of review), will be between $5,000 and $10,000. There is little hope you will be able to get the accountancy to accept stock in your company (to offset all or part of this fee) as they must, by definition, be "independent" in order to be able to honestly state such in the opinion letter they will prepare to accompany the company's audited balance sheet. If they own stock in your company, they are not independent. The main reason for providing an audited financial statement in your private placement is to let your future investors know where and how the company will be starting out financially from a qualified, independent, known source. Would you want to invest in a company that had nebulous assets and liabilities? __________ President __________ Treasurer Convert your Business Plan into a Private Placement Memorandum

The Business Plan is vital, so get all management, professionals and other parties interested in the Company to put in their advice, but the President must make the final decision as to how this input will be synthesized in the best interest of the stockholders. Incorporate all of the above into a first draft Private Placement Memorandum, the main instrument you must have to raise money. __________ President __________ Securities Attorney ___________ Treasurer ___________ CPA Firm Polish and Complete Your Investment Memorandum

Continue to get input from as wide a circle of people as you can about the clarity and viability of your Private Placement Memorandum. When it is done, have your management, securities counsel and independent auditing firm put the finishing touches on it: authorized as fulfilling the state and federal disclosure requirements and the audited balance sheet reflecting the financial condition of the Company according to commonly accepted accounting principles. ___________ President ___________ Treasurer ___________ Counsel ___________ CPA Firm Hire Financial Printer to print up PPM

Hire a printer that specializes in "financial printing." Do not use any other type of printer. Print up 500 to 1,000 Private Placement Memoranda and Subscription Documents (or as many as you feel you have accredited investors) to make offers. ___________ President ___________ Printer PROMOTION & OPERATIONS SETUP Establish a Copy Center

Again, unless you are right next doors to an all night major photo copy center, you will now need to rent a high volume, high quality photo copier which does the following: 1. Auto Feeds. 2. Handles letter-, legal- and ledger-size paper. 3. Collates. 4. Staples. __________ President Start selling at least $1,500,000 worth of Company Securities

The capital you raise with the Private Placement is additional seed capital you will need to set up operations and implement the financing of your various movie projects, each of which may involve their own private placement for hundreds of thousands or millions of dollars. __________ Broker/ Dealers __________ Company Employees Do Not Violate Any Securities Laws

Get the ground rules from your securities counsel on what you can and cannot do when offering securities for sale. Offer the PPM and Subscription Document to no people that do not meet the state and federal suitability requirements. __________ President __________ Broker-Dealers __________ Company Employees Draft Employment Agreements

Your counsel should provide you with standard employment contracts so you can officially hire your executives and provide for any stock option plans, benefits and non-compete, non-disclosure stipulations. __________ Counsel Post a Exec VP Operations/Deputy President

The President delegates all administrative posts to the Exec VP Operations, who is the Chief Operating Officer or COO. Until they are delegated, the COO will hold the following posts from above: VP Admin/Corporate Secretary VP Quality Control VP Finance/Treasurer The post of Director of Personnel continues to be held by the President with the with the Exec VP assisting with posting until the President decides to delegate it. __________ President President Holds Balance of Posts

Until delegated, the President will hold the following posts from above: Promoter President of Production Senior VP Marketing __________ President Establish Admin Computer Systems

The first order of business the Exec VP Operations must tend to is the establishment of better admin computer systems. S/he must also establish a connection with an expert who knows computers from the point of view of purchasing, maintenance, upgrading, software installation, operation and Internet. If you do not have someone, or the "some-ones" to do this, contact BackBone Enterprises. __________ Exec VP OPs Post VP Quality Control

Exec VP Operations delegates VP Quality Control to a capable, affable person who will hat people who come into the Company and oversee the sale of manuals and courses. As s/he becomes overloaded, the post will unbundle into a Hatting Officer/Director of Training, Ethics Officer and eventually a Librarian. Everyone new to the company must get checked out on their Hats constantly and if they do not know their post or the company basics, they must be requested to study it until they do. The VP Quality Control must be computer literate and able to teach computer operation. No VP Quality Control who is computer illiterate should be hired. The VP Quality Control executes the Entertainment Orientation Program (the EOP) and chairs the Quality Control Board which licenses Movie Mogul Manuals to entrepreneurs who want to establish their own companies and embark on this program. This is a very responsible post and should be delegated carefully. __________ President Establish training Space near Office

A training space does not have to start out fancy. All you need is several tables and chairs and a space to post Success Stories and Stats. __________ VP Qual VP Quality Control Hats and Sells

