NOTE: There is no actual application – this is a process of following the steps outlined below and submitting information.

KEY REQUIREMENTS:

• A guarantor for the principal amount of the loan must be in place (See Step Two for a description of the necessary qualifications of acceptable guarantors)
• Script must meet Eligibility requirement (See Step Three for further details)
• The film must be wholly or substantially shot in New Mexico - at least 85% of principal and second unit photography. Animation projects must spend at least 85% of their production budget in New Mexico.
• A binding and commercially appropriate distribution agreement (or agreements) from a reputable and appropriate distributor (or distributors) for significant rights must be in place (See Step Six for more details on distribution)
• Using justifiable data (normally from the underlying distributors), there need to be bona fide and reasonably substantiated revenue projections, netted against costs, as to below normal, expected and above normal commercial performance consistent with the above distribution agreements.
• A minimum of 60% of “below-the-line” (BTL) payroll and body count must be allocated to New Mexico residents

STEP ONE:
Email Lisa Strout, Director of the New Mexico Film Office (NMFO), and Jennifer Schwalenberg, Deputy Director, the following five (5) items and use the subject line:Film Loan Step One:

lisa@nmfilm.com and jennifer@nmfilm.com

1. Name of project
2. Type of project (feature film, television series…)
3. Projected shooting dates or months
4. Amount ($) requesting
5. Your name and contact information

STEP TWO:
Email Greg Kulka of the State Investment Council (SIC) the name of your guarantor (including address and contact information) and provide a letter (essentially a letter of intent) from that entity stating that they have reviewed the project and underlying collateral and are prepared to issue the requisite guarantee (letter of credit) to the State of New Mexico pending SIC approval. The guarantee must be one of the following and is callable upon the first to occur of default or maturity:

• An irrevocable Letter of Credit from a U.S. based bank having a credit rating of “A” or better by either Moody’s Investor Services or Standard & Poor’s.
• A corporate guarantee by a corporate entity having at least an investment grade credit rating (“BBB” or better) by either Moody’s Investor Services or Standard & Poor’s.

Greg Kulka, State Investment Council: greg.kulka@state.nm.us

After Greg has approved your guarantor, you may proceed to Step Three.

STEP THREE:
Submit the script to the New Mexico Film Office and attach Greg Kulka’s approval of your guarantor from Step Two.  Please note that we read scripts for content and locations purposes only so that we may determine the following:

• Eligibility requirement:The State of New Mexico’s incentive program is limited by statute and regulation to avoid excessive or gratuitous violence or sexual content, severe language, drug abuse, culturally sensitive material (glorification of drugs, suicide, irresponsibility with racial or religious subject matter, etc…) or a combination of some of the above.  The NMFO will determine eligibility based upon these elements.
• Viability of project for New Mexico: We will assess whether there are suitable locations (storyline does not need to be New Mexico specific – we can double for many locations), as well as a budget that will reasonably cover the scope of the project.

Preferred method for sending script: Final Draft or PDF via email to jennifer@nmfilm.com
OR hard copy (to support our Green efforts, printing double-sided would be appreciated), including all contact information, to:

Jennifer Schwalenberg, Deputy Director
New Mexico Film Office
418 Montezuma Ave.
Santa Fe, NM 87501

STEP FOUR:
Contact Jon Hendry, Business Agent for IATSE Local 480: ba480@hotmail.com or (505) 670-7381, and all other unions and guilds associated with the project to determine the availability of NM crew during your proposed production schedule. This step is imperative for determining that you’ll be able to fulfill the 60% BTL requirement with New Mexicans.  You may be in touch with Jon Hendry at any point during this process, but it is imperative to make contact no later than this point in time, as Local 480 will make up the bulk of your BTL crew.

