EFTA02685294.pdf

"ARBITRAGE" Investment Overview EFTA_R1_02008731 EFTA02685294  far trage] noun : the purchase of the stock of a takeover target, especially with a view to selling it profitably to the raider ARBITRAGE is a feature-length theatrical film starring Al Pacino, Drake, and Eva Green that begins production March 21, 2011 in New York City. Investment in the picture provides the possibility of significant return on equity (ROE) with limited downside risk. The filmmakers have assembled an Academy-award winning cast and crew poised to deliver a successful aesthetic and financial outcome. EFTA_R1_02008732 EFTA02685295 7 MOM Al Pacino Eva Green Michelle Monaghan Susan Sarandon 2, 1S1 1:4 . ; Drake Edgar Ramirez EFTA_R1_02008733 EFTA02685296  CAST / FILMMAKER CREDITS "Robert Miller" — Al Pacino ("You Don't Know Jack," "Ocean's Thirteen," "The Insider," "Heat") "Jimmy Grant" — Drake (Mull-award Platinum recording artist, feature-film debut) "Ellen Miller" — Susan Sarandon Mall Street: Money Never Sleep?", "The Lovely Bones," "In The Valley of Elah") "Julie Cote" — Eva Green ("Casino Royale," "The Golden Compass," "Camelot") "Brooke Miller" — Michelle Monaghan ("Due Date," "Gone Baby Gone," "Mission Impossible III") "Det. Michael Gower" — Edgar Ramirez ("Carlos," "Che: Part One," "Vantage Point") Writer / Director — Nicholas Jarecki ("The Outsider," "The Informers," "Tyson") EFTA_R1_02008734 EFTA02685297  INVESTMENT OVERVIEW ARBITRAGE, LLC is seeking an equity investment of $2.7MM. Funds will be required for 18 months, starting January 10, 2011. Investors will recoup their equity plus a 25% preference. After preference, investors receive 30% of all ongoing revenues. EFTA_R1_02008735 EFTA02685298  FUNDS USE AND CAPITAL STRUCTURE Funds sought will be used to capitalize production of "Arbitrage." The total cash budget of the film is $9,642,846 6.95MM has already been raised. Funds will come from the following sources: Sour USD Bank Loan 6,142,846 Jarecki Cash Equity 500,000 "Zappos" Branding 300,000 Investor 2,700,000 TOTAL 9,642,846 EFTA R1_02008738 EFTA02685299  PRODUCTION VALUE ARBITRAGE will be photographed in the highest-tier New York locations, including the centerpiece "mansion" location, the famous "Ben Sonnenberg" house on Gramercy Park, often called "the finest private home in Manhattan." Other locations, like the "Mudd Club" loft and the "Falcon" will be of comparable value. These locations will be provided by the director at no charge. EFTA_R1_02008737 EFTA02685300  UNIQUE COMPETITIVE ADVANTAGES The total equity pool is 3.5MM A product placement arrangement has been secured with zappos.com for inclusion of their box in the picture. Zappos will provide 300k in a non- recoupable payment, reducing the total equity pool to 3.2MM. The film's director, Nicholas Jarecki, will personally invest 500k into the same equity pool and on the same terms with the equity investor. Jarecki will also defer all writing / directing fees (estimated at 350k), as well as provide the "mansion" location, loft, and plane locations at no charge (estimated value: 450k) Total contributions from Jarecki have a use value of approximately 1.6MM EFTA_R1_02008738 EFTA02685301  PROFORMA FINANCIALS Equity investors will receive a 25% preferred return on their investment as well as 30% of ongoing revenues. A mini/max draft P&L below shows a healthy return based on reasonable, demonstrable assumptions: 'REVENI Mgt, FOREIGN SALES Foreign Sales Closed 4.387,000 4.387.. r Foreign Sales Remaining 3,465.000 4.022.00r Total Foreign Sales 7.852,000 8.809,000 DOMESTIC (net) 2.250.000 4.250.$ NY TAX CREDIT 1,950,000 1,950.. Total Revenue 12.052.000 15.009.$ • Loss Production Loans (6 654.875) (6.694.875 5,357.125 8,314.1 — Loss Costs Marketing Fee (75,000) (75.000 Distribution Expenses (80.000) (80.000 Foreign Sales Fee (some already paid from deposits) 7.5% 1309,141) (380.916 Guild Residuals 5.6% (565.712) (731,304 Foreign Withholding Tax 1.0% (78.520) (88,090 Collection /Accounting Fees 0.6% (43.186) (48.4V, , (1.151,559) (1.40 • Total Revenue net of Sales Costs 4.205,568 6.910,366 Equity Investment (3.200,000) (3,200,000) Gross Profit 1,005.566 3,710.366 Equity Preferred Return 25% (800.04X) (80, Net Profit 205 566 2910.366 EFTA_R1_02008739 EFTA02685302  THE DEAL / RECOUPMENT Production budget is 9.64MM Bank loans and deposits will net 6.14MM to production Zappos will net 300M to production Equity will provide 3.2MM Recoupment schedule and order is as follows: Amount not, to any debt provider that funds 1 of the Approved Budges until Debt Provider ("Bank") 56,142,846 they haw received their principal plus