People who come into the Company to work will have to be hatted and people who want to work elsewhere, or set up their own Company, will have to be trained. The VP Quality Control oversees this hatting and training and when courses are not in session, he or she personally sells books, manuals and courses and hires sales people to do same. __________ VP Qual

Post General Counsel

The President, Exec VP Operations and other Professionals should conclude a constant search for the ideal attorney to hold the post of General Counsel. This person must be at heart and entertainment attorney familiar with securities law and be able to work well with a team of other specialties and will retain the title of General Counsel. __________ President Post VP Finance

The President and Exec VP Operations and other Professionals should conclude a search for the ideal accountant to hold the post of CFO, Chief Financial Officer. This person must be a certified public accountant (CPA) and will retain the title of VP Finance. This individual must be a CPA because a CPA is required to do an IPO. The CFO must specialize in entertainment and be able to hire the additional long-term auditing, accounting and tax management talent needed as well as hold all treasury posts from above. __________ President Post a Director of Data Processing/MIS Officer

Eventually computer operations will be so important to the Company you will have to post someone full-time to oversee everything. This person will be your CIO, Chief Information Officer and will retain the title of Director of Data Processing/MIS Officer. __________ President __________ Exec VP Ops __________ VP Admin President unbundels and posts the Director of Personnel

As more and more resumes and requests for employment come in, the President will eventually have to post someone to receive, evaluate and interview candidates for employment. __________ President __________ Exec VP Ops All Execs Familiar with, The Org Board, their Hats, products, production statistics and the Company Communications System

Before you go further, the Systems of the Company must be understood and known and used by all people in the company. The VP Quality Control starts quizzing everybody to find out who knows and who is pretending to know. __________ VP Qual DEVELOPMENT DIV SET UP Post VP Development

The VP Development starts to set up the development division which will acquire and develop movie projects. __________ President __________ Dir Person Option and Develop Screenplays

The VP Development holds all the hats in the division, including Writer's queries, until they are unbundled. __________ VP Dev Post Director of Communications

VP Admin delegates post of Director of Communications. ____________ VP Admin Establish a Message Center

The Dir Comm sets up The Message Center which will include a legal size in basket for each person in the company as well as a bulletin board where notices can be posted. Central files can also be in this area as well as a computer terminal, typewriter, fax machine and mailing supplies. (See "The Message Center") __________ VP Admin Post Head Reader

The Initial Head Reader will be posted by the VP Development and s/he will help recruit Readers to form a Reader Pool that will evaluate literary properties for company purchase and production. The Reader Pool will elect future Head Readers. __________ VP Dev Reader Fees Fund Established

The VP Development establishes and supervises the Reader Fund and recruits and pays qualified Readers. __________ VP Development __________ Treasurer Set up Script Logging System

Set up a reliable logging system to keep track of all the screenplays that are received and leave the company. __________ VP Development Solicit Screenplays

Find Scripts that can be made for budgets the Company wants to finance. Accept only finished, completed, properly typed screenplays. Do NOT accept story ideas, concepts, titles or treatments off the street - only finished, completed screenplays. In reading the finished work of a writer, only then can you get an inkling of the quality you will receive should you have a company- originated treatment taken to full script by that writer. Give writers, whose scripts the company has previously optioned, first shot at developing company originated concepts or treatments to screenplay. __________ VP Dev __________ Head Reader Establish a Reader Pool

The Head Reader and the VP Development recruit Readers on an independent contractor basis to read and Report on Scripts and Treatments. __________ Head Reader Script Option Fund Established __________ VP Dev __________ Treasurer Emergency Literary Purchase Fund Established

This fund must be available in case an entity attempts to wait out an option term for the purpose of snatching up the hot property. The fund makes it possible for the Company to be ready and able to purchase outright any literary property under option by the Company if an emergency situation arises. __________ President __________ Treasurer Constantly Receive and Evaluate Screenplays

Log in and review as many screenplays as provided for in the budget. This process should never stop. __________ VP Dev __________ Head Reader __________ Readers Option Screenplays with Reader Recommendations

Option any screenplay that gets the authorized number of recommendations. __________ VP Dev __________ Counsel Post a Director of Creative Affairs

Director of Creative Affairs will work with Writers and hold the Story Editor post work with Research Consultants. __________ Pres Prod __________ VP Dev Writer Fund Established

Establish a fund to pay writers to write treatments and screenplays. ___________ Pres Prod __________ VP Dev Start Creating Treatments

