1-U

  UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 1-U

CURRENT REPORT PURSUANT TO REGULATION A

Date of Report (Date of earliest event reported): September 4, 2020

VidAngel, Inc.
(Exact name of issuer as specified in its charter)
Delaware	46-5217451
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
295 W Center Str. Provo, Utah 84601
(Full mailing address of principal executive offices)
(760) 933-8437
(Issuer’s telephone number, including area code)
Title of each class of securities issued pursuant to Regulation A:
Class B Nonvoting Common Stock

ITEM 2. BANRUPTCY OR RECEIVERSHIP

Order Confirming Joint Plan of Reorganization

On September 1, 2020, VidAngel, Inc. (the “Company”) filed a Joint Plan of Reorganization of Trustee and Studios (the “Joint Plan”) in the United States Bankruptcy Court for the District of Utah (the “Bankruptcy Court”). On September 4, 2020, the Joint Plan along with the settlement agreement between the Company and the "Studios" (as hereinafter defined)(the "Settlement Agreement"), were confirmed by the Bankruptcy Court, with an effective date to be determined upon the satisfaction of certain conditions as set forth in the Joint Plan.

A full copy of the Joint Plan is furnished as Exhibit 1.2 to this Current Report on Form 1-U and is incorporated herein by reference. The following is a summary of certain provisions of the Joint Plan and is not intended to be a complete description of the Joint Plan.

The Joint Plan contemplates that:

●

The Company will continue as a “going concern”, and will reorganize through the continuation of its business operations and satisfaction of its debts over time.

●

The Company agrees not to directly or indirectly descramble or decrypt a copyrighted work of the studios which are party to the Settlement Agreement (the "Studios"), or their affiliates.

●

The Company also agrees not to reproduce, transmit, stream, publicly perform, or distribute copyrighted works of the Studios, or their affiliates.

●

The Company agrees not to bring any legal action asserting claims under Title 17 of the Unites States Code, or any related federal or state law claims, against any of the Studios, or their affiliates, unless the action is related to alleged infringement of the Company’s exclusive rights in its own copyrighted works.

●

The Company agrees not to use any resources to lobby congress to amend the Family Movie Act of 2005, and agrees to voluntarily dismiss our appeal of the permanent injunction and judgement obtained by the Studios in the California Action (as defined in the Joint Plan).

●

Holders of all allowed claims will be paid in full and holders of equity interests shall retain their interests in the Company.

●

Upon the effective date of the Joint Plan, holders of Class 1 & 2 claims will be paid in full.

●

Upon the effective date of the Joint Plan, holders of Class 3 claims shall be paid a total of $9.9M over 14 years, due quarterly, with the first payment of $176,786 due on October 15, 2020.

As of September 4, 2020, the Company had 21,564,957 Class A & Class B Common shares outstanding, with no shares reserved for future issuance in respect of claims and interests filed and allowed under the Joint Plan.

Information as to the Assets and Liabilities of the Company as of August 31, 2020, are furnished as Exhibit 1.4 to this Current Report on Form 1-U and is incorporated herein by reference.

ITEM 2.1 EXHIBITS

The following exhibits are filed as part of this Current Report on Form 1-U:

Exhibit Number		Description
	1.1	Order Confirming Joint Plan of Reorganization
	1.2	Joint Plan of Reorganization of Trustee and Studios Under Chapter 11 of the Bankruptcy Code
	1.3	Settlement Agreement between VidAngel, Inc. and the Studios
	1.3a	Promissory Note between VidAngel, Inc. and Studios
	1.3b	Security Agreement between VidAngel, Inc. and Studios
	1.3c	Non-Compete Agreement between VidAngel, Inc. and Neal Harmon
	1.3d	Non-Compete Agreement between VidAngel, Inc. and Jeffrey Harmon
	1.4*	Chapter 11 Bankruptcy Monthly Operating Report for August 2020

* To be filed by amendment when available.

SIGNATURE

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VidAngel, Inc.
Dated: September 14, 2020	By:	/s/ Neal S. Harmon
		Neal S. Harmon
		Chief Executive Officer

EX1U-1 UNDR AGMT

  Exhibit 1.1

Prepared and submitted by:

George Hofmann (10005)

Matthew M. Boley (8536)

Jeffrey Trousdale (14814)

Cohne Kinghorn, P.C.

111 East Broadway, 11th Floor

Salt Lake City, UT 84111

Telephone: (801) 363-4300

Email:                       

jtrousdale@ck.law

Attorneys for George Hofmann,

Chapter 11 Trustee

IN THE UNITED STATES BANKRUPTCY COURT

DISTRICT OF UTAH, CENTRAL DIVISION

In re: VIDANGEL, INC., Debtor. Bankruptcy No. 17-29073 (KRA) Chapter 11

ORDER CONFIRMING JOINT PLAN OF REORGANIZATION

This matter came before the Court on September 4, 2020 at 10:00 a.m. (the “Confirmation Hearing”) to consider confirmation of the Joint Plan of Reorganization of Trustee and Studios Under Chapter 11 of the Bankruptcy Code [Docket No. 849] (the “Joint Plan”), and upon the Trustee’s Second Amended Motion to Modify Plan and Motion to Confirm Modified Joint Plan [Docket No. 839] (the “Motion to Modify Plan”), both filed by George Hofmann (the “Trustee”), in his capacity as the Chapter 11 Trustee of VidAngel, Inc. (the “Debtor”), the Debtor in the above-referenced chapter 11 bankruptcy case (the “Case”).

Matthew M. Boley, Jeffrey Trousdale, and Caitlin McKelvie appeared on behalf of the Trustee. Thomas Walper, Rose Ehler, and Michael Johnson appeared on behalf of Disney Enterprises, Inc., Lucasfilm Ltd. LLC, Twentieth Century Fox Film Corporation, Warner Bros. Entertainment Inc., MVL Film Finance, LLC, New Line Productions, Inc., and Turner Entertainment Co. (collectively, the “Studios”). Other counsel and parties-in-interest noted their appearances on the record.

WHEREFORE, the Joint Plan and Motion to Modify having been transmitted to creditors and equity security holders as well as the Disclosure Statement approved by the Court;

WHEREFORE, the Court having announced its findings of fact and conclusions of law on the record during the Confirmation Hearing and having entered separately its written Findings and Conclusions Regarding Confirmation of Joint Plan of Reorganization (collectively, the “Findings and Conclusions”);

WHEREFORE, it having been determined, after hearing on notice, that all of the applicable requirements for confirmation set forth in 11 U.S.C. § 1129 have been satisfied with respect to the Joint Plan; and

WHEREFORE, based upon the Joint Plan, the Findings and Conclusions, the Ballot Tabulation Register [Docket No. 768], the Declaration of George Hofmann in Support of Confirmation of the Joint Plan of Reorganization and Motion to Approve Settlement Agreement Between VidAngel, Studios, and the Harmons [Docket No. 852], the Declaration of Mark Hashimoto in Support of Confirmation of Joint Plan of Reorganization [Docket No. 853], the Settlement Motion, the Motion to Modify, other filings concerning the Plan [e.g., Docket Nos. 640, 668, 841, 843, 844, 850, 851, and 854], the statements of counsel, the evidence received at the Confirmation Hearing and other matters of record, and good cause appearing, it hereby is

ORDERED that:

1.Plan Confirmed. The Joint Plan shall be, and hereby is, CONFIRMED as expressly supplemented and modified by this Confirmation Order1 (as supplemented and modified, the “Joint Plan” or the “Confirmed Plan”). A copy of the Joint Plan is attached hereto as Exhibit “1”.2

2.Motion to Modify Plan Granted. The Motion to Modify Plan shall be, and hereby is, GRANTED as more particularly described in this Confirmation Order.

3.Resolving Inconsistency. In the event of any conflict or inconsistency between the terms of the Joint Plan and the terms of this Confirmation Order, the terms of this Confirmation Order shall control. Except as otherwise provided herein, the terms of the Joint Plan (including the Plan Supplement Documents) are incorporated by reference into and are an integral part of this Confirmation Order.

4.Objections. Any and all objections to confirmation of the Joint Plan that were not withdrawn, waived or settled at or prior to the Confirmation Hearing, and all reservations of rights included in any such objections, are overruled in their entirety on the merits (except as otherwise provided in this Confirmation Order), and all withdrawn objections are deemed withdrawn with prejudice.

5.Effect of Confirmation. As of the Effective Date of the Joint Plan, all persons and entities hereby are enjoined permanently from commencing or continuing, in any manner or in any place, any action or other proceeding, whether directly, indirectly, derivatively or otherwise against the Debtor, its Estate, or the Reorganized Debtor, on account of, or respecting any claims, interests, debts, rights, Causes of Action or liabilities discharged or released pursuant to the Joint Plan, except only to the extent expressly provided under the Joint Plan, the Settlement Agreement, the Plan Supplement Documents, or this Confirmation Order. All parties further are enjoined permanently from taking actions as provided under sections 12.3, 12.4, 12.5 and 12.6 of the Joint Plan, which provisions of the Joint Plan are incorporated by reference and shall be interpreted as express injunctions, Orders of restraint, and Orders of specific performance, if restated in this Confirmation Order in their entirety, and all parties are further enjoined as specified in section 1141 of the Bankruptcy Code.

6.Occurrence of Effective Date. The Joint Plan shall not become effective, and the Effective Date shall not occur, unless and until the conditions set forth in section 10.1 of the Joint Plan have been satisfied or waived. Notwithstanding anything in the Joint Plan to the contrary, the conditions set forth in section 10.1 of the Joint Plan must be satisfied or waived on or before sixty (60) days after the date of entry of this Order, or the Joint Plan shall be deemed revoked and withdrawn, this Order shall be deemed vacated, and the Plan Supplement Documents shall become void and unenforceable. Notwithstanding anything in the Confirmed Plan to the contrary, and except only to the extent the conditions set forth in section 10.1 of the Confirmed Plan have not yet been satisfied or waived, the Plan shall become effective upon the earlier of (a) one business day after the Trustee and the Studios file notice (i) that the conditions set forth in section 10.1 of the Confirmed Plan are satisfied or waived, and (ii) that the Trustee, the Reorganized Debtor and the Studios are prepared to satisfy their respective Effective Date obligations, including, for example, the obligations under sections 4.1(b) and 4.2(b) of the Confirmed Plan to deliver or tender payment in full to the holders of Allowed Class 1 Claims and Allowed Class 2 Claims on the Effective Date, or (b) ten business days after the Confirmation Date.

 

1            

Capitalized terms used but not otherwise defined herein are defined in the Joint Plan.

 

2            

The form of Joint Plan attached hereto as Exhibit 1 is substantially identical to the form of plan filed as Docket No. 849.

7.Revesting of Debtor’s Property. Except as otherwise provided in the Joint Plan, the Plan Supplement Documents, or in this Order, on the Effective Date, in accordance with § 1141(b) and (c), all assets of the Debtor and the Estate shall be vested in the Reorganized Debtor free and clear of all Liens, Claims and interests, provided, however, that the Reorganized Debtor shall remain subject to the supervision and control of the Trustee until he is discharged and released from his duties and obligations as Trustee by Order of the Bankruptcy Court.

8.Assumed Contracts. As of the Effective Date, pursuant to section 9.1 of the Joint Plan and Bankruptcy Code §§ 365(a) and 1123(a)(5), the Debtor’s assumption of the Assumed Contracts3 shall be, and hereby is, approved. The Assumed Contracts shall be transferred to, and remain in full force and effect for the benefit of, the Reorganized Debtor in accordance with their respective terms, notwithstanding any provision in any such Assumed Contract (including those of the type described in sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits, restricts, or conditions such assignment or transfer. The deemed “cure amount” for the Assumed Contracts is Zero dollars ($0).

9.Implementation and Consummation of Joint Plan. In accordance with section 1142 of the Bankruptcy Code, the implementation and consummation of the Joint Plan (including execution and delivery of the Plan Supplement Documents) in accordance with its terms shall be, and hereby is, authorized and approved, and the Debtor, the Reorganized Debtor, the Trustee, the Studios, and any other person referenced in the Joint Plan shall be, and they hereby are, authorized, empowered and directed to issue, execute, deliver, file and record any documents, and to take any action necessary or appropriate to consummate the Joint Plan in accordance with its terms.

10.Plan Supplement Documents Approved; Covenant Not to Compete. The form and content of the Plan Supplement Documents that are attached to the Joint Plan and/or appended to Docket No. 854 are approved in their entirety. The parties are authorized, empowered, and directed to take any action necessary or appropriate to execute, deliver and consummate the Plan Supplement Documents. For Neal Harmon and Jeffrey Harmon to remain in management positions with the Reorganized Debtor, and as a condition to their continued employment with the Reorganized Debtor, each shall execute in favor of the Reorganized Debtor the one-year covenant not to compete in the business of “Self-Selected Viewing” in a form substantially similar to what is attached to Docket No. 854 as Exhibit A.

11.Settlement Agreement Approved. The Settlement Agreement between the Debtor, the Studios, and the Harmons, as that term is defined in the Joint Plan, is approved in all of its particulars pursuant to Bankruptcy Code § 1123(b)(3), Bankruptcy Rule 9019, and other applicable law. This Order shall be, and hereby is, deemed to constitute an Approval Order, as referenced and defined in the Settlement Agreement and the Joint Plan. Nonetheless, a separate Approval Order may be entered contemporaneous with this Confirmation Order.

12.Appeals in California Action Deemed Abandoned. As of the Effective Date, the Trustee, the Debtor, the Reorganized Debtor, and the Estate shall be deemed to have abandoned all appeals in the California Action. Within three (3) business days after the Effective Date, the Chapter 11 Trustee, on behalf of the Debtor and Reorganized Debtor, shall file a Notice of Voluntary Dismissal, and take all other steps necessary to dismiss all appeals in the Ninth Circuit, including Nos. 19-56174 and 20-55352.

13.Entry of this Confirmation Order and confirmation of the Joint Plan (A) does not constitute an adjudication (including allowance, disallowance, liquidation or estimation) of Proof of Claim No. 12 (the “ClearPlay Claim”), filed by ClearPlay, Inc. (“ClearPlay”) in this Bankruptcy Case, which ClearPlay Claim currently is unliquidated and is disputed by the Reorganized Debtor and by the Trustee, and (B) does not bar or release any claims that ClearPlay may assert based upon infringements, if any, committed by the Reorganized Debtor after the Effective Date of the Joint Plan (“Future Infringement”).  All respective rights, defenses and objections of ClearPlay, the Reorganized Debtor, the Trustee and other parties-in-interest are preserved with respect to the ClearPlay Claim and allegations of Future Infringement.

14.Payment of Statutory Fees. Until entry of an Order closing, dismissing or converting the Bankruptcy Case, any quarterly payments due to the office of the United States Trustee after the Effective Date of the Confirmed Plan shall be paid in accordance with 28 U.S.C. § 1930(a)(6).

15.Final Decree. A final decree may be entered as soon as practicable, and within the time limits set forth in Local Rule 3022-1.

16.Retention of Jurisdiction. Subject to sections 11.3, 11.4, and 12.8 of the Joint Plan, this Court shall retain exclusive jurisdiction, in accordance with the Joint Plan and sections 105(a) and 1142 of the Bankruptcy Code, with respect to all matters arising in, arising under or related to the Bankruptcy Case or Joint Plan pursuant to, and for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code, including but not limited to the matters described in sections 10.1, 10.2, 10.3 and 10.4 of the Joint Plan.

17.Exclusive Jurisdiction to Interpret and Enforce the Joint Plan and the Plan Supplement Documents.  Subject to section 3.G of the Settlement Agreement and sections 11.3, 11.4 and 12.18 of the Joint Plan, the Studios shall enforce exclusively in the Bankruptcy Court (A) the Express Covenants specified in sections 7.2 and 7.3 of the Joint Plan and/or under section 2 of the Settlement Agreement, (B) the Studios’ rights and remedies under sections 4.B.2 and 4.E of the Settlement Agreement, and (C) all of the Studios’ rights and remedies under this Confirmation Order, the Joint Plan, the Plan Supplement Documents (including, the Settlement Agreement, the Note, the Security Agreement and the Stock Pledge and Security Agreement referenced under section 6.C of the Settlement Agreement) and the Compliance Lien.  Subject only to the exceptions noted in sections 4.B.1.a and 4.B.1.b of the Settlement Agreement (and subject to section 3.G of the Settlement Agreement and sections 11.3, 11.4 and 12.18 of the Joint Plan) the Bankruptcy Court shall have, and retain, exclusive and continuing jurisdiction to enforce and interpret this Confirmation Order, the Joint Plan, the Plan Supplement Documents (including, the Settlement Agreement, the Note, the Security Agreement and the Stock Pledge and Security Agreement) and the Compliance Lien.  The Bankruptcy Court’s exclusive jurisdiction as specified in this Confirmation Order, in the Joint Plan and the Settlement Agreement shall continue in full force and effect notwithstanding entry of a final decree and/or entry of an order closing this Bankruptcy Case.  The Studios, the Reorganized Debtor and other parties in interest shall have the right, as specified in section 11.5(c) of the Joint Plan, to reopen the Bankruptcy Case to the extent necessary to enforce their respective rights and/or enforce their respective remedies.

3            

The “Assumed Contracts” means: any executory contract or unexpired lease which (i) has not expired by its own terms on or prior to the Confirmation Date, (ii) has not been assumed and assigned or rejected with the approval of the Bankruptcy Court on or prior to the Confirmation Date, (iii) is not the subject of a motion to assume or reject which is pending at the time of the Confirmation Date, or (iv) is not the basis of a Credit Holders’ Claim.

 

18.Notice of Entry of Confirmation Order. Pursuant to Bankruptcy Rules 2002(f)(7), 2002(f)(7) and 3020(c)(2), on or before the fifth Business Day following the date of entry of this Confirmation Order, the Debtor and/or the Trustee shall serve notice of entry of this Confirmation Order on all creditors, the United States Trustee and other parties-in-interest, by causing such notice of entry to be delivered to such parties by CM/ECF notice and/or via first-class mail, postage prepaid, provided, however, that notice of Entry of the Confirmation Order may also be provided by posting such notice to the Debtor’s “bankruptcy blog” maintained on its website, and no further notice need be given to holders of Class 4 Claims or Class 5 Interests. No other or further notice shall be necessary.

19.Notice of Effective Date to be Given by the Debtor or Trustee. Within five Business Days following the occurrence of the Effective Date, the Reorganized Debtor and/or the Trustee shall file notice of the occurrence of the Effective Date with the Court. No other or further notice of the Effective Date shall be necessary.

------------------------------------- END OF DOCUMENT -------------------------------------

EX1U-1 UNDR AGMT

  Exhibit 1.2

Michael R. Johnson, Esq. (A7070) RAY QUINNEY & NEBEKER P.C. 36 South State Street, 14th Floor Salt Lake City, Utah 84111 Telephone: (801) 532-1500 Facsimile: (801) 532-7543 Email: mjohnson@rqn.com Thomas B. Walper (pro hac vice) Kelly M. Klaus (pro hac vice) Rose Leda Ehler (pro hac vice) MUNGER, TOLLES & OLSON LLP 350 South Grand Avenue, 50th Floor Los Angeles, California 90071-3426 Telephone: (213) 683-9100 Facsimile: (213) 687-3702 Email: thomas.walper@mto.com Email: kelly.klaus@mto.com Email: rose.ehler@mto.com Attorneys for the Studios		George Hofmann (10005) Matthew M. Boley (8536) Jeffrey Trousdale (14814) COHNE KINGHORN, P.C. 111 East Broadway, 11th Floor Salt Lake City, Utah 84111 Telephone: (801) 363-4300 Email: ghofmann@ck.law Email: mboley@ck.law Email: jtrousdale@ck.law Attorneys for George Hofmann, Chapter 11 Trustee
IN THE UNITED STATES BANKRUPTCY COURT DISTRICT OF UTAH, CENTRAL DIVISION
In re VIDANGEL, INC., Debtor.	Case No. 17-29073 (KRA) Chapter 11
JOINT PLAN OF REORGANIZATION OF TRUSTEE AND STUDIOS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

Dated: August 28, 2020

George Hofmann (the “Trustee”), in his capacity as the Chapter 11 Trustee of VidAngel, Inc. (“VidAngel” or the “Debtor”) and its bankruptcy estate, on the one hand, and each of Disney Enterprises, Inc., Lucasfilm Ltd. LLC, Twentieth Century Fox Film Corporation, Warner Bros. Entertainment Inc., MVL Film Finance LLC, New Line Productions, Inc., and Turner Entertainment Co. (collectively, “Studios”), on the other hand, hereby jointly propose the following plan of reorganization under Section 1121 of Title 11 of the United States Bankruptcy Code.

i

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS AND CONSTRUCTION OF TERMS		1
ARTICLE II TREATMENT OF ALLOWED ADMINISTRATIVE EXPENSE CLAIMS AND ALLOWED PRIORITY TAX CLAIMS		8
Section 2.1	Non-Classification	8
Section 2.2	Administrative Expense Claims	9
Section 2.3	Priority Tax Claims.	9
ARTICLE III CLASSIFICATION OF CLAIMS		10
ARTICLE IV TREATMENT OF CLAIMS AND EQUITY INTERESTS		10
Section 4.1	Class 1 - Priority Claims	10
Section 4.2	Class 2 - General Unsecured Claims	10
Section 4.3	Class 3 - Studios Monetary Claims	11
Section 4.4	Class 4 - Credit Holders’ Claims	11
Section 4.5	Class 5 - Equity Interests	12
Section 4.6	No Penalties	12
Section 4.7	All Defaults Cured and Waived; All Notes and Obligations Decelerated and Reinstated	12
Section 4.8	No Assumed Liability	12
Section 4.9	Satisfaction of Claims and Release	12
Section 4.10	Amendments to Claims	12
ARTICLE V MEANS FOR EXECUTION OF THE PLAN		13
Section 5.1	Revesting of Property; Discharge and Release of Chapter 11 Trustee; Notice of Effective Date	13
Section 5.2	Continuation of Business Operations	13
Section 5.3	Continuation of Anti-Discrimination Provisions of Bankruptcy Code	13
Section 5.4	Effect of Entry of Case Closing Order	13
Section 5.5	Promissory Note	13
Section 5.6	Security Agreement and Compliance Lien	14
Section 5.7	Distributions on Account of Claims and Interests	14
Section 5.8	Employment of Professionals	14
Section 5.9	Ability to Incur Debt	15
Section 5.10	Management of Reorganized Debtor	15
Section 5.11	Settlement and Compromise	15
Section 5.12	New Equity and Restructuring Options	15

ii

ARTICLE VI IMPLEMENTATION OF THE PLAN		16
Section 6.1	Method of Distributions Under the Plan	16
Section 6.2	Objections to Disputed Claims	16
Section 6.3	Resolution of Claims	16
Section 6.4	Estimation of Claims	17
Section 6.5	Retention and Preservation of Claim Objections and Causes of Action	17
ARTICLE VII EXPRESS COVENANTS		17
Section 7.1	Debtor’s Management Covenant Not to Compete	17
Section 7.2	Abandonment of Debtor’s Appeals in California Action; Covenant Not to Sue; Covenant Not to Seek Certain Changes in Law	18
Section 7.3	“No Use Covenant” Applicable to the Studios’ Copyrighted Works	18
Section 7.4	Effective Date of the Express Covenants	18
Section 7.5	No Intended Third Party Beneficiaries; Enforcement of the Express Covenants	18
ARTICLE VIII VOTING ON THE PLAN		18
Section 8.1	Voting of Claims	18
Section 8.2	Nonconsensual Confirmation	19
ARTICLE IX EXECUTORY CONTRACTS AND UNEXPIRED LEASES		19
Section 9.1	Assumption of Executory Contracts and Unexpired Leases; Deemed Cure Amount	19
Section 9.2	Post-Petition Agreements Unaffected By Plan	19
Section 9.3	Credit Holders’ Claims Treated Under Section 4.4	19
ARTICLE X CONDITIONS PRECEDENT TO EFFECTIVE DATE		19
Section 10.1	Conditions Precedent to Effectiveness	19
Section 10.2	Failure of Conditions Precedent	20
Section 10.3	Waiver of Conditions	20
ARTICLE XI RETENTION OF JURISDICTION		20
Section 11.1	Retention of Jurisdiction	20
Section 11.2	Exclusive Jurisdiction	21
Section 11.3	Alternative Exclusive Jurisdiction	21
Section 11.4	Exclusive Jurisdiction Over Permanent Injunction	21
Section 11.5	Closure of Case	21

iii

ARTICLE XII MISCELLANEOUS		22
Section 12.1	Continuation of Injunctions or Stays Until Effective Date	22
Section 12.2	All injunctions or stays provided for in the Bankruptcy Case under Sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date.Discharge	22
Section 12.3	Injunction Relating to the Plan	22
Section 12.4	Broad Injunction	23
Section 12.5	Exculpation	23
Section 12.6	Release of Claims	23
Section 12.7	Default of Plan	23
Section 12.8	Setoffs	23
Section 12.9	Amendment or Modification of the Plan	23
Section 12.10	Severability	24
Section 12.11	Revocation or Withdrawal of the Plan	24
Section 12.12	Binding Effect	24
Section 12.13	Written Notices	24
Section 12.14	Governing Law	24
Section 12.15	Post-Confirmation Fees, Final Decree	24
Section 12.16	Headings	24
Section 12.17	Filing of Additional Documents	24
Section 12.18	Inconsistency	24

iv

ARTICLE I

DEFINITIONS AND CONSTRUCTION OF TERMS

For purposes of this Plan, the following terms shall have the meanings specified in this Article I. A term used but not defined herein, which is also used in the Bankruptcy Code, shall have the meaning ascribed to that term in the Bankruptcy Code. A term used but not defined herein, but which is defined in the Settlement Agreement (as defined below and attached as an exhibit hereto), shall have the meaning ascribed to that term in the Settlement Agreement. Wherever from the context it appears appropriate, each term stated shall include both the singular and the plural, and pronouns shall include the masculine, feminine and neuter, regardless of how stated. The words “herein,” “hereof,” “hereto,” “hereunder” and other words of similar import refer to the Plan as a whole, including exhibits attached hereto, and not to any particular Section, sub-Section or clause contained in the Plan. The rules of construction contained in Section 102 of the Bankruptcy Code shall apply to the terms of this Plan. The headings in the Plan are for convenience of reference only and shall not limit or otherwise affect the provisions hereof.

“Administrative Expense Claim” shall mean a Claim that is Allowed under Section 503(b) of the Bankruptcy Code or otherwise is allowed under this Plan, and that is entitled to priority under Section 507(a)(1) of the Bankruptcy Code and/or under Section 2.2 of this Plan, including, without limitation:

(a)           fees and expenses of Professionals Allowed pursuant to an Order of the Bankruptcy Court,

(b)           all fees and charges assessed against the Estate pursuant to 28 U.S.C. § 1930,

(c)           Post-Confirmation fees and expenses of the Chapter 11 Trustee and his Professionals payable pursuant to this Plan, and

(d)           other Post-Confirmation Date Administrative Expenses.

