UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT
REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 4, 2017
HELIOS AND MATHESON ANALYTICS INC.
(Exact name of Registrant as specified in charter)
| Delaware | 0-22945 | 13-3169913 | ||
|
(State
or other jurisdiction
of incorporation) |
(Commission File Number) |
(IRS
Employer
Identification Number) |
Empire State Building
350 5 th Avenue
New York, New York 10118
(Address of principal executive offices)
Registrant’s telephone number, including area code: (212) 979-8228
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2 below).
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| þ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13(e)-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 1.01. | Entry Into a Material Definitive Agreement. |
Amendment to MoviePass Securities Purchase Agreement
On October 6, 2017, Helios and Matheson Analytics Inc. (“Helios”) and MoviePass Inc. (“MoviePass”) entered into an amendment (the “Amendment”) to the Securities Purchase Agreement, dated as of August 15, 2017 (the “MoviePass Purchase Agreement”), by and between Helios and MoviePass. Pursuant to the MoviePass Purchase Agreement, Helios plans to acquire a majority interest in MoviePass, subject to certain conditions, including the approval of the transaction by Helios’ stockholders. Pursuant to the Amendment, Helios and MoviePass amended and restated the subordinated convertible promissory note issued by MoviePass on August 18, 2017 (the “Original MoviePass Note”) in order to increase the principal amount of the Original MoviePass Note from $5,000,000 to $11,500,000 (the “Amended and Restated MoviePass Note”) in connection with Helios making an additional loan to MoviePass in the amount of $6,500,000 (the “Additional Loan”) on October 6, 2017.
The Additional Loan was comprised of two components: (i) an advance of $5,000,000 to MoviePass that would have otherwise been due within 90 days following the closing (the “Closing”) of the transactions contemplated by the MoviePass Purchase Agreement (collectively, the “MoviePass Transaction”), and (ii) an additional investment of $1,500,000 to purchase additional shares of common stock of MoviePass amounting to 0.71% of the outstanding shares of common stock of MoviePass effective as of the Closing (the “Additional Investment”), such Additional Investment based upon a pre-money valuation of MoviePass of $210,000,000. In connection with the Amended and Restated MoviePass Note, the parties agreed to replace the promissory note to be issued by Helios to MoviePass with a new note (the “New Helios Note”) which removed the obligation to provide $5,000,000 to MoviePass within 90 days following the Closing, which was already satisfied by a portion of the Additional Loan.
Pursuant to the Amendment, as a result of the Additional Investment, the maximum purchase price payable by Helios increased from $27,000,000 to $28,500,000 (the “Amended Purchase Price”). Accordingly, at the Closing, Helios will receive shares of common stock of MoviePass totaling 51.71% of the then-outstanding shares of MoviePass common stock, in addition to shares of MoviePass common stock issuable upon conversion of the Kelly Note (as defined in the MoviePass Purchase Agreement) amounting to 2% of the outstanding shares of MoviePass common stock on a post-transaction basis, for a total ownership percentage of 53.71%. At the Closing, in accordance with the terms of the MoviePass Purchase Agreement and the Original MoviePass Note, the Amended and Restated MoviePass Note will be cancelled in full satisfaction of Helios’ obligation to make the Initial Cash Payment under the MoviePass Purchase Agreement, which increased from $5,000,000 to $11,500,000 as a result of the Amendment.
The above discussion does not purport to be a complete description of the Amendment, the MoviePass Purchase Agreement and the New Helios Note described in this Current Report on Form 8-K (this “Current Report”) and it is qualified in its entirety by reference to the full text of the Amendment, the MoviePass Purchase Agreement and the form of New Helios Note, which are attached as exhibits to this Current Report and are incorporated herein by reference.
MoviePass Investment Option Agreement
On October 11, 2017, Helios and MoviePass entered into an investment option agreement (the “Option Agreement”), pursuant to which Helios was granted an option to purchase additional shares of MoviePass common stock in an amount up to $20 million based on a pre-money valuation of MoviePass of $210,000,000 (the “Option”) amounting to an additional investment of up to 8.7% of the Currently Outstanding Shares of Common Stock (as defined in the Option Agreement) of MoviePass, giving effect to the Closing. The Option may be exercised by Helios until 5:00 p.m. Eastern Time on the thirtieth day after it receives MoviePass’ audited financial statements for the years ended December 31, 2016 and 2015 and the reviewed unaudited interim financial statements for the periods ended September 30, 2017 and 2016. In the event Helios exercises the Option in whole or in part prior to the Closing, then MoviePass will issue Helios a subordinated convertible promissory note (the “Option Note” ), in substantially the same form as the MoviePass Note, in the principal amount equal to Helios’ additional investment and, immediately upon the Closing, MoviePass will issue the amount of shares of its common stock to Helios underlying the Option Note, and upon such issuance the Option Note shall be deemed satisfied in full.
The above discussion does not purport to be a complete description of the Option Agreement described in this Current Report and it is qualified in its entirety by reference to the full text of the Option Agreement, which is attached as an exhibit to this Current Report and is incorporated herein by reference.
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Consulting Agreement
On October 5, 2017, Helios entered into a consulting agreement (the “Consulting Agreement”) with Mr. Muralikrishna Gadiyaram, a director of Helios. The Consulting Agreement formalizes the consulting arrangement between Helios and Mr. Gadiyaram, for which Helios has been accruing consulting fees since January 1, 2017. Mr. Gadiyaram has been providing consulting services without an agreement or compensation since Helios’ acquisition of Zone Technologies, Inc. (“Zone”) in November 2016. Pursuant to the Consulting Agreement, Mr. Gadiyaram will continue providing guidance to Helios and Zone relating to the further development of their respective businesses and technologies, including, without limitation, rolling-out the RedZone Map application outside the United States, particularly in India. If requested by Helios, Mr. Gadiyaram will also provide guidance with respect to the development of any businesses or technologies that Helios or Zone may acquire during the term of the Consulting Agreement, including, without limitation, MoviePass. In exchange for his services, Mr. Gadiyaram will receive fees in the amount of $18,750 per month in cash. Following Helios’ execution of the Consulting Agreement, pursuant to its terms, Helios paid Mr. Gadiyaram the accrued consulting fees for the period from January 1, 2017 through June 30, 2017, which did not become due or owing until the execution of the Consulting Agreement. The Consulting Agreement has a term of two years but may be terminated by either party at any time by giving 30 days written notice to the other party. If Helios terminates the Consulting Agreement without Cause, as defined in the Consulting Agreement, prior to the end of the term, Mr. Gadiyaram will be entitled to a termination fee equal to the lesser of (a) the consulting fee for the remainder of the term, or (b) the consulting fee for a period of 12 months following the delivery of written notice of termination by Helios, in each case payable monthly and subject to proration.
The above discussion does not purport to be a complete description of the Consulting Agreement described in this Current Report and it is qualified in its entirety by reference to the full text of the Consulting Agreement, which is attached as an exhibit to this Current Report and is incorporated herein by reference.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The information included in Item 8.01 of this Current Report is hereby incorporated by reference into this Item 3.02 to the extent required.
Pursuant to an amendment, dated August 11, 2017, to the agreement between the Company and its placement agent (the “Placement Agent”), the Placement Agent is entitled to a fee equal to 2.5% of the aggregate purchase price of Helios’ investment in MoviePass, payable in shares of Helios’ common stock at a value of $3.00 per share upon consummation of the MoviePass Transaction. Based on the Amended Purchase Price, the Placement Agent will receive 237,500 shares of common stock (the “Placement Agent Transaction Shares”). In the event the Option is exercised, the Placement Agent may receive up to an additional 166,667 shares of common stock (the “Placement Agent Option Shares” and together with the Placement Agent Transaction Shares, the “Placement Agent Shares”).
Helios issued the Placement Agent Warrant (as defined in Item 8.01 below) and plans to issue the shares of common stock issuable upon exercise of the Placement Agent Warrant and the Placement Agent Shares in reliance upon the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
| Item 7.01 | Regulation FD Disclosure. |
Helios plans to issue a press release on October 12, 2017 relating to the Amendment and the Option Agreement. A copy of the press release is furnished herewith as Exhibit 99.1.
The information disclosed under this Item 7.01, including Exhibit 99.1 furnished herewith, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed incorporated by reference into any filing made under the Securities Act, except as expressly set forth by specific reference in such filing.
| Item 8.01 | Other Matters. |
During the period from August 16, 2017 through October 6, 2017, Helios received aggregate gross cash proceeds of $12,820,000 from the holder of its senior secured convertible notes (the “Investor”), thereby satisfying the $10,000,000 minimum financing condition of the MoviePass Transaction set forth in Section 4.4 of the MoviePass Purchase Agreement.
On October 5, 2017, Helios received a cash payment of $6,970,000 from the Investor (the “October Proceeds”) pursuant to the secured promissory note in the principal amount of $8,800,000 given by the Investor to Helios on August 16, 2017 as partial payment for the senior secured convertible notes issued by Helios to the Investor on that date (the “August Investor Note”). Helios used the October Proceeds to fund the Additional Loan to MoviePass. In exchange for the October Proceeds, Helios entered into a waiver with the Investor , dated as of October 4, 2017 (the “Waiver”), pursuant to which Helios agreed to (a) waive its right to effect a private placement or exercise any New Offering Right (as defined in the Waiver) prior to November 15, 2017, and (b) waive any right to complete an offering of its securities (except for certain excluded securities), other than certain private placements for up to $3,000,000 in gross proceeds, during the period commencing on November 15, 2017 through the later of (x) December 15, 2017 and (y) thirty calendar days after the earlier to occur of (I) the first date on which the registration statement registering the resale of certain securities issuable to the Investor is declared effective by the U.S. Securities and Exchange Commission (the “SEC”) or (II) the first date on which all of such registrable securities are eligible to be resold by the Investor pursuant to Rule 144.
In connection with the receipt of the October Proceeds, Helios issued the Placement Agent a placement agent warrant to purchase up to 139,400 shares of common stock at an exercise price of $14.27 per share (the “Placement Agent Warrant”).
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The above discussion does not purport to be a complete description of the Waiver and the Placement Agent Warrant described in this Current Report and it is qualified in its entirety by reference to the full text of the form of Waiver and the form of Placement Agent Warrant, which are attached as exhibits to this Current Report and are incorporated herein by reference.
Certain Information and Risk Factors Regarding MoviePass
Helios is providing the following information and risk factors about MoviePass that it deems important to its security holders in light of the previously announced proposed acquisition by Helios of a majority interest in MoviePass, which acquisition remains subject to approval by Helios’ stockholders.
Overview
MoviePass was incorporated in Delaware in 2011 and is a movie theater subscription service that allows members to see a new movie every day in theaters nationwide for a monthly price of $9.95. Once they sign up for the MoviePass service online, subscribers are prompted to download the MoviePass application on their smart phones and are then mailed a MoviePass debit card. The MoviePass application shows subscribers the showtimes of all the movies that are currently showing at their local movie theaters. Once they have received their MoviePass debit card, subscribers can use the debit card to purchase up to one movie ticket a day at any of the movie theaters listed in the MoviePass application without paying any additional costs.
Risk Factors Relating to MoviePass
Investing in Helios’ securities involves a high degree of risk, particularly in light of Helios’ current investments in and pending acquisition of a majority interest in MoviePass. Please see the risk factors set forth below relating to MoviePass as well as those risk factors set forth in Part I, Item 1A of Helios’ most recent Annual Report on Form 10-K and in Part II, Item 1A of Helios’ Quarterly Reports on Form 10-Q and other filings Helios makes with the SEC. Before deciding to invest in Helios’ securities, you should carefully consider these risks related to Helios and MoviePass as well as other information Helios includes in its SEC filings. The risks and uncertainties Helios has described are not the only ones it or MoviePass faces. Additional risks and uncertainties not presently known to Helios or that Helios currently deems immaterial may also affect Helios or MoviePass. These risks could materially affect Helios’ business, results of operations or financial condition and cause the value of Helios’ securities to decline.
MoviePass has a limited operating history and history of net losses, and it is likely that it will experience net losses for the foreseeable future.
You should consider MoviePass’ business and prospects in light of the risks, expenses and difficulties encountered by companies in their early stage of development. It has experienced significant net losses since its inception and, given the significant operating and capital expenditures associated with its business plan, anticipates continuing net losses and significant negative cash flows for the foreseeable future. If MoviePass ever does achieve profitability, of which no assurances can be given, MoviePass may be unable to sustain or increase such profitability.
To achieve and sustain profitability, MoviePass will need to accomplish numerous objectives, including substantially increasing the number of paying subscribers to its service and securing additional sources of revenue and economies of scale. There is a significant risk that MoviePass will be unable to achieve these objectives, which would damage MoviePass’ business and could lead to the loss of Helios’ investment in MoviePass.
MoviePass currently spends more to retain a subscriber than the revenue derived from that subscriber and MoviePass currently does not have other sources of revenue. This results in a negative gross profit margin. MoviePass expects its negative gross profit margin to remain significant until MoviePass can generate other sources of revenues to offset the losses or achieve substantial economies of scale. There is no assurance MoviePass will be able to generate other sources of revenue or be able to achieve economies of scale that would reduce the cost of revenue sufficiently to generate a positive gross profit margin. Failure to achieve positive gross profit margin in the foreseeable future could materially and adversely impact MoviePass’ ability to sustain its operations.