Create treatments that can be made for budgets that the Company can raise. Create Treatments from surveyed story ideas, marketable ideas and based upon "Name" people places or things. __________ Pres Prod __________ SN VP Marketing __________ VP Dev __________ Dir Cre Aff _________ Writers Start Creating Screenplays

As money is available, experience evident and writers known, move treatments on to screenplay only when 1) Readers you love and recommend the story and 2) Readers in the company (who represent the market) love and recommend the story as well. If you both don't love the story - stop development of that project. __________ VP Dev __________ Dir Cre Aff __________ Writers ESTIMATE PROJECT COSTS Post VP Production Services

Post VP Production Services who is a Production Manager and who holds the post of permanent Production Manager with the Company. Until there is a First Assistant Director, the PM will do budget estimates and break down scripts to board them, manually or in computer memory. When in production he is called the Production Manager, when not in production he's the VP Production Services. These are two different Hats. Each project has a Unit Production Manager (a UPM) which is basically the PM Hat as it relates to assisting the Production Manager/VP Production Services. This post is the hottest production post in the company, so post it carefully and always provisionally until proof exists that it is being handled correctly, efficiently and ethically. The VP Production Services must be the nec plus ultra of speed and efficiency and know where and how to hire good Production Managers for all the film units. __________ President __________ Exec VP

Establish Pool of Assistant Apprentices

The Assistants that are in training (I/T) will report to the President (or his secretary) until allocated to various jobs and study. Running around type help will always be needed and someone will always need training in exchange for work. __________ Exec VP __________ Dir Person Obtain Budgets for Past Productions which have been done __________ VP Prod Serv Do partial breakdowns on optioned Scripts __________ VP Prod Serv __________ PAs Get outside estimates for Budgets

Have sections of the Budgets reviewed for comments by out side producer's services and suppliers when specific services are necessary, such as special effects, titles, set construction... __________ VP Prod Serv Determine Fixed Costs vs Variables __________ VP Prod Serv Create Topsheet Budget Estimates __________ VP Prod Serv __________ PAs Determine What can be deferred __________ VP Prod Serv Determine Whether the Company should become union signatory

Based on the scope and budget of the contemplated project(s) of the Company, it is wise or unwise to become signatory to DGA, SAG and /or IA. If it is a big picture you may need to hire union personnel who have the proper experience. If you sign a union contract for personnel, you will fall under an entirely different system with your personnel. Make sure you are experienced at producing if or when you go with union personnel as they are experienced and expensive. Work with your General Counsel on this decision and carefully review all signatory contracts so you understand the obligations and benefits. __________ Pres Prod __________ VP Prod Serv DECIDE WHICH PROJECTS HAVE MARKET VALUE Post Senior VP Marketing

President turns over his marketing research activities, first started at the beginning of this program, to a Senior VP Marketing. A continual eye must be maintained on the market - what movies the public is buying, what's at the American Film Market that's selling, what talent is in demand, what one-sheets look like. Input of market nature must be made available to the Producers and Development. __________ President __________ VP Dev Senior VP Marketing and VP Dev Plan marketing Strategies

All projects in the Company that are under development and option must be continuously evaluated and as to what markets they will play to and how much money is warranted to be allocated for their production. Packaging considerations must also be evaluated. __________ Sr VP Market __________ Pres Prod __________ VP Dev Post Director of Market Research

The Senior VP Marketing hires a Director of Market Research to act as his main information source on market conditions. __________ Dir Mark Res Estimate Development money needed to reach production financing of Various Projects __________ President __________ Pres Prod __________ VP Dev __________ VP Finance Assemble a list of distributors and studios

Assemble or Develop a list of distributors and studios that have successfully distributed pictures of the size and genre as the one(s) you contemplate. Find them in the Special Issues of the Hollywood Reporter, Hollywood Creative Directory, on the Internet and in other sources. __________ Sr VP Market _________ VP Finance __________ VP Dev

Prioritize the list

Find out what the distributor/studios last successful films were and how much they spend on development, production and marketing of current and future product. Place the list in priority order based on the sequence of projects in development or production. Put the list into priority by considering all criteria. __________ Pres Prod __________ SN VP Marketing __________ VP Prod __________ VP Development Post Pitchmasters