“Allowed” shall mean, with reference to any Claim:

(a)           a Claim that has been listed by the Debtor in its Schedules and (i) is not listed as disputed, contingent or unliquidated, and (ii) is not a Claim as to which a proof of claim has been filed;

(b)           a Claim as to which a timely proof of claim has been filed by the Bar Date and either (i) no objection thereto, or application to estimate, equitably subordinate or otherwise limit recovery, has been made on or before any applicable deadline, or (ii) if an objection thereto, or application to estimate, equitably subordinate or otherwise limit recovery has been interposed, the extent to which such Claim has been allowed (whether in whole or in part) by a Final Order;

(c)           a Claim arising from the recovery of property under Section 550 or 553 of the Bankruptcy Code and allowed in accordance with Section 502(h) of the Bankruptcy Code; or

(d)           any Claim expressly allowed under this Plan or pursuant to the Confirmation Order.

1

Except as otherwise specified in the Plan (or, as to the Studios, in the Settlement Agreement, the Note and/or the Security Agreement) or any Final Order of the Bankruptcy Court, the amount of an Allowed Claim shall not include any attorneys’ fees, costs, penalties, or interest on such Claim occurring or incurred from and after the Petition Date.

“Approval Order” shall mean the order entered by the Bankruptcy Court approving the Settlement Agreement, including pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code and/or Federal Rule of Bankruptcy Procedure 9019. It is anticipated that the Confirmation Order will be the Approval Order.

“Avoidance Actions” shall mean Causes of Action arising or held by the Estate under Sections 502, 510, 541, 544, 545, 547, 548, 549, or 550 of the Bankruptcy Code, or under related state or federal statutes and common law, including fraudulent or avoidable transfer laws.

“Bankruptcy Case” shall mean the Debtor’s case pending in the Bankruptcy Court under case number 17-29073.

“Bankruptcy Code” shall mean Title 11 of the United States Code, as amended from time to time, as applicable to the Bankruptcy Case.

“Bankruptcy Court” shall mean the United States Bankruptcy Court for the District of Utah in which the Bankruptcy Case is pending and, to the extent of any reference under 28 U.S.C. § 157, the unit of such District Court specified pursuant to 28 U.S.C. § 151.

“Bankruptcy Rules” shall mean the Federal Rules of Bankruptcy Procedure as promulgated under 28 U.S.C. § 2075, and any applicable local rules of the Bankruptcy Court.

“Bar Date” shall mean: (i) February 14, 2018, with respect to a Claim against the Estate other than a Claim of a Governmental Unit, a Credit Holders’ Claim, or a Pre-Appointment Administrative Expense Claim; (ii) February 14, 2018, with respect to a Claim of a Governmental Unit against the Estate; (iii) December 13, 2019, with respect to a Pre-Appointment Administrative Expense Claim; (iv) April 17, 2020, with respect to a Credit Holders’ Claim; and (v) if this Plan and/or an order of the Bankruptcy Court establishes a different bar date for a specific claim or category of Claims (e.g., rejection damages Claims or other post-Petition Date Claims), the date established by the Plan or order of the Court.

“Business Day” shall mean any day other than a Saturday, Sunday or an officially designated legal public holiday as designated in 5 U.S.C. § 6103.

“California Action” shall means the case captioned Disney Enterprises, Inc. et al. v. VidAngel, Inc., No. 2:16-cv-04109-AB-PLA, filed in the United States District Court for the Central District of California, including any appeals therefrom and related thereto (which appeals include without limitation Ninth Circuit Case Nos. 19-56174, 20-55352).

“California Court” shall mean the United States District Court for the Central District of California.

“Cash” shall mean lawful currency of the United States of America (including wire transfers, cashier’s checks drawn on a bank insured by the Federal Deposit Insurance Corporation, certified checks and money orders).

2

“Causes of Action” shall mean, without limitation, any and all actions, causes of action, defenses, liabilities, obligations, rights, suits, debts, sums of money, damages, judgments, Claims or proceedings to recover money or property and demands of any nature whatsoever, whether known or unknown, in law, equity or otherwise, including, without limitation, Avoidance Actions.

“Chapter 11 Trustee” shall mean the duly-appointed chapter 11 trustee in the Case, who is presently George Hofmann, acting on behalf of the Debtor, VidAngel, Inc. It is anticipated that the Chapter 11 Trustee will be discharged upon the earlier of (a) the entry of a final decree and Order closing the case pursuant to Section 350 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 3022, or (b) entry of an order discharging and releasing him from his duties and obligations as Chapter 11 Trustee, whereupon the Chapter 11 Trustee shall have no further duties under this Plan.

“Circumvention or Circumvent” shall have the meaning set forth in the Settlement Agreement.

“Claim” shall mean a claim against a Person or its property as defined in Section 101(5) of the Bankruptcy Code, including, without limitation, (i) any right to payment, whether or not such right is reduced to judgment, and whether or not such right is liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii) any right to an equitable remedy for breach of performance, if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, or is fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.

“Class” shall mean those classes designated in Article III of this Plan.

“Collateral” shall mean any property or interest in property of the Estate subject to a Lien to secure the payment or performance of a Claim, which Lien is not subject to avoidance under the Bankruptcy Code or otherwise invalid under the Bankruptcy Code or applicable law.

“Confirmation Date” shall mean the date on which the clerk of the Bankruptcy Court enters the Confirmation Order on the docket in the Bankruptcy Case.

“Confirmation Order” shall mean the order of the Bankruptcy Court confirming the Plan pursuant to the provisions of the Bankruptcy Code.

“Contingent or Unliquidated Claim” shall mean any Claim for which a proof of claim has been filed with the Bankruptcy Court but which was not filed in a sum certain, or which has not occurred and is dependent upon a future event that has not occurred or may never occur, and which has not been Allowed.

“Copyrighted Work(s)” shall have the meaning set forth in the Settlement Agreement.

“Credit Holders” means the holders of VidAngel Credits, referred to in the Debtor’s Schedule E/F, paragraph 3.5, located at Docket No. 47 in the Bankruptcy Case, as modified pursuant to the Stipulated Order Approving Trustee’s Motion for Order: (i) Fixing a Bar Date for Filing Customer Claims; (ii) Approving the Form and Method of Providing the Bar Date Notice; (iii) Approving the Mailing Procedures; and (iv) Approving the Form of Amended Schedules E/F [Docket No. 568].

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“Credit Holders’ Claims” means all Claims held by Credit Holders which arise from currently held VidAngel Credits. For the avoidance of doubt, if a Credit Holder holds a Claim or that is not related to a VidAngel Credit (e.g., a General Unsecured Claim), then such Claim shall be treated in the more appropriate Class(es) of Claims as set forth herein.

“Cure” shall have the meaning (a) set forth in the Settlement Agreement as to matters covered by the Settlement Agreement, the Note and/or the Security Agreement, and (b) as to other matters, either (i) a meaning specified by this Plan (if applicable), or (ii) as shall be determined by the Bankruptcy Court.

“Cure Period” shall have the meaning (a) set forth in the Settlement Agreement as to matters covered by the Settlement Agreement, the Note and/or the Security Agreement, and (b) as to other matters, either (i) a meaning specified by this Plan (if applicable), or (ii) as shall be determined by the Bankruptcy Court.

“Debtor” shall mean VidAngel, Inc. References to the Debtor shall mean and refer to the Reorganized Debtor at any point in time after the Effective Date.

“Default” (a) shall have the meaning set forth in the Settlement Agreement as to matters covered by the Settlement Agreement, the Note and/or the Security Agreement, or (b) as to other matters, shall mean the material failure to comply with the Plan.

“Default Remedies” shall have the meaning set forth in the Settlement Agreement.

“Disputed Claim” shall mean:

(a)           if no proof of claim relating to a Claim has been filed, a claim that is listed in the Schedules as unliquidated, disputed or contingent;

(b)           if a proof of claim relating to a Claim has been filed, a Claim as to which a timely objection or request for estimation, or request to equitably subordinate or otherwise limit recovery in accordance with the Bankruptcy Code and the Bankruptcy Rules, has been made, or which is otherwise disputed by the Chapter 11 Trustee, Debtor, or Reorganized Debtor in accordance with applicable law, which objection, request for estimation, action to limit recovery or dispute has not been withdrawn or determined by Final Order;

(c)           a Claim which is a Contingent or Unliquidated Claim; or

(d)           a Claim that is specifically identified as “disputed” or a Disputed Claim in this Plan.

“Disputed Claim Amount” shall mean either the amount set forth in the proof of claim relating to a Disputed Claim, or an amount estimated pursuant to an order of the Bankruptcy Court in respect of a Disputed Claim in accordance with Section 502(c) of the Bankruptcy Code.

“Distribution Funds” shall mean all Cash and funds available or to become available to the Debtor prior to the Confirmation Date, which Distribution Funds are required to be distributed to holders of Claims under this Plan.

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“Effective Date” shall mean the first calendar day after the date of entry by the Bankruptcy Court of the Approval Order and the Confirmation Order and all other conditions for the Plan to become effective as specified in section 10.1 of the Plan have been satisfied, or have been waived by both the Trustee and the Studios pursuant to section 10.3 of the Plan.

“Employees” shall mean such persons as are employed by the Debtor as of the Effective Date.

“Enforcement Action” shall have the meaning set forth in the Settlement Agreement.

“Equity Interest” shall mean the interest of any holder of any stock in the Debtor, and any and all options, warrants and rights, contractual or otherwise, to acquire any such stock, as such interests exist immediately prior to the Effective Date.

“Estate” shall mean the estate created in the Bankruptcy Case pursuant to Section 541 of the Bankruptcy Code.

“Express Covenants”shall mean each of the express covenants specified in Article 7 of this Plan, including (a) the Express Covenants as defined in the Settlement Agreement and specified in Section 2 of the Settlement Agreement, which are incorporated by reference and made part of this Plan under sections 7.2(b) (the Covenant Not to Sue), 7.2(c) (the Covenant Not to Seek Certain Changes in Law) and 7.3 (the No Use Covenant), and (b) the additional covenants specified in Article 7, including under section 7.1 (the Covenant Not to Compete) and 7.2(a) (the Dismissal of the California Action appeals).

“Final Order” shall mean an order or judgment which has not been reversed, stayed, modified or amended and as to which (i) the time to appeal or seek review or rehearing has expired and as to which no appeal or petition for certiorari, review or rehearing is pending, or (ii) if appeal, review, reargument or certiorari of the order has been sought, the order has been affirmed or the request for review, reargument or certiorari has been denied and the time to seek a further appeal, review, reargument or certiorari has expired, and as a result of which such order shall have become final and nonappealable in accordance with applicable law; provided, however, that the possibility that a motion under Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be filed with respect to such order shall not cause such order not to be a Final Order.

“General Unsecured Claim” shall mean a Claim that is not a Secured Claim or that is not entitled to priority of payment under Section 507 of the Bankruptcy Code, other than the Studios Monetary Claims and the Credit Holders’ Claims.

“Harmon Parties” shall mean Neal Harmon and Jeffrey Harmon.1

“License” shall have the meaning set forth in the Settlement Agreement.

“Lien” shall have the meaning set forth in Section 101(37) of the Bankruptcy Code; except that a Lien that has been avoided in accordance with Sections 544, 545, 546, 547, 548, 549 or 553 of the Bankruptcy Code shall not constitute a Lien.

“Monetary Judgment” shall mean that certain $62,448,750.00 monetary judgment entered September 23, 2019, at Docket No. 525, in the California Action, as amended by any award or settlement of the Studios’ claim for attorneys’ fees.

1 The Harmon Parties, the Studios and the Trustee are signatories to a separate Settlement Agreement, attached hereto as Exhibit A.

 

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“Motion Picture” shall have the meaning set forth in the Settlement Agreement.

“No Use Covenant” shall mean the covenant specified in Section 2.A of the Settlement Agreement which is incorporated by reference and made part of this Plan under section 7.3 of this Plan.

“Non-Compliant Professionals” shall mean those Persons who, in the Chapter 11 Trustee’s or the Reorganized Debtor’s judgment, subject to the ultimate determination of the Bankruptcy Court, should have (i) been employed as a “Professional” of the Debtor pursuant to an order of the Bankruptcy Court in accordance with Sections 327 or 1103 of the Bankruptcy Code, or (ii) sought Bankruptcy Court approval for compensation for their services to the Debtor pursuant to Sections 327, 328, 329, 330 and 331 of the Bankruptcy Code, but failed to seek such Court approval in either or both instances.

“Note” shall have the meaning outlined in Section 4.3(b). A true and correct copy of the Note is attached as Exhibit B hereto.

“Notice of Default” (a) shall have the meaning set forth in the Settlement Agreement as to matters covered by the Settlement Agreement, the Note and/or the Security Agreement, or (b) as to other matters, shall mean a notice of default given according to the requirements of this Plan.

“Notice of Settlement” means and refers to the form of notice attached as Exhibit D hereto, which shall be filed with the California Court upon satisfaction of the conditions specified in section 6.D of the Settlement Agreement.

“Payment Agent” shall have the meaning outlined in Section 4.3(b).

“Permanent Injunction” shall mean the Permanent Injunction entered September 5, 2019, at Docket No. 520, in the California Action, which shall remain in full force and effect and shall not be modified or impaired by this Plan.

“Person” shall mean any individual, corporation, limited liability company, partnership, limited liability partnership, joint venture, association, joint-stock company, trust, unincorporated association or organization, Governmental Unit or political subdivision thereof.

“Petition Date” shall mean October 18, 2017.

“Plan” or “Joint Chapter 11 Plan” shall mean this Plan of Reorganization, including, without limitation, the exhibits, supplements, appendices, Plan Supplement Documents, and schedules hereto, either in their present form or as the same may be altered, amended or modified from time to time.

“Plan Supplement Documents” shall mean the Note, the Security Agreement, the Settlement Agreement, the Covenant Not to Compete, and any other legal or contractual documents provided for by this Plan.

“Post-Confirmation Date Administrative Expenses” shall mean: (i) the fees and expenses of the Chapter 11 Trustee’s attorneys’ and other professionals following the Confirmation Date; (ii) the fees and expenses of the attorneys and Professionals hired to represent the Chapter 11 Trustee, the Debtor, the Reorganized Debtor, and the Estate (or any one of them) in any contested matter, or any adversary proceeding arising under or related to this Bankruptcy Case; and (iii) the fees, expenses, and costs of the Chapter 11 Trustee following the Confirmation Date.

“Preference Claims” shall mean and refer to all claims to recover a payment or property transferred on account of an antecedent debt, including without limitation claims under Section 547 of the Bankruptcy Code, and claims under Utah Code Ann. § 25-6-203(2) and other similar state statutes.

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“Pre-Appointment Administrative Expense Claim” shall mean an Administrative Expense Claim against the Estate under Bankruptcy Code § 503(b), arising on or after October 18, 2017, and on or before August 28, 2019, as described in the Trustee’s Motion for Order: (i) Fixing a Bar Date for Filing Applications to Allow Administrative Expense Claims; (ii) Approving the Form of the Bar Date Notice; and (iii) Approving the Mailing Procedures, found at Docket No. 375 in the Bankruptcy Case, and the Order: (i) Fixing a Bar Date for Filing Applications to Allow Administrative Expense Claims; (ii) Approving the Form of the Bar Date Notice; and (iii) Approving the Mailing Procedures, found at Docket No. 399 in the Bankruptcy Case.

“Priority Claims” shall mean any and all Claims (or portions thereof), if any, entitled to priority under Section 507(a) of the Bankruptcy Code other than Administrative Expense Claims and Priority Tax Claims.

“Priority Tax Claims” shall mean any Claim of a Governmental Unit entitled to priority under Section 507(a)(8) of the Bankruptcy Code.

“Pro Rata” shall mean a proportionate share of the total distribution made at any particular time under this Plan to the holders of Allowed Claims in a Class.

“Professionals” shall mean (i) those Persons employed pursuant to an order of the Bankruptcy Court in accordance with Sections 327 or 1103 of the Bankruptcy Code and to be compensated for services pursuant to Sections 327, 328, 329, 330 and 331 of the Bankruptcy Code, and (ii) those Persons for which compensation and reimbursement is allowed by the Bankruptcy Court pursuant to Section 503(b)(4) of the Bankruptcy Code.

“Reorganized Debtor” shall mean the Debtor, as reorganized after the Effective Date pursuant to the terms of this Plan. Any reference to the “Debtor” that follows the Effective Date shall be deemed to mean the Reorganized Debtor.

“Schedules” shall mean the schedules of assets and liabilities, the list of holders of interests and the statements of financial affairs filed by the Debtor or the Chapter 11 Trustee under Section 521 of the Bankruptcy Code and Bankruptcy Rule 1007, as such schedules, lists and statements have been or may be supplemented or amended from time to time.

“SEC” shall mean the United States Securities and Exchange Commission.

“Secured Claim” shall mean any Allowed Claim that is secured by a Lien on Collateral to the extent of the value of such Collateral, as determined in accordance with Section 506(a) of the Bankruptcy Code, or, in the event that such Claim is a claim of setoff under Section 553 of the Bankruptcy Code, to the extent of such setoff.

“Security Agreement” shall have the meaning outlined in Section 4.3(c). A true and correct copy of the Security Agreement is attached as Exhibit C hereto.

“Settlement Agreement” shall mean the Settlement Agreement entered into on August 27, 2020 by (a) the Studios, (b) the Trustee on behalf of the Debtor, and (c) the Harmon Parties. A true and correct copy of the Settlement Agreement is attached as Exhibit A hereto.

“Settlement Amount” shall have the meaning set forth in the Settlement Agreement.

“Strike” shall have the meaning set forth in the Settlement Agreement.

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“Studios” shall mean Disney Enterprises, Inc., Lucasfilm Ltd. LLC, Twentieth Century Fox Film Corporation, Warner Bros. Entertainment Inc., MVL Film Finance LLC, New Line Productions, Inc. and Turner Entertainment Co., individually and/or collectively, as the context may require.

“Studio Affiliates”shall have the meaning set forth in the Settlement Agreement.

“Studios Monetary Claim” shall have the meaning set forth in the Settlement Agreement. To avoid any confusion, provided, however, that the term “Studios Monetary Claims” shall not mean any Claims (if any) arising out of or pursuant to this Plan and the rights and protections granted to the Studios hereunder.

“Third Party” shall have the meaning set forth in the Settlement Agreement as to matters covered by the Settlement Agreement.

“Uncured Default” (a) shall have the meaning set forth in the Settlement Agreement as to matters covered by the Settlement Agreement, the Note and/or the Security Agreement, or (b) as to other matters, shall mean a Default not Cured within the Cure Period.

“Written Notice” (a) shall have the meaning set forth in the Settlement Agreement as to matters covered by the Settlement Agreement, the Note and/or the Security Agreement, or (b) as to other matters, (i) shall have the meaning specified by this Plan (if applicable), or (ii) shall have the meaning as determined by the Bankruptcy Court.

“VidAngel Credits” means any credit(s) that any Credit Holder has as of the Effective Date that can be used in lieu of payment for any aspect of the Debtor’s consumer-facing business.

“Voting Deadline” shall mean the deadline set by the Bankruptcy Court for voting on the Plan.

ARTICLE II

TREATMENT OF ALLOWED ADMINISTRATIVE EXPENSE CLAIMS AND ALLOWED PRIORITY TAX CLAIMS

Section 2.1Non-Classification. As provided in Section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims are not classified for the purposes of voting on, or receiving distributions under, the Plan. All such Claims are instead treated separately in accordance with the terms in this Article II.

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Section 2.2Administrative Expense Claims.

(a)           Bar Date. All applications for allowance of Administrative Expense Claims other than (i) fees and expenses of Professionals Allowed pursuant to an Order of the Bankruptcy Court, (ii) fees and charges assessed against the Estate pursuant to 28 U.S.C. § 1930, and (iii) Pre-Appointment Administrative Expense Claims, shall be filed not later than thirty (30) days after the Effective Date. All Administrative Expense Claims not filed within thirty days after the Effective Date shall be barred. The deadline in the preceding sentence shall be construed and have the same force and effect as a statute of limitations. The Reorganized Debtor shall provide notice to all creditors listed on the mailing matrix of this bar date within ten days after the Effective Date. The Bankruptcy Court shall determine all Administrative Expense Claims. This clause is not intended, and shall not be construed, to set a bar date for Post-Effective Date Administrative Expenses, which will be paid by the Reorganized Debtor as set forth in Section 2.2(d)(2) of this Plan.

(b)           General. Except as otherwise agreed to by the Chapter 11 Trustee or the Reorganized Debtor, as applicable, and the holder of an Allowed Administrative Expense Claim, and subject to Section 2.2(c) below, each such holder shall be paid in full in Cash on the later of (i) the date such Allowed Administrative Expense Claim becomes due in accordance with its terms, and (ii) the Effective Date. If the Chapter 11 Trustee, the Reorganized Debtor, or their successor(s) or assign(s) dispute any portion of an Administrative Expense Claim, the Reorganized Debtor shall pay such Claim within 30 days after the entry of a Final Order with respect to the allowance of such disputed Administrative Expense Claim.

(c)           U.S. Trustee’s Fees. The United States Trustee’s quarterly fees shall be paid in full without prior approval pursuant to 28 U.S.C. § 1930.

(d)           Professional Compensation and Expense Reimbursement Claims.

(1)           Each Professional shall file a final application for the allowance of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date within thirty (30) days after the Effective Date. Any award granted by the Bankruptcy Court shall be paid (i) within fifteen days of the entry of the order of the Bankruptcy Court approving such award, unless a stay is obtained, or (ii) upon such other terms as may be mutually agreed upon between such holder of an Allowed Administrative Expense Claim and the Chapter 11 Trustee or the Reorganized Debtor, as applicable.

(2)           All Post-Effective Date Administrative Expenses of Professionals, including the attorneys’ fees and costs of the Trustee and his Professionals from the Effective Date through the date of entry of a final decree and Order closing the case (the “Case Closing Order”), shall be paid by the Reorganized Debtor upon receipt of reasonably detailed invoices therefor in such amounts and on such terms as such Professional and the Chapter 11 Trustee or the Reorganized Debtor, as applicable, may agree, without the need for further Bankruptcy Court authorization or entry of a Final Order.

Section 2.3Priority Tax Claims.

At the sole election of the Reorganized Debtor, each holder of an Allowed Priority Tax Claim shall be paid either (i) upon such terms as may be agreed to between the Debtor and such holder of an Allowed Priority Tax Claim, or (ii) in full in Cash on the later of the Effective Date or the date that such Allowed Priority Tax Claim would have been due if the Bankruptcy Case had not been commenced.

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ARTICLE III

CLASSIFICATION OF CLAIMS

Claims, other than Administrative Expense Claims and Priority Tax Claims, shall be classified for all purposes, including voting on, confirmation of, and distribution pursuant to the Plan, as follows:

Class 1 - Priority Claims. Class 1 shall consist of all Allowed Priority Claims against the Debtor, other than Priority Tax Claims.

Class 2 - General Unsecured Claims. Class 2 shall consist of all Allowed General Unsecured Claims against the Debtor except for the Studios Monetary Claims and the Credit Holders’ Claims.

Class 3 – Studios Monetary Claims. Class 3 shall consist of the Studios Monetary Claims against the Debtor, all of which are deemed Allowed under this Plan.

Class 4 - Credit Holders’ Claims. Class 4 shall consist of all Allowed Credit Holders’ Claims.

Class 5 - Equity Interests in the Debtor. Class 5 shall consist of all Equity Interests in the Debtor.

ARTICLE IV

TREATMENT OF CLAIMS AND EQUITY INTERESTS

Section 4.1Class 1 - Priority Claims.

(a)           Impairment. Class 1 is not impaired under the Plan. Holders of an Allowed Class 1 Claim shall be deemed to have voted to accept the Plan.

(b)           Payment. On the Effective Date, the holders of Allowed Class 1 Claims shall be paid from Distribution Funds the full amount of their claims in full satisfaction of those Claims.

Section 4.2Class 2 - General Unsecured Claims.

(a)           Impairment. Class 2 is not impaired under the Plan. Holders of Allowed Class 2 Claims shall be deemed to have voted to accept the Plan.

(b)           Payment. On the Effective Date, the holders of Allowed Class 2 General Unsecured Claims shall be paid the full amount of their claims in Cash in full satisfaction of those Claims.

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Section 4.3Class 3 - Studios Monetary Claims.

(a)           Impairment. Class 3 is impaired under the Plan. Notwithstanding such impairment, the Studios are proponents of this Plan, and shall be deemed to have voted to accept the Plan.

(b)           Treatment of Claim. The Studios Monetary Claims are Allowed under this Plan (i.e., the Allowed Class 3 Claims) and shall be treated consistent with the terms set forth in the Settlement Agreement, Note and Security Agreement, which are incorporated by referenced as if restated herein in its entirety. To the extent of any inconsistency between the Settlement Agreement and the provisions of this Plan that govern the relationship(s) of the Studios and the Reorganized Debtor, the terms of the Settlement Agreement shall control. By way of summary, and without limitation:

(i)           the Reorganized Debtor shall be bound by, and shall observe and perform, the Express Covenants (excepting the Covenant Not to Compete described in Section 7.1 of the Plan, which does not apply as to the Reorganized Debtor), including (A) the Express Covenants as defined in the Settlement Agreement which are incorporated by reference and made part of this Plan under sections 7.2(b) (the Covenant Not to Sue), 7.2(c) (the Covenant Not to Seek Certain Changes in Law) and 7.3 (the No Use Covenant), and (B) the additional covenant specified in Section 7.2(a) (the Dismissal of the California Action appeals);

(ii)           as described in section 6.D of the Settlement Agreement, the Studios’ Monetary Claims, the Studios’ proofs of claims in the Bankruptcy Case and the Monetary Judgment in the California Action will be superseded by this Plan, Settlement Agreement, the Note, and the Security Agreement after all of the following events have occurred: (1) entry of the Approval Order and Confirmation Order and the occurrence of the Effective Date; (2) the dismissal of the appeals in the California Action; and (3) execution and delivery of the Note and the Security Agreement;

(iii)           the Permanent Injunction shall remain in full force and effect and is not considered part of the Studios’ Monetary Claims;

(iv)           the Reorganized Debtor will make and deliver the Note to the Studios as contemplated by the Settlement Agreement, and will perform according to its terms;

(v)           the Reorganized Debtor will make and deliver the Security Agreement to the Studios as contemplated by the Settlement Agreement, pursuant to which the Studios will be granted the Compliance Lien, and will perform according to its terms; and

(vi)           the Studios shall have the rights and remedies specified in the Settlement Agreement, the Note, the Security Agreement and this Plan.