MoviePass has incurred losses since inception and has a present need for additional funding, which may be unavailable to it. As such, MoviePass expects it will receive a qualification on its audited financial statements for the fiscal years ended December 31, 2016 and 2015 from its independent registered public accounting firm expressing substantial doubt about its ability to continue as a going concern.
MoviePass has incurred losses since its inception and has a present need for additional funding. These factors raise substantial doubt about MoviePass’ ability to continue as a going concern. For the foreseeable future, MoviePass expects to fund its operations from additional debt or equity offerings and increased revenue from subscribers. If MoviePass cannot raise additional short-term capital, it may consume all of its cash needed for operations. There are no assurances that MoviePass will be able to raise capital on terms acceptable to it. If MoviePass is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned growth, which could harm its business, financial condition and operating results. As a result, MoviePass expects that its independent registered public accounting firm will include an explanatory paragraph in its audit report on MoviePass’ financial statements for the years ended December 31, 2016 and 2015 with respect to the uncertainty of MoviePass’ ability to continue as a going concern.
Increased monthly usage by MoviePass’ subscribers will cause it to incur losses and negative cash flow.
MoviePass’ monthly subscription pricing plan of $9.95 per month allows a subscriber to see a new movie each day for the entire month. In most cases, MoviePass pays the theaters the full cost for each movie ticket that a subscriber uses. Accordingly, increased movie viewing by subscribers would result in significant and increasing losses per subscriber, negative cash flow and could impair the ability of MoviePass to operate as a going concern absent additional sources of revenue or financing.
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MoviePass may not gain acceptance from large national exhibitors (movie theater chains), which could have a material adverse effect on MoviePass’ financial condition and results of operations.
MoviePass has historically paid large national exhibitors full price for each ticket purchased by a MoviePass subscriber through the MoviePass application (though in the past, MoviePass has received as much as a 20% discount on movie tickets for its subscribers from a small group of its exhibitor partners that currently represent less than 6% of all movie tickets that MoviePass currently purchases). Additionally, MoviePass has not historically received a benefit from any large national exhibitors for driving MoviePass subscribers to their theaters (for example, in the form of a portion of concession sales). MoviePass anticipates negotiating discounts on movie tickets and receiving a portion of concession sales to its subscribers attending theaters operated by those exhibitor partners. However, if MoviePass is unable to partner with large national exhibitors, (i) MoviePass likely will continue to be required to pay full price per movie ticket each time a MoviePass subscriber attends a movie theater operated by a large national exhibitor, (ii) MoviePass would be unlikely to share in concession sales to its subscribers attending those theaters, and (iii) MoviePass may not be able to sell digital advertising or data analytics services to those large national exhibitors. If MoviePass is unable to negotiate discounted ticket prices from, share in concession sales with or sell digital advertising or data analytics services to large national exhibitors, MoviePass’ financial condition and results of operations may be materially and adversely affected, MoviePass may not become profitable and MoviePass may not be able to sustain its operations.
MoviePass may not gain acceptance from large movie studios, which could have a material adverse effect on MoviePass’ financial condition and results of operations.
MoviePass’ success will depend, in part, on deriving revenue from sales of digital advertising and data analytics services to large movie studios. However, if MoviePass is unable to gain acceptance from large national exhibitors (movie theater chains), upon which large movie studios depend to distribute and exhibit their movies, then large movie studios may refrain from purchasing digital advertising or data analytics services from MoviePass. If MoviePass is unable to derive revenue from selling digital advertising or data analytics services to large movie studios, MoviePass’ financial condition and results of operations may be materially and adversely affected, MoviePass may not become profitable and MoviePass may not be able to sustain its operations.
Following the Additional Loan, MoviePass will continue to need additional capital, and it cannot be sure that additional financing will be available.
Since inception, MoviePass has funded its operating losses and capital expenditures through proceeds from private equity and debt financings, including through the pending MoviePass Transaction. MoviePass has a present need for significant additional financing, and such need may continue for the foreseeable business given the nature of MoviePass’ present operations. MoviePass’ ability to obtain financing will depend on, among other things, its development efforts, business plans, operating performance and the condition of the capital markets at the time it seeks financing. There is a material risk that additional financing for MoviePass will be unavailable to it on favorable terms when required, or at all.
Even if MoviePass raises additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of Helios, and MoviePass’ stockholders (including Helios) may experience dilution, perhaps to a significant extent. In addition, there is no assurance that the MoviePass Transaction will close, and even if it does close, there is no assurance that MoviePass will receive any additional cash as a result. To close the MoviePass Transaction and receive the remaining proceeds described below (and also to ensure that the MoviePass Note is deemed satisfied in full), MoviePass needs to complete certain milestones. MoviePass entered into the MoviePass Purchase Agreement with Helios on August 15, 2017 in which Helios originally agreed to acquire a majority stake in MoviePass for a purchase price of up to $27 million, which was increased to $28.5 million in connection with the Amendment. Pursuant to the MoviePass Purchase Agreement, Helios loaned MoviePass $5,000,000 in cash, pursuant to a subordinated convertible promissory note of MoviePass in the principal amount of $5,000,000. Such note was increased to $11.5 million pursuant to the Amendment and, as a result, Helios’ potential ownership percentage in MoviePass increased. At the closing of the MoviePass Transaction, in exchange for the majority stake, Helios will issue MoviePass (i) 4,000,000 unregistered shares its common stock for a total agreed upon value of approximately $12,000,000, which such shares may not be immediately saleable; and (ii) a promissory note in the principal amount of $5,000,000 (the “Helios Note”). Pursuant to the Helios Note, Helios has agreed to pay $5,000,000, plus all accrued interest thereon, on the later of the 180th calendar day following the closing or when MoviePass’ common stock becomes listed on the Nasdaq Stock Market or the New York Stock Exchange. If MoviePass is not listed on such an exchange on or before June 1, 2018 (the “Extended Listing Maturity Date”), then, within ten (10) business days thereafter, Helios will redeem the outstanding principal (not to exceed $5,000,000) and accrued unpaid interest on the Helios Note as of the Extended Listing Maturity Date (the “Redemption Amount”) in exchange for Helios tendering to MoviePass for immediate cancellation such number of MoviePass shares in consideration of the immediate and automatic cancellation of Helios’ obligation to repay any outstanding principle and accrued interest under the Helios Note. There can be no assurance that MoviePass will become listed on the Nasdaq Stock Market or the New York Stock Exchange in a timely manner, if at all, which would lead to an even more urgent need on the part of MoviePass to secure additional funding.
MoviePass’ ability to develop and implement new and updated features and services may be more difficult than expected and may not result in sufficient increases in revenue to justify the costs.
Attracting and retaining subscribers requires MoviePass to continue to improve the technology underlying its applications and to continue to develop new and updated features, services and applications. If MoviePass is unable to do so on a timely basis, or if it’s unable to implement new features and services without disrupting its existing applications, MoviePass may lose current and potential subscribers. MoviePass relies on a combination of internal development, strategic relationships and licensing to develop its service offering and related features. The development and implementation of new technologies, features and services may cost more than expected, may take longer than originally expected, may require more testing than originally anticipated, or may require the acquisition of additional personnel, technology and other resources. There can be no assurance that MoviePass’ revenue opportunities from any new or updated technologies, applications, features or services will justify the amounts spent.
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MoviePass’ success depends on its ability to maintain its brand. If events occur that damage its brand, MoviePass’ business and financial results may be harmed.
MoviePass’ success depends on its ability to maintain the value of its brand. Maintaining, promoting, and positioning the MoviePass brand will depend largely on the success of its marketing efforts and its ability to provide consistent, high quality products and services through its applications. The MoviePass brand could be harmed if MoviePass fails to achieve these objectives or if its public image or brand were to be tarnished by negative publicity. MoviePass’ reputation and brand may be harmed if it fails to maintain a consistently high level of customer service. Executing the strategies necessary to maintain its brand may require MoviePass to make substantial investments, and these investments may not be successful. Such failures may adversely affect MoviePass’ business, financial condition and operating results.
Any material disruption or breach of MoviePass’ information technology systems or those of third-party partners could materially damage subscriber and business partner relationships, and could subject MoviePass to significant reputational, financial, legal, and operational consequences.
Despite the implementation of security measures, the servers of MoviePass’ computing providers and other systems, and other third parties on which MoviePass relies, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Any material disruption or slowdown of MoviePass’ systems or those of third parties whom MoviePass depends upon, including a disruption or slowdown caused by MoviePass’ failure to successfully manage significant increases in subscriber volume or successfully upgrade applicable systems, system failures, viruses, security breaches, or other causes, could harm MoviePass’ brand and reputation, and cause revenues to decline. To the extent that any disruption or security breach was to result in a loss of or damage to data or applications, or inappropriate disclosure of confidential or proprietary information, MoviePass could incur liability and the further development of products and services could be delayed. In addition, if changes in technology cause MoviePass’ information systems, or those of third parties on whom MoviePass depends, to become obsolete, or if such information systems are inadequate to handle MoviePass’ growth, MoviePass could lose subscribers and its business and operating results could be adversely affected.
MoviePass’ online services are dependent on the development and maintenance of the Internet infrastructure.
MoviePass’ ability to deliver its online services is dependent on the development and maintenance of the infrastructure provided by the Internet, which is maintained by third parties. The Internet has experienced a variety of outages and other delays as a result of damages to portions of its infrastructure, and it could face outages and delays in the future. The Internet has also experienced, and is likely to continue to experience, significant growth in the number of users and the amount of traffic. If the Internet continues to experience increased usage, the Internet infrastructure may be unable to support the demands placed on it. In addition, the reliability and performance of the Internet may be harmed by increased usage or by denial-of-service attacks. Any resulting interruptions in MoviePass’ services or increases in response time could, if significant, result in a loss of potential or existing subscribers and, if sustained or repeated, could reduce the attractiveness of MoviePass’ service offerings.
MoviePass’ failure or inability to protect its intellectual property rights could diminish the value of its brand and weaken its competitive position.
MoviePass relies on a combination of trademark, trade secret, and unfair competition laws, as well as confidentiality agreements and procedures and licensing arrangements, and where appropriate, patents and copyright to establish and protect its intellectual property rights. There is a risk that the steps taken by MoviePass to protect its intellectual property rights will be inadequate to prevent infringement of such rights by others, including imitation of MoviePass’ services and misappropriation of its brand. Additionally, the process of obtaining patent or trademark protection is expensive and time-consuming, and MoviePass may not be able to prosecute all necessary or desirable patent applications or apply for all necessary or desirable trademark applications at a reasonable cost or in a timely manner.
Moreover, costly and time-consuming litigation could be necessary to enforce and determine the scope of MoviePass’ proprietary rights, and its failure or inability to obtain or maintain trade secret protection or otherwise protect its proprietary rights could adversely affect its business. MoviePass may be subject to intellectual property-related lawsuits in various jurisdictions, and there is a risk that MoviePass’ products or activities violate the patents, trademarks, or other intellectual property rights of third-party claimants. MoviePass may also need to institute litigation to protect its own intellectual property from third party infringers. Costs of supporting such litigation and disputes may be considerable, and there can be no assurances that a favorable outcome will be obtained. Patent infringement, trademark infringement, trade secret misappropriation, and other intellectual property claims and proceedings brought against MoviePass or brought by MoviePass, whether successful or not, could result in substantial costs, harm to the MoviePass brand, and have an adverse effect on MoviePass’ business.
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If MoviePass is not able to manage its growth, its business could be affected adversely.
MoviePass’ subscriber base has expanded rapidly since August 15, 2017, when it announced its new subscription price of $9.95 per month. MoviePass may not be able, for many reasons, including lack of financing or adequate personnel resources, to meet the demand to timely deliver MoviePass cards to its subscribers or otherwise service its business. As a result, MoviePass could experience a significant slowdown or stoppage as it attempts to serve the expanding subscriber base.
MoviePass anticipates that further expansion of its operations will be required to address any significant growth in its subscriber base and to take advantage of favorable market opportunities. Any future expansion will likely place significant demands on its managerial, operational, administrative and financial resources. If it is not able to respond effectively to new or increased demands that arise because of MoviePass’ growth, or, if in responding, MoviePass’ management is materially distracted from current operations, MoviePass’ business may be affected adversely.
If MoviePass’ efforts to attract and service subscribers are not successful, its revenues and results of operations will be affected adversely.
MoviePass must continue to attract, retain and grow the number of its subscribers. To succeed, it must continue to attract a large number of subscribers who have traditionally used online and pay cable channels, such as Netflix, HBO and Showtime, and pay-per-view and video-on-demand as opposed to attending movie theaters. MoviePass’ ability to attract and retain subscribers will depend in part on its ability to consistently provide subscribers a high quality experience for purchasing passes and viewing movies in theaters. If consumers do not perceive MoviePass’ service offering to be of high quality, or if MoviePass introduces new services that are not favorably received by customers, it may not be able to attract or retain subscribers. If its efforts to satisfy its existing subscribers are not successful, MoviePass may not be able to attract new subscribers, and as a result, its revenue and results of operations will be affected adversely.