If you cannot pitch projects such that the person hearing them reacts enthusiastically, get a Pitchmaster or an Assistant Pitchmaster to do the job. Executives usually don't hear anything, except the phone ringing - so infinite numbers of terrific story concepts have had the plug pulled on them. Establish Pitchmasters that can stick to the wall while reciting a one-liner or 30 second pitch. Usually executives, lawyers and accountants make the worst Pitchmasters. Many times the writer is not a good Pitchmaster. Hire good actors and actresses to make pitches - after all isn't a pitch a performance? (See "Pitchmaster Hat") __________ VP Dev ___________ VP Qual ___________ Dir Cre Aff Set Up Pitchmaster Fund __________ Pitchmaster __________ Treasurer Post Director of Business Affairs

As more and more projects come on line each one will have its own production counsel. The Director of Business Affairs will be needed to coordinate all these business affairs with the General Counsel of the Corporation. __________ President __________ Gen Counsel Set up Story Conferences and Open Discussions with Studio

Executives Never just mail an unsolicited script (idea or movie story) somewhere as that is a total waist of money and time and most of the recipient, especially studios, major agents, talent and producers, will not appreciate it. Call the entity and introduce yourself as an executive or producer with the Company and ask them if you may pitch or send them a project with a cover letter indicating what you are looking for. Give them two to three weeks to respond and then call or write them. If they liked the script or liked your resume, try to set up a meeting at their office, to more fully understand what exact types of material they are looking for or what they are NOT looking for. No one knows exactly what they're looking for - something good - but that can be anything. Meet to find out what they throw up upon seeing so that you can start out the relationship avoiding those types of properties. Get feedback on which elements they feel would make it easiest for them to sell the picture to their seniors and the public. Politely don't let them be too general. Keep the meeting crisp and clear - you're one of a thousand people, at first - so don't be pushy and be brief. __________ President __________ VP Dev Fit Projects to Budgets & Fit Budgets to Projects

Don't sit around forever trying to raise an unrealistic sum of money for any project (even though your friends will be impressed, for a while, by the scope of your vision. On the other hand, if you just can't raise the money but you are certain your budget is warranted and you know you are not in over you head, change the script, the package and/or the financiers you are promoting - but don't keep changing the BOTTOM LINE OF YOUR BUDGET. Make better use of the chunk of money you can raise by jockeying the script and the budget subcategories and solicit services on a deferred basis. Some executive producers and financial types, thinking everything is burned into stone or being too slow mentally, cannot handle change - so they will brand you a "neophyte" if you change the budget around too often - even if justified. Be aware of this every time you have to make an adjustment. Weigh the pros and cons of dealing with these types - if they are bone fide. __________ VP Dev __________ VP Prod Serv __________ Dir Crea Aff

Establish Priorities for Various Projects at Given Budgets __________ Sr VP Market __________ President Start Getting Studio Recommendations for Scripts

Remember, no one wants or will make a movie until there is wide agreement that the script is great. Once a great script is recommended by your Development Division and a Studio/Distributor also likes it you should get a list of talent the studio would like in the picture. __________ VP Dev __________ Dir Cre Aff ___________ Pitchmasters See What Talent Studios would like in recommended scripts

Be completely sensitive to determine WHO likes what at every turn, including yourself - People ARE movies. __________ VP Dev Make Development Deals for Various Projects __________ VP Dev __________ Dir Biz Aff Post Writers for Revisions and Polish as needed __________ VP Dev __________ Dir Cre Aff Determine methods of financing that are desirable for each particular studio __________ VP Finance __________ President __________ Gen Counsel SET UP PRODUCER UNITS Post President of Production

President of Production starts establishing Producer Units necessary to get the projects packaged, financed, supervised and marketed in the most efficient manner possible according to the budget agreed upon. __________ President __________ Dir Biz Aff Get Rough Ideas For Producers __________ VP Prod __________ President Obtain interest for Various Projects From Appropriate Producers __________ VP Prod Discover Which Producers Work Well Together __________ VP Prod Obtain Letters of Intent from Producers __________ VP Prod ___________ Pitchmaster Negotiate Terms and Participation for Producer Units __________ VP Prod __________ Dir Biz Aff Set Division of Responsibility __________ VP prod Match various Producers Units for Various Projects __________ VP Prod __________ President All Execs Familiar with the Computer System

VP Quality Control makes certain all Execs in the Company know how to use the computers by now. __________ VP Qual FILL OUT EXECUTIVE AND STAFF POSITIONS Each Division Head Hires and posts his key department heads