(d)           Plan Supplement Documents. The Settlement Agreement, Note, Security Agreement, and other legal and contractual documents (the “Plan Supplement Documents”) contemplated or required by this Plan are attached hereto as Exhibits A through D respectively. The Confirmation Order shall specifically approve the form and content of the Plan Supplement Documents.

Section 4.4Class 4 - Credit Holders’ Claims.

(a)           Impairment. Class 4 is arguably impaired under the Plan. Holders of Allowed Class 4 Claims shall be entitled to vote to accept or reject the Plan.

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(b)           Payment. Holders of Allowed Class 4 Claims shall be entitled to use their VidAngel Subscription Credits as a credit towards the Reorganized Debtor’s Self-Selected Viewing Services, provided however, that any Credit Holder that has not used all of his or her VidAngel Subscription Credits by the date that is 18 months after the Effective Date he or she shall be assumed to have been abandoned and such Holder shall lose his or her remaining VidAngel Subscription Credits; and provided further, that no Credit Holder shall have any right to redeem his or her VidAngel Subscription Credits for Cash and no Credit Holder shall be paid from Distribution Funds.

(c)           Effect of Use of VidAngel Credits Prior to Effective Date. To the extent that a holder of an Allowed Class 4 Claim redeems some or all of its VidAngel Credits Prior to the Effective Date, the Allowed Claim of such Credit Holder(s) shall be deemed satisfied up to the amount redeemed.

Section 4.5Class 5 - Equity Interests.

(a)           Impairment. Class 5 is arguably impaired under the Plan. Holders of Class 5 Equity Interests shall be entitled to vote to accept or reject the Plan.

(b)           Treatment. Each record holder of an Equity Interest in the Debtor shall retain its interest in the Debtor. The Reorganized Debtor shall be prohibited from making any distributions of Cash or other property to the holders of Equity Interests on account of such Equity Interests unless and until the Settlement Amount has been paid in full; provided, however, that such Equity Interests may be purchased by the Reorganized Debtor or redeemed from the proceeds of New Equity Options or capital contributions.

Section 4.6No Penalties. Except as expressly stated in the Plan or the Plan Supplement Documents, or allowed by the Bankruptcy Court, no late charge or penalty, including but not limited to prepayment penalties, shall be allowed on any Claim subsequent to the Petition Date.

Section 4.7All Defaults Cured and Waived; All Notes and Obligations Decelerated and Reinstated. Pursuant to Sections 1123(a)(5)(G) and 1124(2) of the Bankruptcy Code, among others, and except as otherwise provided by this Plan, all defaults by the Debtor that existed or that may have existed under any promissory note, loan document, unexpired lease, executory contract or other written agreement of or by the Debtor shall be deemed cured and waived as of the Effective Date. All notes, instruments or obligations that were accelerated pre-petition and/or pre-confirmation shall be decelerated and reinstated as of the Effective Date.

Section 4.8No Assumed Liability. Except as otherwise expressly set forth in the Plan, the Reorganized Debtor shall not assume or be liable for any Claims.

Section 4.9Satisfaction of Claims and Release. As of the Effective Date, all Claims against the Debtor and the Estate existing as of the Confirmation Date shall be satisfied and released except as provided in the Plan (and in the case of the Studios, except as provided in the Plan and in the Plan Supplement Documents).

Section 4.10Amendments to Claims. On or after the Confirmation Date, a Claim may not be amended without the prior authorization of the Bankruptcy Court. Absent such authorization, any amended Claim filed shall be deemed disallowed in full and expunged without any further action.

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ARTICLE V

MEANS FOR EXECUTION OF THE PLAN

Section 5.1Revesting of Property; Discharge and Release of Chapter 11 Trustee; Notice of Effective Date. Except as otherwise provided in this Plan, the Reorganized Debtor, as of the Effective Date, shall be vested with all of the assets of the Estate; provided, however, that the Reorganized Debtor shall remain subject to the supervision and control of the Chapter 11 Trustee until he is discharged and released him from his duties and obligations as Chapter 11 Trustee by Order of the Bankruptcy Court. Upon the earlier of (a) the entry of a final decree and Order closing the case pursuant to Section 350 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 3022, or (b) entry of an order discharging and releasing him from his duties and obligations as Chapter 11 Trustee, the Chapter 11 Trustee and shall have no further obligations to the Court, the Debtor, its creditors or its equity holders.  Unless such period is enlarged by Order of the Bankruptcy Court, the Chapter 11 Trustee, the Studios and/or the Reorganized Debtor shall request entry of the Case Closing Order within no more than sixty (60) days from the Effective Date, and the Case Closing Order shall be entered by no later than one hundred (100) days from the Effective Date. The Studios, the Chapter 11 Trustee or the Reorganized Debtor shall file a Notice of Effective Date with the Court indicating that the Effective Date has occurred. 

Section 5.2Continuation of Business Operations. Except as otherwise expressly set forth in the Plan, from and after the date of entry of the Case Closing Order, the Reorganized Debtor is authorized to continue its normal business operations, and enter into such transactions as it deems advisable, free of any restriction or limitation imposed under any provision of the Bankruptcy Code.

Section 5.3Continuation of Anti-Discrimination Provisions of Bankruptcy Code. A governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, or discriminate with respect to such a grant against, the Debtor, the Reorganized Debtor, or another Person with whom the Debtor or the Reorganized Debtor have been or are associated or affiliated, solely because of the commencement, continuation, or termination of the Bankruptcy Case or because of any provision of the Plan or the legal effect of the Plan, and the Confirmation Order will constitute an express injunction against any such discriminatory treatment by a governmental unit.

Section 5.4Effect of Entry of Case Closing Order. As of the date of entry of the Case Closing Order, the Debtor’s existing management team shall assume full control of the Debtor and its Assets subject to the terms and requirements of this Plan and the Plan Supplement Documents, and all Assets will vest in the Reorganized Debtor free and clear of all Claims, Liens, and other interests except as otherwise expressly provided in and subject to the terms of the Plan and the Plan Supplement Documents and the Confirmation Order.  As more particularly specified in the Settlement Agreement and the Security Agreement: (a) substantially all of the Assets of the Reorganized Debtor will be subject to the Compliance Lien during the 14-year period after the Effective Date; (b) the Reorganized Debtor may be subject to restrictions on selling assets without the Studios’ consent; (c) the Reorganized Debtor remains subject to the California Court’s Permanent Injunction; and (d) the Reorganized Debtor shall remain obligated to observe the Express Covenants (excepting the covenant specified in section 7.1 of the Plan, which does not apply as to the Reorganized Debtor).

Section 5.5Promissory Note.

(a)           As set forth more fully in the Settlement Agreement and Section 4.3(b)(iv) of the Plan, and subject to and effective upon the occurrence of the Effective Date, the Reorganized Debtor (and/or the Chapter 11 Trustee on behalf of the Reorganized Debtor) shall execute and deliver the Note to the Studios.

(b)           If, upon the expiration of fourteen (14) years after the Effective Date, the Settlement Amount is timely paid in full and there is no Uncured Default and there have not been four Strikes in a consecutive five (5) year period, then the Note shall be cancelled, and the original Note marked “Paid and Cancelled” shall be returned to the Reorganized Debtor.

(c)           Even if the Settlement Amount is timely paid in full, the Note shall remain valid and effective for fourteen (14) years from the Effective Date. If prior to the expiration of fourteen (14) years from the Effective Date, the Studios prevail in an Enforcement Action against the Reorganized Debtor, as set forth in Section 4.E of the Settlement Agreement, the Bankruptcy Court (or, if applicable, the alternative Utah courts specified in Section 11.3) may, in addition to any other relief authorized under section 4.E of the Settlement Agreement, order the immediate acceleration of the Note and may enter a money judgment in the amount of the unpaid balance of the Note.

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Section 5.6Security Agreement and Compliance Lien.

(a)           As set forth more fully in the Settlement Agreement and Section 4.3(b)(v) of the Plan, and subject to and effective upon the occurrence of the Effective Date, the Reorganized Debtor (and/or the Chapter 11 Trustee on behalf of the Reorganized Debtor) shall execute and deliver the Security Agreement to the Studios.

(b)           Pursuant to the Settlement Agreement and upon delivery of the fully executed Security Agreement, the Reorganized Debtor shall be deemed to have granted the Compliance Lien to the Studios as of the Effective Date, which Compliance Lien shall constitute a lien on the Collateral (as defined and specified in the Security Agreement).

(c)           Upon delivery of the fully executed Security Agreement to the Studios, the Compliance Lien shall attach and become valid, binding, continuing, enforceable, fully-perfected and non-avoidable by operation of law as of the Effective Date without any further action by the Studios or any other party in interest, and without the necessity of execution by the Debtor, the Chapter 11 Trustee or any other party in interest of a separate document, or the filing or recordation, of any financing statements, security agreements, mortgages, deeds of trust, or other documents. Nonetheless, the Studios may file financing statements (and at the appropriate time continuation statements) in appropriate filing offices (including the State of Utah, Department of Commerce, Division of Corporations and Commercial Code, and United States Patent & Trademark Office) as they deem necessary or appropriate to perfect the Compliance Lien. Provided the Reorganized Debtor is not in Default (i.e., there is no Notice of Default that is not Cured or the subject of a Notice of Dispute or Enforcement Action proceeding), the Compliance Lien shall be released and eliminated, and the Security Agreement shall expire, fourteen (14) years after the Effective Date. Neither the expiration of the Compliance Lien, nor satisfaction of payment obligations of the Note, shall relieve the Reorganized Debtor of its obligations to comply with the Express Covenants.

(d)           The Studios shall be obligated to subordinate the Compliance Lien on the terms and conditions specified in the Settlement Agreement and in the Security Agreement.

(e)           Compliance Lien Shall Not Trigger a Default. Notwithstanding any provision in this Plan or in any lease, loan agreement or executory contract of the Debtor to the contrary, neither the execution of the Security Agreement, nor the granting of the Compliance Lien, nor the continuation of the Compliance Lien, nor any acts by the Reorganized Debtor or the Studios to perfect the Compliance Lien shall constitute, create or trigger a default by the Debtor or an event of default.

(f)           Limitations on Enforcement. The Compliance Lien shall be limited to, and enforceable only to the extent authorized by, the Settlement Agreement. Without limitation, the Compliance Lien granted hereunder and Secured Parties’ rights in collateral pledged under the Security Agreement, may be enforced only through the institution of an Enforcement Action, subject to the notice requirements and limitations specified in the Settlement Agreement, including in section 4.E thereof.

Section 5.7Distributions on Account of Claims and Interests. The Reorganized Debtor shall make the distributions contemplated under the Plan (or establish the reserves required by this Plan) from Cash assets in existence on the Effective Date and from additional cash, assets and property generated or obtained after the Effective Date, and in accordance with the procedures set forth in Section 6.1 of this Plan. Pursuant to Section 1142 of the Bankruptcy Code, in the event the Reorganized Debtor fails to fulfill its payment obligations under this Plan the Studios or any other parties in interest may, but shall not be required to, request that the Court enter an order either (a) directing the Reorganized Debtor to make such payments, (b) appointing an appropriate third party to control and oversee the Reorganized Debtor’s payment obligations, or (c) exercise the other rights granted to them by this Plan (or, in the case of the Studios, by the Plan Supplement Documents).

Section 5.8Employment of Professionals. Following the Effective Date, the Reorganized Debtor may employ attorneys, accountants, or other professionals as it may deem appropriate in the ordinary course of business and pay such professionals’ reasonable fees and expenses. Professionals employed by the Reorganized Debtor after the Effective Date shall not be subject to Bankruptcy Court approval.

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Section 5.9Ability to Incur Debt. The Reorganized Debtor may incur debt after the Effective Date on a secured or unsecured basis without further notice, opportunity for hearing or order, except only to the extent the terms and provisions of this Plan or the Settlement Agreement expressly and specifically provide otherwise.

Section 5.10Management of Reorganized Debtor. Effective upon the entry of the Case Closure Order, the Reorganized Debtor shall be managed day-to-day by the Debtor’s officers, including Neal Harmon (CEO), Jeffrey Harmon (CMO), Elizabeth Ellis (President/COO), Patrick Reilly (CFO), and Joseph Wecker (CTO). Until the date of entry of the Case Closure Order, the Reorganized Debtor shall be managed by the same individuals, but subject to the oversight and direction of the Trustee.

Section 5.11Settlement and Compromise.

Pursuant to and consistent with Section 1123(b)(3) of the Bankruptcy Code, Federal Rule of Bankruptcy Procedure 9019 and other applicable law, this Plan (including the Plan Supplement Documents) provides for the settlement and adjustment of legal claims and interests belonging to the Debtor and the estate. In exchange for the consideration provided to the Studios herein and in the Plan Supplement Documents—including the covenants and agreements in Sections 7.2 and 7.3, the release of the Studios under the Settlement Agreement, the Note, the Security Agreement, the Compliance Lien and the Settlement Agreement—the Studios have agreed to substantially reduce their Claims as provided herein. The Confirmation Order shall, among other provisions, specifically approve this settlement and compromise pursuant to Section 1123(b)(3), Bankruptcy Rule 9019 and other applicable law.

Section 5.12New Equity and Restructuring Options.

Notwithstanding anything to the contrary under the Plan, the Reorganized Debtor may issue new equity interests after the Effective Date, including without limitation, by: (i) offering employees “options” or “rights” to purchase equity interests in the Reorganized Debtor; (ii) implementing new rounds of Crowdfunding; (iii) issuing or selling shares, certificates, notes, bonds, indentures, purchase rights, options, warrants, or other instruments, documents, or methods providing for new ownership interests in the Reorganized Debtor (collectively, the “New Equity Options”). Nothing herein is intended to constitute the disclosure of such information as may be required by the SEC, similar state agencies, or federal or state law for the sale of securities. In the event that any or all of the New Equity Options are implemented, the Reorganized Debtor shall provide such disclosures at such time as are required by applicable law. The Debtor is, and shall be, authorized to issue and award up to 956,200 Class A Stock Options to the Debtor’s Employees as of the Effective Date. To the extent that the Debtor has reserved additional Class A Options for its Employees or future employees, the Reorganized Debtor may issue or award such options at any time after the Effective Date. Subject to the requirements of its organizational and other corporate documents, the Reorganized Debtor shall retain full discretion as to how, to whom, and in what amounts it will issue the Class A Stock Options.

The Reorganized Debtor may restructure or otherwise reorganize its corporate structure, including, without limitation, by “spinning off” its “original content” line of business, its Self-Selected Viewing Service business, and its “DryBar Comedy” line of business into three or more separate entities. It is possible that such a “spin off” could entail the transfer of a portion, all, or substantially all of the Reorganized Debtor’s assets into one or more newly formed entities. Notwithstanding any “spin off” of any of its lines of business, the new entities, the Reorganized Debtor, and all property of the new entities and the Reorganized Debtor, shall remain subject to the provisions of this Plan, the Settlement Agreement and the Plan Supplement Documents as though each is considered to be part of “Reorganized Debtor” or its property, including without limitation paying obligations under the Plan, the Express Covenants, and the Notes and Security Agreement. Further, each new entity shall sign such further documentation as the Studios may reasonably request in order to document and affirm or reaffirm their agreement to be bound by the terms of this Settlement Agreement, the Plan and the Plan Supplement Documents, and the Studios are hereby authorized to file and/or record such UCC-1 financing statements or other document as they deem appropriate in their sole discretion to evidence the creation, attachment and/or perfection of their lien on the assets of the new entities.

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ARTICLE VI

IMPLEMENTATION OF THE PLAN

Section 6.1Method of Distributions Under the Plan.

(a)           In General. Subject to Bankruptcy Rule 9010, all distributions under the Plan to be made to the holder of each Allowed Claim shall be mailed by first class mail, postage prepaid, to the address of such holder as listed on the Schedules as of the Confirmation Date, unless the Debtor or the Reorganized Debtor has been notified in writing of a change of address, including, without limitation, by the filing of a proof of claim or notice of transfer of claim filed by such holder that provides an address for such holder different from the address reflected on the Schedules. The Debtor and the Reorganized Debtor shall have no obligation to locate such holders whose distributions or notices are properly mailed but nevertheless returned.

(b)           Form of Distributions. Any payment of Cash made by the Reorganized Debtor pursuant to the Plan shall be made by check; provided, however, that after the occurrence of the Effective Date, the Reorganized Debtor is not obligated to make any Cash payment under the Plan unless the payment exceeds fifty dollars ($50); provided, further, that Cash equal to 100% of the distributions to which the holder of a Claim would be entitled under the Plan if the payment to such holder was less than or equal to fifty dollars ($50) shall be maintained in a reserve (the “Small Payment Reserve”) for the benefit of such holder until an aggregate of at least fifty ($50) dollars is payable to such holder and at such time the holder shall receive a payment equal to 100% of the distributions to which it would otherwise be entitled. The remaining balance of the Small Payment Reserve shall be returned to the Reorganized Debtor’s general funds once all objections to Claims have been resolved, free and clear of any claim or interest of any holder of a Claim under the Plan.

(c)           Reversion of Unclaimed Checks. The amount of any checks issued for distributions under the Plan that remain uncashed for a period of 180 days after the date of such distribution shall revert and be vested in the Reorganized Debtor free and clear of any claim or interest of any holder of a Claim under the Plan.

(d)           Distributions to be on Business Days. Any payment or distribution required to be made under the Plan on a day other than a Business Day shall be made on the next succeeding Business Day.

(e)           Distributions to Holders as of the Confirmation Date. As of the close of business on the Confirmation Date, the claims register shall be closed. The Reorganized Debtor shall have no obligation to recognize any transfer of any Claims occurring after the close of business on the Confirmation Date, and shall instead be entitled to recognize and deal for all purposes under the Plan with only those holders of record as of the close of business on the Confirmation Date.

(f)           Withholding Taxes on Distributions. The Reorganized Debtor shall withhold from any Cash or property distributed under the Plan such amounts as the Reorganized Debtor is obligated under non-bankruptcy law to withhold and transmit to taxing authorities.

Section 6.2Objections to Disputed Claims. Any objections to Claims against the Estate may be prosecuted by the Debtor, the Reorganized Debtor or any other party in interest. Except for the Studios Monetary Claims, which are deemed Allowed by this Plan, or as otherwise provided by order of the Bankruptcy Court, the Debtor, Reorganized Debtor or any other party in interest may file an objection to any Claim until ninety (90) days after the Effective Date.

Section 6.3Resolution of Claims. The Court shall have entered orders or there shall be agreements satisfactory to the Chapter 11 Trustee or the Reorganized Debtor concerning Claims, any Liens asserted by holders of Claims, and any interests in the Debtor (which may be orders included within the Confirmation Order) that, in the sole discretion of the Chapter 11 Trustee are required for the feasibility and implementation of the Plan.

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Section 6.4Estimation of Claims. Prior to the Confirmation Date, the Chapter 11 Trustee and/or the Studios may request that the Bankruptcy Court estimate a Disputed Claim, pursuant to Section 502(c) of the Bankruptcy Code, as necessary to confirm the Plan. If the Bankruptcy Court determines the maximum limitation of such Claim, such determination shall not preclude the Studios, the Chapter 11 Trustee, the Debtor or any other party in interest from pursuing any additional proceedings to object to any ultimate payment of such Claim. If the Bankruptcy Court determines the Allowed amount of such Claim, the amount so determined shall be deemed the amount of the Disputed Claim for all purposes under this Plan. All such proceedings are cumulative and not exclusive remedies. For the avoidance of doubt, the Studios Monetary Claims are not subject to estimation.

Section 6.5Retention and Preservation of Claim Objections and Causes of Action. Except as otherwise provided by this Plan, pursuant to Section 1123(b)(3)(B) of the Bankruptcy Code, on the date of entry of the Case Closing Order, the Debtor and the Reorganized Debtor’s rights to object to all Claims and Interests asserted against the Estate and all of the Debtor’s or Estate’s Causes of Action, including without limitation: (1) the Debtor’s Causes of Action asserted in any adversary proceeding, state court proceeding, or any other proceeding which is pending as of the Confirmation Date; (2) all Claims and Causes of Action disclosed in the Schedules or Statement of Financial Affairs which are incorporated herein by reference; (3) all Claims and Causes of Action described in the Trustee’s Disclosure Statement; (4) any Claims and Causes of Action contained in any contested matter or objection to Claim pending on the Confirmation Date; (5) any Claims and Causes of Action held by the Debtor or the Estate, arising pre- or post-Petition Date, against the Debtor’s officers, employees, directors, and shareholders; (6) any Claims and Causes of Action held by the Debtor or the Estate, arising pre- or post-Petition Date, for professional or legal malpractice, including without limitation Claims and Causes of Action against David Quinto, Kupferstein Manuel & Quinto, LLP, and Kaplan Voekler Cunningham & Frank, PLC; (7) any Claims and Causes of Action against Non- Compliant Professionals, including without limitation, Fred Pena, Pena Legal, LLC, J. Morgan Philpot, and Oyster Consulting, LLC; (8) any Claims and Causes of Action against VAS Portal, LLC, VAS Brokerage, LLC, and Studio Brokerage, LLC; (9) all Avoidance Actions, including without limitation actions under Bankruptcy Code § 549 for unauthorized transfers made by the Debtor; and (10) any and all other Claims and Causes of Action that the Debtor holds preconfirmation, including, but not limited to, Claims for unpaid accounts receivable, shall vest in the Estate, and shall be subject to the exclusive control and authority of the Reorganized Debtor. Prior to the date of entry of the Case Closing Order, all such rights shall continue to be held by the Chapter 11 Trustee, as the representative of the Estate.

As more fully outlined in the Settlement Agreement and this Plan, the Class 3 Studios Monetary Claims are Allowed under this Plan; the Debtor’s appeals of those claims shall be deemed abandoned and dismissed pursuant to Section 7.2(a) of this Plan; and the Reorganized Debtor will not retain any rights to pre-Confirmation Claims or Causes of Action that the Debtor or the Estate may otherwise have been entitled to assert against the Studios.

ARTICLE VII

EXPRESS COVENANTS

Section 7.1Debtor’s Management Covenant Not to Compete.

Consistent with this Plan and the Settlement Agreement, the Confirmation Order shall provide that for Neal Harmon and Jeffrey Harmon to remain in management positions with the Reorganized Debtor, and as a condition to their continued employment, each shall execute in favor of the Reorganized Debtor a one-year covenant not to compete in the business of “Self-Selected Viewing” (a) in form substantially similar to what is attached hereto as Exhibit E, or (b) in an alternative form approved by, and acceptable to, Neal Harmon and Jeffrey Harmon, the Trustee and the Studios.

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Section 7.2Abandonment of Debtor’s Appeals in California Action; Covenant Not to Sue; Covenant Not to Seek Certain Changes in Law.

(a)           As of the Effective Date, and as specified in the Confirmation Order, the Chapter 11 Trustee, the Debtor, the Reorganized Debtor and the Estate shall be deemed to have abandoned all appeals in the California Action; and within three (3) business days after the Effective Date the Chapter 11 Trustee, on behalf of the Debtor and Reorganized Debtor, shall file a Notice of Voluntary Dismissal, and take all other steps necessary to dismiss all appeals in the Ninth Circuit, including Nos. 19-56174 and 20-55352.

(b)           Section 2.B of the Settlement Agreement is incorporated by reference as if restated in its entirety in this section 7.2(b) (such terms and conditions, the “Covenant Not to Sue”) as a covenant of the Reorganized Debtor.

(c)           Section 2.C of the Settlement Agreement is incorporated by reference as if restated in its entirety in this section 7.2(c) (such terms and conditions, the “Covenant Not to Seek Certain Changes to Law”) as a covenant of the Reorganized Debtor.  

Section 7.3“No Use Covenant” Applicable to the Studios’ Copyrighted Works. Section 2.A of the Settlement Agreement is incorporated by reference as if restated in its entirety in this section 7.3 (such terms and conditions, the “No Use Covenant”) as a covenant of the Reorganized Debtor.

Section 7.4Effective Date of the Express Covenants. The Express Covenants become effective as of the Effective Date and claims alleging a breach of an Express Covenant are limited to conduct occurring on or after the Effective Date.

Section 7.5No Intended Third Party Beneficiaries; Enforcement of the Express Covenants. The covenant not to compete contemplated under section 7.1 of this Plan is solely for the benefit of the Reorganized Debtor, and there are no intended third-party beneficiaries (including the Studios). Only the Reorganized Debtor may enforce the covenant not to compete under section 7.1 of this Plan, and then only according to the terms and conditions of the written agreement and the limits of Utah law.

Only the Studios may enforce the Express Covenants under sections 7.2 and 7.3 of this Plan and/or the Studios’ rights and remedies under the Settlement Agreement, the Note and the Security Agreement. The right and ability of the Studios to enforce the Settlement Agreement, the Note, the Security Agreement and/or the Express Covenants under sections 7.2 and 7.3 of this Plan are subject to the limits imposed under, and the terms and conditions of, the Settlement Agreement, including (as specified in the Settlement Agreement) certain notice obligations, cure rights, and dispute resolution procedures. Without limitation, the Express Covenants under sections 7.2 and 7.3 of this Plan may be enforced only by instituting an Enforcement Action in the Bankruptcy Court (or, if applicable, the alternative Utah courts specified in Section 11.3).

ARTICLE VIII

VOTING ON THE PLAN

Section 8.1Voting of Claims. Each holder of an Allowed Claim in an impaired Class which retains or receives property under the Plan shall be entitled to vote separately to accept or reject the Plan and indicate such vote on a duly executed and delivered ballot as provided in such order as is entered by the Bankruptcy Court establishing certain procedures with respect to the solicitation and tabulation of votes to accept or reject the Plan. As the treatment of Class 4 Credit Holders’ Claims under Section 4.4 and Class 5 Equity Interests under Section 4.5 is substantively identical to the treatment of such classes under the Trustee’s proposed Plan of Reorganization, dated April 9, 2020 [Dkt. 596], and as voting has already been conducted on that plan, the Trustee and the Studios reserve the right to assert that the results of voting by Classes 4 and 5 on the Trustee’s proposed Plan of Reorganization (i.e., their acceptance of the plan) should likewise apply to this Plan.

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Section 8.2Nonconsensual Confirmation. If any impaired Class entitled to vote shall not accept the Plan or be deemed to have accepted the Plan by the requisite statutory majorities provided in Sections 1126(c) or 1126(d) of the Bankruptcy Code, as applicable, or if any impaired class is deemed to have rejected the Plan, the Trustee and the Studios reserve the right (i) to confirm the Plan under Section 1129(b) of the Bankruptcy Code, and (ii) to amend the Plan to the extent necessary to obtain entry of a Confirmation Order.