If MoviePass is unable to compete effectively, its business will be affected adversely.
The market for filmed entertainment ticketing services is intensely competitive and subject to rapid change. MoviePass may experience competition that could negatively affect demand for MoviePass’ service or ability to be accepted at certain theater chains. Current potential competitors include Atom Tickets, MovieTickets.com, Fandango as well as potential exhibitors offering their own subscription services.
Many consumers maintain simultaneous relationships with multiple filmed entertainment ticketing providers and can easily shift spending from one provider to another. If MoviePass is unable to successfully compete with current and new competitors and technologies, it may not be able to achieve adequate market share, increase its revenues, or achieve and maintain profitability.
Many of its competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than MoviePass does. Some of its competitors have adopted, and may continue to adopt, aggressive pricing policies and devote substantially more resources to marketing and website and systems development than MoviePass does. In addition, MoviePass’ competitors may form or extend strategic alliances with studios, exhibitors and distributors that could affect adversely its ability to compete on favorable terms.
The loss by MoviePass of one or more of its key personnel, or its failure to attract, assimilate and retain other highly qualified personnel in the future, could seriously harm MoviePass’ existing business and new service developments.
MoviePass depends on the continued services and performance of its key personnel, particularly its Chief Executive Officer Mitch Lowe and other key members of management. In addition, much of MoviePass’ key technology and systems are custom made for its business by its personnel. The loss of MoviePass key managerial and key technology personnel could disrupt its operations and have an adverse effect on its ability to grow and expand its business.
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| Item 9.01 | Financial Statements and Exhibits. |
* Filed herewith.
** Furnished herewith.
(1) The schedules and similar attachments have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The descriptions of the omitted schedules and similar attachments are contained within the MoviePass Purchase Agreement. Helios hereby agrees to furnish a copy of any such omitted schedule or similar attachment to the SEC upon request.
Important Additional Information
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication relates to the MoviePass Transaction, which will become the subject of a proxy statement to be filed with the SEC by Helios, and may be deemed to be solicitation material in respect of the MoviePass Transaction. This document is not a substitute for the proxy statement that Helios will file with the SEC or any other documents that Helios may file with the SEC or transmit to stockholders in connection with the MoviePass Transaction. Before making any voting decision, investors and security holders are urged to read the proxy statement and all other relevant documents filed or that will be filed with the SEC in connection with the MoviePass Transaction as they become available because they will contain important information about the proposed transaction and related matters. Investors and security holders will be able to obtain free copies of the proxy statement and all other relevant documents filed or that will be filed with the SEC by Helios through the website maintained by the SEC at www.sec.gov.
In addition, investors and security holders will be able to obtain free copies of the proxy statement, once it is filed, from Helios by accessing Helios’ website at www.hmny.com or upon written request to: Helios and Matheson Analytics Inc., Attn: Secretary, Empire State Building, 350 Fifth Avenue, Suite 7520, New York, New York 10118, (212) 979-8228.
Participants in the Solicitation
Helios, MoviePass and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Helios’ stockholders in connection with the MoviePass Transaction. Information regarding Helios’ directors and executive officers is contained in its annual report on Form 10-K for the year ended December 31, 2016, filed with the SEC on April 14, 2017, and its definitive proxy statement on Schedule 14A filed with the SEC on October 3, 2017. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing Helios’ website at www.hmny.com. Additional information regarding the interests of those persons and other persons who may be deemed participants in the MoviePass Transaction may be obtained by reading the proxy statement regarding the MoviePass Transaction, when it becomes available. You may obtain free copies of this document as described in the preceding paragraph.
Cautionary Statement on Forward-looking Information
Certain information in this Current Report and its exhibits contain forward-looking statements about Helios and MoviePass within the meaning of the Private Securities Litigation Reform Act of 1995 or under Section 27A of the Securities Act and Section 21E of the Exchange Act (collectively, “forward-looking statements”) that may not be based on historical fact, but instead relate to future events, including without limitation statements containing the words “believe”, “may”, “plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect”, “project” and similar expressions. All statements other than statements of historical fact included in this communication are forward-looking statements, including statements regarding the Closing. Statements regarding future events are based on the parties’ current expectations and are necessarily subject to the risks set forth in this Current Report and other risks related to, among other things, whether the outstanding conditions to the Closing will be satisfied, the occurrence of any event, change or other circumstances that could give rise to the termination of the MoviePass Purchase Agreement, and general economic conditions.
Such forward-looking statements are based on a number of assumptions. Although management of Helios believes that the assumptions made and expectations represented by such statements are reasonable, there can be no assurance that a forward-looking statement contained herein will prove to be accurate. Actual results and developments may differ materially and adversely from those expressed or implied by the forward-looking statements contained herein and even if such actual results and developments are realized or substantially realized, there can be no assurance that they will have the expected consequences or effects.
Given these risks, uncertainties and factors, you are cautioned not to place undue reliance on such forward-looking statements and information, which are qualified in their entirety by this cautionary statement. All forward-looking statements and information made herein are based on Helios’ and MoviePass’ current expectations and Helios does not undertake an obligation to revise or update such forward-looking statements and information to reflect subsequent events or circumstances, except as required by law.
| 8 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: October 11, 2017 | HELIOS AND MATHESON ANALYTICS INC. | |
| By: | /s/ Stuart Benson | |
|
Stuart
Benson,
Chief Financial Officer |
||
| 9 |
EXHIBIT INDEX
* Filed herewith.
** Furnished herewith.
(1) The schedules and similar attachments have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The descriptions of the omitted schedules and similar attachments are contained within the MoviePass Purchase Agreement. Helios hereby agrees to furnish a copy of any such omitted schedule or similar attachment to the SEC upon request.
10
Exhibit 2.2
AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT
This Amendment No. 1 to Securities Purchase Agreement (the “ Amendment ”) is made and entered into as of October 6, 2017 by and between MoviePass Inc., a Delaware corporation (“ MoviePass ”), and Helios and Matheson Analytics Inc., a Delaware corporation (“ Helios ”).
WHEREAS , MoviePass and Helios are signatories to that certain Securities Purchase Agreement, dated August 15, 2017 (the “ Purchase Agreement ”); and
WHEREAS , MoviePass and Helios now desire to amend the Purchase Agreement as provided for herein.
NOW, THEREFORE , in consideration of the premises set forth above, which are incorporated in this Amendment as if fully set forth below, and the representations, warranties, covenants and agreements contained in the Purchase Agreement, and intending to be legally bound hereby, and in accordance with Section 7.11 of the Purchase Agreement, the parties hereby agree to amend the Purchase Agreement as follows:
1. Unless otherwise expressly defined herein, all capitalized terms used in this Amendment shall have the same meaning as they are defined in the Purchase Agreement.
2. The first sentence of Section 1.1(b) of the Purchase Agreement is hereby amended and restated in its entirety as follows:
“(b) Subject to the terms and conditions of this Agreement, Helios agrees to purchase at the Closing and MoviePass agrees to sell and issue to Helios at the Closing, such number of shares of MoviePass common stock, $0.0001 par value per share (the “Common Stock ”), equal to 51.71% of the then outstanding shares of Common Stock of MoviePass (on a fully-diluted basis, giving effect to the payment or conversion of any notes that convert into MoviePass capital stock that are outstanding immediately prior to the Closing, but excluding any outstanding options to purchase shares of Common Stock and warrants to purchase shares of MoviePass’s capital stock and the shares of Common Stock issuable upon conversion of the Kelly Note (as defined below)) for an aggregate purchase price of up to $28,500,000 (the “ Maximum Purchase Price ”), payable as provided in Subsection 1.1(c) below.”
3. Section 1.1(c)(ii) of the Purchase Agreement is hereby amended and restated in its entirety as follows:
“(ii) up to $18,500,000, payable as follows:”
4. The first sentence of Section 1.1(c)(ii)(A) of the Purchase Agreement is hereby amended and restated in its entirety as follows:
“(A) $11,450,000 in cash to be paid upon receipt of the MoviePass Stockholder Approval (as defined in Subsection 5.25 hereof), in the form of a loan in the principal amount of $11,500,000 (such principal amount inclusive of the Expense Payment (as defined below)) to be made by Helios to MoviePass in accordance with a Second and Amended and Restated Subordinated Convertible Note Purchase Agreement, substantially in the form of Exhibit B-1 attached to this Agreement (the “ Amended Note Purchase Agreement ”) whereby, in exchange for such payment, Helios will receive a subordinated convertible promissory note of MoviePass in the principal amount of $11,500,000, substantially in the form of Exhibit B-2 attached to this Agreement (the “ MoviePass Note ” and together with the Shares and any shares of capital stock of MoviePass issuable upon conversion of the MoviePass Note, the “ MoviePass Securities ”).
5. Section 1.1(c)(ii)(B) of the Purchase Agreement is hereby amended and restated in its entirety as follows:
“(B) a promissory note in the principal amount of $5,000,000, in the form of Exhibit C attached to this Agreement, to be delivered by Helios to MoviePass at the Closing (the “ Helios Note ”); and”
6. The Helios Note in the form attached as Exhibit C to the Purchase Agreement is hereby superseded by and replaced with the form attached as Exhibit A to this Amendment.
7. Except as specifically amended hereby, the Agreement shall remain in full force and effect and all other terms of the Agreement remain unchanged. To the extent any provision of the Agreement is inconsistent with this Amendment, this Amendment shall control.
8. This Amendment is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
9. The language used in this Amendment will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
10. This Amendment may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature delivered by fax or e-mail/.pdf transmission shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature, and deliver by such means shall be due deliver hereof.
11. The headings of this Amendment are for convenience of reference and shall not form part of, or affect the interpretation of, this letter agreement.
[ Signature Page Follows ]
| Page 2 of 3 |
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.
| MOVIEPASS, INC. | |||
| By: | / s/ Mitch Lowe | ||
| Name: | Mitch Lowe | ||
| Title: | Chief Executive Officer | ||
| HELIOS AND MATHESON ANALYTICS INC. | |||
| By: | /s/ Theodore Farnsworth | ||
| Name: | Theodore Farnsworth | ||
| Title: | Chief Executive Officer | ||
[Signature Page to Amendment No. 1 to Securities Purchase Agreement]
| Page 3 of 3 |
EXHIBIT A
Helios Note
Exhibit 4.1
THE SECURITIES REFERENCED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
AMENDED AND RESTATED
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
| $11,500,000 | Issuance Date: October 6, 2017 |
| Original Issue Date: August 18, 2017 |
For value received, MoviePass Inc., a Delaware corporation (the “ Company ”), promises to pay to Helios and Matheson Analytics Inc., a Delaware corporation (the “ Holder ”), the principal sum of Eleven Million Five Hundred Thousand Dollars ($11,500,000), or such lesser amount as shall then equal the outstanding principal amount hereunder (the “ Principal Amount ”), including $50,000 previously advanced to the Company by the Holder. This Amended and Restated Subordinated Convertible Promissory Note (this “ Note ”) amends, replaces and supersedes in its entirety that certain Subordinated Convertible Promissory Note issued by the Company to the Holder on August 18, 2017 (the “ Prior Note ”), which Prior Note shall be deemed canceled immediately as of the date hereof with no further action required from the Company or Holder. Interest shall accrue on this Note from the Issuance Date of this Note on the unpaid Principal Amount at a rate equal to 5.00% per annum, compounded annually and computed on the basis of a 365-day year and the actual number of days elapsed; it being understood that $34,246.58 of interest which had previously accrued on the Prior Note based upon the then unpaid principal amount of $5,000,000 shall also be due and payable by the Company in accordance with the provisions of this Note. This Note is being issued to the Holder pursuant to that certain Second Amended and Restated Subordinated Convertible Note Purchase Agreement, dated August 18, 2017 and as amended on the date hereof, among the Company, the Holder and a Requisite Majority (as defined therein) (the “ Amended Note Purchase Agreement ”), as contemplated by Subsection 1.1(c)(ii)(A) of that certain Securities Purchase Agreement, dated August 15, 2017 and as amended by Amendment No. 1 to Securities Purchase Agreement the date hereof, between the Company and the Holder (the “ SPA ”). Capitalized terms not otherwise defined herein have the meaning given them in the SPA. This Note, which is referred to as the MoviePass Note in the SPA, is subject to the following terms and conditions.
