An offering statement pursuant to Regulation A relating to these
securities has been filed with the Securities and Exchange
Commission. Information contained in this Preliminary
Offering Circular is subject to completion or amendment. These
securities may not be sold nor may offers to buy be accepted before
the offering statement filed with the Commission is
qualified. This Preliminary Offering Circular shall not
constitute an offer to sell or the solicitation of an offer to buy
nor may there be any sales of these securities in any state in
which such offer, solicitation or sale would be unlawful before
registration or qualification under the laws of any such
state. We may elect to satisfy our obligation to deliver
a Final Offering Circular by sending you a notice within two
business days after the completion of our sale to you that contains
the URL where the Offering Circular was filed may be
obtained.
Preliminary Offering Circular
September 2, 2020
Subject to Completion
THE CHOSEN, LLC
4 S 2600 W, Suite 5
Hurricane, Utah 84737
(435) 767-1338
Class B Preferred Units of Membership Interest
$20,000,001 Maximum Offering Amount (2,857,143 Class B
Units)
The
Chosen, LLC, a Utah limited liability company, referred to herein
as our Company, is offering a maximum of $20,000,001 in Class B
preferred units of its membership interest, which we refer to as
the Class B Units or the Class B Units (the "Offering"). The Company is offering
the Class B Units for a purchase price of $7.00 per Class B Unit.
This Offering will terminate on the earliest to occur of (i) the
date on which we sell the maximum number of Class B Units, or the
Maximum Offering Amount, (ii) twelve (12 months) from the date of
qualification of this Offering, or (iii) the date on which we elect
to terminate the Offering, in our sole discretion. We refer to the
earliest of (i) - (iii) in the foregoing sentence as the
“Termination Date.” The initial closing date will occur
within one month after the Company has received and accepted the
first subscription for Units. If, on the initial closing date, we
have sold less than the Maximum Offering Amount, then we will hold
one or more additional closings for additional sales at least
monthly, up to the Maximum Offering Amount, through the Termination
Date. For the initial closing and each subsequent additional
closing, proceeds for subscriptions over $2,500 must be transmitted
directly by wire or electronic funds transfer via ACH to the
specified bank account maintained by the Company per the
instructions set forth on the Offering's website at thechosen.tv. Such funds will
be kept in a non-interest-bearing account maintained by the Company
until the closing. Proceeds for subscriptions of $2,500 or less may
be (i) submitted through a purchaser’s customer account in
accordance with the billing information for such purchaser at
thechosen.tv to be
kept in the specified bank account maintained by the Company per
the instructions in the subscription agreement if such payment
method is made available, or (ii) transmitted directly by wire or
electronic funds transfer via ACH to the specified bank account
maintained by the Company per the instructions in the subscription
agreement. We intend to accept payment for subscriptions of $2,500
or less through a purchaser’s customer account in accordance
with the billing information for such purchaser at thechosen.tv. However, the
credit card method of payment is not approved by our payment
processors at this time and may not be approved for this Offering.
Payments for all subscriptions may be transmitted directly by wire
or electronic funds transfer via ACH to the specified bank account
maintained by the Company per the instructions set forth on the
Offering's website at thechosen.tv. Upon each closing
of this Offering, the proceeds for the Offering will be distributed
to the Company and the Class B Units will be issued to the
investors. If the Company terminates the Offering for any reason,
which the Company may in its sole discretion, all proceeds
submitted but not yet closed upon will be promptly returned to
investors without interest. The purchase price per Class B Unit is
$7.00 and the minimum purchase requirement is 72 Class B Units
($504); however, we can waive the minimum purchase requirement in
our sole discretion. Once a subscription has been submitted and
accepted by the Company, an investor will not have the right to
request the return of its subscription payment prior to
closing.
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Proceeds to
Other Persons
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Per
Unit:
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$7.00
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$7.00
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$0.00
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Maximum Offering
Amount:
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$20,000,001
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$20,000,001
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$0.00
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Generally, no sale may be made to you
in this Offering if the aggregate purchase price you pay is more
than 10% of the greater of your annual income or net worth.
Different rules apply to accredited investors and non-natural
persons. Before making any representation that your investment does
not exceed applicable thresholds, we encourage you to review Rule
251(d)(2)(i)(C) of Regulation A. For general information on
investing, we encourage you to refer to www.investor.gov.
An investment in the Class B Units is subject to certain risks and
should be made only by persons or entities able to bear the risk of
and to withstand the total loss of their
investment. Prospective investors should carefully consider
and review the RISK FACTORS beginning on page
6.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, OR THE
COMMISSION, DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL TO
ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT
PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR
OTHER SELLING LITERATURE. THESE SECURITIES ARE OFFERED PURSUANT TO
AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE
COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE
SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.
This
Offering Circular is following the Offering Circular format
described in Part II of Form 1-A.
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This summary of the Offering
Circular highlights material
information contained elsewhere in this Offering
Circular. Because it is a summary, it
may not contain all of the information that is important to your
decision of whether to invest in the Class B Units. To understand
this Offering fully, you should read the entire Offering
Circular carefully, including
the Risk
Factors section. The use of the
words “we,” “us,” “the
Company,” or “our” refers to THE CHOSEN, LLC and
our subsidiaries, except where the context otherwise requires. The
term “Operating Agreement” refers to our
Company’s Amended and Restated Limited Liability Company
Agreement dated March 6, 2018,
as amended.
The CHOSEN, LLC, a Utah limited liability company,
is an independent television and film production company formed on
October 24, 2017 solely to develop and produce an episodic television series
entitled “The Chosen” (the “Series”). The Series is
based on the gospels of the Bible and tells the story of the life
of Jesus Christ primarily through the perspectives of those who met
him throughout his life.
We intend to use the proceeds from this Offering
to fund the development and production of the second half of the
second season (“Season 2”) and the entire third season
(“Season 3”) of The Chosen. We anticipate the second half of Season 2 will
contain four episodes and Season 3 of the Series will contain eight episodes,. We
have projected that Season 2 and Season 3 will cost approximately
$4.8 million and $9.6 million, respectively, and the second half of
Season 2 and Season 3 will take approximately three and six months
to produce, respectively. We anticipate that marketing expenses of
the second half of Season 2 and Season 3 will cost approximately
$1.47 million and $2.93 million, respectively, and our offering
expenses for Season 2 and Season 3 are estimated at approximately
$450,000 if we sell the Maximum Offering Amount. If we fail to
raise the Maximum Offering Amount, we initially expect to
eliminate, on a dollar-for-dollar basis as necessary, all marketing
expenses for Season 3 followed by production costs for Season 3
from the uses of proceeds of the Offering.
In
addition to revenues directly related to the Series, we earn a
portion of our revenues from the sale of merchandise. Merchandise
sales, consisting mainly of t-shirts. We do not own or maintain the
merchandise inventory, but manage an online store through a
third-party application in which orders are drop shipped to end
customers using that third-party platform. We contract with a
third-party supplier that fulfills these sales orders on our behalf
by screen printing T-shirts and shipping them to end
customers.
The Series is loosely inspired by a film entitled
“The
Shepherd.” The Company
exclusively owns all right, title, and interest in and to the
copyrights and all other rights in and to The Shepherd
pursuant to an Assignment and
Assumption Agreement between the Company and Creatus, LLC.
The Shepherd is based on
the story ideas and concepts of Dallas Jenkins, an owner and
founder of the Company. Mr. Jenkins assigned all intellectual
property related to the stories of The Chosen to us in exchange for 49% of
the common units of our membership interest, which we refer to as
Common Units. Mr. Jenkins subsequently assigned his Common Units to
our Manager.
The
Pilot episode, Season 1 of the Series, and merchandise sales
generated revenues of approximately $12,734, $802,896, and
$168,973, respectively, and aggregate revenues of $984,603 in 2019
compared to $56,465 in revenues for the year ended December 31,
2018. Operating expenses other than amortized film costs were
$827,745 for 2019. The Company had a net income of $64,329 in
2019.
Season
1 of the Series and merchandise sales generated revenues of
approximately $5,585,622 and $1,167,618, respectively, for the
period between January 1 and May 31, 2020.
The Series is intended to be distributed through
online video streaming services, television, and home video. The
Company has entered into a license agreement (the “License
Agreement”) with VidAngel, Inc. (“VidAngel”)
providing VidAngel the following licenses, granting the right to
sublicensable license to transmit, reproduce, distribute, publicly
perform, display, create Derivative Works (as defined in the
License Agreement and otherwise exploit each season’s
episodes of the Licensed Materials (as defined in the License
Agreement), including, without limitation, the Content (as defined
in the License Agreement):: (i) a one-year nationwide
exclusive license on any and all media; (ii) a one-year
international license on any and all media; (iii) a worldwide
exclusive license for video-on-demand and video-on-demand with pay
it forward; (iv) a nationwide non-exclusive license for
video-on-demand; (v) an international non-exclusive license for
video-on-demand for video-on-demand; (vi) an exclusive nationwide
license for subscription video-on-demand; (vii) an exclusive
international license for video-on-demand for subscription
video-on-demand; (viii) a worldwide non-exclusive license for
video-on-demand without tipping and subscription video-on-demand
without pay it forward; (ix) a worldwide exclusive license for all
forms of Physical Media; (x) a worldwide non-exclusive license on
hardcopy e-book versions of The Chosen Book, published by
Broadstreet.
With
the exception of (i) and (ii) above, the licenses are for a period of three years (which period will
automatically renew for additional one-year periods if not
terminated).
Pursuant to the
license agreement, twenty-five percent (25%) of VidAngel’s
revenues from the exploitation of video-on-demand and
subscription-video-on-demand content will be applied to marketing
the Series. The Company will receive licensing payments in an
amount equal to forty percent (40%) of the net profits attributable
to the Series based on the number of hours the Series was viewed by
VidAngel’s customers. In addition to the licensing payments,
the Company will be eligible to receive an uncapped bonus in an
amount based on a proprietary algorithm determined by
“goodness,” “loyalty” and “word of
mouth.”
As of
the initial closing of this Offering, our Company will have three
classes of membership interests, the Class A Units, the Class B
Units, and the Common Units. There are currently
13,900,000 Common Units
and 11,193,300 Class A Units outstanding. The Chosen Productions,
LLC, our sole manager (the “Manager”), holds all of the
outstanding Common Units. Purchasers of our Class B Units will
become Members in our Company with respect to their ownership of
Class B Units. Upon investors’ receipt of Class B Units
purchased in this Offering, they will become bound by our Operating
Agreement. Our Operating Agreement governs the various rights and
obligations of our Members.
Securities Offered
We are
offering a maximum of 2,857,143
of our Class B Units in this Offering for a purchase price of $7.00
per Class B Unit. The minimum investment is 72 Class B Units ($504)
however, we can waive the minimum purchase requirement in our sole
discretion.
This
Offering will terminate on the earliest to occur of (i) the date on
which we sell the maximum number of Class B Units, or the Maximum
Offering Amount, (ii) twelve (12 months) from the date of
qualification of this Offering, or (iii) the date on which we elect
to terminate the Offering, in our sole discretion. We refer to the
earliest of (i) – (iii) in the foregoing sentence as the
“Termination Date.” The initial closing will occur
within one month after the Company has received and accepted the
first subscription for Units. If on the initial closing date we
have sold less than the Maximum Offering Amount, we will hold one
or more additional closings at least monthly for additional sales
up to the Maximum Offering Amount until the Termination Date. For
each closing, proceeds for subscriptions over $2,500 must be
transmitted directly by wire or electronic funds transfer via ACH
to the specified bank account maintained by the Company per the
instructions in the subscription agreement. Such funds will be kept
in a non-interest-bearing account maintained by the Company until
the closing. Proceeds for subscriptions of $2,500 or less may be
(i) submitted through a purchaser’s customer account in
accordance with the billing information for such purchaser at
thechosen.tv to be kept in the specified bank account maintained by
the Company per the instructions in the subscription agreement if
such payment method is made available or (ii) transmitted directly
by wire or electronic funds transfer via ACH to the specified bank
account maintained by the Company per the instructions in the
subscription agreement. We intend to accept payment for
subscriptions of $2,500 or less through a purchaser’s
customer account in accordance with the billing information for
such purchaser at thechosen.tv. However, the credit card method of
payment is not approved by our payment processors at this time and
may not be approved for this Offering. Payments for all
subscriptions may be transmitted directly by wire or electronic
funds transfer via ACH to the specified bank account maintained by
the Company per the instructions set forth on the Offering's
website at thechosen.tv. Upon each closing, the proceeds collected
for such closing will be disbursed to the Company and the Units for
such closing will be issued to investors. If the Company terminates
the Offering for any reason, which the Company may in its sole
discretion, allproceeds submitted but not yet closed upon will be
promptly returned to investors without interest. Once a
subscription has been submitted and accepted by the Company, an
investor will not have the right to request the return of its
subscription payment prior to closing.
The
Company is offering its Units through our Offering’s website:
thechosen.tv. This
Offering Circular will be furnished to prospective investors at
thechosen.tv via
download at any time. We are not selling the Units through
commissioned sales agents or underwriters.
Purchasers of Units
will become Members of our Company. Our Units are membership
interests of preferred equity. Any distributions of available cash
flow will be made in the discretion of our Manager in the following
order and priority:
(i)
First, an amount
equal to 120% and 110% of the aggregate purchase price to the
holders of the Class A Units and Class B Units, respectively,
pari passu in accordance
with the number of aggregate Class A Units and Class B Units held;
and
(ii)
Thereafter, to all
Members pro rata in accordance with their respective holdings of
Membership Units.
Other
than the above described preferred distribution rights, Class B
Units shall rank pari passu to Class A Units and Common Units, and
shall hold no preference in any other respect, whether economic,
voting or otherwise to the Class A Units and Common Units. Holders
of Class B Units, Class A Units and Common Units, which we refer to
collectively as Membership Units, will vote collectively on all
matters on which the Members vote. Each Membership Unit will
receive one vote.
The preferred distribution rights of the Class
B Units are not a guaranty of any distribution. Any distribution to
be made is subject to our available cash flow and the discretion of
our Manager. The
order and priority of our distributions is further described in
“SECURITIES BEING OFFERED
– Distributions.”
Management
We are
a manager-managed limited liability company. Pursuant to our
Operating Agreement, we have one initial manager, The Chosen
Productions, LLC (the “Manager”). The Manager is
responsible for the day-to-day management of our business and
affairs, subject only to the rights of our members to vote on
certain major decisions as described below. See “SECURITIES BEING OFFERED – Description of
our Operating Agreement.” Approval of a majority of
the Membership Units present and voting at a duly called and held
meeting of our Members at which a quorum is present will be
required before we may take any of the following actions with
respect to our Company:
(i)
The sale, exchange
or other disposition of all, or substantially all, of the Company's
assets occurring as part of a single transaction or plan, or in
multiple transactions over a three (3) month period, except in the
orderly liquidation and winding up of the business of the Company
upon its duly authorized dissolution;
(ii)
The merger of the
Company with another limited liability company or limited
partnership;
(iii)
The merger of the
Company with a corporation or a general partnership or other
person;
(iv)
The conversion of
the Company to another type of entity organized within or without
the State, including without limitation, a limited
partnership;
(v)
The decision to
change the tax election status of the Company; and
(vi)
Any other
transaction described in the Operating Agreement as requiring the
vote, consent, or approval of the Members.
Members
holding a majority of Membership Units as of the record date of any
meeting and entitled to vote at such meeting will constitute a
quorum for the transaction of business. Any action that may be
taken at a meeting may also be taken by written consent the members
holding the percentage of Membership Units required to take such
action assuming all eligible Class B Units were in attendance and
voting at the meeting.
The
Manager may not be removed by the Members. The Manager will serve
indefinitely until it either resigns or is otherwise removed or
until a successor shall have been elected and qualified by the
affirmative vote or written consent of Members holding a majority
of the then outstanding Membership Units in the Company. Derral
Eves is the manager of our Manager, which has exclusive power,
authority, and discretion to control the business, property, and
affairs of the Company. The Manager holds all of the Common Units
and thereby has the power to vote all of the Common Units for
matters that require the vote of the Members.
Taxation
We have
elected to be taxed as a subchapter C corporation effective as of
our 2018 fiscal year, and, as such, are required to pay federal
income tax at the corporate tax rates on our taxable
income.
Summary Risk Factors
●
The Company has
limited operating history upon which an Investor can base an
investment decision and faces all of the risks.
●
The Company’s
actual operating results may differ from its
estimates.
●
The Company’s
operating results may fluctuate significantly.
●
Investors will bear
substantially all of the risk of cash loss if the television series
is unsuccessful.
●
The Company’s
success depends on external factors in the feature film and
television industry.
●
The success of the
Company and its film production depends on the Company’s
ability to raise sufficient funds for production.
●
The Company’s
success depends entirely on one television series.
●
Budget overruns may
adversely affect the Company’s business.
●
If the Company is
unable to continue production of its television series, it will
have incurred expenses and may not be able to return the
investors’ entire investment.
●
The VidAngel
licensing agreement gives VidAngel exclusive rights to distribute
the series through on-demand and subscription on-demand services,
and, as a result, if VidAngel is unsuccessful, the Company may have
lost a significant potential source of revenue.
●
There can be no
assurance that the Company will attract any distributors in
addition to VidAngel or that such distributors will adequately
promote and exploit its television series.
●
There can be no
assurance that the Company will be able to compete in the
television and film production industry and its lack of
diversification may make it vulnerable to oversupply in the
market.
●
Technological
advances may reduce demand for television series.
●
The Company’s
success depends on protecting its intellectual
property.
●
The Company will
depend heavily on its Manager.
●
Because the Company
was founded as a single purpose company to produce the Series, it
has numerous potential conflicts of interest.
●
The Company faces
inherent international trade risks that may have a material adverse
effect on its business.
●
The Company’s
revenues are vulnerable to currency fluctuations.
●
The offering price
of the Class B Units has been arbitrarily determined.
●
There is no public
market for the Class B Units and such securities are subject to
certain restrictions on transfer.
Interest of Management and Related Parties
The
Manager will not receive any remuneration for acting as our
manager. The Manager owns 13,900,000 of our outstanding Common Units
representing all of our outstanding Common Units as of the date of
this Offering Circular. Additionally, Dallas Jenkins an owner and
founder of the Company owns 100 Class A Units and Carolyn Eves, the
wife of Derral Eves, our chief executive officer, owns 1,500 Class
A Units as of the date of this Offering.
Reporting Requirements under Tier II of Regulation A
Following
this Tier 2, Regulation A offering, we will be required to comply
with certain ongoing disclosure requirements under Rule 257 of
Regulation A. We will be required to file: an annual report with
the SEC on Form 1-K; a semi-annual report with the SEC on Form
1-SA; current reports with the SEC on Form 1-U; and a notice under
cover of Form 1-Z. The necessity to file current reports will be
triggered by certain corporate events. Parts I & II of Form 1-Z
will be filed by us if and when we decide to and are no longer
obligated to file and provide annual reports pursuant to the
requirements of Regulation A.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This
Offering Circular contains certain forward-looking statements that
are subject to various risks and uncertainties. Forward-looking
statements are generally identifiable by use of forward-looking
terminology such as “may,” “will,”
“should,” “potential,”
“intend,” “expect,” “outlook,”
“seek,” “anticipate,”
“estimate,” “approximately,”
“believe,” “could,” “project,”
“predict,” or other similar words or expressions.
Forward-looking statements are based on certain assumptions,
discuss future expectations, describe future plans and strategies,
contain financial and operating projections or state other
forward-looking information. Our ability to predict results or the
actual effect of future events, actions, plans, or strategies is
inherently uncertain. Although we believe that the expectations
reflected in our forward-looking statements are based on reasonable
assumptions, our actual results and performance could differ
materially from those set forth or anticipated in our
forward-looking statements. Factors that could have a material
adverse effect on our forward-looking statements and upon our
business, results of operations, financial condition, funds derived
from operations, cash available for distribution, cash flows,
liquidity and prospects include, but are not limited to, the
factors referenced in this Offering Circular, including those set
forth below.
When
considering forward-looking statements, you should keep in mind the
risk factors and other cautionary statements in this Offering
Circular. Readers are cautioned not to place undue reliance on any
of these forward-looking statements, which reflect our views as of
the date of this Offering Circular. The matters summarized below
and elsewhere in this Offering Circular could cause our actual
results and performance to differ materially from those set forth
or anticipated in forward-looking statements. Accordingly, we
cannot guarantee future results or performance. Furthermore, except
as required by law, we are under no duty to, and we do not intend
to, update any of our forward-looking statements after the date of
this Offering Circular, whether as a result of new information,
future events or otherwise.
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An investment in our Class B Units is highly speculative and is
suitable only for persons or entities that are able to evaluate the
risks of the investment. An investment in our Class B Units should
be made only by persons or entities able to bear the risk of and to
withstand the total loss of their investment. Prospective investors
should consider the following risks before making a decision to
purchase our Class B Units. To the best of our knowledge, we have
included all material risks to investors in this
section.+
History of Operations – The Company has limited operating
history upon which an Investor can base an investment
decision.
The
Company is an early stage television and film development and
production company in which investors may lose their entire
investment. The Company was formed on October 24, 2017 for a single
purpose, to develop and produce a television series entitled
“The Chosen.”
The Company has only produced one season of the Series and due to
its limited operating history, the Company is unable to provide
investors with significant data upon which an evaluation can be
made of the Company’s prospects and an investment in its
securities.
The
Company cannot be certain that its business plan or the remainder
of the Series will develop or that production will be successful.
As an early stage company, the Company will be particularly
susceptible to the risks and uncertainties described in these risk
factors and will be more likely to incur expenses associated with
addressing them.
The
Company cannot assure investors that it will be able to achieve any
of its objectives, generate sufficient revenues to achieve or
sustain profitability or compete successfully in the television and
film production industry.
Actual Operating Results May Differ from Estimates – The
Company’s actual operating results may differ from its
initial estimates.
The
Company’s operating results depend on production costs,
public tastes, and promotion success. The Company expects to
continue to generate its revenues from the distribution and
exploitation of the Series and the rights therein. The ability of
the Company to continue generating revenues depends on the
continued successful distribution of Season 1 and getting Season 2
and Season 3 produced and into distribution, upon the timing and
the level of market acceptance of Season 2 and Season 3, as well as
upon the ultimate cost to produce, distribute and promote it. The
revenues derived from the continued distribution of the Series
depend primarily on its acceptance by the distributors and then by
the public, which cannot be predicted and does not necessarily bear
a direct correlation to the production costs incurred. The
commercial success of the Series also depends upon terms and
condition of its distribution, promotion and marketing and certain
other factors. Accordingly, the Company’s revenues are, and
will continue to be, difficult to forecast.
Revenues – There is no guarantee revenues will remain
consistent over time.
It is
likely that revenues generated from the Series will not remain
consistent over time. Even if the Company is successful in
creating, distributing, and marketing the Series, revenues from
previous seasons will likely decrease over time as subsequent
seasons of the Series are released. Further, once production,
distribution and marketing of the entire Series is complete,
revenues from the Series are likely to decrease over
time.
Dilution – Investors may experience dilution in the future if
the Company issues additional units of membership
interest.
The
Company may, in the sole discretion of the Manager, issue
additional units of membership interest in the Company to raise
additional capital. Any such issuance would dilute the percentage
interest of investors in our Company, including investors in this
Offering.
Jurisdiction – Any claims in connection with the Operating
Agreement are subject to the exclusive jurisdiction of Utah
courts.
Once
the Members have been issued Class B Units and become bound by our
Operating Agreement, the Members submit to the exclusive
jurisdiction of state and federal courts sitting in Utah in any
action on a claim arising out of, under, or in connection with the
Operating Agreement or the transactions contemplated by the
Operating Agreement. We intend to seek to enforce this provision in
any action or claim brought against us by a Member. Our forum
selection clause applies to claims brought by our Members and
former Members, as well as claims brought by Members or former
Members against our managers, officers, former managers and former
officers, if such claims relate to their roles as Members, managers
and/or officers of the Company. Service of process on a Member
shall be delivered to the address listed on such Member’s
subscription agreement as provided to the Company by the transfer
agent. We believe that our exclusive forum provision is enforceable
under Utah law.
Our
exclusive forum provision may have the effect of discouraging
Members from bringing lawsuits against us by forcing them into a
foreign forum or by adding costs relating to challenging our
Operating Agreement’s exclusive jurisdiction clause. Further,
this clause may limit the ability of our Members to bring a claim
against us in a judicial forum that such Member finds favorable for
disputes with us or our Manager or officers.
Fee Shifting – The prevailing party in any
litigation between the Company and the Members or among the Members
is entitled to recover from the other party all reasonable fees,
costs and expenses of enforcing any right of the prevailing party,
including reasonable attorneys’ fees and
expenses.
Pursuant to the
terms of our Operating Agreement, in the event that any dispute
between the Company and the Members or among the Members should
result in litigation, the prevailing party in such dispute is
entitled to recover from the other party all reasonable fees, costs
and expenses of enforcing any right of the prevailing party,
including reasonable attorneys’ fees and expenses. We believe
that we are entitled to recover fees if we are the prevailing party
in litigation with our Members, and we intend to enforce this
provision in any claim or dispute between the Company and our
Members, including claims brought under the federal securities
laws. Our fee shifting provision applies to claims brought by our
Members and our former Members, as well as claim brought by Members
or former Members against our directors, officers, former directors
and former officers, if such claims relate to their roles as
Members, directors and/or officers of the Company.
Our fee
shifting provision may have a chilling effect on claims or actions
our Members may seek to bring against us because of the risk that a
claimant will be required to pay our legal fees if it does not
prevail. In addition, our fee shifting provision may result in
greater losses to our company in any litigation between us and our
Members in which we are not the prevailing party.
Fluctuations in Operations – The Company’s operating
results may fluctuate significantly.
The
Company expects that its future operating results will fluctuate
significantly as a result of, among other factors:
●
The timing of
domestic and international releases of the Series;
●
The success of the
Series;
●
The release of
competitors’ television series and film productions into the
market at or near the same time the Series is
released;
●
The costs to
distribute and promote the Series;
●
The success of
attracting influential distributors and the success of such
distributors in marketing and exploiting the Series;
●
The timing of
receipt of proceeds generated by the Series by
distributors;
●
The timing and
magnitude of operating expenses and capital
expenditures;
●
The level of
un-reimbursed production costs in excess of budgeted maximum
amounts;
●
The demand for, and
costs of manufacturing of, merchandise related to the Series;
and
●
General economic
conditions, including continued slowdown in advertiser
spending.
As a
result, the Company believes that its results of operations may
fluctuate significantly, and it is possible that the
Company’s operating results could be below the expectations
of investors.
Risk of Cash Loss – Investors will bear substantially all of
the risk of cash loss if the Series is unsuccessful.
The
Company depends on revenues from the Series to generate returns for
its Members. This means that if the Series is unsuccessful and is
unable to generate revenues, investors will bear substantially all
of the economic risk.
Dependence on External Factors – The Company’s success
depends on external factors in the television and film production
industry.
Operating in the
television and film production industry involves a substantial
degree of risk. Each production is an individual artistic work, and
unpredictable audience reactions primarily determine commercial
success. The commercial success of a production also depends upon
the quality and acceptance of other competing productions released
into the marketplace at or near the same time, critical reviews,
the availability of alternative forms of entertainment and leisure
activities, general economic conditions and other tangible and
intangible factors, all of which are subject to change and cannot
be predicted with certainty. The Company’s success will
depend on the experience and judgment of its management in
producing the Series. There can be no assurance that the Series
will reach the marketplace or that it will obtain favorable ratings
or reviews once it does.
Diversification – The Company’s success depends
entirely on one television series.
The
most common way to diversify risk in the television and film
production industry is by producing groups of productions, as done
by the major production companies. This diversification reduces the
impact of a single production’s commercial success or failure
on a company’s overall financial health. Due to financial
limitations, however, most television series are produced as
individual projects and that is the case with the Series. The
Company plans to produce one project so there will be no risk
diversification for investors in the event that the Series is not
successful.