ARTICLE IX

EXECUTORY CONTRACTS AND UNEXPIRED LEASES

Section 9.1Assumption of Executory Contracts and Unexpired Leases; Deemed Cure Amount. Any executory contract or unexpired lease which (i) has not expired by its own terms on or prior to the Confirmation Date, (ii) has not been assumed and assigned or rejected with the approval of the Bankruptcy Court on or prior to the Confirmation Date, (iii) is not the subject of a motion to assume or reject which is pending at the time of the Confirmation Date, or (iv) is not the basis of a Credit Holders’ Claim, shall be deemed assumed as of the Effective Date. If there has been a default in an executory contract or unexpired lease, then the Reorganized Debtor shall cure or provide adequate assurance that it will promptly cure such default prior to its assumption of such lease or contract, as required under (and subject to the limitations of) Bankruptcy Code § 365(b), unless otherwise agreed to by the Reorganized Debtor and the counterparty to such lease or executory contract. Unless the counterparty to an unexpired lease or executory contract provides notice on or before the Confirmation Date, any existing defaults shall be deemed cured as of the Effective Date, and the deemed cure amount for any such lease or contract is $0. Any dispute regarding a cure amount or the cure of any other existing default under an unexpired lease or executory contract shall be heard and determined by the Bankruptcy Court. Any claim for a cure amount or the cure of any other existing default under an assumed lease or executory contract must be filed with the Court and served on the Reorganized Debtor by no later than 30 days after the Confirmation Date.

Section 9.2Post-Petition Agreements Unaffected By Plan. Except as otherwise expressly provided herein, nothing contained in the Plan shall alter, amend or supersede any agreements or contracts entered into by the Debtor after the Petition Date that were otherwise valid, effective and enforceable against the Debtor as of the Confirmation Date. The Reorganized Debtor shall be deemed to be substituted for any Debtor in such contract or agreement, as applicable, and the Reorganized Debtor shall have all right, title and interest of the Debtor under such contract or agreement as if the Reorganized Debtor had been the original contracting party thereunder.

Section 9.3Credit Holders’ Claims Treated Under Section 4.4. Neither the assumption nor rejection of any executory contract under this plan shall alter, amend, or supersede the treatment afforded to Credit Holders under Section 4.4 of this Plan. Accordingly, the executory contracts on which the Credit Holders’ Claims are based are deemed rejected under the Plan, provided, however, that the Credit Holders shall be entitled to treatment under Section 4.4 of this Plan.

ARTICLE X

CONDITIONS PRECEDENT TO EFFECTIVE DATE

Section 10.1Conditions Precedent to Effectiveness. The Plan shall not become effective, and the Effective Date shall not occur, unless and until the following conditions shall have been satisfied or waived:

(a)           this Plan is confirmed without material change (unless such change has been expressly agreed to by the Studios and the Trustee), the Plan Supplement Documents are approved by the Bankruptcy Court without material change (unless such change has been expressly agreed to by the Studios and the Trustee) and the Confirmation Order, in form and substance reasonably acceptable to the Studios and the Trustee, shall have been entered by the Bankruptcy Court;

(b)           The form and content of the Plan Supplement Documents have all been approved in the Confirmation Order, and the same have all been executed, delivered and, if necessary, properly acknowledged and/or recorded, and all other actions, documents and agreements necessary to implement the Plan and the Settlement Agreement shall have been executed, delivered and, if necessary, properly acknowledged and/or recorded, and shall have become effective; and

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(c)           the Estate shall have sufficient Cash to meet all Cash funding obligations under the Plan required to be made on the Effective Date.

Section 10.2Failure of Conditions Precedent. Notwithstanding anything in this Plan to the contrary, the conditions set forth in Section 10.1 above must be satisfied or waived on or before sixty (60) days after the Confirmation Date. In the event that the conditions set forth in Section 10.1 above are not satisfied on or before sixty (60) days after the Confirmation Date, then the Plan shall be deemed revoked and withdrawn, the Confirmation Order shall be deemed vacated, and the Plan Supplement Documents shall become void and unenforceable.

Section 10.3Waiver of Conditions. The Studios and the Trustee may jointly waive one or more of the conditions precedent to the effectiveness of the Plan set forth in Section 10.1 above, but neither the Studios nor the Trustee shall have the right to unilaterally waive such conditions.

ARTICLE XI

RETENTION OF JURISDICTION

Section 11.1Retention of Jurisdiction. Except only as expressly and specifically permitted under the Settlement Agreement or this Plan, after the Effective Date and for a period of fourteen (14) years thereafter, and notwithstanding the entry of the Case Closure Order, the Bankruptcy Court shall retain exclusive jurisdiction over the Bankruptcy Case, the Plan, the Settlement Agreement, the Note and the Security Agreement, including to address the following specified matters arising out of, and related to, the Bankruptcy Case and the Plan pursuant to, and for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code:

(a)           to hear and determine any and all objections to the allowance of any Claims or any controversies as to the classification of any Claims or estimate any Disputed Claim;

(b)           to hear and determine any and all applications by Professionals for compensation and reimbursement of expenses;

(c)           to hear and determine any and all pending applications for the rejection or assumption of executory contracts and unexpired leases, and fix and allow any Claims resulting therefrom;

(d)           to enforce the provisions of the Plan, the Settlement Agreement, the Note and the Security Agreement, subject to the terms thereof;

(e)           to correct any defect, cure any omission, or reconcile any inconsistency in the Plan or in the Confirmation Order as may be necessary to carry out the purpose and the intent of the Plan;

(f)           to determine any Claim or liability to a Governmental Unit which may be asserted as a result of the transactions contemplated herein;

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(g)           to hear and determine matters concerning state, local, and federal taxes in accordance with Sections 346, 505 and 1146 of the Bankruptcy Code;

(h)           to hear and determine any and all adversary proceedings, applications, contested matters and other litigated matters pending on the Confirmation Date;

(i)           to enforce the releases, exculpatory provisions and/or injunctions described or provided under this Plan, which shall include jurisdiction to enter temporary restraining orders, preliminary injunctions, permanent injunctions, contempt sanctions and other appropriate orders and remedies, including to stay and prevent litigation filed or pending before another court or tribunal; and

(j)           to determine such other matters as may be provided for in the Confirmation Order.

Except only as expressly and specifically permitted under the Settlement Agreement or this Plan, the Studios will pursue their Default Remedies in the Bankruptcy Court (or, if applicable, the alternative Utah courts specified in section 11.3, below). The Bankruptcy Court’s retention of exclusive jurisdiction under this section 11.1, and/or under section 11.2 below, is not intended, and shall not be construed, to limit the Studios’ rights to seek relief as specified in section 4.B.1 of the Settlement Agreement.

Section 11.2Exclusive Jurisdiction. Except only as expressly and specifically permitted under the Settlement Agreement or this Plan, the Bankruptcy Court (or, if applicable, the alternative Utah courts specified in Section 3.G.) shall have exclusive jurisdiction to enforce the Settlement Agreement, the Note, the Security Agreement, and the Studios’ rights under this Plan. Without limitation, the Bankruptcy Court (or, if applicable, the alternative Utah courts specified in Section 3.G.) shall have exclusive and continuing jurisdiction to enforce the Express Covenants under sections 7.2 and 7.3 of this Plan (and under Section 2 of the Settlement Agreement) and any and all remedies under the Note, the Security Agreement, and/or the Compliance Lien.  The Studios will pursue their Default Remedies under the Settlement Agreement, the Note, the Security Agreement and under the Plan, including remedies for any Uncured Breach, exclusively in the Bankruptcy Court (or, if applicable, the alternative Utah courts specified in Section 11.3). The Bankruptcy Court’s retention of exclusive jurisdiction under this section 11.2, and/or under section 11.1 above, is not intended, and shall not be construed, to limit the Studios’ rights to seek relief as specified in section 4.B.1 of the Settlement Agreement.

Section 11.3Alternative Exclusive Jurisdiction. To the extent the Bankruptcy Court does not accept jurisdiction of enforcement proceedings as described in the Settlement Agreement (incorporated herein), such must then be filed with the Federal District Court for the District of Utah (Salt Lake City), and the Studios and the Reorganized Debtor consent to jurisdiction (and will not dispute jurisdiction) before that court and agree to stipulate and abide by the same timing considerations described in section 3.E of the Settlement Agreement unless ordered otherwise. If both the Bankruptcy Court and the Federal District Court for the District of Utah refuse to accept jurisdiction, the proceedings must then be filed with the Third Judicial District Court in and for Salt Lake County, State of Utah, located at Matheson Courthouse, 450 South State Street in Salt Lake City, Utah.

Section 11.4Exclusive Jurisdiction Over Permanent Injunction. Nothing in this Plan shall impact the exclusive jurisdiction of the California Court to interpret and enforce the Permanent Injunction.

Section 11.5Closure of Case.

(a)           Closing the Bankruptcy Case. Pursuant to Local Rule 3022-1, the Bankruptcy Case shall be administratively closed pursuant to 11 U.S.C. § 350, following (i) notice and a motion for final decree filed by the Trustee or by the Reorganized Debtor to the Bankruptcy Court that all payments due as of the Effective Date have been paid and the Plan has been substantially consummated; and (ii) the entry of the Case Closing Order.

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(b)           Post-Confirmation Payments to United States Trustee. Until entry of an Order closing, dismissing or converting the Bankruptcy Case, any quarterly payments due to the office of the United States Trustee prior to the Effective Date of the Plan shall be paid in accordance with 28 U.S.C. § 1930(a)(6) by the Reorganized Debtor. No quarterly payments shall come due or be required after the Bankruptcy Case is closed, unless the Bankruptcy Case for any reason is reopened.

(c)           Reopening Case. At any time after the entry of the Case Closing Order, the Bankruptcy Case may be reopened to address the matters set forth in this Plan or to address any other matters authorized by the Bankruptcy Code upon ex parte application of the Reorganized Debtor, the Studios or any other party in interest and submission of an appropriate order to the Bankruptcy Court provided, however, that any order reopening the Bankruptcy Case shall not reinstate the Chapter 11 Trustee. Rather, as set forth in Section 5.1 of this Plan, upon entry of the Case Closing Order the Chapter 11 Trustee shall be discharged and shall have no further obligations to the Court, the Debtor, its creditors or its equity holders.

ARTICLE XII

MISCELLANEOUS

Section 12.1Continuation of Injunctions or Stays Until Effective Date

Section 12.2. All injunctions or stays provided for in the Bankruptcy Case under Sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date. Discharge.Pursuant to Section 1141(d) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan, or in any contract, instrument, or other agreement or document created pursuant to the Plan (including, without limitation, the Plan Supplement Documents), the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims, Interests, and Causes of Action, including any interest accrued on Claims or Interests from and after the Petition Date, whether known or unknown, against, liabilities of, Liens on, obligations of, rights against, and Interests in, the Debtor, the Estate, or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Confirmation Date, any liability (including withdrawal liability) to the extent such Claims or Interests relate to services performed by employees of the Debtor prior to the Confirmation Date and that arise from a termination of employment, any contingent or non-contingent liability on account of representations or warranties issued on or before the Effective Date, and all debts of the kind specified in Sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (1) a Proof of Claim based upon such debt or right is filed or deemed filed pursuant to Section 501 of the Bankruptcy Code; (2) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to Section 502 of the Bankruptcy Code; or (3) the Holder of such a Claim or Interest has accepted the Plan or voted to reject the Plan. The Confirmation Order shall be a judicial determination of the discharge of all pre-Confirmation Date Claims, Interests, and Causes of Action, subject to the occurrence of the Effective Date, except as otherwise specifically provided in the Plan.

Section 12.3Injunction Relating to the Plan. As of the Effective Date, and except as otherwise provided in this Plan or the Plan Supplement Documents, all Persons are hereby permanently enjoined from commencing or continuing, in any manner or in any place, any action or other proceeding, whether directly, indirectly, derivatively or otherwise against the Debtor, its Estate, the Reorganized Debtor, or their successors-in-interest or assigns, on account of, or respecting any Claims, debts, rights, Causes of Action or liabilities discharged or treated pursuant to the Plan. Upon entry of the Confirmation Order, and except as otherwise authorized by this Plan or the Plan Supplement Documents, all holders of Claims and Equity Interests and other parties in interest, along with all persons in active concert or participation with them, shall be enjoined from taking any actions to interfere with the implementation or consummation of the Plan. Further, except as otherwise expressly provided in the Plan, the Plan Supplement Documents or the Confirmation Order, all Persons who have held, hold, or may hold Claims against the Debtor, or who have held, hold or may hold any debt or interest relating to the Debtor, are permanently enjoined, from and after the Effective Date, to the maximum extent permitted by law, from (i) commencing or continuing in any manner any action or other proceeding of any kind with respect to any such Claim, debt or interest against the Reorganized Debtor or the Estate or (ii) enforcing, attaching, collecting or recovering by any manner or means any judgment, award, decree or order against the immediate or any mediate transferee of any property distributed pursuant to the Plan or of any putative securities, based upon a claim that the transferor’s receipt of such property constituted a fraudulent transfer, fraudulent conveyance, preference, violation of bulk sales or other law, or based upon any other claim that receipt and/or distribution of property by transfer pursuant to the Plan is wrongful, whether in law or equity.

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Section 12.4Broad Injunction. The intent of sections 12.2 and 12.3 is to provide the broadest possible injunction permitted by law and, to the extent permitted by law, to expand the scope of that injunction for the benefit of the Reorganized Debtor to the extent that, at any time after the Effective Date, the law is clarified or changed to permit such a broader injunction. The injunction in the Confirmation Order shall provide that, except as otherwise authorized by the Settlement Agreement, the Plan or the Confirmation Order, the holders of Claims shall be enjoined from commencing or continuing any such specified action or proceeding against Reorganized Debtor with respect to any Claim or property of the Estate, including Claims based in whole or in part on an allegation: (i) that the Debtor breached any contract, with, or any duty or obligation to the Creditor; (ii) that the Debtor was the alter ego or instrumentality of another Person; (iii) that the Debtor made any preferential or fraudulent transfer or any other voidable transfer or payment to any Person; or (iv) that the Debtor or the Estate are liable for any act or omission.

Section 12.5Exculpation. Notwithstanding anything herein to the contrary, the Studios, the Debtor, the Chapter 11 Trustee, and their attorneys, accountants, officers, employees, professionals, or agents (the “Exculpated Parties”) shall not have or incur, and each Exculpated Party is released and exculpated from, any liability to any Holder of a Cause of Action, Claim, or Interest for any act or omission in connection with, relating to, or arising out of the formulation, preparation, dissemination, negotiation, filing, or consummation of this Plan or any contract, instrument, release or other agreement or document created or entered into in connection with this Plan or the pursuit of consummation of this Plan. The Exculpated Parties have, and upon confirmation of the Plan shall not be liable at any time for the violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of this Plan.

Section 12.6Release of Claims.

(a)           Release of Claims Against the Debtor, Other Than Those Preserved by the Plan and the Settlement Agreement. Except as contemplated by the Settlement Agreement or this Plan, the rights afforded to holders of Claims in the Plan shall be in exchange for a complete release, satisfaction and discharge of all Claims against the Debtor or the Reorganized Debtor, and acceptance of such distributions under the Plan shall be deemed irrevocably to release any and all claims of any type, kind or nature against the Debtor. Persons deemed to have released Claims pursuant to this paragraph shall be forever precluded from asserting against the Debtor, the Reorganized Debtor or their respective assets any Claim, including any Claim of the type released or deemed released herein.

(b)           Mutual Releases Among the Reorganized Debtor and the Studios. The limited release provisions under Section 8.J of the Settlement Agreement hereby are incorporated as if restated herein in their entirety.

Section 12.7Default of Plan. The provisions governing dispute resolution and Default Remedies regarding Defaults of the Express Covenants and payment defaults are set forth in the Plan Supplement Documents which are attached to this Plan. All other Defaults shall be handled according to this Plan and the Bankruptcy Code.

Section 12.8Setoffs. Except as otherwise provided in this Plan, nothing contained in this Plan shall constitute a waiver or release by the Estate of any rights of setoff the Estate may have against any Person. All claims of setoff or recoupment against the Debtor or Estate, however, are discharged and released pursuant to Sections 12.2 and 12.5 of this Plan.

Section 12.9Amendment or Modification of the Plan. Alterations, amendments or modifications of the Plan may be proposed in writing jointly by the Trustee and the Studios at any time prior to the Confirmation Date, provided that the Plan, as altered, amended or modified, satisfies the conditions of Sections 1122 and 1123 of the Bankruptcy Code, and the Trustee and the Studios shall have complied with Section 1125 of the Bankruptcy Code. The Plan may be altered, amended or modified at any time before or after the Confirmation Date and before substantial consummation, provided that the Plan, as altered, amended or modified, satisfies the requirements of Sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms the Plan, as altered, amended or modified, under Section 1129 of the Bankruptcy Code. A holder of a Claim that has accepted the Plan shall be deemed to have accepted the Plan, as altered, amended or modified, if the proposed alteration, amendment or modification does not materially and adversely change the treatment of the Claim of such holder. The Trustee and the Studios may, without notice to holders of Claims insofar as it does not materially and adversely affect the interests of any such holders, file any non-material modification of the Plan to correct any defect or omission in this Plan and any exhibit hereto. Neither the Trustee, nor the Studios may amend the Plan without the consent of the other.

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Section 12.10Severability. If, prior to the Confirmation Date, any term or provision of the Plan is determined by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court may, upon the request of the Trustee and the Studios, alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alternation or interpretation. The Confirmation Order shall constitute a judicial determination that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable according to its terms.

Section 12.11Revocation or Withdrawal of the Plan. The Trustee and the Studios reserve the right to individually or collectively revoke or withdraw the Plan prior to the Confirmation Date. If the Trustee and/or the Studios revoke or withdraw the Plan prior to the Confirmation Date, then the Plan shall be deemed null and void. In such event, nothing contained herein shall constitute or be deemed a waiver or release of any Claims by or against the Estate or any other Person or to prejudice in any manner the rights of the Studios in any further proceedings involving the Estate.

Section 12.12Binding Effect. The rights, duties and obligations of any Person named or referred to in this Plan shall be binding upon, and shall inure to the benefit of, the successors and assigns of such Person.

Section 12.13Written Notices. All notice provisions of the Settlement Agreement are incorporated by reference as if restated herein in their entirety, including without limitation Section 8.A of the Settlement Agreement. All Notices under this Plan, the Settlement Agreement, the Note and/or the Security Agreement shall be in writing. Except as provided in Settlement Agreement (solely with respect to notices by and between the Studios and the Reorganized Debtor) notices under this Plan shall be send by first class mail, postage-prepaid or by overnight courier.

Section 12.14Governing Law. Except to the extent the Bankruptcy Code, the Bankruptcy Rules or other federal law is applicable, the rights and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of Utah, without giving effect to the principles of conflicts of law of such jurisdiction.

Section 12.15Post-Confirmation Fees, Final Decree. The Reorganized Debtor shall be responsible for the payment of any post-confirmation fees due pursuant to 28 U.S.C. § 1930 and the filing of post-confirmation reports, until a final decree is entered pursuant to the Case Closing Order.

Section 12.16Headings. Headings are used in the Plan for convenience and reference only, and shall not constitute a part of the Plan for any other purpose.

Section 12.17Filing of Additional Documents. On or before substantial consummation of the Plan, the Chapter 11 Trustee and Studios shall file with the Bankruptcy Court any agreements or other documents that may be necessary or appropriate to effectuate and further evidence the terms and conditions hereof.

Section 12.18Inconsistency. In the event of any inconsistency between the Plan and the Settlement Agreement, the terms of the Settlement Agreement shall control. Nothing in this Plan is intended, or shall be construed, to amend, limit or to augment the rights, remedies, duties and obligations of the parties to the Settlement Agreement, including without limitation (a) the scope and interpretation of the Express Covenants, (b) notice and opportunity to cure procedures specified in the Settlement Agreement, (c) the dispute resolution procedures specified in the Settlement Agreement, (d) the remedies for breach of contract specified in section 4.E of the Settlement Agreement, or (e) the right of the Studios to seek relief as specified in section 4.B.1 of the Settlement Agreement. In the event of any inconsistency between the Plan and any other Supplement Document, the terms of the Plan shall control.

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DATED this 28th day of August, 2020.

COHNE KINGHORN, P.C.

   /s/ Matthew M. Boley (with permission)

George Hofmann

Matthew M. Boley

Jeffrey Trousdale

Attorneys for George Hofmann, Chapter 11 Trustee

Thomas B. Walper (pro hac vice)

Kelly M. Klaus (pro hac vice)

Rose Leda Ehler (pro hac vice)

Munger, Tolles & Olson LLP

350 South Grand Avenue, 50th Floor

Los Angeles, California 90071-3426

Telephone: (213) 683-9100

Facsimile: (213) 687-3702

Email: thomas.walper@mto.com

Email: kelly.klaus@mto.com

Email: rose.ehler@mto.com

—and—

Michael R. Johnson, Esq.

Ray Quinney & Nebeker P.C.

36 South State Street, 14th Floor

Salt Lake City, Utah 84111

Telephone: (801) 532-1500

Facsimile: (801) 532-7543

Email: mjohnson@rqn.com

/s/ Michael R. Johnson

Michael R. Johnson

Attorneys for the Studios

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EX1U-1 UNDR AGMT

 Exhibit 1.3

CONFIDENTIAL DRAFT

FOR SETTLEMENT PURPOSES ONLY

FED. R. EVID. 408 AND ALL SIMILAR PRIVILEGES

SETTLEMENT AGREEMENT

This Settlement Agreement (together with exhibits hereto), is made and entered into as of August 26, 2020 by and between the Studios, and VidAngel, Inc. (by and through the Trustee, and, with respect to Sections 1, 2, and 7, and portions of Sections 6 and 8, the Harmon Parties.

This Settlement Agreement, and the rights, duties and obligations of the Parties hereunder, shall become effective and fully binding on the Parties on the first calendar day after the date of entry by the Bankruptcy Court of final orders (a) approving this Settlement Agreement pursuant to Federal Rule of Bankruptcy Procedure 9019 (the “Approval Order”) and (b) confirming a Joint Chapter 11 Plan (together with all exhibits thereto, the “Joint Chapter 11 Plan” or “Plan”) jointly proposed by the Studios and the Trustee in the Bankruptcy Case (the “Confirmation Order”).

RECITALS

WHEREAS, on October 18, 2017 (the “Petition Date”), the Debtor filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code, thereby initiating Case No. 17-29073 KRA (the “Bankruptcy Case”) currently pending in the United States Bankruptcy Court for the District of Utah (the “Bankruptcy Court”);

WHEREAS, each of the Studios is a holder of a claim, as defined in section 101(5) of the Bankruptcy Code, against the Debtor, arising out of the California Action and judgment in favor of the Studios for $62,448,750.00 in statutory damages;

WHEREAS, Neal Harmon and Jeffrey Harmon are officers of and, through a closely held company, the largest shareholders in VidAngel;

WHEREAS, on August 28, 2019, the Bankruptcy Court entered an Order appointing the Trustee following the Studios’ and VidAngel’s stipulation to appoint a Chapter 11 Trustee;

WHEREAS, since August 28, 2019, the Trustee, as Chapter 11 Trustee of VidAngel, has fulfilled the obligations and performed the duties imposed on a Chapter 11 bankruptcy trustee, including the obligations and duties set forth in 11 U.S.C. § 1106;

WHEREAS, the Parties hereby intend to resolve the Bankruptcy Case and California Action, including appeals, as well as establish a mechanism for resolution of actual or potential future disputes regarding certain conduct by VidAngel and/or the Harmon Parties regarding the Studios’ Copyrighted Works, on the terms set forth below;

NOW, THEREFORE, in consideration of the foregoing and the premises, mutual covenants, and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

SECTION 1.

Definitions:

A.

Parties: The Parties (collectively “Parties”) to the Settlement Agreement are:

1.

Studios: Disney Enterprises, Inc., Lucasfilm Ltd. LLC, Twentieth Century Film Corporation, Warner Bros. Entertainment Inc., MVL Film Finance, LLC, New Line Productions, Inc., and Turner Entertainment Co. (each individually a “Studio”).

2.

Trustee: George Hofmann, not individually, but in his capacity as Chapter 11 Trustee of VidAngel, Inc. and its Chapter 11 bankruptcy estate.

3.

VidAngel: VidAngel, Inc. the debtor in In re: VidAngel, Inc. Case No. 17-29073 KRA, and following the Effective Date the Reorganized Debtor (“VidAngel” or “Reorganized Debtor”).

B.

Harmon Parties: (i) Neal Harmon, in his individual capacity, and/or (ii) Jeffrey Harmon, in his individual capacity.

C.

Studio Affiliates means an affiliated person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Studio, where “control” means possession, directly or indirectly, of the power to direct (or cause the direction of) the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, included on the list of affiliates, provided as a confidential exhibit to the Settlement Agreement. A Studio at any time may amend its list of Affiliates by Written Notice, and the amendment is effective five (5) Business Days after Written Notice.

D.

Copyrighted Work means a copyrighted Motion Picture (i.e., an audiovisual work such as movies or television programs) in which a Studio or Studio Affiliate owns or controls an exclusive right under the Copyright Act, 17 U.S.C. §§ 101 et seq.

1.

For purposes of the Settlement Agreement, one or more of the following shall conclusively establish that a Motion Picture is a Copyrighted Work:

a.

The name or logo of the Studio or Studio Affiliate appears (i) on the packaging or physical storage media (DVD, Blu-ray disc, 4K/UHD disc, or other physical storage media) of a physical copy of the Motion Picture (if the Reorganized Debtor has, or had on or after the Effective Date, such packaging or physical storage media in its possession) or on an image of the packaging or physical storage media that appears on the IMDB website page for the Motion Picture, or (ii) in a title card or copyright notice that appears in the Motion Picture;

b.

The name of the Studio or Studio Affiliate appears on the IMDB website page (including the “Company Credits” sub-page) for the Motion Picture; or

c.

The name of the Studio or Studio Affiliate appears on a record of the United States Copyright Office relating to the Motion Picture that is accessible using the United State Copyright Office’s online research tool.

2.

For Motion Pictures not covered by subsections (a)-(c) of D.1 above, if a Studio provides Written Notice that a Motion Picture is a Copyrighted Work, it will be treated as such five (5) Business Days after such Written Notice. If, as of the date a particular title is added to any service of the Reorganized Debtor (i) none of subsections (a)-(c) of D.1 above applies, and (ii) a Written Notice has not been given as stated in the preceding sentence, the Reorganized Debtor shall not be obligated to treat the Motion Picture as a Copyrighted Work unless and until it has been provided Written Notice.

3.

If the Reorganized Debtor is not able to determine after a diligent investigation whether certain Motion Pictures are Copyrighted Works, then on a quarterly basis, starting with the first calendar quarter following the Effective Date, the Reorganized Debtor may make a written inquiry concerning those Motion Pictures by sending to the Studios Written Notice of a list of those Motion Pictures that includes the title, year of release, and entity identified on the copyright notice; provided, however, such list shall be limited to no more than twenty-five (25) such Motion Pictures. Within two (2) weeks of receiving the notice, the Studios shall respond in writing, identifying any work on the list that is a Copyrighted Work.

4.