| 1) | Maturity . While this Note is outstanding, the Principal Amount and any accrued but unpaid interest under this Note shall be due and payable upon demand of the Holder at any time after the two-year anniversary of the Original Issue Date of this Note first stated above (the “ Maturity Date ”). Subject to Section 2 below, interest shall accrue on this Note and shall be due and payable on the Maturity Date. Notwithstanding the foregoing, the entire unpaid Principal Amount, together with accrued and unpaid interest thereon, shall become immediately due and payable upon the commencement of any bankruptcy, insolvency or dissolution proceeding by the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing by or against the Company of a petition in bankruptcy or any petition for relief under the federal bankruptcy act or the continuation of such petition without dismissal for a period of 90 days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Company. |
| 2) | Cancellation of Note Upon Consummation of SPA Transaction . Upon the Closing: |
| a) | this Note shall be immediately cancelled and of no further force or effect, automatically and without any action being required on the part of the Holder, and the Company will be forever released from all of its obligations and liabilities under this Note including (without limitation) the obligation to pay the Principal Amount and accrued interest; |
| b) | cancellation of this Note as provided above shall constitute full satisfaction of the Holder’s obligation to make the Initial Cash Payment pursuant to the SPA; and |
| c) | the Holder shall deliver any original executed copy of this Note in the Holder’s possession to the Company for destruction, provided that any failure by the Holder to deliver such original executed copy of this Note to the Company shall not affect the automatic cancellation of this Note as provided by Section 2(a) above. |
| 3) | Next Equity Conversion . |
| a) | Next Equity Financing . If either the Holder or the Company terminates the SPA due to the other party’s material breach of any representation, warranty or covenant thereof that remains uncured within the time frame specified in Section 7.8 of the Purchase Agreement (an “ SPA Termination ”), the outstanding Principal Amount and any accrued but unpaid interest under this Note (the amount being converted, the “ Conversion Amount ”) may, at the Holder’s option, be converted, in whole or in part, into equity securities issued and sold at the initial closing of the Company’s next equity financing following such SPA Termination (the “ Next Equity Securities ”) in a single transaction or a series of related transactions yielding gross proceeds to the Company of at least $1,000,000 (excluding the principle amount or accrued interest or any other amounts owing on any notes, including the Notes (as defined in the Amended Note Purchase Agreement), converted into capital stock and issued therein) other than an Exempt Issuance (the “ Next Equity Financing ”). “ Exempt Issuance ” means the issuance of (a) shares of the Company’s common stock, options or other equity-based awards to employees, officers, directors, consultants or vendors of the Company for services rendered to the Company pursuant to any stock or option plan or agreement that was duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Notes issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Company’s common stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities and (c) securities issued pursuant to acquisitions or strategic transactions of other assets or businesses approved by a majority of the disinterested directors of the Company or the shareholders of the Company prior to such issuance; provided that (x) the primary purpose of such issuance is not to raise capital, (y) the purchaser or acquirer of such shares of the Company’s common stock in such issuance solely consists of either (1) the actual owners of such assets or securities acquired in such merger or acquisition or (2) the shareholders, partners or members of the foregoing persons, and (z) the number or amount (as the case may be) of such shares of the Company’s common stock issued to such person by the Company shall not be disproportionate to such person’s actual ownership of such assets or securities to be acquired by the Company (as applicable). |
| 2 |
| b) | Notice of Conversion . If this Note is eligible to be converted pursuant to Section 3(a), at least fifteen (15) business days prior to the proposed initial closing of the Next Equity Financing, the Company shall deliver written notice to the Holder of this Note at the address last shown on the records of the Company for the Holder or given by the Holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying the Holder of the Next Equity Financing, specifying the conversion price, the Principal Amount and accrued interest of this Note eligible to be converted, the proposed closing date of the proposed Next Equity Financing requesting the Holder notify the Company of its election to convert this Note if any, in the manner and at the place designated in the Company’s notice. A Holder’s election to convert all or a portion of this Note in connection with the Next Equity Financing must be made at least five (5) business days before the expected initial closing date of the Next Equity Financing. |
| c) | Terms of Conversion . The number of shares of Next Equity Securities to be issued upon such conversion shall be equal to the quotient obtained by dividing (i) the Conversion Amount by (ii) 80.00% of the cash price per share of the Next Equity Securities sold in the Next Equity Financing (excluding the Participation Shares, as defined in the Amended Note Purchase Agreement), rounded down to the nearest whole share (the “ Note Conversion Price ”). The issuance of such shares upon such conversion shall be upon the terms and subject to the conditions applicable to the Next Equity Financing and the Company’s Certificate of Incorporation, Bylaws, and other corporate governing documents, as determined by the Company and the investors in the Next Equity Financing in their sole discretion. The Note Conversion Price, however, shall not be greater than: (1) for $10,000,000 of the Principal Amount, including accrued interest thereon, the quotient obtained by dividing (x) $25,000,000 by (y) the total number of shares of Common Stock outstanding (assuming full conversion and exercise of all convertible or exercisable securities other than (i) the Notes (as defined in the Amended Note Purchase Agreement), (ii) other outstanding convertible notes and (iii) outstanding convertible equity securities); and (2) for the remaining $1,500,000 of the Principal Amount, including accrued interest thereon, the quotient obtained by dividing (x) $210,000,000 by (y) the total number of shares of Common Stock outstanding (assuming full conversion and exercise of all convertible or exercisable securities other than (i) the Notes (as defined in the Amended Note Purchase Agreement), (ii) other outstanding convertible notes and (iii) outstanding convertible equity securities). Upon such conversion of this Note, the Holder hereby agrees to execute and deliver to the Company all transaction documents related to the Next Equity Financing, including any purchase agreement and other ancillary agreements, with customary representations and warranties and transfer restrictions (including, without limitation, a lock-up agreement in connection with an initial public offering). |
| 4) | Change of Control . In the event of a Change of Control (as defined below) prior to the conversion of this Note or repayment in full of this Note, immediately prior to such Change of Control, this Note shall become immediately due and payable. The term “ Change of Control ” means (i) a sale of all or substantially all of the Company’s assets other than to an Excluded Entity (as defined below), (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, limited liability company or other entity other than an Excluded Entity, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of all of the Company’s then outstanding voting securities. Notwithstanding the foregoing, a transaction shall not constitute a Change of Control if its purpose is to (A) change the jurisdiction of the Company’s incorporation, (B) create a holding company that will be owned in substantially the same proportions by the persons who hold the Company’s securities immediately before such transaction, or (C) obtain funding for the Company in a financing that is approved by the Company’s Board of Directors. An “ Excluded Entity ” means a corporation or other entity of which the holders of voting capital stock of the Company outstanding immediately prior to such transaction are the direct or indirect holders of voting securities representing at least a majority of the votes entitled to be cast by all of such corporation’s or other entity’s voting securities outstanding immediately after such transaction. |
| 3 |
| 5) | Mechanics and Effect of Conversion . No fractional shares of the Company’s capital stock will be issued upon conversion of this Note. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company will pay to the Holder in cash the amount of the unconverted Principal Amount and accrued interest under this Note that would otherwise be converted into such fractional share. Upon conversion of this Note, the Holder shall surrender this Note, duly endorsed, at the principal offices of the Company or any transfer agent of the Company. At its expense, the Company will, as soon as practicable thereafter, issue the number of Next Equity Securities to which such Holder is entitled upon such conversion, together with any other securities and property to which the Holder is entitled upon such conversion under the terms of this Note, including a check payable to the Holder for any cash amounts payable as described herein and shall deliver to such Holder, at such principal office, a notice of issuance upon request for the number of shares to which such Holder is entitled upon such conversion. Upon conversion of this Note, the Company will be forever released from all of its obligations and liabilities under this Note with regard to that portion of the principal amount and accrued interest being converted including (without limitation) the obligation to pay such portion of the principal amount and accrued interest. |
| 6) | Payment; Prepayment . All payments shall be made in lawful money of the United States of America at such place as the Holder hereof may from time to time designate in writing to the Company. Payment shall be credited first to collection costs, if any, then the accrued interest then due and payable and the remainder shall be applied to principal. The Company may prepay this Note at any time without penalty only upon written consent of the Holder. |
| 7) | Stockholders, Officers and Directors Not Liable . In no event shall any stockholder, officer or director of the Company be liable for any amounts due or payable pursuant to this Note. |
| 8) | Subordination . |
| a) | The indebtedness evidenced by this Note is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all of the Company’s Senior Indebtedness. The Holder further agrees to execute a form of subordination agreement, as requested by any current or future lender to the Company, to effect the foregoing subordination. “ Senior Indebtedness ” shall mean the principal of and unpaid interest and premium, if any, on (i) indebtedness of the Company or with respect to which the Company is a guarantor, whether outstanding on the date hereof or hereafter created, to banks, insurance companies or other lending or thrift institutions regularly engaged in the business of lending money, whether or not secured, (ii) any deferrals, renewals or extensions or any debentures, notes or other evidence of indebtedness issued in exchange for such Senior Indebtedness, (iii) those certain secured convertible promissory notes issued by the Company pursuant to the Secured Convertible Promissory Note and Warrant Purchase Agreement dated on May 27, 2016. |
| b) | Upon any receivership, assignment for the benefit of creditors, bankruptcy, reorganization, or arrangement which creditors (whether or not pursuant to bankruptcy or other insolvency laws), sale of all or substantially all of the assets, dissolution, liquidation, or any other marshaling of the assets and liabilities of the Company or in the event this Note shall be declared due and payable, (i) no amount shall be paid by the Company, whether in cash or property in respect of the principal of or interest on this Note at the time outstanding, unless and until the full amount of any Senior Indebtedness then outstanding shall be paid in full, and (ii) no claim or proof of claim shall be filed with the Company by or on behalf of the holder of this Note which shall assert any right to receive any payments in respect of the principal of and interest on this Note except subject to the payment in full all of the Senior Indebtedness then outstanding. |
| 4 |
| c) | If an event of default has occurred with respect to any Senior Indebtedness, permitting the holder thereof to accelerate the maturity thereof, then unless and until such event of default shall have been cured or waived or shall have ceased to exist, or all Senior Indebtedness shall have been paid in full, no payment shall be made in respect of the principal of or interest on this Note. |
| d) | Nothing contained in the preceding paragraphs shall impair, as between the Company and the Holder, the obligation of the Company, which is absolute and unconditional, to pay to the Holder hereof the principal hereof and interest hereon as and when the same shall become due and payable, or shall prevent the Holder, upon default hereunder, from exercising all rights, powers and remedies otherwise provided herein or by applicable law, all subject to the rights, if any, of the holders of Senior Indebtedness under the preceding paragraphs to receive cash or other properties otherwise payable or deliverable to the Holder pursuant to this Note. |
| 9) | Interest Rate Limitation . Notwithstanding anything to the contrary contained in this Note, the Amended Note Purchase Agreement or the SPA, as applicable (the “ Loan Documents ”), the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “ Maximum Rate ”). If the Holder shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal remaining owed under this Note or, if it exceeds such unpaid principal, refunded to the Company. In determining whether the interest contracted for, charged, or received by the Holder exceeds the Maximum Rate, the Holder may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of this Note. |
| 10) | Action to Collect on Note . If action is instituted to collect on this Note, the Company promises to pay all of each Holder’s costs and expenses, including reasonable attorney’s fees, incurred in connection with such action. |
| 11) | Loss of Note . Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note or any Note exchanged for it, and indemnity satisfactory to the Company (in case of loss, theft or destruction) or surrender and cancellation of such Note (in the case of mutilation), the Company will make and deliver in lieu of such Note a new Note of like tenor. |
| 12) | Miscellaneous . |
| a) | Governing Law; Venue . The validity, interpretation, construction and performance of this Note, and all acts and transactions pursuant hereto and the rights and obligations of the Company and Holder shall be governed, construed and interpreted in accordance with the laws of the state of California, without giving effect to principles of conflicts of law. Venue for any legal action under this Note shall be in the state or federal courts located in the City of Los Angeles in the State of California. |
| b) | Entire Agreement . This Note, together with the Amended Note Purchase Agreement, the SPA, and the documents referred to therein, constitute the entire agreement and understanding between the Company and the Holder relating to the subject matter herein and supersede all prior or contemporaneous discussions, understandings and agreements, whether oral or written between them relating to the subject matter hereof. |
| 5 |
| c) | Amendments and Waivers . Any term of this Note may be amended only with the written consent of the Company and the Holder. Any amendment or waiver effected in accordance with this Section 12(c) shall be binding upon the Company, the Holder and each transferee of the Note or any portion thereof. |
| d) | Successors and Assigns . The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the Company and the Holder. Notwithstanding the foregoing, the Holder may not assign, pledge, or otherwise transfer this Note without the prior written consent of the Company except pursuant to the exercise of rights by the holder(s) of Helios’ senior secured convertible notes holding a security interest in Helios’ assets. Subject to the preceding sentence, this Note may be transferred only upon surrender of the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new note for the same principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note. |
| e) | Notices . Any notice, demand or request required or permitted to be given under this Note shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records. |
| f) | Counterparts . This Note may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument. |
[Signature Page Follows]
| 6 |
IN WITNESS WHEREOF , the parties have executed this Amended and Restated Subordinated Convertible Promissory Note as of the date first set forth above.
| THE COMPANY: | ||
| MOVIEPASS INC. | ||
| By: | /s/ Mitch Lowe | |
| (Signature) | ||
| Name: | Mitch Lowe | |
| Title: | Chief Executive Officer | |
| Address: | 175 Varick Street | |
| Suite 604 | ||
| New York, NY 10012 | ||
| AGREED TO AND ACCEPTED: | ||
| THE HOLDER: | ||
| HELIOS AND MATHESON ANALYTICS INC. | ||
| By: | /s/ Theodore Farnsworth | |
| (Signature) | ||
| Name: | Theodore Farnsworth | |
| Title: | Chief Executive Officer | |
| Address: | Empire State Building | |
| 350 5th Avenue, Suite 7520 | ||
| New York, New York | ||
| 10118 | ||
[Signature Page to the Subordinated Convertible Promissory Note of MoviePass Inc.]