Reliance on this Offering – The Company’s operations
and future success depend on the amount of proceeds raised from
this Offering.
The
production of Seasons 2 and 3 and our ability to continue to market
the Series are largely dependent on the amount of proceeds raised
in this Offering. Should we fail to raise the Maximum Offering
Amount, we expect to reduce, on a dollar-for-dollar basis as
necessary, all marketing expenses for Season 3 followed by
production costs for Season 3, from the uses of proceeds of the
Offering; however, if we do not raise enough to cover production
costs for Seasons 2 or Season 3, and are not otherwise able to
finance such costs through our ongoing revenues or third party
financing, our ability to meet our projected revenues will be
substantially limited.
Budget Overruns – Budget overruns may adversely affect the
Company’s business.
Actual
production costs may exceed their budget, sometimes significantly.
Risks, such as labor disputes, death or disability of star
performers, rapid high technology changes relating to special
effects, or other aspects of production, such as shortages of
necessary equipment, damage to film negatives, master tapes and
recordings, or adverse weather conditions, may cause cost overruns
and delay or frustrate completion of a production. If Seasons 2 or
3 incur substantial budget overruns, the Company may have to seek
additional financing from outside sources to complete production of
the film. No assurance can be given as to the availability of such
financing on terms acceptable to the Company. In addition, if a
production incurs substantial budget overruns, there can be no
assurance that such costs will be recouped, which could have a
significant adverse impact on the Company’s business, results
of operations or financial results.
VidAngel Licensing Agreement – The VidAngel licensing
agreement gives VidAngel exclusive rights to distribute the series
through on-demand and subscription on-demand services, and, as a
result, if VidAngel is unsuccessful, the Company may have lost a
significant potential source of revenue.
VidAngel, Inc.
holds several nationwide and international exclusive licenses to
exploit the Series through video-on-demand services, subscription
video-on-demand services and all forms of physical media, for a
period of three years (which period will automatically renew for
one-year increments) and a nationwide exclusive license to exploit
the Series through subscription-video-on-demand services. Although
VidAngel has a financial interest in the success of the Series,
there is no guarantee that VidAngel will perform its obligations
pursuant to the licensing agreement in a manner that will result in
the successful distribution of the Series through video-on-demand
services. If VidAngel is unsuccessful, the Company may have lost a
significant potential source of revenue.
Additional Distributors – There can be no assurance that the
Company will attract any distributors in addition to VidAngel, Inc.
for the Series.
There
can be no assurance that any distributors in addition to VidAngel,
Inc. will contract with the Company to distribute the Series either
based on the Series itself or on other considerations such as the
materials already being distributed by such distributor. Further,
decisions regarding the timing of release and promotional support
of television series are important in determining the success of a
particular television series. As with most production companies
which rely on others to distribute productions, the Company will
not solely control the timing and manner in which its distributors
will distribute the Series. Although any distributor the Company
uses may have a financial interest in the success of the Series,
any decision by its distributors not to distribute or promote the
Series or to promote a competitor’s productions to a greater
extent than it promotes the Company’s could have a material
adverse effect on the Company’s business, results of
operations or financial condition.
Competition – There can be no assurance that the Company will
be able to compete in the television production industry and its
lack of diversification may make it vulnerable to oversupply in the
market.
There
are numerous other production companies that develop and produce
television series. The Company’s lack of diversification may
make it vulnerable to oversupplies in the market. Most of the major
U.S. production studios are part of large diversified corporate
groups with a variety of other operations, including television
networks and cable channels, which can provide means of
distributing their products. The number of productions released by
the Company’s competitors, particularly the major U.S.
production studios, in any given period may create an oversupply of
product in the market and may make it more difficult for the
Company to succeed.
Reliance on Personnel – The Company will depend heavily on
creative and production personnel to produce the
Series.
The
production of the Series will require many highly skilled creative
and production personnel, including cinematographers, editors,
costume designers, set designers, sound technicians, lighting
technicians and actors. Although the Company expects to find high
quality candidates to fill these positions, there can be no
assurance the Company will find the necessary personnel to complete
production or that such personnel will cooperate and participate
through completion of production. Finding or replacing key
personnel could delay production or reduce the quality of the
Series, which may impair the Company’s revenue.
The current pandemic of the novel coronavirus, or COVID-19, could
materially and adversely impact or disrupt our ability to produce
Season 2 and Season 3.
Since
its discovery in December 2019, a new strain of coronavirus (also
known as the “COVID-19 virus”) has spread from China to
many other countries, including the United States. The outbreak has
been declared to be a pandemic by the World Health Organization,
and the Health and Human Services Secretary has declared a public
health emergency in the United States in response to the outbreak.
Considerable uncertainty still surrounds the COVID-19 virus and its
potential effects, and the extent of and effectiveness of any
responses taken on a national and local level. However, measures
taken to limit the impact of this coronavirus, including social
distancing and other restrictions on travel, congregation and
business operation have already resulted in significant negative
short-term economic impacts. The long-term impact of this
coronavirus on the U.S. and world economies remains uncertain but
is likely to result in a world-wide economic downturn, the length
and breadth of which cannot currently be predicted.
Our
ability to make distributions to Members is significantly dependent
on the production of Season 2 and Season 3 and extended
restrictions due to the COVID-19 pandemic, including stay-at-home
orders and other social distancing guidelines, will restrict our
ability to produce episodes for Season 2 and Season 3. As a result,
our ability to make distributions may be limited. Additionally, in
the event of an extended world-wide economic downturn, the demand
for our product may be reduced, which may have an effect on our
revenues and in turn, limit our ability to make
distributions.
Technological Advances – Technological advances may reduce
demand for television series.
The
entertainment industry in general, and the television industry in
particular, are continuing to undergo significant changes,
primarily due to technological developments. Because of this rapid
growth of technology, shifting consumer tastes and the popularity
and availability of other forms of entertainment, it is impossible
to predict the overall effect these factors will have on the
potential revenue from and profitability of an episodic television
series.
Limited Protection of Intellectual Property and Proprietary Rights
– The Company’s success depends on protecting its
intellectual property.
The
Company’s success will depend, in part, on its and the
Manager’s ability to protect their respective proprietary
rights in the Series. The Company has secured its intellectual
property rights with respect to the Series pursuant to the
Assignment Agreement it has entered into with Dallas Jenkins and
the Assignment and Assumption Agreement it has entered into with
Creatus, LLC. The Company will rely primarily on a combination of
copyright laws and other methods to protect its respective
proprietary rights in the Series. However, there can be no
assurance that such measures will protect the Company’s
proprietary information, or that its competitors will not develop
screenplays for feature films otherwise similar to the
Company’s, or that the Company will be able to prevent
competitors from developing a similar television series for
production. The Company believes that its proprietary rights will
not infringe on the proprietary rights of third parties. However,
there can be no assurance that third parties will not assert
infringement claims against the Company in the future with respect
to the Series. Such assertion may require the Company to incur
substantial legal fees and costs in order to protect its rights, or
possibly enter into arrangements on terms unfavorable to it in
order to settle such claims. To the extent that the Company or the
Manager fails to adequately protect its respective intellectual
property rights in the Series, or if the financial burden of
enforcing its rights becomes too cost-prohibitive, the Company may
be unable to continue to implement its business strategy, which
would have a material adverse effect on the Company’s
business, prospects, financial condition, and results of
operations.
Reliance on Management – The Company will depend heavily on
its Manager.
The
successful production of the Series and the operation of the
Company’s business is dependent on the continued efforts of
the Company’s Manager, The Chosen Productions,
LLC.
The
production of the Series will require many other highly skilled
creative and production personnel, including cinematographers,
editors, costume designers, set designers, sound technicians,
lighting technicians and actors. Although the Company expects to
find high quality candidates to fill these positions, there can be
no assurance of their cooperation and participation through
completion of the Series. Replacing key talent could delay
production or reduce the quality of the Series which would impair
the Company’s revenue. Also, many of these positions will
require the Company to hire members of unions or guilds. As a
result, the Company’s ability to terminate unsatisfactory or
non-performing workers could be adversely affected by existing
union or guild contracts and regulations. This could delay
production of the Series and significantly increase
costs.
Conflicts of Interest – Because the Company was founded as a
single purpose company to produce the Series, it has numerous
potential conflicts of interest.
It is
common in the television and film production industry to produce
television series through single purpose companies. However, this
strategy creates numerous inherent conflicts of interest. For
instance, the Company’s Manager may be contracting with
distributors, cast members and others that they have had
arrangements with in the past and will likely have arrangements
with in the future that are unrelated to the business of the
Company. Further, our Manager and executive officers are involved
in other businesses, including other television and film production
businesses. Our Operating Agreement permits our Manager to have
outside business activities, including those that compete with our
business. We believe our Manager and executive officers have the
capacity to discharge their responsibilities to our Company
notwithstanding participation in other projects. See “INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS AND OTHER CONFLICTS OF INTEREST” for more
information.
International Trade Risks – The Company faces inherent
international trade risks that may have a material adverse effect
on its business.
The
Company intends to distribute the Series in foreign countries and
derive a significant percentage of its revenues from sources
outside the United States. As a result, the Company’s
business is subject to certain risks inherent in international
trade, many of which are beyond its control. Among those risks are
the following:
●
Changes in local
regulatory requirements;
●
Changes in the laws
and policies affecting trade;
●
Investment and
taxes (including laws and policies relating to the repatriation of
funds and withholding taxes);
●
Differing degrees
of protection for intellectual property;
●
Instability of
foreign economies and governments; and
These
factors can have a material adverse effect on the Company’s
business and results of operations.
Currency Fluctuations – The Company’s revenues are
vulnerable to currency fluctuations.
The
Company cannot accurately predict the impact of future exchange
rate fluctuations between the U.S. dollar and other foreign
currencies on revenues, and fluctuations could have a material
adverse effect on its business and results of
operations.
Arbitrary Pricing -- The offering price of the Class B Units may be
arbitrarily determined.
Since
no public market exists for the Class B Units, the offering price
for the Class B Units was not determined on an arm’s length
basis and does not necessarily represent the fair market value of
the Class B Units. In determining the terms of the Offering, the
Company gave consideration to the risks associated with its
business plan, its assumptions regarding its future financial
performance and other considerations it deemed relevant. However,
the offering price of the Class B Units may not bear any direct
relationship to the foregoing considerations or any other generally
accepted criteria of value and many of such criteria cannot be used
in evaluating the offering price because the Company has no
operating or financial history.
No Public Market -- There is no public market for the Class B Units
and such securities are subject to certain restrictions on
transfer.
Investors should
regard the Class B Units as an illiquid investment. No public
market for the Class B Units exists or is likely to develop in the
near future. While the Class B Units are qualified under Regulation
A, and therefore have the status of “exempt securities”
under the federal securities laws, the Class B Units have not been
registered pursuant to the laws of any state, and any resale of the
Class B Units may require the transferor to register the
transferred Class B Units under applicable state securities laws,
or find an exemption therefrom.
General
We are
not selling the Class B Units through commissioned sales agents or
underwriters. The Company is offering its Class B Units through our
Offering’s website: thechosen.tv. This Offering
Circular will be furnished to prospective investors at thechosen.tv via download at
any time.
Offering Amount and Distribution
We are
offering a maximum of 2,857,143 Class B Units in this Offering for
a purchase price of $7.00 per Class B Unit.
The
minimum purchase in this Offering is 72 Class B Units ($504);
however, we can waive the minimum purchase requirement at our sole
discretion. The Class B Units will be issued in one or more
closings, occurring at least monthly after the Company has received
and accepted the first subscription for Class B Units. For each
closing, proceeds for subscriptions over $2,500 must be transmitted
directly by wire or electronic funds transfer via ACH to the
specified bank account maintained by the Company per the
instructions in the subscription agreement. Such funds will be kept
in a non-interest-bearing account maintained by the Company until
the closing. Proceeds for subscriptions of $2,500 or less may be
(i) submitted through a purchaser’s customer account in
accordance with the billing information for such purchaser at
thechosen.tv to be
kept in the specified bank account maintained by the Company per
the instructions in the subscription agreement if such payment
method is made available, or (ii) transmitted directly by wire or
electronic funds transfer via ACH to the specified bank account
maintained by the Company per the instructions in the subscription
agreement. We intend to accept payment for subscriptions of $2,500
or less through a purchaser’s customer account in accordance
with the billing information for such purchaser at thechosen.tv. However, the
credit card method of payment is not approved by our payment
processors at this time and may not be approved for this Offering.
Payments for all subscriptions may be transmitted directly by wire
or electronic funds transfer via ACH to the specified bank account
maintained by the Company per the instructions set forth on the
Offering's website at thechosen.tv. Upon each
closing, any proceeds collected for such closing will be disbursed
to the Company and the Class B Units for such closing will be
issued to investors. Once a subscription has been submitted and
accepted by the Company, an investor will not have the right to
request the return of its subscription payment prior to
closing.
Procedures for Acquiring Class B Units
All
subscriptions for Class B Units must be made through our
Offering’s website, thechosen.tv (the
“Website”). Prior to purchasing any Class B Units, you
should review this entire Offering Circular and any appendices,
exhibits and supplements accompanying this Offering Circular.
Prospective investors who abide by the investment limitations
described below may order Class B Units as follows:
●
Complete the
Subscription Agreement form, including the representations and
warranties regarding your accredited status and/or the percentage
of your net worth being invested in this Offering.
●
Electronically sign
and submit the Subscription Agreement.
●
If your
subscription price is greater than $2,500, payment for your Class B
Units must be made by direct delivery of funds pursuant to wire or
electronic funds transfer via ACH to the specified account
maintained by the Company, in accordance with the payment
instructions provided in your Subscription Agreement.
●
If your
subscription price is $2,500 or less, you may (i) pay for your
subscription price through your customer account in accordance with
your billing information at thechosen.tv if such payment
method is made available, or, (ii) transmit funds directly by wire
or electronic funds transfer via ACH to the specified account
maintained by the Company per the instructions in your subscription
agreement. We will bill your customer account in accordance with
your billing information at thechosen.tv .
Subscriptions will be effective only upon our
acceptance, and we reserve the right to reject any order, in whole
or in part. An approved custodian or trustee must process and
forward to us orders made through IRAs, Keogh plans, 401(k) plans
and other tax-deferred plans. If we do not accept your
order, the Company will promptly refund any purchase price
transferred via wire transfer without interest. Any order
application not accepted within ten (10) days after receipt shall
be deemed rejected.
Investment Limitations
Generally, no sale may be made to you in this Offering if the
aggregate purchase price you pay is more than 10% of the greater of
your annual income or net worth. Different rules apply to
accredited investors and non-natural persons. Before making any
representation that your investment does not exceed applicable
thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of
Regulation A. For general information on investing, we encourage
you to refer to www.investor.gov.
As a Tier 2, Regulation A offering, investors must
comply with the 10% limitation to investment in the Offering. The
only investor in this Offering exempt from this limitation is an
accredited investor, an “Accredited Investor,” as
defined under Rule 501 of Regulation D. If you meet one of
the following tests you should qualify as an Accredited
Investor:
(i)
You are a natural
person who has had individual income in excess of $200,000 in each
of the two most recent years, or joint income with your spouse in
excess of $300,000 in each of these years, and have a reasonable
expectation of reaching the same income level in the current
year;
(ii)
You are a natural
person and your individual net worth, or joint net worth with your
spouse, exceeds $1,000,000 at the time you purchase Class B Units
(please see below on how to calculate your net worth);
(iii)
You are an
executive officer or general partner of the issuer or a manager or
executive officer of the general partner of the
issuer;
(iv)
You are an
organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, or the Code, a corporation, a
Massachusetts or similar business trust or a partnership, not
formed for the specific purpose of acquiring the Class B Units,
with total assets in excess of $5,000,000;
(v)
You are a bank or a
savings and loan association or other institution as defined in the
Securities Act, a broker or dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, an insurance company as defined by the Securities
Act, an investment company registered under the Investment Company
Act of 1940, as amended, or the Investment Company Act, or a
business development company as defined in that act, any Small
Business Investment Company licensed by the Small Business
Investment Act of 1958 or a private business development company as
defined in the Investment Advisers Act of 1940;
(vi)
You are an entity
(including an Individual Retirement Account trust) in which each
equity owner is an accredited investor;
(vii)
You are a trust
with total assets in excess of $5,000,000, your purchase of Class B
Units is directed by a person who either alone or with his
purchaser representative(s) (as defined in Regulation D promulgated
under the Securities Act) has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of the prospective investment, and you were not
formed for the specific purpose of investing in the Class B Units;
or
(viii)
You are a plan
established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has
assets in excess of $5,000,000.
Under
Rule 251 of Regulation A, non-accredited, non-natural investors
are subject to the investment limitation and may only invest funds
which do not exceed 10% of the greater of the purchaser’s
revenue or net assets (as of the purchaser’s most recent
fiscal year end). A non-accredited,
natural person may only invest funds which do not exceed 10%
of the greater of the purchaser’s annual income or net worth
(please see below on how to calculate your net worth).
NOTE: For the purposes of
calculating your net worth, or Net Worth, it is defined as the
difference between total assets and total liabilities. This
calculation must exclude the value of your primary residence and
may exclude any indebtedness secured by your primary residence (up
to an amount equal to the value of your primary residence). In the
case of fiduciary accounts, net worth and/or income suitability
requirements may be satisfied by the beneficiary of the account or
by the fiduciary, if the fiduciary directly or indirectly provides
funds for the purchase of the Class B Units.
See the “PLAN OF
DISTRIBUTION” section of
this Offering Circular for additional details on how you can
purchase Class B Units.
VidAngel Consulting and Coordination Agreement
The
Company has entered into a consulting and coordination agreement
with VidAngel, Inc. dated August 11, 2020 pursuant to which
VidAngel will provide the following services to the Company in
exchange for a fee of $300,000 payable within 30 days of the launch
of the website through which the Offering will be conducted by the
Company: (i) providing Company with the technology necessary to
facilitate the Offering; (ii) assist in the reconciliation and
accounting of all funds received and shares issued for the
Offering; (iii) video recording, editing, and marketing related
consultation; and (vi) assisting Company with such other matters as
may be agreed upon.
The
services provided by VidAngel, Inc. will not include acting as
placement agent for the Offering, soliciting investors or
indications of interest in buying securities, discussing the merits
of the offering with third parties, or any other activity that
could be characterized as a brokerage activity.
USE OF PROCEEDS TO
ISSUER
Net
proceeds to our Company from this Offering are anticipated to be
$19,550,000 following the payment of offering costs. Set forth
below is a table showing the estimated sources and uses of the
proceeds from this Offering.
|
|
|
|
|
|
|
|
Gross
Proceeds
|
$20,000,001
|
100.00%
|
|
|
|
|
|
Estimated Offering
Expenses(1)
|
$450,000
|
2.25%
|
|
|
|
|
|
Net
Proceeds
|
$19,550,001
|
97.75%
|
|
|
|
|
|
Production
Expenses(2)
|
$14,400,001
|
72.00%
|
|
|
|
|
|
Working
Capital(3)
|
$750,000
|
3.75%
|
|
|
|
|
|
Distribution/Marketing
Expenses(4)
|
$4,400,000
|
22.00%
|
|
|
|
|
|
Total
Use of Proceeds
|
$19,550,001
|
97.75%
|
(1)
The Company intends
to use up to $450,000 of the
gross proceeds of the Offering for estimated offering expenses,
including legal, accounting, printing, advertising, travel,
marketing, blue sky compliance and other expenses of this Offering,
and transfer agent fees. The estimated offering expenses also
includes the $300,000 payment
to VidAngel pursuant to the Consulting Agreement to be paid when
the Company’s cash flow is sufficient to allow payment but
not later than the closing of this Offering for at least
$20,000,001 in aggregate gross
proceeds.
(2)
The Company intends
to use up to $14,400,001 of the net proceeds of this Offering for
production expenses, including cast compensation, production staff
compensation, sets, props, wardrobes, transportation, music, sound,
film, visual effects and other expenses in connection with
producing the Series.
(3)
The Company intends
to use up to $750,000 of
the net proceeds of this Offering for working capital, including
general overhead costs, if the Company raises the Maximum Offering
Amount.
(4)
The Company intends
to use up to $4,400,000 of
the net proceeds of this Offering for distribution and marketing
expenses, including expenses associated with hiring a publicist and
public relations specialist, if the Company raises the Maximum
Offering Amount.
If the
Company fails to raise the Maximum Offering Amount in this
Offering, we initially expect to eliminate, on a dollar-for-dollar
basis as necessary, all marketing expenses for Season 3 followed by
production costs for Season 3, from the uses of proceeds of the
Offering.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
DESCRIPTION OF OUR
BUSINESS
General
The Chosen, LLC was formed as a Utah limited
liability company on October 24, 2017 solely to develop and produce
an episodic television series entitled “The Chosen” (the “Series”), which is
intended to be distributed through online video streaming services,
television and home video. The story ideas and concepts upon which
the Series is based were created by Dallas Jenkins, who received a
49% ownership interest of Common Units in the Company in exchange
for all of his rights in and to his story ideas and
concepts.
We
intend to use the proceeds from this Offering to continue to fund
the development and production of the Series. The filming location
for Season 2 will be Goshen, Utah, pursuant to an agreement with
Deseret Book Company.
The Series is loosely inspired by a film entitled
“The
Shepherd.” The Company
exclusively owns all right, title, and interest in and to the
copyrights and all other rights in and to The Shepherd
pursuant to the Assignment and
Assumption Agreement (the “Assignment Agreement”)
between the Company and Creatus, LLC. Pursuant to the Assignment
Agreement, Creatus, LLC assigned its respective rights in and
to The
Shepherd to the Company in
exchange for $100,000.
The Series
Synopsis
The
Series is based on the story concepts and ideas of Dallas Jenkins.
The Series is based on the gospels of the Bible and tells the story
of the life of Jesus Christ primarily through the perspectives of
those who met him throughout his life, as the stories of his many
miracles were exposed primarily through the word of those who
witnessed them. Over the course of multiple seasons, the viewer
meets Jesus, his followers, the Romans occupying Jewish territory
and the religious leaders who resisted him. Season 1 begins with
the gathering of Jesus’ followers and follows the progression
of the disciples from their calling to their preparation for
Jesus’ ministry. Season 2 will focus on the start of
Jesus’ ministry in Samaria and end with the Sermon on the
Mount and Season 3 will continue to focus on His ministry and
miracles. The first half of Season 2 will be financed through pay
it forward and sales of merchandise. This Offering will solely
finance the second half of Season 2 and Season 3.
Production
The
Company intends to develop and produce the second half of Season 2
and Season 3 of the Series within the $14,400,001 budget. Season 1
took three months to produce and had a production cost of
approximately $8.1 million. The budget for the second half of
Season 2 and Season 3 covers all expenses to be incurred to develop
and create each season and may be subject to change in connection
with the exigencies of the production process. The Company has not
yet decided on a production location or locations and will continue
to consider options. The decision on any production location will
be based on such factors, among others, as production costs
(including expenses associated with the hiring of a film
crew),other financial considerations and the continuing effects of
the COVID-19 virus. We have not yet begun production of Season 2
and we expect production to be completed over an approximately
six-month period for the entirety of Season 2, after which
production on Season 3 will begin.
Distribution and Marketing
The Series is intended to be distributed through
online video streaming services, television, and home video. The
Company has entered into a license agreement (the “License
Agreement”) with VidAngel, Inc. (“VidAngel”)
providing VidAngel the following licenses, granting the right to
sublicensable license to transmit, reproduce, distribute, publicly
perform, display, create Derivative Works (as defined in the
License Agreement and otherwise exploit each season’s
episodes of the Licensed Materials (as defined in the License
Agreement), including, without limitation, the Content (as defined
in the License Agreement): (i) a one-year nationwide
exclusive license on any and all media; (ii) a one-year
international license on any and all media; (iii) a worldwide
exclusive license for video-on-demand and video-on-demand with pay
it forward; (iv) a nationwide non-exclusive license for
video-on-demand; (v) an international non-exclusive license for
video-on-demand for video-on-demand; (vi) an exclusive nationwide
license for subscription video-on-demand; (vii) an exclusive
international license for video-on-demand for subscription
video-on-demand; (viii) a worldwide non-exclusive license for
video-on-demand without tipping and subscription video-on-demand
without pay it forward; (ix) a worldwide exclusive license for all
forms of Physical Media; (x) a worldwide non-exclusive license on
hardcopy e-book versions of The Chosen Book, published by
Broadstreet.
Pursuant to the
license agreement, twenty-five percent (25%) of VidAngel’s
revenues from the exploitation of video-on-demand and
subscription-video-on-demand content will be applied to marketing
the Series. The Company will receive licensing payments in an
amount equal to 40% of the net profits attributable to the Series
based on the number of hours the Series was viewed by
VidAngel’s customers. In addition to the licensing payments,
the Company will be eligible to receive an uncapped bonus in an
amount based on a proprietary algorithm determined by
“goodness,” “loyalty” and “word of
mouth.”
If the
Company fails to raise the Maximum Offering Amount, the Company
initially expects to eliminate, on a dollar-for-dollar basis as
necessary, all marketing expenses for Season 3 followed by
production costs for Season 3, from the uses of proceeds of the
Offering,
Writer Work-For-Hire Agreement
The
Company has entered into a work-for-hire agreement with Dallas
Jenkins (the “Writer”), pursuant to which the Writer,
jointly with Ryan Swanson and Tyler Thompson (collectively, the
“Co-Writers”), produce an outline and treatment for
Season 2, which will include eight episodes. Additionally, upon
notification from the Company, the Writer will prepare a teleplay
for each of the eight episodes of Season 2, which will consist of a
first draft and revisions to the first draft. The Writers each
entered into a work-for-hire agreement with the Company on October
20, 2019. Pursuant to the work-for-hire agreement, the Writer began
work on November 6, 2019 and will be compensated $3,333 for the
outline and treatment and $12,500 for a teleplay for each of the
eight episodes of Season 2. Upon the start of filming for each
episode produces based upon the materials created by the Writer,
the Company will pay the Writer $1,000 as a production bonus. The
company will also pay the Co-Writers the same amounts paid to the
Writer, for each episode co-written by the Co-Writers.
Additionally, the Company entered into an agreement with Jenkins
Entertainment, LLC and Mr. Jenkins, Amanda Jenkins and Kristen
Hendricks to write two "devotional" books based upon the Series.
Each of Mr. Jenkins, Amanda Jenkins and Kristen Hendricks received
$3,000 and will receive 12.5% of all revenues received by the
Company from VidAngel on the sale of the books, pursuant to the
terms of the agreement between VidAngel and the
Company.
Under
the agreements, we paid the Mr. Jenkins $138,000 to direct and
write the last four episodes of The Chosen Series, Season 1. We
have continued to engage Mr. Jenkins as a writer for the second
season and paid him $16,000 during 2019 on this contract. We will
pay the remaining $23,000 during 2020 for the rest of the writer
contract. Mr. Jenkins has also received payment from our Company
for advertising through the member’s digital media channels,
totaling $21,000 for the year.
Merchandise
The
Company is producing and distributing merchandise related to the
Series on its website. Merchandise sales consist mainly of
T-shirts. We do not own or maintain the merchandise inventory, but
manage an online store through a third-party application in which
orders are drop shipped to end customers using that third-party
platform. We contract with a third-party supplier that fulfills
these sales orders on our behalf by screen printing merchandise and
shipping them to end customers. The Company pays a fee equal to
3.6% of each order plus $0.30 per order.
For the
year ended December 31, 2019, the Company’s revenues and
costs from merchandise sales were approximately $168,973 and
$96,736, respectively.
Employees
The
Company has four employees, Adam Swerdlow, the Company’s
Chief Operating Officer and Collin Macleod, the Company’s
Lead Videographer and Editor. Additionally, Derral Eves and Dallas
Jenkins have employment agreements with the Company. The
Company’s officers are principals of the Company’s
Manager. The Company anticipates that all personnel involved with
the production of Season 2, including writers, directors, actors,
crew, and other production personnel, will be hired as independent
contractors.