As work loads become heavier, Executives unbundle hats they are holding in consultation with the VP Admin and the Dir of Personnel. All personnel in the Company, before they are hired, must be approved by the President and the VP Quality Control and either can veto an proposed applicant for any reason or no reason. __________ President __________ VP Qual __________ VP Admin __________ Dir Person __________ All Execs COMMENCE PRODUCTION FINANCING ACTIVITIES Battle planing Meetings for Packaging and Financing __________ President __________ Gen Counsel __________ Dir Biz Aff __________ VP Finance __________ Pres Prod __________ Sr VP Market Division of Labor Confirmed __________ President Final Determination, by vote, of the Product Line Up __________ President __________ Sr VP Market __________ VP Finance __________ Pres Prod __________ VP Prod Serv __________ VP Dev __________ Dir Cre Aff __________ Head Reader __________ VP Biz Aff Coordinate all financing activities through VP Finance __________ President __________ VP Finance __________ VP Dev __________ Pres Prod __________ Sr VP Market __________ Dir Biz Aff All Financing activities must be quick flow authorized by President and General Counsel before Company name is on the line. __________ President __________ Gen Counsel PACKAGE DIRECTORS AND TALENT Get Rough Ideas For Directors __________ Pack Prod Obtain interest for Various Projects From Appropriate Directors __________ Pack Prod __________ Pitchmaster Discover Which Directors Work Well __________ Pack Prod Obtain Letters of Intent from Directors

At first you may not be able to get name talent for your productions. Don't worry about it. Just go down your list and package talent for the amounts you have in your budget. The Producer Unit should interview Directors first as the Director casts the picture. After various Directors have reviewed the script, give them the packaging list you have developed and ask them which talents they feel would be best as well as additional ideas and Talent they might be able to bring to the project if they were hired. Get Letters of Intent from Directors that are interested in directing various projects. __________ Pack Prod Negotiate Terms and Participation for Directors __________ Pack Prod Hire a Casting Directors __________ Pack Prod __________ Director Determine Packages of Talent for each Project with Priorities __________ Pack Prod __________ Director Send out Scripts to Various Talent in Priority __________ Pack Prod __________ Dir Comm Obtain Letters of Intent from Talent

With all parties input, especially the Director you've chosen and hired, package the rest of the picture. Don't adjust the budget to the Talent and don't commit to any pay or play deals unless you have a financial source that will pick up the tab. If for some reason, a major talent gives you a Letter of Intent without a pay or play deal or offer, ask the Talent, which studios or distributors they would prefer you take the project to and patronize those studios. (See "Letter of Interest" and "Establishing New Connections") __________ Pack Prod DETERMINE METHODS OF FINANCING Independent Financing:

Producer or Company pays for entire cost of production directly; __________ President __________ Treasurer Or, Producer or Company forms private or public entity that finances project; __________ President __________ Gen Counsel __________ VP Finance Studio/Distributor Financing:

Or, Join with or Post an Executive Producer(s) who is familiar with the Studio/Distributor; __________ President __________ Gen Counsel __________ VP Finance Or, Studio/Distributor pays for entire cost of production directly; __________ President __________ Gen Counsel __________ VP Finance Or, Studio/Distributor reimburses Producer all or part of production costs upon delivery of Negative (Neg Pickup); __________ President __________ Gen Counsel __________ VP Finance Creative Financing:

Or, Budget is financed by all, some or none of above: __________ President __________ Gen Counsel __________ VP Finance __________ Treasurer DRAFT ACCURATE BUDGETS Hire Line Producer for each Project Financed __________ VP Prod Serv __________ Pack Prod First Assistant Director candidates are approved __________ VP Prod Serv __________ Pack Prod __________ Director Director selects First Assistant Director from candidates

The Director picks his First AD out of the three or rejects them all and the process repeats once. __________ Director Hire First Assistant Director __________ Director Receive Final Sequenced Script __________ Director __________ First AD First AD starts Breakdown of Project at a Hand

First AD breaks down the script. PAs help with this. __________ First AD __________ PAs