7
Exhibit 4.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS, OR AN EXEMPTION FROM REGISTRATION THEREUNDER, IN EACH CASE, TO THE EXTENT APPLICABLE HERETO.
PROMISSORY NOTE
| $5,000,000 | New York, New York |
| _________, ______ |
FOR VALUE RECEIVED, Helios and Matheson Analytics Inc., a Delaware corporation (“ Helios ”), hereby promises to pay to MoviePass Inc., a Delaware corporation (“ MoviePass ”), on or before the Maturity Date (as defined below), (i) the principal amount of Five Million Dollars ($5,000,000) and (ii) interest on the unpaid principal balance hereof at the rate set forth herein. This Promissory Note (this “ Note ”) is issued pursuant to Section 1.1(c)(ii)(B) of that certain Securities Purchase Agreement, dated as of August 15, 2017, as amended on October 6, 2017, between MoviePass and Helios (as amended, modified, supplemented, extended, renewed, restated or replaced from time to time, the “ Securities Purchase Agreement ”), as partial payment for the Shares. Capitalized terms not defined herein shall have the meaning as set forth in the Securities Purchase Agreement. NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED, WHETHER BY MOVIEPASS, OPERATION OF LAW, COURT ORDER OR OTHERWISE, WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT OF HELIOS. ANY SUCH PURPORTED ASSIGNMENT OR TRANSFER WITHOUT SUCH CONSENT SHALL BE NULL AND VOID.
1. Payment of Principal . The principal amount of this Note (the “ Principal ”), together with all unpaid Interest (as defined below) thereon, shall be due and payable on the later of (i) the 180th calendar day following the Closing Date and (ii) such date when the MoviePass Common Stock becomes listed on any of the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (the “ Maturity Date ”). Payment shall be made at such place as MoviePass may designate. All payments when made to MoviePass shall be paid in the lawful money of the United States of America in immediately available funds. Helios hereby waives presentment, notice of dishonor and protest in respect hereof. No interest or other amount shall be payable in excess of the maximum permissible rate under applicable law, and any interest or other amount which is paid in excess of such maximum rate shall be deemed to be a payment of principal hereunder.
2. Payment of Interest . The unpaid Principal balance due hereunder shall bear interest (the “ Interest ”) at an annual rate equal to 5% (the “ Interest Rate ”). All accrued Interest shall be due and payable on the Maturity Date. All Interest shall be computed on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days (including the first day but excluding the last day) elapsed.
3. Helios Defaults .
(a) Helios shall be deemed in default hereunder upon the occurrence of any of the following (each, a “ Helios Default ”):
(i) Failure to Pay Principal or Interest . Helios shall have failed to pay, when due, all or any part of any Principal or Interest required to be paid hereunder;
(ii) Bankruptcy, etc . Helios shall have commenced any bankruptcy, insolvency or dissolution proceeding; Helios shall have executed a general assignment for the benefit of creditors; Helios shall have filed or have filed against it a petition in bankruptcy or any petition for relief under the federal bankruptcy act or the continuation of such petition without dismissal for a period of 90 days or more; or there shall have been an appointment of a receiver or trustee to take possession of the property or assets of Helios.
(b) Consequence of Helios Default . Upon the occurrence of a Helios Default under Section 3(a)(i) that remains uncured for ten (10) business days following written notice thereof from MoviePass, the outstanding Principle and accrued but unpaid Interest hereunder shall, at the option of MoviePass, become immediately due and payable. Upon the occurrence of a Helios Default under Section 3(a)(ii), the outstanding Principle and accrued but unpaid Interest hereunder shall become immediately due and payable automatically without any action on the part of MoviePass.
4. Helios Redemption and Cancellation Right . Notwithstanding anything herein to the contrary, if the MoviePass Common Stock is not listed on the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange on or before June 1, 2018 (as such date may be extended as described below, the “ Extended Listing Maturity Date ”), then, within ten (10) business days thereafter, Helios shall redeem the outstanding Principal amount and accrued unpaid interest thereon as of the Extended Listing Maturity Date (the “ Redemption Amount ”) in exchange for Helios tendering to MoviePass for immediate cancellation such number of Shares (the “ Redemption and Cancellation ”) equal to the Redemption Amount divided by the Closing Share Price (the “ MoviePass Cancelled Shares ”). For purposes hereof, the “ Closing Share Price ” shall equal $28,500,000 divided by the number of Shares issued to Helios upon the Closing. The Extended Listing Date may be extended from time to time by Helios and MoviePass upon mutual written agreement at any time prior to the tenth (10 th ) business date following the Extended Listing Date (such 10th business day being referred to herein as the “ Redemption and Cancellation Date ”). On or before the Redemption and Cancellation Date, (i) Helios shall surrender to MoviePass (or if MoviePass then has a third party transfer agent, to its transfer agent) any stock certificate(s) representing the MoviePass Cancelled Shares, and if such stock certificate(s) represent(s) a greater number of Shares than the number of MoviePass Cancelled Shares, MoviePass or its transfer agent, as applicable, shall promptly deliver (or cause its transfer agent to deliver) to Helios a new stock certificate representing the difference between the number of MoviePass Cancelled Shares and the number of Shares represented by the stock certificate(s) so surrendered and (ii) MoviePass shall stamp “cancelled” on the original execution version of this Note and return the same to Helios. From and after the Redemption and Cancellation Date, notwithstanding, any failure by Helios to promptly deliver such certificates or any failure by MoviePass to promptly deliver such original, the Redemption Amount of this Note, and all rights of MoviePass with respect thereto, automatically shall be deemed cancelled, terminated and of no further force or effect.
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5. Pledge .
(a) Helios hereby grants a first priority security interest in, and pledges, a number of Shares equal to forty four percent (44%) of all of the Shares that Helios received pursuant to the Securities Purchase Agreement (the “ Pledged Shares ”), and all proceeds thereon (the Pledged Shares, together with all proceeds of the foregoing, being referred to as the “ Pledged Collateral ”) to MoviePass to secure the satisfaction by Helios of all its obligations to MoviePass under this Note, based on an agreed upon per share value of the Pledged Shares equal to the Closing Share Price (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or similar recapitalization affecting the Common Stock of MoviePass). This pledge shall be governed by all applicable provisions of, and MoviePass shall have all rights and remedies with respect to the Pledged Collateral of a secured party under, the Uniform Commercial Code as in effect in the State of New York (or, if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests in the Pledged Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect on or after the date hereof in any other jurisdiction, such other jurisdiction for purposes of the provisions hereof relating to such perfection or the effect of perfection or non-perfection or availability of such remedy). Helios agrees to deliver to MoviePass such other documents of transfer and to take such other actions as MoviePass may from time to time reasonably request to enable MoviePass to perfect its security interest in the Pledged Collateral under applicable laws and to otherwise effect the purposes of this Note, and upon the occurrence of a Helios Default and during the continuance thereof, Helios agrees to deliver to MoviePass such other documents of transfer and to take such other actions as MoviePass may reasonably request to enable MoviePass to transfer the Pledged Shares into its name or the name of its nominee. Helios agrees that it will not (i) sell, transfer, assign, pledge or otherwise dispose of, whether directly or indirectly, whether with or without consideration and whether voluntarily or involuntarily or by operation of law, any interest (legal or beneficial), or grant any option with respect to, any of the Pledged Collateral without the prior written consent of MoviePass, or (ii) create or permit to exist any lien upon or with respect to any of the Pledged Collateral, except for the security interest granted hereby. Helios hereby authorizes MoviePass to file any financing statements, continuation statements, instruments, agreements or documents, and amendments to any such statements, instruments, agreements or documents, in any offices MoviePass deems necessary or appropriate in order to perfect MoviePass’ security interest in the Pledged Collateral. A carbon, photographic or other reproduction of this Note or any financing statement covering the Pledged Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. Helios hereby authorizes MoviePass, and hereby grants a power-of-attorney to MoviePass (which is irrevocable and is coupled with an interest), to execute in the name and on behalf of Helios any and all financing statements, instruments, agreements or documents that MoviePass deems necessary or appropriate in order to perfect MoviePass’ security interest in the Pledged Collateral. Helios hereby represents and warrants that its principal place of business is as Helios has provided to MoviePass and Helios covenants to promptly notify MoviePass in writing in the event Helios changes its principal place of business.
(b) In the event that, during the term of this Note, any interest, dividend, distribution, reclassification, readjustment or other change is declared or made in the capital structure of MoviePass, Helios shall have all rights, title and interests in and to any and all such interest, dividends, distributions and securities issued to or acquired by Helios by reason of any such event (except that MoviePass shall have a security interest in all securities issued to or acquired by Helios related to the Pledged Shares by reason of such event, which securities shall become part of the Pledged Collateral).
(c) During the term of this Note and for so long as the Pledged Collateral is owned by Helios, Helios shall have the right to vote the Pledged Shares and any and all other securities constituting part of the Pledged Collateral, and to exercise any other voting rights pertaining to such Pledged Collateral, and to give consents, ratifications and waivers with respect thereto, and to exercise all of its rights as a stockholder thereof for all purposes, in each case, in accordance with the voting proxy agreement by and between MoviePass and Helios dated the date of this Note.
(d) MoviePass hereby acknowledges that its right to recover amounts payable hereunder shall be limited to the Pledged Collateral.
6. No Set-Off . The obligations of Helios, and the rights of MoviePass, under this Note shall be absolute and shall not be subject to any counterclaim, set-off, deduction or defense other than as set forth in Section 7.1 of the Securities Purchase Agreement.
7. Miscellaneous .
(a) Full Recourse . The parties hereby acknowledge and agree that this Note is a full recourse obligation of Helios, subject to Section 5(d) of this Note.
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(b) No Oral Waivers or Modifications . No provision of this Note may be waived or modified orally, but only in a writing signed by MoviePass and Helios.
(c) Assignment . The provisions of this Note shall be binding upon and inure to the benefit of Helios and MoviePass, and (to the extent permitted by the terms hereof) their respective successors and permitted assigns. Helios may not assign, sell, pledge or otherwise transfer all or any portion of his rights or obligations under this Note without the prior written consent of MoviePass and MoviePass may not assign, sell, pledge or otherwise transfer all or any portion of its rights or obligations under this Note without the prior written consent of Helios.
(d) Amendments . None of the terms or provisions of this Note may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Helios and MoviePass.
(e) Waiver . MoviePass shall not by any act, delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Helios Default or other breach hereof. No failure to exercise, nor any delay in exercising, on the part of MoviePass or Helios, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by MoviePass or Helios of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which MoviePass or Helios would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
(f) Enforcement . Helios hereby agrees to pay or reimburse MoviePass for all costs, including, but not limited to, reasonable attorneys’ fees, incurred by MoviePass in seeking to enforce the obligations of Helios to pay any portion of the Principal amount hereunder or any accrued interest thereon (subject to Section 4 hereof), when due in accordance with the terms hereof but unpaid, against Helios after and during the continuance of an Helios Default, whether or not pursued in court or otherwise.
(g) Governing Law . This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the Borough of Manhattan in the City of New York, New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
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(h) No Severability . Whenever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Note shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
(i) Usury . If interest payable under this Note is in excess of the maximum permitted by law, the Interest chargeable hereunder shall be reduced to the maximum amount permitted by law and any excess over the maximum amount permitted by law shall be credited to the Principal balance of this Note and applied to the same and not to the payment of Interest.
(j) Remedies . No delay or omission on the part of MoviePass or Helios in the exercise of any right or remedy hereunder shall operate as a waiver thereof, and no partial exercise of any right or remedy precludes other or further exercise thereof or the exercise of any other rights or remedy.
(k) Notices . All notices, statements or other documents which are required or contemplated by this Note shall be made and delivered in accordance with the Securities Purchase Agreement.
(l) Certain Interpretive Matters . The parties acknowledge and agree that: (i) this Note is the result of negotiations between the parties and will not be deemed or construed as having been drafted by any one party; (ii) each party and its counsel have reviewed and negotiated the terms and provisions of this Note and have contributed to its revision; (iii) the rule of construction to the effect that any ambiguities are resolved against the drafting party will not be employed in the interpretation of this Note; (iv) the headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of this Note; (v) whenever required by the context, any pronoun used in this Note shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (vi) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Note shall be deemed in each case to refer to this Note as a whole and not to any particular subdivision of this Note; (vii) the words “include” and “including” and other words of similar import when used herein shall not be deemed to be terms of limitation but rather shall be deemed to be followed in each case by the words “without limitation”, (viii) any reference herein to “dollars” or “$” shall mean United States dollars and (ix) any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented, including by waiver or consent and references to all attachments thereto and instruments incorporated therein.