DESCRIPTION OF OUR PROPERTIES
As of the date of this Offering Circular, our
primary assets are our copyrights in the film entitled
“The
Shepherd,” which served
as the underlying source material for the Series, and our
copyrights in the screenplays for the Series. We do not own any
real property. See “DESCRIPTION OF
BUSINESS” for more
information.
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MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
We were
formed as a Utah limited liability company on October 24, 2017. Our
company’s objective is to develop and produce an episodic
television series entitled “The Chosen”.
As of
the date of this Offering Circular, all eight episodes of Season 1
of the Series were successfully released via a VOD model, along
with physical product. We also began selling T-Shirts and other
“The Chosen” merchandise in October 2019 utilizing a
third-party fulfillment partner. The pre-production phase for
Season 2, including writing, set design, filming location selection
and actor interviews, began in November 2019 in anticipation of
additional funding from both revenues and future capital raising to
continue to produce the Series.
Offering proceeds
will be applied to the production of the Series and the payment or
reimbursement of placement fees and other offering expenses. We
will experience a relative increase in liquidity as we receive net
offering proceeds and a relative decrease in liquidity as we spend
net offering proceeds in connection with the development and
production of the Series.
Operating Results
The
following represents our performance highlights:
Revenues
For
the year ended December 31, 2019, the Company had revenues related
to the Pilot and Season 1 of $815,630.
Operating Expenses
The
production of Season 1 was finalized at a total cost of $8,270,567.
Film costs are capitalized and amortized over a period of time in
proportion to ultimate revenue production. Amortization of film
costs for 2019 was $279,062.
Operating Expenses
other than the amortization of film costs for the period ended
December 31, 2019 were $827,745.
Liquidity and Capital Resources
Short-Term Liquidity
As
of the date of this Offering Circular, we had received $200,000 in
cash investment from our founders in return for Common
Units
As
of December 31, 2019, we had $630,325 cash on hand.
Plan of Operations
Our
plan of operations, including material expenditures, over the next
fiscal year is focused on the development, production and marketing
of Season 2 of the Series and the continued marketing of the
entirety of Season 1.
Trend Information
To
date, revenues for 2020 have been ahead of management’s
anticipations. It appears that the stay-at-home orders that existed
this spring during the COVID-19 pandemic have influenced revenues.
The revenues received this year through April 2020 related to the
release of Season 1 of the Series are $3,806,562, with $2,358,694
of that amount (62%) coming in April 2020. Merchandise sales
through mid-May were $938,837 with related costs of
$524,414.
Other
than the above mentioned, we have not identified any known trends,
uncertainties, demands, commitments or events involving our
business that are reasonably likely to have a material effect on
our revenues, income from continuing operations, profitability,
liquidity or capital resources, or that would cause the reported
financial information in this report to not be indicative of future
operating results or financial condition.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
DIRECTORS, EXECUTIVE OFFICERS AND
SIGNIFICANT EMPLOYEES
Our
Company is managed by our Manager, which has the sole power to
manage our Company’s day-to-day affairs and may bind our
Company to contracts. See
“SECURITIES BEING OFFERED
– Description of our Operating Agreement.” The
Manager unilaterally controls our management, subject to the rights
of the members holding a Majority Interest (which is defined in our
Operating Agreement as Members whose percentage interests represent
greater than 50% of all of the Members) in the Company, to approve
certain major decisions, as more fully described below in
“SECURITIES BEING OFFERED
– Description of our Operating Agreement – Major
Decision Rights.”
The
Manager may not be removed by the Members. The Manager will serve
indefinitely until it either resigns or is otherwise removed or
until a successor shall have been elected and qualified by the
affirmative vote or written consent of Members holding a majority
of the membership interests in the Company.
The
Manager is owned by its members, Derral Eves, Ricky Ray Butler,
Dallas Jenkins, and Earl Seals. The Manager is managed by its
manager, Derral Eves. Unless Mr. Eves resigns or is removed, Mr.
Eves shall hold office until a successor is elected and qualified
by the affirmative vote or written consent of the Manager’s
members holding a majority of the membership interests entitled to
vote. The Manager’s manager shall have all necessary powers
to manage and carry out the purposes, business, property, and
affairs of the Manager, subject to certain actions which must be
approved by a majority of the Manager’s membership
interests.
All
matters for which the vote, approval or consent of the
Manager’s members is required will require the approval of
the Manager’s members holding a majority of the membership
interests entitled to vote.
Set
forth below are our executive officers. Our Manager has delegated
our day-to-day operations to our executive officers. We have not
yet identified any significant employees.
|
Name
|
Position
|
Age
|
Term of
Office
|
Hours/Year
(for Part-Time
Employees)
|
|
Derral
Eves
|
Chief
Executive Officer
|
46
|
February
2018
|
N/A
|
|
Dallas
Jenkins
|
Chief
Creative Officer
|
44
|
February
2018
|
N/A
|
|
Adam
Swerdlow
|
Chief
Operating Officer
|
35
|
July
2020
|
N/A
|
Biographical Information
Biographical
information regarding our executive officers and executive officer
nominees is set forth below.
Derral Eves
Derral
Eves is our Chief Executive Officer. Mr. Eves graduated from
Southern Utah University with a bachelor’s degree in
Communications and Public Relations and a minor in Spanish. Since
January 2006, Mr. Eves has served as the Chief Executive Officer of
Creatus, LLC. Mr. Eves is the creator of VidSummit, the leading
professional conference for social media creators. Mr. Eves is one
of the world’s top YouTube and online video marketing
experts. The content on Mr. Eves’ distribution channels have
received over 24 billion video views on YouTube and over 9 billion
views on Facebook. Mr. Eves is also the mentor of some of the
biggest and most impactful YouTube and social media stars. He has
been featured on Good Morning America, The Today Show, NBC, ABC,
CBS, FOX, ESPN, FORBES, AdWeek, Christians Today, World Religion
News, and several other media outlets. He was recently featured in
an article published by Forbes as #4 on the list of “20 Must
Watch YouTube Channels That Will Change Your
Business.”
Dallas Jenkins
Dallas
Jenkins is our Chief Creative Officer. Mr. Jenkins graduated from
Northwestern College with a bachelor’s degree in Bible and
Communications. Mr. Jenkins currently serves as the president of
Jenkins Entertainment and is primarily responsible for the
oversight of the production of all films and videos produced by
Jenkins Entertainment. Mr. Jenkins is also a film writer who has
worked in Hollywood for nearly two decades, creating films for
Warner Brothers, Lionsgate, Hallmark Channel, PureFlix and
Universal. Mr. Jenkins has created several faith-based films, such
as Midnight Clear,
What If…,
Though None Go With Me and
The Resurrection of Gavin
Stone. Mr. Jenkins is the son of celebrated Christian author
Jerry B. Jenkins (the creator of The Left Behind Series and The Jesus Chronicles
Series).
Adam Swerdlow
Adam
Swerdlow is our Chief Operating Officer. Mr. Swerdlow graduated
from University of Massachusetts-Amherst with a bachelor’s
degree in Communications and a minor in Film. Originally from
the suburbs of New York City in Connecticut, starting in 2011 Adam
built a financial planning practice at Northwestern Mutual. In
order to be closer to his family who moved to California in 2007,
Adam moved his practice and tenacity to Newport Beach in Q3 of
2016. During his tenure at Northwestern Mutual he accomplished many
goals including achieving million dollar round table (MDRT) and
other numerous company and industry accolades. He was also
responsible for recruiting, building and managing teams of
Financial Advisors in his respective offices. Adam left
Northwestern in 2019 to practice as an Independent Financial
Advisor and also co-founded The Financial Advisors Alliance, a
coaching and consulting firm for Financial Advisors. In 2020 The
Financial Advisors Alliance was acquired by Model FA where Adam
continues to consult. Not only does he bring his wealth of
knowledge from his near decade as a Financial Advisor, he also
brings his skillset in business development, operations and
management. Adam also stays active as a member of a few local
charities, chambers and community foundations. When he is not
working, he enjoys being as physically active as possible with his
wife Shaylene and dog, Poppy.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
COMPENSATION OF DIRECTORS AND EXECUTIVE
OFFICERS
Neither
our Manager nor our executive officers receive compensation for
acting in their capacities as Manager and executive officers of the
Company. However, the Manager and executive officers may receive
compensation from the Company if employed as independent
contractors of the Company for services performed in connection
with the creation, distribution, and production of the
Series.
In
2019, we entered into agreements with Dallas Jenkins, our Chief
Creative Officer and a member of our Manager, to act as a Director
and Writer for the Series. Under the agreements, we paid the Mr.
Jenkins $138,000 to direct and write the last four episodes of The
Chosen Series, Season 1. We have continued to engage Mr. Jenkins as
a writer for the second season and paid the member $16,000 during
2019 on this contract. We will pay the remaining $23,000 during
2020 for the rest of the writer contract. Mr. Jenkins has also
received payment from our Company for advertising through the
member’s digital media channels, totaling $21,000 for the
year.
In July
2020, we entered into an agreement with Collin McLeod to serve as
Lead Videographer and Editor of the Series for which we will pay
Mr. McLeod a base salary of $80,000 annually with a production
bonus of $5,000 at such time as the Company begins on-site
production of a season of the Series, beginning with Season 2. Mr.
McLeod will be an at-will employee pursuant to his agreement with
the Company.
In
August 2020, we entered into an agreement with Mr. Jenkins to
expand the scope of his duties and change his compensation. Under
the new agreement, we will pay Mr. Jenkins an initial base salary
of $300,000, which will increase by 4% annually unless the Manager
reasonably determines otherwise. The new agreement runs through
December 31, 2026.
In
August 2020, we entered into an agreement with Mr. Eves, our chief
executive officer, under which we will be pay him an annual base
salary of $180,000. Mr. Eves will be an at-will employee pursuant
to his agreement with the Company.
In July
2020, we entered into an agreement with Adam Swerdlow, our Chief
Operating Officer, under which we will pay him an annual base
salary of $200,000. The initial employment term for Mr. Swerdlow
will run through July 31, 2021 and he will be an at-will employee
of the Company for any employment beyond that date.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN SECURITYHOLDERS
As of
the initial closing of this Offering, our Company will have three
classes of membership interests, the Class A Units, the Class B
Units and the Common Units. There are currently
13,900,000 Common Units
and 11,193,300 Class A Units outstanding. Purchasers of our Class B
Units will become Members in our Company with respect to their
ownership of Class B Units. Our Manager has the right to create,
authorize and issue new units of membership interests in our
Company, including new classes.
Capitalization
The
following table sets forth the beneficial ownership of our
Membership Units of each of our Manager, executive officers, and
security holders who own more that 10% of a class of our Membership
Units:
|
Title of
Class
|
Name and Address
of
Beneficial
Owner
|
Amount and
Nature of
Beneficial
Ownership(1)
|
Amount and
Nature of
Beneficial
Ownership
Acquirable
|
Percent
of
Common
Units
|
|
Common
Units
|
Dallas
Jenkins
3693
Heathmoor Ct.
Elgin,
IL 60124
|
6,811,000
Common
Units
|
N/A
|
49%
|
|
Common
Units
|
Ricky
Ray Butler
9849
Yoakum Dr.
Beverly
Hills California 90210
|
3,058,000
Common
Units
|
N/A
|
22%
|
|
Common
Units
|
Derral
Eves
4 S
2600 W Ste 5
Hurricane,
Utah 84737
|
2,780,000
Common
Units
|
N/A
|
20%
|
(1)
Each beneficial
owner owns his interest through the Manager.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
INTEREST OF MANAGEMENT AND OTHERS IN
CERTAIN TRANSACTIONS AND OTHER CONFLICTS OF INTEREST
Obligations to Other Entities
Our
Manager and executive officers are involved in other businesses,
including other television and film production businesses.
Therefore, conflicts of interest may exist between their
obligations to such businesses and to us. Under our Operating
Agreement, our Manager is permitted to have outside business
activities, including those that compete with our business. We
believe our Manager and executive officers have the capacity to
discharge their responsibilities to our Company notwithstanding
participation in other present and future investment programs and
projects.
Transactions with the Company
The
Manager may, and may cause its Affiliates to, engage in any
transaction (including, without limitation, the purchase, sale,
lease, or exchange of any property or the rendering of any service,
or the establishment of any salary, other compensation, or other
terms of employment) with the Company so long as such transaction
is not expressly prohibited by the Operating Agreement and so long
as the terms and conditions of such transaction, on an overall
basis, are fair and reasonable to the Company and are at least as
favorable to the Company as those that are generally available from
persons capable of similarly performing them in similar
transactions between parties operating at arm's length. A
transaction between the Manager and/or its Affiliates, on the one
hand, and the Company, on the other hand, shall be conclusively
determined to constitute a transaction on terms and conditions, on
an overall basis, fair and reasonable to the Company and at least
as favorable to the Company as those generally available in a
similar transaction between parties operating at arm's length if a
Majority Interest of the Members having no interest in such
transaction (other than their interests as Members) affirmatively
vote or consent in writing to approve the transaction.
Notwithstanding the foregoing, the Manager shall not have any
obligation in connection with any such transaction between the
Company and the Manager or its Affiliate, to seek the consent of
the Members.
A
Member may lend money to and transact other business with the
Company with prior approval of the Manager and after full
disclosure of the Member’s involvement. Such Member has the
same rights and obligations with respect thereto as a person who is
not a Member. A loan to the Company by a Member will not dilute the
ownership interests of any other Member. We do not have any
outstanding loans or loan guarantees with any related party, and,
as of the date of this Offering Circular, we do not have any
intentions to enter into any such transactions.
Related Party Transaction
The
Company has entered into a work-for-hire agreement with Dallas
Jenkins, who owns 49% of Common Units in the Company, pursuant to
which the Mr. Jenkins, jointly with Ryan Swanson and Tyler Thompson
(collectively, the “Co-Writers”), produce an outline
and treatment as well as a teleplay for each of the eight episodes
of Season 2, which will include eight episodes. Pursuant to the
work-for-hire agreement, the Mr. Jenkins will be compensated $3,333
for the outline and treatment and $12,500 for a teleplay for each
of the eight episodes of Season 2 for an aggregate of $103,333 for
Season 2. Additionally, upon the start of filming for each episode
produces based upon the materials created by the Mr. Jenkins, the
Company will pay the Mr. Jenkins $1,000 as a production
bonus.
During
2019, we entered into agreement with Dallas Jenkins, our Chief
Creative Officer and a member of our Manager, to act as a Director
and Writer for the Series. Under the agreements, we paid the Mr.
Jenkins $138,000 to direct and write the last four episodes of The
Chosen Series, Season 1. We have continued to engage Mr. Jenkins as
a writer for the second season and paid the member $16,000 during
2019 on this contract. We will pay the remaining $23,000 during
2020 for the rest of the writer contract. Mr. Jenkins has also
received payment from our Company for advertising through the
member’s digital media channels, totaling $21,000 for the
year.
In July
and August 2020, we entered into employment agreement with Mr.
Jenkins, Derral Eves, our Chief Executive Officer, Adam Swerdlow,
our Chief Operating Officer and Collin Mcleod, our Lead
Videographer and Editor. See “COMPENSATION OF DIRECTORS AND EXECUTIVE
OFFICERS”.
Creatus, LLC
assigned to the Company all of its rights, title and interest in
and to the film entitled The
Shepherd. The Company paid $100,000 in exchange for all
rights in and to The
Shepherd. The
Shepherd served as the underlying source material upon which
the Series is loosely based. Derral Eves, sole manager of our
Manager, is the sole owner of Creatus, LLC. The Assignment and
Assumption Agreement between Creatus, LLC and the Company is filed
as an exhibit to the offering statement filed in 2018 (File #:
024-10814).
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
General
Our
Company is offering a maximum of $20,000,001 of our Class B Units.
The purchase price per Class B Unit is $7.00 and the minimum order is 72 Class B Units ($504); however, we can waive the minimum
order in our sole discretion.
The
Class B Units are preferred equity and are entitled solely to a
preference in respect of distributions until the Company has
distributed to holders of the Class B Units an aggregate amount
equal to 110% of the aggregate
purchase price of the Class B Units. See “– Distributions.”
Upon
issuance of Class B Units to you, you will become bound by our
Operating Agreement. See
“– Description of Our
Operating Agreement” below for a detailed summary of
terms of our Operating Agreement. Our Operating Agreement is filed
as an exhibit to the Offering Statement of which this Offering
Circular is a part. Any claim arising out of, under or in
connection with the Operating Agreement or the transactions
contemplated by the Operating Agreement is subject to the exclusive
jurisdiction of state and federal courts sitting in Utah. The
Company intends to seek to enforce our forum selection clause in an
action or claim against the company by an investor; however,
enforceability of a forum selection clause is subject to the law
and regulations of each jurisdiction in which the applicable claim
is brought and may not be enforced in all circumstances. Our forum
selection clause applies to claims brought by our Members and
former Members, as well as claims brought by Members or former
Members against our directors, officers, former directors and
former officers, if such claims relate to their roles as Members,
directors and/or officers of the Company. Service of process on a
Member shall be delivered to the address listed on such
Member’s subscription agreement as provided to the Company by
the transfer agent. We believe that our exclusive forum provision
is enforceable under Utah law. Further, pursuant to our Operating
Agreement, in the event that any dispute between the Company and
the Members or among the Members should result in litigation, the
prevailing party in such dispute is entitled to recover from the
other party all reasonable fees, costs and expenses of enforcing
any right of the prevailing party, including reasonable
attorneys’ fees and expenses. Our fee shifting provision
applies to claims brought by our Members and former Members, as
well as claims brought by Members or former Members against our
directors, officers, former directors and former officers, if such
claims relate to their roles as Members, directors and/or officers
of the Company. We believe that we are entitled to recover fees if
we are the prevailing party in litigation with our Members, and the
Company intends to enforce this provision in any claim or dispute
between the Company and the Members, including claims brought under
the federal securities laws. If the Company does not prevail in
such a claim or dispute, the Company will be responsible for the
costs and expenses of litigation of any such prevailing Member or
Members.
We have
three classes of membership interests, Class A Units, Class B Units
and Common Units. Our Manager has the right to create, authorize
and issue new Membership Units in our Company, including new
classes.
Registrar, Paying Agent and Transfer Agent for our Class B
Units
Duties
Direct
Transfer, LLC will serve as the
registrar, paying agent and transfer agent for our Class B Units.
We will pay all fees charged by the transfer agent for transfers of
our Class B Units except for special charges for services requested
by the holder of a Class B Unit. The transfer any paying agent fee
is expected to be approximately $100,000.
There
will be no charge to our members for disbursements of our cash
distributions. We will indemnify the transfer agent, its agents and
each of their respective stockholders, directors, officers and
employees against all claims and losses that may arise out of acts
performed or omitted for its activities in that capacity, except
for any liability due to any gross negligence or intentional
misconduct of the indemnified person or entity.
Resignation or Removal
The
transfer agent may resign, by notice to us, or be removed by us.
The resignation or removal of the transfer agent will become
effective upon our appointment of a successor transfer agent and
registrar and its acceptance of the appointment. If no successor
has been appointed and has accepted the appointment within 30 days
after notice of the resignation or removal, our Manager, or a
designee of our Manager, may act as the transfer agent and
registrar until a successor is appointed.
Transfer of Class B Units and Restrictions on
Transfers
Our
units, including the Class B Units sold pursuant to this Offering,
are freely transferable, subject to any restrictions imposed by
applicable securities laws and regulations.
By
the transfer of Class B Units in accordance with our Operating
Agreement, each transferee of Class B Units shall be admitted as a
member with respect to the Class B Units transferred when such
transfer and admission are reflected in our books and records. Each
transferee:
●
automatically
agrees to be bound by the terms and conditions of, and is deemed to
have executed, our Operating Agreement;
●
represents
and warrants that the transferee has the right, power, authority,
and capacity to enter into our Operating Agreement;
and
●
gives
the consents, waivers and approvals contained in our Operating
Agreement.
Distributions
No
distributions to investors of our Class B Units are assured, nor
are any returns on, or of, an Investor’s investment
guaranteed. Distributions are subject to our ability to generate
positive cash flow from operations. All distributions are further
subject to the discretion of our Manager. It is possible that we
may have cash available for distribution, but our Manager could
determine that the reservation, and not distribution, of such cash
by our Company would be in our best interest.
Distributable Cash
We
define “distributable cash” as the amount of cash which
the Manager deems available for distribution to the Members, taking
into account all Company debts, liabilities, and obligations of the
Company then due and amounts which the Manager deems necessary to
place into reserves for customary and usual claims with respect to
the Company's business. Our Manager, in its sole discretion, may
determine from time to time that we have received sufficient cash
flow to make a distribution. Any distributions of available cash
flow will be made in the discretion of our Manager in the following
order and priority:
(i)
First, an
amount equal to 120% and 110% of the aggregate purchase price to
the holders of the Class A Units and Class B Units,
respectively, pari passu
in accordance with the number of
aggregate Class A Units and Class B Units held;
and
(ii)
Thereafter, to all Members pro rata in
accordance with their respective holdings of Membership
Units.
Liquidating Distributions
Upon
the dissolution of our Company, our Manager will convert all of our
property to cash and then make the following
distributions:
(i)
All known debts and
liabilities of the Company, excluding debts and liabilities to
Members who are creditors of the Company;
(ii)
All known debts and
liabilities of the Company owed to Members who are creditors of the
Company;
(iii)
The remaining
assets shall be distributed to the Members in accordance with the
distribution waterfall described above.
Basis for Distributions
Our
Company’s ability, and our Manager’s decisions, to make
distributions to our members will be based upon the consolidated
operating results of our Company and our subsidiaries. Although our
Manager has discretion over whether to make distributions to our
members, our Manager does not intend, and has no reason to withhold
distributions from our members, except as may be necessary to fund
reserves for our Company, or our subsidiaries, as deemed
appropriate by our Manager or required by any financing
arrangements we may enter into.
Description of Our Operating Agreement
The following summary describes material provisions of our
Operating Agreement, but it is not a complete description of our
Operating Agreement. A copy of our Operating Agreement is filed as
an exhibit to the Offering Statement of which this Offering
Circular is a part.
Generally
Our Operating Agreement refers to our
Company’s Amended and Restated Limited Liability Company
Agreement dated as of March 6, 2018, as amended by Amendment No. 1
dated as of April 25, 2018, Amendment No. 2 dated as of May 1, 2018
and Amendment No. 3 dated as of August 25, 2020.
Management
Subject
to our Members’ rights to consent to certain transactions as
described below, the business and affairs of our Company are
managed by, and all powers are exercised by, our Manager. If the
Manager resigns, a new manager will be elected by the affirmative
vote or written consent of Members holding a majority of the
membership interests of the Company entitled to vote.
The
Company shall have one manager, The Chosen Productions, LLC (the
“Manager”). The Manager may not be removed by the
Members. The Manager will serve indefinitely until it either
resigns or is otherwise removed or until a successor shall have
been elected and qualified by the affirmative vote or written
consent of Members holding a majority of the membership interests
in the Company.
Our
Manager is indemnified by us and held harmless from liability to us
or any member for any action or inaction as long as (i) the Manager
performed its managerial duties in good faith and in a manner it
reasonably believed to be in the best interests of the Company and
with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar
circumstances, and (ii) such course of conduct did not constitute
fraud, deceit, gross negligence, reckless or intentional
misconduct, or a knowing violation of law by the
Manager.
Our
Manager is required by our Operating Agreement to use its
reasonable efforts to carry out the objectives of our Company, and
to devote, and cause its affiliates to devote, such amounts of
their time, skill and attention during normal business hours that
the Manager may deem necessary. Our Operating Agreement does not
prevent our Manager from engaging in other business activities in
which our Company will have no right to participate. The Members
have waived any and all rights and claims which they may otherwise
have against the Manager and its affiliates as a result of any such
activities.
Fiduciary Duties and Indemnification
Our
Manager and our executive officers will owe fiduciary duties to our
Company and our members in the manner prescribed in the Utah
Uniform Limited Liability Company Act and applicable case law. Our
Manager is required to act in good faith and in a manner that it
determines to be in our best interests. However, nothing in our
Operating Agreement precludes our Manager or executive officers or
any affiliate of our Manager or any of its respective officers,
directors, employees, members or trustees from acting, as a
director, officer or employee of any corporation, a trustee of any
trust, an executor or administrator of any estate, a member of any
company or an administrative official of any other business entity,
or from receiving any compensation or participating in any profits
in connection with any of the foregoing, and neither our Company
nor any member shall have any right to participate in any manner in
any profits or income earned or derived by our Manager or any
affiliate thereof or any of their respective officers, directors,
employees, members or trustees, from or in connection with the
conduct of any such other business venture or activity. Our
Manager, our executive officers, any affiliate of any of them, or
any shareholder, officer, director, employee, partner, member or
any person or entity owning an interest therein, may engage in or
possess an interest in any other business or venture of any nature
or description; and no member or other person or entity shall have
any interest in such other business or venture by reason of its
interest in our Company.
Our
Manager has no liability to our Company or to any Member for any
claims, costs, expenses, damages, or losses suffered by our Company
which arise out of any action or inaction of the Manager if the
Manager meets the following standards: (i) the Manager performed it
managerial duties in good faith and in a manner it reasonably
believed to be in the best interests of the Company and with such
care, including reasonable inquiry, as an ordinarily prudent person
in a like position would use under similar circumstances, and (ii)
such course of conduct did not constitute fraud, deceit, gross
negligence, reckless or intentional misconduct, or a knowing
violation of law by the Manager. These exculpation provisions in
our Operating Agreement are intended to protect our Manager from
liability when exercising their business judgment regarding
transactions we may enter into.
Insofar
as the foregoing provisions permit indemnification or exculpation
of our Manager, executive officers or other persons controlling us
from liability arising under the Securities Act, we have been
informed that in the opinion of the SEC this indemnification and
exculpation is against public policy as expressed in the Securities
Act and is therefore unenforceable.
Members’ Voting Rights
Meetings of Members
may be held at such date, time and place as the Manager may fix
from time to time or upon written demand of Members holding more
than ten percent (10%) of our outstanding units eligible to vote.
No business shall be transacted, and no action shall be taken, at
any meeting other than that stated in the notice to the members of
our Company announcing such meeting, unless such action was
approved by a majority (greater than 50%) of our outstanding units
of either class eligible to vote. The presence of members holding
at least a majority of our outstanding units of either class
eligible to vote as of the record date for any meeting shall
constitute a quorum for such meeting.
Major Decision Rights
Although our
Manager has the sole authority to manage our business and to bind
our Company, the Members of our Company have the right to consent
to certain actions which we term “major decisions.”
Member consent is required before the Manager may take any of the
following actions:
(i)
The sale, exchange
or other disposition of all, or substantially all, of the Company's
assets occurring as part of a single transaction or plan, or in
multiple transactions over a three (3) month period, except in the
orderly liquidation and winding up of the business of the Company
upon its duly authorized dissolution;
(ii)
The merger of the
Company with another limited liability company or limited
partnership;
(iii)
The merger of the
Company with a corporation or a general partnership or other
person;
(iv)
The conversion of
the Company to another type of entity organized within or without
the State, including without limitation, a limited
partnership;
(v)
The decision to tax
election status of the Company; and
(vi)
Any other
transaction described in the Operating Agreement as requiring the
vote, consent, or approval of the Members.
The
transactions described above in “– Major Decision Rights”
require the approval of a Majority Interest of the Members present
and voting at a meeting or a Majority Interest of the Members as a
whole acting by written consent. In the event the Manager resigns,
a new manager may be elected by the affirmative vote of a Majority
Interest of the Members in a meeting duly called and held with
respect to the election of a new manager, or by written consent
regarding the same.
Contributions
Our
members’ amounts invested in us, number of Class B Units of
membership interest held, and percentage interest in our Company
are reflected in the books and records of our Company. If you
purchase Class B Units in this Offering, you will make a cash
investment of $7.00 per Unit purchased and you will become a Member
of our Company.