For purposes of Section 2.A of this Settlement Agreement, the following will not be treated as Copyrighted Works (a) a Motion Picture that consists of a trailer (or similar advertisement) of a movie or television show or other Motion Picture that a Licensed streaming service or other Licensed distributor, without any involvement of the Reorganized Debtor or the Harmon Parties, includes with its stream, transmission, or public performance of a Motion Picture that is not a Copyrighted Work; and (b) a de minimis portion of a Copyrighted Work that appears in the background of a scene in a Motion Picture that is not a Copyrighted Work (by way of example, where a movie in which the Reorganized Debtor and the Harmon Parties have had no involvement includes a scene with a television set in the background, and that television is displaying a de minimis portion of a different movie that is a Copyrighted Work, e.g., the display of de minimis portions of the movie Casablanca on a television in the background of a scene in the movie When Harry Met Sally).

E.

Motion Pictures are, as defined in 17 U.S.C. § 101, audiovisual works consisting of a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any; where “audiovisual works” are works that consist of a series of related images which are intrinsically intended to be shown by the use of machines, or devices such as projectors, viewers, or electronic equipment, together with accompanying sounds, if any, regardless of the nature of the material objects, such as films or tapes, in which the works are embodied.

F.

License means express written authorization from a Studio or Studio Affiliate that owns or controls the copyright(s) in the applicable Copyrighted Work(s) (a Copyrighted Work subject to a License is “Licensed”).

G.

Third Party means any person or entity (excluding a Party or the Harmon Parties), including without limitation, a customer or subscriber of the Reorganized Debtor or of another business or service.

H.

Default means a breach or violation of the Settlement Agreement.

I.

Strike refers to each not-Licensed Copyrighted Work that is the subject of a Notice of Default alleging a violation of the No Use Covenant, where the violation is either admitted (expressly or implicitly through waiving a Notice of Dispute) or determined to be a Strike by the Bankruptcy Court, subject to the limitations set forth in Sections 5.A and 5.B.

J.

Express Covenants means each of the covenants listed in Section 2, the No Use Covenant (2.A), the Covenant Not to Sue (2.B), and the Covenant Not to Seek Certain Changes to Law (2.C).

K.

Written Notice means notice sent in writing as provided in Section 8.A.

L.

Business Day means any day other than a Saturday, Sunday or an officially designated legal public holiday as designated in 5 U.S.C. § 6103.

M.

Cure Period means, for purposes of Sections 3, 4 and 5.A.2, three (3) Business Days from the date and time Written Notice of the Notice of Default is sent.

N.

Uncured Default means a Default not Cured within the Cure Period.

O.

Bankruptcy Court means the United States Bankruptcy Court for the District of Utah in which the Bankruptcy Case is pending and, to the extent of any reference under 28 U.S.C. § 157, the unit of the United States District Court for the District of Utah specified pursuant to 28 U.S.C. § 151.

P.

California Action means the case captioned Disney Enterprises, Inc. et al. v. VidAngel, Inc., No. 2:16-cv-04109-AB-PLA, filed in the United States District Court for the Central District of California, including any appeals therefrom (which appeals include without limitation Ninth Circuit Case Nos. 19-56174, 20-55352).

Q.

Monetary Judgment means the $62,448,750.00 monetary judgment entered September 23, 2019, at Docket No. 525, in the California Action.

R.

Permanent Injunction means the Permanent Injunction entered September 5, 2019, at Docket No. 520, in the California Action, which shall remain in full effect.

S.

Effective Date means the first calendar day after the date of entry by the Bankruptcy Court of the Approval Order and the Confirmation Order and all other conditions for the Plan to become effective have been satisfied. The Effective Date of this Settlement Agreement and the Joint Chapter 11 Plan shall be the same.

SECTION 2.

Express Covenants:

A.

No Use Covenant:

1.

The No Use Covenant shall be binding on the following parties:

a.

The Reorganized Debtor, which for purposes of this Section 2 includes the Reorganized Debtor’s officers, agents, employees, and other persons who receive notice of this No Use Covenant and who are in active concert or participation with the Reorganized Debtor; and

b.

The Harmon Parties, subject to the limitations herein.

2.

Duration of the No Use Covenant:

a.

The No Use Covenant shall be unlimited in duration as to the Reorganized Debtor;

b.

The No Use Covenant shall have a duration of fourteen (14) years from the Effective Date with respect to the Harmon Parties, subject to the limitations in Section 7.D.2.

3.

The Reorganized Debtor and/or Harmon Parties shall not, directly or indirectly, without the express written authorization of a Studio or Studio Affiliate that owns or controls the copyright(s) in the applicable Copyrighted Work(s):

a.

descramble a scrambled Copyrighted Work, decrypt an encrypted Copyrighted Work, or otherwise avoid, bypass, remove, deactivate, or impair technological measures that effectively control access to a Copyrighted Work (“Circumvention”) or facilitate Circumvention by any Third Party, where the Reorganized Debtor and/or Harmon Parties knows or should know that the Third-Party’s Circumvention is not Licensed;

b.

reproduce a Copyrighted Work or any portion thereof, or facilitate any Third Party’s reproduction of the Copyrighted Work(s) or any portion thereof, where the Reorganized Debtor and/or Harmon Parties knows or should know that the Third-Party’s reproduction is not Licensed;

c.

stream, transmit, or publicly perform a Copyrighted Work or any portion thereof, or facilitate any Third Party’s streaming, transmitting, or publicly performing a Copyrighted Work or any portion thereof, where the Reorganized Debtor and/or Harmon Parties knows or should know that the Third-Party’s streaming, transmitting, or publicly performing is not Licensed; or

d.

distribute a Copyrighted Work or any portion thereof, or facilitate any Third Party’s distribution of a Copyrighted Work or any portion thereof, where the Reorganized Debtor and/or Harmon Parties knows or should know that the Third-Party’s distribution is not Licensed.

4.

In any action to enforce the No Use Covenant, it is not a defense that the conduct of the Reorganized Debtor, Harmon Parties, and/or any Third Party relating to an alleged breach of the No Use Covenant is non-infringing, a fair use, the subject of an implied license, a private performance of a Copyrighted Work, or subject to a defense under Title 17 United States Code.

5.

Without limiting the foregoing, it is the intent of the parties that the No Use Covenant:

a.

precludes the Reorganized Debtor and/or Harmon Parties, directly or indirectly, as part of any business or service (whether or not for profit) from offering, or facilitating access by any Third Party to, a Copyrighted Work without a License in connection with such business or service, including without limitation, any service described by the Debtor, the Reorganized Debtor, or the Trustee, as the “Disc-Based Model,” the “Stream-Based Model,” the “DVR Model,” or “Skip TV”;

b.

precludes any (i) Circumvention, (ii) reproduction, (iii) streaming, transmitting, or publicly performing, or (iv) distribution, of a Copyrighted Work by the Reorganized Debtor, Harmon Parties, or any Third Party without a License as part of any business or service (whether or not for profit) of the Reorganized Debtor;

c.

precludes the Reorganized Debtor and/or Harmon Parties from facilitating any Third Party’s (i) Circumvention, (ii) reproduction, (iii) streaming, transmitting, or publicly performing, or (iv) distribution, of a Copyrighted Work by that Third Party or any other Third Party without a License in connection with any business or service (whether or not for profit) where the Reorganized Debtor and/or Harmon Parties knows or should know that any Third Party that is (i) Circumventing, (ii) reproducing, (iii) streaming, transmitting, or publicly performing or (iv) distributing, a Copyrighted Work does not have a License to do so; and

d.

does not preclude the Harmon Parties or any officer or employee of the Reorganized Debtor from viewing a private performance of a Copyrighted Work from an authorized copy (e.g., directly through a Licensed platform in compliance with such platform’s terms of service).

B.

Covenant Not to Sue: Neitherthe Chapter 11 Trustee, nor the Reorganized Debtor, nor the Harmon Parties shall bring an action against any Studio or Studio Affiliate, including without limitation, via declaratory judgment action, claim for equitable relief, motion to modify or clarify the Permanent Injunction, or otherwise, asserting any claims under Title 17 of the United States Code, or any related federal or state law claims; provided, however, that nothing in this Settlement Agreement prevents the Reorganized Debtor or Harmon Parties from bringing an action against any party alleging the infringement of the Reorganized Debtor’s or Harmon Parties’ exclusive rights in their own Copyrighted Works.

C.

Covenant Not to Seek Certain Changes to Law: For a period of fourteen (14) years following the Effective Date, no resources of the Reorganized Debtor will be used for lobbying activities directly seeking to amend the Family Movie Act, 17 U.S.C. § 110(11) or to enact or amend any other provisions of law that would allow a person engaged in “filtering,” (i.e., making imperceptible, skipping, or removing limited portions of the audio or video content of a Motion Picture or the creation or provision of a computer program or other technology that enables such filtering) to engage in copying, streaming, or distributing of Motion Pictures, or to Circumvent technological measures that control access to copyrighted works, without the written authorization of the copyright owner.  For the same fourteen (14) year period, (i) the Harmon Parties shall not engage in such lobbying activities; and (ii) neither the Reorganized Debtor, nor the Harmon Parties, will authorize, encourage, promote, or support any such lobbying activity by any VidAngel officer, director, or employee.

D.

Effective Date of Express Covenants: The Express Covenants become effective as of the Effective Date and claims alleging a breach of an Express Covenant are limited to conduct occurring on or after the Effective Date.

SECTION 3.

Notice to Reorganized Debtor of Default, Obligation to Cure, Grounds for Disputing Notice of Default:

A.

General Notice of Default: If a Studio believes the Reorganized Debtor has breached the Settlement Agreement (e.g., the Reorganized Debtor has failed to comply with payment obligations or violated the Express Covenants, or otherwise defaulted on its obligations under the Settlement Agreement) the Studio may serve the Reorganized Debtor with a Notice of Default setting forth the basis for the Default (and, to the extent applicable, the additional information relating to a violation of the No Use Covenant, described in Section 3.B), via Written Notice.

B.

Notice of Default Relating to the No Use Covenant: The Notice of Default for a violation of the No Use Covenant shall, to the extent such information is reasonably available to the Studio sending the Notice of Default, (a) identify the Copyrighted Work(s) that the Studio contends is the subject of a Default (including any of its or its Affiliates’ Copyrighted Work(s) that the Studio knows is the subject of the violation of the No Use Covenant as of the date of such Notice of Default), (b) identify the conduct of the Reorganized Debtor that the Studio contends violated the No Use Covenant, and (c) to the extent the Studio contends that the violation arises from prohibited “facilitation” of violative conduct by a Third-Party, describe the conduct of the Third-Party. Without waiving any rights with respect to subsequently-identified violations of the No Use Covenant as to Copyrighted Work(s) not identified in the Notice of Default, the Notice of Default shall identify all Copyrighted Works of the Studio or its Affiliates that the Studio knows is being, or has been, Circumvented, reproduced, streamed, transmitted, publicly performed, or distributed in violation of the No Use Covenant.

C.

Reorganized Debtor’s Ability to Cure Default of the No Use Covenant (as appropriate, “Cure” or “Cured”):

1.

To Cure a Default of the No Use Covenant, the Reorganized Debtor must, within the Cure Period, ensure that all conduct in violation of the No Use Covenant that is subject to the Notice of Default has completely ceased, and that the Copyrighted Work is completely removed and made inaccessible from its or their business or service offering.

2.

To Cure a Default of the No Use Covenant based on facilitation, as specified in Section 2.A., the Reorganized Debtor must, as applicable, within the Cure Period, (1) cease all activity facilitating the Third Party’s conduct in violation of the No Use Covenant that is subject to the Notice of Default; (2) use all means reasonably available to the Reorganized Debtor to have the Third Party discontinue the conduct subject to the Notice of Default; and (3) agree to cooperate with the Studio in enforcing its rights against the Third Party.

D.

Notice of Dispute: The Reorganized Debtor has until the expiration of five (5) Business Days of the service of the Notice of Default alleging a violation of the No Use Covenant within which to serve Written Notice of a Notice of Dispute.

1.

The primary grounds for a Notice of Dispute challenging the occurrence of a violation of the No Use Covenant are:

a.

the Motion Picture is not a Copyrighted Work under the Settlement Agreement;

b.

the Copyrighted Work was not (i) Circumvented, (ii) reproduced, (iii) streamed, transmitted, or publicly performed, or (iv) distributed, in violation of the No Use Covenant;

c.

to the extent the Studios contend that the violation arises from prohibited “facilitation” of violative conduct by a Third-Party, whether the Reorganized Debtor violated the prohibitions on facilitation in the No Use Covenant; or

d.

the Default should not count as a Strike because the Reorganized Debtor has met the requirements of Section 5.A. or the number of Strikes should be reduced under 5.B., below.

2.

The Reorganized Debtor is not precluded from raising other defenses that the Bankruptcy Court may consider in its discretion.

3.

The serving of a Notice of Dispute shall not toll or extend the Cure Period nor impact, in any way, the Studios rights to pursue proceedings regarding an Uncured Default of the No Use Covenant as provided in Section 4.A.

E.

Procedure for Resolving Notices of Dispute: The Parties shall meet and confer within five (5) Business Days after the Notice of Dispute is sent to determine if the issues in the Notice of Dispute can be resolved without court intervention. If the Parties do not informally resolve the issues in a Notice of Dispute, the Reorganized Debtor may, no later than ten (10) Business Days after the meet-and-confer (or the expiration of the time of the meet and confer) file an application in the Bankruptcy Court to resolve any outstanding issue in the Notice of Dispute, as follows:

1.

The application shall be an expedited proceeding before the Bankruptcy Court, subject to the Bankruptcy Court’s availability, with no more than fifteen (15) Business Days between the filing of the application and the noticed hearing date. Any written response to the application must be filed and served within two (2) Business Days before the hearing. The Bankruptcy Court may, for good cause shown, allow discovery, increase page limits, or grant an extension of time.

2.

The primary issues for the Bankruptcy Court’s determination are whether the Reorganized Debtor has established the grounds for challenging a Notice of Default set forth in Section 3.D.1; provided, however, the Reorganized Debtor is not precluded from raising other defenses that the Bankruptcy Court may consider in its discretion.

F.

Attorneys’ Fees: In any proceeding on a Notice of Dispute, the prevailing party, as determined by the Bankruptcy Court, shall be entitled to its reasonable attorneys’ fees and costs incurred in connection with the Notice of Dispute and proceeding thereon.

G.

Alternative Jurisdiction: To the extent the Bankruptcy Court does not accept jurisdiction, the proceedings under Section 3.E above, or Section 4, below, must then be filed with the Federal District Court for the District of Utah (Salt Lake City), and the Parties consent to jurisdiction (and will not dispute jurisdiction) before that Court and agree to stipulate and abide by the same timing considerations described in Section 3.E as above unless ordered otherwise. If both the Bankruptcy Court and the Federal District Court for the District of Utah refuse to accept jurisdiction, the proceedings under Section 3.E above, or Section 4, below, must then be filed with the Third Judicial District Court in and for Salt Lake County, State of Utah, located at Matheson Courthouse, 450 South State Street in Salt Lake City, Utah.

SECTION 4.

Proceedings and Remedies for Reorganized Debtor’s Defaults:

A.

Utah Bankruptcy Court Jurisdiction: The Studios will pursue their Default Remedies under Section 4.E exclusively in the Utah Bankruptcy Court (or, if applicable, the alternative Utah courts specified in Section 3.G).  The Utah Bankruptcy Court (or, if applicable, the alternative Utah courts specified in Section 3.G.) shall have exclusive and continuing jurisdiction to enforce the Express Covenants in Section 2 and any and all remedies on the Note and/or Security Agreement/Compliance Lien.  This Section 4.A. does not limit the Studios’ rights under Sections 4.B.1.a and b, below.

B.

Uncured Default of No Use Covenant: If the Reorganized Debtor has not timely Cured a Default set forth in a Notice of Default of the No Use Covenant, then the affected Studio(s) may pursue any of the forms of relief specified in subsections 4.B.1 and/or 4.B.2.

1.

Pursue Relief for a Violation of the Permanent Injunction / File a New Action Seeking Equitable Relief:

a.

If the Studio believes the conduct underlying the Uncured Default constitutes a violation of the Permanent Injunction issued in the California Action, the Studio immediately may seek to enforce the Permanent Injunction in the U.S. District Court for the Central District of California (“California Proceeding”). In any such California Proceeding, the Studio may request contempt sanctions and injunctive relief, but shall not seek statutory or actual damages.

b.

The Studio may file a new action based on the conduct underlying the Uncured Default in any court of competent jurisdiction (“New Action”), asserting claims under the Copyright Act, DMCA, or other applicable law (but not a contract claim for a Default under this Settlement Agreement). In any New Action the Studio may seek only injunctive relief, including a request for contempt sanctions (including monetary contempt sanctions) in the circumstance that an injunction has issued in a New Action and thereafter is violated, but shall not seek any other relief, including without limitation statutory or actual damages. In any such New Action, to the extent there has been a previous California Proceeding, the Reorganized Debtor may assert any defense arising from or relating to the California Proceeding, including collateral estoppel, res judicata, waiver, estoppel and any other preclusion doctrine. Notwithstanding the foregoing, after the Satisfaction of Note (Section 6.B.2) and Release of Compliance Lien (Section 6.C.3) have occurred, a Studio shall have the right to give written notice to the Reorganized Debtor of its election to terminate the Express Covenants (an “Election to Terminate”). If a Studio gives notice of an Election to Terminate, the Studio may thereafter file a New Action for an uncured Default without any limitation on the relief it can seek in that New Action (i.e., it would no longer be limited to seeking only injunctive relief, but could also seek statutory or actual damages and all other remedies provided for under applicable law). If a Studio gives notice of an Election to Terminate, that Studio and that Studios’ Affiliates permanently forego their right to bring an Enforcement Action to enforce the Express Covenants.

c.

With respect to any particular Uncured Default, a Studio may not pursue (a) a California Proceeding after instituting a New Action, or (b) a California Proceeding and a New Action concurrently. However, if a Studio’s request for injunctive relief in a California Proceeding is denied on the ground that the California Court determines that the conduct at issue was not within the scope of the Permanent Injunction or for a procedural reason, the Studio thereafter may commence a New Action seeking only injunctive relief as described in section 4.B.1.b, above (unless it has given notice of an Election to Terminate).

d.

In any Enforcement Action that is concurrent with or subsequent to a California Proceeding or a New Action (the latter two referred to as “Injunction Proceeding(s)”), a Studio shall not, directly or indirectly, seek to introduce or advise the Court in such Enforcement Action of (i) the existence of the Injunction Proceeding or the results of the same, or (ii) any findings, rulings, or orders issued in the Injunction Proceeding. No evidence of any findings, rulings, or orders issued in the Injunction Proceeding adverse to the Reorganized Debtor or the Harmon Parties shall be admissible in any Enforcement Action. If a Studio violates these prohibitions, directly or indirectly, that violation shall constitute a waiver, only as to the Default in issue in such Enforcement Action, of the Studio’s right to seek any default remedies other than injunctive relief, and the Default in issue shall not count as a Strike. If the court in the Enforcement Action finds that the Studio has violated any of the foregoing prohibitions, directly or indirectly, the Studio will withdraw the request for Default in the Enforcement Action; provided, however, that the Studio shall not be obligated to withdraw a request that the Court in the Enforcement Action enjoin the continuation or recurrence of conduct that constitutes an Uncured Default.

e.

If the Studio does not prevail on the merits in an Injunction Proceeding, the Reorganized Debtor, may introduce or advise the Court in any Enforcement Action of any findings, rulings, or orders issued in an Injunction Proceeding; provided, however, that if the Reorganized Debtor introduces or advises the Court of any such matters, then the Studio may respond, and such response shall not constitute a violation of the prohibitions in subsection c, above.

f.

The legal conclusions and factual findings from an Injunction Proceeding shall not be binding in an Enforcement Action to enforce the Default Remedies in the Utah Bankruptcy Court, Utah District Court, or Utah State Court.

2.

Institute an Enforcement Action: Unless a Studio has given notice of an Election to Terminate, that Studio may institute an Enforcement Action in the Bankruptcy Court, which shall be an expedited proceeding, noticed with no more than ten (10) Business Days between the filing of the Enforcement Action and hearing, subject to the Bankruptcy Court’s availability. Any written opposition to the Enforcement Action must be filed and served within two (2) Business Days before the hearing. The Utah Bankruptcy Court may, for good cause shown, allow discovery, increase in page limits or grant an extension of time. The primary issues for the Bankruptcy Court’s decision regarding an Uncured Default of the No Use Covenant are:

a.

whether the Notice of Default complied with Section 3.B;

b.

whether the Motion Picture is a Copyrighted Work under the Settlement Agreement;

c.

whether the Copyrighted Work was (i) Circumvented, (ii) reproduced, (iii) streamed, transmitted, or publicly performed, or (iv) distributed, in violation of the No Use Covenant;

d.

to the extent the Studio contends that the violation arises from prohibited “facilitation” of violative conduct by a Third-Party, whether the Reorganized Debtor violated the prohibition on facilitation in the No Use Covenant; or

e.

whether the Default was Cured, and if so, Cured within the Cure Period;

f.

provided, however, the Reorganized Debtor is not precluded from raising other defenses that the Bankruptcy Court may consider in its discretion.

C.

Four Strikes in Five-Year Period:

1.

For each Default involving the No Use Covenant, one “Strike” shall be given for each Copyrighted Work that is the subject of the Notice of Default, subject to a determination by the Bankruptcy Court that it shall not count as a “Strike” under the limitations set forth in Sections 5.A or count as fewer Strikes under 5.B. The Reorganized Debtor is only allowed three Strikes in any consecutive five-year period.

2.

If the Reorganized Debtor incurs four or more Strikes within any consecutive five-year period, then any Studio may institute an Enforcement Action against the Reorganized Debtor pursuant to the procedures set forth in Section 4.B.2, above. It shall not be a defense to such Enforcement Action that the Defaults were timely Cured.

3.

In any Enforcement Action based on four or more Strikes, the primary issues for the Bankruptcy Court’s decision are:

a.

whether the Reorganized Debtor has incurred four or more Strikes within a consecutive five-year period;

b.

whether the Notices of Default have either been (i) admitted by the Reorganized Debtor expressly or implicitly through the failure to timely serve a Notice of Dispute; (ii) adjudicated in favor of the Studios by the Bankruptcy Court pursuant to Section 3.E; and

c.

if neither 4.C.3.b (i) or (ii) applies, the other issues referenced in Section 3.D.1.

4.

In any Enforcement Action under this Section 4.C, neither the Studios nor the Reorganized Debtor may ask the Bankruptcy Court to revisit Strikes that previously were waived or adjudicated by the Bankruptcy Court (a) in an expedited proceeding pursuant to Section 3.E, or (b) in a prior Enforcement Action.

5.

The Reorganized Debtor is not precluded from raising other defenses that the Bankruptcy Court may consider in its discretion.

D.

Other Defaults of the Settlement Agreement: For Defaults other than for the No Use Covenant, the Parties shall meet and confer within five (5) Business Days after the Notice of Default is sent to determine if the issues in the Notice of Default can be resolved without court intervention. If the Parties do not informally resolve the issues in a Notice of Default, the Reorganized Debtor or any Studio may institute an Enforcement Action pursuant to the procedures set forth in Section 4.B.2. The primary issues for the Bankruptcy Court’s decision are whether a Default has occurred and, if so, whether it is excused under the Settlement Agreement; provided, however, that the Reorganized Debtor is not precluded from raising other defenses that the Bankruptcy Court may consider in its discretion.

E.

Remedies for the Studios in an Enforcement Action Against the Reorganized Debtor:

1.

If a Studio prevails in an Enforcement Action for violations of the Express Covenants, including the No Use Covenant, whether pursuant to Section 4.B.2 or 4.C, any Studio shall immediately be entitled to all of the following remedies to be awarded by the Utah Bankruptcy Court (or, if applicable, the alternative Utah courts specified in Section 3.G) against the Reorganized Debtor:

a.

a temporary restraining order, preliminary injunction, or any other injunction to cure the violation of the Express Covenants;

b.

if the Note have not been cancelled as contemplated in Section 6.B.2, immediate acceleration of the Note and entry of a money judgment in the amount of the unpaid portion of the Note;

c.

if the Security Agreement/Compliance Lien is still in effect, the right to foreclose on the collateral pledged under the Security Agreement/Compliance Lien;

d.

if the Note have been cancelled as contemplated in Section 6.B.2, an award of actual damages, if any, directly caused by the breach of contract; and

e.

reasonable attorneys’ fees and costs incurred in connection with the Enforcement Action.

2.

If a Studio prevails in an Enforcement Action for Defaults under the Settlement Agreement, other than Defaults of the Express Covenants (which are addressed under Section 4.E.1), that Studio shall be entitled to all of the following remedies to be awarded by the Utah Bankruptcy Court (or, if applicable, the alternative Utah courts specified in Section 3.G) against the Reorganized Debtor:

a.

contract damages and remedies;

b.

in the case of an uncured payment default as described in Section 6.B.1.c, immediate acceleration of the Note and payment of damages in the amount of the unpaid portion of the Note;

c.

in the case of an uncured payment default, if the Security Agreement/Compliance Lien is still in effect, the right to foreclose on the security interest in the Reorganized Debtor’s assets and the Harmon Parties’ equity in VidAngel, as set forth in the Security Agreement/Compliance Lien; and

d.

reasonable attorneys’ fees and costs incurred in connection with the Enforcement Action.

3.

The Reorganized Debtor agrees that the Studios would be irreparably harmed by and are entitled to injunctive relief for a breach by the Reorganized Debtor of an Express Covenant and that monetary damages would be inadequate, impracticable, and difficult to prove.

4.

The aforementioned remedies are the exclusive remedies available in an Enforcement Action.

SECTION 5.

Limitations on Strikes Against the Reorganized Debtor:

A.

Debtor’s Certification of No Copyrighted Works.

1.

On or before September 15, 2020, the Studios will provide the Trustee and the Reorganized Debtor with a non-exhaustive list (or lists) of Copyrighted Works (“Studios’ List(s)”). To the extent available, the Studios’ List will be an Excel spreadsheet containing columns reflecting title, year, and studio. Within 30 days of receipt of the Studios’ List(s), with the exception of retaining basic meta data (like the title and years and description of the film) the Reorganized Debtor will certify that no Copyrighted Works identified on the Studios’ List(s) are part of the Reorganized Debtor’s service or otherwise stored on its computers or servers (regardless of whether those computers or servers are leased or owned by the Reorganized Debtor). If, after the date of the Reorganized Debtor’s certification, a Studio provides a Notice of Default for a violation of the No Use Covenant with respect to a Copyrighted Work that appeared on the Studios’ List(s) and that occurred after the Reorganized Debtor certification, the Default as to that Copyrighted Work will be deemed a Strike for purposes of Section 4.C (Four Strikes in five-year period).

a.