(m) Counterparts . This Note may be executed in any number of counterparts, each of which will be deemed an original, with the same effect as if the signature on each such counterpart were on the same instrument. Further, this Note may be executed by transfer of an originally signed document by facsimile or e-mail (in PDF or a similarly scanned format), each of which will be as fully binding as an original document
[Signature Page Follows]
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IN WITNESS WHEREOF, this Note has been executed as of the date first written above.
| HELIOS AND MATHESON ANALYTICS INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
Agreed
and accepted as of
this ___ day of [ ], 201_ by:
| MOVIEPASS INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
[Signature Page to Helios Note]
6
Exhibit 10.1
CONSULTING AGREEMENT
This Consulting Agreement (“Agreement”) is made as of the 5th day of October 2017 (the “Effective Date”) by and between Muralikrishna Gadiyaram (the “Consultant”), and Helios and Matheson Analytics Inc. (together with each of its present and future subsidiaries, the “Company”), in reference to the following:
RECITALS
WHEREAS, The Company wishes to retain the Consultant, and the Consultant wishes to be retained by the Company, to continue to assist the Company and Zone in their strategic and business development efforts.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Consultant agree as follows:
AGREEMENT
1. Term. The Company retains the Consultant and the Consultant accepts this appointment with the Company beginning as of the Effective Date. The initial term of this Agreement shall be two (2) years (the “Term”), renewable thereafter by mutual written consent, unless terminated sooner pursuant to Section 5 hereof.
2. Duties of Consultant. The Consultant agrees to continue providing guidance to the Company and Zone relating to the further development of their respective businesses and technologies, including, without limitation, rolling-out the RedZone Map application worldwide (outside the United States), particularly in India, and, if requested by the Company, the Consultant shall provide guidance with respect to the development of any businesses or technologies that the Company or Zone may acquire during the term of this Agreement, including, without limitation, MoviePass Inc. (the “Services”). The Consultant will determine the method, details and means of performing the Services. The Consultant may, at the Consultant’s own expense, use employees or other subcontractors to assist the Consultant with the performance of the Services. In providing the Services, the Consultant shall report to the Chief Executive Officer of the Company.
3. Compensation.
3.1 Monthly Compensation. The Company shall pay to the Consultant, as compensation for the Services, a consulting fee of US$18,750 per month, which consulting fee shall be paid on the last business day of each calendar month during which the Services are rendered, with the first such payment being due and accruing as of January 31, 2017. If this Agreement is terminated prior to the end of a calendar month, the consulting fee for such month shall be pro-rated to the date of the Consultant’s termination.
3.2 Compensation for Additional Services. Compensation for Additional Services shall be determined at the time the Subsequent Statement of Work is entered into and shall be included therein. Compensation for Additional Services shall be paid on the last business day of each calendar month during the period that the Additional Services are rendered.
4. Nondisclosure.
4.1 Property Belonging to Company. The Consultant agrees that all developments, ideas, devices, improvements, discoveries, apparatus, practices, processes, methods, concepts and products (collectively the “Inventions”) developed by the Consultant during the term of this Agreement are the exclusive property of the Company and shall belong to the Company. The Consultant agrees to assign the Inventions to the Company. Notwithstanding the foregoing, the Consultant shall not be required to assign his rights in any invention which the Consultant developed entirely on his own time without using the Company’s equipment, supplies, facilities or trade secret information except for those inventions that either:
(i) Relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company; or
(ii) Result from any work performed by the Consultant for the Company.
The Consultant understands that he bears the full burden of proving to the Company that an invention qualifies fully under this section 4.1.
4.2 Access to Confidential Information. The Consultant agrees that during the term of the business relationship between the Consultant and the Company, the Consultant will have access to and become acquainted with confidential proprietary information (“Confidential Information”) which is owned by the Company and is regularly used in the operation of the Company’s business. The Consultant agrees that the term “Confidential Information” as used in this Agreement is to be broadly interpreted and includes (i) information that has, or could have, commercial value for the business in which the Company is engaged, or in which the Company may engage at a later time, including but not limited to all information of any kind or nature relating to the RedZone Map technology, and (ii) information that, if disclosed without authorization, could be detrimental to the economic interests of the Company. The Consultant agrees that the term “Confidential Information” includes, without limitation, any patent, patent application, copyright, trademark, trade name, service mark, service name, “know-how,” negative “know-how,” trade secrets, customer and supplier identities, characteristics and terms of agreements, details of customer or consultant contracts, pricing policies, operational methods, marketing plans or strategies, product development techniques or plans, business acquisitions plans, science or technical information, ideas, discoveries, designs, computer programs (including source codes), financial forecasts, unpublished financial information, budgets, processes, procedures, formulae, improvements or other proprietary or intellectual property of the Company, whether or not in written or tangible form, and whether or not registered, and including all memoranda, notes, summaries, plans, reports, records, documents and other evidence thereof. The Consultant acknowledges that all Confidential Information, whether prepared by the Consultant or otherwise acquired by the Consultant in any other way, shall remain the exclusive property of the Company.
4.3 No Unfair Use by Consultant. The Consultant promises and agrees that the Consultant (which shall include his employees and contractors) shall not misuse, misappropriate, or disclose in any way to any person or entity any of the Company’s Confidential Information, either directly or indirectly, nor will the Consultant use the Confidential Information in any way or at any time except as required in the course of the Consultant’s business relationship with the Company. The Consultant agrees that the sale or unauthorized use or disclosure of any of the Company’s Confidential Information constitutes unfair competition. The Consultant promises and agrees not to engage in any unfair competition with the Company and will take measures that are appropriate to prevent his employees or contractors from engaging in unfair competition with the Company.
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4.4 Further Acts. The Consultant agrees that, at any time during the term of this Agreement or any extension thereof, upon the request of the Company and without further compensation, but at no expense to the Consultant, the Consultant shall perform any lawful acts, including the execution of papers and oaths and the giving of testimony, that in the opinion of the Company, its successors or assigns, may be necessary or desirable in order to obtain, sustain, reissue and renew, and in order to enforce, perfect, record and maintain, patent applications and United States and foreign patents on the Company’s inventions, and copyright registrations on the Company’s inventions.
4.5 Obligations Survive Agreement. The Consultant’s obligations under this section 4 shall survive the expiration or termination of this Agreement.
5. Termination .
5.1 Termination on Default. Should either party default in the performance of this Agreement or materially breach any of its provisions, the non-breaching party may terminate this Agreement by giving written notification to the breaching party. Termination shall be effective immediately on receipt of said notice. For purposes of this section, material breaches of this Agreement shall include, but not be limited to, (i) the failure by the Company to pay the compensation set forth in section 3 above; or (ii) any item that constitutes Cause (as defined in Section 5.2).
5.2 Termination on Notice. Either party may terminate this Agreement at any time by giving thirty (30) days written notice to the other party. If the Company terminates the Agreement without Cause prior to the end of the Term, the Consultant shall be entitled to a severance payment equal to the lesser of (a) the consulting fee for the remainder of the Term, or (b) the consulting fee for a period of 12 months following the delivery of written notice of termination by the Company, in each case, payable monthly and subject to proration in accordance with Section 3.1. For the purposes of this Agreement, “Cause” shall be defined as (i) the Consultant’s conviction of, or entry of a plea of guilty or nolo contendere for any crime which constitutes a felony in the jurisdiction involved; (ii) misappropriation by the Consultant of funds of the Company or the Consultant’s commission of an act of fraud against the Company , as determined by the Company’s Board of Directors in good faith; (iii) the Consultant’s gross negligence in the performance of the Services, as determined by the Company’s Board of Directors in good faith; (iv) a willful breach by the Consultant of a material provision of this Agreement, as determined by the Company’s Board of Directors in good faith; (v) termination of the Consultant’s employment in connection with the bankruptcy, insolvency, liquidation or similar winding-up of the Company’s businesses; (vi) the Consultant’s failure to substantially perform the Services, as determined by the Company’s Board of Directors in good faith, (vii) the Consultant’s failure to conform in all material respects to all laws and regulations governing the Consultant’s duties under this Agreement; (viii) the Consultant’s commission of any act that tends to bring the Company into public scandal or which will reflect unfavorably on the reputation of the Company, as determined by the Company’s Board of Directors in good faith; or (ix) the Consultant’s commission of any act of dishonesty, fraud, or misrepresentation with respect to the Company, as determined by the Company’s Board of Directors in good faith.
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5.3 Automatic Termination. This Agreement terminates automatically on the occurrence of the bankruptcy or insolvency of either party.
5.4 Return of Company Property. Upon the termination or expiration of this Agreement, the Consultant shall immediately transfer to the Company all files (including, but not limited to, electronic files), records, documents, drawings, specifications, equipment and similar items in his possession relating to the business of the Company or its Confidential Information (including the work product of the Consultant created pursuant to this Agreement).
6. Status of Consultant . The Consultant understands and agrees that his employees are not employees of the Company and that his employees shall not be entitled to receive employee benefits from the Company, including, but not limited to, sick leave, vacation, retirement, death benefits, or an automobile. The Consultant shall be responsible for providing, at the Consultant’s expense and in the Consultant’s name, disability, worker’s compensation or other insurance as well as licenses and permits usual or necessary for conducting the services hereunder. Furthermore, the Consultant shall pay, when and as due, any and all taxes incurred as a result of the Consultant’s compensation hereunder, including estimated taxes, and shall provide the Company with proof of said payments, upon demand. The Consultant hereby agrees to indemnify the Company for any claims, losses, costs, fees, liabilities, damages or injuries suffered by the Company arising out of the Consultant’s breach of this section.
7. Representations by Consultant . The Consultant represents that the Consultant has the qualifications and ability to perform the services in a professional manner, without the advice, control, or supervision of the Company. The Consultant shall indemnify, defend, and hold harmless the Company, and the Company’s officers, directors, and shareholders from and against any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries, and deficiencies, including, without limitation, interest, penalties, and reasonable attorney fees and costs, that the Company may incur or suffer and that arise, result from, or are related to any breach or failure of the Consultant to perform any of the representations, warranties and agreements contained in this Agreement.
8. Business Expenses . The Company shall reimburse the Consultant for all reasonable business expenses incurred by the Consultant, provided that each such expenditure is approved by the Chief Executive Officer or Chief Financial Officer of the Company prior to being incurred and qualifies as a proper deduction on the Company’s federal and state income tax return. Each such expenditure shall be reimbursable only if the Consultant furnishes to the Company adequate records and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authorities for the substantiation of that expenditure as an income tax deduction.
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9. Notices . Unless otherwise specifically provided in this Agreement, all notices or other communications (collectively and severally called “Notices”) required or permitted to be given under this Agreement, shall be in writing, and shall be given by: (A) personal delivery (which form of Notice shall be deemed to have been given upon delivery), (B) by telegraph or by private airborne/overnight delivery service (which forms of Notice shall be deemed to have been given upon confirmed delivery by the delivery agency), or (C) by electronic or facsimile or telephonic transmission, provided the receiving party has a compatible device or confirms receipt thereof (which forms of Notice shall be deemed delivered upon confirmed transmission or confirmation of receipt). Notices shall be addressed to the address set forth below, or to such other address as the receiving party shall have specified most recently by like Notice, with a copy to the other party.
If to the Company:
Helios and Matheson Analytics Inc.
The Empire State Building
350 5th Avenue, Suite 7520
New York, New York 10118
Attn.: Chief Financial Officer
Facsimile No.:
Email: sbenson@hmny.com
If to the Consultant:
Mr. Muralikrishna Gadiyaram
Facsimile No.:
Email:
10. Choice of Law and Venue . This Agreement shall be governed according to the laws of the state of New York. Venue for any legal or equitable action between the Company and the Consultant which relates to this Agreement shall be in the Federal or State courts located in the borough of Manhattan, City of New York, State of New York.
11. Entire Agreement . This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the Services to be rendered by the Consultant to the Company and contains all of the covenants and agreements between the parties with respect to the Services to be rendered by the Consultant to the Company in any manner whatsoever. Each party to this agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding on either party.
12. Counterparts . This Agreement may be executed manually or by facsimile signature in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute but one and the same instrument.
13. Severability . If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be determined to be invalid, illegal or unenforceable under present or future laws effective during the term of this Agreement, then and, in that event: (A) the performance of the offending term or provision (but only to the extent its application is invalid, illegal or unenforceable) shall be excused as if it had never been incorporated into this Agreement, and, in lieu of such excused provision, there shall be added a provision as similar in terms and amount to such excused provision as may be possible and be legal, valid and enforceable, and (B) the remaining part of this Agreement (including the application of the offending term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable) shall not be affected thereby and shall continue in full force and effect to the fullest extent provided by law.
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14. Preparation of Agreement . It is acknowledged by each party that such party either had separate and independent advice of counsel or the opportunity to avail himself or itself of same. In light of these facts it is acknowledged that no party shall be construed to be solely responsible for the drafting hereof, and therefore any ambiguity shall not be construed against any party as the alleged draftsman of this Agreement.
15. No Assignment of Rights or Delegation of Duties by Consultant; Company’s Right to Assign . The Consultant’s rights and benefits under this Agreement are personal to him and therefore no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer. The Company may assign its rights and delegate its obligations under this Agreement to any other person or entity.
16. Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument, binding on all parties hereto. Any signature page of this Agreement may be detached from any counterpart of this Agreement and reattached to any other counterpart of this Agreement identical in form hereto by having attached to it one or more additional signature pages.
17. Electronically Transmitted Documents . If a copy or counterpart of this Agreement is originally executed and such copy or counterpart is thereafter transmitted electronically by facsimile or similar device, such facsimile document shall for all purposes be treated as if manually signed by the party whose facsimile signature appears.