Additional Members
Additional members
may be admitted to the Company by the Manager. Additional members
shall obtain Class B Units, net profits, net losses, and
distributions of the Company on such terms as determined by the
Manager.
Amendments to the Operating Agreement
Our
Operating Agreement may be amended in a writing signed by all of
the Members. Notwithstanding the preceding sentence, the Manager
shall have the power, without the consent of the Members, to amend
the Operating Agreement in writing as may be required, to reflect
the issuance of additional Units, including Class A Preferred
Units, Class B Preferred Units and any other class or series of
Units that may be established after the date of the Operating
Agreement; provided, that, any additional classes or series of
Units shall have similar designations, preferences and rights to
the outstanding Units.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
An
investment in us by an employee benefit plan is subject to
additional considerations because the investments of these plans
are subject to the fiduciary responsibility and prohibited
transaction provisions of ERISA and restrictions imposed by Section
4975 of the Code. For these purposes the term “employee
benefit plan” includes, but is not limited to, qualified
pension, profit-sharing and stock bonus plans, Keogh plans,
simplified employee pension plans and tax deferred annuities or
IRAs established or maintained by an employer or employee
organization. Among other things, consideration should be given
to:
●
whether the
investment is prudent under Section 404(a)(1)(B) of
ERISA;
●
whether in making
the investment, that plan will satisfy the diversification
requirements of Section 404(a)(1)(C) of ERISA; and
●
whether the
investment will result in recognition of unrelated business taxable
income by the plan and, if so, the potential after-tax investment
returns.
The
person with investment discretion with respect to the assets of an
employee benefit plan, often called a fiduciary, should determine
whether an investment in us is authorized by the appropriate
governing instrument and is a proper investment for the
plan.
Section
406 of ERISA and Section 4975 of the Code prohibit employee benefit
plans from engaging in specified transactions involving “plan
assets” with parties that are “parties in
interest” under ERISA or “disqualified persons”
under the Code with respect to the plan.
In
addition to considering whether the purchase of Class B Units is a
prohibited transaction, a fiduciary of an employee benefit plan
should consider whether the plan will, by investing in us, be
deemed to own an undivided interest in our assets, with the result
that our operations would be subject to the regulatory restrictions
of ERISA, including its prohibited transaction rules, as well as
the prohibited transaction rules of the Code.
The
Department of Labor regulations provide guidance with respect to
whether the assets of an entity in which employee benefit plans
acquire equity interests would be deemed “plan assets”
under some circumstances. Under these regulations, an
entity’s assets would not be considered to be “plan
assets” if, among other things:
(i)
the
equity interests acquired by employee benefit plans are publicly
offered securities - i.e., the equity interests are widely held by
100 or more investors independent of the issuer and each other,
freely transferable and registered under some provisions of the
federal securities laws;
(ii)
the
entity is an “operating company”—i.e., it is
primarily engaged in the production or sale of a product or service
other than the investment of capital either directly or through a
majority-owned subsidiary or subsidiaries; or
(iii)
there
is no significant investment by benefit plan investors, which is
defined to mean that less than 25% of the value of each class of
equity interest is held by the employee benefit plans referred to
above.
We
do not intend to limit investment by benefit plan investors in us
because we anticipate that we will qualify as an “operating
company”. If the Department of Labor were to take the
position that we are not an operating company and we had
significant investment by benefit plans, then we may become subject
to the regulatory restrictions of ERISA which would likely have a
material adverse effect on our business.
Plan
fiduciaries contemplating a purchase of Class B Units should
consult with their own counsel regarding the consequences under
ERISA and the Code in light of the serious penalties imposed on
persons who engage in prohibited transactions or other
violations.
ACCEPTANCE
OF ORDERS ON BEHALF OF PLANS IS IN NO RESPECT A REPRESENTATION BY
OUR MANAGER OR ANY OTHER PARTY RELATED TO US THAT THIS INVESTMENT
MEETS THE RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS
BY ANY PARTICULAR PLAN OR THAT THIS INVESTMENT IS APPROPRIATE FOR
ANY PARTICULAR PLAN. THE PERSON WITH INVESTMENT DISCRETION SHOULD
CONSULT WITH HIS OR HER ATTORNEY AND FINANCIAL ADVISERS AS TO THE
PROPRIETY OF AN INVESTMENT IN US IN LIGHT OF THE CIRCUMSTANCES OF
THE PARTICULAR PLAN.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
We will
furnish the following reports, statements, and tax information to
each Member:
Reporting Requirements under
Tier II of Regulation A. We are
required to comply with certain ongoing disclosure requirements
under Rule 257 of Regulation A. We are required to file: an annual
report with the SEC on Form 1-K; a semi-annual report with the SEC
on Form 1-SA; current reports with the SEC on Form 1-U; and a
notice under cover of Form 1-Z. The necessity to file current
reports will be triggered by certain corporate events, similar to
the ongoing reporting obligation faced by issuers under the
Exchange Act, however the requirement to file a Form 1-U is
triggered by significantly fewer corporate events than that of the
Form 8-K. Parts I & II of Form 1-Z will be filed by us if and
when we decide to and are no longer obligated to file and provide
annual reports pursuant to the requirements of Regulation
A.
Annual Reports. The Manager will send an
annual report to each of the Members not later than one hundred
twenty (120) days after the close of the Company’s fiscal
year, ending on December 31 of each year. The report shall contain
a balance sheet as of the end of the fiscal year and an income
statement and statement of changes in financial position for the
fiscal year. Such financial statements shall be accompanied by the
report thereon, if any, of the independent accountants engaged by
the Company or, if there is no report, the certificate of a Manager
that the financial statements were prepared without audit from the
books and records of the Company.
Tax Information. The Manager will
furnish to the Members tax information reasonably required by them
for federal and state income tax reporting purposes with respect to
a taxable year on or before January 31st of the year immediately
following such taxable year.
Membership Certificates. We do not
anticipate issuing membership certificates representing Class B
Units purchased in this Offering to the Members. Instead, Class B
Units will be issued in book-entry form and our Unit ledger will be
maintained by our transfer agent.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
The
consolidated balance sheets of The Chosen, LLC as of December 31,
2019 and 2018, and the consolidated statements of operations and
members' equity and cash flows for the years ended December 31,
2019 and December 31, 2018, have been included in this Offering
Circular and have been audited by Tanner LLC, independent auditors,
as stated in their report appearing herein.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
Index to Financial
Statements
The Chosen, LLC
|
The
Chosen, LLC Consolidated Financial Statements as of December 31,
2019 and 2018
|
F-1
|
|
|
F-2
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
|
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
The Chosen, LLC
Consolidated Financial Statements
as of December 31, 2019 and 2018
and For the Years
Then Ended
Together with Independent Auditors’ Report
INDEPENDENT AUDITORS’ REPORT
To Management and Members of The Chosen, LLC
We have audited the accompanying consolidated financial statements
of The Chosen, LLC and subsidiary (collectively, the Company),
which comprise the consolidated balance sheets as of December 31,
2019 and 2018, and the related consolidated statements of
operations and members’ equity, and cash flows for the years
ended December 31, 2019 and 2018, and the related notes to
consolidated financial statements.
Management’s Responsibility for the Financial
Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with accounting
principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement,
whether due to error or fraud.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the
financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to error or fraud. In making
those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of
the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit
also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation
of the financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the
Company as of December 31, 2019 and 2018, and the results of its
operations and its cash flows for the years ended December 31, 2019
and 2018, in accordance with accounting principles generally
accepted in the United States of America.
/s/ Tanner
LLC
Salt Lake City, Utah
June 12, 2020
THE CHOSEN, LLC AND
SUBSIDIARY
Consolidated Balance
Sheets
As of December 31,
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$630,325
|
$220,700
|
|
Accounts
receivable
|
614,565
|
20,410
|
|
Prepaid expenses
and other current assets
|
778
|
98,904
|
|
|
|
|
|
Total current
assets
|
1,245,668
|
340,014
|
|
|
|
|
|
Film costs,
net
|
8,039,004
|
3,884,663
|
|
Deferred income tax
asset
|
283,352
|
-
|
|
|
|
|
|
Total
assets
|
$9,568,024
|
$4,224,677
|
|
|
|
|
|
Liabilities
and Members' Equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
Accounts
payable
|
$126,575
|
$539,435
|
|
Notes
payable
|
-
|
76,327
|
|
|
|
|
|
Total
liabilities
|
126,575
|
615,762
|
|
|
|
|
|
Commitments and
contingencies (see Notes 2, 3, 5 and 8)
|
|
|
|
|
|
|
|
Members'
equity
|
9,441,449
|
3,608,915
|
|
|
|
|
|
Total liabilities
and members' equity
|
$9,568,024
|
$4,224,677
|
See notes to consolidated financial statements
THE CHOSEN, LLC AND
SUBSIDIARY
Consolidated Statements of Operations
For the Years Ended December 31, 2019 and 2018
|
|
|
|
|
Revenues:
|
|
|
|
Licensing revenues,
net
|
$815,630
|
$56,465
|
|
Merchandise
revenue
|
168,973
|
-
|
|
|
|
|
|
Total
revenues
|
984,603
|
56,465
|
|
|
|
|
|
Cost of goods
sold
|
96,736
|
-
|
|
|
|
|
|
Gross
profit
|
887,867
|
56,465
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
General and
administrative
|
574,197
|
162,797
|
|
Advertising and
marketing
|
532,610
|
752,344
|
|
|
|
|
|
Total operating
expenses
|
1,106,807
|
915,141
|
|
|
|
|
|
Loss from
operations
|
(218,940)
|
(858,676)
|
|
|
|
|
|
Interest
income
|
17
|
-
|
|
|
|
|
|
Loss before
provision for
|
|
|
|
income
taxes
|
(218,923)
|
(858,676)
|
|
|
|
|
|
Benefit (provision)
for income taxes
|
283,252
|
(100)
|
|
|
|
|
|
Net income
(loss)
|
$64,329
|
$(858,776)
|
See notes to consolidated financial statements
THE CHOSEN, LLC AND SUBSIDIARY
Consolidated Statements of Members’ Equity
For the Years Ended December 31, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2017
|
-
|
-
|
$200,000
|
$(13,663)
|
$186,337
|
|
|
|
|
|
|
|
|
Issuance of
founders' common units
|
13,900,000
|
-
|
-
|
-
|
-
|
|
Issuance of
preferred units for cash
|
-
|
4,636,978
|
4,436,408
|
-
|
4,436,408
|
|
Offering
expense
|
-
|
-
|
(167,781)
|
-
|
(167,781)
|
|
Equity-based
compensation
|
-
|
-
|
12,727
|
-
|
12,727
|
|
Net
loss
|
-
|
-
|
-
|
(858,776)
|
(858,776)
|
|
|
|
|
|
|
|
|
Balance at December
31, 2018
|
13,900,000
|
4,636,978
|
4,481,354
|
(872,439)
|
3,608,915
|
|
|
|
|
|
|
|
|
Cancellation of
units
|
-
|
(40,465)
|
(38,715)
|
-
|
(38,715)
|
|
Issuance of
preferred units for cash
|
-
|
6,596,787
|
6,563,766
|
-
|
6,563,766
|
|
Offering
expense
|
-
|
-
|
(756,846)
|
-
|
(756,846)
|
|
Net
income
|
-
|
-
|
-
|
64,329
|
64,329
|
|
|
|
|
|
|
|
|
Balance at December
31, 2019
|
13,900,000
|
11,193,300
|
$10,249,559
|
$(808,110)
|
$9,441,449
|
See notes to consolidated financial statements
THE CHOSEN, LLC AND
SUBSIDIARY
Consolidated Statements of Cash Flows
For the Years Ended December 31,
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
Net income
(loss)
|
$64,329
|
$(858,776)
|
|
Adjustments to
reconcile net income (loss) to net cash used
|
|
|
|
in operating
activities:
|
|
|
|
Amortization of
film costs
|
279,062
|
-
|
|
Deferred income tax
benefit
|
(283,352)
|
-
|
|
Equity-based
compensation
|
-
|
12,727
|
|
Decrease (increase)
in:
|
|
|
|
Accounts
receivable
|
(594,155)
|
(20,410)
|
|
Prepaid expenses
and other current assets
|
98,126
|
(98,258)
|
|
Film
costs
|
(4,433,403)
|
(3,854,663)
|
|
(Decrease) increase
in:
|
|
|
|
Accounts
payable
|
(412,860)
|
500,772
|
|
|
|
|
|
Net cash used in
operating activities
|
(5,282,253)
|
(4,318,608)
|
|
|
|
|
|
Cash
flows from investing activities:
|
-
|
-
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
Net proceeds from
issuance of preferred units
|
5,806,920
|
4,268,627
|
|
Cancellation of
units
|
(38,715)
|
-
|
|
Proceeds from
issuance of notes payable
|
-
|
156,327
|
|
Payments on notes
payable
|
(76,327)
|
(80,000)
|
|
|
|
|
|
Net cash provided
by financing activities
|
5,691,878
|
4,344,954
|
|
|
|
|
|
Net change in
cash
|
409,625
|
26,346
|
|
|
|
|
|
Cash at beginning
of year
|
220,700
|
194,354
|
|
|
|
|
|
Cash and at end of
year
|
$630,325
|
$220,700
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
Cash paid for
interest
|
$-
|
$-
|
|
Cash paid for
income taxes
|
100
|
100
|
See notes to consolidated financial statements
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2019 and 2018
1.
Description
of Organization and Summary of Significant Accounting
Policies
Organization
The
Chosen, LLC (Chosen) was organized on October 24, 2017 as a
perpetual Utah Limited Liability Company. Chosen is a business
whose planned principal operations are the production and
distribution of a television series. The first four episodes of
season one of the television series were released in April 2019;
the last four episodes of season one were released in November
2019. During 2019 and 2018, the Company raised equity capital to
support the completion of the first season of its television
series.
Principles of Consolidation
The
consolidated financial statements include the accounts of The
Chosen, LLC and its wholly owned subsidiary The Chosen Texas, LLC
(collectively, the Company). All significant intercompany balances
and transactions have been eliminated in
consolidation.
Recently Issued Accounting Pronouncements
In March 2019, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update (ASU) No. 2019-02,
Entertainment
– Films – Other Assets – Films Costs
(Subtopic 926-20) and Entertainment –
Broadcasters – Intangibles – Goodwill and Other
(Subtopic 920-350) (ASU 2019-02). ASU
2019-02 requires management to evaluate a film or license agreement
for program material within the scope of Subtopic 920-350 for
impairment at the film level when the film or license agreement is
predominantly monetized on its own. ASU 2019-02 also aligns the
accounting for production costs of an episodic television series
with the accounting for production costs of films by removing the
content distinction for capitalization. ASU 2019-02 is effective
for reporting periods ending after December 15, 2020. Early
adoption is permitted. Management elected to adopt this standard
early effective January 1, 2018. There was no financial impact to
the Company’s financial statements upon adoption of this
ASU.
In May
2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606). Topic 606 supersedes the revenue recognition
requirements in Accounting Standards Codification (ASC) Topic 605,
Revenue Recognition (Topic
605), and requires the recognition of revenue when promised goods
or services are transferred to customers in an amount that reflects
the consideration to which the entity expects to be entitled to in
exchange for those goods or services. Topic 606 also includes
Subtopic 340-40, Other Assets and
Deferred Costs – Contracts with Customers, which
requires the deferral of incremental costs of obtaining a contract
with a customer. The Company adopted the requirements of Topic 606
effective January 1, 2019, utilizing the modified retrospective
method of transition. Adoption of Topic 606 did not result in
adjustments to revenue, deferred revenue, receivables, or deferred
costs.
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
Continued
December 31, 2019 and 2018
1.
Description
of Organization and Summary of Significant Accounting
Policies
Continued
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
Concentrations of Credit Risk
The
Company maintains its cash in bank deposit accounts which, at
times, could exceed federally insured limits. As of December 31,
2019, the Company had approximately $341,000 in cash that exceeded
the federally insured limits. As of December 31, 2018, the Company
did not have any cash that exceeded federally insured limits. To
date, the Company has not experienced a loss or lack of access to
its invested cash; however, no assurance can be provided that
access to the Company’s invested cash will not be impacted by
adverse conditions in the financial markets.
A major
customer is considered to be one that comprises more than 10% of
the Company’s accounts receivable or annual revenues. For the
years ended December 31, 2019 and 2018, 83% and 100%, respectively,
of the Company’s revenues related to one customer –
VidAngel, Inc. (VidAngel). As of December 31, 2019 and 2018, 99%
and 90%, respectively, of the Company’s accounts receivable
related to VidAngel.
Accounts Receivable
Accounts
receivable are carried at original invoice amount less an estimate
for doubtful accounts based on a review of all outstanding amounts.
Management determines the allowance for doubtful accounts by
identifying specific troubled accounts and applying historical
experience. Receivables are written off when management determines
the likelihood of collection is remote. Recoveries of receivables
previously written off are recorded when payment is
received.
Revenue Recognition
The
Company generates revenue from 1) licensing agreements with
VidAngel relating to the streaming of the Company’s
intellectual property via digital media – Video-on-Demand
(VOD) and Subscription Video-on-Demand (SVOD), 2) physical media
sales, 3) combination of physical media and digital media and 4)
merchandise sales.
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
Continued
December 31, 2019 and 2018
1.
Description
of Organization and Summary of Significant Accounting
Policies
Continued
Revenue Recognition - continued
The Company recognizes revenue when a customer obtains control of
promised products or services. The amount of revenue recognized
reflects the consideration that the Company expects to be entitled
to receive in exchange for these products or services. To achieve
the core principle of Topic 606, the Company applies the following
five steps:
1)
Identify the contract with the customer
2)
Identify the performance obligations in the contract
3)
Determine the transaction price
4)
Allocate the transaction price to performance obligations in the
contract
5)
Recognize revenue when or as the Company satisfies a performance
obligation
Digital Media (VOD and SVOD)
Digital
media revenue stems from licensing agreements with VidAngel,
wherein VidAngel streams the Company’s intellectual property.
The license is not distinct from the streaming services, and the
arrangement represents a sale or usage-based royalty with the
license representing the predominant item to which the royalty
relates. The VOD sales and SVOD usage revenues are determined
according to the licensing agreement based on hours viewed by
VidAngel’s customers during each quarter of the year.
VidAngel provides the Company quarterly royalty reports detailing
the sales or usage-based royalties, which amounts VidAngel remits
to the Company. The Company recognizes revenue based on these
royalty reports, which represents when the sales or usage occurred
and the satisfaction of the performance obligation to the end
customer. During 2019, the digital media revenue was substantially
all related to the first television season of The Chosen. During 2018, the digital
media revenue was related to The
Shepard. As VidAngel is primarily responsible to fulfil the
performance obligation and sets the pricing, the Company recognizes
revenue on a net basis, which represents the royalty amounts the
Company receives from VidAngel.
Physical Media
The
Company sells Blu-Ray discs and DVD’s to end users. The
Company does not own or maintain the physical media inventory. The
inventory is owned by VidAngel, and VidAngel fulfills the sales.
Revenue is recognized when the end customer receives and pays for
the physical media. VidAngel remits a portion of the sales amount
to the Company. The Company recognizes revenue on a net
basis.
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
Continued
December 31, 2019 and 2018
1.
Description
of Organization and Summary of Significant Accounting
Policies
Continued
Revenue Recognition - continued
Combination of physical media and digital media
The
Company sells Blu-Ray discs and DVD’s to end users in a
combination pack with digital media. The Company does not own or
maintain the physical media inventory. As noted in the description
of physical media above, the inventory is owned by VidAngel, and
VidAngel fulfills the sales. As noted in the description above of
digital media, digital media stems from licensing agreements with
VidAngel, wherein VidAngel streams the Company’s intellectual
property. The Company recognizes revenue on a net
basis.
Merchandise revenue
The
Company sells The Chosen
merchandise – mainly T-shirts during 2019. Revenue is
recognized when the customer receives and pays for the merchandise.
The Company does not own or maintain the merchandise inventory.
However, when the goods ship from the third party to the customer,
the Company has risk-of-loss, and is responsible for goods in
transit. The Company manages an online store through a third-party
application and orders are drop shipped to end customers using the
third-party platform. The Company contracts with a third-party
supplier that is responsible for fulfilling the sales. The
third-party supplier invoices the Company for inventory sold and
fulfillment services; all of the cost of goods sold is related to
the third-party supplier costs. The Company recognizes revenue and
respective expenses on a gross basis.
Revenue
is disaggregated from contracts with customers by goods or services
as we believe it best depicts how the nature, amount, timing and
uncertainty of our revenue and cash flows are affected by economic
factors. The following table presents the Company’s revenue
disaggregated by the previously mentioned performance obligations
for the years ended December 31:
|
|
|
|
|
|
|
|
|
Combination of
physical media and digital media
|
$343,105
|
$-
|
|
Physical
media
|
246,974
|
-
|
|
Merchandise
|
168,973
|
-
|
|
Digital media -
VOD
|
164,619
|
56,465
|
|
Digital media -
SVOD
|
60,932
|
-
|
|
|
|
|
|
Total
revenues
|
$984,603
|
$56,465
|
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
Continued
December 31, 2019 and 2018
1.
Description
of Organization and Summary of Significant Accounting
Policies
Continued
Film Costs
Costs
incurred in the direct production of video content are capitalized
and stated at the lower of unamortized cost or net realizable
value. The Company periodically evaluates the net realizable value
of film costs by estimating future revenue generation. As of
December 31, 2019 and 2018, $8,039,004 and $3,884,663 in film costs
were capitalized, respectively.
The
Company amortizes film costs in proportion to the recognition of
the related revenue to total expected revenue from each episode.
Amortization of film costs was $279,062 and $0 for the years ended
December 31, 2019 and 2018, respectively, and is recorded in
general and administrative expenses.
The
Company periodically evaluates unamortized film costs for
impairment. Any unamortized film costs in excess of net realization
value are written off. As of December 31, 2019 and 2018, the
Company determined no impairment existed.
The
following table represents the components of film costs as of
December 31:
|
|
|
|
|
|
|
|
|
Released and
completed film costs
|
$8,270,567
|
$-
|
|
Not released, in
production film costs
|
-
|
3,884,663
|
|
In development or
preproduction film costs
|
47,499
|
-
|
|
|
|
|
|
|
8,318,066
|
3,844,663
|
|
Accumulated
amortization
|
(279,062)
|
-
|
|
|
|
|
|
|
$8,039,004
|
$3,884,663
|
The
future aggregate amounts of amortization expense expected to be
recognized over the next three years related to released and
completed film costs as of December 31, 2019 are as
follows:
|
Years
Ending December 31:
|
|
|
|
|
|
2020
|
$1,760,840
|
|
2021
|
1,625,391
|
|
2022
|
1,625,391
|
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
Continued
December 31, 2019 and 2018
1.
Description
of Organization and Summary of Significant Accounting
Policies
Continued
Advertising and Marketing
Advertising
costs are expensed as incurred. Advertising expenses totaled
$532,610 and $752,344 for the years ended December 31, 2019 and
2018, respectively.
Reclassifications
Certain
amounts in the 2018 financial statements have been reclassified to
conform to the current year presentation.
Income Taxes
The
Company is a Utah limited liability company. In August 2019, the
Company elected to be taxed as a C-corporation, effective January
1, 2018. The IRS approved the election in October 2019. As the
Company recorded a 100% valuation allowance against its net
deferred income tax assets as of January 1, 2019, there was no
significant adjustment recorded as of January 1, 2019 due to this
change in accounting method.
Income taxes are provided for the tax effects of transactions
reported in the consolidated financial statements and consist of
taxes currently due plus deferred income taxes related primarily to
differences between the tax and financial reporting bases of assets
and liabilities. Deferred income taxes represent the future tax
return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered
or settled. Deferred income tax assets are reviewed periodically
for recoverability, and valuation allowances are provided when it
is more likely than not that some or all of the deferred income tax
assets may not be realized.
The Company believes that it has appropriate support for the income
tax positions taken and to be taken on its tax returns and that its
accruals for tax liabilities are adequate for all open tax years
based on an assessment of many factors including experience and
interpretations of tax laws applied to the facts of each matter.
The Company files income tax returns in the US federal jurisdiction
and certain state jurisdictions.
Subsequent Events
Management
has evaluated events and transactions for potential recognition or
disclosure through June 12, 2020, which is the date the financial
statements were available to be issued.
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
Continued
December 31, 2019 and 2018
The
Company has incurred significant net losses since inception that
have accumulated to approximately $808,000 as of December 31,
2019. The Company used net cash of approximately $5,282,000
in operating activities in 2019. The accumulated deficit and
use of cash in operating activities resulted from the filming and
producing of season one of The
Chosen series. In 2019, the Company raised an
additional $5,806,920, net through preferred unit offerings. In
addition, the Company has started generating revenues following the
release of episodes of The
Chosen in April 2019. Management believes that existing
cash balances along with increased revenues will sustain ongoing
operations through at least June 12, 2021.
The
Company’s activities are subject to significant risks and
uncertainties, including failing to secure additional funding to
produce additional television series. There can be no
assurance that the Company will be successful in its efforts to
raise sufficient capital to complete additional television
series.
3.
Commitments
and Contingencies
Litigation
The
Company is involved in legal proceedings from time to time arising
in the normal course of business. Management, after
consultation with legal counsel, believes that the outcome of these
proceedings will not have a material impact on the Company’s
financial position, results of operations, or
liquidity.
Exclusivity Agreement
In
2018, the Company entered into an exclusive video-on-demand and
subscription licensing agreement with VidAngel, for distribution of
the Company’s television series. This agreement was amended
in November 2019.
Consulting and Coordination Agreement
In
2018, the Company entered into a consulting and coordination
agreement with VidAngel. The Company will pay VidAngel the fee for
consulting services no later than the closing of the
Company’s Regulation A offering for at least the minimum
amount. The agreement is structured such that no fee is due unless
the minimum amount is met. As of December 31, 2019, the minimum
amount had been achieved and the Company paid VidAngel $600,000,
which was directly related to the issuance of preferred units for
cash, and was recorded as a reduction of members’
equity.
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
Continued
December 31, 2019 and 2018
3.
Commitments
and Contingencies
Continued
Employee Agreements
The
Company has entered into employment agreements with members of
management and certain contractors. The terms of the
agreements vary but include one or more of the following
provisions: stipulated base salary, equity grants, profit sharing,
royalties, retention bonuses, vacation benefits, and
severance.
4.
Equity Based Compensation
The
Company entered into an agreement with a member of management to
grant an ownership interest of common units in the Company’s
parent company for services performed for The Chosen, LLC. The
value of $20,000 on the grant date was based on the amount paid in
cash by other members for an equivalent ownership interest of
common units in the Company (the parent company’s sole asset
is the Company). The equity grant vested upon the release of the
first season of The Chosen.
The expense associated with the equity grant was being recognized
ratably through the expected release date with $0 and $12,727
recognized for the years ended December 31, 2019 and 2018,
respectively. The Company asserted breach of contract during 2019,
has not granted the membership interest, and has not recognized the
remaining $7,273, pending resolution of the matter.
The
Company entered into several promissory notes with VidAngel during
2018. Each note is non-interest bearing and is due the earlier of
January 31, 2020 or upon the Company raising at least $9,000,000 in
investments from the Regulation A Offering. As of December 31,
2018, the aggregate balance of the notes outstanding was $67,340.
During 2019, the Company exceeded the $9,000,000 threshold and paid
these notes in full in January 2019.
The
Company entered into a non-interest bearing promissory note with a
member of management that is unsecured and due upon demand. The
outstanding balance of the note as of December 31, 2019 and 2018
was $0 and $8,987, respectively.
The Company’s Class A Preferred Units (Units) are non-voting.
If and when distributions are declared, distributions are first
made to the holders of the Units until 120% of $1 per Unit has been
distributed to the holders in proportion to their interest.
Thereafter, distributions are made to the holders of the common
units in proportion to their interest.
