New York | Entertainment Law
Legal Question
PARI PASSU - Definition
I am trying to understand the meaning of the term ''pari passu'' in the
following example: (Film Developement Investment)
A typical investor's return on investment follows:
1. On the first day of principle photography of the feature film, each
investor will receive an amount equal to 125% of their respective
investment in the developement fund.
2. Each Investor will participate on a PARI PASSU basis with other
investors in the distribution of 4% of the Producer's Adjusted Net Profits
as the term is commonly defined within the film industry.
Thanks in advance for those who can help define the use of the term
as mentioned above.
R.
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Legal Answer
Re: PARI PASSU - Definition
“Pari Passu” generally means that an equity party shall have the same rights as another equity party. In plain English that usually means that one investor shall receive the same ROI (or return on investment) as another investor. The term typically appears in investment instruments (everything from shareholders agreements to mutual fund regulations). Sometimes film labor agreements will characterize “above the line” recoupment in terms of pari passu.
In your case, pari passu is applied to investors. Based on the language you provided, 4% of the producer’s “adjusted net profits” shall be split equally, or on a pari passu basis, among the investors. More importantly, the language “as the term is commonly defined within the film industry” appears to define “adjusted net profits,” which has a unique meaning in that industry (i.e. what factors are typically netted out of gross).
Hope this was helpful. Good luck with your project and/or your research.
Kaiser
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