[SIGNATURES APPEAR ON NEXT PAGE]
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WHEREFORE, the parties have executed this Consulting Agreement on the date first written above.
| “CONSULTANT” | ||
| /s/ Muralikrishna Gadiyaram | ||
| Muralikrishna Gadiyaram | ||
| “COMPANY” | ||
| Helios and Matheson Analytics Inc. | ||
| By: | /s/ Theodore Farnsworth | |
| Name: | Theodore Farnsworth | |
| Title: | Chief Executive Officer | |
7
Exhibit 10.2
THE SECURITIES REPRESENTED BY THIS AGREEMENT AND ISSUABLE UPON THE EXERCISE OF THE OPTION EVIDENCED HEREBY (COLLECTIVELY, THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
INVESTMENT OPTION AGREEMENT
INVESTMENT OPTION AGREEMENT, dated as of October 11, 2017 (this “ Agreement ”), by and between Helios and Matheson Analytics Inc., a Delaware corporation (“ Helios ”), and MoviePass Inc., a Delaware corporation (“ MoviePass ”). Capitalized terms used but not otherwise defined herein have the meanings ascribed to those terms in the Purchase Agreement (as defined below).
WHEREAS, Helios and MoviePass are parties to a Securities Purchase Agreement, dated August 15, 2017 (as may be amended from time to time, the “ Purchase Agreement ”);
WHEREAS, pursuant to the Purchase Agreement, Helios agreed to purchase such number of shares of MoviePass common stock, $0.0001 par value per share (the “ Common Stock ”), equal to 51% of the then outstanding shares of Common Stock of MoviePass (on a fully-diluted basis, giving effect to the payment or conversion of any notes that convert into MoviePass capital stock that are outstanding immediately prior to the Closing, but excluding any outstanding options to purchase shares of Common Stock and warrants to purchase shares of MoviePass’ capital stock and the shares of Common Stock issuable upon conversion of the Kelly Note) for an aggregate purchase price of up to $27,000,000;
WHEREAS, on October 6, 2017, Helios and MoviePass entered into an amendment to the Purchase Agreement (the “ Amendment ”), pursuant to which the amount of shares of Common Stock to be purchased by Helios at the Closing was increased to 51.71% of the then outstanding shares of Common Stock for an aggregate purchase price of $28,500,000 and $5,000,000 to be loaned under the Helios Note on the 90th calendar day following the Closing was accelerated and provided to MoviePass as of the date of the Amendment; and
WHEREAS, in consideration of the transactions contemplated by the Amendment, MoviePass desires to grant an option, and Helios desires to acquire an option, to purchase such additional number of shares of Common Stock equal to an additional 8.7% of the Currently Outstanding Shares of Common Stock (as defined below) for an aggregate purchase price of up to $20,000,000 (the “ Maximum Option Amount ”).
NOW, THEREFORE, in consideration of the premises, mutual covenants herein set forth and other good and valuable consideration, subject to the terms and conditions herein, MoviePass and Helios hereby agree as follows:
1. Grant of Option; Term; Exercise Price.
(a) Subject to the terms and conditions herein, MoviePass hereby grants to Helios an option (the “ Option ”) to purchase up to that number of shares of MoviePass’ common stock (such shares of common stock being referred to herein as the “ Option Shares ”) equal to 8.7% of the Currently Outstanding Shares of Common Stock of MoviePass as of the date hereof. For purposes of this Agreement, “ Currently Outstanding Shares of Common Stock ” means the sum of (i) all shares of Common Stock outstanding as of the date hereof, (ii) all shares of Common Stock issuable upon conversion of outstanding Preferred Stock as of the date hereof, (iii) all shares of Common Stock issuable assuming the conversion in full of any convertible notes of MoviePass outstanding as of the date hereof (the “ Currently Outstanding Notes ”) that convert into MoviePass capital stock, including the Kelly Note, and (iv) all shares of Common Stock issuable to Helios at Closing assuming that Closing occurred on the date hereof and giving effect to (i), (ii) and (iii) above.
(b) The Option is exercisable, in whole or in part, by Helios’ delivery to MoviePass of an Exercise Notice at any time from the date of this Agreement until 5:00 p.m. Eastern Time on the thirtieth (30th) day following the delivery by MoviePass to Helios of (i) its audited financial statements for the years ended December 31, 2016 and 2015 with the corresponding audit report and (ii) its reviewed unaudited interim financial statements for the periods ended September 30, 2017 and 2016 (the “ Exercise Period ”). For the avoidance of doubt, Helios may exercise the Option multiple times up to the Maximum Option Amount.
(c) The exercise price per Option Share (the “ Exercise Price ”) shall be equal to the quotient of (x) $210,000,000 divided by (y) the Currently Outstanding Shares of Common Stock. Notwithstanding the foregoing, to the extent the Option is exercised prior to the Closing, then MoviePass shall issue Helios a subordinated convertible promissory note (the “ Option Note ”), in substantially the same form as the MoviePass Note, pursuant to and in accordance with the Amended Note Purchase Agreement, in the principal amount equal to the aggregate Exercise Price and, immediately upon the Closing, MoviePass shall issue the Option Shares to Helios in accordance with Subsection 2(a)(ii) below, and upon such issuance the Option Note shall be deemed satisfied in full (it being understood that if the Purchase Agreement is terminated prior to the Closing, such Option Note shall remain outstanding in accordance with its terms); provided, however, that in the event that any of the Currently Outstanding Notes are not converted into Common Stock at or prior to Closing, but are instead repaid by MoviePass in cash, the number of Currently Outstanding Shares of Common Stock shall be adjusted to reflect such repayment and, accordingly, the number of Option Shares deliverable to Helios at Closing pursuant to this Agreement and the Option Note shall be proportionately reduced.
(d) The Exercise Price shall be payable in cash.
2. Exercise Procedure.
(a) Procedure .
(i) Helios may exercise the Option, in whole or in part, at any time during the Exercise Period, by delivering to MoviePass a written notice duly signed by Helios indicating that Helios is exercising the Option and stating the form of consideration to be paid pursuant to Subsection 1(d) above (the “ Exercise Notice’ ). The Option shall not be deemed exercised, however, until full payment in an amount equal to the full purchase price for the Option Shares in accordance with Subsection 1(d) above has been made. Helios may withdraw the Exercise Notice and elect not to exercise the Option at any time before making full payment.
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(ii) Subject to Subsection 1(c) above, following receipt by MoviePass of such Exercise Notice and full payment of the Exercise Price, MoviePass shall issue, as soon as practicable, in certificate form the Option Shares in the name as designated by Helios.
(b) Legend . The Option Shares and any securities issued in respect of or exchange for the Option Shares, as applicable, may be notated with the following legend to the extent the Option Shares are not registered with the SEC for resale or available for resale without restriction under Rule 144 under the Securities Act:
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”
3. Rights of Helios . Helios shall not have any rights to dividends or any other rights of a stockholder with respect to any Option Shares until such Option Shares shall have been issued to Helios (as evidenced by the appropriate entry on the transfer books of MoviePass). MoviePass will give written notice to Helios at least fifteen (15) days prior to the date on which MoviePass closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any securities or rights to purchase stock, warrants, securities or other property to all (or substantially all) holders of shares of Common Stock or (C) for determining rights to vote with respect to any merger, reorganization, sale of substantially all assets, dissolution, liquidation, recapitalization, stock split or stock combination, provided in each case that if the Common Stock is then listed on Nasdaq or NYSE such information shall be made known to the public prior to or in conjunction with such notice being provided to Helios.
4. Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt, or (a) personal delivery to the party to be notified, (b) when sent and affirmatively confirmed as received, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 4. If notice is given to MoviePass, a copy shall also be sent to Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, New York, NY 10105, attention: Barry I. Grossman, Esq., telephone: (212) 370-1300, e-mail: bigrossman@egsllp.com and if notice is given to Helios, a copy shall also be given to Mitchell Silberberg & Knupp LLP, 11377 W. Olympic Blvd., Los Angeles, CA 90064, attention: Kevin Friedmann, Esq., telephone: (310) 312-3106, e-mail: kxf@msk.com.
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5. Binding; Assignment . The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.
6. Dispute Resolution . The parties (i) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of New York and to the jurisdiction of the United States District Court for the Southern District of New York for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (ii) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of New York or the United States District Court for the Southern District of New York, and (iii) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
7. WAIVER OF JURY TRIAL . EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
8. Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto with respect to the matters herein, and cannot be amended, modified or terminated except by an agreement in writing executed by the parties hereto.
9. Governing Law . This Agreement shall be governed by the internal law of the State of New York without giving effect to the conflicts of laws principles thereof.
[ Signature page to follow ]
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IN WITNESS WHEREOF, the parties hereto have executed this Investment Option Agreement as of the date first set forth above.
| MOVIEPASS INC.: | |||
| By: | /s/ Mitch Lowe | ||
| Name: | Mitch Lowe | ||
| Title: | Chief Executive Officer | ||
| Address: | 175 Varick Street | |
| Suite 604 | ||
| New York, New York 10012 |
[MoviePass Signature page to Investment Option Agreement]
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IN WITNESS WHEREOF, the parties hereto have executed this Investment Option Agreement as of the date first set forth above.
| HELIOS AND MATHESON ANALYTICS INC.: | |||
| By: | /s/ Theodore Farnsworth | ||
| Name: | Theodore Farnsworth | ||
| Title: | Chief Executive Officer | ||
| Address: | Empire State Building | |
| 350 5th Avenue | ||
| New York, New York 10018 |
[Helios Signature page to Investment Option Agreement]
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Exhibit 99.1
News
FOR IMMEDIATE RELEASE
HMNY Contact: Stephanie Goldman/Mark Havenner
The Pollack PR Marketing Group
(310) 556-4443
sgoldman@ppmgcorp.com / mhavenner@ppmgcorp.com
MoviePass
Contact: Gavin Skillman
LaunchSquad for MoviePass
(212)
564-3665
gavin@launchsquad.com
Helios and Matheson Analytics Inc.
Satisfies MoviePass Transaction Financing Condition,
Increases Investment in MoviePass
and Acquires Option for Additional Investment in MoviePass
NEW YORK (October 12, 2017) — Helios and Matheson Analytics Inc. (NASDAQ: HMNY) (“HMNY”) announced today that, since August 15, 2017, it has received aggregate gross cash proceeds of approximately $12.8 million from the holder of its senior secured convertible notes, thereby satisfying the $10 million financing condition to HMNY’s pending acquisition of a majority stake in MoviePass Inc. (“MoviePass”), which was announced in August 2017. HMNY also announced that it has agreed to increase the purchase price for its stake in MoviePass from $27 million to $28.5 million, which will increase its ownership stake in MoviePass from 53% to 53.71% upon the closing of the transaction. HMNY agreed to make the additional $1.5 million investment in MoviePass for an additional 0.71% ownership stake based on an agreed $210 million pre-money valuation of MoviePass. In conjunction with the additional investment, MoviePass also granted HMNY an option to purchase additional shares of MoviePass common stock for $20 million in cash based on the agreed $210 million pre-money valuation of MoviePass, pursuant to an option agreement, which, if exercised in full, would amount to an additional 8.7% ownership stake in MoviePass as of the date of the option agreement. If HMNY were to exercise the option in full prior to the closing of the transaction, its total ownership stake in MoviePass would be 62.41% as of the date of the option agreement.
In connection with increasing its investment commitment to MoviePass, HMNY provided $6.5 million in cash to MoviePass on October 6, 2017, consisting of an advance payment of $5 million that would have otherwise been due within 90 days after closing the acquisition transaction with MoviePass plus the additional $1.5 million investment amount, for which HMNY received an amended and restated convertible promissory note of MoviePass in the amount of $11.5 million, which superseded and replaced the $5 million convertible promissory note issued by MoviePass to HMNY on August 18, 2017.
HMNY agreed to increase its MoviePass investment commitment and acquired the additional MoviePass investment option after evaluating the significant and rapid increase in the number of MoviePass subscribers since MoviePass announced its new $9.95 per month subscription fee on August 15, 2017 and the public’s interest in the MoviePass monthly movie theater subscription service.
“I believe we are witnessing a major disruption in the movie industry,” said Ted Farnsworth, Chairman and CEO of HMNY. “The marketplace has responded, and we could not be more thrilled with the new subscriber results of MoviePass.”
“There is much that MoviePass needs to do to make the customer experience enjoyable and seamless,” said MoviePass CEO Mitch Lowe. “We have scaled our operations beyond expectation and with further investment from Helios and Matheson, we believe we can scale even further. We are focused on innovating the movie theater experience so that movie-goers, exhibitors, and the entire industry can thrive beyond its current challenges. We are aiming to create a new era of movie-going where independent films and blockbusters alike can enjoy large and eager audiences in every theater, especially for entertainment consumers who value subscription. This is not innovation for innovation sake, we want to bring the film industry into a new golden age.”
MoviePass, established in 2011, and now led by Netflix co-founding senior executive Mitch Lowe, offers subscribers the ability to purchase up to one movie ticket a day at most U.S. movie theaters with no blackout days. Concurrent with the announcement of HMNY’s transaction with MoviePass in August 2017, MoviePass lowered its monthly subscription fee to $9.95, propelling a widespread and dramatic national interest in the service and increased attendance to movie theater exhibitors.
