An Option to the Option Agreement

WHEN WRITERS SUBMIT THEIR SCRIPTS INTO the marketplace, they often encounter producers who cannot afford to purchase the rights. The producer-frequently independent and undercapitalized-may instead offer to "option" the script by paying the writer a sum of money for the exclusive right to take the script "off the market" for a fixed period of time. And so begins the ritualistic dance in which a producer offers as little money as possible for an option term that is as long as possible.

Taken to an extreme, the producer may offer "no money down" or $1 options for a period of 18 months, renewable at a producer's discretion for an additional eighteen months for no or some nominal sum of money. So why would a writer accept an option that could tie up his or her work for three years with little or no cash in return?

It's not insanity. Many writers have discovered that it's a buyer's market, with too many scripts in circulation and not enough producers. Producers serve as advocates, championing a script when they submit it to financial sources-which, most times, the writer wouldn't otherwise have access to. If the producer has produced several projects, that track record might impress potential funding sources or, if that producer has produced a somewhat financially successful project, then he or she can return to prior funding sources or attract new financiers.

RECENTLY A NEW TWIST HAS BEEN ADDED to the picture: the "shopping" agreement. This is an arrangement whereby a producer pays no option money and is given the right to submit a writer's script to specific financiers. As part of the shopping agreement, the producer must provide a list of funding sources he or she will approach-studios, independent distributors that can finance a project in whole or in part, larger production companies, reputable foreign sales agents, and such "end users" as network, cable, or syndicated television and video companies. Additional funding sources could be added periodically. The point is, the writer knows exactly to which parties a producer has submitted a project-a feature usually absent in the conventional option agreement.

What's more, unlike the usual option agreement, the shopping agreement may be either exclusive or nonexclusive with a particular producer.

If nonexclusive, the writer or other parties may submit the script to their own respective funding sources. This creates a level of freedom for the writer and a degree of competitive pressure for the producer that can help speed a script's development along. Obviously, it is important that everyone informs each other and coordinates their efforts to prevent duplicate submissions and confusion.

Another feature of the shopping agreement is that its term is usually for a shorter period of time than a regular option agreement-that is, for three to six months, as opposed to a year or more. This helps motivate producers to get feedback from funding sources in a relatively short amount of time. (As always, there can be loopholes written into the agreement. If, for instance, a producer is in the midst of negotiating a proposal with a potential funding source as the shopping agreement term expires, a provision in the agreement should permit an extension until the producer's negotiations have concluded, one way or the other.)

Due to the short term of the shopping agreement, the producer may insist on a provision that bars the writer from approaching the listed funding sources for a certain period of time (e.g., six to 12 months) without the producer's consent. Writers can limit the scope of this non-circumvention provision, however, by permitting the writer to approach these funders during this period without the producer's consent if the writer brings a new or changed element to the project. This would include the addition of a "name" actor or director.

Another major difference between the standard option and the shopping agreement lies in the area of pre-negotiated terms-the script's purchase price, a writer's credit and compensation, the rights granted, and any right to participate in such "spin offs" as sequels and television series.

In regular option agreements, such terms are fully negotiated and stated in the option agreement, which both parties sign. If a producer exercises the right to purchase the script, the producer and writer are bound by the terms of the agreement.

In the shopping agreement, such pre-negotiated terms may be replaced by the right of the producer and the writer to negotiate his or her own arrangement with a financing source. For instance, the writer could negotiate the underlying rights to his or her script or writing services, while the producer is simultaneously negotiating for his or her production services. This absence of pre-negotiated terms permits a writer to negotiate a possibly more favorable deal.

This also can create problems, however. Since the producer cannot simply present pre-established terms to any funding source, his or her ability to fund and produce a project is subject to the ability of the writer and a funding source to reach a mutually acceptable agreement. If the writer and the financier cannot reach an agreement-whether because of a lack of communication, or the writer having an unrealistic sense of his or her script's value in the marketplace, or some other stumbling block-the producer's deal cannot be concluded successfully.

There are several ways to address this issue. The shopping agreement may include a provision in which the parties agree to negotiate their respective deals in good faith concerning such terms as the producer's and writer's compensation and credit. The agreement could also state that if the financier offers the writer an agreed-upon minimum amount or "floor" payment for the acquisition of rights to the script and/or the writer's services, then the writer would have to accept this proposal.

Writers may question why there is an emphasis on a writer's ability to reach an agreement. On a pragmatic level, similar provisions applying to the producer could be included in a shopping agreement. However, it's industry custom for producers to approach funding sources with established parameters for the acquisition of rights to a script. Producers may be reluctant to enter into shopping agreements without that comfort level or certainty. Writers can argue, however, that the absence of such pre-negotiated terms is the trade-off for the producer receiving a free option.

Finally, the shopping agreement usually states that the failure of the producer or writer to reach an agreement with a financier would not constitute a breach of the agreement provided that each has negotiated in good faith.

Whether a shopping agreement is the right choice will depend on the intentions and flexibility of the writer and producer as they deal with one another in attempting to reach a common goal: to finance a project based on the writer's script.