The Reorganized Debtor may not maintain digital or other copies of the Copyrighted Works (other than those expressly permitted below). However, the Reorganized Debtor may maintain information regarding the Studios’ Copyrighted Works, such as the title, year, and description of the Copyrighted Work, as reasonable or necessary to ensure its past and future compliance with the Permanent Injunction and its future compliance with the No Use Covenant and the Reorganized Debtor may hold and retain:

i.

original physical copies (DVD, Blu-ray disc, 4K/UHD disc, or other physical storage media) of any Copyrighted Work lawfully obtained by the Reorganized Debtor (but not any copies of Licensed copies);

ii.

the packaging of physical copies (DVD, Blu-ray disc, 4K/UHD disc, or other physical storage media) of any Copyrighted Work;

iii.

an image of the packaging or physical storage media, including a screen shot or download from the IMDB website page for any Copyrighted Work;

iv.

a copy or image of the title card or copyright notice that appears in any Copyrighted Work;

v.

information for any Copyrighted Work listed on the IMDB website page (including the “Company Credits” sub-page); and

vi.

images or copies of any record of the United States Copyright Office relating to a Copyrighted Work..

2.

Within thirty (30) days of receipt of the Studios’ List(s), the Reorganized Debtor will provide the Studios with a list of the Motion Pictures that, as of that date, the Reorganized Debtor is currently offering as part of its service (“VidAngel Certified List”). To the extent available, the VidAngel Certified List will be an Excel spreadsheet containing columns reflecting title, year, and owner of the copyright. The Reorganized Debtor shall certify that the VidAngel Certified List is complete and does not include any of the Copyrighted Works on the Studios’ List(s). If, after the date the Reorganized Debtor provides the Studios with the VidAngel Certified List, a Studio provides a Notice of Default with respect to a Copyrighted Work on the VidAngel Certified List and that Copyrighted Work was not listed in the Studios’ List, the Reorganized Debtor shall Cure within the Cure Period. If the Reorganized Debtor timely Cures the Default with respect to such Copyrighted Work, then the Default as to that Copyrighted Work shall not be counted as a Strike or Default. If, after the date the Reorganized Debtor provides the Studios with the VidAngel Certified List, a Studio provides a Notice of Default with respect to a Copyrighted Work that appeared on the Studio’s List, then, notwithstanding the Reorganized Debtor’s timely Cure of the Default, this can be a Strike for purposes of Section 4.C if all other elements of a Strike are satisfied. If the Reorganized Debtor fails to timely Cure such Default, the Studio will have all rights specified in this Settlement Agreement that are available for any Uncured Default.

B.

Limited Exception in Counting Multiple Works as Multiple Strikes Against the Reorganized Debtor

1.

In connection with a Notice of Default of the No Use Covenant, a Default involving multiple Copyrighted Works, rather than being counted as multiple Strikes, may be counted as a single Strike (the “Single Strike Exception”) if all of the conditions set forth below are established. The Single Strike Exception may be applied once during any consecutive five (5) year period commencing on the Effective Date.

a.

For the Single Strike Exception to apply, the Reorganized Debtor must establish, by a preponderance of the evidence, all of the following:

i.

The Reorganized Debtor conducted an objectively reasonable investigation to determine whether each Motion Picture was a Copyrighted Work before adding that Motion Picture to its service.

ii.

That for any multiple Copyrighted Works that the Reorganized Debtor seeks to have counted as a single Strike, the Copyrighted Works:

(i)must have been added to the Reorganized Debtor’s service as the result of a technical malfunction, non-deliberate act, or similar mistake; and

(ii)must have been added within the same consecutive 72-hour period; and

iii.

The Single Strike Exception cannot include Copyrighted Works listed on the Studios’ List.

b.

The total number of Copyrighted Works that were part of the Single Strike Exception cannot exceed fifteen (15) Copyrighted Works.

i.

Only for the purpose of counting the total number of Copyrighted Works that are part of the Single Strike Exception, the following rule shall apply for counting episodes within a single season of the same television series: Provided the Reorganized Debtor has established all the other requirements for the Single Strike Exception, then all of the episodes within a single season of the same television series may count as one (1) Copyrighted Work, but this rule may only be applied to a maximum of three (3) seasons, regardless of whether it is the same or a different television series. Once the rule has been applied to three seasons, then each additional episode of any television series (whether from the same television series or a different television series) that is the subject of the Single Strike Exception shall each count as an individual Copyrighted Work for purposes of counting to the limit of 15. By way of example and not of limitation, if there has been a violation of the No Use Covenant with respect to three complete seasons of a single television series and four episodes from a different season of the same series, and if the Reorganized Debtor has established all of the other requirements of this Section, then those three seasons plus four additional episodes shall count as seven (7) Copyrighted Works for purposes of counting to the limit of 15 ((three seasons = three Copyrighted Works) + (four episodes over and above the three seasons = four Copyrighted Works) = seven total Copyrighted Works).

SECTION 6.

The Reorganized Debtor’s Note, Payment Obligations, and Security Agreement/Compliance Lien:

A.

Studios’ Claims Are Allowed: The Studios’ Amended Proofs of Claims filed in the Bankruptcy Case shall be allowed in full and shall not be subject to objection, expungement, setoff, recoupment, or appeal.

B.

Promissory Note: On the Effective Date, the Reorganized Debtor shall execute and deliver Promissory Note (“Note”) to the Studios equal to their pro rata portion of $62,461,456, reflecting the Monetary Judgment and unpaid sanctions award in the California Action (“Studios Monetary Claim”). These amounts shall be calculated by the Studios. The Permanent Injunction shall remain in full effect and is not considered part of the Studios Monetary Claims.

1.

The unpaid balance of the Note ($62,461,456 minus any paid amounts) will remain outstanding for fourteen 14 years from the Effective Date (and the Studios will have the right to collect on the unpaid balance as specified in Sections 4.E and 6.B.2). Without limiting the foregoing, the Reorganized Debtor will not have further installment payments due on the Note after timely payment of $9,900,000 (the “Settlement Amount”).

a.

The Settlement Amount shall be payable in fifty-six (56) equal quarterly installments of $176,785.72 (payable on January 15, April 15, July 15, and October 15 (or the next business day) of each year over a period of fourteen (14) years) with the first payment due on October 15, 2020.

b.

Notwithstanding the foregoing in subsection 6.B.1.a., if there are no Strikes against the Reorganized Debtor for at least three (3) years from the Effective Date, and no uncured payment defaults, the Reorganized Debtor may satisfy the Settlement Amount at the end of the three-year period by making an additional lump sum payment to the Studios such that its total payments equal $7.8 million. The Reorganized Debtor, at its option, can extend this period for up to an additional two (2) years (for a total period of five (5) years from the Effective Date) assuming it has no Strikes during both the 3-year initial period and the extended period (i.e., the no-strike and lesser payment periods are co-terminus).

c.

If the Reorganized Debtor fails to timely make any payment due under the Note (subject to its right to pay the lesser Settlement Amount), such failure to pay shall constitute a Default. If the Reorganized Debtor fails to cure its payment default within five (5) Business Days after a Notice of Default served by the Studios, the Studios shall be entitled to accelerate payment under the Note and foreclose as set forth in the Security Agreement/Compliance Lien.

2.

Even if the Settlement Amount is timely paid, the remaining balance of the Note shall remain outstanding for fourteen (14) years from the Effective Date. If prior to the expiration of fourteen (14) years, the Studios prevail in an Enforcement Action against the Reorganized Debtor, as set forth in Section 4.E, the Studios shall be immediately entitled to collect the balance of the Studios Monetary Claim (i.e., the Studios Monetary Claim minus any payments previously made by the Reorganized Debtor to the Studios toward the Settlement Amount ). If, upon the expiration of fourteen (14) years after the Effective Date, the Settlement Amount is timely paid and there is no Uncured Default and there have not been four Strikes in a consecutive five (5) year period, then the Note shall be cancelled, and the original Note marked “Paid and Cancelled” shall be returned to the Reorganized Debtor (the “Satisfaction of Note”).

C.

Security Agreement and Compliance Lien: Performance under the Note as well as the Express Covenants shall be secured by a first priority fully perfected lien on all of the Reorganized Debtor’s assets and all of the Harmon Parties’ equity in VidAngel (the “Compliance Lien”) as set forth in the Security Agreement to be executed in conjunction with this Agreement (“Security Agreement”). The Security Agreement shall be executed and shall become effective on the Effective Date. The Studios shall each be a beneficiary of the Compliance Lien. The other terms and conditions of the Compliance Lien are set forth in the Security Agreement, which Security Agreement is being concurrently negotiated and shall be signed by the Trustee (on behalf of the Reorganized Debtor) and the Harmon Parties and shall include customary commercial terms and provisions. The Harmon Parties shall execute and deliver to the Studios such other and further documents as the Studios deem appropriate to create, attach and perfect the Compliance Lien as it relates to their equity (currently held in the name of a controlled affiliate) in VidAngel, including execution of a stock pledge agreement and a blank stock power of attorney.

1.

The Security Agreement/Compliance Lien shall remain in effect for fourteen (14) years to secure the Note and the Express Covenants, regardless of whether the Reorganized Debtor has paid the Settlement Amount as set forth in Section 6.B.1. Until cancelled in accordance with Section 6.B.2, a finding in favor of the Studios in an Enforcement Action shall declare the unpaid balance under the Note to be immediately due, as described above in Sections 4.E and 6.B.2.

2.

If and only in the event the Reorganized Debtor makes a written request and the following conditions are all satisfied or waived by the Studios, the Studios shall enter into a written subordination agreement (“Subordination Agreement”) and thereby subordinate the Compliance Lien and any other lien rights granted to them under this Plan:

a.

No uncured Default exists under the Plan or this Settlement Agreement or any of the Plan Supplement Documents as of the date of execution of the Subordination Agreement;

b.

The subordination in the Subordination Agreement provides only for the subordination of the priority of the Compliance Lien and any other lien rights granted to the Studios under the Plan or this Settlement Agreement or any of the Plan Supplement Documents, and the Subordination Agreement contains no provisions which limit, impair, preclude or purport to limit, impair or preclude the Studios’ rights or ability to enforce or pursue remedies granted to them in the event of a Default;

c.

The purpose of the Subordination Agreement is to allow the Reorganized Debtor to obtain secured business loans for working capital to support ongoing or contemplated operations or refinancing of existing debt;

d.

Any subordination of the priority of the Compliance Lien and any other lien rights shall be limited in amount to the greater of Ten Million Dollars ($10,000,000) or 1.15x the balance of Shareholder’s Equity (as defined under GAAP) of the Reorganized Debtor, but in no event any greater than Twenty Five Million Dollars ($25,000,000), until the Settlement Amount ($9.9 million or, if applicable, $7.8 million) is paid in full (not limited once the Settlement Amount has been paid). For purposes of clarification, the then-balance of the Studios Monetary Claim will not be included in the ratio while the Settlement Amount has not been fully paid.

e.

The counterparty to the Subordination Agreement must be an arm’s length, non-insider third party, including a bank or a credit union;

f.

No proceeds received from the counterparty to the Subordination Agreement may be paid or distributed to any insider of the Reorganized Debtor (except for any salary that may be paid to such insider for services actually rendered in the ordinary course of the Reorganized Debtor’s business); and

g.

The Subordination Agreement shall also be signed by the Reorganized Debtor, and shall contain the Reorganized Debtor’s express representation and agreement that any default under the loan and security documents of the counterparty to the Subordination Agreement that is not cured within the applicable cure period established by such loan and security documents is an automatic Default under the terms of the Plan and this Settlement Agreement allowing the Studios to immediately enforce their rights and remedies under the Plan and this Settlement Agreement, including their right to enforce the Compliance Lien.

3.

Provided the Reorganized Debtor is not in Default (i.e., there is no Notice of Default that is not Cured or the subject of a Notice of Dispute or Enforcement Action proceeding), the Compliance Lien shall be released and eliminated, and the Security Agreement shall expire, fourteen (14) years after the Effective Date (the “Release of Compliance Lien”).

4.

Neither the expiration of the Security Agreement/Compliance Lien in accordance with Section 6.C.3, nor satisfaction of payment obligations of the Note in accordance with Section 6.B.2, shall relieve the Reorganized Debtor of its obligations to comply with the Express Covenants.

D.

Merging of Claims: The Studios’ proofs of claims in the Bankruptcy Case and the Monetary Judgment in the California Action will be superseded by this Settlement Agreement, the Plan, Note, and the Security Agreement after all of the following events have occurred: (1) entry of the Approval Order and Confirmation Order and the occurrence of the Effective Date; (2) the dismissal of the appeals in the California Action; and (3) execution and delivery of the Note and the Security Agreement. After the foregoing events have occurred, the Studios will have the rights and remedies as provided for in the Settlement Agreement, the Plan, Note, and the Security Agreement and will not seek to enforce the Monetary Judgment in the California Court or any other court of competent jurisdiction. The Studios will continue to have all rights and remedies under the Settlement Agreement, Plan, Note, and Security Agreement, including collecting on the balance of the Note (reflecting the full amount of the Studios Monetary Claims) if they prevail on an Enforcement Action. The Studios will continue to have all rights and remedies under the Permanent Injunction. The parties will file a notice of settlement with the California Court in the form attached hereto as Exhibit ___.

SECTION 7.

Dispute Resolution Regarding Harmon Parties’ Covenants:

A.

The Harmon Parties agree to be bound, in their individual capacity, by the Express Covenants in Section 2.

B.

Legal Action Against the Harmon Parties for Violations of Express Covenants:

1.

Any proceeding under Section 7.B.2 by the Studios against the Harmon Parties for breach of the Express Covenants must be filed initially in the Bankruptcy Court. If the Bankruptcy Court does not accept jurisdiction, the proceedings under Section 7.B.2, below, must then be filed with the Federal District Court for the District of Utah (Salt Lake City), and the Parties consent to jurisdiction (and will not dispute jurisdiction) before that Court and agree to stipulate and abide by the same timing considerations unless ordered otherwise. If both the Bankruptcy Court and the Federal District Court for the District of Utah refuse to accept jurisdiction, the proceedings under Section 7.B.2, below, must then be filed with the Third Judicial District Court in and for Salt Lake County, State of Utah, located at Matheson Courthouse, 450 South State Street in Salt Lake City, Utah. The Harmons Parties will consent and not object to the jurisdiction of the Bankruptcy Court for all purposes to enforce the Express Covenants against them and agree that the orders of the Bankruptcy Court are binding on and enforceable against them.

2.

Any action filed by the Studios against the Harmon Parties for breach of the Express Covenants shall be an expedited proceeding, noticed with no more than ten (10) Business Days between the filing of the action and hearing, subject to the Bankruptcy Court’s availability. Any written opposition to the action must be filed and served within two (2) Business Days before the hearing. The Utah Bankruptcy Court may, for good cause shown, allow discovery, increase in page limits or grant an extension of time.

3.

The primary issues for the Bankruptcy Court’s decision regarding an alleged violation of the Express Covenants are:

a.

As it relates to Section 2.A, the issues referenced in Section 4.B.2(b)-(d); provided, however, the Harmon Parties are not precluded from raising other defenses that the Bankruptcy Court may consider in its discretion; and

b.

As it related to Section 2.B and 2.C: whether the conduct violated the Covenant Not to Sue or the Covenant Not to Seek Certain Changes to Law.

4.

If the Studios prevail against the Harmon Parties for violation of the Express Covenants, the Studios shall be entitled to only a temporary restraining order, preliminary injunction, or other equitable relief, and reasonable attorneys’ fees and costs, as set forth in Section 7.C. The Studios shall not be entitled to monetary damages. For avoidance of any doubt, the Harmon Parties shall not be personally liable for any damages arising from the breach of this Settlement Agreement, other than to the extent of their equity interest in VidAngel where the Studios have the right to foreclose, and reasonable attorneys’ fees and costs as set forth in Section 7.C.

5.

The Harmon Parties agree that the Studios would be irreparably harmed by and are entitled to injunctive relief for a breach by the Harmon Parties of an Express Covenant and that monetary damages would be inadequate, impracticable, and difficult to prove.

C.

Attorneys’ Fees: In any action pursuant to Section 7.B brought against the Harmon Parties for a violation of the Express Covenants, the prevailing party (as determined by the court) shall be entitled to an award of its reasonable attorneys’ fees and costs. 

D.

Limitations: Any legal action pursued by the Studios against the Harmon Parties personally for breach of the Express Covenants shall be subject to the following:

1.

The Studios’ right to enforce the Express Covenants against the Harmon Parties shall expire fourteen (14) years from the Effective Date, unless terminated earlier as set forth in Section 7.D.2.

2.

If the Studios do not prevail on the merits in establishing a violation of the Express Covenants in two actions that the Studios commence during such fourteen (14) year period, the Studios will be barred from bringing any additional action for breach of the Express Covenants of this Settlement Agreement against the Harmons Parties in their individual capacities. (For example, and without limitation, this limitation on the Studios’ right to bring additional actions would not apply if the court dismissed on procedural grounds or found a violation but declined to enter injunctive relief.)

3.

Unless the Harmon Parties are agents or principals of the Reorganized Debtor at the time of the act(s) allegedly giving rights to such a claim, nothing in this Section or in this Settlement Agreement applies to or limits the Studios’ right to seek relief against the Harmon Parties under the Copyright Act, DMCA, or other applicable law in a court of competent jurisdiction. To the extent the Harmon Parties are agents or principals of the Reorganized Debtor at the time of the act(s) and acting in their capacity as agents or principals, however, Sections 3 and 4 of this Settlement Agreement shall apply.

SECTION 8.

Additional Provisions:

A.

Notices: All Notices under the Settlement Agreement shall be in writing, and shall be sent by overnight delivery and via email to all of the parties listed email addresses on the same day, as follows:

1.

VidAngel, Inc. and/or Reorganized Debtor

Attn: President/CEO

295 West Center Street

Provo, UT 84601

Email: studios-notice@vidangel.com

-and-

Joseph M.R. Covey, Esq.

Parr Brown Gee & Loveless

101 South 200 East, Suite 700

Salt Lake City, Utah 84111

Email: jcovey@parrbrown.com

2.

Harmon Parties

To Neal Harmon

295 West Center Street

Provo, UT 84601

Email: neal@vidangel.com

To Jeffrey Harmon

295 West Center Street

Provo, UT 84601

Email: jeff@vidangel.com

-and for each of the Harmon Parties-

Joseph M.R. Covey, Esq.

Parr Brown Gee & Loveless

101 South 200 East, Suite 700

Salt Lake City, Utah 84111

Email: jcovey@parrbrown.com

3.

Studios

To Disney Enterprises, Inc., Lucasfilm Ltd. LLC, MVL Film Finance, LLC, and Twentieth Century Film Corporation

General Counsel

The Walt Disney Company

500South Buena Vista Street

Burbank, CA 91521

To Warner Bros. Entertainment Inc., New Line Productions, Inc., and Turner Entertainment Co.

Attn: General Counsel

4000 Warner Blvd.

Burbank, CA 91522

-and for each of the Studios-

Michael R. Johnson, Esq.

Ray Quinney & Nebeker P.C.

36 South State Street, 14th Floor

Salt Lake City, Utah 84111

Email: mjohnson@rqn.com

-and-

Rose Ehler, Esq.

Munger, Tolles & Olson LLP

350 South Grand Avenue, 50th Floor

Los Angeles, California 90071-3426

Email: rose.ehler@mto.com

4.

Trustee

George Hofmann, Trustee

Cohne Kinghorn, P.C.

111 East Broadway, 11th Floor

Salt Lake City, Utah 84111

Email: ghofmann@ck.law

-and-

Matthew M. Boley, Esq.

Jeffrey L. Trousdale, Esq.

Cohne Kinghorn, P.C.

111 East Broadway, 11th Floor

Salt Lake City, Utah 84111

Email: mboley@ck.law, jtrousdale@ck.law

5.

Notices are deemed sent and received on the day the email is sent. If an email address is no longer current or operational, the Written Notice is nonetheless deemed sent in accordance with this provision.

6.

A party may modify to whom notice is to be given by sending Written Notice to the other parties in compliance with this provision. The modification shall become effective upon receipt.

B.

Successors and Assigns: This Settlement Agreement shall be binding on and/or inure to the benefit of any and all successors or assigns of VidAngel, the Studios, and the Studio Affiliates.

C.

Binding Effect: Subject to entry of the Approval Order and Confirmation Order by the Bankruptcy Court, this Settlement Agreement is binding upon the Parties (and, only as applicable, the Harmon Parties) and any and all their respective heirs, successors and assigns. Nothing in this Settlement Agreement shall be construed to create any rights or obligations except among the Parties (or, as applicable, the Harmon Parties), and, except as expressly provided herein with respect to the Studio Affiliates and Released Parties, no person or entity shall be regarded as a third party beneficiary of this Settlement Agreement.

D.

Modifications and Amendments: The terms and provisions of this Settlement Agreement may be modified or amended only by a written agreement executed by all Parties (and, if an amendment effects the rights or obligations of the Harmon Parties, by the Harmon Parties).

E.

Governing Law: This Settlement Agreement hereunder shall be construed in accordance with and governed by the law of the State of Utah, without giving effect to the conflict of law principles thereof.

F.

Bankruptcy Court Approval: The effectiveness of the Settlement Agreement is expressly conditioned upon the Bankruptcy Court’s entry of (i) the Approval Order, approving the Settlement Agreement without changes and agreeing to assume jurisdiction to resolve disputes and (ii) the Confirmation Order confirming the Joint Chapter 11 Plan, to be proposed jointly by the Trustee and the Studios, without changes. In the event the Bankruptcy Court fails to enter the Approval Order and/or Confirmation Order, this Settlement Agreement shall become null and void, and the Parties shall be restored to the positions they enjoyed prior to their entry in this Settlement Agreement. Notwithstanding the foregoing, or any other provision of this Settlement Agreement to the contrary, the Parties immediately are, and shall be, obligated (A) to make their best efforts to obtain entry of the Approval Order promptly and on or before the deadline(s) specified herein, and (B) to jointly prepare, submit and request confirmation of a Joint Chapter 11 Plan, including the Exhibits, Note, and Security Agreement, in the Bankruptcy Case which, among other provisions, approves and implements the terms of this Settlement Agreement.

G.

Execution and Delivery: This Settlement Agreement may be executed in one or more counterparts, all of which shall be considered one and the same Settlement Agreement and shall become effective when counterparts have been signed by each of the Parties and delivered to the other Parties, it being understood that all Parties need not sign the same counterpart. Delivery of a copy of this Settlement Agreement bearing an original signature by facsimile transmission or via electronic email in “portable document format” (PDF) shall have the effect as physical delivery of the paper document with the original signature.

H.

Settlement Discussions: Nothing in this Settlement Agreement shall be deemed an admission of any kind. To the extent provided by Federal Rule of Evidence 408 and any applicable state rules of evidence, the Settlement Agreement and all negotiations relating thereto shall not be admissible into evidence in any proceeding other than in support of a proceeding to enforce the terms of this Settlement Agreement.

I.

Integration Clause: This Settlement Agreement reflects the entire agreement between the Parties and Harmon Parties with respect to the matters specifically addressed herein (but not the contemplated separate agreements) and supersedes any and all prior written and/or oral agreements, negotiations, discussions, or understandings. However, this Settlement Agreement is part of an overall series of agreements transaction embodied in the Joint Chapter 11 Plan and Exhibits thereto, the Note, and Security Agreement, each of which will include many customary commercial terms and provisions. While it is anticipated that the Plan, Note, and Security Agreement may contain terms in addition to those specified herein, they shall not directly contradict the terms of this Settlement Agreement. This Settlement Agreement may be altered or modified only in writing signed by the parties hereto.

J.

Limited Releases:

1.

The Debtor, the Reorganized Debtor, the Chapter 11 Trustee, and the Harmon Parties (the “Debtor and Harmon Parties Releasors”), and all persons claiming by, through or under them shall be deemed to have fully released and discharged the Studios and their agents, attorneys, employees, officers, directors, representatives, affiliates, subsidiaries, predecessors, successors and assigns (collectively, the “Studio Released Parties”), from any and all manner of actions, causes of action in law or equity, suits, debts, liens, contracts, liabilities, claims, demands, damages, losses, fees, costs or expenses, set offs, or claims for recoupment, of any kind or nature whatsoever, known or unknown, fixed or contingent, (collectively, “Claims”) that concern, arise out of or relate to, the Claims and allegations in the California Action, the Utah Declaratory Judgment Action or the Bankruptcy Case that were asserted or could have been asserted by the Debtor and the Harmon Parties in any of those actions, or could have been asserted in any forum or proceeding or otherwise by the Debtor and the Harmon Parties against the Studio Release Parties that the Debtor and Harmon Parties Releasors have or may have against the Studio Release Parties, from the beginning of time to the Effective Date (collectively the “Debtor and Harmon Parties’ Released Claims”). The Debtor and Harmon Parties’ Released Claims do not include claims that concern, arise out of, or are based upon the Settlement Agreement, Plan, Note, Security Agreement, Covenant Not to Compete, including all exhibits and attachments thereto, arising after the Effective Date.

2.

The Studios, and all persons claiming by, through or under them (the “Studio Releasors”) shall be deemed to have fully released and discharged the Debtor, the Reorganized Debtor, the Chapter 11 Trustee, and the Harmon Parties and their agents, attorneys, employees, officers, directors, representatives, affiliates, subsidiaries, predecessors, successors and assigns (collectively, the “Debtor Release Parties”), from any and all manner of actions, causes of action in law or equity, suits, debts, liens, contracts, liabilities, claims, demands, damages, losses, fees, costs or expenses, set offs, or claims for recoupment, of any kind or nature whatsoever known or unknown, fixed or contingent, (collectively, “Claims”), that concern, arise out of or relate to, the Claims and allegations in the California Action, the Utah Declaratory Judgment Action or the Bankruptcy Case that were asserted or could have been asserted by the Studio Releasors in any of those actions, or could have been asserted in any forum or proceeding or otherwise by the Studio Releasors against the Debtor Release Parties that the Studio Releasors have or may have against the Debtor Release Parties, from the beginning of time to the Effective Date; (collectively the “Studios Released Claims”). The Studios Released Claims do not include claims that concern, arise out of, or are based upon the Settlement Agreement, Plan, Note, Security Agreement, Covenant Not to Compete, including all exhibits and attachments thereto, arising after the Effective Date.

3.

Section 1542 Waiver: Each party expressly waives and relinquishes, to the fullest extent permitted by law, the provisions, rights, and benefits conferred by any law of any state or territory of the United States, or principle of common law, or international or foreign law, which would limit the scope of the releases provided above, including any provision which is similar, comparable, or equivalent to Section 1542 of the California Civil Code, which provides:

A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.

K.

