5. Net Profits: In addition to the purchase price, it is customary for the author to receive a net profits participation for the Picture. Generally, and certainly for Scribbler, it would be 5-10% of `100% (not just the "producer's share") of the net profits derived from the exploitation of the Picture. However, "net profits" is a very broad term; it can be defined in numerous ways depending on the financing structure and on who drafts the definition. As you may know, net profit definitions can be very complicated and involved. People sue each other over them all the time! They can require many days of negotiation. But don't anguish at this point. You may never even make the Picture. The easiest short-cut is to agree that net profits will be calculated, accounted for, and paid in accordance with the definition either (a) used by the domestic theatrical distributor of the Picture, or, if you and Larry prefer, (b) accorded to you by the financiers of the Picture. Either way, a smart agent like Larry will then ask that Scribbler's definition will be no less favorable than that of any other net profits participant. This is called "favored nations". I try to resist this if possible because you may want to give a financier, (non-star) director or (non-star) actor a better definition. But Larry will likely insist. A good compromise for you is to offer that Scribbler's definition will be no less favorable than the definition given to the screenwriter; but if that doesn't fly (and it might not), then offer that it will be no less favorable than that given to any other above-the-line creative element. That way you are still free to finagle the investors!
6. Warranties/Indemnity: For this paragraph, it would be good for you to take a look at a good motion picture contract form book for full language. Basically, the author warrants and represents that: He is the exclusive owner of the book; he has not transferred any of the rights granted to you to any other person or entity and will not do so for as long as this agreement is still in effect, and that no material in the book will, to the best of his knowledge, infringe anybody's copyright, trademark, contract, or other rights or defame or invade the privacy of anyone. In turn, you warrant that you have the full and exclusive right and power to enter into and perform this agreement, and that any original material that you create or have created for the Picture (like the screenplay) will not infringe the same rights stated above. You and the author agree to indemnify each other (and your agents, officers, successors, permitted assigns, and heirs) from any claims, liabilities, and expenses including, but not limited to, reasonable attorneys fees and costs, arising from a breach of any such warranties. This paragraph is standard and is rarely disputed.
7. Remake/Sequel/Series Royalties: While you get the right to produce remakes, sequels, and series based on the Picture (as opposed to author-written sequels), you must pay Scribbler for the privilege. Fortunately, these royalties have pretty standard parameters. For each theatrical remake produced, Scribbler gets 1/3 of the purchase price you paid for the original rights [continued on page 4]