Obtain breakdown sheets and Itemize the following for each Sequence: __________ First AD __________ PAs Principal Talent __________ PA Supporting Talent __________ PA Bits __________ PA Extras __________ PA Stunts __________ PA Locations __________ PA Sets to be built __________ PA Picture Vehicles __________ PA Other Vehicles __________ PA Special Effects __________ PA Props __________ PA Wardrobe __________ PA Anything else that will be needed. __________ PA __________ First AD Obtain a Breakdown Board ($100) __________ First AD Transfer Talent, Scene Number, Page Length and FX shots data from each breakdown page to a Strip using the following color code: EXT/DAY - White EXT/NIGHT - Blue INT/DAY - Yellow INT/NIGHT - Green __________ First AD Juggle the strips around the breakdown board until the most economical shooting sequence possible is realized __________ First AD Define a "Day" (i.e., 8 hours, 10 hours) __________ VP Prod Serv Define "Lunch time" (i.e., half hour or forty five minutes) __________ VP Prod Serv Check final script length __________ First AD Decide Approximately how many days you want Principal Photography to be __________ VP Prod Serv Determine how many pages of script can realistically be shot in each Day __________ Director __________ First AD Place dividers to indicate what scenes will have to be shot on each day to meet the approximated Principal Photography duration desired __________ First AD Define a "Week" (i.e. 5 day week or 6 day week) based on the defined "Day" __________ VP Prod Serv Determine the number of these Weeks that will be needed for Prep, Principal Photography and Wrap to the nearest tenth of a Week __________ VP Prod Serv Obtain all fixed estimates from suppliers __________ VP Prod Serv EQUIPMENT ITEMIZATIONS: DP's Requirements, if known __________ PA Sound Mixer's Department Requirements, if known __________ PA Editor's Requirements, if known __________ PA Composer's Requirements, if known __________ PA Art Dir Requirements, if known __________ PA Property Master Requirements, if known __________ PA Wardrobe Mistress's Requirements, if known __________ PA Star's Requirements, if known __________ Pack Prod Obtain all fixed contracts Talent, Director, Producers __________ VP Prod __________ Pack Prod Determine all Rates for Staff and Crew __________ VP Prod Serv If Signatory to any Union or Guild Agreements, prepare budget in accordance to such agreements __________ VP Prod Serv Assemble all cost and schedule data into computer budget program ___________ VP Prod Serv __________ First Ad Print out First Draft Budget __________ VP Prod Serv __________ Line Prod Print out Subsequent Budget Variations __________ VP Prod Serv __________ PA Obtain the Second Draft Budget __________ Line Prod Set up (Escrow) Accounts to receive Budget funds with appropriate

signatory Set up an escrow account such that the money is released when enough money has been raised to cover everything through principal photography (and P&A if you are financing that too). __________ VP Prod __________ Treasurer CAPITAL MARKETS FINANCING Producer or Company pays for entire cost of production directly; __________ President __________ Treasurer Or, Producer or Company forms private or public entity that finances project; __________ President __________ Gen Counsel __________ VP Finance VP Production Services may retain a Unit Production Manager to prepare accurate budgets

It is essential, that the Unit Production Manager ("UPM") who will be managing the production, sooner or later be brought in to polish the budget and/or determine whether or not he or she can execute the production per the budget. Many budget drafts will probably be made before the final budget is approved and production starts with that budget as its official budget. __________ VP Prod Serv Refine Budget Line Items __________ UPM Obtain a completion Bond __________ VP Prod Serv __________ Line Prod

Have all options and purchase agreements to Literary Property at hand __________ VP Dev Have any Talent and Director Agreements at hand __________ VP Prod __________ Pack Prod Have a distribution deal at hand (optional) __________ Sr VP Market ___________ VP Finance Using the script, package, schedule and budget as your blueprint

Prepare a Private Placement Memorandum, or Prospectus, for production financing. Keep the financing instrument no longer than fifty (50) pages, not including partnership agreement and subscription forms, if any. Describe the risks accurately, but don't dwell on them - everything in life and the universe is risky. __________ President __________ Gen Counsel __________ VP Finance Print up the Package and Investment Memorandum attractively

Sell participation in the Proposed Project at hand Have the finished Memorandum printed attractively. Reference The Movie Mogul Manual as your operating management policy invite finance people to look it over, hold it and read it for as long as they want however it is against policy for you to give them a copy of it or allow it out of your sight, even for one day. The first thing they might do is copy it all, screw your deal and go into competition with you. Don't leave it around or your license to use The Movie Mogul Manual will be immediately revoked if you violate this policy. _________ Sr VP Market _________ Graphic Art Points of Consideration:

o Re: Offering Investors participation in not only particular projects but the company itself with all its projects There are roughly two kinds of investments: A. Investment in the entire Company hence all its projects. B. Investment in a particular project or projects of the Company. _________ VP Finance o Re: Raising project development capital privately