Joint Chapter 11 Plan. The Trustee and the Studios shall prepare, file and seek to confirm a Joint Chapter 11 Plan in the Bankruptcy Case based on the Studios’ Plan, as amended May 14, 2020, which, among other provisions, approves and implements the terms of this Settlement Agreement. Among other provisions, the Joint Chapter 11 Plan will provide for inclusion of the Express Covenants as part of the Plan as they relate to the Reorganized Debtor, the dismissal of the appeals from the California Action and the Note, Security Agreement and Covenant Not to Compete, which are being finalized concurrently with this Settlement Agreement and are material parts of the consideration for this Settlement Agreement. The Joint Chapter 11 Plan shall be consistent with this Settlement Agreement and if there is inconsistency, this Settlement Agreement shall control. The Trustee shall be a co-proponent of the Joint Chapter 11 Plan. The Parties shall work diligently to file the Joint Chapter 11 Plan on or before September 10, 2020 and seek an Approval Order and Confirmation Order from the Bankruptcy Court on or before September 15, 2020, subject to the Bankruptcy Court’s schedule. The Parties will request that the Bankruptcy Court make the Joint Chapter 11 Plan effective as of the first Business Day following entry of the Confirmation Order. The Harmon Parties agree that, provided the terms of the Joint Chapter 11 Plan are consistent with the terms of this Settlement Agreement, they shall vote for and otherwise support confirmation of the Plan. The Trustee has proposed and the Studios will not object to inclusion in the Joint Chapter 11 Plan the provisions contained in Exhibit A hereto.

L.

Permanent Injunction: Nothing in this Settlement Agreement shall affect the exclusive jurisdiction of the California Court over the Permanent Injunction, which shall remain binding and in full effect following the Effective Date.

M.

Dismissal of Appeals: Within three (3) Business Days of the Effective Date, the Reorganized Debtor and/or Trustee will file a Notice of Voluntary Dismissal of the appeals of the California Action, Ninth Circuit Case Nos. 19-56174, 20-55352.

N.

No Construction Against Drafter: The Parties and the Harmon Parties to this Settlement Agreement have each cooperated in its drafting and preparation. Thus, the language of all parts of this Settlement Agreement shall in all cases be construed as a whole, according to its fair meaning and not strictly for or against any party as the drafter thereof.

O.

Additional Representations and Warrants:

1.

The Parties and the Harmon Parties, and each of them, represent and declare that in executing this Settlement Agreement, they rely solely upon their own judgment, belief and knowledge, and on the advice and recommendations of their own independently selected counsel, concerning the nature, extent and duration of their rights and claims and that they have not been influenced to any extent whatsoever in executing the same by any representations or statements covering any matters made by any of the Parties or the Harmon Parties or by any person representing them or any of them. The Parties and the Harmon Parties acknowledge that no party hereto nor any of their representatives has made any promise, representation or warranty whatsoever, written or oral, as any inducement to enter into this Settlement Agreement, except as expressly set forth in this Settlement Agreement.

2.

The Parties and the Harmon Parties further represent and warrant that they have carefully read and considered all aspects of this Settlement Agreement and know and understand all the contents thereof, and that they signed this Settlement Agreement freely and voluntarily, without duress or coercion of any kind, having had the opportunity to consult with counsel throughout this process. The representative from each company executing this Settlement Agreement represents that he/she is empowered to do so on its behalf and thereby bind his or her respective company.

CONFIDENTIAL DRAFT

FOR SETTLEMENT PURPOSES ONLY

FED. R. EVID. 408 AND ALL SIMILAR PRIVILEGES

IN WITNESS WHEREOF, the parties have executed and entered into this Settlement Agreement on the day and year written above:

VIDANGEL, INC.

a Delaware Corporation and debtor in bankruptcy

By /s/ George Hoffmann

George Hofmann

Trustee of VidAngel, Inc.

DISNEY ENTERPRISES, INC.

By /s/ Gregory Belzer

Print Name: Gregory Belzer

Print Title: Assistant Treasurer, Disney Enterprises, Inc.

LUCASFILM LTD., LLC

By /s/ Daniel E. Grossman

Print Name: Daniel E. Grossman

Print Title: Vice President, Lucasfilm LTD., LLC

TWENTIETH CENTURY FOX FILM CORPORATION

By /s/ Chakira H. Gavazzi

Print Name: Chakira H. Gavazzi

Print Title: Secretary, Twentieth Century Fox Film Corporation

WARNER BROS. ENTERTAINMENT, INC.

By /s/ Patrick T. Perkins

Print Name: Patrick T. Perkins

Print Title: SVP, Chief IP Counsel

MVL FILM FINANCE, LLC

By /s/ Carlos A. Gomez

Print Name: Carlos A. Gomez

Print Title: Treasurer, MVL Film Finance LLC

NEW LINE PRODUCTIONS, INC.

By /s/ Patrick T. Perkins

Print Name: Patrick T Perkins

Print Title: SVP, Chief IP Counsel

TURNER ENTERTAINMENT CO.

By /s/ Patrick T. Perkins

Print Name: Patrick T Perkins

Print Title: SVP, Chief IP Counsel

SIGNING SOLELY AS TO SECTIONS 1, 2 AND 7 AND PORTIONS OF SECTIONS 6 and 8:

 /s/ Neal Harmon

NEAL HARMON, an individual

/s/ Jeffrey Harmon

JEFFREY HARMON, an individual

CONFIDENTIAL DRAFT

FOR SETTLEMENT PURPOSES ONLY

FED. R. EVID. 408 AND ALL SIMILAR PRIVILEGES

EXHIBIT A

Notwithstanding anything to the contrary under the Plan, the Reorganized Debtor may issue new equity interests after the Effective Date, including without limitation, by: (i) offering employees “options” or “rights” to purchase equity interests in the Reorganized Debtor; (ii) implementing new rounds of Crowdfunding; (iii) issuing or selling shares, certificates, notes, bonds, indentures, purchase rights, options, warrants, or other instruments, documents, or methods providing for new ownership interests in the Reorganized Debtor (collectively, the “New Equity Options”). Nothing herein is intended to constitute the disclosure of such information as may be required by the SEC, similar state agencies, or federal or state law for the sale of securities. In the event that any or all of the New Equity Options are implemented, the Reorganized Debtor shall provide such disclosures at such time as are required by applicable law. The Debtor is, and shall be, authorized to issue and award up to 956,200 Class A Stock Options to the Debtor’s Employees as of the Effective Date. To the extent that the Debtor has reserved additional Class A Options for its Employees or future employees, the Reorganized Debtor may issue or award such options at any time after the Effective Date. Subject to the requirements of its organizational and other corporate documents, the Reorganized Debtor shall retain full discretion as to how, to whom, and in what amounts it will issue the Class A Stock Options.

The Reorganized Debtor may restructure or otherwise reorganize its corporate structure, including, without limitation, by “spinning off” its “original content” line of business, its Self-Selected Viewing Service business, and its “DryBar Comedy” line of business into three or more separate entities. It is possible that such a “spin off” could entail the transfer of a portion, all, or substantially all of the Reorganized Debtor’s assets into one or more newly formed entities. Notwithstanding any “spin off” of any of its lines of business, the new entities, the Reorganized Debtor, and all property of the new entities and the Reorganized Debtor, shall remain subject to the provisions of this Settlement Agreement and the Plan and the Plan Supplement Documents as though each is considered to be part of “Reorganized Debtor” or its property, including without limitation paying obligations under the Plan, the Express Covenants, and the Note and Security Agreement. Further, each new entity shall sign such further documentation as the Studios may reasonably request in order to document and affirm or reaffirm their agreement to be bound by the terms of this Settlement Agreement, the Plan and the Plan Supplement Documents, and the Studios are hereby authorized to file and/or record such UCC-1 financing statements or other document as they deem appropriate in their sole discretion to evidence the creation, attachment and/or perfection of their lien on the assets of the new entities.

Any covenant not to compete to be signed by the Harmon Parties pursuant to the Plan shall be limited to one year and to the business of filtering content.

EX1U-1 UNDR AGMT

Exhibit 1.3a

Salt Lake City, Utah

Date: _______________, 2020

PROMISSORY NOTE

FOR VALUE RECEIVED, VIDANGEL, INC., a Delaware corporation and reorganized debtor pursuant to the Plan, as specified below (the “Obligor” or “VidAngel”) promises to pay to the order of Disney Enterprises, Inc., Lucasfilm Ltd. LLC, Twentieth Century Fox Film Corporation, Warner Bros. Entertainment Inc., MVL Film Finance LLC, New Line Productions, Inc., and Turner Entertainment Co. (the “Payees” or “Studios”), with all payments to be made to the Payees’ Payment Agent address located at [PLACEHOLDER FOR PAYMENT INFORMATION], or at such other location as designated in writing by the Payees, in lawful money of the United States of America, the principal amount of Sixty Two Million Four Hundred Sixty One Thousand Four Hundred Fifty Six and No/100 Dollars ($62,461,456.00) or such portion thereof as may be outstanding.

1.           The Obligor’s Obligations Arising Under the Plan and the Settlement Agreement. This Promissory Note (the “Note”) documents the payment obligations of the Obligor arising under (a) that certain Joint Consensual Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, including all exhibits thereto, dated _____________, 2020 (the “Plan”) that was confirmed by the United States Bankruptcy Court for the District of Utah (the “Bankruptcy Court”) in the case of In re VidAngel, Inc., Case No. 17-29073-KRA (the “Bankruptcy Case”) pursuant to that certain Confirmation Order entered by the Bankruptcy Court in the Bankruptcy Case on _________________, 2020 [Dkt. ____], and (b) that certain Settlement Agreement, dated ___________________, 2020 (the “Settlement Agreement”), that was approved by the Bankruptcy Court in the Bankruptcy Case pursuant to Federal Rule of Bankruptcy Procedure 9019 on _________________________, 2020 [Dkt. _____].

3.           Studios Monetary Claim; No Interest. The “Studios Monetary Claim” in favor of the Payees, jointly, is in the amount of Sixty Two Million Four Hundred Sixty One Thousand Four Hundred Fifty Six and No/100 Dollars ($62,461,456.00). The unpaid balance of this Note, including the unpaid balance of the Studios Monetary Claim, shall not bear interest.

4.           Payment Terms. Pursuant to the Plan and the Settlement Agreement (the terms of which are incorporated herein by this reference), and notwithstanding the face amount of the Studios Monetary Claim or anything set forth herein to the contrary, VidAngel’s payment obligations to the Payees under this Note are as follows:

A.           The unpaid balance of the Note in the amount of the Studios Monetary Claim less any payments that have been made by VidAngel under the Note will remain outstanding for fourteen (14) years from the Effective Date and the Studios will have the right to collect on the unpaid balance in the circumstances set forth in the Settlement Agreement and subsection 4.B, below. Without limiting the foregoing, VidAngel will not have further installment payments due on the Note after timely payment to the Payees, collectively, of Nine Million Nine Hundred Thousand and no/100 Dollars ($9,900,000) (the “Settlement Amount”).

i.           The Settlement Amount shall be payable in fifty-six (56) equal quarterly installments of $176,785.72 (payable on January 15, April 15, July 15, and October 15 (or the next business day) of each year over a period of fourteen (14) years) with the first payment due on October 15, 2020.

1

ii.           If there are no Strikes1 against VidAngel for at least three (3) years from the Effective Date, and no uncured payment defaults, VidAngel may satisfy the Settlement Amount at the end of the three-year period by making an additional lump sum payment to the Payees, collectively, such that its total payments shall equal Seven Million Eight Hundred Thousand and no/100 Dollars ($7,800,000). VidAngel, at its option, can extend this period for up to an additional two (2) years (for a total period of five (5) years from the Effective Date) assuming it has no Strikes during both the 3-year initial period and the extended period (i.e., the no-Strike and lesser payment periods are coterminous).

iii.           If VidAngel fails to timely make any payment due under this Note (subject to its right to pay the lesser Settlement Amount), such failure to pay shall constitute a Default. If VidAngel fails to cure its payment default within five (5) Business Days after a Notice of Default served by the Payees, or any of them, the Payees shall be entitled to accelerate payment remaining Studios Monetary Claim under the Note and exercise any and all of their rights under the Security Agreement.

B.           Even if the Settlement Amount is timely paid in full, the remaining balance of the Studios Monetary Claim shall remain outstanding for the full fourteen (14) years from the Effective Date. If prior to the expiration of fourteen (14) years, the Payees prevail in an Enforcement Action against VidAngel, the Payees shall be immediately entitled to collect the entire remaining balance of the Studios Monetary Claim, consisting of the face amount of the Studios Monetary Claim in the amount of $62,461,456.00, less any payments that have been made by VidAngel under the Note.

C.           If, upon the expiration of fourteen (14) years after the Effective Date, the Settlement Amount is timely paid in full and there is no Uncured Default and there have not been four Strikes in a consecutive five (5) year period, then the any remaining balance under the Note shall be cancelled, and the original Note marked “Paid and Cancelled” shall be returned to VidAngel.

5.           

Prepayments. The quarterly payments under the Note may be prepaid in part or in full at any time without penalty.

6.           

Collateral for the Obligations under the Note. As collateral security (the “Collateral”) for its Obligations under the Note, VidAngel has granted to the Payees a security interest in certain of the Obligor’s assets (the “Personal Property”) more particularly identified in the Security Agreement (the “Security Agreement”) of even date with this Note that shall obligate the Obligor in favor of the Payees. The Payees are hereby authorized to file Uniform Commercial Code financing statements covering the Personal Property in the State of Delaware and/or in the State of Utah and/or with the United States Patent & Trademark Office, listing the Obligor as VidAngel and the Payees as the Secured Parties. The Security Agreement and the security interests granted therein shall continue in effect for a period of fourteen (14) years from the Effective Date, and secure the remaining balance of the Studios Monetary Claim, even if all non-default payment obligations under this Note are paid and satisfied in full prior to that date. At the end of the fourteen (14) year period, this Security Agreement and the security interests granted in the Collateral shall expire and no longer be effective.

7.           

Events of Default; Remedies Following Event of Default. Subject to the terms and conditions of the Settlement Agreement and the Plan, a default under the Plan, Security Agreement and/or the Settlement Agreement shall likewise constitute an Event of Default under this Note. Upon the occurrence of a Default under this Note (including a default in payment) or the Settlement Agreement, adjudicated in favor of the Studios through an Enforcement Action, the Payee shall have the immediate right to pursue or enforce all rights and remedies, individually or cumulatively, given to it under the Plan, the Settlement Agreement and the Security Agreement including, without limitation, the right to enforce and foreclose upon the lien in the Collateral granted by the Security Agreement. Except as provided in the Settlement Agreement or the Plan, Obligor waives the right to require Payees to pursue any other remedy for the benefit of Obligor and agrees that Payees may proceed against Obligor to collect the accelerated balance of the Note owed by Obligor to Payees in accordance with the terms of the Plan, the Settlement Agreement, the Security Agreement, and this Note.

1 Capitalized terms not defined herein shall have the meaning given to them in the Settlement Agreement.

 

2

8.           

General. Subject to the notice requirements specified in the Settlement Agreement and the Plan (and any additional notices required or specified in this Note), the Obligor waives presentment for payment, protest, notice of protest and of nonpayment of this Note. The Obligor specifically consents to and waives notice of the release by the Payees of all or any part of the Collateral for the payment of the Note. Subject to the terms of the Settlement Agreement and the Plan, the Obligor agrees that the failure of the Payees to exercise any rights under their Note shall not constitute a waiver in the event of a later default. This Note shall be governed by the laws of the State of Utah. The Obligations of Obligor under this Note are binding upon the successors of the Obligor. Time is of the essence of this Note. The provisions of this Note are intended to be severable and, therefore, the invalidity or unenforceability of any part or portion hereof shall not operate to invalidate or make unenforceable any other provision or term hereof. Except only as provided in the Settlement Agreement or the Plan, No forbearance, failure to exercise a remedy or right, waiver in any given instance of a remedy or right, or other action or inaction in neglect or relinquishment of the same, shall constitute a waiver of the same for any other purpose or be a bar to the subsequent exercise of any right or remedy.

[this space left blank intentionally]

9.           

Entire Agreement. This Note, together with the Plan, the Settlement Agreement and Security Agreement, reflects the final expression of the agreement and understanding between Obligor and Payees, superseding any previous understanding, negotiations or discussions, whether written or oral. The Note, the Plan, the Settlement Agreement, and the Security Agreement may not be contradicted by evidence of any alleged oral agreement. This Note may, and does, contain terms in addition to those specified in the Settlement Agreement and Plan. In the event that any provision of this Note is inconsistent with an express provision of the Settlement Agreement, however, the terms of the Settlement Agreement shall control. For example, this Note may be enforced only through the institution of an Enforcement Action, subject to the notice requirements and limitations specified in the Settlement Agreement, including in section 4.E thereof.

OBLIGOR:

VIDANGEL, INC., a Delaware corporation

By: _________________________________

Name: George Hofmann, in his representative capacity as the duly appointed Chapter 11 Trustee of Obligor, VidAngel, Inc.

--and--

By: _________________________________

Name: Neal Harmon, President and Chief Executive Officer of Obligor, VidAngel, Inc.

3

EX1U-1 UNDR AGMT

Exhibit 1.3b

SECURITY AGREEMENT

(VidAngel, Inc.)

This Security Agreement (“Security Agreement”) is made and delivered this __________ day of ________________, 2020, by VidAngel, Inc., and any and all of its existing and future subsidiaries and affiliates (“VidAngel” or “Debtor”), a Delaware corporation, as a debtor under the Uniform Commercial Code (as defined herein). This Security Agreement is delivered to and for the benefit of Disney Enterprises, Inc., Lucasfilm Ltd. LLC, Twentieth Century Fox Film Corporation, Warner Bros. Entertainment Inc., MVL Film Finance LLC, New Line Productions, Inc., and Turner Entertainment Co. (collectively the “Secured Parties” or “Studios,” and each individually a “Secured Party”).

Recitals

WHEREAS, this Security Agreement is part of the documentation required to secure the VidAngel’s monetary and non-monetary obligations to the Secured Parties under (a) that certain Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code including all exhibits thereto, dated _____________, 2020 (the “Plan”) that was confirmed by the United States Bankruptcy Court for the District of Utah (the “Bankruptcy Court”) in the case of In re VidAngel, Inc., Case No. 17-29073-KRA (the “Bankruptcy Case”) pursuant to that certain Confirmation Order entered by the Bankruptcy Court in the Bankruptcy Case on _________________, 2020 [Dkt. ____] (“Confirmation Order”), and (b) that certain Settlement Agreement, dated ___________________, 2020 (the “Settlement Agreement”), that was approved by the Bankruptcy Court in the Bankruptcy Case pursuant to Federal Rule of Bankruptcy Procedure 9019 on _________________________, 2020 [Dkt. _____].

WHEREAS, VidAngel’s monetary and non-monetary obligations to the Secured Parties are evidenced by the Plan, Confirmation Order, Settlement Agreement, by this Security Agreement and by the Promissory Note made by VidAngel as maker and payable to the Secured Parties, as described more fully below (the “Note”).

WHEREAS, pursuant to the terms of the Plan, Confirmation Order, Note and the Settlement Agreement, each of the Secured Parties is a beneficiary of the Lien, which is described in this Security Agreement (the “Lien”).

WHEREAS, this Security Agreement and the Lien shall continue in effect for a period of fourteen (14) years from the Effective Date of the Plan to secure compliance with the Obligations, as defined below, even if VidAngel has paid the Settlement Amount as set forth in the Note prior to that date. At the end of the fourteen (14) year period, and if all of the Obligations have been satisfied in full, and there is not an Uncured Default, the Security Agreement and the Lien shall expire and no longer be effective.

NOW, THEREFORE, in consideration of the promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.           Definitions. All capitalized terms used herein without definitions shall have the respective meanings provided therefor in the Settlement Agreement, Note, Plan and/or Confirmation Order, as applicable. All terms used herein that are defined in Section 70A-9a-101 et seq. of the Utah Uniform Commercial Code, as amended, or in the corresponding sections of the Delaware Uniform Commercial Code (the Utah and the Delaware versions of the Uniform Commercial Code are collectively referred to herein as the “Uniform Commercial Code”) shall have the same definitions herein as specified in the Uniform Commercial Code. In addition to the foregoing, the following terms as used herein are defined as follows:

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1.1           Obligations. “Obligations” means, collectively:

(a)           Payment of all of the indebtedness evidenced by the Promissory Note, of even date herewith and payable to the order of Secured Parties in the principal sum of Sixty Two Million Four Hundred Sixty One Thousand Four Hundred Fifty Six and No/100 Dollars ($62,461,456.00) (“Studios Monetary Claim”) and made by VidAngel and payable to the Secured Parties at the times and in the manner as therein set forth, and any amendments, restatements, extensions, renewals or modifications thereof (all of which are included in the definition of the “Note”).

(b)           The full performance of all obligations of VidAngel and in favor of any Secured Party under the Plan, including but not limited to the obligations of VidAngel set forth in Sections ___ of the Plan.

 (c)           The full performance of all obligations of VidAngel and in favor of the Secured Parties under the Settlement Agreement, including but not limited to the obligations of VidAngel set forth in Sections 2, 3, 4 and 6 of the Settlement Agreement, and all applicable subparts thereof.

(d)           All costs of collecting the indebtedness or other amounts or Obligations evidenced by the Notes or described in the Plan, the Settlement Agreement, or this Security Agreement, including reasonable attorneys’ fees and other costs of collection to the extent authorized or allowed by the Plan, the Confirmation Order and/or the Settlement Agreement.

(e)            Payment of all sums advanced by the Secured Parties to protect the Collateral (as defined below).

1.2           Excluded Cash. “Excluded Cash” means any specifically identifiable cash that (1) VidAngel receives, after August 1, 2020 (a) as a capital contribution from new or existing shareholders or equity holders, (b) as proceeds of a sale of stock or other equity interests in VidAngel (or any future Subsidiaries or Affiliates of VidAngel), or (c) as proceeds or recoveries on the Debtor’s malpractice causes of action against David Quinto and his former law firm; and (2) such cash is deposited into, and remains deposited in, one or more segregated bank accounts owned and maintained by VidAngel. The name of the bank, bank address, and account number(s) of the account(s) meeting the requirements of clause (2) must be provided to the Secured Parties. Any transaction in which VidAngel uses or transfers Excluded Cash shall be arms-length and commercially reasonable.

1.3           Collateral. “Collateral” has the meaning specified in section 2, below. Notwithstanding anything in this Security Agreement to the contrary, Collateral does not include (a) Excluded Cash, and (b) the Debtor’s malpractice causes of action against David Quinto and his former law firm.

1.4.           Affiliate. The term “Affiliate” shall have meaning given to such term under 17 CFR § 230.405.

1.5           Subsidiary. The term “Subsidiary” shall have the meaning given such term under 17 CFR 230-405.

1.6           Insider. The term “Insider” shall have the meaning given to such term under Section 101(31) of Title 11 of the United States Code.

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2.           Grant of Security Interest. To secure the payment and performance in full of all of the Obligations, VidAngel, along with its Affiliates and Subsidiaries, hereby grant to the Secured Parties a security interest in and a pledge and assignment to the Secured Parties of the following properties, assets, and rights, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (all of the same being hereinafter called the “Collateral”):  

All their personal and real property assets, whether currently owned or controlled by VidAngel or its Affiliates and Subsidiaries, or whether acquired, created, owned, or controlled by them after the Effective Date, including without limitation all income, proceeds, and products of the same, including but not limited to the following categories of property:

(a)           All cash (except Excluded Cash), accounts, accounts receivable, deposit accounts, contracts, contract rights, documents, documents of title, payment intangibles, chattel paper, instruments, tax refunds, and deposit accounts;

(b)           all inventory;

(c)           all equipment;

(d)           all real property and all fixtures and all leases and leasehold interests;

(e)           all general intangibles and payment intangibles, including but not limited to all causes of action (other than the Debtor’s malpractice causes of action against David Quinto and his former law firm) and all intellectual property including all trademarks, tradenames, patents, patent applications, copyrights, copyright applications, good will, and work in process;

(g)           all commercial tort claims (except as provided in section 2(e), above);

(h)           all insurance claims and all insurance recoveries;

(i)           all accessions, attachments and other additions to the foregoing;

(j)           all substitutes or replacements of any of the foregoing;

(k)           all proceeds, products, rents and profits of any of the foregoing;

(l)           all rights under warranties and insurance contracts covering any of the foregoing; and

(m)           all books and records pertaining to any of the foregoing, including but not limited to any computer-readable memory and any computer hardware or software necessary to process such memory.

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3.           VidAngel’s Subsidiaries and Affiliates. This Agreement shall be executed by VidAngel and all of its existing Subsidiaries and Affiliates. VidAngel hereby covenants to cause any and all future Subsidiaries and Affiliates, as such entities are formed, to execute, grant a security interest in their Collateral and be bound by this Agreement. All assets and property of any Subsidiaries and Affiliates of VidAngel shall remain subject to the provisions of this Settlement Agreement and the Plan and the Plan Supplement Documents as though each is considered to be part of VidAngel or its property. Further, each future Subsidiary or Affiliate shall sign this Agreement, as of formation, and such further documentation as the Secured Parties may reasonably request in order to document and affirm or reaffirm their agreement to be bound by the terms of this Agreement, and the Secured Parties are hereby authorized to file and/or record such UCC-1 financing statements or other document as they deem appropriate in their sole discretion to evidence the creation, attachment and/or perfection of their lien on the assets of the new entities.

4.           Perfection of Lien. The Secured Parties may but are not required to file financing statements (and at the appropriate time continuation statements) in appropriate filing offices (including the State of Utah, Department of Commerce, Division of Corporations and Commercial Code; the Delaware Secretary of State; and/or the United States Patent & Trademark Office) as the Secured Parties deem necessary or appropriate to perfect the Lien. Accordingly, VidAngel hereby irrevocably authorizes Secured Parties at any time and from time to time to file in any filing office in the State of Utah and/or the State of Delaware and/or any other Uniform Commercial Code jurisdiction (and/or any other relevant filing office) any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of VidAngel or words of similar effect, regardless of whether any particular asset comprised as part of the Collateral falls within the scope of the Uniform Commercial Code of such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail; and (b) provide any other information required by the Uniform Commercial Code or by such other jurisdiction for the sufficiency or filing office acceptance of any financing statement or any amendment thereto. Notwithstanding anything in this Security Agreement to the contrary, the Debtor shall not be obligated to enter into any deposit account control agreements in favor of Secured Parties, or to give Secured Parties control of its deposit accounts by agreement or otherwise.

5.           No Representations and Warranties Concerning Collateral, etc. VidAngel makes no representations or warranties to Secured Parties regarding the Collateral and its current title or condition. Rather, the Collateral is pledged in its “as is,” “where is,” “if is” condition, subject to all presently existing faults.