interest Second. no Financier's recoupment of the Financing Amount, plus a preferred Private Equity S4IN)0,000 mourn of 25% Merton. Third, to the payment of all deferments granted to third panics (e.g. mom, Deferral Recipients producers, director.) Amounts oil/ in negotiations IVounh, all remaining scans shall be divided pro rata, peel passu. Profit Participants Equity investment will be out for approximately 18 months (blended) Base ROE is projected at 19.5% per annum EFTA_R1_02008740 EFTA02685303 Graham King's GK Films has pre-sold the picture for theatrical release to the top- tier film distributors in over half the countries of the world, including: Germany, Spain, France, and 10 other central territories. After shooting begins, sales will continue. By the end of 2011, distribution will be secure for the rest of the world, with the United States sold by mid-2012. Foreign (non-US) sales to date total $4.39MM. Projected remaining foreign sales range between $3.46-4.42MM US sales will be made after premiere at a festival (Cannes, Toronto, Sundance) or in private screenings. US sales are estimated between $2.5-4.5MM EFTA_R1_02008741 EFTA02685304  CLOSED SALES DATA FROM GK FILMS Original Territor Client Projected MG Actual Iceland Myndform 35,000 $7,500 India/Pakistan/Sri Lanka Italia $15,000 $25,000 Portugal Pris $35,000 $35,000 China DDDream $30,000 $45,000 Switzerland Ascot $75,000 $100,000 Taiwan SSG $60,000 S100,000 Turkey Pinema $75,000 $100,000 Greece/Cyprus Italia $90,000 5150,000 Middle East Italia $100,000 $150,000 Bulgaria SPI $300,000 $350,000 Scandinavia Svensk $325,000 $350,000 Spain Triples $375,000 $375 000 CIS/Baltic States MGN $325,000 5400,000 Brazil / Mexico Swen inc Mex $450,000 $575,000 France Metropolitan $575,000 $575,000 German ex Switzerland Wild Bunch $1 150 000 $1 050 000 TOTAL $3,985,000 $4,387,500 EFTA_R1_02008742 EFTA02685305  The success of the equity investment is conditioned solely on the following: Will the remaining foreign sales come in near target numbers? Will US sell for near our projections? If the answers are yes, the investor profits substantially. The success of remaining sales are primarily conditioned on the quality of the ultimate picture (as well as GK's strong relationships with foreign distributors). As the picture is bonded to the budget, it cannot go over-budget without the approval of investors and the bond company (which rarely, if ever, will approve this idea). Thus, downside risk is limited. EFTA_R1_02008743 EFTA02685306  NOT YOUR AVERAGE FILM DEAL Typically, studios finance production by themselves, or use outside capital to finance their slates in asymmetric deals. Independent productions most often must finance their entire budget with equity investment, and hope to sell their film at a festival upon completion. Our structure provides foreign sales, tax credits, product placement, and bank loan backing to cover 71% of the production's costs, with only a 29% equity gap. The bank does not participate in any upside above low interest charges (LIBOR +4%). We received Minimum Guarantees (MG's) from our foreign distributors, thus we need not worry about expenses or profit sharing in the various territories. US has enormous upside potential through an MG or Gross Corridor arrangement (where the distributor advances significant P&A) — and US can be decided upon later. EFTA_R1_02008744 EFTA02685307  RISK MITIGATION Substantial foreign sales have already been made. The draft P&L shows a break-even at $1.25MM in US sales. DVD value on the title and cast alone is estimated at $1.5-2MM. If the sky falls, foreign sales are half of estimates, and the picture is disastrous, loss is strongly capped. EFTA_R1_02008745 EFTA02685308  DUE DILIGENCE The foreign sales results and remaining estimates are attached to this document. The terms of each contract are detailed in the attached "Finance Plan: Exhibit A." We can provide our distributor agreements for verification. The budget is also attached, and will be bonded by Film Finance, Inc., the world's largest completion guarantor. EFTA_R1_02008746 EFTA02685309  PRODUCTION PERSONNEL Producers / EPs: Laura Bickford (Oscar-nominee: "Traffic," "Che," "Duplicity") Robert Salerno (Oscar-nominee: "A Single Man," "21 Grams") Kevin Turen ("The Fields" — new Sam Worthington picture) Brian Young ("The Runaways") Camera / Design: Yorick Le Saux ("I Am Love," "Swimming Pool," "Carlos") Beth Mickle (ISA-nominated: "Drive" — new Carrie Mulligan picture) EFTA_R1_02008747 EFTA02685310  ARBITRAGE Nicholas Jarecki Green Room Films 77 White Street New York, NY 10013 Ofc. Cel. Fax. EFTA_R1_02008748 EFTA02685311