STEP FIVE:
Submit to Lisa Strout:

• Full budget
• Production schedule

Preferred method for sending budget & schedule: Movie Magic via email to lisas@nmfilm.com

STEP SIX:
When you have DISTRIBUTION in place, contact the State of New Mexico's Film Advisor via email for acceptability: filmadvisor@state.nm.us

Distributors (Distribution is a statutory requirement although every medium or territory does not have to be accounted for.) The State is seeking vindication in the commercial marketplace that the contemplated motion picture is a viable and commercial production.  Thus, there is a requirement that there be a signed distribution agreement in place in respect of a sufficiently economically significant media and/or territories such that the film in question is clearly a viable commercial product.  The distribution agreement must be with an appropriate, experienced and economically stable distributor.  The distributor must be approved by the Film Advisor, and the distribution agreement must be for a significant territory that supports revenue estimates covering a substantial part of the budget.  For example, having foreign distribution in place and shopping domestic distribution after completion of the film is acceptable only under a few limited circumstances (see below).  Increasingly, the Film Advisor is emphasizing domestic marketing and distribution because of recent changes in the global marketplace.

The Film Advisor also needs the distributor’s track record and financials, unless they are well known in the industry, and the same information regarding any sales agent who might count as a distributor.

The State Investment Council and the Film Advisor are aware of the relatively recent and significant increase in the number of theatrical, feature-length motion pictures produced independently (i.e., without a meaningful, up-front distribution commitment from an established domestic distributor) with the intention of seeking initial release in the U.S. theatrical distribution marketplace or in other relevant and economically significant media. The SIC and the Film Advisor have also noticed the trend where, despite the thousands of such films produced annually, less than 1% of that pool eventually achieve that level of domestic distribution. Thus, in reviewing applications for the upside in lieu of interest film loan program, where revenues are expected on any given motion picture in any medium within the domestic market and such revenues are critical to the film's achieving breakeven and profitability, the Film Advisor must take into consideration whether or not the respective motion picture has a high degree of probability of achieving the desired level of distribution.

Note that under current market conditions, “assumptions” that a film can be placed directly into the DVD market without an up-front agreement or that “new media” will provide significant revenues and marketing support are not viewed as tenable.

Under these circumstances, the following represent the primary factors that will determine such viability:

1. Binding and meaningful contractual commitments from established domestic distributors/telecasters for the media which is required for economic success of the project.
2. Films which generate their economic viability (with tangible evidence of such viability) from revenues generated outside of the domestic marketplace (i.e., the domestic marketplace can only enhance the international success).
3. High production/talent (including director) value motion pictures from filmmakers with a clearly established and consistent track record of achieving such domestic distribution on past films within the recent past.
4. Motion picture productions with economically viable and committed marketing and distribution funding in place and sufficient to support the level of anticipated domestic release contemplated coupled with a realistic and viable marketing and distribution plan for the deployment of that funded commitment.

STEP SEVEN:
To the extent that you have proceeded through the prior six steps, our Film Advisor, contracted by the State of New Mexico, will help you to prepare your package.  He (not you) will write a Recommendation (see included Sample on page 10) which, upon completion, will be presented at two hearings* you must attend in Santa Fe, NM: the first is the Private Equity Investment Advisory Committee (PEIAC) and then the State Investment Council (SIC).  The PEIAC meets approximately six times per year, and the two hearings are generally two weeks apart.

*Please see “What to Expect at your Hearing” on Page 8.

The Film Advisor must have completed and submitted your Recommendation eight days prior to each hearing.  A Recommendation document takes approximately 25 – 50 hours of work to complete; therefore you must submit your full package requirements to our Film Advisor at least 30 days prior to the next scheduled meeting of the PEIAC.  Ultimately, our Film Advisor will determine in which month your project will be presented.

Note: The services provided by our Film Advisor are at no cost to your production; however, if you are approved for the Film Investment Loan, you are responsible for associated legal fees that typically range from $25,000-$45,000.  See “When you can expect the funds” on page 8.