Development capital is used to develop a project to the point whereby such project is financed for production and the development capital is returned, (out of the production budget) to the development division for further use and profits to investors. Raise the initial capital you estimated to properly develop at least one project to a point whereby it is financed. (See "Raising Money", "Broker-Dealer Hat" and "Why Invest in a Movie") Make sure you are never undercapitalized for an activity. It is better to not take ANY money than take not enough to get the job done. You can always cut back the size of your projects and get talent, staff and crew to defer their fees thus in essence "financing" the deficit yourself by locating, hiring and/or training some of the 80% unemployed in the movie business. The Materials that come with The Movie Mogul Manual will make it possible for you to get inexperienced people up to running speed in no time thus optimizing investors dollars and minimizing risk. __________ VP Finance o Re: Offering premium participation to early in Development

Investors Offer greater amounts of stock and points to individuals and entities who contribute earlier on. They are taking greater risk and therefore deserve greater compensation. (See Compensation by Points and Securities, The Pro rate System and computer programs offered by MEC for on-line fees and consultation fees.) Offer the development investors (the Class A Investors) a favored payback position to the production investors (the Class B Investors) and the production investors a favored payback position to the post-production investors (the Class C investors). __________ VP Finance o Re: Offering regular participation for project production

financing Offer participation in Producer's Net profits ("Points") to outside Producers, Writers, Financiers, Directors and Producers Services who contribute to specific projects. Allocating Points means that you are paying for such services from the future cash flow of those specific projects. Giving away stock means that you are granting partial ownership of corporation: its assets and liabilities, thus any cash flow the corporation receives from any projects will reflect in the dividends and appreciation connected with the stock. These investors should have subordinated pay back positions to development investors and all investors collectively should never receive more than 50% of producer's net. __________ VP Finance __________ Exec Prod __________ Broker-Dealers o Re: Raising funds to payback development costs

Solicit the list of investors and raise the minimum amount of money necessary to pay back development costs. Place this in escrow to be released when the minimum balance is raised. Place in development escrow, a percentage of each dollar raised, and make this fact known to the development financiers to see if they will purchase greater interests in the project. __________ VP Finance __________ VP Dev o Re: Raising the sum necessary to finish principal photography

Continue to Solicit the list of investors and raise the sum necessary to complete principal photography. __________ VP Finance o Re: Raising the sum necessary to finish post production

Continue to solicit the investors to raise the balance as budgeted through post-production. __________ VP Finance o Re: Possibly raising funds equivalent to kick off half the initial advertising and print costs

As units of participation are subscribed to, allocate them to various portions of the budget using the following two criteria:

1) What will promote the project to its next level of interest and financing so production can actually start delivering results?

2) What will payback, with profit, the earliest investors in so they are free to a) walk away or b) invest further. __________ VP Finance __________ Sr VP Market o Re: Inviting Investors to casting, the set, and screenings

Continue to raise the balances of funding by inviting the investors to casting sessions, the set, into the editing rooms and to screenings to show them concrete progress and results. __________ VP Finance o Re: NEVER giving control away to novices

Never give away creative or management control to people who have not made movies before - NEVER NEVER NEVER - they will waist money and lives every time. (For details on some of the horror stories that have happened to people who have violated this, please read "Introduction to The Movie Mogul Manual".) Also, just don't be impressed by people who swagger money and credentials. I can't tell you how many all night meetings I have with these types of people who have done nothing but waist my time. When they try to impress you with their other business exploits and successes don't be fooled - there is NO business is like show business - so they are still in kindergarten as far as movies go. The only exception might be if they worked on staff in The White House for the President of the United States or on a presidential campaign. Otherwise, start them out as PAs - even if they were the CEO of General Motors. __________ President __________ VP Qual __________ Dir Person o Re: Allowing no fence sitters

Investors who have been paid back should not be allowed to fence sit and see what happens. Each time they have been paid back with a return on their money commensurate with the risk, they should be offered the best new investment opportunities first as they are the ones that deserve them. If they accept, carry forward to greater heights - but if they take their money and run ("Runners") or become fence sitters ("Fence Sitters") that is fine. It is their prerogative, however it is our prerogative to not accept further subscriptions from Runners and Fence Sitters who may come back and I would strongly recommend this as firm policy to all Presidents. __________ President __________ VP Finance STUDIO/DISTRIBUTOR FINANCING Or, Join with or Post an Executive Producer(s) who is familiar with the Studio/Distributor. An Executive or Producer, connected with the Distributor or Studio, may come aboard the project to supervise the financial interest and work with the Producer Unit. There may be two or three Executive Producers, two or three Producers and two or three Associate Producers. Who cares, so long as all are necessary, there is sufficient money to pay for the services and each contributes an element that without which the project COULD NOT be made. __________ President __________ Gen Counsel __________ VP Finance __________ VP Prod __________ Exec Prod Or, Studio/Distributor pays for entire cost of production directly; __________ President __________ Gen Counsel __________ VP Finance __________ VP Prod Or, Studio/Distributor reimburses Producer all or part of production costs upon delivery of the negative AND the right to distribute in various markets (Negative Pickup Guarantee); __________ President __________ Gen Counsel __________ VP Finance __________ VP Prod __________ Sr VP Market Determine WHAT Rights you will Sell in each Project

