Under recoupment, when can the distributor begin paying a share of revenues beyond the advance?

• A. After the advance has been recouped
• B. Immediately at the start of the contract
• C. Only after all other parties are paid
• D. After 10 years

Answer: (A)

Recoupment means the distributor must recover the upfront advance from the project’s receipts before any profits are shared. In a typical distribution deal, money first goes toward recouping that advance; only after that amount has been recouped does the distributor start paying a share of revenues beyond the advance, per the contract’s waterfall. This protects the financier by ensuring the initial investment is paid back before continuing with profit participation. For example, if the advance is $1 million and gross receipts total $1.2 million, the $1 million is recouped first, and the remaining $200,000 can be shared according to the agreement. The other options don’t fit the standard structure, since sharing starts only after recoupment, not immediately or after arbitrary time frames or after everyone else is paid.