SECURITY AGREEMENT (VidAngel, Inc.)
Exhibit 1.3b
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 Xxxxxx
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 Xxxxx Xxxxxx 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 Xxxxx Xxxxxx
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:
(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 Xxxxx Xxxxxx 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:
Xxxxxx Xxxxxxx, in his representative capacity as the duly
appointed Chapter 11 Trustee of Debtor
--and--
By:
_________________________________
Name:
Xxxx Xxxxxx, 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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