After distribution has been approved by our Film Advisor (Step Six), he will need the following sixteen (16) pieces of information:

1. The approved guarantor from the State Investment Council for the principal amount of the loan (from Step Two)
2. Top sheet from the budget
3. The number of shoot days and locations in New Mexico (if shooting takes place elsewhere, the Film Advisor needs to know where and how many days)
4. Synopsis
5. Cast list (with credits)
6. Producers and Executive Producers (with credits)
7. Director (with credits)
8. Writer (with credits and underlying source material, if any)
9. A viable completion bond commitment (if delivery is a precondition to payment by the guarantor from bullet point 1 above)
10. Information about the production company applicant (who owns, any assets, etc.)
11. Information about how the financing that supports the guarantee works and who is supplying it
12. The material terms of distribution and written confirmation from the relevant distributors that this project is being distributed by them
13. A marketing plan (which may be subsumed under the distribution agreement)
14. Substantiated low, medium and high projections (these need to be based on some meaningful and objective basis, preferably by the relevant sales agent or distributor as to the film’s performance). The entire world does not have to be accounted for, and we can make the approval contingent on securing a limited number of identified elements. The Film Advisor also needs to see what the production company receives and what it is required to pay out before recoupment or profits are generated. You should show the revenues and costs in a mini-spread sheet.
15. How many years from funding you are requesting the loan’s outside date for payback (not to exceed 4-5 years for animated films and television series, normally not more than 3 years for live action feature films) Note: the State can recoup behind the distributor and the equity investors (where there is equity in addition to the loan), but if it does not recoup its principal, then the guarantee of principal is called.
16. If applicable, source of additional equity.

Please note that the requirements listed above do not guarantee that you will receive a film loan.  The PEIAC has the full discretion to determine whether or not to recommend a film to the SIC for additional consideration and final determination.

Any questions, please contact: filmadvisor@state.nm.us

Since the loan will not bear interest, the State takes an appropriate piece of the post-breakeven revenues in lieu of interest.  The State needs the above information to make a business decision as to whether this is an appropriate vehicle for the SIC to deploy its investment capital.  The decision is discretionary with the State.  No one individual has the authority to approve a loan, and that approval power, which, again, is totally discretionary, is vested solely in the SIC.  Commercial viability is the most significant factor that the SIC will examine.

The Film Investment Advisor will review the submitted materials for completeness and will begin due diligence on the potential film loan if it is found to be in proper order.  If incomplete, the Film Investment Advisor will notify the applicant along with a list detailing the missing items.  The applicant will then have ten (10) business days to submit the requested information.

If the Film Investment Advisor determines that the project does not meet the investment requirements of the New Mexico State Investment Council, the applicant will be informed of this decision.  Resubmission of the project will be at the discretion of the Film Advisor and/or SIC staff.

STEP EIGHT:
The New Mexico Film Office will need the following to complete your package:

• Copy of full budget
• Copy of full shooting schedule
• One or two sentence synopsis of story
• First New Mexico prep date
• First New Mexico shoot date
• How many days of shooting in New Mexico
• What city you plan to base production
• New Mexico Locations: the Film Office needs to verify that the production (principal & second unit photography) will take place “wholly or substantially” (at least 85%) in New Mexico, broken down by cities or regions.  Aside from New Mexico, where else are you shooting and how many days? 
• Estimated expenditure in New Mexico (include pre & post)
• The unions and guilds to which you are signatory (IATSE, WGA, DGA, SAG, Teamsters)
• Key positions held by New Mexicans (or those you believe will be held by New Mexicans)
• Crew Spreadsheet: a Below-the-Line spreadsheet, including rates and total salary for each BTL crew member for the run of the production.  (We will also require a spreadsheet and crew count information after wrap to ensure compliance with the 60% BTL requirement.)
  New Mexico hires, including their full names, must be clearly indicated.
• Crew Count:
   Total number of BTL Crew members:
   Total number of BTL New Mexico Crew:
   Total number of BTL Distant Hire Crew:
  
   Total BTL Payroll:  $
   Total BTL New Mexico Crew Payroll:  $
   Total BTL Distant Hire Payroll:  $ 
  
   Total Percentage BTL New Mexico Crew Payroll:  % 
   Total Percentage BTL Distant Hire Payroll:  %
• Crew Letter:  After your contract is completed with Jon Hendry, IATSE Local 480, he will write the Film Office a letter stating that he believes you will make the 60% of BTL New Mexico crew requirement.  As the IATSE technicians make up the bulk of crew, this is the only letter required and will be part of your package.