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
Continued
December 31, 2019 and 2018
The
(provision) benefit for income taxes are as follows for the years
ended December 31:
|
|
|
|
|
Deferred income tax
benefit
|
$283,352
|
$–
|
|
Current income
taxes
|
(100)
|
(100)
|
|
|
|
|
|
|
$283,252
|
$(100)
|
The
(provision) benefit for income taxes differs from the amount
computed at federal statutory rates mainly due to the change in the
valuation allowance for the years ended December 31, 2019 and
2018.
Significant
components of the Company’s deferred income tax assets
(liabilities) are as follows as of December 31:
|
|
|
|
|
Film
costs
|
$(2,077,472)
|
–
|
|
Net operating loss
carryforwards
|
2,356,163
|
224,790
|
|
Other
|
4,661
|
1,802
|
|
Valuation
allowance
|
–
|
(226,592)
|
|
|
|
|
|
|
$283,352
|
$–
|
As of
December 31, 2019, the Company has net operating loss (NOL)
carryforwards available to offset future taxable income, if any, of
approximately $9,062,000. NOL’s are carried forward
indefinitely.
The utilization of the NOL carryforwards is subject to annual
limitations under Section 382 of the Internal Revenue Code. Section
382 imposes limitations on a corporation’s ability to utilize
its NOL carryforwards if it experiences an “ownership
change.” In general terms, an ownership change results from
transactions increasing the ownership of certain stockholders in
the stock of a corporation by more than 50% over a three-year
period.
The
Company has concluded that there are no significant uncertain tax
position requiring disclosure, and there are no material amounts of
unrecognized tax benefits.
THE CHOSEN, LLC AND SUBSIDIARY
Notes to Consolidated Financial Statements
Continued
December 31, 2019 and 2018
8.
Related Party
Transactions
During 2019, the Company entered into agreements with a member of
the Company as a Director and Writer. Under the agreements, the
Company paid the member $138,000 to direct and write, the last four
episodes of The Chosen Series, season 1. The Company continued to
engage the member as a writer for the second season and paid the
member $16,000 during 2019 on this contract. The Company will pay
the remaining $23,000 during 2020 for the rest of the writer
contract. The member also received payment from the Company for
advertising through the member’s digital media channels,
totaling $21,000 for the year.
During 2019, the Company engaged an advertising agency, which is
wholly owned by one of the members of the Company’s parent
company. During the 2019, the Company paid the advertising agency
$40,000.
An entity owned by a member assigned to the Company all of its
rights, title and interest in and to the film entitled
The
Shepherd. The Company paid
$100,000 in exchange for all rights in and to The
Shepherd. The Shepherd
served as the underlying source
material upon which the Series is loosely based. The member is the
sole owner of the related entity. The Assignment and Assumption
Agreement between the related entity and the Company is filed as an
exhibit to the offering statement filed in 2018 (File #:
024-10814).
EXHIBIT INDEX
|
Exhibit
Number
|
|
Exhibit Description
|
|
|
|
|
|
|
|
Certificate
of Registration*
|
|
|
|
|
|
(3)(a)
|
|
Operating
Agreement dated March 6, 2018*
|
|
|
|
|
|
(3)(b)
|
|
First
Amendment to the Operating Agreement dated April 25,
2018*
|
|
|
|
|
|
(3)(c)
|
|
Second
Amendment to the Operating Agreement dated May 1,
2018*
|
|
|
|
|
|
|
|
Third
Amendment to the Operating Agreement dated August 25,
2020
|
|
|
|
|
|
|
|
Exclusive
Video-On-Demand and Subscription Video-On-Demand Licensing
Agreement by and between The Chosen, LLC and VidAngel,
Inc.*
|
|
|
|
|
|
|
|
Writer
Work-for-Hire Agreement dated October 29, 2019 by and between the
Company and Dallas Jenkins*
|
|
|
|
|
|
|
|
Writer
Work-for-Hire Agreement dated October 20, 2019 by and between the
Company and Ryan Swanson.*
|
|
|
|
|
|
|
|
Writer
Work-for-Hire Agreement dated October 20, 2019 by and between the
Company and Tyler Thompson*
|
|
|
|
|
|
|
|
Consulting
and Coordination Agreement dated August 11, 2020 by and between the
Company and VidAngel, Inc.
|
|
|
|
|
|
|
|
Employment
Agreement dated July 12, 2020 by and between the Company and Colin
McLeod
|
|
|
|
|
|
|
|
Employment
Agreement dated July 15, 2020 by and between the Company and Adam
Swerdlow
|
|
|
|
|
|
|
|
Employment
Agreement dated August 1, 2020 by and between the Company and
Derral Eves
|
|
|
|
|
|
|
|
Employment
Agreement dated August 1, 2020 by and between the Company and
Dallas Jenkins
|
|
|
|
|
|
|
|
Consent
of Tanner LLC
|
|
|
|
|
|
(11)(b)
|
|
Consent
of Kaplan, Voekler, Cunningham & Frank, PLC**
|
|
|
|
|
|
(12)
|
|
Opinion
of Kaplan, Voekler, Cunningham & Frank, PLC regarding legality
of the Class B Units**
|
_____________
**
To be filed by amendment
Pursuant
to the requirements of Regulation A, the issuer certifies that it
has reasonable grounds to believe that it meets all of the
requirements for filing on Form 1-A and has duly caused this
offering statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hurricane, State of Utah
on September 2, 2020.
The Chosen, LLC,
a Utah limited liability company
By: /s/
Derral
Eves
Name: Derral Eves
Its:
Manager
By: /s/
Dallas
Jenkins
Name: Dallas
Jenkins
Its:
Member
Exhibit 3(d)
THIRD AMENDMENT TO
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
THE CHOSEN, LLC
THIS
THIRD AMENDMENT TO AMENDED AND RESTATED OPERATING AGREEMENT (this
“Third
Amendment”) of THE CHOSEN, LLC, a Utah limited
liability company (the “Company”), is
made as of the 25th day of August, 2020
(“Effective
Date”), by and between the Company and The Chosen
Productions, LLC, a Utah limited liability company (the
“Manager”), as
the sole member of the Company. Unless
otherwise indicated, capitalized words and phrases used in this
Third Amendment shall have the meanings set forth in the Operating
Agreement (as defined below).
RECITALS
A. The
Company was duly organized on October 24, 2017 as a limited
liability company under Utah law and is governed by that certain
Amended and Restated Operating Agreement dated March 6, 2018 (the
“Original
Agreement”), as amended by that certain First
Amendment to the Amended and Restated Operating Agreement dated
April 25, 2018 (the “First
Amendment”) and by that certain Second Amendment to
the Amended and Restated Operating Agreement dated May 23, 2018
(the “Second
Amendment,”
and together with the Original Agreement and the First Amendment,
the “Operating
Agreement”).
B. The
undersigned desires to amend the Operating Agreement as set forth
below.
C. Pursuant
to Section 12.9 of the Operating Agreement, all of the Members have
unanimously approved this Third Amendment.
AMENDMENT
NOW,
THEREFORE, for and in consideration of the mutual covenants
contained in this Third Amendment and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1.
The following
definitions are hereby added to Article I:
“Class
A/B Percentage Interest” shall mean a fraction, expressed as
a percentage, the numerator of which is the aggregate total of a
Member’s Class A Preferred Units and Class B Preferred Units
and the denominator of which the aggregate total of all outstanding
Class B Preferred Units.”
“Class B
Percentage Interest” shall mean a fraction, expressed as a
percentage, the numerator of which is the total of a Member’s
Class B Preferred Units and the denominator of which is the total
of all outstanding Class B Preferred Units.
“Class B
Preferred Face Value” shall mean $7.00 per Class B Preferred
Unit.
“Class B
Preferred Members” shall mean the holders of Class B
Preferred Units as set forth on Exhibit A.
“Class B
Preferred Units” shall mean the Units representing the
Membership Interests having the rights and obligations with respect
to Class B Preferred Units in this Agreement. The Manager has the
authority to issue an unlimited number of Class B Preferred
Units.
2. Section
1.41 of the Operating Agreement is hereby deleted in its entirety
and replaced with the following:
1.41
“Units”
shall mean the units of Membership Interest in the Company and
shall include all Common Units, Class A Preferred Units, Class B
Preferred Units and any other class of Membership Interest
authorized by the Manager. Each Unit in the Company represents a
Unit of Membership Interest in the Company.
3. Section
6.1 of the Operating Agreement is herby deleted in its entirety and
replaced with the following:
6.1
Distribution of Assets by the Company. Subject to applicable law
and any limitations contained elsewhere in this Agreement, the
Manager may elect from time to time to distribute Distributable
Cash to the Members, which distributions shall be in the following
order of priority:
(a) First,
to the Economic Interest Owners of the Class A Preferred Units and
Class B Preferred Units, pari
passu in proportion
to their Class A/B Percentage Interests but subject to Section
6.1(a)(2), until: (i) an amount equal to 120% of the Class A
Preferred Face Value per each Class A Preferred Unit has been
distributed to the Economic Interest Owners of the Class A
Preferred Units (the “Class A Preferred Distribution”);
and (ii) an amount equal to 110% of the Class B Preferred Face
Value per each Class B Preferred Unit has been distributed to the
Economic Interest Owners of the Class B Preferred Units, provided
that in no event shall distributions under this Section 6.1(a)
exceed the Class A Preferred Distribution respecting each Class A
Preferred Unit or the Class B Preferred Distribution respecting
each Class B Preferred Unit; and
(b) Second,
to the Members in proportion to their Total Percentage
Interests.
All
such distributions shall be made only to the persons who, according
to the books and records of the Company, are the holders of record
of the Economic Interests in respect of which such distributions
are made on the actual date of distribution. Neither the Company
nor the Manager shall incur any liability for making distributions
in accordance with this Section 6.5.
4. The
following shall be added to Section 12.9 of the Operating
Agreement:
B. Notwithstanding
the preceding sentence, the Manager shall have the power, without
the consent of the Members, to amend this Agreement in writing as
may be required, to reflect the issuance of additional Units,
including Class A Preferred Units, Class B Preferred Units and any
other class or series of Units that may be established after the
date of this Agreement; provided, that, any additional classes or
series of Units shall have similar designations, preferences and
rights to the outstanding Units.
5. This
Third Amendment shall be deemed to amend the Operating Agreement
and, to the extent of any conflict therewith, supersedes the
provisions thereof. All remaining terms and conditions of the
Operating Agreement not modified by this Third Amendment shall
remain in full force and effect, and the Member hereby ratifies and
confirms the Operating Agreement, as hereby amended, in all
respects.
6.
The laws of the State of Utah shall govern the validity of this
Third Amendment and the construction and interpretation of its
terms.
[Signatures on Following Page]
IN
WITNESS WHEREOF, the Manager has executed this Third Amendment on
the date first written above.
MANAGER:
THE
CHOSEN PRODUCTIONS, LLC
By:
/s/Derral
Eves____________
Name:
Derral Eves
Title:
Manager
Exhibit 6(f)
EMPLOYMENT AGREEMENT
THIS
AGREEMENT (“Agreement”) is made
effective as of the 12 day of July, 2020 (the “Effective Date”) by and
between THE CHOSEN, LLC, a Utah limited liability company (the
“Company”) and Colin
MacLeod an individual (“Employee”).
RECITALS
A. The
Company desires to employ Employee, and Employee desires to be
employed by the Company, on the terms and conditions set forth
herein.
B. The
parties believe it is in their best interests to make provision for
certain aspects of their relationship during and after the period
in which Employee is employed by the Company.
NOW,
THEREFORE, in consideration of the premises and the mutual
agreements and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the Company and Employee, it is hereby
agreed as follows:
ARTICLE 1
EMPLOYMENT
1.1 At
Will Employment. The employment of Employee shall be
"at-will" at all times. The Company may terminate Employee's
employment with the Company at any time and the Employee may quit
Employee's employment with the Company at any time, without any
advance notice, and for any reason or no reason at all,
notwithstanding anything to the contrary contained in or arising
from any statements, policies or practices of the Company relating
to the employment, discipline or termination of its employees. Upon
such termination of employment, all obligations of the Company
under this Agreement shall cease except as otherwise specifically
provided herein.
1.2 Position
and Duties. Employee shall be employed in the position of
Lead Videographer and Editor of The Chosen, a multi-season
television series on the life of Jesus Christ (“The Chosen”) and shall be
subject to the authority of, and shall report to, the manager of
the Company (the “Manager”) and to the
Director and Producer of The Chosen. Employee’s duties and
responsibilities shall include all those duties and
responsibilities customarily attendant to the position of a Lead
Videographer and Editor of The Chosen (as defined below) and such
other duties and responsibilities as may be assigned by the Manager
of the Company or Director and Producer of The Chosen. During the
Employment Term, Employee shall (a) devote Employee’s entire
business time, loyalty, attention and energies exclusively to The
Chosen and promoting The Chosen and the other business interests of
the Company while employed by the Company, (b) use his best efforts
to promote the interests, prospects and condition (financial and
otherwise) and welfare of the Company and shall perform his duties
and responsibilities to the best of his ability in a diligent,
trustworthy, businesslike and efficient manner, and (c) comply at
all times with all policies and codes of conduct of the Company, as
such policies and codes may change from time to time. Employee
acknowledges that Employee’s duties and responsibilities will
require all of Employee’s business time and efforts and
agrees that during Employee’s employment with the Company
will not engage in any outside business activities that conflict
with his obligations under this Agreement; provided, however, that
nothing set forth in this Section 1.2 shall affect
Employee’s ability to participate in religious, civic or
charitable organizations or to serve on religious, civic or
charitable boards, provided that (i) such activities do not
interfere with Employee’s performance of his duties hereunder
and (ii) the foregoing shall in no way waive, modify, or limit
Employee’s other agreements and obligations hereunder,
including without limitation Article 3.
ARTICLE 2
COMPENSATION AND OTHER BENEFITS
2.1 Base
Salary. The Company shall pay Employee an annual salary of
$80,000 (“Base
Salary”), payable in accordance with the normal
payroll practices of the Company. Employee’s Base Salary will
be reviewed from time to time in accordance with the established
procedures of the Company for adjusting salaries for similarly
situated executives and may be adjusted in the sole discretion of
the Company. Employee’s Base Salary does not include bonuses
paid by the Company.
2.2 Bonus.
In addition to the Base Salary, the Company shall pay a production
bonus of $5,000 to Employee at such time as the Company begins
on-site production of a season of The Chosen (with the next season
being Season 2 of The Chosen).
2.3 Benefit
Plans. Employee shall be eligible to participate in and
receive benefits under the employee benefit plans, practices,
policies, perquisites and programs established and maintained by
the Company from time to time for which employees of the Company
are generally eligible, in each case, subject to the eligibility
and participation requirements thereof. Unless and until the
Company provides health insurance benefits to its Employees, it
will reimburse Employee the out of pocket costs incurred by
Employee to pay the basic membership for himself and his immediate
family members with Samaritan Ministries health sharing
plan.
2.4 Expenses.
The Company shall reimburse Employee for authorized and
approved expenses
incurred by Employee during the Employment Term in the course of
the performance of Employee’s duties and responsibilities
pursuant to this Agreement and consistent with the Company’s
policies with respect to travel, entertainment and miscellaneous
expenses; provided, that Employee shall provide to the Company
documentation or evidence of expenses for which Employee seeks
reimbursement in accordance with the policies and procedures
established by the Company from time to time.
2.5 Paid
Time Off. Employee shall be entitled to ___________ weeks of
paid time off (including vacation and sick time) in each calendar
year (pro-rated for calendar year 2020). Employee shall make good
faith efforts to schedule vacations so as to least conflict with
the conduct of the Company business (and not during on-site
production) and will give the Company adequate advance notice of
Employee’s planned absences. Accrued paid time off not taken
in any calendar year may not be carried forward or be usable in any
subsequent calendar year, nor shall Employee be entitled to
compensation for unused paid time off during the Employment Period
or upon termination of employment. Paid holidays may be taken in
accordance with the holiday policy and schedule of the Company as
from time to time in effect.
ARTICLE 3
CONFIDENTIALITY;
NONCOMPETITION
3.1
Covenants Regarding
Confidential Information, Trade Secrets and Other Matters.
Employee covenants and agrees as follows:
(a) Definitions.
For purposes of this Agreement, the following terms are defined as
follows:
(i) “Invention”
means any discovery, improvement or idea (whether or not described
in writing or reduced to practice, and whether patentable or not)
made solely by Employee or jointly with others, during employment
by the Company: (i) relating to The Chosen or any of the
Company’s other media productions, if any; or (ii) relating
to any work or investigations conceived or carried on by Employee
in connection with or because of The Chosen or any of the
Company’s other media productions, if any.
(ii) “Work
of Authorship” means any literary, pictorial,
sculptural, graphic or audio-visual work, as well as any computer
program or system, whether published or unpublished, and whether
copyrightable or not, in whatever form and in whatever media,
originated solely by Employee or jointly with others, during
employment by the Company or within one (1) year thereafter: (i)
relating to The Chosen or any of the Company’s other media
productions, if any; or (ii) relating to ideas, work or
investigations conceived or carried on by Employee in connection
with or because of The Chosen or any of the Company’s other
media productions, if any.
(iii) “Trade
Secret” means unpublished Inventions and Works of
Authorship as well as all information possessed by or developed for
the Company, including, without limitation, a compilation, program,
device, method, system, technique or process, to which all of the
following apply: (i) the information derives independent economic
value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use and (ii)
the information is the subject of efforts to maintain its secrecy
that are reasonable under the circumstances.
(iv) “Confidential
Information” means information, to the extent it is
not a Trade Secret, which is possessed by or developed for the
Company and which relates to the Company’s existing or
potential business or technology, which information is generally
not known to the public and which information the Company seeks to
protect from disclosure to its existing or potential competitors or
others, including, without limitation, for example: business plans,
strategies, existing or proposed bids, costs, technical
developments, existing or proposed research projects, financial or
business projections, investments, marketing plans, negotiation
strategies, training information and materials, information
generated for client engagements and information stored or
developed for use in or with computers. Confidential Information
also includes information received by the Company from others which
the Company has an obligation to treat as confidential, including
all information obtained in connection with client
engagements.
(b) Ownership
of Intellectual Property. In the event Employee,
individually or jointly with others, makes an Invention, originates
a Work of Authorship, creates Confidential Information or creates a
Trade Secret while employed by the Company, it shall, without
further payment, immediately become the property of the Company
throughout the world. In addition:
(i) Employee
shall disclose and communicate to the Company promptly and fully
all such Inventions made, Works of Authorship originated and Trade
Secrets and Confidential Information created;
(ii) Whether
during or after Employee’s employment by the Company and
without charge to the Company, but at its request and expense,
Employee shall execute patent applications, copyright applications,
assignments and other documents relating to each Invention and Work
of Authorship necessary or proper to vest ownership in the Company
and to obtain, maintain and enforce patents, certificates of
copyright registration, and other proprietary rights to the
Inventions and Works of Authorship throughout the world;
and
(iii) Whether
during or after Employee’s employment by the Company and
without charge to the Company, but at its request and expense,
Employee shall give affidavits and testimony as to facts within
Employee’s knowledge in connection with any such Inventions
and Works of Authorship in any administrative proceedings,
arbitration, litigation or controversy relating
thereto.
(iv) Employee
hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Employee’s agents and
attorneys in fact to act for and in Employee’s behalf and
instead of Employee, to execute and file any documents and to do
all other lawfully permitted acts to further the above purposes
with the same legal force and effect as if executed by Employee.
The foregoing designation and appointment shall constitute an
irrevocable power of attorney, and are deemed by the Company and
Employee to be, coupled with an interest.
(v) Employee
acknowledges that all original works of authorship (including
software (in source or object code forms)) which are made by him
(solely or jointly) are works made for hire under the United States
Copyright Act (17 U.S.C., et seq.).
(c) Nondisclosure
of Confidential Information. Except as required in the
conduct of the Company’s business or as expressly authorized
in writing on behalf of the Company, Employee shall not use or
disclose, directly or indirectly, any Confidential Information
during the period of his employment with the Company. In addition,
for a two year period following the termination of Employee’s
employment Employee shall not use or disclose, directly or
indirectly, any Confidential Information. This prohibition does not
apply in the following circumstances: (i) when disclosure of
Confidential Information is required by law or by any court,
arbitrator, mediator or administrative or legislative body;
provided, that prior to such disclosure Employee shall provide to
the Company prompt notice of such required disclosure to enable the
Company to seek a protective order or other relief, and reasonably
cooperate with the Company in connection with seeking any such
order or other relief; or (ii) with respect to Confidential
Information that becomes generally known to the public other than
due to (A) Employee’s violation of this Agreement or any
other obligation or duty to the Company or (B) a disclosure by a
third party who owes the Company an obligation of confidence in
relation to such Confidential Information. This prohibition also
does not prohibit Employee’s use of general skills and
know-how acquired during and prior to employment by the Company, as
long as such use does not involve the use or disclosure of
Confidential Information or Trade Secrets.
(d) Trade
Secrets. During Employee’s employment by the Company,
Employee shall do what is reasonably necessary to prevent
unauthorized misappropriation or disclosure and threatened
misappropriation or disclosure of the Company’s Trade Secrets
and, after termination of employment, Employee shall not use or
disclose the Company’s Trade Secrets as long as they remain,
without misappropriation, Trade Secrets. Notwithstanding the
foregoing, Employee understands that, pursuant to the Defend Trade
Secrets Act of 2016, Employee shall not be held criminally or
civilly liable under any federal or state trade secret law for the
disclosure of a Trade Secret that: (i) is made (a) in confidence to
a federal, state or local government official, either directly or
indirectly, or to an attorney and (b) solely for the purpose of
reporting or investigating a suspected violation of law; or (ii) is
made in a complaint or other document filed in a lawsuit or other
proceeding, if such filing is made under seal. Nothing in this
Agreement is intended to conflict with 18 U.S.C. § 1833(b).
Employee understands that in the event it is determined that
disclosure of the Trade Secrets of the Company was not done in good
faith pursuant to the above, Employee shall be subject to damages
under federal criminal and civil law, including punitive damages
and attorneys’ fees.
(e) Policy
on Documents. In any event, and regardless whether
Confidential Information or Trade Secrets are involved, Employee
will not remove from the Company premises or publish any copies or
originals of contracts, sales invoices, purchase orders, leases,
pricing information, bid forms, government filings, blueprints,
designs, plans, processes, technical information, computer media or
files, or other documents or materials pertaining to the
Company’s business, unless required in the course of
employment by the Company or unless expressly authorized in writing
by the Company.
3.2 Non-Solicitation.
For a two year period following the termination of Employee’s
employment, Employee will not solicit, or assist another person to
solicit, any employee, supplier or independent contractor of the
Company (including, without limitation, any actor or other party
participating in the production of The Chosen) to terminate such
employee’s employment or terminate or curtail such
supplier’s or independent contractor’s business
relationship with the Company.
3.3 Return
of Materials. Immediately upon termination of employment,
Employee will return to the Company, and so certify in writing to
the Company, all the Company’s papers, documents and things,
including information stored for use in or with computers and
software applicable to the Company’s business (and all copies
thereof), which are in Employee’s possession or under
Employee’s control, regardless whether such papers, documents
or things contain confidential information or trade
secrets.
3.4 Post-Employment
Assistance. After the termination of Employee’s
employment with the Company for any reason, Employee shall, upon
reasonable notice, furnish the Company with such information as may
be in Employee’s possession or control, and cooperate with
the Company, as the Company may reasonably request, in connection
with any litigation, claim, or other dispute in which any Company
or any of its Affiliates is or may become a party, provided that
following termination of Employee’s employment with the
Company, any such assistance shall not unreasonably interfere with
Employee’s personal or business affairs. The Company shall
reimburse Employee for all reasonable out-of-pocket expenses
incurred by Employee in fulfilling Employee’s obligations
under this Section
3.4. For purposes of this Agreement, the term
“Affiliates” means any
individual, corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated association
or other entity (other than the Company) that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the
Company.
3.5 Disclosure
to Future Employer. During the term of Employee’s
employment and for a two year period following the termination of
Employee’s employment Employee shall disclose the existence
and contents of this Agreement to any potential employer prior to
accepting employment with that employer.
3.6 No
Conflicts. To the extent that they exist, Employee will not
disclose to the Company any of Employee’s previous
employer’s confidential information or trade secrets.
Further, Employee represents and warrants that Employee has not
previously assumed any obligations inconsistent with those of this
Agreement and that employment by the Company does not conflict with
any prior obligations to third parties.
3.7 Agreement
on Fairness. Employee acknowledges that: (i) this Agreement
has been specifically bargained between the parties and reviewed by
Employee, (ii) Employee has had an opportunity to obtain legal
counsel to review this Agreement, and (iii) the covenants made by
and duties imposed upon Employee hereby are fair, reasonable and
minimally necessary to protect the legitimate business interests of
the Company, and such covenants and duties will not place an undue
burden upon Employee’s livelihood in the event of termination
of Employee’s employment by the Company and the strict
enforcement of the covenants contained herein.
3.8 Equitable
Relief and Remedies. Employee acknowledges that any breach
of this Agreement will cause substantial and irreparable harm to
the Company for which money damages would be an inadequate remedy.
Accordingly, the Company shall in any such event be entitled to
obtain injunctive and other forms of equitable relief to prevent
such breach and to recover from Employee the Company’s costs
(including, without limitation, reasonable attorneys’ fees)
incurred in connection with enforcing this Agreement, in addition
to any other rights or remedies available at law, in equity or by
statute.
ARTICLE 4
GENERAL PROVISIONS
4.1 Notices.
Except as otherwise provided in this Agreement, all notices,
demands, requests, consents, approvals and other communications
with respect to this Agreement, shall be in writing and shall be
deemed delivered upon: (a) the personal delivery thereof; (b) upon
transmission if transmitted by fax or e-mail and accompanied by a
confirmation of valid transmission or receipt; (c) upon the earlier
of (i) receipt or (ii) three days after posting by registered mail
or certified mail, return receipt requested; or (d) on the next
business day following delivery to a reliable and recognized
overnight air freight delivery service; provided such notices
(other than personal delivery which may be made at any location)
shall be addressed or delivered to the parties at their respective
physical addresses, fax numbers or e-mail addresses set forth below
(or to such other physical address, fax number or e-mail address
for a party as such party may have substituted by notice pursuant
to this Section). Each of the foregoing methods of delivery is a
writing for purposes of this Agreement.:
(a) If
to the Company:
The
Chosen, LLC4 S. 2600 W. Ste 5
4 S.
2600 W. Ste 5
Hurricane, UT
84737phone:
phone:
email:
derral@thechosen.tv
attn: Derral
If to
Employee:
[address]
phone:
email:
4.2 Effect
of Prior Agreements. This Agreement contains the entire
understanding between the Company and Employee relating to the
subject matter hereof and, as of the Effective Date, will supersede
any prior employment agreement between Employee and any Company
Entity and any other agreement relating to the subject matter
hereof between Executive and any Company Entity. From and after the
Effective Date, Employee shall not be entitled to any rights or
benefits, and the Company shall not have any obligations, under any
prior employment agreement between Employee and the Company or any
other agreement relating to the subject matter hereof between
Employee and the Company. Employee acknowledges that has not
relied, is not relying and will not (at any time) rely on any oral
or written statements, promises, representations or warranties
(whether made by the Company or any equity holder, partner, member,
director, manager, officer, employee, agent or other representative
of the Company or otherwise) that are not expressly set forth in
this Agreement.
4.3 Withholding
and Deductions. All amounts payable to Employee (or his
estate, as applicable) pursuant to this Agreement shall be subject
to such withholding and deductions by the Company as required by
law and the applicable benefit plans of the Company.
4.4 Amendment.
This Agreement may be altered, amended or modified only in a
writing, signed by both of the parties hereto. Headings included in
this Agreement are for convenience only and are not intended to
limit or expand the rights of the parties hereto. References to
Sections herein shall mean sections of the text of this Agreement,
unless otherwise indicated.
4.5 Assignability.
This Agreement and the rights and duties set forth herein may not
be assigned by Employee, but may be assigned by the Company, in
whole or in part. This Agreement shall be binding on and inure to
the benefit of each party and such party’s respective heirs,
legal representatives, successors and assigns.