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Key Transaction Details
HMNY has filed with the U.S. Securities and Exchange Commission (the “SEC”) a Current Report on Form 8-K with respect to its satisfaction of the MoviePass transaction financing condition, its additional investment in MoviePass and the additional investment option that it acquired from MoviePass, as described in this press release, together with certain risk factors regarding MoviePass that it deems important to HMNY security holders (the “Current Report”). The Current Report is available for review at www.sec.gov. The information in this press release is qualified in its entirety by reference to such Current Report.
About Helios and Matheson
Helios and Matheson Analytics Inc. (NASDAQ:HMNY) is a provider of information technology services and solutions, offering a range of technology platforms focusing on big data, artificial intelligence, business intelligence, social listening, and consumer-centric technology. Its holdings include RedZone Map™, a safety and navigation app for iOS and Android users, a community-based ecosystem that features a socially empowered safety map app that enhances mobile GPS navigation using advanced proprietary technology. Through TrendIt, HMNY has acquired technology addressing crowd and migration patterns and consumer behavior in real-time. The patented technology predicts population behavior, along with a crowd's population size, origin and destination. HMNY is headquartered in New York, NY and listed on the Nasdaq Capital Market under the symbol HMNY. For more information, visit www.hmny.com.
About MoviePass
MoviePass is a mobile technology company dedicated to enhancing the exploration of cinema. As the nation's premier movie-theater subscription service, MoviePass provides film enthusiasts the ability to attend up to one new movie per day for a monthly subscription fee of $9.95. The service, now accepted at more than 91% of theaters across the United States, is the nation's largest theater network. For more information, visit www.moviepass.com.
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Additional Information for Stockholders of HMNY about the Proposed Transaction between HMNY and MoviePass and Where to Find It
HMNY plans to file with the SEC and furnish its stockholders with a proxy statement in connection with the proposed transaction with MoviePass and security holders of HMNY are urged to read the proxy statement and the other relevant materials when they become available because such materials will contain important information about HMNY, MoviePass and their respective affiliates and the proposed transaction. The proxy statement and other relevant materials (when they become available), and any and all other documents filed by HMNY with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov.
In addition, investors may obtain a free copy of HMNY's filings from HMNY's website at www.hmny.com or by directing a request to: Helios and Matheson Analytics Inc., Attn: Secretary, Empire State Building, 350 Fifth Avenue, Suite 7520, New York, New York 10118, (212) 979-8228.
INVESTORS AND SECURITY HOLDERS OF HMNY ARE URGED TO READ THE PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION BETWEEN HMNY AND MOVIEPASS.
Participants in the Solicitation
HMNY and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the security holders of HMNY in connection with the proposed transaction between HMNY and MoviePass. Information about those directors and executive officers of HMNY, including their ownership of HMNY securities, is set forth in the annual report on Form 10-K for the year ended December 31, 2016, filed with the SEC on April 14, 2017, and its definitive proxy statement on Schedule 14A filed with the SEC on October 3, 2017. Investors and security holders may obtain additional information regarding the direct and indirect interests of HMNY and its directors and executive officers in the proposed transaction by reading the proxy statement and other public filings referred to above.
Cautionary Statement on Forward-looking Statements and Other Information in this Press Release
Certain information in this communication contain “forward-looking statements” about HMNY and MoviePass within the meaning of the Private Securities Litigation Reform Act of 1995 or under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, "forward-looking statements") that may not be based on historical fact, but instead relate to future events. events. Forward-looking statements are generally identified by words such as "projects," "may," "will," "could," "would," "should," "believes," "expects," "anticipates," "estimates," "intends," "plans," "potential" or similar expressions Such forward-looking statements include, without limitation, statements regarding (i) the expected completion of HMNY’s acquisition of a controlling interest in MoviePass, (ii) the time frame in which such acquisition is expected to occur, (iii) the expected benefits to HMNY and MoviePass from completing the acquisition and (iv) MoviePass’ business and subscriber growth. Statements regarding future events are based on the parties' current expectations and are necessarily subject to associated risks related to, among other things, the conditions to the closing of the acquisition may not be satisfied, the occurrence of any event, change or other circumstances that could give rise to the termination of the acquisition agreement between MoviePass and HMNY, MoviePass’ continuing need for additional financing, and general economic conditions. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.
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Such forward-looking statements are based on a number of assumptions. Although the parties believe that the assumptions made and expectations represented by such statements are reasonable, there can be no assurance that a forward-looking statement contained herein will prove to be accurate. Actual results and developments may differ materially and adversely from those expressed or implied by the forward-looking statements contained herein and even if such actual results and developments are realized or substantially realized, there can be no assurance that they will have the expected consequences or effects.
Risk factors and other material information concerning HMNY and MoviePass are described in the Current Report described above, in HMNY’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and other HMNY filings, including subsequent current and periodic reports, information statements and registration statements filed with the SEC. You are cautioned to review such reports and other filings at www.sec.gov.
Given these risks, uncertainties and factors, you are cautioned not to place undue reliance on such forward-looking statements and information, which are qualified in their entirety by this cautionary statement. All forward-looking statements and information made herein are based on the parties' current expectations and the parties do not undertake an obligation to revise or update such forward-looking statements and information to reflect subsequent events or circumstances, except as required by law.
In particular, MoviePass’ $9.95 per month subscription pricing model is new. There can be no assurance that the resulting rate of increase in its subscribers will continue or be sustained. Moreover, the increase in the number of MoviePass subscribers provides no assurance that the MoviePass business model will lead to profitability.
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Exhibit 99.2
WAIVER
This Waiver (this “ Waiver ”) is entered into as of the 4th day of October, 2017, by and between Helios and Matheson Analytics Inc., a Delaware corporation with offices located at Empire State Building, 350 5th Avenue, New York, New York 10118 (the “ Company ”) and the investor signatory hereto (the “ Holder ”), with reference to the following facts:
A. Prior to the date hereof, pursuant to that Securities Purchase Agreement, dated as of August 15, 2017, by and between the Company and the Holder (as amended prior to the date hereof, the “ August Securities Purchase Agreement ”), the Company issued to the Holder, among other things, a senior secured convertible note, convertible into shares of Common Stock, in accordance with the terms of thereof (the “ August Note ”, as converted the “ August Conversion Shares ”), which was paid for, in part, by a promissory note issued by the Holder to the Company (the “ August Investor Note ”). Capitalized terms not defined herein shall have the meaning as set forth in the August Securities Purchase Agreement.
B. Pursuant to the terms of the August Securities Purchase Agreement, the Company also agreed that for the period commencing on August 15, 2017 and ending on the 90 th Trading Day after the Applicable Date (provided that such period shall be extended by the number of calendar days during such period and any extension thereof contemplated by this proviso on which any Registration Statement is not effective or any prospectus contained therein is not available for use or any Current Public Information Failure exists or, if later, until such time after the Applicable Date as the Equity Conditions (as defined in the Notes) are initially satisfied in full) (the “ Restricted Period ”), neither the Company nor any of its Subsidiaries would directly or indirectly issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related security (including, without limitation, any “equity security” (as that term is defined under Rule 405 promulgated under the 1933 Act), any Convertible Securities (as defined below), any debt, any preferred stock or any purchase rights) (any such issuance, offer, sale, grant, disposition or announcement (whether occurring during the Restricted Period or at any time thereafter and whether pursuant to a public or private offering) is referred to as a “ Subsequent Placement ”) other than certain permitted offerings of Excluded Securities, including, without limitation, the right (the “ New Offering Right ”) at any time no December Notes, February Notes, or Series B Notes remain outstanding, to effect one or more Subsequent Placements of shares of Common Stock and/or Convertible Securities, each at a New Issuance Price (as defined in the Warrant and as calculated in accordance with Section 2(b) of the Warrant) of at least $3.00 per share of Common Stock (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) (the foregoing restrictions, the “ Offering Restrictions ”).
C. Prior to the date hereof, pursuant to that certain Amendment and Exchange Agreement, dated September 19, 2017 (as amended prior to the date hereof, the “ Exchange Agreement ”), the Holder waived, in part, the Offering Restrictions to permit the Company’s offer, sale or issuance of shares of Common Stock and/or Convertible Securities in one or more private Subsequent Placements, each at a New Issuance Price (as defined in the Warrant and as calculated in accordance with Section 2(b) of the Warrant) of at least $3.00 per share of Common Stock (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) and not constituting a Variable Rate Transaction (each a “ Permitted PIPE ”).
D. The Company and the Holder desire to further waive, in part, their rights under the Offering Restrictions and the Exchange Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:
1. Waiver . Effective as of the initial time the August Investor Note is no longer outstanding (the “ Effective Time ”, and the voluntary prepayment by the Holder of the August Investor Note to effect the Effective Time, the “ Prepayment ”), the Company hereby waives (a) any right to, directly or indirectly, effect a Permitted PIPE or exercise any New Offering Right prior to November 15, 2017 and (b) during the period commencing on November 15, 2017 through the later of (x) December 15, 2017 and (y) thirty calendar days after the earlier to occur of (I) the first date on which the resale by the Investor Buyers of the Registrable Securities required to be filed on the initial Registration Statement (as defined in the Registration Rights Agreement) (after giving effect to any cutbacks required by the SEC) pursuant to the Registration Rights Agreement is declared effective by the SEC (and each prospectus contained therein is available for use on such date) or (II) the first date on which all of the Registrable Securities are eligible to be resold by the Investor Buyers pursuant to Rule 144 (or, if a Current Public Information Failure has occurred and is continuing, such later date after which the Company has cured such Current Public Information Failure) (the “ New Restricted Period ”), waives any right to, directly or indirectly, effect any Permitted PIPE or exercise any New Offering Right except for $3 million in gross proceeds raised from one or more Subsequent Placements of Permitted PIPEs and/or exercise of New Offering Rights (in each case, not constituting a Variable Rate Transaction) occurring during the New Restricted Period (each, a “ New Permitted Offering ”). Effective upon the earlier of (x) the calendar day immediately following the Restricted Period and (y) such time as no December Notes, February Notes, Series A Notes or Series B Notes remain outstanding, the Holder hereby waives the Offering Restrictions. For the avoidance of doubt, the Company hereby acknowledges and reaffirms the Offering Restrictions and agrees to comply with the additional offering restrictions created hereunder, after giving effect to the waiver in this Section 1, not to, directly or indirectly, effect a Permitted PIPE or exercise any New Offering Right prior to November 15, 2017 and not to, directly or indirectly, effect any Permitted PIPE or exercise any New Offering Right during the New Restricted Period other than pursuant to New Permitted Offerings.
2. Prepayment . On or prior to the date hereof, the Holder shall effect the Prepayment in accordance with the Flow of Funds Letter attached hereto as Exhibit A (including, without limitation, the withholding and payment Legal Counsel Expense Amount (as defined below).
3. Ratifications . Except as otherwise expressly provided herein, each of the August Securities Purchase Agreement, the Exchange Agreement and each other Transaction Document (as defined in the August Securities Purchase Agreement), is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects.
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4. No Material Non-Public Information . The Company hereby represents and warranties to the Holder that neither the waivers and transactions contemplated hereby, nor anything contained herein, constitute material non-public information and, as of the time of execution of this Waiver, the Company has disclosed all material, non-public information (if any) provided up to such time to the Holder by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents. The Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement with respect to the transactions contemplated by this Waiver, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Holder or any of their affiliates, on the other hand, as of the time of execution of this Waiver shall terminate. Neither the Company, its Subsidiaries nor the Holder shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided , however , the Company shall be entitled, without the prior approval of the Holder, to make a press release or other public disclosure with respect to such transactions as is required by applicable law and regulations. Without the prior written consent of the Holder (which may be granted or withheld in the Holder’s sole discretion), except as required by applicable law, the Company shall not (and shall cause each of its Subsidiaries and affiliates to not) disclose the name of the Holder in any filing, announcement, release or otherwise.
5. Fees . The Company shall reimburse Kelley Drye & Warren LLP, counsel to the Holder, for its fees and expenses in connection with the structuring, documentation, negotiation of this Waiver, and all other outstanding amounts owed by the Company to Kelley Drye & Warren LLP pursuant to any other agreement by and between the Company and the Holder, in an aggregate amount equal to $15,000 (“ Legal Counsel Expense Amount ”), by instructing the Holder in the Flow of Funds Letter to withhold the Legal Counsel Expense Amount from the Prepayment and pay such Legal Counsel Expense Amount directly to Kelley Drye & Warren LLP on or prior to the Effective Time.
6. Miscellaneous Provisions . Section 9 of the August Securities Purchase Agreement is hereby incorporated by reference herein, mutatis mutandis.
[The remainder of the page is intentionally left blank]
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IN WITNESS WHEREOF, Holders and the Company have executed this Waiver as of the date set forth on the first page of this Waiver.
| COMPANY: | ||
| HELIOS AND MATHESON ANALYTICS INC. | ||
| By: | ||
| Name: Theodore Farnsworth | ||
| Title: Chief Executive Officer | ||
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IN WITNESS WHEREOF, Holders and the Company have executed this Waiver as of the date set forth on the first page of this Waiver.
| HOLDER: | ||
| By: | ||
| Name: | ||
| Title: | ||
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