What to Expect at your Hearings:
Once the Film Advisor has determined your package is complete and has issued a Recommendation, he will determine in which month he will present your project at the two hearings you (producer and/or director) must attend.

The First Hearing:
The Private Equity Investment Advisory Committee (PEIAC)
Location: State Investment Council, Santa Fe, NM

The Second Hearing:
The State Investment Council (SIC)
Location: Governor’s Cabinet Room, State Capitol Building, Santa Fe, NM

Hearings are generally held at 9:00 am, so please plan to arrive in New Mexico the evening prior to your hearing. 

What happens at the hearings:

• Our Film Advisor will be there to represent your project and describe the financials and structure of the deal.
• Lisa Strout will be in attendance and give testimony to the rating, the 60% BTL crew requirement, the “wholly or substantially shot in NM” requirement, affiliations with unions, and number of shoot days, and so forth.
• Greg Kulka, of the State Investment Council, may answer questions from Council Members about your project.
• You (producer and/or director) will be asked to briefly speak on behalf of your project: story line, creative elements, and so forth.

Council Members will vote in your presence as to the approval/disapproval of the loan.

If your loan is approved at the PEIAC hearing, you will attend the SIC hearing two weeks later and the process will be much the same.

NEGOTIATION OF DOCUMENTS AND FUNDING (When can you expect the funds?):

If the project has been approved at the second (SIC) hearing, plan on 5 to 8 weeks for negotiation and preparation of final loan documents from the time of provision of the retainer to the SIC’s counsel.  This period could be longer depending upon how responsive the project representatives are in providing diligence materials requested by the SIC’s counsel, how responsive your counsel to the project is in negotiation of documents, the overall complexity of the financing structure in which the SIC funds may be a part, as well as other factors.

Immediately upon approval by the SIC, applicants will be required to fund at least half of the estimated $25,000 – $45,000 State legal fee commitment that is required to be paid in connection with the expected implementing paperwork, as instructed by the Film Advisor. 

The project will also be required to provide an opinion of outside counsel in connection with the delivery of the loan agreement.  In addition to the required full, unconditional and irrevocable  guarantee of repayment, the SIC ordinarily requires the grant of a security interest in the film collateral and also requires credit for itself in the main/end titles.

The SIC’s counsel will need the following due diligence materials in order to negotiate and prepare final loan documents for closing:

• chain of title for the picture
• all documents that involve any dispute or claim that alleges infringement of intellectual property rights
• all sales agency and distribution agreements
• all agreements with key cast and key crew
• all production agreements
• all material agreements related to production of the picture
• all documents related to borrowings, guarantees of debt or similar arrangements by any entities involved in production of the picture
• all security agreements relating to assets involved in the Film
• all documents relating to any liens, claims, pledges or the like on property owned or leased by any entities involved in the production of the picture
• UCC and copyright searches
• copies of insurance policies
• information concerning litigation
• the following for all entities involved in production:
• charter documents
• jurisdiction in which each entity is organized 
• list of jurisdictions in which each entity is qualified to do business
• list of officers, directors, shareholders, managers and/or members
• location of books and records
• bank names and account numbers  
• organizational chart showing ownership relationship of all entities involved in production
• description of transactions and agreements between any entities involved in production and their owners, officers and directors
• financial statements for the past 3 years (as available)
• tax returns filed for the past 3 years (as available)
• other due diligence materials as requested by SIC’s counsel

Funds become available within two or three days after the loan closing, depending on the funding schedule negotiated in the loan agreement.

Note: If you are approved for the loan and then decide not to take it or otherwise halt the process prior to the loan funding, you are still responsible for the associated legal fees for the preparation of the loan documents.