4.6 Severability.
If any court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then such
invalidity or unenforceability shall have no effect on the other
provisions hereof, which shall remain valid, binding and
enforceable and in full force and effect, and such invalid or
unenforceable provision shall be construed in a manner so as to
give the maximum valid and enforceable effect to the intent of the
parties expressed therein.
4.7 Arbitration.
Any controversy, dispute or claim arising out of or relating to
this Agreement (including, but not limited to, any claim regarding
the scope or effect of this Section and any claim that this Section
is invalid or unenforceable), or the breach hereof, shall be
settled by a single arbitrator in binding arbitration conducted in
St. George, Utah in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (“AAA”)
(or such other arbitration service as the parties may agree upon),
and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The
arbitrator’s decision shall be in writing. In addition to the
Commercial Arbitration Rules of the AAA and unless otherwise agreed
to by the parties, the following rules shall apply:
(a) Each
party shall be entitled to discovery exclusively by the following
means: (i) requests for admission, (ii) requests for production of
documents, (iii) up to 15 written interrogatories (with any subpart
to be counted as a separate interrogatory), and (iv) depositions of
no more than six individuals.
(b) Unless
the arbitrator finds that delay is reasonably justified or as
otherwise agreed to by the parties, all discovery shall be
completed, and the arbitration hearing shall commence within five
months after the appointment of the arbitrator.
(c) Unless
the arbitrator finds that delay is reasonably justified, the
hearing will be completed, and an award rendered within 30 days of
commencement of the hearing.
The
arbitrator’s authority shall include the ability to render
equitable types of relief and, in such event, any aforesaid court
may enter an order enjoining and/or compelling such actions or
relief ordered or as found by the arbitrator. The arbitrator also
shall make a determination regarding which party’s legal
position in any such controversy or claim is the more substantially
correct (the “Prevailing Party”) and
the arbitrator shall require the other party to pay the legal and
other professional fees and costs incurred by the Prevailing Party
in connection with such arbitration proceeding and any necessary
court action. However, notwithstanding the foregoing, the parties
expressly agree that a court of competent jurisdiction may enter a
temporary restraining order or an order enjoining a breach of
Article 3 of this Agreement pending a final award or further order
by the arbitrator. Such remedy, however, shall be cumulative and
nonexclusive, and shall be in addition to any other remedy to which
the parties may be entitled.
4.8 Waiver
of Breach. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by either party.
4.9 Governing
Law; Construction. This Agreement shall be governed by the
internal laws of the State of Utah, without regard to any rules of
construction concerning the party responsible for the drafting
hereof.
4.10 Counterparts.
This Agreement may be executed in separate counterparts and may be
executed and delivered by facsimile or electronically transmitted
PDF copies, each of which is deemed to be an original and all of
which, taken together, constitute one and the same
agreement.
4.11 No
Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be
applied against any person.
[Remainder
of Page Intentionally Blank; Signature Page to Follow]
IN
WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and Employee has signed
this Agreement, as of the date first above written.
COMPANY
The Chosen,
LLC
By:
/s/Derral
Eves___________
Name:
Derral Eves
Title:
CEO
EMPLOYEE:
/s/Colin Macleod____________
Colin
MacLeod
Exhibit 6(g)
EMPLOYMENT AGREEMENT
THIS
AGREEMENT (“Agreement”) is made
effective as of the 15 day of July, 2020 (the “Effective Date”) by and
between THE CHOSEN, LLC, a Utah limited liability company (the
“Company”) and Adam
Swerdlow an individual (“Employee”).
RECITALS
A. The
Company produces a multi-season television series on the life of
Jesus Christ (“The
Chosen”).
B. The
Company desires to employ Employee, and Employee desires to be
employed by the Company, on the terms and conditions set forth
herein.
C. The
parties believe it is in their best interests to make provision for
certain aspects of their relationship during and after the period
in which Employee is employed by the Company.
NOW,
THEREFORE, in consideration of the premises and the mutual
agreements and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the Company and Employee, it is hereby
agreed as follows:
ARTICLE 1
EMPLOYMENT
1.1 Initial
Employment Term; At Will Employment. The Company employs
Employee, and Employee accepts employment by the Company, for the
period commencing on the date hereof and ending on July 31, 2021
(the “Initial
Employment Term”). After the Initial Employment Term,
any continued employment of Employee shall be “at-will”
at all times thereafter, meaning the Company may then terminate
Employee’s employment with the Company at any time after the
Initial Employment Term and the Employee may quit Employee’s
employment with the Company at any time after the Initial
Employment Term, without any advance notice, and for any reason or
no reason at all, notwithstanding anything to the contrary
contained in or arising from any statements, policies or practices
of the Company relating to the employment, discipline or
termination of its employees. Upon such termination of employment,
all obligations of the Company under this Agreement shall cease
except as otherwise specifically provided herein.
1.2 Position
and Duties. Employee shall be employed in the position of
Chief Operating Officer (“COO”) and shall be
subject to the authority of, and shall report to, the manager of
the Company (the “Manager”).
Employee’s duties and responsibilities shall include all
those duties and responsibilities customarily attendant to the
position of a COO, including the following or efforts to accomplish
the following:
(a) Spearhead
strategies to steer the Company’s future in a positive
direction;
(b) Drive
the company’s operating capabilities to surpass Company
goals;
(c) Controlling
company costs, and introducing tactical initiatives to address
losses;
(d) Overseeing
marketing initiatives and implementing better business
practices;
(e) Delegating
responsibilities to empower employees to grow as capable
participants;
(f) Employing
various initiatives to coach employees to optimize their
capabilities;
(g) Completing
performance reviews in a prudent manner;
(h) Assessing
and implementing improved processes and new technologies, and
collaborating with management regarding the implementation of these
improvements;
(I) Overseeing
vendor and contractor relationships to maximize efficiency and
profitability; and
(J) such
other duties and responsibilities as may be assigned by the Manager
of the Company.
1.3 Full-Time
Position and Expectations. During Employee’s
employment, Employee shall (a) devote Employee’s entire
business time, loyalty, attention and energies exclusively to
business of the Company, (b) use his best efforts to promote the
interests, prospects and condition (financial and otherwise) and
welfare of the Company and shall perform his duties and
responsibilities to the best of his ability in a diligent,
trustworthy, businesslike and efficient manner, and (c) comply at
all times with all policies and codes of conduct of the Company, as
such policies and codes may change from time to time. Employee
acknowledges that Employee’s duties and responsibilities will
require all of Employee’s business time and efforts and
agrees that during Employee’s employment with the Company
will not engage in any outside business activities that conflict
with his obligations under this Agreement; provided, however, that
nothing set forth in this Section 1.3 shall affect
Employee’s ability to participate in religious, civic or
charitable organizations or to serve on religious, civic or
charitable boards, provided that (i) such activities do not
interfere with Employee’s performance of his duties hereunder
and (ii) the foregoing shall in no way waive, modify, or limit
Employee’s other agreements and obligations hereunder,
including without limitation Article 3.
ARTICLE 2
COMPENSATION AND OTHER BENEFITS
2.1 Base
Salary. The Company shall pay Employee an annual salary of
$200,000 (“Base
Salary”), payable in accordance with the normal
payroll practices of the Company. Employee’s Base Salary will
be reviewed from time to time in accordance with the established
procedures of the Company for adjusting salaries for similarly
situated executives and may be adjusted in the sole discretion of
the Company. Employee’s Base Salary does not include bonuses
paid by the Company.
2.2 Benefit
Plans. Employee shall be eligible to participate in and
receive benefits under the employee benefit plans, practices,
policies, perquisites and programs established and maintained by
the Company from time to time for which employees of the Company
are generally eligible, in each case, subject to the eligibility
and participation requirements thereof. Unless and until the
Company provides health insurance benefits to its Employees, it
will reimburse Employee the out of pocket costs incurred by
Employee to pay the basic membership for himself and his immediate
family members with Samaritan Ministries health sharing plan or the
costs of another health insurance plan selected by Employee;
provided, that, if the cost of such Employee selected insurance
plan exceeds the cost of the Samaritan Ministries plan, then the
amount reimbursed by the Company will be capped at the costs that
the Company would have otherwise reimbursed for the Samaritan
Ministries health sharing plan.
2.3 Expenses.
The Company shall reimburse Employee for authorized and
approved expenses
incurred by Employee during his employment and in the course of the
performance of Employee’s duties and responsibilities
pursuant to this Agreement and consistent with the Company’s
policies with respect to travel, entertainment and miscellaneous
expenses; provided, that Employee shall provide to the Company
documentation or evidence of expenses for which Employee seeks
reimbursement in accordance with the policies and procedures
established by the Company from time to time. In addition, the
Company shall reimburse Employee for legal fees incurred by
Employee to retain an attorney to advise Employee with respect to
United States securities law issues related to issuers and issuer
agents; provided, that, such reimbursement amount will be limited
to $2,500 unless the Manager of the Company otherwise consents in
writing to a higher amount is the Manager’s sole and absolute
discretion.
2.4 Paid
Time Off. Employee shall be entitled to 10 business days of
paid time off (including vacation and sick time) in each calendar
year (pro-rated for calendar year 2020). Employee shall make good
faith efforts to schedule vacations so as to least conflict with
the conduct of the Company business and will give the Company
adequate advance notice of Employee’s planned absences.
Accrued paid time off not taken in any calendar year may not be
carried forward or be usable in any subsequent calendar year, nor
shall Employee be entitled to compensation for unused paid time off
during the Employment Period or upon termination of employment.
Paid holidays may be taken in accordance with the holiday policy
and schedule of the Company as from time to time in
effect.
ARTICLE 3
TERMINATION
3.1 Termination
by Company For Cause. The Company may terminate
Employee’s employment at any time for “Cause” (as defined below)
by giving notice to Employee stating the basis for such
termination, effective immediately upon giving such notice or at
such other time thereafter as the Company may designate.
“Cause”
shall mean any of the following:
(a) Employee
has breached this Agreement or any other agreement to which
Employee and the Company are parties or has breached any other
obligation or duty owed to the Company, which breach (other than a
breach under Article
4 hereof which is uncurable) remains uncured to the
satisfaction of the Manager of the Company for thirty (30) days
after Employee receives notice thereof from the
Manager;
(b) Employee
has engaged in harassing or offensive conduct which has the
potential to give rise to an action under Federal, state or local
laws for discrimination in employment;
(c) Employee
repeatedly interacts with staff or subordinates in a demeaning and
unprofessional or abusive manner;
(d) Employee
has committed gross negligence, willful misconduct or any violation
of law in the performance of Employee’s duties to the
Company;
(e) the
Company’s good faith determination that Employee engaged in
any conduct, even if not in conjunction with his duties hereunder,
which could reasonably be expected to, or which does, materially
and negatively affect the business, integrity, character or
reputation of any of the Company (including its reputation with any
of their content consumers, customers, suppliers, vendors,
employees, contractors or other parties having a business
relationship with the Company);
(f) the
Company’s good faith determination that Employee engaged in
any conduct, even if not in conjunction with his duties hereunder,
which could reasonably be expected to, or which does, materially
and negatively affect Employee’s own integrity, character or
reputation (including Employee’s reputation with any clients,
customers, suppliers, vendors or employees of the Company) so as to
cause Employee to be unfit to act in the capacity of Writer,
Director and Producer of the Company;
(g) Employee
has failed to follow instructions from the Manager to whom Employee
reports concerning the operations or business of the
Company;
(h) Employee
has committed a felony deemed by the Company to be adverse to its
best interest or reputation;
(i) Employee
has misappropriated funds or property of the Company;
(j) Employee
has attempted to obtain a personal profit from any transaction in
which the Company has an interest, and which constitutes a
corporate opportunity of the Company or is adverse to the interests
of the Company, unless the transaction was approved in writing by
the Company’s Manager after full disclosure of all details
relating to such transaction; or
(k) Employee
reporting to work under the influence of alcohol or
Employee’s use of illegal drugs (whether or not at the
workplace).
If
Employee’s employment is terminated pursuant to this
Section 3.1,
Employee shall have no further rights against the Company
hereunder, except for the right to receive (i) any unpaid Base
Salary with respect to the period prior to the effective date of
termination, and (ii) reimbursement of expenses to which Employee
is entitled under Section
2.3 hereof (collectively, the “Accrued Obligations”).
The Accrued Obligations shall be paid in accordance with applicable
state law and in no event later than thirty (30) days after the
date of termination.
3.2 Termination
by Company Without Cause. The Company may terminate
Employee’s employment at any time without Cause upon written
notice to Employee. If Employee’s employment is terminated
pursuant to this Section
3.2, Employee shall have no further rights against the
Company hereunder, except for the right to receive (i) the Accrued
Obligations payable as set forth in Section 3.1 above, and (ii) if
and only if Employee’s employment is terminated by the
Company without Cause prior to the end of the Initial Employment
Term, severance payments in an aggregate amount equal to
Employee’s Base Salary remaining to be paid over the
remaining Initial Employment Term, payable in equal installments
over the remaining Initial Employment Term at the Company’s
regular payroll intervals, with the first installment being payable
on the first payroll date following the date of termination (the
obligations under clause (ii), the “Severance Benefits”);
provided, however, Employee’s right to receive the Severance
Benefits is subject to and contingent on the Company’s
receipt of a Separation Agreement and General Release in accordance
with Section 3.7 which has not been revoked by Employee. By way of
example, if Company terminated Employee’s employment without
Cause under this Section 3.2 on April 30, 2021, then the remaining
Initial Employment Term would be the subsequent 3 months (May, June
and July, 2021) and the Severance Benefits would be 3 months salary
at the Base Salary rate payable as provided above. Notwithstanding
the foregoing, in the event that Employee shall breach any of his
obligations under Article
4 at any time, in addition to any other remedies available
to the Company at law or in equity, the Company shall be relieved
from and shall have no obligation to pay Employee any then unpaid
Severance Benefits amounts to which Employee would otherwise have
been entitled under this Section 3.2.
3.3 Termination
Upon Death or Disability. Employee’s employment and
the Company’s obligations under this Agreement shall
terminate: (i) automatically, effective immediately and without any
notice being necessary, upon Employee’s death; and (ii) in
the event of the disability of Employee, by the Company giving
notice of termination to Employee. If Employee’s employment
is terminated pursuant to this Section 3.3, Employee (or
Employee’s estate) shall have no further rights against the
Company hereunder (even if such event happens during the Initial
Employment Term), except for the right to receive the Accrued
Obligations payable as set forth in Section 3.1 above. For purposes
of this Agreement, “disability” means the inability of
Employee, due to a physical or mental impairment, for 90 days
(whether or not consecutive) during any period of 360 days to
perform, with reasonable accommodation, the essential functions of
the work contemplated by this Agreement. In the event of any
dispute as to whether Employee is disabled, the matter shall be
determined by the Company’s Manager in consultation with a
physician satisfactory to the Company, and Employee shall cooperate
with the efforts to make such determination. Any such determination
shall be conclusive and binding on the parties. Any determination
of disability under this Section 3.3 is not intended to
alter any benefits any party may be entitled to receive under any
long-term disability insurance policy carried by either the Company
or Employee with respect to Employee, which benefits shall be
governed solely by the terms of any such insurance policy. Nothing
in this subsection shall be construed as limiting or altering any
of Employee’s rights under state workers compensation laws or
state or Federal family and medical leave laws.
3.4 Voluntary
Resignation by Employee. Employee may terminate his
employment for any reason upon written notice. Notwithstanding the
foregoing, during the Initial Employment Term Employee shall
provide at least ninety (90) days advance notice prior to the
termination of his employment; provided, that, upon such notice
from Employee Company may terminate the employment even during the
Initial Employment Term pursuant to this Section 3.4 immediately upon
notice to Employee. If the Employee’s employment is
terminated during or after the Initial Employment Term pursuant to
this Section 3.4,
the Company shall have no further obligation to Employee except for
Accrued Obligations, which shall be paid in accordance with
Section
3.1.
3.5 General
Release. The obligation of the Company to pay any Severance
Benefits as a result of a termination of Employee’s
employment prior to expiration of the Initial Employment Term
pursuant to Section
3.2 shall be contingent upon Employee’s due execution
and delivery to the Company of a separation agreement and general
release in the form to be provided by the Company upon such
termination (the “Separation Agreement and General
Release”) and Employee’s non-revocation of such
Separation Agreement and General Release. Such Separation Agreement
and General Release shall not, however, relieve Employee of
Employee’s obligation to comply with the continuing terms of
this Agreement, including those arising under Article 4. If the Severance
Benefits are determined by the Company to be non-exempt
nonqualified deferred compensation subject to Section 409A of the
U.S. Internal Revenue Code of 1986, as amended (the
“Code”), and the period
during which Employee has discretion to execute or revoke the
Separation Agreement and General Release straddles two taxable
years of Employee, then the Company shall make the Severance
Benefits payments starting in the second of such taxable years,
regardless of the taxable year in which Employee actually delivers
the executed Separation Agreement and General Release to the
Company.
3.6 Exclusive
Remedy. To the extent permitted by applicable law, the
payments contemplated by this Article 3 shall constitute the
exclusive and sole remedy for any termination of Employee’s
employment by the Company (whether pursuant to, or in violation of,
the terms of this Agreement). Employee covenants not to assert or
pursue any remedies, other than an action to enforce the payments
due to Employee under this Agreement, at law or in equity, with
respect to any termination of employment, and shall execute a
release and waiver on such terms and conditions as the Company may
require as a condition of entitlement to such
payments.
ARTICLE 4
CONFIDENTIALITY;
NONCOMPETITION
4.1 Covenants
Regarding Confidential Information, Trade Secrets and Other
Matters. Employee covenants and agrees as
follows:
(a) Definitions.
For purposes of this Agreement, the following terms are defined as
follows:
(i) “Invention”
means any discovery, improvement or idea (whether or not described
in writing or reduced to practice, and whether patentable or not)
made solely by Employee or jointly with others, during employment
by the Company: (i) relating to The Chosen or any of the
Company’s other media productions, if any; or (ii) relating
to any work or investigations conceived or carried on by Employee
in connection with or because of The Chosen or any of the
Company’s other media productions, if any.
(ii) “Work
of Authorship” means any literary, pictorial,
sculptural, graphic or audio-visual work, as well as any computer
program or system, whether published or unpublished, and whether
copyrightable or not, in whatever form and in whatever media,
originated solely by Employee or jointly with others, during
employment by the Company or within one (1) year thereafter: (i)
relating to The Chosen or any of the Company’s other media
productions, if any; or (ii) relating to ideas, work or
investigations conceived or carried on by Employee in connection
with or because of The Chosen or any of the Company’s other
media productions, if any.
(iii) “Trade
Secret” means unpublished Inventions and Works of
Authorship as well as all information possessed by or developed for
the Company, including, without limitation, a compilation, program,
device, method, system, technique or process, to which all of the
following apply: (i) the information derives independent economic
value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use and (ii)
the information is the subject of efforts to maintain its secrecy
that are reasonable under the circumstances.
(iv) “Confidential
Information” means information, to the extent it is
not a Trade Secret, which is possessed by or developed for the
Company and which relates to the Company’s existing or
potential business or technology, which information is generally
not known to the public and which information the Company seeks to
protect from disclosure to its existing or potential competitors or
others, including, without limitation, for example: business plans,
strategies, existing or proposed bids, costs, technical
developments, existing or proposed research projects, financial or
business projections, investments, marketing plans, negotiation
strategies, training information and materials, information
generated for client engagements and information stored or
developed for use in or with computers. Confidential Information
also includes information received by the Company from others which
the Company has an obligation to treat as confidential, including
all information obtained in connection with client
engagements.
(b) Ownership
of Intellectual Property. In the event Employee,
individually or jointly with others, makes an Invention, originates
a Work of Authorship, creates Confidential Information or creates a
Trade Secret while employed by the Company, it shall, without
further payment, immediately become the property of the Company
throughout the world. In addition:
(i) Employee
shall disclose and communicate to the Company promptly and fully
all such Inventions made, Works of Authorship originated and Trade
Secrets and Confidential Information created;
(ii) Whether
during or after Employee’s employment by the Company and
without charge to the Company, but at its request and expense,
Employee shall execute patent applications, copyright applications,
assignments and other documents relating to each Invention and Work
of Authorship necessary or proper to vest ownership in the Company
and to obtain, maintain and enforce patents, certificates of
copyright registration, and other proprietary rights to the
Inventions and Works of Authorship throughout the world;
and
(iii) Whether
during or after Employee’s employment by the Company and
without charge to the Company, but at its request and expense,
Employee shall give affidavits and testimony as to facts within
Employee’s knowledge in connection with any such Inventions
and Works of Authorship in any administrative proceedings,
arbitration, litigation or controversy relating
thereto.
(iv) Employee
hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Employee’s agents and
attorneys in fact to act for and in Employee’s behalf and
instead of Employee, to execute and file any documents and to do
all other lawfully permitted acts to further the above purposes
with the same legal force and effect as if executed by Employee.
The foregoing designation and appointment shall constitute an
irrevocable power of attorney, and are deemed by the Company and
Employee to be, coupled with an interest.
(v) Employee
acknowledges that all original works of authorship (including
software (in source or object code forms)) which are made by him
(solely or jointly) are works made for hire under the United States
Copyright Act (17 U.S.C., et seq.).
(c) Nondisclosure
of Confidential Information. Except as required in the
conduct of the Company’s business or as expressly authorized
in writing on behalf of the Company, Employee shall not use or
disclose, directly or indirectly, any Confidential Information
during the period of his employment with the Company. In addition,
for a two year period following the termination of Employee’s
employment Employee shall not use or disclose, directly or
indirectly, any Confidential Information. This prohibition does not
apply in the following circumstances: (i) when disclosure of
Confidential Information is required by law or by any court,
arbitrator, mediator or administrative or legislative body;
provided, that prior to such disclosure Employee shall provide to
the Company prompt notice of such required disclosure to enable the
Company to seek a protective order or other relief, and reasonably
cooperate with the Company in connection with seeking any such
order or other relief; or (ii) with respect to Confidential
Information that becomes generally known to the public other than
due to (A) Employee’s violation of this Agreement or any
other obligation or duty to the Company or (B) a disclosure by a
third party who owes the Company an obligation of confidence in
relation to such Confidential Information. This prohibition also
does not prohibit Employee’s use of general skills and
know-how acquired during and prior to employment by the Company, as
long as such use does not involve the use or disclosure of
Confidential Information or Trade Secrets.
(d) Trade
Secrets. During Employee’s employment by the Company,
Employee shall do what is reasonably necessary to prevent
unauthorized misappropriation or disclosure and threatened
misappropriation or disclosure of the Company’s Trade Secrets
and, after termination of employment, Employee shall not use or
disclose the Company’s Trade Secrets as long as they remain,
without misappropriation, Trade Secrets. Notwithstanding the
foregoing, Employee understands that, pursuant to the Defend Trade
Secrets Act of 2016, Employee shall not be held criminally or
civilly liable under any federal or state trade secret law for the
disclosure of a Trade Secret that: (i) is made (a) in confidence to
a federal, state or local government official, either directly or
indirectly, or to an attorney and (b) solely for the purpose of
reporting or investigating a suspected violation of law; or (ii) is
made in a complaint or other document filed in a lawsuit or other
proceeding, if such filing is made under seal. Nothing in this
Agreement is intended to conflict with 18 U.S.C. § 1833(b).
Employee understands that in the event it is determined that
disclosure of the Trade Secrets of the Company was not done in good
faith pursuant to the above, Employee shall be subject to damages
under federal criminal and civil law, including punitive damages
and attorneys’ fees.
(e) Policy
on Documents. In any event, and regardless whether
Confidential Information or Trade Secrets are involved, Employee
will not remove from the Company premises or publish any copies or
originals of contracts, sales invoices, purchase orders, leases,
pricing information, bid forms, government filings, blueprints,
designs, plans, processes, technical information, computer media or
files, or other documents or materials pertaining to the
Company’s business, unless required in the course of
employment by the Company or unless expressly authorized in writing
by the Company.
4.2 Non-Solicitation.
For a two year period following the termination of Employee’s
employment, Employee will not solicit, or assist another person to
solicit, any employee, supplier or independent contractor of the
Company (including, without limitation, any actor or other party
participating in the production of The Chosen) to terminate such
employee’s employment or terminate or curtail such
supplier’s or independent contractor’s business
relationship with the Company.
4.3 Return
of Materials. Immediately upon termination of employment,
Employee will return to the Company, and so certify in writing to
the Company, all the Company’s papers, documents and things,
including information stored for use in or with computers and
software applicable to the Company’s business (and all copies
thereof), which are in Employee’s possession or under
Employee’s control, regardless whether such papers, documents
or things contain confidential information or trade
secrets.
4.4 Post-Employment
Assistance. After the termination of Employee’s
employment with the Company for any reason, Employee shall, upon
reasonable notice, furnish the Company with such information as may
be in Employee’s possession or control, and cooperate with
the Company, as the Company may reasonably request, in connection
with any litigation, claim, or other dispute in which any Company
or any of its Affiliates is or may become a party, provided that
following termination of Employee’s employment with the
Company, any such assistance shall not unreasonably interfere with
Employee’s personal or business affairs. The Company shall
reimburse Employee for all reasonable out-of-pocket expenses
incurred by Employee in fulfilling Employee’s obligations
under this Section
4.4. For purposes of this Agreement, the term
“Affiliates” means any
individual, corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated association
or other entity (other than the Company) that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the
Company.
4.5 Disclosure
to Future Employer. During the term of Employee’s
employment and for a two year period following the termination of
Employee’s employment Employee shall disclose the existence
and contents of this Agreement to any potential employer prior to
accepting employment with that employer.
4.6 No
Conflicts. To the extent that they exist, Employee will not
disclose to the Company any of Employee’s previous
employer’s confidential information or trade secrets.
Further, Employee represents and warrants that Employee has not
previously assumed any obligations inconsistent with those of this
Agreement and that employment by the Company does not conflict with
any prior obligations to third parties.
4.7 Agreement
on Fairness. Employee acknowledges that: (i) this Agreement
has been specifically bargained between the parties and reviewed by
Employee, (ii) Employee has had an opportunity to obtain legal
counsel to review this Agreement, and (iii) the covenants made by
and duties imposed upon Employee hereby are fair, reasonable and
minimally necessary to protect the legitimate business interests of
the Company, and such covenants and duties will not place an undue
burden upon Employee’s livelihood in the event of termination
of Employee’s employment by the Company and the strict
enforcement of the covenants contained herein.
4.8 Equitable
Relief and Remedies. Employee acknowledges that any breach
of this Agreement will cause substantial and irreparable harm to
the Company for which money damages would be an inadequate remedy.
Accordingly, the Company shall in any such event be entitled to
obtain injunctive and other forms of equitable relief to prevent
such breach and to recover from Employee the Company’s costs
(including, without limitation, reasonable attorneys’ fees)
incurred in connection with enforcing this Agreement, in addition
to any other rights or remedies available at law, in equity or by
statute.
ARTICLE 5
GENERAL PROVISIONS
5.1 Notices.
Except as otherwise provided in this Agreement, all notices,
demands, requests, consents, approvals and other communications
with respect to this Agreement, shall be in writing and shall be
deemed delivered upon: (a) the personal delivery thereof; (b) upon
transmission if transmitted by fax or e-mail and accompanied by a
confirmation of valid transmission or receipt; (c) upon the earlier
of (i) receipt or (ii) three days after posting by registered mail
or certified mail, return receipt requested; or (d) on the next
business day following delivery to a reliable and recognized
overnight air freight delivery service; provided such notices
(other than personal delivery which may be made at any location)
shall be addressed or delivered to the parties at their respective
physical addresses, fax numbers or e-mail addresses set forth below
(or to such other physical address, fax number or e-mail address
for a party as such party may have substituted by notice pursuant
to this Section). Each of the foregoing methods of delivery is a
writing for purposes of this Agreement.:
(a) If
to the Company:
The
Chosen, LLC
4 South 2600 West,
Suite
Hurricane, Utah
84737
phone:
email:
Attn: The Chosen
Productions, LLC, Manager
If to
Employee:
_________________________________
_________________________________
5.2 Effect
of Prior Agreements. This Agreement contains the entire
understanding between the Company and Employee relating to the
subject matter hereof and, as of the Effective Date, will supersede
any prior employment agreement between Employee and any Company
Entity and any other agreement relating to the subject matter
hereof between Executive and any Company Entity. From and after the
Effective Date, Employee shall not be entitled to any rights or
benefits, and the Company shall not have any obligations, under any
prior employment agreement between Employee and the Company or any
other agreement relating to the subject matter hereof between
Employee and the Company. Employee acknowledges that has not
relied, is not relying and will not (at any time) rely on any oral
or written statements, promises, representations or warranties
(whether made by the Company or any equity holder, partner, member,
director, manager, officer, employee, agent or other representative
of the Company or otherwise) that are not expressly set forth in
this Agreement.