Determine what rights you will sell in the worldwide market to and break them down into the percentage of returns each right, territory and language will bring for the picture. __________ Sr VP Market __________ President __________ Gen Counsel __________ VP Finance __________ VP Prod Or, Studio/Distributor reimburses Producer all or part of production costs upon delivery of the negative AND the right to distribute in various markets (Negative Pickup Guarantee); __________ President __________ Gen Counsel __________ VP Finance __________ VP Prod __________ Sr VP Market Determine WHAT Rights you will Sell in each Project

Determine what rights you will sell in the worldwide market to and break them down into the percentage of returns each right, territory and language will bring for the picture. __________ Sr VP Market __________ VP Finance Determine the value of EACH right

Determine a sensible dollar value to all the rights for sale. (See Pre-Sale Licensing Work Sheet and computer programs available from MEC.) __________ Sr VP Market __________ VP Finance Create a Preliminary Package outlining Producers, Directors, Talent, Amount Studio is asked to put up, amount Producer will put up, rights to be sold. __________ Pack Prod When the Studio or distributor approves the Preliminary Package obtain a Deal Memo describing the Conditions under which more formal arrangements will be made. __________ Pack Prod __________ Dir Biz Aff Determine who will supply a Completion Bond and under what terms __________ VP Prod Serv __________ Line Prod Secure a Completion Bond

A commercial lending institution discounting a negative pickup will require a completion bond if you are an unproven producer. Secure the bond before going to the bank and save time. A completion guarantor will not grant a completion bond unless there is an absolutely accurate and workable budget in place first. Show the completion guarantor the DGA Reviewed Budget and integrate their fee. __________ VP Prod Serv __________ Line Prod Obtain a formal Production-Distribution Agreement and Negative Pickup Guarantee from the Studio, (or a Letter of Credit having the same effect issued by the Distributor's bank)

Formalize the various deal memos between the parties and the agreed upon amount of total financing to be made available. __________ President __________ Gen Counsel __________ Dir Biz Aff __________ Sr VP Market __________ VP Finance __________ VP Prod Finance the production by selling, at a discount, the Negative Pickup Guarantee to a lending institution and/or other entity

If a Negative pickup was arranged with a major distributor or studio, discount it for the production cash at a bank that handles entertainment loans. Make sure the budget is sufficient to accomplish production even when the bank fee is considered. If the distributor is not bankable, have their bank issue a Letter of Credit with terms stipulating that it will be payable to the discounting lender, upon fulfillment of delivery requirements. Then obtain the production loan with this guarantee. __________ VP Finance __________ Gen Counsel Sell various rights to various studios and/or distributors

With the script and package owned by the company, sell all or part of the rights connected with the picture in exchange for full or partial financing and/or a distribution arrangement in a Deal Memo. __________ President __________ VP Finance __________ Dir Biz Aff __________ Sr VP Market

Be very careful not to sell your lowest risk markets too cheaply so as to not be able to raise the balance of the production budget with remaining rights __________ President __________ VP Finance __________ Dir Biz Aff __________ Sr VP Market "CREATIVE" FINANCING Or, Budget is financed by all, some or none of above: Keep in Mind Two Rules: 1. Do anything under the Sun to raise money in any Land on the Planet. __________ President __________ VP Finance __________ Gen Counsel 2. Observe the Law of the Land. __________ President __________ Gen Counsel PRODUCTION FUNDING ALLOCATED Production Funds Committed for one project, then series of projects, then series of simultaneously produced projects. __________ Treasurer Funds Placed in Corporate Main Account from Escrow each time __________ Treasurer Treasurer Sets up Production Account (with Line Producer and Unit Production Manager Co-Signatories and Treasurer sole Signatory) to receive funds from the Corporate Main Account

This is the checking account that all below-the-line production expenditures are made from, including weekly payroll. This account funds all petty cash funds such as that for the Property Master. __________ Line Prod __________ UPM __________ Treasurer Copyright 1990 - 2002 by James R. Jaeger II ALL RIGHTS RESERVED

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