6.           Secured Parties’ Obligations and Duties. Anything herein to the contrary notwithstanding, VidAngel shall remain obligated and liable under each contract or agreement comprised in or associated with the Collateral that is to be observed or performed by VidAngel thereunder. The Secured Parties shall not have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by the Secured Parties of any payment relating to any of the Collateral. Nor shall the Secured Parties be obligated in any manner to perform any of the obligations of VidAngel under or pursuant to any such contract or agreement; to make inquiry as to the nature or sufficiency of any payment received by the Secured Parties in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement; to present or file any claim; or to take any action to enforce any performance or to collect the payment of any amounts that may have been assigned to the Secured Parties or to which the Secured Parties may be entitled at any time or times. The Secured Parties’ sole duty with respect to the custody, safe keeping and physical preservation of the Collateral in their possession, under Section 70A-9a-207 of the Utah Uniform Commercial Code (or corresponding provisions of the Delaware Uniform Commercial Code) or otherwise, shall be to deal with such Collateral in a commercially reasonable manner and in the manner required by applicable law.

7.           Rights and Remedies.

7.1           Right of Enforcement. The Lien shall be limited to, and enforceable only to the extent authorized by, the Settlement Agreement and Plan. Without limitation, this Security Agreement, the Lien granted hereunder and Secured Parties’ rights in the Collateral, may be enforced only through the institution of an Enforcement Action, subject to the notice requirements and limitations specified in the Settlement Agreement, including in section 4.E thereof.

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7.2.           Remedies. If a Default shall have occurred under the Plan, Confirmation Order, Note and/or the Settlement Agreement and is adjudicated in the Studios’ favor through an Enforcement Action pursuant to the terms of the Plan, Confirmation Order, Note and/or the Settlement Agreement as applicable, the Secured Parties shall have all rights and remedies, including but not limited to the right to enforce the Lien granted hereunder pursuant to the terms of the Plan, Confirmation Order, Note and/or the Settlement Agreement, as applicable including, in addition to all other rights and remedies, the rights and remedies of a secured party under the Uniform Commercial Code and any additional rights and remedies that may be provided to a secured party in any jurisdiction in which Collateral is located, including, without limitation, the right to take possession of the Collateral, and for that purpose the Secured Parties may, so far as VidAngel can give authority therefor, enter upon any premises on which any of the Collateral may be situated and remove the same therefrom. The Secured Parties may in their discretion require VidAngel to assemble all or any part of the Collateral at such location or locations within the jurisdiction(s) of VidAngel’s principal office(s) or at such other locations as the Secured Parties may reasonably designate. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Secured Parties shall give to VidAngel at least ten (10) business days prior written notice of the time and place of any public sale of Collateral or of the time after which any private sale or any other intended disposition is to be made.

8.           Standards for Exercising Rights and Remedies. To the extent that applicable law imposes duties on the Secured Parties to exercise remedies in a commercially reasonable manner, VidAngel acknowledges and agrees that it is not commercially unreasonable for the Secured Parties: (a) not to incur expenses reasonably deemed significant by the Secured Parties to prepare Collateral for disposition or otherwise to fail to complete raw material or work-in-process into finished goods or other finished products for disposition; (b) not to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other applicable law, not to obtain governmental or third-party consents for the collection or disposition of Collateral to be collected or disposed of; (c) not to exercise collection remedies against account debtors or other persons obligated on any Collateral or not to remove liens or encumbrances on or any adverse claims against Collateral; (d) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists; (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature; (f) to contact other persons, whether or not in the same business as VidAngel, for expressions of interest in acquiring all or any portion of the Collateral; (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature; (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets; (i) to dispose of assets in wholesale rather than retail markets; (j) to disclaim disposition warranties; (k) to purchase insurance or credit enhancements to insure the Secured Parties against risks of loss, collection or disposition of Collateral or to provide to the Secured Parties a guaranteed return from the collection or disposition of Collateral; or (l) to the extent reasonably deemed appropriate by the Secured Parties, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Secured Parties in the collection or disposition of any of the Collateral. VidAngel acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by the Secured Parties would fulfill the Secured Parties’ duties under the Uniform Commercial Code or other applicable law of the State of Utah or the State of Delaware or any other relevant jurisdiction in the Secured Parties’ exercise of remedies against the Collateral, and that other actions or omissions by the Secured Parties shall not be deemed to fail to fulfill such duties solely on account of not being indicated in this Section. Without limited the foregoing, nothing contained in this Section shall be construed to grant any rights to VidAngel or to impose any duties on the Secured Parties that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

9.           Subordination Agreement. If and only in the event VidAngel makes a written request and the following conditions are all satisfied or waived by the Secured Parties, the Secured Parties shall enter into a written subordination agreement (“Subordination Agreement”) and thereby subordinate the Lien granted hereunder on the following conditions:

(a)           No uncured Default exists under the Plan or the Settlement Agreement or this Security Agreement as of the date of execution of the Subordination Agreement;

(b)           The subordination in the Subordination Agreement provides only for the subordination of the priority of the Lien and any other lien rights granted to the Secured Parties under the Plan or the Settlement Agreement or this Security Agreement, and the Subordination Agreement contains no provisions which limit, impair, preclude or purport to limit, impair or preclude the Secured Parties’ rights or ability to enforce or pursue remedies granted to them in the event of a Default;

(c)           The purpose of the Subordination Agreement is to allow VidAngel to obtain secured business loans for working capital to support ongoing or contemplated operations or refinancing of existing debt;

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(d)           Any subordination of the priority of the Lien and any other lien rights shall be limited in amount to the greater of Ten Million Dollars ($10,000,000) or 1.15x the balance of Shareholder’s Equity (as defined under GAAP) of VidAngel, but in no event any greater than Twenty Five Million Dollars ($25,000,000), until the Settlement Amount ($9.9 million or, if applicable, $7.8 million) is paid in full (not limited once the Settlement Amount has been paid). For purposes of clarification, the then-balance of the Studios Monetary Claim will not be included in the ratio while the Settlement Amount has not been fully paid.

(e)           The counterparty to the Subordination Agreement must be a third party lender, such as a bank, credit union, hedge fund, venture capital fund, or a private lender (one that regularly provides similar loans in the marketplace), or similar financial entity, that is a non-Insider (and not controlled by an Insider), in an arms-length transaction;

(f)           No proceeds received from the counterparty to the Subordination Agreement may be paid or distributed to any Insider of the Reorganized Debtor (except for any salary that may be paid to such Insider for services actually rendered in the ordinary course of the Reorganized Debtor’s business); and

(g)           The Subordination Agreement shall also be signed by VidAngel, and shall contain VidAngel’s express representation and agreement that any default under the loan and security documents of the counterparty to the Subordination Agreement that is not cured within the applicable cure period established by such loan and security documents is an automatic Default under the terms of the Plan and the Settlement Agreement and this Security Agreement allowing the Secured Parties to immediately enforce their rights and remedies under the Plan and the Settlement Agreement and this Security Agreement, including their right to enforce the Lien.

10.           No Waiver by the Secured Parties, etc. Except only to the extent specified in the Settlement Agreement or the Plan (including as specified in section 4.E of the Settlement Agreement): (a) the Secured Parties shall not be deemed to have waived any of their rights or remedies in respect of the Obligations or the Collateral unless such waiver shall be in writing and signed by all of the Secured Parties; (b) no delay or omission on the part of the Secured Parties in exercising any right hereunder shall operate as a waiver of such right or remedy or any other right or remedy hereunder; (c) a waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion; and (d) all rights and remedies of the Secured Parties with respect to the Obligations or the Collateral, whether evidenced hereby or by any other instrument or papers, shall be cumulative and may be exercised singularly, alternatively, successively or concurrently at such time or at such times as the Secured Parties deem expedient.

11.           Proceeds of Dispositions; Expenses. To the extent awarded and ordered in an Enforcement Action, VidAngel shall pay to the Secured Parties any and all expenses, including reasonable attorneys’ fees and disbursements, incurred or paid by the Secured Parties in protecting, preserving or enforcing the Secured Parties’ rights and remedies under or in respect of any of the Obligations or any of the Collateral. After deducting all of said expenses, the residue of any proceeds of collection or sale or other disposition of the Collateral shall, to the extent actually received in cash, be applied to the payment of the Obligations in such order or preference as the Secured Parties may determine, proper allowance and provision being made for any Obligations not then due. Upon the final payment and satisfaction in full of all of the Obligations and after making any payments required by Sections 70A-9a-608 or 70A-9a-615 of the Utah Uniform Commercial Code (or corresponding provisions of the Delaware Uniform Commercial Code), any excess shall be returned to VidAngel. In the absence of final payment and satisfaction in full of all of the Obligations, VidAngel shall remain liable for any deficiency.

12.           Governing Law. The validity of this Agreement, the construction, interpretation and enforcement hereof and thereof, and the rights of the parties hereto and thereto with respect to all matters arising hereunder or thereunder or related hereto or thereto, shall be determined under, governed by and construed in accordance with Utah law.

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13.           Entire Agreement; Resolving Inconsistencies. Certain of the terms and conditions of the Security Agreement and Lien are set forth in the Plan, Confirmation Order, Note and the Settlement Agreement, which are incorporated herein. The Parties intend the Plan, Confirmation Order, Note, Security Agreement and Settlement Agreement to be read collectively and consistently. This Security Agreement, together with the Plan, the Settlement Agreement and the Note, reflects the final expression of the agreement and understanding between Debtor and Secured Parties, superseding any previous understanding, negotiations or discussions, whether written or oral. In the event of any inconsistency between the terms of this Security Agreement and the terms of the Plan, Confirmation Order, Note or the Settlement Agreement regarding the Lien and the respective rights and obligations of VidAngel and the Secured Parties hereunder, the terms of the Confirmation Order, Settlement Agreement, Note, Security Agreement and Plan shall control, in that order of priority. In the event that any provision of this Security Agreement is inconsistent with an express provision of the Settlement Agreement, the terms of the Settlement Agreement shall control. For example, this Security Agreement may be enforced only through the institution of an Enforcement Action, subject to the notice requirements and limitations specified in the Settlement Agreement, including in section 4.E thereof.

14.           Miscellaneous. The headings of each section of this Security Agreement are for convenience only and shall not define or limit the provisions thereof. This Security Agreement and all rights and obligations hereunder shall be binding upon VidAngel, and shall inure to the benefit of the Secured Parties and their successors and assigns. If any term of this Security Agreement shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable, the validity of all other terms hereof shall in no way be affected thereby, and this Security Agreement shall be construed and be enforceable as if such invalid, illegal, or unenforceable term had not been included herein. VidAngel acknowledges receipt of a copy of this Security Agreement. Except as provided in the Settlement Agreement, notices required or permitted hereunder shall be made in the manner required or permitted by the Uniform Commercial Code.

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, this Security Agreement shall become effective and will be binding upon the VidAngel and the Secured Parties as of the Effective Date of the Plan.

“Debtor” or “VidAngel”

VIDANGEL, INC., a Delaware corporation

By: _________________________________

Name: George Hofmann, in his representative capacity as the duly appointed Chapter 11 Trustee of Debtor

--and--

By: _________________________________

Name: Neal Harmon, President and Chief Executive Officer of Debtor

VAS Portal, LLC, a Utah limited liability company, and wholly owned subsidiary of VidAngel

By: _________________________________

Name/Title:

VAS Brokerage, LLC, a Delaware limited liability company, and wholly owned subsidiary of VidAngel

By: _________________________________

Name/Title:

[Add any other Subsidiaries and Affiliates, and signature lines for future companies]

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EX1U-1 UNDR AGMT

Exhibit 1.3c

NON-COMPETITION AGREEMENT

This Non-Competition Agreement (the “Agreement”) is entered into by and between VidAngel, Inc. (the "Employer" or “Company”), and Neal Harmon (the "Employee").

As a condition of Employee’s continued employment with Employer, its subsidiaries, affiliates, successors or assigns, and in consideration of Employee’s employment with the Company and his receipt of the compensation now and hereafter paid to him by Company, Employee agrees to the following:

1.Notification of New Employer. In the event that Employee leaves the employ of the Company, Employee hereby grants consent to notification by the Company to Employee’s new employer about his obligations under this Agreement.

2.Non-Compete Covenant.

A.Covenant Not to Compete. Employee agrees that during the course of his employment and for a period of twelve (12) months immediately following the termination of his employment with the Company for any reason, whether with or without cause, at the option either of the Company or Employee, with or without notice, Employee will not, without the prior written consent of the Company: (i) serve as a partner, principal, licensor, licensee, employee, consultant, officer, director, manager, agent, affiliate, representative, advisor, promoter, associate, investor, or otherwise for (except for passive ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended, or Section 12 of the Securities Exchange Act of 1934, as amended); (ii) directly or indirectly, own, purchase, organize or take preparatory steps for the organization of; or (iii) build, design, finance, acquire, lease, operate, manage, control, invest in, work or consult for or otherwise join, participate in or affiliate himself with, any business whose business, products or operations are in any respect involved in the Covered Business.  For purposes of this Agreement, “Covered Business” shall mean any “filtering” business (i.e., making imperceptible, skipping, or removing limited portions of the audio or video content of a Motion Picture or the creation or provision of a computer program or other technology that enables such filtering) without the written authorization of the copyright owner in which the Company is engaged or in which the Company has taken steps to be engaged, or any service that the Company provides or has taken steps to provide. The foregoing covenant shall cover Employee’s activities in every part of the Territory.  For purposes of this Agreement, “Territory” shall mean: (i) all states of the United States of America; and (ii) any other countries in which the Company maintains non-trivial operations or facilities, provides goods or services, has customers, or otherwise conducted business at any time during the two-year period prior to the date of the termination of Employee’s employment with the Company. Should Employee obtain other employment during his employment with the Company or within twelve (12) months immediately following the termination of Employee’s employment with the Company, Employee agrees to provide written notification to the Company as to the name and address of Employee’s new employer, the position that Employee expects to hold, and a general description of Employee’s duties and responsibilities, at least three (3) business days prior to starting such employment.

B. Acknowledgements. Employee acknowledges that his fulfillment of the obligations contained in this Agreement, including, but not limited to, Employee’s obligations not to compete above, is necessary to protect to preserve the value and goodwill of the Company.  Employee also acknowledges the time, geographic and scope limitations of his obligations under subsection (A) above are fair and reasonable in all respects, especially in light of the scope and nature of the Company’s business, and that Employee will not be precluded from gainful employment if Employee is obligated not to compete with the Company during the period and within the Territory as described above. In the event of Employee’s breach or violation of this Agreement, or good faith allegation by the Company of Employee’s breach or violation of this Agreement, the restricted periods set forth in this Section 2 shall be tolled until such breach or violation, or dispute related to an allegation by the Company that Employee has breached or violated this Agreement, has been duly cured or resolved, as applicable.

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D.            Separate Covenants. The covenants contained in subsection (A) above shall be construed as separate covenants, one for each city, county and state of any geographic area in the Territory.  Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in subsections (A) above.  If, in any judicial or arbitral proceeding, a court or arbitrator refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be revised, or if revision is not permitted it shall be eliminated from this Agreement, to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced.  In the event that the provisions of subsection (A) above are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, then permitted by such law. In the event that the applicable court or arbitrator does not exercise the power granted to it in the prior sentence, Employee and the Company agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

E.           Enforcement of Covenants.

(1) Employee agrees that any breach by him of any of the foregoing covenants during his employment by the Company shall be grounds for Employee’s immediate dismissal, and unless prohibited by law, forfeiture of any accrued bonuses or commissions, or other compensation as liquidated damages, which shall be in addition to and not exclusive of any and all other rights and remedies the Company may have against Employee.

(2) Employee further agrees that any breach of any of the foregoing covenants may cause the Company irreparable harm. Accordingly, in the event of any such breach, Employee consents to the entry of an appropriate temporary and/or permanent injunction in a Court of appropriate jurisdiction without the necessity of the Company posting a bond or other security to the extent permitted by applicable law. Such injunction shall be in addition to and not in lieu of any other relief to which the Company may be entitled under law.

3.Protected Activity Not Prohibited. Employee understands that nothing in this Agreement shall in any way limit or prohibit Employee from engaging for a lawful purpose in any Protected Activity. For purposes of this Agreement, “Protected Activity” means filing a charge or complaint, or otherwise communicating, cooperating, or participating with, any state, federal, or other governmental agency, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, and the National Labor Relations Board. Notwithstanding any restrictions set forth in this Agreement, Employee understands that he is not required to obtain authorization from the Company prior to disclosing information to, or communicating with, such agencies, nor is Employee obligated to advise the Company as to any such disclosures or communications. Employee further understands that “Protected Activity” does not include the disclosure of any Company attorney-client privileged communications, and that any such disclosure without the Company’s written consent shall constitute a material breach of this Agreement. In addition, Employee hereby acknowledges that the Company has provided Employee with notice in compliance with the Defend Trade Secrets Act of 2016 regarding immunity from liability for limited disclosures of trade secrets.  The full text of the notice is attached in Exhibit A.

4.General Provisions.

A.At Will Employment. Employee understands and agrees that nothing in this Agreement creates a contract, express or implied, of employment for any specified period. Employee understands and acknowledges that his employment with the Company is for an unspecified duration and constitutes “at-will” employment. Employee also understands that any representation to the contrary is unauthorized and not valid unless it is in a writing signed by the Board of Directors of the Company. Accordingly, Employee acknowledges that his employment relationship may be terminated at any time, with or without notice, with or without good cause and for any reason, at Employee’s option or at the option of the Company.

B.Governing Law. This Agreement will be governed by the laws of the State of Utah without giving effect to any choice of law rules or principles that may result in the application of the laws of any jurisdiction other than Utah.

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C.Entire Agreement. This Agreement, together with the Exhibit hereto, sets forth the entire agreement and understanding between the Company and Employee relating to the subject matter herein and supersedes all prior discussions or representations between the parties, whether written or oral. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by the Board of Directors of the Company and Employee. Any subsequent change or changes in Employee’s duties, salary or compensation will not affect the validity or scope of this Agreement.

D.Attorneys’ Fees. In the event it is necessary or reasonably desirable to enforce the terms of this Agreement, the party prevailing by judicial order or decision shall recover, in addition to any other remedy, its reasonable costs and attorneys’ fees incurred in enforcing the terms of this Agreement.

E.Severability. If one or more of the provisions in this Agreement are deemed void by law, then the remaining provisions will continue in full force and effect.

F.Successors and Assigns. This Agreement will be binding upon Employee’s heirs, executors, assigns, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns. There are no intended third party beneficiaries to this Agreement except as expressly stated.

G.Waiver. Waiver by the Company of a breach of any provision of this Agreement will not operate as a waiver of any other or subsequent breach.

H.Survivorship. The rights and obligations of the parties to this Agreement will survive termination of Employee’s employment with the Company.

I.Signatures. This Agreement may be signed in two counterparts, each of which shall be deemed an original, with the same force and effectiveness as though executed in a single document.

Agreed by the parties:

VidAngel, Inc. By its authorized signatory:	Neal Harmon
___________________________	/s/ Neal Harmon
Signature ___________________________ Print Name	Signature Neal Harmon Print Name
___________________________ Title ___________________________ Date	09 / 03 / 2020 Date

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Exhibit A

SECTION 7 OF THE DEFEND TRADE SECRETS ACT OF 2016

“ .. . . An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(A) is made—(i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. . . . An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual—(A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”

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EX1U-1 UNDR AGMT

Exhibit 1.3d

NON-COMPETITION AGREEMENT

This Non-Competition Agreement (the “Agreement”) is entered into by and between VidAngel, Inc. (the "Employer" or “Company”), and Jeffrey Harmon (the "Employee").

As a condition of Employee’s continued employment with Employer, its subsidiaries, affiliates, successors or assigns, and in consideration of Employee’s employment with the Company and his receipt of the compensation now and hereafter paid to him by Company, Employee agrees to the following:

1.Notification of New Employer. In the event that Employee leaves the employ of the Company, Employee hereby grants consent to notification by the Company to Employee’s new employer about his obligations under this Agreement.

2.Non-Compete Covenant.

A.Covenant Not to Compete. Employee agrees that during the course of his employment and for a period of twelve (12) months immediately following the termination of his employment with the Company for any reason, whether with or without cause, at the option either of the Company or Employee, with or without notice, Employee will not, without the prior written consent of the Company: (i) serve as a partner, principal, licensor, licensee, employee, consultant, officer, director, manager, agent, affiliate, representative, advisor, promoter, associate, investor, or otherwise for (except for passive ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended, or Section 12 of the Securities Exchange Act of 1934, as amended); (ii) directly or indirectly, own, purchase, organize or take preparatory steps for the organization of; or (iii) build, design, finance, acquire, lease, operate, manage, control, invest in, work or consult for or otherwise join, participate in or affiliate himself with, any business whose business, products or operations are in any respect involved in the Covered Business.  For purposes of this Agreement, “Covered Business” shall mean any “filtering” business (i.e., making imperceptible, skipping, or removing limited portions of the audio or video content of a Motion Picture or the creation or provision of a computer program or other technology that enables such filtering) without the written authorization of the copyright owner in which the Company is engaged or in which the Company has taken steps to be engaged, or any service that the Company provides or has taken steps to provide. The foregoing covenant shall cover Employee’s activities in every part of the Territory.  For purposes of this Agreement, “Territory” shall mean: (i) all states of the United States of America; and (ii) any other countries in which the Company maintains non-trivial operations or facilities, provides goods or services, has customers, or otherwise conducted business at any time during the two-year period prior to the date of the termination of Employee’s employment with the Company. Should Employee obtain other employment during his employment with the Company or within twelve (12) months immediately following the termination of Employee’s employment with the Company, Employee agrees to provide written notification to the Company as to the name and address of Employee’s new employer, the position that Employee expects to hold, and a general description of Employee’s duties and responsibilities, at least three (3) business days prior to starting such employment.

B. Acknowledgements. Employee acknowledges that his fulfillment of the obligations contained in this Agreement, including, but not limited to, Employee’s obligations not to compete above, is necessary to protect to preserve the value and goodwill of the Company.  Employee also acknowledges the time, geographic and scope limitations of his obligations under subsection (A) above are fair and reasonable in all respects, especially in light of the scope and nature of the Company’s business, and that Employee will not be precluded from gainful employment if Employee is obligated not to compete with the Company during the period and within the Territory as described above. In the event of Employee’s breach or violation of this Agreement, or good faith allegation by the Company of Employee’s breach or violation of this Agreement, the restricted periods set forth in this Section 2 shall be tolled until such breach or violation, or dispute related to an allegation by the Company that Employee has breached or violated this Agreement, has been duly cured or resolved, as applicable.

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D.            Separate Covenants. The covenants contained in subsection (A) above shall be construed as separate covenants, one for each city, county and state of any geographic area in the Territory.  Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in subsections (A) above.  If, in any judicial or arbitral proceeding, a court or arbitrator refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be revised, or if revision is not permitted it shall be eliminated from this Agreement, to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced.  In the event that the provisions of subsection (A) above are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, then permitted by such law. In the event that the applicable court or arbitrator does not exercise the power granted to it in the prior sentence, Employee and the Company agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

E.           Enforcement of Covenants.

(1) Employee agrees that any breach by him of any of the foregoing covenants during his employment by the Company shall be grounds for Employee’s immediate dismissal, and unless prohibited by law, forfeiture of any accrued bonuses or commissions, or other compensation as liquidated damages, which shall be in addition to and not exclusive of any and all other rights and remedies the Company may have against Employee.

(2) Employee further agrees that any breach of any of the foregoing covenants may cause the Company irreparable harm. Accordingly, in the event of any such breach, Employee consents to the entry of an appropriate temporary and/or permanent injunction in a Court of appropriate jurisdiction without the necessity of the Company posting a bond or other security to the extent permitted by applicable law. Such injunction shall be in addition to and not in lieu of any other relief to which the Company may be entitled under law.

3.Protected Activity Not Prohibited. Employee understands that nothing in this Agreement shall in any way limit or prohibit Employee from engaging for a lawful purpose in any Protected Activity. For purposes of this Agreement, “Protected Activity” means filing a charge or complaint, or otherwise communicating, cooperating, or participating with, any state, federal, or other governmental agency, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, and the National Labor Relations Board. Notwithstanding any restrictions set forth in this Agreement, Employee understands that he is not required to obtain authorization from the Company prior to disclosing information to, or communicating with, such agencies, nor is Employee obligated to advise the Company as to any such disclosures or communications. Employee further understands that “Protected Activity” does not include the disclosure of any Company attorney-client privileged communications, and that any such disclosure without the Company’s written consent shall constitute a material breach of this Agreement. In addition, Employee hereby acknowledges that the Company has provided Employee with notice in compliance with the Defend Trade Secrets Act of 2016 regarding immunity from liability for limited disclosures of trade secrets.  The full text of the notice is attached in Exhibit A.

4.General Provisions.

A.At Will Employment. Employee understands and agrees that nothing in this Agreement creates a contract, express or implied, of employment for any specified period. Employee understands and acknowledges that his employment with the Company is for an unspecified duration and constitutes “at-will” employment. Employee also understands that any representation to the contrary is unauthorized and not valid unless it is in a writing signed by the Board of Directors of the Company. Accordingly, Employee acknowledges that his employment relationship may be terminated at any time, with or without notice, with or without good cause and for any reason, at Employee’s option or at the option of the Company.

B.Governing Law. This Agreement will be governed by the laws of the State of Utah without giving effect to any choice of law rules or principles that may result in the application of the laws of any jurisdiction other than Utah.

C.Entire Agreement. This Agreement, together with the Exhibit hereto, sets forth the entire agreement and understanding between the Company and Employee relating to the subject matter herein and supersedes all prior discussions or representations between the parties, whether written or oral. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by the Board of Directors of the Company and Employee. Any subsequent change or changes in Employee’s duties, salary or compensation will not affect the validity or scope of this Agreement.

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D.Attorneys’ Fees. In the event it is necessary or reasonably desirable to enforce the terms of this Agreement, the party prevailing by judicial order or decision shall recover, in addition to any other remedy, its reasonable costs and attorneys’ fees incurred in enforcing the terms of this Agreement.

E.Severability. If one or more of the provisions in this Agreement are deemed void by law, then the remaining provisions will continue in full force and effect.

F.Successors and Assigns. This Agreement will be binding upon Employee’s heirs, executors, assigns, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns. There are no intended third party beneficiaries to this Agreement except as expressly stated.

G.Waiver. Waiver by the Company of a breach of any provision of this Agreement will not operate as a waiver of any other or subsequent breach.

H.Survivorship. The rights and obligations of the parties to this Agreement will survive termination of Employee’s employment with the Company.

I.Signatures. This Agreement may be signed in two counterparts, each of which shall be deemed an original, with the same force and effectiveness as though executed in a single document.

Agreed by the parties:

VidAngel, Inc. By its authorized signatory:	Jeffrey Harmon
_________________________________	/s/ Jeffrey Harmon
Signature   _________________________________ Print Name	Signature  Jeffrey Harmon Print Name
_________________________________ Title   _________________________________ Date	09 / 03 / 2020 Date

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Exhibit A

SECTION 7 OF THE DEFEND TRADE SECRETS ACT OF 2016

“ .. . . An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(A) is made—(i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. . . . An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual—(A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”

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