5.3 Withholding
and Deductions. All amounts payable to Employee (or his
estate, as applicable) pursuant to this Agreement shall be subject
to such withholding and deductions by the Company as required by
law and the applicable benefit plans of the Company.
5.4 Amendment.
This Agreement may be altered, amended or modified only in a
writing, signed by both of the parties hereto. Headings included in
this Agreement are for convenience only and are not intended to
limit or expand the rights of the parties hereto. References to
Sections herein shall mean sections of the text of this Agreement,
unless otherwise indicated.
5.5 Assignability.
This Agreement and the rights and duties set forth herein may not
be assigned by Employee, but may be assigned by the Company, in
whole or in part. This Agreement shall be binding on and inure to
the benefit of each party and such party’s respective heirs,
legal representatives, successors and assigns.
5.6 Severability.
If any court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then such
invalidity or unenforceability shall have no effect on the other
provisions hereof, which shall remain valid, binding and
enforceable and in full force and effect, and such invalid or
unenforceable provision shall be construed in a manner so as to
give the maximum valid and enforceable effect to the intent of the
parties expressed therein.
5.7 Arbitration.
Any controversy, dispute or claim arising out of or relating to
this Agreement (including, but not limited to, any claim regarding
the scope or effect of this Section and any claim that this Section
is invalid or unenforceable), or the breach hereof, shall be
settled by a single arbitrator in binding arbitration conducted in
St. George, Utah in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (“AAA”)
(or such other arbitration service as the parties may agree upon),
and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The
arbitrator’s decision shall be in writing. In addition to the
Commercial Arbitration Rules of the AAA and unless otherwise agreed
to by the parties, the following rules shall apply:
(a) Each
party shall be entitled to discovery exclusively by the following
means: (i) requests for admission, (ii) requests for production of
documents, (iii) up to 15 written interrogatories (with any subpart
to be counted as a separate interrogatory), and (iv) depositions of
no more than six individuals.
(b) Unless
the arbitrator finds that delay is reasonably justified or as
otherwise agreed to by the parties, all discovery shall be
completed, and the arbitration hearing shall commence within five
months after the appointment of the arbitrator.
(c) Unless
the arbitrator finds that delay is reasonably justified, the
hearing will be completed, and an award rendered within 30 days of
commencement of the hearing.
The
arbitrator’s authority shall include the ability to render
equitable types of relief and, in such event, any aforesaid court
may enter an order enjoining and/or compelling such actions or
relief ordered or as found by the arbitrator. The arbitrator also
shall make a determination regarding which party’s legal
position in any such controversy or claim is the more substantially
correct (the “Prevailing Party”) and
the arbitrator shall require the other party to pay the legal and
other professional fees and costs incurred by the Prevailing Party
in connection with such arbitration proceeding and any necessary
court action. However, notwithstanding the foregoing, the parties
expressly agree that a court of competent jurisdiction may enter a
temporary restraining order or an order enjoining a breach of
Article 3 of this Agreement pending a final award or further order
by the arbitrator. Such remedy, however, shall be cumulative and
nonexclusive, and shall be in addition to any other remedy to which
the parties may be entitled.
5.8 Waiver
of Breach. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by either party.
5.9 Governing
Law; Construction. This Agreement shall be governed by the
internal laws of the State of Utah, without regard to any rules of
construction concerning the party responsible for the drafting
hereof.
5.10 Counterparts.
This Agreement may be executed in separate counterparts and may be
executed and delivered by facsimile or electronically transmitted
PDF copies, each of which is deemed to be an original and all of
which, taken together, constitute one and the same
agreement.
5.11 No
Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be
applied against any person.
[Remainder
of Page Intentionally Blank; Signature Page to Follow]
IN
WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and Employee has signed
this Agreement, as of the date first above written.
COMPANY
The Chosen,
LLC
By:
/s/Derral
Eves___________
Name:
Derral Eves
Title:
CEO
EMPLOYEE:
/s/Adam Swerdlow___________
Adam
Swerdlow
Exhibit 6(h)
EMPLOYMENT AGREEMENT
THIS
AGREEMENT (“Agreement”) is made
effective as of the 1st day of August 2020 (the “Effective Date”) by and
between THE CHOSEN, LLC, a Utah limited liability company (the
“Company”) and Derral Eves
an individual (“Employee”).
RECITALS
A. The
Company produces a multi-season television series on the life of
Jesus Christ (“The
Chosen”).
B. The
Company desires to employ Employee, and Employee desires to be
employed by the Company, on the terms and conditions set forth
herein.
C. The
parties believe it is in their best interests to make provision for
certain aspects of their relationship during and after the period
in which Employee is employed by the Company.
NOW,
THEREFORE, in consideration of the premises and the mutual
agreements and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the Company and Employee, it is hereby
agreed as follows:
ARTICLE 1
EMPLOYMENT
1.1 At
Will Employment. The employment of Employee shall be
“at-will” at all times. The Company may terminate
Employee’s employment with the Company at any time and the
Employee may quit Employee’s employment with the Company at
any time, without any advance notice, and for any reason or no
reason at all, notwithstanding anything to the contrary contained
in or arising from any statements, policies or practices of the
Company relating to the employment, discipline or termination of
its employees. Upon such termination of employment, all obligations
of the Company under this Agreement shall cease except as otherwise
specifically provided herein.
1.2 Position
and Duties. Employee shall be employed in the position of
Executive Producer and Chief Executive Officer (“CEO”) and shall be
subject to the authority of, and shall report to, the manager of
the Company (the “Manager”).
Employee’s duties and responsibilities shall include all
those duties and responsibilities customarily attendant to the
position of an Executive Producer and CEO which includes
supervising the creative content and the financial aspects of the
production of The Chosen together with such activities typically
attendant to the position of CEO.
1.3 Position
and Expectations. During the term of Employee’s
employment (the “Employment Term”),
Employee shall (a) devote sufficient business time, attention and
energies to the business of the Company to fulfill the function of
CEO and Executive Producer of The Chosen, (b) use his best efforts
to promote the interests, prospects and condition (financial and
otherwise) and welfare of the Company and shall perform his duties
and responsibilities to the best of his ability in a diligent,
trustworthy, businesslike and efficient manner, and (c) comply at
all times with all policies and codes of conduct of the Company, as
such policies and codes may change from time to time. The Company
understands and acknowledges that Employee’s duties and
responsibilities will not require all of Employee’s business
time and efforts and agrees that during Employee’s employment
with the Company Employee may engage in outside business activities
so long as such outside business activities do not conflict with
the business of the Company or his obligations under this
Agreement; provided, however, that the foregoing shall in no way
waive, modify, or limit Employee’s other agreements and
obligations hereunder, including without limitation Article 3.
ARTICLE 2
COMPENSATION AND OTHER BENEFITS
2.1 Base
Salary. The Company shall pay Employee an annual salary of
$180,000 (“Base
Salary”), payable in accordance with the normal
payroll practices of the Company. Employee’s Base Salary will
be reviewed from time to time in accordance with the established
procedures of the Company for adjusting salaries for similarly
situated executives and may be adjusted in the sole discretion of
the Company. Employee’s Base Salary does not include bonuses
paid by the Company.
2.2 Benefit
Plans. Employee shall be eligible to participate in and
receive benefits under the employee benefit plans, practices,
policies, perquisites and programs established and maintained by
the Company from time to time for which employees of the Company
are generally eligible, in each case, subject to the eligibility
and participation requirements thereof. Unless and until the
Company provides health insurance benefits to its Employees, it
will reimburse Employee the out of pocket costs incurred by
Employee to pay the basic membership for himself and his immediate
family members with Samaritan Ministries health sharing plan or a
similar benefit under a similar health sharing plan.
2.3 Expenses.
The Company shall reimburse Employee for authorized and
approved expenses
incurred by Employee during the Employment Term in the course of
the performance of Employee’s duties and responsibilities
pursuant to this Agreement and consistent with the Company’s
policies with respect to travel, entertainment and miscellaneous
expenses; provided, that Employee shall provide to the Company
documentation or evidence of expenses for which Employee seeks
reimbursement in accordance with the policies and procedures
established by the Company from time to time.
ARTICLE 3
CONFIDENTIALITY;
NONCOMPETITION
3.1 Covenants
Regarding Confidential Information, Trade Secrets and Other
Matters. Employee covenants and agrees as
follows:
(a) Definitions.
For purposes of this Agreement, the following terms are defined as
follows:
(i) “Invention”
means any discovery, improvement or idea (whether or not described
in writing or reduced to practice, and whether patentable or not)
made solely by Employee or jointly with others, during employment
by the Company: (i) relating to The Chosen or any of the
Company’s other media productions, if any; or (ii) relating
to any work or investigations conceived or carried on by Employee
in connection with or because of The Chosen or any of the
Company’s other media productions, if any.
(ii) “Work
of Authorship” means any literary, pictorial,
sculptural, graphic or audio-visual work, as well as any computer
program or system, whether published or unpublished, and whether
copyrightable or not, in whatever form and in whatever media,
originated solely by Employee or jointly with others, during
employment by the Company or within one (1) year thereafter: (i)
relating to The Chosen or any of the Company’s other media
productions, if any; or (ii) relating to ideas, work or
investigations conceived or carried on by Employee in connection
with or because of The Chosen or any of the Company’s other
media productions, if any.
(iii) “Trade
Secret” means unpublished Inventions and Works of
Authorship as well as all information possessed by or developed for
the Company, including, without limitation, a compilation, program,
device, method, system, technique or process, to which all of the
following apply: (i) the information derives independent economic
value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use and (ii)
the information is the subject of efforts to maintain its secrecy
that are reasonable under the circumstances.
(iv) “Confidential
Information” means information, to the extent it is
not a Trade Secret, which is possessed by or developed for the
Company and which relates to the Company’s existing or
potential business or technology, which information is generally
not known to the public and which information the Company seeks to
protect from disclosure to its existing or potential competitors or
others, including, without limitation, for example: business plans,
strategies, existing or proposed bids, costs, technical
developments, existing or proposed research projects, financial or
business projections, investments, marketing plans, negotiation
strategies, training information and materials, information
generated for client engagements and information stored or
developed for use in or with computers. Confidential Information
also includes information received by the Company from others which
the Company has an obligation to treat as confidential, including
all information obtained in connection with client
engagements.
(b) Ownership
of Intellectual Property. In the event Employee,
individually or jointly with others, makes an Invention, originates
a Work of Authorship, creates Confidential Information or creates a
Trade Secret while employed by the Company, it shall, without
further payment, immediately become the property of the Company
throughout the world. In addition:
(i) Employee
shall disclose and communicate to the Company promptly and fully
all such Inventions made, Works of Authorship originated and Trade
Secrets and Confidential Information created;
(ii) Whether
during or after Employee’s employment by the Company and
without charge to the Company, but at its request and expense,
Employee shall execute patent applications, copyright applications,
assignments and other documents relating to each Invention and Work
of Authorship necessary or proper to vest ownership in the Company
and to obtain, maintain and enforce patents, certificates of
copyright registration, and other proprietary rights to the
Inventions and Works of Authorship throughout the world;
and
(iii) Whether
during or after Employee’s employment by the Company and
without charge to the Company, but at its request and expense,
Employee shall give affidavits and testimony as to facts within
Employee’s knowledge in connection with any such Inventions
and Works of Authorship in any administrative proceedings,
arbitration, litigation or controversy relating
thereto.
(iv) Employee
hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Employee’s agents and
attorneys in fact to act for and in Employee’s behalf and
instead of Employee, to execute and file any documents and to do
all other lawfully permitted acts to further the above purposes
with the same legal force and effect as if executed by Employee.
The foregoing designation and appointment shall constitute an
irrevocable power of attorney, and are deemed by the Company and
Employee to be, coupled with an interest.
(v) Employee
acknowledges that all original works of authorship (including
software (in source or object code forms)) which are made by him
(solely or jointly) are works made for hire under the United States
Copyright Act (17 U.S.C., et seq.).
(c) Nondisclosure
of Confidential Information. Except as required in the
conduct of the Company’s business or as expressly authorized
in writing on behalf of the Company, Employee shall not use or
disclose, directly or indirectly, any Confidential Information
during the period of his employment with the Company. In addition,
for a two year period following the termination of Employee’s
employment Employee shall not use or disclose, directly or
indirectly, any Confidential Information. This prohibition does not
apply in the following circumstances: (i) when disclosure of
Confidential Information is required by law or by any court,
arbitrator, mediator or administrative or legislative body;
provided, that prior to such disclosure Employee shall provide to
the Company prompt notice of such required disclosure to enable the
Company to seek a protective order or other relief, and reasonably
cooperate with the Company in connection with seeking any such
order or other relief; or (ii) with respect to Confidential
Information that becomes generally known to the public other than
due to (A) Employee’s violation of this Agreement or any
other obligation or duty to the Company or (B) a disclosure by a
third party who owes the Company an obligation of confidence in
relation to such Confidential Information. This prohibition also
does not prohibit Employee’s use of general skills and
know-how acquired during and prior to employment by the Company, as
long as such use does not involve the use or disclosure of
Confidential Information or Trade Secrets.
(d) Trade
Secrets. During Employee’s employment by the Company,
Employee shall do what is reasonably necessary to prevent
unauthorized misappropriation or disclosure and threatened
misappropriation or disclosure of the Company’s Trade Secrets
and, after termination of employment, Employee shall not use or
disclose the Company’s Trade Secrets as long as they remain,
without misappropriation, Trade Secrets. Notwithstanding the
foregoing, Employee understands that, pursuant to the Defend Trade
Secrets Act of 2016, Employee shall not be held criminally or
civilly liable under any federal or state trade secret law for the
disclosure of a Trade Secret that: (i) is made (a) in confidence to
a federal, state or local government official, either directly or
indirectly, or to an attorney and (b) solely for the purpose of
reporting or investigating a suspected violation of law; or (ii) is
made in a complaint or other document filed in a lawsuit or other
proceeding, if such filing is made under seal. Nothing in this
Agreement is intended to conflict with 18 U.S.C. § 1833(b).
Employee understands that in the event it is determined that
disclosure of the Trade Secrets of the Company was not done in good
faith pursuant to the above, Employee shall be subject to damages
under federal criminal and civil law, including punitive damages
and attorneys’ fees.
(e) Policy
on Documents. In any event, and regardless whether
Confidential Information or Trade Secrets are involved, Employee
will not remove from the Company premises or publish any copies or
originals of contracts, sales invoices, purchase orders, leases,
pricing information, bid forms, government filings, blueprints,
designs, plans, processes, technical information, computer media or
files, or other documents or materials pertaining to the
Company’s business, unless required in the course of
employment by the Company or unless expressly authorized in writing
by the Company.
3.2 Non-Solicitation.
For a two year period following the termination of Employee’s
employment, Employee will not solicit, or assist another person to
solicit, any employee, supplier or independent contractor of the
Company (including, without limitation, any actor or other party
participating in the production of The Chosen) to terminate such
employee’s employment or terminate or curtail such
supplier’s or independent contractor’s business
relationship with the Company.
3.3 Return
of Materials. Immediately upon termination of employment,
Employee will return to the Company, and so certify in writing to
the Company, all the Company’s papers, documents and things,
including information stored for use in or with computers and
software applicable to the Company’s business (and all copies
thereof), which are in Employee’s possession or under
Employee’s control, regardless whether such papers, documents
or things contain confidential information or trade
secrets.
3.4 Post-Employment
Assistance. After the termination of Employee’s
employment with the Company for any reason, Employee shall, upon
reasonable notice, furnish the Company with such information as may
be in Employee’s possession or control, and cooperate with
the Company, as the Company may reasonably request, in connection
with any litigation, claim, or other dispute in which any Company
or any of its Affiliates is or may become a party, provided that
following termination of Employee’s employment with the
Company, any such assistance shall not unreasonably interfere with
Employee’s personal or business affairs. The Company shall
reimburse Employee for all reasonable out-of-pocket expenses
incurred by Employee in fulfilling Employee’s obligations
under this Section
3.4. For purposes of this Agreement, the term
“Affiliates” means any
individual, corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated association
or other entity (other than the Company) that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the
Company.
3.5 Disclosure
to Future Employer. During the term of Employee’s
employment and for a two year period following the termination of
Employee’s employment Employee shall disclose the existence
and contents of this Agreement to any potential employer prior to
accepting employment with that employer.
3.6 No
Conflicts. To the extent that they exist, Employee will not
disclose to the Company any of Employee’s previous
employer’s confidential information or trade secrets.
Further, Employee represents and warrants that Employee has not
previously assumed any obligations inconsistent with those of this
Agreement and that employment by the Company does not conflict with
any prior obligations to third parties.
3.7 Agreement
on Fairness. Employee acknowledges that: (i) this Agreement
has been specifically bargained between the parties and reviewed by
Employee, (ii) Employee has had an opportunity to obtain legal
counsel to review this Agreement, and (iii) the covenants made by
and duties imposed upon Employee hereby are fair, reasonable and
minimally necessary to protect the legitimate business interests of
the Company, and such covenants and duties will not place an undue
burden upon Employee’s livelihood in the event of termination
of Employee’s employment by the Company and the strict
enforcement of the covenants contained herein.
3.8 Equitable
Relief and Remedies. Employee acknowledges that any breach
of this Agreement will cause substantial and irreparable harm to
the Company for which money damages would be an inadequate remedy.
Accordingly, the Company shall in any such event be entitled to
obtain injunctive and other forms of equitable relief to prevent
such breach and to recover from Employee the Company’s costs
(including, without limitation, reasonable attorneys’ fees)
incurred in connection with enforcing this Agreement, in addition
to any other rights or remedies available at law, in equity or by
statute.
ARTICLE 4
GENERAL PROVISIONS
4.1 Notices.
Except as otherwise provided in this Agreement, all notices,
demands, requests, consents, approvals and other communications
with respect to this Agreement, shall be in writing and shall be
deemed delivered upon: (a) the personal delivery thereof; (b) upon
transmission if transmitted by fax or e-mail and accompanied by a
confirmation of valid transmission or receipt; (c) upon the earlier
of (i) receipt or (ii) three days after posting by registered mail
or certified mail, return receipt requested; or (d) on the next
business day following delivery to a reliable and recognized
overnight air freight delivery service; provided such notices
(other than personal delivery which may be made at any location)
shall be addressed or delivered to the parties at their respective
physical addresses, fax numbers or e-mail addresses set forth below
(or to such other physical address, fax number or e-mail address
for a party as such party may have substituted by notice pursuant
to this Section). Each of the foregoing methods of delivery is a
writing for purposes of this Agreement.:
(a) If
to the Company:
The
Chosen, LLC
4 South
2600 West, Suite 5
Hurricane,
Utah 84737
phone:
email:
Attn:
The Chosen Productions, LLC, Manager
If to
Employee:
4 South
2600 West, Suite 5
Hurricane,
Utah 84737
phone:
435-680-0580
email:
derraleves@gmail.com
4.2 Effect
of Prior Agreements. This Agreement contains the entire
understanding between the Company and Employee relating to the
subject matter hereof and, as of the Effective Date, will supersede
any prior employment agreement between Employee and any Company
Entity and any other agreement relating to the subject matter
hereof between Executive and any Company Entity. From and after the
Effective Date, Employee shall not be entitled to any rights or
benefits, and the Company shall not have any obligations, under any
prior employment agreement between Employee and the Company or any
other agreement relating to the subject matter hereof between
Employee and the Company. Employee acknowledges that has not
relied, is not relying and will not (at any time) rely on any oral
or written statements, promises, representations or warranties
(whether made by the Company or any equity holder, partner, member,
director, manager, officer, employee, agent or other representative
of the Company or otherwise) that are not expressly set forth in
this Agreement.
4.3 Withholding
and Deductions. All amounts payable to Employee (or his
estate, as applicable) pursuant to this Agreement shall be subject
to such withholding and deductions by the Company as required by
law and the applicable benefit plans of the Company.
4.4 Amendment.
This Agreement may be altered, amended or modified only in a
writing, signed by both of the parties hereto. Headings included in
this Agreement are for convenience only and are not intended to
limit or expand the rights of the parties hereto. References to
Sections herein shall mean sections of the text of this Agreement,
unless otherwise indicated.
4.5 Assignability.
This Agreement and the rights and duties set forth herein may not
be assigned by Employee, but may be assigned by the Company, in
whole or in part. This Agreement shall be binding on and inure to
the benefit of each party and such party’s respective heirs,
legal representatives, successors and assigns.
4.6 Severability.
If any court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then such
invalidity or unenforceability shall have no effect on the other
provisions hereof, which shall remain valid, binding and
enforceable and in full force and effect, and such invalid or
unenforceable provision shall be construed in a manner so as to
give the maximum valid and enforceable effect to the intent of the
parties expressed therein.
4.7 Arbitration.
Any controversy, dispute or claim arising out of or relating to
this Agreement (including, but not limited to, any claim regarding
the scope or effect of this Section and any claim that this Section
is invalid or unenforceable), or the breach hereof, shall be
settled by a single arbitrator in binding arbitration conducted in
St. George, Utah in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (“AAA”)
(or such other arbitration service as the parties may agree upon),
and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The
arbitrator’s decision shall be in writing. In addition to the
Commercial Arbitration Rules of the AAA and unless otherwise agreed
to by the parties, the following rules shall apply:
(a) Each
party shall be entitled to discovery exclusively by the following
means: (i) requests for admission, (ii) requests for production of
documents, (iii) up to 15 written interrogatories (with any subpart
to be counted as a separate interrogatory), and (iv) depositions of
no more than six individuals.
(b) Unless
the arbitrator finds that delay is reasonably justified or as
otherwise agreed to by the parties, all discovery shall be
completed, and the arbitration hearing shall commence within five
months after the appointment of the arbitrator.
(c) Unless
the arbitrator finds that delay is reasonably justified, the
hearing will be completed, and an award rendered within 30 days of
commencement of the hearing.
The
arbitrator’s authority shall include the ability to render
equitable types of relief and, in such event, any aforesaid court
may enter an order enjoining and/or compelling such actions or
relief ordered or as found by the arbitrator. The arbitrator also
shall make a determination regarding which party’s legal
position in any such controversy or claim is the more substantially
correct (the “Prevailing Party”) and
the arbitrator shall require the other party to pay the legal and
other professional fees and costs incurred by the Prevailing Party
in connection with such arbitration proceeding and any necessary
court action. However, notwithstanding the foregoing, the parties
expressly agree that a court of competent jurisdiction may enter a
temporary restraining order or an order enjoining a breach of
Article 3 of this Agreement pending a final award or further order
by the arbitrator. Such remedy, however, shall be cumulative and
nonexclusive, and shall be in addition to any other remedy to which
the parties may be entitled.
4.8 Waiver
of Breach. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by either party.
4.9 Governing
Law; Construction. This Agreement shall be governed by the
internal laws of the State of Utah, without regard to any rules of
construction concerning the party responsible for the drafting
hereof.
4.10 Counterparts.
This Agreement may be executed in separate counterparts and may be
executed and delivered by facsimile or electronically transmitted
PDF copies, each of which is deemed to be an original and all of
which, taken together, constitute one and the same
agreement.
4.11 No
Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be
applied against any person.
[Remainder
of Page Intentionally Blank; Signature Page to Follow]
IN
WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and Employee has signed
this Agreement, as of the date first above written.
COMPANY
By:
/s/Dallas
Jenkins_______
Name:
Dallas Jenkins
Title:
President
EMPLOYEE:
/s/Derral Eves_____________
Derral
Eves
Exhibit 6(i)
EMPLOYMENT AGREEMENT
THIS
AGREEMENT (“Agreement”) is made
effective as of the 1st day of August, 2020 (the
“Effective
Date”) by and between THE CHOSEN, LLC, a Utah limited
liability company (the “Company”) and Dallas
Jenkins an individual (“Employee”).
RECITALS
A. Employee
and Company are parties to a Writer Work for Hire Agreement dated
October 20, 2019 a copy of which is attached hereto as Exhibit A
(the “Writer Work
for Hire Agreement”).
B. The
Company desires to expand the duties of Employee under the Writer
Work for Hire Agreement, employ Employee as an employee of the
Company, change the compensation to be paid to Employee, and
Employee desires to be employed by the Company under the terms and
conditions set forth herein.
C. The
parties believe it is in their best interests to make provision for
certain aspects of their relationship during and after the period
in which Employee is employed by the Company.
NOW,
THEREFORE, in consideration of the premises and the mutual
agreements and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the Company and Employee, it is hereby
agreed as follows:
ARTICLE 1
EMPLOYMENT
1.1 Term
of Employment. The Company employs Employee, and Employee
accepts employment by the Company, for the period commencing on the
date hereof and ending on December 31, 2026, subject to earlier
termination as hereinafter set forth in Article III (the
“Employment
Term”)
1.2 Position
and Duties. Employee shall be employed in the position of
Writer, Director and Producer of The Chosen, a multi-season
television series on the life of Jesus Christ (“The Chosen”) and shall be
subject to the authority of, and shall report to, the manager of
the Company (the “Manager”).
Employee’s duties and responsibilities shall include all
those set forth in the Writer Work for Hire Agreement and those
additional duties and responsibilities customarily attendant to the
position of a Writer, Director and Producer of The Chosen (as
defined below) and such other duties and responsibilities as may be
assigned by the Manager. During the Employment Term, Employee shall
(a) devote Employee’s entire business time, loyalty,
attention and energies exclusively to writing, directing and
producing The Chosen and promoting The Chosen and the other
business interests of the Company while employed by the Company,
(b) use his best efforts to promote the interests, prospects and
condition (financial and otherwise) and welfare of the Company and
shall perform his duties and responsibilities to the best of his
ability in a diligent, trustworthy, businesslike and efficient
manner, and (c) comply at all times with all policies and codes of
conduct of the Company, as such policies and codes may change from
time to time. Employee acknowledges that Employee’s duties
and responsibilities will require all of Employee’s business
time and efforts and agrees that during the Employment Term,
Employee will not engage in any outside business activities that
conflict with his obligations under this Agreement; provided,
however, that nothing set forth in this Section 1.2 shall affect
Employee’s ability to participate in religious, civic or
charitable organizations or to serve on religious, civic or
charitable boards, provided that (i) such activities do not
interfere with Employee’s performance of his duties hereunder
and (ii) the foregoing shall in no way waive, modify, or limit
Employee’s other agreements and obligations hereunder,
including without limitation Article 4.
1.3 Coordination
with Writer Work for Hire Agreement. The parties agree that
Sections 1 and Section 4 through 12 of the Writer Work for Hire
Agreement continue to apply with respect to the Assigned Material
(as defined in the Writer Work for Hire Agreement). Sections 2 and
3 of the Writer Work for Hire Agreement are hereby terminated
effective as of the date hereof.
ARTICLE 2
COMPENSATION AND OTHER BENEFITS
2.1 Base
Salary. The Company shall pay Employee an annual salary of
$300,000 (“Base
Salary”), payable in accordance with the normal
payroll practices of the Company. Employee’s performance
shall be reviewed annually by the Board, and the Base Salary shall
be increased by 4% annually unless the Manager reasonably
determines otherwise in connection with such annual review.
Employee and the Company agree that Section 3 for the Writer Work
for Hire Agreement regarding compensation is terminated (to the
extent that compensation under Section 3 has not already been paid)
and that the compensation and benefits to be paid to Employee
pursuant to the terms of this Agreement are in substitution
thereof.
2.2 Benefit
Plans. Employee shall be eligible to participate in and
receive benefits under the employee benefit plans, practices,
policies, perquisites and programs established and maintained by
the Company from time to time for which employees of the Company
are generally eligible, in each case, subject to the eligibility
and participation requirements thereof. Unless and until the
Company provides health insurance benefits to its Employees, it
will reimburse Employee the out of pocket costs incurred by
Employee to pay the basic membership for himself and his immediate
family members with Samaritan Ministries health sharing
plan.
2.3 Expenses.
The Company shall reimburse Employee for authorized and
approved expenses
incurred by Employee during the Employment Term in the course of
the performance of Employee’s duties and responsibilities
pursuant to this Agreement and consistent with the Company’s
policies with respect to travel, entertainment and miscellaneous
expenses; provided, that Employee shall provide to the Company
documentation or evidence of expenses for which Employee seeks
reimbursement in accordance with the policies and procedures
established by the Company from time to time.
2.4 Paid
Time Off. Employee shall be entitled to ___________ weeks of
paid time off (including vacation and sick time) in each calendar
year (pro-rated for calendar year 2020). Employee shall make good
faith efforts to schedule vacations so as to least conflict with
the conduct of the Company business and will give the Company
adequate advance notice of Employee’s planned absences.
Accrued paid time off not taken in any calendar year may not be
carried forward or be usable in any subsequent calendar year, nor
shall Employee be entitled to compensation for unused paid time off
during the Employment Period or upon termination of employment.
Paid holidays may be taken in accordance with the holiday policy
and schedule of the Company as from time to time in
effect.
ARTICLE 3
TERMINATION
3.1 Termination
by Company For Cause. The Company may terminate the
Employment Term and Employee’s employment at any time for
“Cause”
(as defined below) by giving notice to Employee stating the basis
for such termination, effective immediately upon giving such notice
or at such other time thereafter as the Company may designate.
“Cause”
shall mean any of the following:
(a) Employee
has breached this Agreement or any other agreement to which
Employee and the Company are parties or has breached any other
obligation or duty owed to the Company, which breach (other than a
breach under Article
4 hereof which is uncurable) remains uncured to the
satisfaction of the Manager of the Company for thirty (30) days
after Employee receives notice thereof from the
Manager;
(b) Employee
has engaged in harassing or offensive conduct which has the
potential to give rise to an action under Federal, state or local
laws for discrimination in employment;
(c) Employee
repeatedly interacts with staff or subordinates in a demeaning and
unprofessional or abusive manner;
(d) Employee
has committed gross negligence, willful misconduct or any violation
of law in the performance of Employee’s duties to the
Company;
(e) the
Company’s good faith determination that Employee engaged in
any conduct, even if not in conjunction with his duties hereunder,
which could reasonably be expected to, or which does, materially
and negatively affect the business, integrity, character or
reputation of any of the Company (including its reputation with any
of their content consumers, customers, suppliers, vendors,
employees, contractors or other parties having a business
relationship with the Company);
(f) the
Company’s good faith determination that Employee engaged in
any conduct, even if not in conjunction with his duties hereunder,
which could reasonably be expected to, or which does, materially
and negatively affect Employee’s own integrity, character or
reputation (including Employee’s reputation with any clients,
customers, suppliers, vendors or employees of the Company) so as to
cause Employee to be unfit to act in the capacity of Writer,
Director and Producer of the Company;
(g) Employee
has failed to follow instructions from the Manager to whom Employee
reports concerning the operations or business of the
Company;
(h) Employee
has committed a felony deemed by the Company to be adverse to its
best interest or reputation;
(i) Employee
has misappropriated funds or property of the Company;
(j) Employee
has attempted to obtain a personal profit from any transaction in
which the Company has an interest, and which constitutes a
corporate opportunity of the Company or is adverse to the interests
of the Company, unless the transaction was approved in writing by
the Company’s Manager after full disclosure of all details
relating to such transaction; or
(k) Employee
reporting to work under the influence of alcohol or
Employee’s use of illegal drugs (whether or not at the
workplace).
If
Employee’s employment is terminated pursuant to this Sections
3.1, Employee shall have no further rights against the Company
hereunder, except for the right to receive (i) any unpaid Base
Salary with respect to the period prior to the effective date of
termination, and (ii) reimbursement of expenses to which Employee
is entitled under Section 2.5 hereof (collectively, the
“Accrued
Obligations”). The Accrued Obligations shall be paid
in accordance with applicable state law and in no event later than
thirty (30) days after the date of termination.
3.2 Termination
by Company Without Cause. The Company may terminate the
Employment Term and Employee’s employment at any time for any
reason upon written notice to Employee. If Employee’s
employment is terminated pursuant to this Section 3.2, Employee
shall have no further rights against the Company hereunder, except
for the right to receive (i) the Accrued Obligations payable as set
forth in Section 3.1 above, (ii) severance payments in an aggregate
amount equal to six (6) months of Employee’s Base Salary at
the time of termination, payable in equal installments over a six
(6)-month period at the Company’s regular payroll intervals,
with the first installment being payable on the first payroll date
following the sixtieth (60th) day following the date of termination
of the Employment Term (which first installment shall include the
portion applicable to the entire period since such date of
termination), (the obligations under clause (ii), the
“Severance
Benefits”); provided, however, Employee’s right
to receive the Severance Benefits is subject to and contingent on
the Company’s receipt, at least eight (8) days prior to the
sixtieth (60th) day following the date of termination of the
Employment Term, of a Separation Agreement and General Release in
accordance with Section
3.7 which has not been revoked by Employee. Notwithstanding
the foregoing, in the event that Employee shall breach any of his
obligations under Article
4 at any time, in addition to any other remedies available
to the Company at law or in equity, the Company shall be relieved
from and shall have no obligation to pay Employee any then unpaid
Severance Benefits amounts to which Employee would otherwise have
been entitled under this Section 3.2.
3.3 Termination
by Employee for Good Reason. Employee may terminate the
Employment Term and his employment obligation hereunder (but not
his obligation under Article 4 hereof) for
“Good Reason” (as hereinafter defined) if Employee
gives written notice thereof to the Company (which notice shall
specify the grounds upon which such notice is given) and the
Company fails, within 30 days of receipt of such notice, to cure or
rectify the grounds for such Good Reason termination set forth in
such notice. “Good
Reason” shall mean any of the following: (i) a
material reduction of the Employee’s duties and
responsibilities hereunder; or (ii) the Company’s material
breach of the Agreement. If Employee’s employment is
terminated pursuant to this Section 3.2, Employee shall
have no further rights against the Company hereunder, except for
the right to receive (i) the Accrued Obligations payable as set
forth in Section
3.1 above, and (ii) the Severance Benefits; provided,
however, Employee’s right to receive the Severance Benefits
is subject to and contingent on the Company’s receipt, at
least eight (8) days prior to the sixtieth (60th) day following the
date of termination of the Employment Term, of a Separation
Agreement and General Release in accordance with Section 3.7 which has not been
revoked by Employee. Notwithstanding the foregoing, in the event
that Employee shall breach any of his obligations under
Article 4 at any
time, in addition to any other remedies available to the Company at
law or in equity, the Company shall be relieved from and shall have
no obligation to pay Employee any then unpaid Severance Benefits
amounts to which Employee would otherwise have been entitled under
this Section
3.3.
3.4 Termination
Upon Death or Disability. Employee’s employment and
the Company’s obligations under this Agreement shall
terminate: (i) automatically, effective immediately and without any
notice being necessary, upon Employee’s death; and (ii) in
the event of the disability of Employee, by the Company giving
notice of termination to Employee. If Employee’s employment
is terminated pursuant to this Section 3.4, Employee shall have no
further rights against the Company hereunder, except for the right
to receive the Accrued Obligations payable as set forth in Section
3.1 above. For purposes of this Agreement, “disability” means the
inability of Employee, due to a physical or mental impairment, for
90 days (whether or not consecutive) during any period of 360 days
to perform, with reasonable accommodation, the essential functions
of the work contemplated by this Agreement. In the event of any
dispute as to whether Employee is disabled, the matter shall be
determined by the Company’s Manager in consultation with a
physician satisfactory to the Company, and Employee shall cooperate
with the efforts to make such determination. Any such determination
shall be conclusive and binding on the parties. Any determination
of disability under this Section 3.4 is not intended to
alter any benefits any party may be entitled to receive under any
long-term disability insurance policy carried by either the Company
or Employee with respect to Employee, which benefits shall be
governed solely by the terms of any such insurance policy. Nothing
in this subsection shall be construed as limiting or altering any
of Employee’s rights under state workers compensation laws or
state or Federal family and medical leave laws.
3.5 Voluntary
Resignation by Employee. Employee may terminate the
Employment Term for any reason upon not less than three hundred
sixty-five (365) days prior written notice; provided, that, upon
such notice Company may terminate the Employment Term pursuant to
this Section 3.5
immediately upon notice to Employee. If the Employment Term is
terminated pursuant to this Section 3.5, the Company shall
have no further obligation to Employee except for Accrued
Obligations, which shall be paid in accordance with Section 3.1.
3.6 Termination
if Production of The Chosen Terminates. The Company may
terminate the Employment Term and Employee’s employment upon
written notice to Employee if the Company determines to permanently
cease or suspend for a period of more than nine months the
production of The Chosen. If the Employment Term is terminated
pursuant to this Section
3.6, the Company shall have no further obligation to
Employee except for Accrued Obligations, which shall be paid in
accordance with Section
3.1.
3.7 General
Release. The obligation of the Company to pay any Severance
Benefits as a result of a termination of the Employment Term
pursuant to Sections
3.2 or 3.3
shall be contingent upon Employee’s due execution and
delivery to the Company of a separation agreement and general
release in the form to be provided by the Company upon such
termination (the “Separation Agreement and General
Release”) and Employee’s non-revocation of such
Separation Agreement and General Release. Such Separation Agreement
and General Release shall not, however, relieve Employee of
Employee’s obligation to comply with the continuing terms of
this Agreement, including those arising under Article 4. If the Severance
Benefits are determined by the Company to be non-exempt
nonqualified deferred compensation subject to Section 409A of the
U.S. Internal Revenue Code of 1986, as amended (the
“Code”), and the period
during which Employee has discretion to execute or revoke the
Separation Agreement and General Release straddles two taxable
years of Employee, then the Company shall make the Severance
Benefits payments starting in the second of such taxable years,
regardless of the taxable year in which Employee actually delivers
the executed Separation Agreement and General Release to the
Company.
3.8 Exclusive
Remedy. To the extent permitted by applicable law, the
payments contemplated by this Article 3 shall constitute the
exclusive and sole remedy for any termination of Employee’s
employment by the Company (whether pursuant to, or in violation of,
the terms of this Agreement). Employee covenants not to assert or
pursue any remedies, other than an action to enforce the payments
due to Employee under this Agreement, at law or in equity, with
respect to any termination of employment, and shall execute a
release and waiver on such terms and conditions as the Company may
require as a condition of entitlement to such
payments.
ARTICLE 4
CONFIDENTIALITY;
NONCOMPETITION
4.1 Covenants
Regarding Confidential Information, Trade Secrets and Other
Matters. Employee covenants and agrees as
follows:
(a) Definitions.
For purposes of this Agreement, the following terms are defined as
follows:
(i) “Invention”
means any discovery, improvement or idea (whether or not described
in writing or reduced to practice, and whether patentable or not)
made solely by Employee or jointly with others, during employment
by the Company: (i) relating to The Chosen or any of the
Company’s other media productions, if any; or (ii) relating
to any work or investigations conceived or carried on by Employee
in connection with or because of The Chosen or any of the
Company’s other media productions, if any.
(ii) “Work
of Authorship” means any literary, pictorial,
sculptural, graphic or audio-visual work, as well as any computer
program or system, whether published or unpublished, and whether
copyrightable or not, in whatever form and in whatever media,
originated solely by Employee or jointly with others, during
employment by the Company or within one (1) year thereafter: (i)
relating to The Chosen or any of the Company’s other media
productions, if any; or (ii) relating to ideas, work or
investigations conceived or carried on by Employee in connection
with or because of The Chosen or any of the Company’s other
media productions, if any; but excluding any book on the life of
Christ (unrelated to the writing and production of The Chosen) that
may be written by Employee, the ownership of which may be retained
by Employee.
(iii) “Trade
Secret” means unpublished Inventions and Works of
Authorship as well as all information possessed by or developed for
the Company, including, without limitation, a compilation, program,
device, method, system, technique or process, to which all of the
following apply: (i) the information derives independent economic
value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use and (ii)
the information is the subject of efforts to maintain its secrecy
that are reasonable under the circumstances.
(iv) “Confidential
Information” means information, to the extent it is
not a Trade Secret, which is possessed by or developed for the
Company and which relates to the Company’s existing or
potential business or technology, which information is generally
not known to the public and which information the Company seeks to
protect from disclosure to its existing or potential competitors or
others, including, without limitation, for example: business plans,
strategies, existing or proposed bids, costs, technical
developments, existing or proposed research projects, financial or
business projections, investments, marketing plans, negotiation
strategies, training information and materials, information
generated for client engagements and information stored or
developed for use in or with computers. Confidential Information
also includes information received by the Company from others which
the Company has an obligation to treat as confidential, including
all information obtained in connection with client
engagements.
(b) Ownership
of Intellectual Property. In the event Employee,
individually or jointly with others, makes an Invention, originates
a Work of Authorship, creates Confidential Information or creates a
Trade Secret while employed by the Company, it shall, without
further payment, immediately become the property of the Company
throughout the world. In addition:
(i) Employee
shall disclose and communicate to the Company promptly and fully
all such Inventions made, Works of Authorship originated and Trade
Secrets and Confidential Information created;
(ii) Whether
during or after Employee’s employment by the Company and
without charge to the Company, but at its request and expense,
Employee shall execute patent applications, copyright applications,
assignments and other documents relating to each Invention and Work
of Authorship necessary or proper to vest ownership in the Company
and to obtain, maintain and enforce patents, certificates of
copyright registration, and other proprietary rights to the
Inventions and Works of Authorship throughout the world;
and
(iii) Whether
during or after Employee’s employment by the Company and
without charge to the Company, but at its request and expense,
Employee shall give affidavits and testimony as to facts within
Employee’s knowledge in connection with any such Inventions
and Works of Authorship in any administrative proceedings,
arbitration, litigation or controversy relating
thereto.
(iv) Employee
hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Employee’s agents and
attorneys in fact to act for and in Employee’s behalf and
instead of Employee, to execute and file any documents and to do
all other lawfully permitted acts to further the above purposes
with the same legal force and effect as if executed by Employee.
The foregoing designation and appointment shall constitute an
irrevocable power of attorney, and are deemed by the Company and
Employee to be, coupled with an interest.
(v) Employee
acknowledges that all original works of authorship (including
software (in source or object code forms)) which are made by him
(solely or jointly) are works made for hire under the United States
Copyright Act (17 U.S.C., et seq.).
(c) Nondisclosure
of Confidential Information. Except as required in the
conduct of the Company’s business or as expressly authorized
in writing on behalf of the Company, Employee shall not use or
disclose, directly or indirectly, any Confidential Information
during the period of his employment with the Company. In addition,
for a two year period following the termination of Employee’s
employment Employee shall not use or disclose, directly or
indirectly, any Confidential Information. This prohibition does not
apply in the following circumstances: (i) when disclosure of
Confidential Information is required by law or by any court,
arbitrator, mediator or administrative or legislative body;
provided, that prior to such disclosure Employee shall provide to
the Company prompt notice of such required disclosure to enable the
Company to seek a protective order or other relief, and reasonably
cooperate with the Company in connection with seeking any such
order or other relief; or (ii) with respect to Confidential
Information that becomes generally known to the public other than
due to (A) Employee’s violation of this Agreement or any
other obligation or duty to the Company or (B) a disclosure by a
third party who owes the Company an obligation of confidence in
relation to such Confidential Information. This prohibition also
does not prohibit Employee’s use of general skills and
know-how acquired during and prior to employment by the Company, as
long as such use does not involve the use or disclosure of
Confidential Information or Trade Secrets.
(d) Trade
Secrets. During Employee’s employment by the Company,
Employee shall do what is reasonably necessary to prevent
unauthorized misappropriation or disclosure and threatened
misappropriation or disclosure of the Company’s Trade Secrets
and, after termination of employment, Employee shall not use or
disclose the Company’s Trade Secrets as long as they remain,
without misappropriation, Trade Secrets. Notwithstanding the
foregoing, Employee understands that, pursuant to the Defend Trade
Secrets Act of 2016, Employee shall not be held criminally or
civilly liable under any federal or state trade secret law for the
disclosure of a Trade Secret that: (i) is made (a) in confidence to
a federal, state or local government official, either directly or
indirectly, or to an attorney and (b) solely for the purpose of
reporting or investigating a suspected violation of law; or (ii) is
made in a complaint or other document filed in a lawsuit or other
proceeding, if such filing is made under seal. Nothing in this
Agreement is intended to conflict with 18 U.S.C. § 1833(b).
Employee understands that in the event it is determined that
disclosure of the Trade Secrets of the Company was not done in good
faith pursuant to the above, Employee shall be subject to damages
under federal criminal and civil law, including punitive damages
and attorneys’ fees.
(e) Policy
on Documents. In any event, and regardless whether
Confidential Information or Trade Secrets are involved, Employee
will not remove from the Company premises or publish any copies or
originals of contracts, sales invoices, purchase orders, leases,
pricing information, bid forms, government filings, blueprints,
designs, plans, processes, technical information, computer media or
files, or other documents or materials pertaining to the
Company’s business, unless required in the course of
employment by the Company or unless expressly authorized in writing
by the Company.
4.2 Non-Solicitation.
For a two year period following the termination of Employee’s
employment, Employee will not solicit, or assist another person to
solicit, any employee, supplier or independent contractor of the
Company (including, without limitation, any actor or other party
participating in the production of The Chosen) to terminate such
employee’s employment or terminate or curtail such
supplier’s or independent contractor’s business
relationship with the Company.
4.3 Return
of Materials. Immediately upon termination of employment,
Employee will return to the Company, and so certify in writing to
the Company, all the Company’s papers, documents and things,
including information stored for use in or with computers and
software applicable to the Company’s business (and all copies
thereof), which are in Employee’s possession or under
Employee’s control, regardless whether such papers, documents
or things contain confidential information or trade
secrets.
4.4 Post-Employment
Assistance. After the termination of Employee’s
employment with the Company for any reason, Employee shall, upon
reasonable notice, furnish the Company with such information as may
be in Employee’s possession or control, and cooperate with
the Company, as the Company may reasonably request, in connection
with any litigation, claim, or other dispute in which any Company
or any of its Affiliates is or may become a party, provided that
following termination of Employee’s employment with the
Company, any such assistance shall not unreasonably interfere with
Employee’s personal or business affairs. The Company shall
reimburse Employee for all reasonable out-of-pocket expenses
incurred by Employee in fulfilling Employee’s obligations
under this Section
4.4. For purposes of this Agreement, the term
“Affiliates” means any
individual, corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated association
or other entity (other than the Company) that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the
Company.
4.5 Disclosure
to Future Employer. During the term of Employee’s
employment and for a two year period following the termination of
Employee’s employment Employee shall disclose the existence
and contents of this Agreement to any potential employer prior to
accepting employment with that employer.
4.6 No
Conflicts. To the extent that they exist, Employee will not
disclose to the Company any of Employee’s previous
employer’s confidential information or trade secrets.
Further, Employee represents and warrants that Employee has not
previously assumed any obligations inconsistent with those of this
Agreement and that employment by the Company does not conflict with
any prior obligations to third parties.
4.7 Agreement
on Fairness. Employee acknowledges that: (i) this Agreement
has been specifically bargained between the parties and reviewed by
Employee, (ii) Employee has had an opportunity to obtain legal
counsel to review this Agreement, and (iii) the covenants made by
and duties imposed upon Employee hereby are fair, reasonable and
minimally necessary to protect the legitimate business interests of
the Company, and such covenants and duties will not place an undue
burden upon Employee’s livelihood in the event of termination
of Employee’s employment by the Company and the strict
enforcement of the covenants contained herein.
4.8 Equitable
Relief and Remedies. Employee acknowledges that any breach
of this Agreement will cause substantial and irreparable harm to
the Company for which money damages would be an inadequate remedy.
Accordingly, the Company shall in any such event be entitled to
obtain injunctive and other forms of equitable relief to prevent
such breach and to recover from Employee the Company’s costs
(including, without limitation, reasonable attorneys’ fees)
incurred in connection with enforcing this Agreement, in addition
to any other rights or remedies available at law, in equity or by
statute.
ARTICLE 5
GENERAL PROVISIONS
5.1 Notices.
Except as otherwise provided in this Agreement, all notices,
demands, requests, consents, approvals and other communications
with respect to this Agreement, shall be in writing and shall be
deemed delivered upon: (a) the personal delivery thereof; (b) upon
transmission if transmitted by fax or e-mail and accompanied by a
confirmation of valid transmission or receipt; (c) upon the earlier
of (i) receipt or (ii) three days after posting by registered mail
or certified mail, return receipt requested; or (d) on the next
business day following delivery to a reliable and recognized
overnight air freight delivery service; provided such notices
(other than personal delivery which may be made at any location)
shall be addressed or delivered to the parties at their respective
physical addresses, fax numbers or e-mail addresses set forth below
(or to such other physical address, fax number or e-mail address
for a party as such party may have substituted by notice pursuant
to this Section). Each of the foregoing methods of delivery is a
writing for purposes of this Agreement.:
(a) If
to the Company:
The
Chosen, LLC
4 S
2600 W Ste #5, Hurricane, UT 84737
phone:
833-924-6736
email:
customersupport@thechosen.tv
If to
Employee:
3693
Heathmoor Court, Elgin, IL 60124
phone:
(310) 916-3670
email:
dallas@thechosen.tv
5.2 Effect
of Prior Agreements. Except as otherwise expressly provided
herein, this Agreement contains the entire understanding between
the Company and Employee relating to the subject matter hereof and,
as of the Effective Date, will supersede any prior employment
agreement between Employee and any Company Entity and any other
agreement relating to the subject matter hereof between Executive
and any Company Entity. Except as otherwise expressly provided
herein, from and after the Effective Date, Employee shall not be
entitled to any rights or benefits, and the Company shall not have
any obligations, under any prior employment agreement between
Employee and the Company or any other agreement relating to the
subject matter hereof between Employee and the Company. Employee
acknowledges that has not relied, is not relying and will not (at
any time) rely on any oral or written statements, promises,
representations or warranties (whether made by the Company or any
equity holder, partner, member, director, manager, officer,
employee, agent or other representative of the Company or
otherwise) that are not expressly set forth in this
Agreement.
5.3 Withholding
and Deductions. All amounts payable to Employee (or his
estate, as applicable) pursuant to this Agreement shall be subject
to such withholding and deductions by the Company as required by
law and the applicable benefit plans of the Company.
5.4 Code
Section 409A. The Company and
Employee agree that this Agreement and the rights granted to
Employee hereunder are intended to meet the requirements of
paragraphs (2), (3) and (4) of Section 409A(a)(1)(A) of the Code.
Accordingly, the parties agree that they shall negotiate in good
faith to revise any provisions of this Agreement that might
otherwise fail to meet the requirements of paragraphs (2), (3) and
(4) of Section 409A of Code. However, the Company does not
guarantee any particular tax effect of payments under this
Agreement, and in no event shall the Company have any
obligation to “gross-up” or otherwise compensate
Employee with respect to any tax effect of payments under this
Agreement.
5.5 Amendment.
This Agreement may be altered, amended or modified only in a
writing, signed by both of the parties hereto. Headings included in
this Agreement are for convenience only and are not intended to
limit or expand the rights of the parties hereto. References to
Sections herein shall mean sections of the text of this Agreement,
unless otherwise indicated.
5.6 Assignability.
This Agreement and the rights and duties set forth herein may not
be assigned by Employee, but may be assigned by the Company, in
whole or in part. This Agreement shall be binding on and inure to
the benefit of each party and such party’s respective heirs,
legal representatives, successors and assigns.
5.7 Severability.
If any court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then such
invalidity or unenforceability shall have no effect on the other
provisions hereof, which shall remain valid, binding and
enforceable and in full force and effect, and such invalid or
unenforceable provision shall be construed in a manner so as to
give the maximum valid and enforceable effect to the intent of the
parties expressed therein.
5.8 Arbitration.
Any controversy, dispute or claim arising out of or relating to
this Agreement (including, but not limited to, any claim regarding
the scope or effect of this Section and any claim that this Section
is invalid or unenforceable), or the breach hereof, shall be
settled by a single arbitrator in binding arbitration conducted in
St. George, Utah in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (“AAA”)
(or such other arbitration service as the parties may agree upon),
and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The
arbitrator’s decision shall be in writing. In addition to the
Commercial Arbitration Rules of the AAA and unless otherwise agreed
to by the parties, the following rules shall apply:
(a) Each
party shall be entitled to discovery exclusively by the following
means: (i) requests for admission, (ii) requests for production of
documents, (iii) up to 15 written interrogatories (with any subpart
to be counted as a separate interrogatory), and (iv) depositions of
no more than six individuals.
(b) Unless
the arbitrator finds that delay is reasonably justified or as
otherwise agreed to by the parties, all discovery shall be
completed, and the arbitration hearing shall commence within five
months after the appointment of the arbitrator.
(c) Unless
the arbitrator finds that delay is reasonably justified, the
hearing will be completed, and an award rendered within 30 days of
commencement of the hearing.
The
arbitrator’s authority shall include the ability to render
equitable types of relief and, in such event, any aforesaid court
may enter an order enjoining and/or compelling such actions or
relief ordered or as found by the arbitrator. The arbitrator also
shall make a determination regarding which party’s legal
position in any such controversy or claim is the more substantially
correct (the “Prevailing Party”) and
the arbitrator shall require the other party to pay the legal and
other professional fees and costs incurred by the Prevailing Party
in connection with such arbitration proceeding and any necessary
court action. However, notwithstanding the foregoing, the parties
expressly agree that a court of competent jurisdiction may enter a
temporary restraining order or an order enjoining a breach of
Article 4 of this Agreement pending a final award or further order
by the arbitrator. Such remedy, however, shall be cumulative and
nonexclusive, and shall be in addition to any other remedy to which
the parties may be entitled.
5.9 Waiver
of Breach. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by either party.
5.10 Governing
Law; Construction. This Agreement shall be governed by the
internal laws of the State of Utah, without regard to any rules of
construction concerning the party responsible for the drafting
hereof.
5.11 Counterparts.
This Agreement may be executed in separate counterparts and may be
executed and delivered by facsimile or electronically transmitted
PDF copies, each of which is deemed to be an original and all of
which, taken together, constitute one and the same
agreement.
5.12 No
Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be
applied against any person.
[Remainder
of Page Intentionally Blank; Signature Page to Follow]
IN
WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and Employee has signed
this Agreement, as of the date first above written.
COMPANY
The Chosen,
LLC
By:
/s/Derral
Eves______
Name:
Derral Eves
Title:
CEO
EMPLOYEE:
/s/Dallas Jenkins_______
Dallas
Jenkins
Exhibit A
Writer Work for Hire Agreement
[copy
attached]
Exhibit 11(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the use, in the Offering Statement on Form 1-A of The
Chosen, LLC and the Offering Circular constituting a part thereof,
of our report dated June 12, 2020 on our audit of the consolidated
balance sheets of The Chosen, LLC and subsidiary, as of December
31, 2019 and 2018 and the related consolidated statements of
operations and members’ equity, and cash flows for the years
then ended, and the related notes to consolidated financial
statements.
/s/ TANNER LLC
Salt Lake City, Utah
September 2, 2020
